Responsibilities of Transnational Corporations

Responsibilitiesof Transnational Corporations

Responsibilitiesof Transnational Corporations

Theimplementation of the proposed Bills C-378 and C-300 cannot wait forany other time. In fact the world is waiting for implementationbecause many people believe that the wisdom of the Canadianlegislature cannot reject the proposals in these bills. Beforeexplaining the rationale for supporting these bills, there are a fewdefinitions that are critical to this discussion. Bill C-378 seeks toprohibit the sale of goods that come from Canadian multinationaltransnational corporations that use sweatshops overseas. A sweatshopis a work environment that has three major features: low pay, longhours of work, and unhealthy and unsafe conditions for the workers(Moran, 2004). Allowing goods from corporations that inflict suchworking conditions to enter the Canadian market violates thecountry’s tradition of respect for human rights. As majorcontributor to the international family, the Canadian governmentshould show its commitment to end sweatshops by supporting proposedbill C-378. The International Labor Organization has specificstandards that each multinational corporation must keep. The samestandards are found in the Canadian labor laws. Rejecting thisprivate members bill contravenes Canada’s internationalobligations.

Someconservative members of parliament are likely to oppose these billson the pretext that they bring to many restrictions on the waycorporations interact with local communities. Others state that thebills are not better the voluntary practices already in place becausethey do have articulate legal effects to offending corporations.Although these concerns are legitimate, they should not be the reasonto reject bills, which will open a new chapter in internationaltrade. There enough reasons for the government to support these twobills than to reject them:

  1. Support the bills will provide an opportunity for necessary amendments

Thereare various valid concerns about the enforceability of these bills.The first concern is that, the Bills do not have the criminal codethat facilitates it enforceability. Those opposed to it also statethat it is not regulatory. It is agreeable that the bill cannotoverstep Canada’s mandate to enforce international law by imposingextraterritorial laws on other host countries. However, once acompany violates an international labor law, which is definitive inCanadian law and also contravenes the constitution of Canada, itwould be justifiable for national law enforcement agencies to actaccordingly. The second concern is that the sanctions on companiesthat violate the guidelines in these bills are vague. The sanctionsunder C-300 introduce a financial punishment through the governmentas a stakeholder. Once the violating company is gazetted as anoffender by the minister, it loses financial support from the ExportDevelopment Bank and necessary support services that the corporationneeds from the agency. Suppose the corporation does not care aboutlosing the support of EDC, the government as a stakeholder can assertits authority by disallowing the Canadian Pension Plan from investingin the Gazzetted Corporation. All the CPP has to do is ensure that itdoes have assets invested in the corporation. The CPP is highlyweighted in the market hence, it will prompt other pensionorganizations to also restrict withdraw their investments in theoffending corporation. No corporation will, therefore, afford toignore the provisions of these bills. Those who feel that the billsare not punitive enough due to lack of a criminal code should not bethe same people arguing that they should be rejected. Instead, therather ask for further amendments to include criminal punishment forpersonalities that deliberately act unethically. The amendments mayinclude individual directors and senior management officials whodeliberately block the efforts of internal and externalwhistleblowers to expose cases of sweatshops and environmentallyharmful activities by corporations.

  1. Voluntary CSR practices have not solved the problem of labor rights violations

Incidencesof deaths and injury arising from a weak legal regime on CSR andlabor laws are common. There are several civil society reportsexposing the ills that go on mining fields. Reports of corporationsusing child labor in textile industries are in the public domain.C-378 and C-300 are preventive laws that will successfully preventCanadian corporations from suffering the consequences of suchviolations. As the old adage goes, “to prevent a disease is farbetter than to cure it”. Prevention is less costly while cureinvolves dealing with financial strain that heavy litigation causeswhen there are allegations. When the court confirms the allegationsthrough evidence, the cost of compensation is even higher. The billscreate a local environment that reinforces ethical behavior forCanadian transnational corporations. Before the international civilsociety exposes issues of labor violations and CSR flaws in miningfields, the government will already have prevented that fromoccurring. Secondly, the regulator frameworks in international tradeare industry dominated (Schwartz, Dunfee, &amp Kline, 2005).

Mosthost governments in poor countries have weak institutional frameworksto enforce international laws. The challenge of entrenched corruptionin these countries also dampens the efforts of civil society groupsand non-governmental organizations to bring cases of violationsforward. Thus, these bills will serve as a reprieve for helplesscitizens who seem to have nowhere to go when their judicial systemsare infiltrated with corruption to the extent that violations gounprosecuted. Industry dominated multi-stakeholder initiatives havelimited participation from the civil society, actors, stakeholders,government representation (Bäckstrand, 2006). The government shouldsupport the two bills because they pave way for social accountabilityinternational initiatives that provide all stakeholders with a roleto play in advancing human rights in the working environment. Theprovisions in the bills, especially C-300 develops a consensus-basedinitiative that accredits auditors, provides training and technicalassistance, and assists corporations in adhering to internationallabor laws in supply chains.

Canadaalready had a framework that depended solely on host country NGOs toinform the government about their findings on social compliance.However, it emerges that some of the perceptions only reflect theinterests and priorities of NGOs and not necessarily localstakeholders in the host country. For instance, there are cases whereNGOs set up monitoring and certification measures in production orextraction areas outside their know-how. Supporting the enactment ofthese bills will allow the government to factor in the real socialissues affecting local stakeholders. The minister will have theburden of proof before imposing any of the sanctions proposed in thebills. Admissible evidence essentially comes from thoroughinvestigations in the particular locality where the corporation runsbusiness to identify the particular violations of international laborlaws or CSR codes.

