Corporate control
MALAYA!<br>Salbiah AhmadPublished: Jan 2, 2001 2:52 AM | Updated: Jan 29, 2008 6:21 PM
The ultimate responsibility of a corporation and its officers is to make profit, declares Milton Friedman. The law of corporations is historically informed by the profit motive and law is structured basically to facilitate commerce.
Corporate lawyers and captains of industry swear by Gower, the doyen of company law who argued that company directors should not subordinate the interests of shareholders to those of consumers, the nation and employees, or they will fall "foul of the law".
In this wake, commercial contracts, management agreements and joint ventures are drafted and crafted with scant interest beyond the legal confines of the law. Thus, for example, logging contracts entered into between a company and the state have little respect for human rights of indigenous communities living on the land, nor for the environmental degradation that would ensue.
Corporate lawyers argue that clients need only abide by the laws in countries in which their clients intend to set up business and their sacred duty is reserved for the clients who instruct them. True to the corporate business ethic, contracts are often drafted with the most minimum provision for liability.
When we talk about the Third World, there is very little law to regulate corporate responsibility and accountability, or none at all. In the last decade or so, Third World corporations have caught up with their counterparts and are investing in "lesser-developed" Third World countries.
In this scenario, Malaysian timber companies with "rainforest expertise" will log in the Amazon, Indo-China or Irian. A US-branded ready-to-wear may be made in an outfit in Asia or Latin America where labour laws are lax.
Improved world communications, policy reform initiatives like privatisation and trade liberalisation supported by even bigger corporations united for commerce like the World Bank and the World Trade Organization have facilitated the corporate expansion drive worldwide. Corporations have a legal personality which transcends political and national boundaries.
The global economy has proven that the transnational and multinational entity is the most effective mode of economic production and corporations provide leadership in trade, investment and financial services.
Corporations are involved in all aspects of human life from providing public services like water and electricity to performing tasks expected of governments or relinquished by governments like education and health. In a nutshell, corporate entities define and maintain human existence within the industrialised world.
Soft power
Corporations are wielding more power than governments. Power demands accountability. But when corporations discuss the rule of law, it revolves around protection of private property and investment. The rule of law here is about supplying the rules so that businesses and investors can plan actions to avoid disputes. Disputes and the risk of disputes raise the risk and cost of new ventures, narrowing the profit margin.
Corporations also represent a key element in "soft power". Hard power consists of military force and other sanctions that can compel compliance by another state. Soft power consists of culture, ideology and institutions that can set agendas and the terms for international debates (Joseph S Nye, Bound to Lead, 1990).
Nye argues that multinationals (MNCs) are possible vehicles for protecting the most powerful nations. Other critics moot that governments (through aid and foreign policy) and MNCs band in creating a business climate and political order that are more conducive to their interests. They are allegedly "investing in repression".
What is the word on accountability and social responsibility of transnational corporations today? Individual country laws are inadequate for regulating transnational corporations which operate in several jurisdictions.
The majority of international human rights covenants deal with state parties and individuals and not corporations as such.
Codes of conduct abound, the latest being the UN-sponsored Global Compact which has received worldwide criticisms from citizens groups and [#1]NGOs[/#]. But codes of conduct are not self-executing.
Protest marches (Seattle in 1999, Washington in April, 2000 and Melbourne in mid-September, 2000) have registered citizens' dissent but not sufficient enough to dent the corporate armour.
NGOs lobbying the UN insist that the UN Sub-commission on the Promotion of Human Rights regulate the behaviour of transnationals and work towards binding international instruments for compliance.
What is also on the drawing board, is the re-conceptualisation of the nature of corporations as moral agents which must accept obligations and responsibilities beyond that owed to shareholders.
The subject of corporate responsibility is no longer confined to directors' duties to shareholders, reporting obligations or employee welfare. Responsibility includes environmental sustainability, accountability, transparency of corporate entities and human rights.
Corporations as legal persons are bound as individuals are for the promotion and respect for human rights. The corporation as a separate legal entity is arguably capable of exercising control and able to make choices and capable of its own separate responsibilities (HLA Hart, Punishment and Responsibility, 1968).
Analysing behaviour
Work has been done on analysing corporate behaviour and policy from a human rights perspective as opposed to economic norms of the marketplace. The traditional separation between social policy and free enterprise is being challenged as part of the emerging human rights discourse.
This trend is enhanced by the fast-shrinking global environment. There is an urgent sense of social solidarity among all peoples and an emphasis on survival and progressive development of the human race.
Human rights law is pervasive across all disciplines and is the ideal regime for the similarly pervasive activities of corporations. Human rights define the relationship between human rights standards and corporate policy. The rule of law takes on a new meaning for corporate responsibility.
These arguments become more compelling in countries where governments and politicians collude with industry (privatisation, cronyism, corruption, nepotism). It is with a human rights regime that recalcitrant governments and politicians should be taken to task, especially where national courts and laws fail because of weak parliamentary systems or the co-option of the judiciary as an extension of the executive.
In these instances, the role of national and regional human rights institutions becomes the more challenging as human rights law prevail over traditional civil and criminal norms.
