Global Compact's executive director: UN correspondent has "troubled relationship with facts"

Yesterday we received a copy of a letter sent by the executive director of the Global Compact to the editors of Foreign Policy. The letter is a response to statements made by UN correspondent Matthew Russell Lee in an article titled "Some Disassembly Required". In the article, Mr. Lee argued that many offices and positions at the UN could simply be cut without anyone knowing or caring, and that the disappearance of some of these "might actually improve things". He included the Global Compact in the latter category.

In the letter to the editors of Foreign Policy, Georg Kell, executive director of the Global Compact, states that it appears that Foreign Policy "did not exercise due diligence when fact-checking the claims made in Mr. Lee's contribution".

Mr. Kell also says that Mr. Lee has a "troubled relationship with facts" and that he "fails to understand the fundamental nature of the Global Compact as a platform for critical, yet constructive dialogue and learning".

With regard to the appointment of Mr. Chey Tae-Won - convicted of accounting fraud in 2003 - to the Global Compact Board, Mr. Kell provides the following clarification:

"Mr. Chey and other new Board members were recommended by Global Compact country networks, which form a crucial component of the Global Compact’s multi-stakeholder governance. These networks were invited to propose nominees to better reflect the Global Compact's geographic reach. A selection committee of the Global Compact Board (Sir Mark Moody-Stuart, Chairman of Anglo-American plc; Mary Robinson, Chair of Realizing Rights: The Ethical Globalization Initiative; and Georg Kell) reviewed all prospective candidates.

In Mr. Chey's case, the selection committee was well aware of his conviction and subsequent presidential pardon (which is not mentioned by Mr. Lee) in connection with violation of corporate governance laws. The fact that Mr. Chey and the SK Group had demonstrated much willingness to learn from past transgressions was a key factor in the decision-making process. By all accounts, the SK Group, under Mr. Chey's leadership, has emerged as a frontrunner in corporate governance in Korea.

To the Global Compact, this is highly relevant and a sign of positive change in the spirit of the Global Compact principles. It also reinforces the notion of continuous performance improvement. Consequently, the selection committee recommended his appointment."

The letter is available here.

© Illustration by Dave Gray.

UN correspondent: "Global Compact has become little more than a promotional tool"

In a recent article in Foreign Policy about his work as a correspondent at the UN headquarters in New York, Matthew Russell Lee severely criticizes the UN Global Compact. In his article, Mr. Lee argues that many offices and positions at the UN could simply be cut without anyone knowing or caring, and that the disappearance of some of these "might actually improve things". He includes the Global Compact in the latter category.

This is what Mr. Lee says about the Compact:

"In the category of UN departments that don't merely waste space, but actually make the world a worse place, consider the UN Global Compact housed in the annex on the other side of First Avenue. Set up by then Secretary-General Kofi Annan as the United Nations' interface with private business, it has become a platform for agribusiness giant Monsanto to talk at a 'VIP' luncheon about how it is solving the food crisis and for Microsoft's 'ambassador to Africa' - who just happens to be the brother of the United Nations' caretaker special adviser on Africa - to meet with African heads of state.

Recently, Secretary-General Ban Ki-moon appointed to the Global Compact's board of directors a South Korean businessman, Chey Tae-won, who was sentenced to three years in prison in 2003 for the fraud of inflating the profits of his SK Group, which he still runs, by $1.25 billion. Global Compact director Georg Kell told Inner City Press that Chey's service on the board was 'fitting', as Chey has learned from his mistakes. The same, of course, could be said of Bernie Madoff. Ban's spokesperson, when asked for Ban's defense of Chey's selection, said that Kell's response was all there was to say."

The article is available here.

Convicted businessman on Global Compact Board

On March 11, the Secretary General of the United Nations appointed six new members to the Board of the UN Global Compact. One of them is a South Korean businessman who was convicted of accounting fraud in 2003. Chey Tae-won, the current president and chairman of the SK Group, was sentenced to three years in prison following revelations of a massive accounting fraud. As the chairman of the SK Corporation, South Korea's biggest oil refiner and the flagship of the SK Group empire, Mr. Chey was convicted of inflating the 2001 profit of the conglomerate's trading arm, SK Global, by 1.5 trillion won (US$1.25 billion).

