The Role and Responsibility of Corporations

With their world-wide operations succeeding in maximizing profits, corporations have assumed extraordinary power, often far surpassing that of governments. With virtually no global rules or regulations, corporations have been able to operate with a free hand in the international marketplace, moving factories where labor costs are low and where resources are cheap.

But corporations themselves are finding out that there are limitations, even in this wild-west theatre of operations. With either a spark of conscience or a heads-up look at the bottom line, many corporations have learned that there are indeed limitations to what they can, and that there are responsibilities they must assume.

• Some corporations have learned this the hard way. Union Carbide learned this when its chemical plant in Bhopal, India, spewed poisonous gases that killed 6,000 people. And Exxon learned this when its tanker, the Exxon Valdez, spilled 11 barrels of oil over the Gulf of Alaska, which caused the company’s sales to fall from U.S. $9.9 billion a year to US $.4.8 billion eight years later, plus an addition billion in clean-up costs.

Catastrophic incidents such as these are well-known and relatively rare. Yet there are growing networks of non-governmental organizations who have made it their business to publicize other corporate transgressions, such as poor environmental, labor, or human rights violations. To limit exposure to bad publicity which can severely limit profits, or in some cases, just to do the right thing, many companies themselves have adopted various codes of conduct in their global dealings.

To engage business and corporations in a dialogue on corporate social responsibility, the UN Secretary-General has proposed a nine-principle code of conduct for business—the Global Compact -- which is drawn from existing international agreements on the environment, human rights and worker rights. A wide range of corporations have pledged that they will adhere to these principles, some that have been extensively criticized for their past practices. One of those companies is the sneaker company Nike, which has been singled out for criticism on its labor practices in developing countries.

• Philip Knight, the founder of Nike and its Chief Executive Officer said at a recent meeting at the UN on the Global Compact: "When we started the company that would eventually become Nike, I never dreamed that a small Oregon business selling sneakers from the trunk of an old Valiant would become a symbol of globalization. But it has."

He added "In many ways Nike has become a fitting symbol for what is right - and what needs fixing - in an increasingly interdependent economy. We are small by multinational standards but manufacture in 50 countries. In each there are distinctly different legal, social, financial and economic systems. That means Nike, and thousands of other companies, have a monumental task: defining what our global responsibility is, and how to act on it, in many host countries."

Developing Countries Wary

Developing countries, however, are nervous about the imposition of conditions. They already must meet a plethora of conditions to receive loans from the International Monetary Fund or the World Bank—and some of these conditions have been more damaging than helpful. Consequently, they are leery of the push for greater corporate responsibility. While they support labor standards, environmental protection, and human rights, many of these countries are wary that they are just a smokescreen for greater protectionism in the richer countries. They fear that without resources, they will be hopelessly unable to enforce these principles, and will then be the target of sanctions. Their fears are not unfounded, as United States President Bill Clinton raised the specter of sanctions in Seattle during the WTO talks.

Developing countries have also been slow to support the Global Compact initiative, as many believe that the principles selected contain a northern bias. Of greater concern to developing countries are the behavior of monopolies, the need for foreign corporations to contribute to the tax base, and a sharing of technology.