Social Responsibility of Multinational Corporations and the “Sphere of Influence”

Interview - Prof. dr. Tom Sorell, Centre for the Study of Global Ethics, University of Birmingham, United Kingdom, October 2007

1. If one participates many discussions about transnational companies (TNC), it may seem to one that TNC’s have no limitations and boundaries. So could it be that it is too optimistic to speak about rules and regulations which companies should obey?

What I always insist on is that not all of these companies are the same, so there are some companies’ whit very good reputations for example John Lewis. If one speaks about company like a “rent a car” companies- you hardly ever hear terrible things about them even dough there are international. I don’t think they are particularly good or particularly bad, but it is not the same picture where ever you go. I think that the worst are the ones that are involved in extraction sector, involved whit very bad labor practices, but than again that is not always typical for all of these companies. If the question is, are there a sizable number of good companies the answer to that is probably yes. When it comes to regulating multinational corporations in the world now, the situation is more complicated because many of multinational corporations that people think about are not the usual companies. They are not American, they come from countries which are known for human rights abusing, for example there are many Chinese multinational companies-they don’t come from a culture that respects human rights, they don’t come from country that is known for corporate social responsibility, there are Malaysian companies that are in the same position.

2. United Nations created "Norms on the Responsibilities of Transnational Corporations …with Regard to Human Rights" which failed in many ways. Is it fair to blame anyone? Perhaps UN didn’t do enough?

I don’t think that people that are one to blame for the collapse of UN norms are the United Nations. Companies are very worried about the low, and they don’t want a lot of regulations even if the laws are relatively harmless, and unenforceable, as the UN norms were. They are worried about law suits and spending a lot of money on layers. So the reason they failed was that companies would not agree to them, and I think they were right to reconsider the process, so its not the United Nations fault its really the fault, I think of some of the NGOs and some of the multinational businesses that were assisting the NGOs, and they didn’t have the clear sense of what would the rest of world business react.

3. What is Your opinion on the international trade and investment agreements, and the theory that many bad things that happen in developing countries are basically allowed by these agreements?

Those agreements are between the governments and sometimes the governments are lobbied by a particular business. But yes there are agreements that are valid internationally, like regulation of international property. These are agreements which are extremely unfair to the developing world and are criticized a lot. If you look at the retail sector that exist in the United States, and in Europe-they tend to be corporate responsible because it is very easy to criticize them and boycott their shops. There for they make an effort to prevent them look bad. Now imagine Chinese big petrol companies that have no petrol stations at all, and what they do is that they find and extract for example gas. These companies are much harder to influence and to distinguish their activities from consumer point of view.

4. You said that two of main problems that occur in the poor countries are that when one investment fails nobody takes the responsibility and that TNC rarely do anything to help these countries. So what could this theory of sphere of activity and project finance do concerning these questions?

Let’s take two cases, we can take project finance and we can take Premiere oil. Here Premiere oil has its investment in Burma were human rights are really endangered. Now if people criticize Premiere oil and they say why don’t you put pressure on Burmese government to change? Well it’s very difficult to know what they can do in a very bad regime like that, and even if they try what would happen? This is one of a kind case where it would be very difficult to say that the sphere of influence or the sphere of activity of Premiere oil covered making diplomatic pressure on Burmese government.
Project finance is completely different thing. A government will advertise to the whole world for example: "We want the damn built, and we want new construction companies to build this damn and make propositions so it can be built". A lot of companies will make proposition and the contracts will contain everything inside them. So here is the company who makes direct contact whit the government, and they are making agreements about things whit human rights consequences and it’s all written down. This is what makes project finance publicly and precisely able to give the sphere of activity and you can call out the contract and you can say: "You agreed to this and you agreed to that". Another thing about project finance is in the most basic case the project finance company will put in much basic infrascture like electricity and they cannot do that and not realize that this is really important to a country economic developments.

Interview by Dragana Brkan

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