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The UN Global Compact: The Challenge and the Promise

  • Oliver F. Williams
Abstract:

The UN Global Compact is a voluntary initiative designed to help fashion a more humane world by enlisting business to follow ten principles concerning human rights, labor, the environment, and corruption. Although the four-year-old Compact is a relatively successful initiative, having signed up over eleven hundred companies and more than two hundred of the large multinationals, and having begun some important projects on globalization issues, there is a serious problem in that very few of the major U.S. companies have joined. While the premier U.S. companies are interested in meeting the legitimate expectations of society, there is concern centering around accountability issues. The accountability issues are in four major areas: 1. Accountability showing that the globalization of the economy actually helps the poor. 2. Accountability showing the corporate performance matches rhetoric. 3. Accountability that provides legitimacy to a two-tier pricing system and other measures that are designed to assist the poor in developing countries. 4. Accountability in the human rights area; what societal expectations are multinational companies accountable for? The article outlines the problems that the Compact brings to the fore and offers some insight from the ethical literature that may address U.S. company concerns or provide new ways of thinking about the issues. It further argues that the forum provided by the Compact may be the most effective means to gain consensus of the role of business in society.

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Notes

1 Kofi Annan, “Business and the UN: A Global Compact of Shared Values and Principles,” 31 January 1999, World Economic Forum, Davos, Switzerland, Reprinted in Vital Speeches of the Day 65(9) (15 February 1999): 260–61. See also Sandrine Tester and Georg Kell, The United Nations and Business (New York: St. Martin’s Press, 2000), 51. Georg Kell is Senior Officer, Executive Office of the Secretary General and Director of the United Nations Global Compact Office.

2 See the Global Compact website at www.unglobalcompact.org for the principles, a compre hensive discussion of the organization and Kofi Annan’s vision of the moral purpose of business.

3 Of the sixty-four U.S. companies that have joined the Compact, most are small and mediumsized firms. Major U.S. multinationals signing include Amerade Hess, Cisco Systems, DuPont, Hewlett-Packard, Starbucks Coffee, and Pfizer. Virtually all industry sectors on every continent are represented in the over 1180 signatories world-wide.

4 For information on the Global 500, see the special edition of Fortune on “The World’s Largest Corporations,” 148(2) (2003): 42–45; F1–45. Georg Kell’s point was made in a private discussion with the author in Pretoria, South Africa, on 24 April 2000. For a discussion of the contrast between Europe and the U.S. on the South Africa case, see S. Prakash Sethi and Oliver F. Williams, Economic Imperatives and Ethical Values in Global Business: The South African Experience and International Codes Today (Notre Dame, Ind.: University of Notre Dame Press, 2001), 183–219.

5 Letter to Kofi Annan, Secretary-General, United Nations, 20 July 2000, from: Upendra Baxi, Professor of Law, University of Warwick, UK, and former Vice Chancellor University of Delhi (In dia): Roberto Bissio, Third World Institute (Uruguay): Thilo Bode, Executive Director, Greenpeace International (Netherlands); Walden Bello, Director, Focus on the Global South (Thailand); John Cavanach, Director, Institute for Policy Studies (U.S.); Susan George, Associate Director, Trans national Institute (Netherlands); Oliver Hoedeman, Corporate Europe Observatory (Netherlands); Joshua Karliner, Executive Director, Transnational Resources and Action Center (U.S.); Martin Khor, Director, Third World Network (Malaysia); Miloon Kothari, Coordinator International NGO Committee on Human Rights in Trade and Investment (India); Smitu Kothari, President, International Group for Grassroots Initiatives (India); Sara Larrain, Coordinator, Chile Sustentable (Chile); Jerry Mander, Director, International Forum on Globalization (U.S.); Ward Morehouse, Director, Program on Corporations, Law and Democracy (U.S.); Atila Roque, Programme Coordinator, Brazilian Institute of Economic and Social Analysis (Brazil); Elisabeth Sterken, National Director INFACT Canada/IBFAN North America; Yash Tandon, Director, International South Group Network (Zimbabwe); Vickey Tauli-Corpuz, Coordinator, Tebtebba (Indigenous Peoples’ International Centre for Policy Research and Education), and Asia Indigenous Women’s Network (Philippines); Etienne Vernet, Food and Agriculture Campaigner Ecoropa (France).

