Corporations and Human Rights

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  • by Anup Shah
  • This Page Last Updated Thursday, September 19, 2002

Of all human rights failures today, those in economic and social areas affect by far the larger number and are the most widespread across the world’s nations and large numbers of people.

Human Development Report 20001, United Nations Development Programme p. 73.

As the new millennium emerges, trends in global human rights are changing. Human rights issues are crossing sovereign boundaries and are no longer just issues of the state. As more and more non-governmental organizations are growing, and the Internet expands and facilitates a quicker spread of information, there are more and more people raising concerns about human rights related issues. Some of these come from the increasingly larger and influential commercial sector including large, multinational companies.

On this page:

  1. Profit over people
  2. Constructive Engagement
  3. Economic Power also wields Political Power
  4. Will Corporations Rule the World?

Profit over people

As the world globalizes, multinational corporations are also coming under more scrutiny, as questions about their accountability are also being raised.

In some cases, some corporations have lobbied their governments to aggressively support regimes that are favorable to them. For example, especially in the 1970s and 80s, some tacitly supported dictatorships as they could control their own people, be more easily influenced and corrupted, allow conditions like cheap labor and sweatshops, and so on. This is less practical today as a company’s image with such associations can more readily be tarnished today. Increasingly then, influence is being spread through lobbying for global economic and trade arrangements that are more beneficial to themselves.

This can be accomplished through various means including:

  • Tacitly supporting military interventions (often dressed in propaganda about saving the people from themselves, or undoing a wrong in the other country and so on)
  • Pushing for economic policies that are heavily weighted in their favor
  • Foreign investment treaties and other negotiations designed in part to give more abilities for corporations to expand into other poorer countries possibly at the expense of local businesses.
  • Following an ideology which is believed to be beneficial to everyone, but hides the realities and complexities that may worsen situations. These ideologies can be influential as some larger corporations may indeed benefit from these policies, but that does not automatically mean everyone else will, and power and such interests may see these agendas being pushed forth more so.

However, with this expansion and drive for further profits, there has often come a disregard for human rights. In some cases, corporations have been accused for hiring local militaries to subdue and even kill people who are protesting the effects and practices of these corporations, such as the various controversies over oil corporations2 and resource and mineral companies3 in parts of Africa have highlighted.

As globalization has increased in the past decade or two, so has the criticisms. Whether it is concerns at profits4 over people as the driving factor, or violations of human rights5, or large scale tax avoidance6 by some companies, some large multinationals operating in developing countries in particular have certainly had many questions to answer.

The pressure to compete has often meant fighting against social clauses7 and policies that may lead to more costs for the company where other companies may not be subject to the same restrictions. The fear of losing out in competition then drives many companies to a lower common denominator rather than a higher one.

And so there is a downward pressure on worker’s wages and their working conditions8 because they are such major costs for many operations.

Many multinationals encourage the formation of export processing zones in developing countries which end up being areas where worker’s rights are reduced. This way they are able to play off countries against each other; if one tries to improve worker or living standards in some way, the company can threaten to move operations to another zone in another country. Some developing countries such as China also benefit from this arrangement as it makes them more competitive in international markets.

Side Note

For many, the implication for this situation is that the right to form unions need to be supported. The topic of unions can cause debate and resentment from companies and free trade advocates.

On the one hand unions are supposed to represent worker’s and their rights. Without unions in some sectors workers have little ability to demand fairer conditions and pay from a more influential and powerful employee.

On the other hand, in an increasingly globalized world, companies struggle to compete with each other, especially where standards vary.

The enormous labor costs means that companies from countries with higher standards are at a competitive disadvantage. Rather than a global effort to improve working conditions for everyone, it seems easier—and more profitable—for companies and countries to argue for lower conditions.

The political effect of this is also increased control and influence; with less organized labor force, the political power is more firmly in the hands of a few powerful elite.

It is quite easy to demonize unions as well because the disruption they can cause (e.g. if the union is for some public service) can easily be shown to be a hindrance for the general population. Media coverage often looks at the inconvenience of the general population and hints at the unreasonable demands unions make.

(As a Human Rights Watch report9 details, it is not just developing countries where this problem exists; even the United States suffers from the denial of such rights.)

Lobbying at international institutions such as the World Trade Organization10 also helps them see more favorable conditions and the companies with more money can wield more influence, creating an imbalanced playing field, as opposed to a level one which they publicly argue for.

Despite the rhetoric of many corporations signing up to human rights related pacts and agreements, their lack of real commitment11 is still apparent, and, as mentioned by the previous link, [w]hat is more, reveals the Washington D.C.-based IPS in a recently released report, Top 200: The Rise of Corporate Global Power, leading corporations have fiercely opposed attempts that require them to achieve a higher level of transparency. [You can see the actual report from this link12 as well.]

