Codes
of Conduct for Multinational Corporations
External Codes of Conduct
Since the 1970s, public and
private expectations of multinational corporate behavior have grown
commensurate with the boom in foreign investment. This change in expectations,
however, has not resulted in a clear-cut set of directions for governments or
businesses to follow in developing codes of conduct. At times, purely voluntary
codes evolved into codes that subsequently were adopted as national legislation.
The United Nations lists ten
major principles that are recognized by international declarations and agreements
that have been developed by the three main organizations, the UN, the ILO, and
the OECD. These main principles comprise the UN Global Compact which covers
four main areas: human rights; labor standards; environment; and
anti-corruption. The ten principles of the UN Global Compact are:
- Businesses should support and respect the
protection of internationally proclaimed human rights.
- Businesses
should make sure that they are not complicit in human rights abuses.
- Businesses should uphold the freedom of
association and the effective recognition of the right to collective
bargaining.
- Businesses should uphold the elimination of all
forms of forced and compulsory labor.
- Businesses
should uphold the effective abolition of child labor.
- Businesses should uphold the elimination of
discrimination in respect of employment and occupation.
- Businesses
should support a precautionary approach to environmental challenges.
- Businesses should undertake initiatives to
promote greater environmental responsibility.
- Businesses should encourage the development and
diffusion of environmentally friendly techniques.
- Businesses should work against corruption in
all its terms, including extortion and bribery.
Corporate and Industry-Specific Codes
of Conduct
A
broad range of factors are influencing firms to adopt codes of conduct. Some
firms see it as enlightened self-interest, while others see it as a necessary
part of risk management.
Corporate codes of conduct and industry-specific codes now exist in one form or
another among most large multinational corporations and among most of the
developed countries. A recent study by the OECD concluded that most corporate
codes tend to be highly specific and to deal with the idiosyncrasies of a
particular company, project, or location.
Industry-specific corporate codes dealing with environment and labor issues
appear to be the most common, and most U.S. manufacturers and retailers in the
apparel industry have adopted corporate codes that prohibit using child,
sweatshop, or prison labor. U.S. companies in such diverse industries as footwear,
personal care products, photographic equipment and supplies, stationary
products, hardware products, restaurants, and electronics and computers have
adopted corporate codes of conduct.
Multinational corporations
generally support the concept of codes of conduct that standardize rules of
corporate behavior across a broad range of countries and industries. While the
motivation behind adopting corporate codes of conduct can be quite complex,
multinational firms generally adopt codes of conduct because they believe they
represent good business practices. Generally, multinational corporations desire
national treatment as a basis for any investment agreement, but are concerned
that standards negotiated in one agreement could be applied to their worldwide
operations, regardless of the disparity in economic conditions between
locations, local customs, jurisprudence, or differences in local business
practices. Some firms also argue that codes which allow foreign groups to
submit complaints to U.S. regulatory bodies concerning the overseas operations
of the subsidiaries of U.S. firms could be used as a competitive tool to damage
the worldwide reputations of U.S. firms.
Industry-specific codes of
conduct are as varied and as extensive as the multitude of industries they
cover. Labor and environmental issues, however, are the two most frequently
covered areas in the codes, regardless of industry. Environmental standards
often comprise commitments from firms to be open to the concerns of the
communities in which they locate. The most common labor codes include
commitments for firms to provide a reasonable working environment, provisions
against discrimination and a commitment to obey laws regarding child labor and
compensation. Concerns over child and sweatshop labor, in particular, have
spurred some public groups to take action on their own.
Concerns of Stakeholders
While traditional economic theory
holds that corporations strive to maximize their profits to benefit the
stockholders, a broad group of “stakeholders” is pressing to have their
interests represented as well. These stakeholders argue that corporations have
responsibilities beyond the narrow scope of their legal charters, or that they
should abide by a “social contract” that reflects society’s changing social and
cultural mores. The size of the group of stakeholders and the social
responsibilities they expect varies with the size of the firm, the industrial
sector it is involved in, and its products and operations. This group of
stakeholders and the associated social responsibilities also become vastly
larger for firms that operate in more than one country and can include issues
beyond the common areas of workers’ rights, environmental concerns, and
business production or financing operations. At times, the issues sought by
stakeholders in one country can clash with those sought by stakeholders in
another country, for instance when workers in developed countries push for job
security, health care and other benefits, and environmental issues, while
workers in developing countries push for more local jobs and local managers,
worker training and education, technology transfers, and higher levels of local
production.