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On July 12, the Chilean newspaper La Nación published an article about Global Compact Board member Guillermo Carey. Mr. Carey is also a senior partner at law firm Carey & Allende Abogados, which is among the fifteen corporate law firms from around the world selected to participate in a UN-led mapping project to identify whether and how national corporate law principles and practices currently foster corporate cultures respectful of human rights.
The author of the article in La Nación, Mariela Vallejos, says that she has documents alleging that Mr. Carey was involved in the events that led to the kidnapping and assassination of Commander-in-Chief General René Schneider in 1970. After the 1970 Chilean presidential election, a plot to kidnap General Schneider was developed. Eliminating General Schneider became a key prerequisite for a military coup, because he opposed any intervention by the armed forces to block Salvador Allende's constitutional election. After repeated attempts, General Schneider was assassinated on October 22, 1970.
As a main source, Ms. Vallejos cites the memoirs of Admiral José Toribio Merino, who was part of Pinochet's military junta. According to his memoirs, Mr. Carey hosted one or more meetings at his house with those involved in the plot to kidnap General Schneider. La Nación alleges that Mr. Carey fled to Argentina on the day of the assassination. A few days later, the Chilean police transmitted an international warrant for the arrest of Mr. Carey to Interpol.
Mr. Carey vehemently denies all allegations made by La Nación. Ms. Vallejos mentions in her article that his name was not included in the case against the suspects of kidnapping and killing General Schneider. Ms. Vallejos interviewed Mr. Carey and sent him her article before La Nación published it. According to Mr. Carey, his enemies have tried to implicate him because he had earlier been the attorney for the leader of the group that organized the plot.
Ms. Vallejos also raises questions about the selection procedure for Global Compact Board members. The purpose of the Board, which is chaired by the UN Secretary General or in his absence a Vice-Chair, is to provide strategic advice for the initiative as a whole, making recommendations to the Global Compact Office, participants and other stakeholders. The members of the Board act in a personal, honorary and unpaid capacity. La Nación discovered that Mr. Carey was recommended in 2006 by a representative of the United Nations Development Program (UNDP) in Chile.
According to Matthias Stausberg of the Global Compact Office – who was interviewed by Ms. Vallejos – board members are appointed by the UN Secretary-General, based on recommendations made by a nominations committee. Nominations are normally vetted by the local networks of the Compact. When Mr. Carey was appointed as a Board member, the nominations committee did not exist yet. The article in La Nación seems to suggest that Mr. Carey was nominated because of his friendship with the UNDP representative in Chile. Ms. Vallejos interviewed this UNDP representative and he told her that he did not know why Mr. Carey was elected as a Board member. Mr. Carey himself told Ms. Vallejos that he also wondered why he was appointed by former Secretary-General Kofi Annan.
Mr. Carey is not the first Global Compact Board member who faces criticism for things he might have done in the past. In March this year, the UN Secretary-General appointed a South Korean businessman who was convicted of accounting fraud in 2003. He 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.
© Photo by Julio Pinar.
At the beginning of the Global Compact Board meeting on July 24, a message of UN Secretary-General Ban Ki-moon was delivered by his Deputy Chef de Cabinet, Kim Won-soo.
In his message, Mr. Ban said that he regretted that he could not participate in the meeting. He welcomed the newly appointed Board members and said that the Global Compact can play a key role in finding solutions for the global economic crisis and other challenges, "by helping to restore confidence in the private sector and facilitating the transition to a low-carbon economy".
The UN Secretary-General also said that the integrity of the Compact is a "paramount concern" and that he relies on the Board "for guidance about ensuring the accountability of participant engagement". Moreover, he said: "The Compact is voluntary in nature, providing a forum for learning and dialogue to advance United Nations goals. It was never meant to be a sanction-based initiative, which I understand might be a disappointment to some. I trust [the members of the Board] will work together to ensure that the accountability of the Compact is consistent with its mandate and resources."