6 Ibid.

7 See Alasdair MacIntyre, “A Partial Response to My Critics,” in After MacIntyre, ed. Charles Taylor (Oxford: Oxford University Press, 1994), 284–66.

8 While I find MacIntyre insightful and provocative, in the final analysis, I side with Andrew Wicks “I find enough coherence, hope, and possibility in both capitalism and ‘modernity’ to cast my lot with those who see the Enlightenment (and what followed) as something other than a disaster.” See Andrew C. Wicks, “On MacIntyre, Modernity and the Virtues: A Response to Dobson.” Busi ness Ethics Quarterly 7(4) (1997): 133–35.

9 See Patricia H. Werhane, “Business Ethics and the Origins of Contemporary Capitalism: Economics and Ethics in the work of Adam Smith and Herbert Spencer,” Journal of Business Ethics 24 (2000): 185–98; also Oliver F. Williams, “Catholic Social Teaching: A Communitarian Democratic Capitalism for the New World Order,” Journal of Business Ethics 12 (1993): 919–23. The 1991 encyclical letter of Pope John Paul II, Centesimus Annus, makes this central point: “The economy in fact is only one aspect and one dimension of the whole of human activity. If economic life is absolutized, if the production and consumption of goods become the center of social life and society’s only value, not subject to any other value, the reason is to be found not so much in the economic system itself as in the fact that the entire socio-cultural system, by ignoring the ethi cal and religious dimension, has been weakened, and ends by limiting itself to the production of goods and services alone.” John Paul II, Centesimus Annus (Washington, D.C.: The US Catholic Conference, 1991), para. 39, p. 77.

10 A good overview of the issues addressed by the Global Compact was presented at the Key note Address to the Society of Business Ethics and the Social Issues in Management Division of the Academy of Management meeting in Chicago, 7 August 1999. See Douglas Cassel, “Human Rights and Business Responsibilities in the Global Marketplace.” Business Ethics Quarterly 11(2) (2001): 261–74.

11 Tester and Kell, The United Nations and Business, p. 51. The case for globalization and capitalism is made in the UN’s 2002 edition of the Human Development Report but not without many caveats. For example: “The proportion of the world’s people living in extreme poverty fell from 29% in 1990 to 23% in 1999,” and “During the 1990’s the number of people living in extreme poverty in Sub-Saharan Africa rose from 242 million to 300 million.” See the report: www.undp.org/hdr2002/.

12 Participants in the Caux Principles have been from twenty-seven countries and include such U.S. companies as 3M International, Chevron, Time Inc., The Prudential Insurance Company of America, The Procter and Gamble Co., The Chase Manhattan Bank, Medtronic Inc., Monsanto Company, Honeywell Inc., Cargill Inc., and the Bank of America. See the website www.cauxroundtable.org. Accountability as discussed here is even less a requirement in the Caux Principles and this endeavor has much less visibility. For the text of the Caux Principles see Global Codes of Conduct, ed. Oliver F. Williams (Notre Dame, Ind.: University of Notre Dame Press, 2000), 384–88. For two articles on the Caux Principles, see Gerald F. Cavanagh, “Executives’ Code of Business Con duct: Prospects for the Caux Principles,” Global Codes of Conduct, pp. 169–82; and Kenneth E. Goodpaster, “The Caux Round Table Principles: Corporate Moral Reflection in a Global Business Environment,” Global Codes of Conduct, 183–95.

13 For a comprehensive history and analysis of the Sullivan Principles, see S. Prakash Sethi and Oliver F. Williams, Economic Imperatives and Ethical Values in Global Business.