TheKarachi Fire accident in 11 September 2012 is a valid case in pointto support this view (Venkatesan, 2013). It was a typical case of asweatshop, which C-378 seeks to prevent in future. The audit reportestablished that the factory had poorly-wired electric bales, lockedexits to prevent workers from leaving early (p. 12). This was anindication that workers worked for long hours under very strictconditions. The stairwells were impassable and the windows wereboarded up. The directors were charged in the local courts but theyare now out on bail. The heartbreakingbit is that the caseproceedings were impeded by allegations of corruption to preventjustice. It was later established that Ali Enterprises had beencertified by Social Accountability international as complaint withSA800 code (p.13). The facility had just been audited by RegistroItaliano Navale Group (RINA) before the fire incident (p.13).Unfortunately, RINA only did paper audits without inspecting thepremises. The management was reported by a labor movement thatthemanagement had intimidated workers to deceive SA inspectors about thesafety of their workplace (p.14). C-300 seeks to restrain anyCanadian corporations to act the same way as the Ali Enterprise did.

  1. Canada has to lead by example on the international stage

Canadashould be the first country to encourage transnational corporationsto comply with the international CSR voluntary codes. The TorontoStock Market has the highest number of securities exchange activitiesin mining in the world. More capital for mining and exploration israised through this market than any other stock market in the world.Sixty percent of the world’s mining and exploration transnationalcorporations are listed on Canadian Stock markets. The statisticsindicate that Canada has the highest stakes in the mining andexploration industry especially in creating the needed capital forinvestments. Furthermore, Canada has been an international partner onhuman rights and fair trade through governmental and non-governmentalactivities. They work tirelessly to ensure that people around theworld have improved working conditions and investors get their sharevalue of return on investments without flouting the internationallabor codes. However, there are many cases of Canadian transnationalcorporations that abuse human rights by putting workers in deplorableworking conditions and also ignoring their responsibility to enhanceenvironmental sustainability. No commercial or non-commercialactivity can go on anywhere in the world without stakeholders. If thegovernment rejects these bills, it will be confirming it continuedrefusal to execute the shared mandate of shareholders. The singlefirm voluntary initiatives that currently exist render theinternational labor codes unenforceable. Single firm voluntaryinitiatives on CSR lack the necessary accountability thatcorporations should have to stakeholders.

Thegovernment of Canada is a stakeholder in all the commercialactivities Canadian corporations abroad. As mentioned above, theCanadian stock market hosts a majority of listed mining corporationsin the world. Mining is an environmentally sensitive explorationsector because it involves fossil fuels, which are responsible forclimate change. Considering that the Canadian government is committedto reversing current trends in climate change, it has to demonstratethat by supporting this bill because it gives it the legal powers todeal with corporations that ignore international protocols on laborand the environment. Secondly, the government has two vital agenciesthat directly or indirectly promote foreign investments for Canadiancorporations. These are the Export Development Bank of Canada and theCanada Pensions Plan Investment Board. These two agencies ensure thatthe taxpayer’s money support Canadian organizations to investabroad to create more income for Canada and also support livelihoodsin poor countries. These are sufficient reasons that demonstrate theposition of the Canadian government as a stakeholder. As astakeholder, the Canadian people through the government expectcorporations to be accountable to the government by respecting theshared values of work both locally, and on the international stage.

Thisbill supports the multi-stakeholder initiatives that provide a legalframework through which the government can act. The state ofadherence to international labor standards today is not convincingbecause single-firm voluntary initiatives on CSR does not havemeasures because corporations are keen measures that save moneyrather than executing meaningful CSR initiatives. In some case,corporations use strategies that “buy off” local opposition onenvironmental hazards for their won convenience(Henderson, 2012).The locals end up lacking their deserved benefits and necessaryprotections against unethical behavior. The government has torecognize that CSR departments of most corporations do not have thesame influence and power. While the production departments demandever-lower prices, CSR departments demand higher wages and betterworking conditions. However, the former is more powerful hence,corporations would rather maximize profits rather than implement CSRinitiatives. The dilemma that arises from deciding which way to gomost often favors the buying departments of consumer corporations.

Conclusion

BillC-378 proposals will provide the government with an opportunity toenforce these standards through the minister in charge. Bill C-300bolsters the provisions of the Bill C-378. The former is moreregulatory and does not have punitive measures that can discourageCanadian transnational corporations from engaging in acts thatviolate labor rights such as sweatshops. Bill C-300 introduces afinancial punitive measure by restricting financial support or nayother service from the Export Development Bank of Canada. The Billintroduces an obligation for Canadian transnational corporations toexercise international Corporate Social responsibility. CSR is acontemporary subject that ensures that corporations are sensitive tosocial, economic, and political issues of the environment theyoperate.

References

Bäckstrand,K. (2006). Multi‐stakeholderpartnerships for sustainable development: rethinking legitimacy,accountability and effectiveness. EuropeanEnvironment,16(5),290-306.

Henderson,G. E. (2012). Making corporations environmentally sustainable: thelimits of responsible investing. GermanLJ,13,1412.

Moran,T. H. (2004). Beyondsweatshops: Foreign direct investment and globalization in developingcountries.Brookings Institution Press.

Schwartz,M. S., Dunfee, T. W., &amp Kline, M. J. (2005). Tone at the top: Anethics code for directors?. Journalof Business Ethics,58(1-3),79-100.

Venkatesan,R. (2013). Clothing Garment Workers in Safety: The Case ofBangladesh. Economicand Political Weekly.

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