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Archive Introduction

Global Compact Hypocrisy      

     In July 2000, following up on a proposal which he made to corporate bigwigs at the World Economic Forum in Davos, Switzerland in 1999,  Secretary-General Annan launched a major new "bold step" in his series of UN reforms and changes.  He challenged business leaders to join a coalition of  UN agencies, labour and civil society to encourage companies to adhere to nine core principles on human rights, labor rights, and the environment, based on UN system declarations.

The business partners agreed to publicly advocate this new "Global Compact" and its principles, to annually report on their progress and "lessons learned" on a UN Internet website, and to join the UN in related partnership projects.

[United Nations Global Compact,  located at www.unglobalcompact.org/Portal/Default.asp

This grand new Global Compact brought conflicting initial reactions.  Some observers felt that it was controversial, but at least gave the United Nations some new independence, linkages, and a "novel degree" of autonomy. Some UN supporters feared that UN association with corporations would contaminate the UN's integrity and undermine its potential to demand and document enforcement of corporate accountability.  However, UN officials confidently assured the fearful that they can handle these risks. Business groups supported the new collaboration, but cautioned that it cannot succeed if it is just a means for the UN to meddle in, and judge, corporations from on high.

William Pfaff, "Annan's new United Nations is beginning to go its own way", International Herald Tribune, September 12, 2000,

Joshua Karliner and Lenny Bruno, "The United Nations sits in suspicious company", International Herald Tribune, August 10, 2000,

John Ruggie,"UN's global compact", response letter in International Herald Tribune, August 16, 2000, and

John Ruggie, "global/governance.net: The Global Compact as learning network", Global Governance 7 (2001), pp. 371-378.

Maria Livanos Cattaui, "Yes to Annan's 'global compact' if it isn't a license to meddle", International Herald Tribune, July 26,  2000.

In January 2001, Secretary-General Annan wrote an article on progress made in the Global Compact effort in "Rallying firms for UN goals." He noted that the UN had enlisted more than 300 corporate partners, up from 44 at its launch and with 1000 expected to endorse the Compact by 2002.   UN Assistant-Secretary-General Michael Doyle explained further in an interview that companies participate in the Compact as a foundation for a learning network where they can share "best practices". He judged that "One year in, we've seen the companies building the kinds of practical and intellectual bridges we [the UN] were hoping for." 

"Doyle said companies participate in the Global Compact by making a commitment to observe a series of general principles on human rights, labor relations and environmental protection, and to engage in open dialogue on how they were doing so.

Once their chosen methods of carrying those guidelines are posted on the Internet, they are subjected to critiques -- by their own employees as well as outsiders including human rights and environmental groups and labor unions."

"Rallying firms for UN goals: The advocate: Kori Annan", in "The global compact: Business and the UN", International Herald Tribune, January 25, 2001, pp. 11-14, [emphasis added.]  and

Irwin Arieff,"Some 300 firms sign up for global compact", Reuters, July 28, 2001. 
                                                                                              

 Outside observers also had doubts:

" … environmental and human rights groups that were participating in the program from the start said they were nonetheless underwhelmed by the Global Compact's achievements to date.

'Viewing the program solely as a learning experience represents a wasted opportunity in assuring corporate responsibility,' said Arvind Ganesan, the … director of business and human rights programs for Human Rights Watch. 'The progress we expected on moving beyond just a learning forum hasn't occurred yet."

Irwin Arieff,"Some 300 firms sign up for global compact", Reuters, July 28, 2001.                                                                                               

            Another expert suggested in 2004 that the Secretary-General should not squander the opportunity created, but instead make a much more serious attempt to produce a series of enforceable rules to regulate corporate human rights impacts:

" … the United Nations must develop new standards concerning the relationship between corporations and human rights … [by] drafting a set of principles that is tough on multinationals … [but] also recognizes the difficulties companies face. 

[This would require] … reasonable and well-defined limits on the human rights responsibilities of companies … [with] a more reasonable and fair approach [that] can resolve this problem and win the support of both businesses and … (NGOs).

… [to elicit] more than just a public relations response from multinationals …

 I would suggest that you begin by establishing a [multi-year timetable] … [for]  a new body of human rights commitments for multinationals and to also have conceived a means of enforcement to ensure compliance -- a U.N. rapporteur, for instance …

Drafting should be … [done] by a small group of carefully-selected experts from [business, NGOs, labor, and the UN, and drawn equally from North and South.]

Assuming that the principles adequately address their interests and worries, … [other multinationals and NGOs should support the new rules … Governments should follow ….

… and take a big step toward building public trust in globalization and tempering some of its ill effects."

Daniel Litvin, "Needed: A global business Code of Conduct", Foreign Policy, November-December 2003, pp. 68-72  [68, 72].                           

[Note: Mr. Litvin is the author of Empires of profit: Commerce, conquest, and corporate responsibility, Texere, New York, 2003, and director of Percept Risk and Strategy, a London-based firm that provides analysis to companies on social and ethical issues.

[Note:  UN Global Compact officials, on behalf of Mr. Annan, declined this interesting action proposal, in favor of the ongoing voluntary initiatives, in

"Letters", "The right norms", Foreign Policy, January-February, 2004.]
                                                                                

In 2004, the Global Compact website reported that, at the first Global Compact Leaders Summit in 2004:

"Secretary-General Annan announced the addition of a tenth principle against corruption [following] a long consultation process with all Global Compact participants.

Through the power of collective action, the Global Compact seeks to advance responsible corporate citizenship …to help realize the Secretary-General's vision: a more sustainable and inclusive global economy.

