Jim Baker’s thoughts on “The Social License” by John Morrison (Palgrave MacMillan, 2014)
(Jim Baker was Co-ordinator of the Council of Global Unions (CGU) until 1 July 2014. The CGU was formed in January of 2007 and is composed of Global Union Federations, which group trade unions by sector and occupation as well as the International Trade Union Confederation (ITUC) and the Trade Union Advisory Committee to the OECD (TUAC), which bring together national trade union centres. Prior to that, Baker was the Director of the Bureau for Workers’ Activities (ACTRAV) at the International Labour Organisation (ILO). Before joining the ILO, he held the post of Director of the Department of Multinational Enterprises at the International Confederation of Free Trade Unions (ICFTU) in Brussels. These comments represent his personal thoughts)
The book accomplished what I understood to be its mission. It provoked thought and helped to further the discussion. What follows are some fairly unorganised thoughts that it provoked, by no means exhaustive: some of which might be useful.
Traditional CSR, public relations, and due diligence
The book showed restraint in its reflections on CSR, but I think that the essential points were made about its weaknesses and about the nature and self-propelling characteristics of the CSR industry. I had two complementary thoughts.
First, some of the comments reminded me of how CSR language has tripped us up. As George Orwell wrote,“…if thought corrupts language, language can also corrupt thought”. I suspect that we have all been afflicted by this language effect. We have become artificially conditioned to react in a way devoid of common sense. It is as if we have become one of Pavlov’s dogs that confuse noise with real food.
That brings me to a larger point that came to mind in several sections of the book; the degree to which we have all been affected by public relations and “hype”. Growing up in the Northwest, dependent on the lumber and wood products industry at the time, I recall that major companies were being attacked for logging without restoring the forests (inadequate planting of new trees to replace the barren ground that they had created). One of the major companies responded, not by planting more trees, but by calling themselves, “the tree growing people”. Part of the struggle for us all will be to separate the real from the imaginary.
The most serious danger of misinformation and disinformation is, undoubtedly, for democracy. The level of political debate is lower than at any other time in my memory. The people may still make decisions, but based on what information? And, where is that information coming from? In the US, with the end of key restrictions on political and issues funding, the “marketplace of ideas” is becoming more distorted as it is being increasingly “bought”.
But, to get back to smaller problems, the business and human rights framework is the best way out of the incestuous CSR world. However, the element that is probably, in practical terms, the most important is due diligence. It gets beyond companies saying and “proving” how good they are and others saying how bad they are to something that, rather than a good and evil measure, can be judged on how robust a process is; in that sense, it compares to democracy. After all, democracy is, above all else, the question of the value and validity and legitimacy of a process.
One of the useful and salvageable words in CSR is “responsibility”. I think that, to some extent, the use of the word “obligations” in the business and human rights discussions has worked. It is the same sense that rehabilitation of the word “responsibility” might be useful.
A key argument of the book is legitimacy. It is related to the social license along with other concepts and it covers business, government and civil society organisations. I understand the importance of the argument and that without it, it does not hold together as well as it would otherwise. However, my idea of legitimacy is more restricted; probably reflecting the fact that I have spent my life dealing with it in a trade union context. And, defining legitimacy was central to the fight against totalitarianism, but also against company unions and other outside influences and control.
Legitimate trade unions are what were called “free trade unions”. Although the term has gone out of style, the concept remains important. Trade unions should be controlled by their members, not by the boss or by government or by a party, or by a church or by various stripes of mobsters. There have been two issues; the lack of outside control and democratic procedures to ensure that there is internal control by members. As in other democracies, the real democratic life in trade unions does not depend exclusively on having democratic constitutions and rules and dedicated democrats as leaders.
I think that it is important (in reference to a passage in the book) to maintain the importance of the distinction between Amnesty International and Human Rights Watch. Both make a significant contribution to the human rights debate, but having democracies inside democracies are also quite important. That is, of course, also true of trade unions that are, if they are free trade unions, both democratic and representative as well as being part of both the private sector and civil society. Trade unions and other democratic organisations also serve as schools for democracy. Also, democratic organisations depend for their legitimacy on internal factors; the expression of views of members or citizens rather than “stakeholders” or others.
That, in no way, minimizes the impact of expertise, dedication and good work any more than it is a form of attack on the great men and women that you quoted in your book. Non-governmental individuals (NGIs) are important, but are different than representative organisations. And, “membership-based” organisations are neither automatically representative nor democratic.
Constraints on business
Although we all have high hopes for the impact that the United Nations Guiding Principles (UNGPs) on Business and Human Rights will have on the future of capitalism, it is important to be realistic. Although there are forces and pressures building for companies to be more sensitive to human rights, such considerations are not driving business, even those making the most sincere efforts. And, there are other powerful forces in the world economy that business cannot ignore.
One of the realities of the financialisation of the economy culminating in the financial crisis is that the actors in financial markets often had more power than the people who were running businesses in the productive economy. Businesses were making bad decisions, in purely business terms (even though they often had human rights impacts as well) because they had to place priority on paying high dividends over investing in the future of their enterprises. If not, they risked hostile takeovers, asset stripping, etc. As has become clear with the BEPS work of the OECD, businesses were also often making bad business decisions related to shifting profits and transfer pricing; again, unrelated to production or services.
I have had a number of discussions with trade union leaders who saw eye to eye with their managers that action that undermined the long-term viability of companies and that resulted in bad investment priorities (and often in layoffs even if units were profitable) was destructive, but that they were in a context where there was no choice. With the GPs, we tend to look at MNEs as if they are powerful forces that can extend their respect for human rights to others. That is, to some extent, true, but it does not mean that they always have complete control or absolute power.
