Tony Juniper: Big business must be held to account

Governments around the world have favoured corporations at the expense of their citizens for far too long, says Tony Juniper. They should stop cosying up to them – at Davos or anywhere else – and start putting the interests of society above those of business – The latest blockbuster James Bond movie, “Die Another Day”, shows corporate smuggling and the laundering of conflict diamonds being used to fund state terrorism. Bond has to resort to his usual dramatic heroics to dispatch the corporate villain to an untimely but deservedly unpleasant end. Unfortunately most victims of corporate abuses cannot call on 007 to bring the wrongdoers to account. Nor can those whose lives are daily blighted by the “normal” operations of companies that are acting within the letter of the law.

Mistrust in corporations is not limited to scriptwriters. As the World Economic Forum discovered in its public opinion research on the subject of trust, national and multinational companies languish in the relegation zone of the table of institutions that people trust to act in society’s best interests. This is no short-term phenomenon, although it is exacerbated by recent high-profile corporate scandals. It is the product of years of exposure of corporate double standards, hypocrisy and political interference.

Trust has been lost because the problems are serious and the public sees governments and intergovernmental institutions, such as the IMF and the World Trade Organization, putting the narrow financial interests of businesses above those of society. These are not problems of perception, to be overcome by explaining loudly and slowly. They require radical surgery and systemic reform: surgery to separate corporate influence from public governance, and reform to establish companies’ accountability to stakeholder citizens. Public trust cannot be rebuilt through private dialogue alone. It requires transparent accountability to stakeholders.

Corporate governance research shows how trust requires stakeholders who are empowered. Without accountability, private dialogue merely neutralizes dissenting voices and provides fertile soil for conflicts of interest to flourish. Corporate executives are the first to recognize this when it comes to financial jiggery-pokery that threatens their own financial interests. The queue of executives and investment managers calling for higher standards of transparency following recent scandals such as Enron, Arthur Andersen and Merrill Lynch has been numerous and vociferous. The problems of Enron and WorldCom are not those of a few bad apples. They are systemic. Self-regulation and voluntarism are not the answer.

Where companies, responding to the tyranny of short-term shareholder value, deliberately seek to conceal the truth about their financial circumstances, the consequences harm all companies’ stock values, and the lives and livelihoods of millions of people through their impact on jobs and pensions. Yet in the arena of social and environmental performance, the safeguards against such abuses are almost nonexistent, while the potential impact on lives and livelihoods – especially in the global south – are huge.

As long as environmental and social resources – such as the use of the atmosphere as a sink for pollution – remain underpriced, companies will have an incentive to externalize costs onto the environment and society. The driving forces of competition and shareholder value make it virtually impossible for corporate executives to act voluntarily, even when the moral case for doing so is clear. Worse, these drivers mean that companies lobby actively against regulation or fiscal measures to internalize costs, and respond only when their reputation is threatened by NGOs or governments in high-profile cases that appeal to the kangaroo courts of the western media.

On these issues the same executives who lobby governments privately are unwilling to engage in public debate. Friends of the Earth challenged all corporate participants at last year’s meeting to declare their position on a legally binding international framework on corporate accountability and liability. More than 99% of those approached failed even to respond, and most of those who did avoided the question.

Perhaps it is naive to expect turkeys to vote for Christmas, but if those businesses that claim to act responsibly decide to close their eyes to the systemic impact of corporate governance and behaviour, then governments will have to seize the initiative – and in doing so regain some of the public trust they have themselves lost by getting too close to business. At Davos, and indeed in many other forums, there is more than enough private dialogue. But everywhere there is too little transparent accountability.

This is a key challenge for governments: rather than engaging in dialogue to encourage businesses to adopt voluntary approaches to “corporate social responsibility”, governments should be responding to democratic citizen demands and developing the legislative framework to ensure accountability at all levels. In particular they should deliver on paragraph 45 of the Johannesburg Plan of Implementation, adopted by the World Summit on Sustainable Development in September, by developing a global framework agreement for corporate accountability. Such a convention must:

• establish mechanisms for adversely affected stakeholders to obtain redress through exercising rights;
• establish social and environmental duties for corporations;
• establish rules for consistently high standards of behaviour by corporations;
• create a market framework in which progressive companies can thrive and in which governments respond fairly to the demands of their citizens rather than to the lobbying of corporations;
• establish appropriate sanctions for breaches;
• ensure that the ecological debt owed by corporations to the south is repaid;
• and secure justice for communities threatened with or exposed to environmental injustice – north and south.

New forms of corporate accountability are today more vital than ever. Public interest constraints are being removed or relaxed in the course of removing non-tariff barriers to trade. The growth of truly global companies makes it more difficult for citizens and communities to seek redress, while consolidating companies’ power and influence. Corporations are increasingly taking control of industries and services previously run by governments, without taking on the associated public interest responsibilities. And the scale of corporate impacts is growing and becoming increasingly remote from both the owners and the customers of the companies. Davos is rather remote from the daily conflicts between business and society.

Oil washes up on the coasts of Galicia in Spain, threatening the livelihoods of fishermen. Timber continues to be illegally logged in Indonesia, destroying the environment of indigenous people. Meanwhile, stock markets languish around the world as investors expect yet more disclosures of overstated earnings. It is time for governments to look beyond the short-term interests of business. It is time for them to take action to deliver corporate accountability, to ensure the right of citizens around the world to call companies to account for their activities and the impact they have on society and the environment.

Tony Juniper
Tony Juniper is vice-chair of Friends of the Earth International and a director of Friends of the Earth England, Wales and Northern Ireland. Friends of the Earth International has decided not to participate at Davos, but Friends of the Earth England, Wales and Northern Ireland is participating in the Annual Meeting 2003.