SALBIAH AHMAD is a lawyer. Malaya! as a name for this column was inspired by meaning of "Malaya" in Tagalog which means freedom. The events at the end of 1998 in KL offer a new inspiration. Malaya! takes on the process of reclaiming the many facets of independence.
Corporate lawyers and captains of industry swear by Gower, the doyen of company law who argued that company directors should not subordinate the interests of shareholders to those of consumers, the nation and employees, or they will fall "foul of the law".
In this wake, commercial contracts, management agreements and joint ventures are drafted and crafted with scant interest beyond the legal confines of the law. Thus, for example, logging contracts entered into between a company and the state have little respect for human rights of indigenous communities living on the land, nor for the environmental degradation that would ensue.
Corporate lawyers argue that clients need only abide by the laws in countries in which their clients intend to set up business and their sacred duty is reserved for the clients who instruct them. True to the corporate business ethic, contracts are often drafted with the most minimum provision for liability.
When we talk about the Third World, there is very little law to regulate corporate responsibility and accountability, or none at all. In the last decade or so, Third World corporations have caught up with their counterparts and are investing in "lesser-developed" Third World countries.
In this scenario, Malaysian timber companies with "rainforest expertise" will log in the Amazon, Indo-China or Irian. A US-branded ready-to-wear may be made in an outfit in Asia or Latin America where labour laws are lax.
Improved world communications, policy reform initiatives like privatisation and trade liberalisation supported by even bigger corporations united for commerce like the World Bank and the World Trade Organization have facilitated the corporate expansion drive worldwide. Corporations have a legal personality which transcends political and national boundaries.
The global economy has proven that the transnational and multinational entity is the most effective mode of economic production and corporations provide leadership in trade, investment and financial services.
Corporations are involved in all aspects of human life from providing public services like water and electricity to performing tasks expected of governments or relinquished by governments like education and health. In a nutshell, corporate entities define and maintain human existence within the industrialised world.
Soft power
Corporations are wielding more power than governments. Power demands accountability. But when corporations discuss the rule of law, it revolves around protection of private property and investment. The rule of law here is about supplying the rules so that businesses and investors can plan actions to avoid disputes. Disputes and the risk of disputes raise the risk and cost of new ventures, narrowing the profit margin.
Corporations also represent a key element in "soft power". Hard power consists of military force and other sanctions that can compel compliance by another state. Soft power consists of culture, ideology and institutions that can set agendas and the terms for international debates (Joseph S Nye, Bound to Lead, 1990).
Nye argues that multinationals (MNCs) are possible vehicles for protecting the most powerful nations. Other critics moot that governments (through aid and foreign policy) and MNCs band in creating a business climate and political order that are more conducive to their interests. They are allegedly "investing in repression".
What is the word on accountability and social responsibility of transnational corporations today? Individual country laws are inadequate for regulating transnational corporations which operate in several jurisdictions.
The majority of international human rights covenants deal with state parties and individuals and not corporations as such.
Codes of conduct abound, the latest being the UN-sponsored Global Compact which has received worldwide criticisms from citizens groups and [#1]NGOs[/#]. But codes of conduct are not self-executing.
Protest marches (Seattle in 1999, Washington in April, 2000 and Melbourne in mid-September, 2000) have registered citizens' dissent but not sufficient enough to dent the corporate armour.
NGOs lobbying the UN insist that the UN Sub-commission on the Promotion of Human Rights regulate the behaviour of transnationals and work towards binding international instruments for compliance.
What is also on the drawing board, is the re-conceptualisation of the nature of corporations as moral agents which must accept obligations and responsibilities beyond that owed to shareholders.
The subject of corporate responsibility is no longer confined to directors' duties to shareholders, reporting obligations or employee welfare. Responsibility includes environmental sustainability, accountability, transparency of corporate entities and human rights.
Corporations as legal persons are bound as individuals are for the promotion and respect for human rights. The corporation as a separate legal entity is arguably capable of exercising control and able to make choices and capable of its own separate responsibilities (HLA Hart, Punishment and Responsibility, 1968).
Analysing behaviour
Work has been done on analysing corporate behaviour and policy from a human rights perspective as opposed to economic norms of the marketplace. The traditional separation between social policy and free enterprise is being challenged as part of the emerging human rights discourse.
This trend is enhanced by the fast-shrinking global environment. There is an urgent sense of social solidarity among all peoples and an emphasis on survival and progressive development of the human race.
Human rights law is pervasive across all disciplines and is the ideal regime for the similarly pervasive activities of corporations. Human rights define the relationship between human rights standards and corporate policy. The rule of law takes on a new meaning for corporate responsibility.
These arguments become more compelling in countries where governments and politicians collude with industry (privatisation, cronyism, corruption, nepotism). It is with a human rights regime that recalcitrant governments and politicians should be taken to task, especially where national courts and laws fail because of weak parliamentary systems or the co-option of the judiciary as an extension of the executive.
In these instances, the role of national and regional human rights institutions becomes the more challenging as human rights law prevail over traditional civil and criminal norms.
SALBIAH AHMAD is a lawyer. Malaya! as a name for this column was inspired by meaning of "Malaya" in Tagalog which means freedom. The events at the end of 1998 in KL offer a new inspiration. Malaya! takes on the process of reclaiming the many facets of independence.
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