Mr. Chey had his three-year sentence for fraud suspended in 2004 and was pardoned in 2008, when the South Korean government announced sweeping pardons for some of the country's most powerful businessmen, including the head of leading carmaker Hyundai Motor, saying they were needed to help revive a troubled economy.

Yesterday a press conference was organized at the UN headquarters in New York to present the Compact’s Annual Review 2008. At the press conference, Matthew Lee from Inner City Press questioned Chey Tae-won’s appointment to the Global Compact Board. In his answer, the executive director of the Compact, Georg Kell, called Mr. Chey a "change agent": "Mr. Chey […] was indeed pardoned. He is a change agent. SK Electronics [sic] is THE conglomerate in Korea which has brought most change on the corporate citizenship agenda about, and he was proposed and chosen by the Korea Network, which is very strong, because we are a learning platform, and no better way of learning then to learn from mistakes." Mr. Kell also stated that Mr. Chey appointment is "very fitting" because the Global Compact is "not a white knight benchmarking exercise, which says 'If you participate in the Compact you are a holy person'. We need real world case studies and lessons to internalize the relevant lessons." (click here for video)

According to Matthew Lee, someone in the audience at the press conference joked: "Who’s next for the Global Compact Board? Bernie Madoff?"

© Photo by Chung Sung-Jun.

Global Compact’s real home should be at the General Assembly of the UN

Yesterday, at a press conference at the UN headquarters in New York, a senior advisor to the President of the General Assembly called on the Global Compact and the CEO Water Mandate to "see its real home as belonging […] at the General Assembly in the United Nations, rather than as controlled and influenced by the major water companies."

The senior adviser to the President of the General Assembly on Food Policy and Sustainable Development, David Andrews, is also a senior representative for Food and Water Watch, a consumer organization that opposes corporate control of global food and water resources.

At the press conference, which was organized to brief on the General Assembly's interactive thematic dialogue on the global food crisis and the right to food, Mr. Andrews mentioned that he had attended several meetings of the Global Compact's CEO Water Mandate at the last World Water Forum in Istanbul. He said: "It still is troubling to me to find the United Nations allowing itself, as a protector of the voice of the people, especially of the poor, to subordinate itself institutionally to a kind of market-driven vision. I would hope that in the future the Global Compact and the CEO Water Mandate would see its real home as belonging here at the General Assembly in the United Nations, rather than as controlled and influenced by the major water companies. […] What strikes me as someone who pays attention to the structure of agriculture and the structure of water, globally, internationally, is the strength of influence that major agribusiness and water companies have within the United Nations' system. It is striking to me because here is the peoples’ forum and it seems to be, in significant circumstances, subordinating itself to a view of the market. A view of the market that now in the light of the financial system and in the light of the lack of adequate regulation, in the light of outrageous speculation, says tat we need a new global architecture for the financial system. But we also need to marry that with attention to the food system and the water system, and recognize and appreciate the role of the UN in ensuring and working to the right to food and water."

Matthew Lee from Inner City Press will cover this story later this week, ideally after the UN Global Compact has responded to the press conference.

A webcast of the press conference is available here (from 21:15 onwards).

© Photo by Devra Berkowitz.

Scholars find that the Global Compact is a "promotional endeavor"

The Global Compact is a "promotional endeavor", according to Graham Knight and Jackie Smith. Last year, they published an article titled The Global Compact and its critics: activism, power relations, and Corporate Social Responsibility. The article was published in the book Discipline and punishment in global politics: illusions of control.

The authors of the article argue that the activities undertaken by the Compact provide companies with the opportunity to "learn better avoidance behaviour, i.e. how to reduce their risk of being complicitous in rights abuses, environmental harm, or corruption". Moreover, they think that the initiative "relies on voluntary compliance and self-policing on the part of its corporate participants, and does not entail any mechanisms of external monitoring, verification or sanctioning to ensure the latter are actually living up to their commitments and claims".

In their article, Mr. Knight and Ms. Smith criticize the Global Compact for its inability to secure corporate accountability. The authors believe that the most sustained and comprehensive criticism to the Compact has come from the Alliance for a Corporate-Free UN, a coalition centred on CorpWatch, a US-based corporate watchdog. The Alliance, which seized to exist in 2005, accused the Compact of facilitating "bluewashing": the fact that many global companies wrap themselves in the UN flag as a way to enhance their image as ethically responsible members of the global community.