14 For an example of this countervailing power of NGOs, see the letter by Louise Frechette, Deputy Secretary-General of the United Nations, of 3 June 2003, responding to the officers of Oxfam, Amnesty International, Lawyers Committee for Human Rights, and Human Rights Watch, who are pressuring for more accountability in the Compact. See the web site www.globalpolicy.org/ngos/business/2003/0626secret.htm. For a recent, similar criticism, see “Global Compact Leaders Summit: NGO Participants Raise Concerns,” 24 June 2004, http://web.amnesty.org/pages/ec-letter-240604-eng.

15 S. Prakash Sethi and Oliver F. Williams, “Creating and Implementing Global Codes of Conduct: An Assessment of the Sullivan Principles as a Role Model for Developing International Codes of Conduct—Lessons Learned and Unlearned.” Business and Society Review 105(2) (2000): 187.

16 S. Prakash Sethi, “Global Compact is Another Exercise in Futility,” The Financial Express, 8 September 2003. Available on the web at: www.financialexpress.com/fe_full_story.php?content_id=41523. For a comprehensive discussion of codes of conduct, see S. Prakash Sethi, Setting Global Standards: Guidelines for Creating Codes of Conduct in Multinational Corporations (New York: John Wiley & Sons, Inc., 2003).

17 Tester and Kell, The United Nations and Business, 53

18 Lynn Sharp Paine, Value Shift: Why Companies Must Merge Social and Financial Imperatives to Achieve Superior Performance (New York: McGraw-Hill, 2003), 20–23.

19 An instance of where Nike is being cited as an example of adverse selection is in the letter to Kofi Annan, Secretary-General, United Nations, 25 July 2000, from the same signatories as listed in note 5 above. For an NGO critical of the Compact, see the web site www.corpwatch.org. The quote from Auret van Heerden is found in Lisa Giron, “Nike Settles Lawsuit Over Labor Claims,” Los Angeles Times, 13 September 2003.

20 Nicholas Stein, “America’s Most Admired Companies,” Fortune (3 March 2003): 81–94.

21 This point has been made repeatedly by Georg Kell in conversations with the author. For example, in light of complaints one current issue Compact officials are discussing is what business behaviors necessitate asking a company to sever its relationship with the Compact.

22 Sandra Waddock, “Creating the Tipping Point Towards Corporate Responsibility: Reflections of Meeting Expectations in the Global Economy. The UN Global Compact Conference at the University of Notre Dame, 21–23 April 2002. Unpublished paper available on the web site of the Notre Dame Center for Ethics and Religious Values in Business www.nd.edu/~ethics.

23 Robert Kinlock Massie, “Effective Codes of Conduct: Lessons from the Sullivan and CERES Principles,” in Global Codes of Conduct, 287–88. See the web site of the Global Reporting Initiative www.globalreporting.org. For an example of the present state of the art of sustainability reporting, see the report of the Royal Dutch Shell Group www.shell.com.

24 For an analysis, see Mallen Baker, “The Global Reporting Initiative: Raising the Bar Too High?” Ethical Corporation Magazine (October 2002): 39–41.

25 See, for example, Manuel Velasquez, “International Business, Morality and the Common Good,” Business Ethics Quarterly 2 (1992): 27–40; Norman Bowie, “A Kantian Theory of Capi talism,” Business Ethics Quarterly, Special Issue No. 1, (1998): 37–60; and Richard De George, Competing with Integrity in International Business (New York: Oxford University Press, 1993).

26 Thomas Donaldson and Thomas W. Dunfee, “Toward a Unified Conception of Business Eth ics: Integrative Social Contracts Theory,” Academy of Management Review 19(2) (1994): 260. See also Thomas Donaldson and Thomas W. Dunfee, Ties That Bind: A Social Contracts Approach To Business Ethics (Boston: Harvard Business School Press, 1999).

27 See Sethi and Williams, Economic Imperatives and Ethical Values in Global Business, for the history of the evolution of the conviction that participating in apartheid was immoral.