One of the most important points on the agenda of the Board was a complaint against CNPC / PetroChina. In February this year, over 80 civil society organizations submitted an open letter to the Compact in support of a formal complaint against PetroChina, a Global Compact participant. The civil society groups allege that CNPC, PetroChina's parent company, is a major financer of the Sudanese government and that it indirectly supports the Sudan regime that is responsible for the human rights crisis in Darfur.
© Photo by UN Photo / Evan Schneider.
By Tabasum van Til LL.M.*
The lack of transparency in corporate structure of PetroChina and CNPC causes great difficulties in establishing responsibility and accountability for human rights abuses.
In the light of the complaint against PetroChina, which will be discussed at the Global Compact Board meeting on July 24, 2009, it is important to understand the intricate nature of China's state owned enterprises (SOEs). In the communications between the group of civil organizations that filed the complaint and the Global Compact Board it has been questioned whether PetroChina and its parent company CNPC are separate corporate entities. This fundamental question needs to be answered before any responsibility or accountability for misconduct can be established.
The centerpiece in China’s economic reforms has been the separation of State ownership and governance. Although in 2005 a separate legal personality has been granted to Chinese SOEs, behind the scenes strings are still attached (See Human Rights, Chinese Business, p. 54-55). Due to their public-private dichotomy, SOEs can either be used in governmental or in private commercial activities. Since resources are a matter of national interest, the enterprises in the extractive sector are state-controlled. It is therefore likely to assume a highly involved participation by the Chinese government in privatized SOEs or private enterprises. This influence can be deducted from the practice of corporate policies, indirect funding, the appointment of board members, supervisor or management and the prerogative of Communist Party members on key positions. All these indications might add up to the conclusion of the State being the owner of an enterprise.
This leads us to another hurdle, the lifting of the "corporate veil": China needs to establish a separate legal personality, through the partition of parent and subsidiary shares. In the case of PetroChina, a subsidiary of CNPC, this partition is questionable. The distinction is interesting when it comes to liability. The possibility of direct liability of CNPC is an option due to the ascertaining of the lack of due care through the control over PetroChina's policies on and corporate conduct. An indirect joint liability of CNPC and PetroChina can be established on the base of the use of common officers (CEOs). Even though PetroChina is a legally independent enterprise on paper, the possibility of joint action in human rights violations with the Sudanese government remains, in spite of CNPC's defense that only CNPC, which is not a participant in the Global Compact, is operating in Sudan. It can therefore be questioned to what extent a key enterprise such as PetroChina is operating independently, without an indirect connection to a State actor such as an SOE (CNPC) or the Chinese government by means of a State organ (SASAC).
Corporate power obliges. It is in the hands of the parent company CNPC to provide for transparency regarding its corporate structure. It is up to PetroChina to make amends as a mature and worthy member of the Global Compact, in the light of the Communication on Progress Policy. Moreover, the company should provide for information on corporate ownership, its objective, the nexus with its parent and governmental financial and policy aid and in addition to allow independent performance audits. It is up to the People’s Republic to wisely monitor its state agents and other business actors, at the least in the light of pure corporate governance, national CSR standards, and agreed upon international treaties. (See chapter 3 of Human Rights, Chinese Business). The lack of transparency of the corporate structure of both PetroChina and CNPC needs to be edified by the Chinese government as CNPC's largest stakeholder and therefore owner of PetroChina. In the light of China’s current improvements on CSR and corporate governance this is not an intrusive request. China’s on the whole non-responsive attitude is cumbersome and in the long run not beneficial to its private sector. As a potential leading nation here to stay, China should clearly define its goals as to what level of state responsibility it is willing and necessary to live up to.
