corporate governance redux

[Ian Murray <seamus2001@xxxxxxxxx>]

[corporate citizenship is a rather funny oxymoron]

Monitoring Corporate Citizens
Voluntary Standards Fall Short, Critics Say

By Jonathan Finer
Washington Post Staff Writer
Thursday, June 5, 2003; Page E04


Big clothing retailers and banks are increasingly adopting voluntary
standards of corporate conduct in response to those who accuse them of
poisoning the environment, abusing workers and harming indigenous people
in the developing world.

In short, the corporations say, we hear you and are taking steps to
address your concerns.

But the critics answer that while voluntary standards are a start,
self-policing does not go far enough, as illustrated by a report released
yesterday that detailed cases in which workers in overseas factories were
overworked and underpaid, were prevented from unionizing or suffered other
workplace indignities.

The report was issued by a group representing seven major retailers --
among them athletic-apparel giants Nike Inc., Reebok International Ltd.,
and Adidas-Salomon AG -- that said the findings offer an independent
assessment of working conditions in their suppliers' factories. The idea
is that the companies will use the information to pressure their suppliers
to improve employment practices.

Also yesterday, 10 major banks -- including Citigroup Inc., Credit Suisse
First Boston Corp., and Credit Lyonnais -- said they will begin adhering
to a code of conduct developed by the International Finance Corp., the
development arm of the World Bank, requiring them to verify that the
projects they finance meet environmental and social impact standards.

Voluntary standards "have a very good side in that they cause corporations
to pay attention to areas they otherwise might not. It's better than
nothing, but far from an ideal situation," said Ann Florini, a senior
fellow at the Brookings Institution and the author of a recent book on
global governance.

Corporations began adopting social, environmental and labor codes of
conduct in the 1970s, with the rise of non-governmental pressure groups.
Internal scrutiny became more aggressive in the 1990s, as the watchdogs
became adept at mobilizing consumers who could spurn companies that did
not fall into line. But activists have long been skeptical that real
change is possible unless corporations disclose more details of their
self-policing efforts.

The banks said they will apply standards known as the "Equator
Principles," which are aimed at minimizing the environmental and social
damage caused by the new dams, power plants, pipelines and other projects
they finance. The banks have agreed to enforce these principles for all
loans of $50 million or more. "Even if you use an extremely conservative
estimate, this will change the rules of the game for about $100 billion in
global investment in the next 10 years," said Peter Woicke, the executive
vice president of the IFC, in a conference call.

But some environmental groups argue that the new policies leave some
gaping loopholes.

"The core issues to me are that there's nothing in the statement that
takes the most ecologically sensitive areas off-limits for
mega-development," said Ilyse Hogue, global finance campaign director for
the Rainforest Action Network, which in recent years has launched a
campaign against the social and environmental practices of Citigroup.

A frequent complaint put forward by critics of corporations' attempts at
self-regulation is that the corporations don't provide enough information
about their methods and findings. The report released yesterday by the
Fair Labor Association -- a consortium of companies, advocacy groups and
university representatives -- was at least in part a response to such
criticism, said Elizabeth Borrelli, director of public affairs and
corporate social responsibility at Eddie Bauer Inc., one of the member
corporations.

"This is groundbreaking in terms of corporate responsibility and
accountability. It's the first time companies are reporting publicly on
these things," she said.

Independent auditors evaluated 185 factories in 30 countries, most of
which are locally owned in the developing world. Their report documents
many violations of international standards, such as a lack of toilet paper
in the bathrooms of a Chinese factory and the crushing of unions in El
Salvador. It also outlines the steps that the auditors hired by FLA
recommended to help improve conditions.

Some labor activists said the report was undermined by some major flaws,
such as not disclosing the names and locations of the factories surveyed.
But even those pointing out the limitations of corporate self-assessments
acknowledge that there's no easy alternative. "Even the best intentioned
corporate actors are not going to substitute for government regulation,"
said Brookings's Florini. "But we don't have government regulation at the
international level. This is a stopgap."