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Constructive Engagement

Some corporations and think tanks argue that their actions can actually be positive. Their constructive engagement allows the spread of democracy, new technologies, human rights13 and so on to those regions, which, over time, would allow more positive benefits to be realized.

This sounds nice and comforting and there are certainly cases where this happens. With globalization in general, cross cultural communication is occurs far quicker than ever before. Being exposed to more ideas, such as democracy, can be very powerful. However, critics point out14 that

  • Often those countries which have been dictatorships are often regimes that have been placed in power, or supported, by western nations and the larger corporations have benefited from the dictatorships’ ability to control their own people.
  • In some countries, large corporations have even funded media suppression or military activities against workers, themselves.
  • Human rights conditions have hardly improved due to corporate activities and the technologies brought in are usually still owned by the company itself, so that the self-empowering benefits of technology transfer is less than what it could be.
  • However, some public pressure has forced certain large companies to address their human rights issues. Such companies include large oil corporations like BP Amoco and Statoil. It remains to be seen if their drive is from a public relations concern, or a genuine concern for the well being of the people that either work for them in other countries or are affected by their work practices.
  • The constructive engagement argument is then seen as a nice cover to continue exploitative practices.

In toys, garments and clothing, the brief history of voluntary Codes of Conduct is one of TNCs being dragged into them with little enthusiasm and not very much willingness to comply unless they have to—although of course, they stoutly maintain the opposite.

… As governments spend resources on EPZs [Export Processing Zones], they foresake the opportunity to create more jobs for the same amount of money by investing in and supporting small enterprises serving the local market. EPZs require government funds which could be used elsewhere for projects that directly help the poor. Their growth is coming at the expense of the poor. Whether they operate inside or outside such zones, TNCs involved in manufacturing have not helped most developing countries to improve the decline in their terms of trade, neither have they provided the poor with an escape from poverty.

… [With respect to tourism] [n]et foreign exchange earnings for developing countries are often lower than the income figure might lead one to believe, says a UN report. The difference is due to leakages—the percentage of the tourist’s money which does not stay in the country being visited, but which goes instead to the foreign-owned airline, tour operator and hotel. … These figures are significant. They show that a great deal more foreign exchange stays in a country when hotels are locally owned.

John Madeley, Big Business Poor Peoples; The Impact of Transnational Corporations on the World’s Poor, (Zed Books, 1999) pp. 112, 114, 135 - 136.

Gordon Hanson, in an article for UNCTAD (United Nations Conference on Trade and Development) and the G-2415 titled Should Countries Promote Foreign Direct Investment?16, February 2001, concludes that countries should be sceptical about claims that promoting FDI [Foreign Direct Investment] will raise their welfare.

We hear more and more about philanthropic organizations set up by mega-successful business elites, where millions of dollars are donated to seemingly worthy causes. However, the fact that such donations are needed also serves as an indication that development policies and globalization policies in their current form are not sustainable! The following quote summarizes this notion quite well:

It is all very well for Bill Gates to charitably donate $750m to pay for immunization programmes for certain diseases, as he recently announced he would do, and for James Wolfensohn to urge transnational companies setting up in poor countries to contribute financially directly to local education services. Societies which depend on such largess to meet their basic health and education needs are neither sustainable, democratic nor equitable—yet new dimensions of power are ceded to large companies.

Brendan Martin, New Leaf or Fig Leaf? The challenge of the New Washington Consensus17, Bretton Woods Project, March 2000.

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Economic Power also wields Political Power

While the drive for efficiency is always a good thing (as it should help prevent wasting resources), oftentimes, the goal of keeping these costs down also leads to reducing wages, working conditions and often the basic rights of people.

This occurs because these corporations and even some nations seek out18 places where poor labor regulations can be taken advantage of in an unfair way, or by not supporting—or even opposing—international or national bodies and policies that could help to ensure fairness.

Whilst it is in the public’s interest that resources be used sparingly and in a sustainable reusable manner, Corporations choose to create disposable products which require constant replacement/repurchase. The Corporations’ interest in maximizing sales and profits is in direct conflict with our own democratic right to choose how finite resources are allocated.

Daniel Bennett, Program on Corporations Law & Democracy19, Corporate Watch, March 1999

And regarding the notion of efficiency, there is a difference between an industry or corporation driving towards efficiency for maximizing profits, versus driving towards efficiency that would benefit society. An example of this will be seen in the next section on this site about medical research and the pharmaceutical industry.

To highlight this point further, take for example the illegal drug or tobacco industries. They, like other industries need to operate efficiently and minimize unnecess