However, with regard to established human rights bodies and initiatives such as the Global Compact, current corporate conduct demonstrates it is time to grow some teeth. For that reason, understanding the limited means and scope of the Global Compact and bearing in mind the delicate nature of consultations with different stakeholders, it is of importance not to let this opportunity to steer the course of abusive companies slip through its fingers. It should be possible as mature and equal players in the same international arena to come to an understanding, however delicate the matter might be. Any outcome of the Global Compact Board meeting might lead to a ripple effect: in case this current complaint is acknowledged, chances are that allegations against other oil companies will follow and misconduct and complicity will be rightly addressed. If however this complaint will insufficiently be dealt with, chances are the abuse will unfetteredly remain. It should no longer be tolerated to partake in window-dressing by supporting CSR initiatives while conducting business activities otherwise. Chinese state owned enterprises, however double-natured, should show their real face.* This article is based on Ms. Tabasum van Til's master's thesis Human rights, Chinese business: how China's state-owned enterprises fit into international human rights law. The thesis is available here.
The Global Compact Office has issued a note to emphasize that its request to remove the reference to the Compact from the annex of the ISO 26000 standard should not be interpreted as a general disapproval of the standard. Last week, the Office released part of an exchange of letters between Georg Kell, the Compact's executive director, and Rob Steele, secretary-general of the International Organization for Standardization (ISO). In a letter dated 16 July, Mr. Kell explained that his request for removal of the reference to the Compact from the annex of the ISO 26000 standard had repeatedly been "misconstrued as a general disapproval of ISO 26000". "This is simply not the case", Mr. Kell said. The conciliatory tone of the letter contrasts sharply with that of the letter sent to ISO about a month ago, in which the Office complained about the decision of the ISO 26000 Working Group to not include references to "the world’s foremost social responsibility initiative" in the text of the standard.In a reply to Mr. Kell's last letter, ISO's secretary-general appeared to welcome the change in tone. Mr. Steele expressed his organization's appreciation for the Global Compact's support and contribution to the development of ISO 26000, particularly through the work of its local networks. "I am pleased that, on the whole, you view that there is substantial consistency and complementarity between the current draft of the ISO 26000 and the Global Compact ten principles," Mr. Steele wrote.© Photo by AKY.
We have reported several times about the conflict between the Global Compact Society in India and Suresh Pramar, ex-joint secretary of the Society. Last week it escalated. Georg Kell, the executive director of the Global Compact Office, decided to remove Mr. Pramar’s organization, the Global Gandhian Trusteeship and Corporate Responsibility Foundation, from the list of participants in the Compact.
Mr. Pramar keeps a website and a discussion group, which are both called "Hamara Global Compact". He has repeatedly made accusations of abuse of power against Dr. Uddesh Kohli, the coordinator of the Focal Point for the Global Compact in India. In March and May 2009, the Global Compact Society in India sent two letters to Mr. Pramar to counter the accusations. In its last letter to Mr. Pramar, the Society enclosed a list of "facts relating to issues and statements" made by Mr. Pramar. According to the Society, Mr. Pramar should refrain from designating himself as the joint secretary of the Society, because his term as "honorary joint secretary" was not renewed after June 2008. Moreover, the secretary of the Society stated that the allegations constituted "an ill-informed attempt" to "vilify a noble initiative" largely due to Mr. Pramar's personal motivations. This did not stop Mr. Pramar from accusing the Society of irregularities.On June 29, Mr. Kell urged Mr. Pramar to immediately "cease and desist [the] use of the Global Compact name". In an e-mail to Mr. Pramar, Mr. Kell said: "If you do not stop using our name in this way creating confusion and undermining the Global Compact in India, we will be forced to take further action. Possible actions may include revoking your participant status, requesting assistance of the relevant Global Compact governmental authorities and/or instituting legal proceedings."