The Alliance for a Corporate-Free UN also criticized the institutional capacity of the Global Compact. Compared to the World Trade Organization (WTO), for example, an organization with great influence in the era of globalization and able "to impose legally enforceable constraints on national governments", the Compact lacks authority and capacity. This points to a major flaw in the Compact: the absence of "any legally binding, enforceable mechanisms to ensure [transnational corporations] are accountable for their actions and inactions."

Mr. Knight and Ms. Smith believe that "putting the accent on promoting corporate responsibility through socialization and communicative action means that the [Global Compact] fails to achieve corporate accountability in a legally effective way." The reason for this failure would be rooted in unequal power relations – the imbalance of power between corporations and states. The authors apply Foucault's conceptualization of power, which in his words "is not only constituted, organized, and exercised but also resisted, challenged and reversed", in order to explain how the international community may respond to corporate violations of universal norms. "Although civil society lacks the legally binding capacity to sanction corporate and governmental actors, it can nevertheless use its communicational resources in the public sphere to pressure and influence these actors."

The chapter compares the ten principles of the Global Compact to the UN Norms for Business, in order to demonstrate that communication can be an "effective strategic tool to regulate corporate conduct and to ensure compliance with and support and promotion of human and environmental rights". Unlike the ten principles of the Compact, the UN Norms for Business were more specific and stringent and, according to the authors, could impose definite obligations and responsibilities to companies. Moreover, the UN Norms for Business emerged from the UN system. The Norms were developed within the Office of the High Commissioner for Human Rights, with the support of the UN Human Rights Commission. By contrast, the Compact was founded through a completely new institutional arrangement. The authors appear to believe that the UN Norms for Business still have potential within the UN, despite the Norms failing to pass the draft stage and subsequently being declared "dead".

Mr. Knight and Ms. Smith conclude that "any attempt to effectively curb the antisocial corporate practices will require efforts to fundamentally restructure power relations between states, international institutions, and [transnational corporations]." That is why, "instead of serving as partners to global CSR schemes", civil society organizations should work to re-assert the autonomy of the state from markets and reclaim the disciplinary and regulatory powers over them.

© Photo by sarah1rene.

Who said what in March 2009

“The main obstacle has been Deutsche Bank’s unwillingness to engage in a dialogue. They always cite their membership of the United Nations Global Compact, but this initiative does not have any mechanism to see whether the businesses are living up to its ideals. It is, therefore, effectively useless and just paraded by businesses as a kind of good-governance marketing tool.” - Tom Mayne, a campaigner with Global Witness, in an interview about Turkmenistan’s public funds held in accounts at Deutsche Bank.

“The CEO Water Mandate, an initiative launched in March 2008 and sponsored by the United Nations Global Compact Program, is presented to the world as an initiative by corporations and CEOs that encourages and enables corporations to take responsibility for their impact on global water resources. It is one of an increasingly dizzying array of ‘corporate social responsibility’ initiatives that make big promises about improving corporate practices, but in many cases have yet to deliver meaningful results. The Mandate is no exception.” - Mark Hays, senior researcher at Corporate Accountability International, in an article about the World Water Forum.

“On the one hand, as the UN Secretary-General, you have correctly issued repeated warnings about increasing water shortages around the world while the UN President, Miguel d’Escoto, has called for the recognition by member states of water as a fundamental human right. On the other hand, the UN has, in effect, taken measures to consolidate the rights of for-profit corporations to secure control over the world’s freshwater sources and supplies by harboring the CEO Water Mandate under the UN Global Compact. As a result, there is the very real danger that water as a corporate right will trump water as a human right and an ecological trust.” - From a letter to the UN Secretary General. In the letter, a group of 118 organizations from 33 countries calls on him to withdraw his support for the CEO Water Mandate.

“Dr. Uddesh Kohli is a highly respected member of the Governing Council as well as senior adviser to the United Nations Global Compact (UNGC). Let it be categorically clarified that Dr. Kohli has never availed any undue financial favors through the society, nor has he been engaged in misrepresenting or finalizing the record notes and minutes of the meetings.” - Satish Rao, secretary of the Global Compact Society India, in his reply to Suresh Pramar, who had submitted a letter of complaint to the president of the Global Compact Society in January 2009.

© Photo by motocchio.