Of course, the market context is different for different sectors and companies inside of sectors. It is important and necessary to try to improve the health and safety and the rights situation in Bangladesh. However, that does not change the fact that in labour-intensive industries like garments, there is enormous competitive pressure for low wages and poor conditions. In other words, to look at Bangladesh without looking at the way that the global market in clothing works is only a tiny piece of the picture. Although it might sound protectionist to some, we did not have these massive problems in the 1970’s when much of the clothing market was being supplied by companies producing in the UK, the US and other developed countries. Workers had fought for their rights for generations and had made huge progress before they lost jobs as employment shifted to workers without rights. In the US, famously on the docks (although it existed elsewhere), there were “shapeups” where workers gathered each morning and were picked by the bosses to work that day. We are now in a sort of global shape-up where the labour of a human being has, once again, become a commodity and the basis of competitive advantage in some markets.
However, there is one specific area where the UNGPs have enormous potential concerning institutional investors. In the trade union movement, we have always had to explain to pension trustees that they cannot use their positions to “do good” or even to carry out their missions as trade unionists. Their job, often restricted by law and regulation, is to get a good return on investments to benefit retirees. If they could help in some situations, it was through the “business case”, in other words, arguing that bad industrial relations or environmental practices could jeapardise the profits and futures of companies and, for that reason, should be avoided. Decisions of the Dutch and Norwegian National Contact Points on due diligence responsibilities of institutional investors even with minority investments are an important change. If such considerations could have equal weight with fiduciary considerations, and if laws could be modified in keeping with that idea, it could, indeed, have great impact.of
Public Private Partnerships
PPPs are in fashion, in part, because governments and international organisations are looking for new sources of revenue. However, I think that there are not enough discussions about their usefulness, about any effects on democratic governance or public priorities or even their efficiency. I have always supported using private money for public purposes, but in the form of government bonds. Investors get a safe, guaranteed return and governments get needed resources, but public control remains intact. That is not the same as turning over services to private parties.
The book helpfully tries to limit the use of the word “stakeholder”, but I have come to the conclusion that we need a stakeholder like in the Dracula films that can put a stake through its heart. It has gotten so out of control that governments are often considered stakeholders in companies, citizens are considered stakeholders in their governments (that might be true in China, but citizens are “shareholders” in democratic governments). It is an over-used and abused, and misleading word.
Some other more specific points
Page 34. The book mentions that CSR directors are restrained on employee issues because that is the province of HR directors. This cuts both ways. CSR directors often see employees, even the companies own employees as “stakeholders”. HR directors, by contrast, most often see employees as internal. An HR director who is instructed to respect human rights is, in fact, at the nexus of one of the few places where democracy actually has an impact on the company. He or she is dealing with trade unions on a daily basis. A good HR director often has the mentality of working and negotiating with people. A bad one, like a lot of CSR directors, sees his/her job as “taking care” of people.
Page 59. I found the Wikileaks example very interesting and completely concur that there is an issue of adverse impacts. An extreme example from some years ago was publishing names of CIA agents; thus putting their lives in danger. However, your paragraphs prompted another thought. Wikileaks also shows how weak and fragile professional, ethical journalism has become. The same information, handled by skilled journalists would have been much more useful than the flood of information with no study or analysis. Would newspapers be capable of breaking the Watergate story today even if they had all the information? And, what will Google do down the road when there is no reliable content?
Pages 70-71. I think that the book is right not to be “absolutist” when it comes to trust. It is very difficult to really understand what it means. In terms of SRI, a very large proportion of money that was SRI invested went into banks – pre-financial crisis. Was that trust mis-placed? But, that probably reflected public sentiment. If you can’t trust the banks, who can you trust?
And, there is the issue of trust by whom. Some decades ago, the US Department of Labour did an extensive poll on attitudes towards trade unions. As expected, it showed fairly negative views by the general public. And, when union members were asked about trade unions, in general, there was little difference from the public reaction. But, when they were asked what they thought of their own trade unions, they were very positive. For me, the second figure is the most important. However, the reaction of union members to trade unions in general also shows that union members are influenced by what they hear in the media in spite of their personal experience. I cite this example as something that shows how complicated trust can be.
Page 84. I thought that the points about tacit consent and about manipulation were very important. If we are to protect democracy, we have to work at it, but these issues are rarely on the agenda. Some years back, a friend of mine from the UAW was complaining about the fact that the Republican right was able to reach some of our members. He said, “It is like convincing the chickens to vote for Colonel Sanders”.
Page 91. I thought that the quotation from Salil Tripathi about not being able to measure a human rights abuse was excellent. The foolishness of claiming respect for freedom of association in China based on interviews is along these lines. This is another reason why due diligence rather than claiming virtue makes sense.
Pages 99-101. The discussion of businesses working in cooperation with NGOs and supply chains prompts me to point out that it is also appropriate for global companies to speak with Global Union Federations about their employees. As opposed to trying to improve conditions and rights in suppliers, some companies, through this process of examination of the situation in their facilities and suppliers some companies are actually making many workers direct employees and, in that way, ensuring that their rights are respected.
Pages 101-102. Although I do not disagree with you on outrageous CEO pay, I tend, however, to look at it as part of a broader issue of inequality. Pay determination is always subjective. To me, paying a CEO millions in salary and other benefits for his work is not inherently more evil than enabling somebody to make millions without working by clipping coupons.
Pages 105-106. The section about understanding power was really good. It is, in fact, an argument that is largely missing in CSR. And, there is no place where the imbalance of power has a bigger effect on rights or their absence than at the workplace. In fact, the worst impact on rights in triangular employment relationships is that a relationship between a worker and an employer that, in labour law, is recognised as being inherently unequal is replaced by commercial law relationships where parties are assumed to be equal. Fear is also highly relevant to power. As bad as it may be to be powerful; it is worse to be powerless.