Business and Human Rights in a Time of Change (Christopher L. Avery, Nov. 1999)
4. A slow response to the new realities
The trends discussed above in section 2 mean that companies will increasingly find human rights issues coming onto their agenda, whether they like it or not. Business is being warned about this; for example, in November 1998 Daniel Yergin, Chairman of Cambridge Energy Research Associates, told a meeting of the American Petroleum Institute that he considers one of the most important pressures on oil companies to be a long-term, growing emphasis on human rights and ethics.[429] Journalist Bennett Daviss noted in 1999: "[A] corporation will not be able to choose whether to have a social identity; the public will fashion one for it based on a company's social and environmental actions - or lack thereof."[430]
But as the millennium approaches, most companies have still not come to terms with the new reality that they are to be held accountable for their human rights-related record. Most have not yet seriously addressed international human rights issues in their company policies and practices. As Sir Geoffrey Chandler notes:
Shell and BP have led the way in explicitly spelling out new human rights principles for their companies and a commitment to their implementation. Rio Tinto has followed these major players on the world scene. But the absentees - the American, German, French and Italian transnationals - remain in the majority, treating human rights violations as external to their responsibilities, regarding any adverse impact as a public relations problem rather than one that lies in the heart of the boardroom….[431] Concern for human rights appears to require corporate disaster or attritional external pressure to bring change, as did the slow corporate acceptance of protection of the environment.[432]
Looking back at the criticism Shell faced after the execution of Ken Saro-Wiwa and the Brent Spar incident, Shell's Senior Managing Director Cor Herkstroter acknowledged that Shell had "become inward looking, isolated,"[433] and had been guilty of "technological arrogance"[434] and insensitivity to the view of society.
In When Good Companies Do Bad Things, the authors identify why certain companies have failed "to prevent bad things from happening" (including human rights crises):
- They fail to create a culture that tolerates dissent or one in which planning processes are encouraged to take nonfinancial risks seriously.
- They focus exclusively on financial measures of performance.
- They discourage employees from thinking about their work as whole people, from using their moral and social intelligence as well as their business intelligence.
- They talk to the same circle of people and information sources all the time and avoid people or organizations who disagree with or criticize them.
- They let their commitment to a particular project or product overwhelm all other considerations -- financial, ethical, or social.
- The senior managers consider ethical or social issues as matters for somebody else to resolve - a vice president for social responsibility, the United Nations, the host country government.
In short, when companies have not examined their operations from a long-term perspective in a social context, they are much more vulnerable to the type of bad things we have described in this book (what author Ian Mitroff calls crisis-prone companies). We propose that once a company brings this perspective to its strategy development and operational planning, it will, of necessity, reperceive the issue of social responsibility and find many opportunities to turn that issue into a distinctive competency.[435]
Sir Geoffrey Chandler has noted that…
it is perhaps unsurprising that companies should fail so significantly in understanding the world in which they work. Technical and commercial success, the insulating carapace of high salaries, company transport, and corporate palaces shield senior executives from a world where non-governmental organisations (NGOs) and single-issue pressure groups, rather than politicians, now reflect the values of society and attract popular allegiance[436]….From this viewpoint, the corporate instinct is to rebut, to look to public relations as a defence, not to change.[437]
Peter Drucker also has recognised the fatal tendency of many companies to resist change:
Businesses that go unchallenged for long decades are rare exceptions. The great majority, no matter how successful, need to think through their basic assumptions much sooner. The great majority, moreover, then find it almost impossible to change.[438]
Drucker notes that over the past forty years only one-third of the 500 top manufacturing companies in the U.S. have managed to maintain their position, and those that did maintain their position "had to change fundamentally." He notes that one of the biggest threats to the survival of companies is "complacency."[439]
It is disappointing that so many companies that find themselves embroiled in a human rights controversy have repeated each other's mistakes. They do not seem to have learned from the experiences of other companies, and have paid for this failure with permanent damage to their reputation.
An intelligent company response to allegations of involvement in human rights abuses would be to:
i) state that any involvement in abuses would be contrary to the company's policies (companies with explicit human rights policies can do this more persuasively);
ii) promise a prompt, thorough and impartial investigation;
iii) pledge that if any abuses are found, the company will take prompt action to remedy the situation and to prevent further abuses.