A few days later, Mr. Pramar sent a lengthy reply to Mr. Kell, in which he stated that he had not used the logo of the Global Compact and that he had never claimed to be a spokesman of the Global Compact. "Your threat to revoke the membership status of the Global Gandhian Trusteeship Foundation is not going to give us sleepless nights", Mr. Pramar said in his e-mail to Mr. Kell. On July 7, Mr. Kell notified Mr. Pramar that his organization was no longer a participant in the Global Compact: "In light of your last e-mail to me, which indicates that you have no intention of abiding my request to stop using the Global Compact name inappropriately and undermining the initiative in India, we are left with no option but to remove your entity's name from our list of participants. This is effective immediately."© Photo by Taara.
In an article published in the Journal of Macromarketing, professor emeritus Robert W. Nason examines the UN Global Compact to understand its impact on and its potential for addressing the dysfunctions of modern-day globalization. He seeks to address the question whether the Compact has or can provide some of the preconditions necessary in the global factor and product and service marketplace. After a description of the Compact, he presents arguments for and against the Compact, reviews evidence from three empirical studies and discusses external drivers affecting success. Mr. Nason also makes an assessment of the current state and potential of the Compact.
He concludes the following:
"During the past seven years, the UN Global Compact has become the largest voluntary corporate-citizenship initiative attempting to elevate and to level the norms of corporate behavior in world markets. Impressive as this start is, the Global Compact has significant shortcomings that threaten its future. Its strategy of having a low bar for admission to drive numbers of participants, along with weak, vague, and toothless requirements of performance, undercut the Compact’s future potential in two ways. First, actions by current participants have not seriously addressed the issues represented by the Compact’s ten principles beyond what they would have done without it. Second, participants do not represent the commitment and actions of innovators and early adopters necessary to gain respect from the vast majority of international companies, thereby driving the global adoption of the Compact norms. Unless the quality of participants is placed above quantity, the Compact will ultimately fail to instill the norms imbedded in its ten principles in the world market in any meaningful sense."
In October 2008, Antonio Vives, consulting professor at Stanford University, also argued that the Global Compact should go for quality instead of quantity. He said: "[…] For the Global Compact to add value, it must become a more exclusive club, one that implies a 'membership fee', that is, one that demands responsible conduct from all its members. […] Perhaps there are too many members for a club like the one proposed, which admits anyone, and therefore devalues its membership."
Professor Nason’s article is available here.
© Photo by nerv.easy.
The secretary-general of the International Organization for Standardization (ISO) has responded to a letter from the Global Compact Office. In the letter, the executive director of the Office requested ISO to remove the reference to the Global Compact from the annex of the ISO 26000 standard – an international standard that provides guidance on social responsibility.
In his reply to the Global Compact Office, ISO's secretary-general Robert Steele says that he views as "unfortunate" that the Office wishes there not be any mention of the Compact in the ISO 26000 standard. According to Mr. Steele, the current draft of the standard is "at least consistent with the ten universal principles" of the Compact. He also states that the Global Compact Office has been involved in different levels of the working group that is drafting the standard, and that the Office has "indeed been able to contribute and indicate [its] perspectives on the evolution of this ISO standard."
In 2006, the Office signed a Memorandum of Understanding (MoU) with ISO related to the development of the ISO 26000 standard. The purpose of this MoU was to encourage cooperation and mutual support between ISO and the Global Compact Office. Specifically, both parties agreed to collaborate extensively on the development, promotion and support of the ISO 26000 standard. In an explanatory note published in November 2006, the executive director of the Office said that the outcome of the ISO 26000 process as a minimum should be consistent with and complement the ten principles of the UN Global Compact.As Mr. Steele correctly states in his letter, the current version of ISO 26000 is consistent with the principles of the Compact. However, it is clear that the Global Compact expected to feature as a main character in the new ISO 26000 standard.© Photo by Fred.
On July 12, the Chilean newspaper La Nación published an article about Global Compact Board member Guillermo Carey. Mr. Carey is also a senior partner at law firm Carey & Allende Abogados, which is among the fifteen corporate law firms from around the world selected to participate in a UN-led mapping project to identify whether and how national corporate law principles and practices currently foster corporate cultures respectful of human rights.