28 Pharmaceutical companies were reluctant to approve the two-tiered pricing system because of the fear of “round-tripping,” fraudulently selling a deeply discounted drug meant for the poor in a developing country in an affluent country at the higher price. This would seriously erode the profit margin required for research for future drugs. After considering the options, most companies have moved to two-tier pricing although it has not been without problems. See Gregory Crouch, “Europeans Investigate Resale of AIDS Drugs,” The New York Times, 29 October 2002, W1; and “Africa’s Cheap AIDS Drugs Threatened by Illegal Exports,” Business Day, 12 May 2003, 10.

29 Stephen Lewis, “Silence = Death: AIDS, Africa and Pharmaceuticals,” Toronto Globe and Mail, 26 January 2001, 12; and “Threatened,” Johannesburg Sunday Times, 2 April 2003, 2.

30 In order to discuss the Compact with major U.S. multinationals and to increase U.S. member ship, the United Nations Global Compact Office and the Center for Ethics and Religious Values in Business at the University of Notre Dame sponsored a conference at Notre Dame in April 2002. Several corporations that are already members of the Compact (Nike, Novartis, and Shell) and some considering joining (Freeport-McMoRan Copper and Gold, Hewlett-Packard, Merck, and Motorola) gave presentations. The statement summarizes the sense of some of the pharmaceutical company presentations at the Notre Dame-UN conference in April 2002.

31 “General Comment No. 14 on Substantive Issues Arising from the Implementation of the Inter national Covenant of Economic, Social and Cultural Rights (ICESCR),” United Nations Economic and Social Council, 2000. Geneva. See www.unhchr.ch. See Henry Shue, Basic Rights (Princeton, N.J.: Princeton University Press, 1981). There is currently a UN draft “Norms on the Responsibili ties of Transnational Corporations and Other Business Enterprises with regard to Human Rights, E/CN. 4/Sub. 2/2003/12 (2003),” but most believe this proposed policy needs considerable field testing before some consensus on how to apportion responsibility emerges.

32 These ideas are developed in Thomas Donaldson, The Ethics of International Business (New York: Oxford University Press, 1989), especially chapter 5. For a good application see Thomas Donaldson, “The Perils of Multinationals’ Largess,” Business Ethics Quarterly 4(3) (1994): 367–71. This article is a response to a critique of Donaldson in Kevin T. Jackson, “Distributive Justice and the Corporate Duty to Aid,” Journal of Business Ethics 12 (1993): 547–51.

33 A study released in December 2001 by the Tufts Center for the Study of Drug Development reported that the average cost of developing a new drug is $802 million and takes, on average, twelve years. These figures are disputed by the Health Research Group, a consumer organization founded by Ralph Nader. See Robert Pear, “Research Cost For New Drugs Said to Soar,” The New York Times, 1 December 2001, 1.

34 See note 25.

35 Michael A. Santoro, “Engagement with Integrity: What We Should Expect Multinational Firms to Do About Human Rights in China,” Business and the Contemporary World 10(1) (1998): 25–54.

36 Ibid., p. 48.

37 James E. Austin, Diana Barrey, and James B. Weber, “Merck Global Health Initiatives(B): Botswana,” Number 9-301-089 (Boston: Harvard Business School Publishing, 2001). Also, the website for the African Comprehensive HIV/AIDS Partnerships (ACHAP) (www.achap.org/) has a description of the project.

38 See Donald G. McNeil, Jr., “Patents or Poverty? New Debate Over Lack of AIDS Care in Africa,” The New York Times, 5 November 2001, 6.

39 The Global Business Coalition on HIV/AIDS headed by Richard Holbrooke, former U.S. Ambas sador to the UN, has enlisted many multinationals in the fight against AIDS. Some companies have gone well beyond the normal role of business in society. See the web site www.businessfightsaids.org/.

40 For example, GlaxoSmithKline cut the price of its AIDS and malaria treatments by 38 percent in the sixty-three poorest countries. “Glaxo Cuts Price of AIDS and Malaria Drugs,” Business Day, 12 May 2003, 1.

41 John Gerard Ruggie, “Taking Embedded Liberalism Global: The Corporate Connection,” unpublished paper, p. 29.

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