But most companies start by denying the allegations and attacking the critics. Were these companies (whether or not they believed the allegations to be true) so out of touch with societal attitudes towards human rights issues that they thought blanket denials and attacks on human rights advocates would stop the pressure? It tended to have the opposite effect. The company's next step often has been grudging recognition that something needs to be done, but too often it tries to get by with minimalist steps such as a half-hearted internal review that looks like a public relations exercise. This just prolongs the controversy and further damages the company's business and reputation. When the company finally (often years later) admits that mistakes had been made, agrees to take remedial action, and adopts human rights policies, shareholders should ask why the company had damaged itself by not taking these steps sooner, why the company's management allowed itself to be consumed for years by a human rights controversy that could have been avoided. If positive steps had been taken at the outset they would have been seen as acts of corporate leadership (and more importantly they could have stopped human rights abuses sooner); after so much delay they appear to be defensive moves, an exercise in damage control. Sir Geoffrey Chandler recently wrote:
Why [do] the boundaries of accepted responsibility have to be pushed forward by disaster and external pressure, rather than forethought and internal leadership? Is there an inherent incompatibility between corporate purpose and the valid expectations of society? …Why…do the transnational companies - some of the most sophisticated of organisations - require damage to reputation or a long attritional battle to force change?[440]
The Economist Intelligence Unit's Business Asia (a "fortnightly report to managers of Asia operations") in 1997 issued a report entitled "Just don't," warning other companies to avoid the mistakes Nike had made:
Human and labour rights groups, along with the news media, bring images of underpaid, ill-treated workers - adults and children - into living rooms worldwide. In this instance, usually disinterested consumers might vilify a once loved brand name. It is this chain of events that makes company managers lose sleep at night: manufacturing decisions become subject to the force of public opinion….
But the question remains, how can a company prevent, or at least detect and fix, a problem that might balloon into a PR nightmare?….
Hindsight is of course 20:20 and Nike would doubtless prefer to have caught these problems before they became headline news….In today's marketplace, consumers demand that brand leaders embody the virtues of social responsibility. Nike…would have done better to focus more resources and money on the early steps in the manufacturing of its products. Humanitarian issues aside, it is clear that one bout of bad publicity can undo hundreds of millions of dollars worth of marketing. Indeed a joyless marketing manager might point out it would have cost less to pay plant workers properly than to rebuild customers' good will.[441]
No doubt Shell has learned many lessons from its mistakes, and Nike has learned many lessons from its mistakes, and as the Economist Intelligence Unit says, "they are better off for the lessons learned."[442] But why had Shell not learned more from earlier mistakes by Freeport-McMoRan and Rio Tinto so that it could have avoided similar problems, and why had Nike not learned more from the experiences of The Gap and Shell? If the management and directors of other companies are not now learning from what happened to Shell and Nike and acting on those lessons by proactively adopting and implementing human rights policies and reviewing their human rights practices, they are not doing their job on behalf of shareholders, and not fulfilling their responsibility to promote respect for human rights. They risk being added to the list of companies whose reputations have been damaged by a human rights controversy. As Sir Geoffrey Chandler notes, "It was the absence of appropriate policies and practices which moved Shell and BP from the financial columns of the media to front page headlines for their actions in Nigeria and Colombia respectively."[443]
Corporate public relations experts now are telling business that it is better to address human rights issues proactively and constructively rather than waiting to react when the company comes under attack. Hill & Knowlton, a U.S.-based public relations firm, advises companies to deal with labour issues constructively rather than defensively.[444] Referring favourably to Hill & Knowlton's advice to business, the Economist Intelligence Unit's Business Asia noted:
Many companies enter Asia without fully understanding the local business environment. Finding the cheapest contractor or partner may not be in the best interest of the firm. Hiring a local consultant to help a firm acclimatise is key. Advisors can help to proactively develop a strong relationship with unions, the local media and, most importantly, with workers.[445]
Sir Geoffrey Chandler urges companies to face up to human rights challenges with wisdom and leadership rather than defensively resisting the attention being focused on their social record:
For companies, scrutiny is here to stay as they acquire greater influence in a globalised world. They face two possible scenarios: they can resist the extension of the boundaries of their responsibilities, as they have in the past, so jeopardising their own reputations and - more dangerously - endangering the principle of the market system as a whole. Or they can demonstrate real corporate leadership which will underpin their economic contribution and raise their reputation. There are no other choices.[446]