Today … hundreds of companies … are engaged in the Global Compact.  [It] is a direct initiative of the Secretary-General: its staff and operations are lean and flexible."

"Columbia launches Annan's Global Compact for better corporate practices",  UN News Service, 27 May 2004. ]                 

[As this article's very personalized title indicates, and of some concern as Mr. Annan nears the end of his second term as Secretary-General, it seems to be somewhat unclear whether the Global Compact is a UN project or a personal project of Mr. Annan.]                                                       

            In fact, the Global Compact summit of 2004 appears to have had a few rough edges:

"Firms joining the compact are expected to make a 'sincere effort' to aspire to [its nine] principles. … In return, the UN blesses member companies and helps to publicize their good deeds.         

… [But] American firms [do not] have the same sort of warm and fuzzy feelings towards Mr. Annan or the UN that foreign ones tend to harbour … Of the 1,400 companies [in] .. the compact so far, say UN officials, a paltry 4.5% come from America.

This may now be changing … After a three-year effort by the UN and the American Bar Association, American companies can commit to the principles using a letter, full of legal boilerplate, which shields them from lawsuits based on claims that they have failed to live up to the compact … and American companies … have rushed to sign up.

As the compact prepares to celebrate this bit of creative lawyering, … a coalition of NGOs … is holding a 'counter-summit' ...  [arguing] that the compact is 'little but a public-relations cover for global corporate malefactors.'  The first item on its agenda?  'Greenwash, bluewash, and the corporate takeover of the UN.'  Maybe Mr. Annan too needs some legal protection."

"Corporate social responsibility: Bluewashed and boilerplated", The Economist, June 19th, 2004, p. 69.             

The schoolmasterish UN blessing of the corporate participants in the Global Compact, despite its own exemption from any national laws -- especially the tough ones that are sending US and other multinational executives to jail -- is of course extremely hypocritical.

However, other reporting from this grand summit meeting stated that Mr. Annan had requested the UN's top manager to establish working groups to make sure that the UN integrates the Compact principles into its own operations.

“The United Nations today said it was undertaking an effort to integrate the principles of the Global Compact  --  which promote better corporate practices in human rights, labour and the environment  –  into its own internal operations. …

In a letter addressed to UN staff, … [USG for Management] Catherine Bertini observed that ‘the United Nations should always lead by example, and be ready to comply with the same requests it makes of others.’

She said that ‘although the United Nations does not knowingly contravene the Compact’s principles in its administrative practices, the Organization could and should be far more explicit in integrating the principles into its administrative processes.’

[When Secretary-General Annan] launched the Global Compact in 1999 … the United Nations considered whether any changes in its own managerial and administrative practices would be necessary and decided that only a limited number of steps were required, primarily an effort to educate potential suppliers to the .. [UN about the compact and its principles], Ms. Bertini said.”

“UN to align managerial practices more closely with Global Compact”, UN News Centre,  28 June 2004.  [emphasis added.]

[Note:  It will indeed be interesting to see how, or if, the UN does explicitly assess and report on the extent to which its own operations match up with the Compact principles – especially in the human rights and labor relations areas – and how it will act to improve any defects that exist, alongside the actions consistently sought from Global Compact participants.]                  

This seems like a golden opportunity to end the UN hypocrisy, but such UN working groups are usually just for show. Instead, the UN could indeed inspire the other Compact participants by acting, as Mr. Doyle said in 2001 as cited above, to subject itself:  

"to critiques -- by their [its] own employees as well as outsiders including human rights and environmental groups and labor unions."

The many problems discussed throughout this archive and the critical views of UN staff in 2004 about UN integrity, leadership, accountability, and corruption-fighting problems, suggest that the UN is more than ripe for such outside critiques itself, especially concerning the two Global Compact principles on human rights:

"Human Rights

Principle 1.  Businesses [in this case the UN] should support and respect the        protection of internationally proclaimed human rights; and

Principle 2.  make sure they are not complicit  in human rights abuses."

[United Nations Global Compact,  "The ten principles", located at www.unglobalcompact.org/Portal/Default.asp  .]

Meanwhile, as the UN dithers, at least some major multinationals seem ready to move ahead much more firmly.

“The financial sector is being increasingly scrutinized for its rule in funding projects associated with human rights abuses …

The issue is rising on the corporate agenda although there is little consensus on how the risks can be managed, the report, by F&C Asset Management and KPMG, said.

Nine institutions took part in the survey, which identified concerns including employee rights, staff security, litigation, loan default and risks to reputation. 

‘We are concerned about the reputational risks lenders may incur through their association with controversial clients and projects’ … said Karina Litvack, head of governance and socially responsible investment at F&C Asset Management.

… in the United States, international financial services institutions have been taken to court over their alleged past roles in the former apartheid regime in South Africa.

The report said that companies should develop a comprehensive human rights policy, communicate it to staff and investors and ensure that senior executives are accountable for enforcement.”

“Briefcase: Rights become a corporate issue,” Reuters, International Herald Tribune, October 30-31, 2004.

[Note: At the UN  -- the “home” of human rights  --  where are the detailed surveys, their wide dissemination, and the firm accountability obligations of  Secretariat senior officials?  For that matter, who is the UN senior official solely responsible for governance and socially responsible operations?]

"As companies increasingly recognize that good corporate governance can enhance their reputations and reduce business and legal risks, there is also a growing interest in indices and standards that measure best practice which investors can use and trust. This report looks at the new FTSE/ISS index which aims to calculate which markets have the most well-governed companies.

The key issues:

§         US: The struggle to control corporate America can be viewed as a battle between the private and public sector -- and between the regulators and the regulated.

§         Europe: Auditors are a major line of defense.

§         Asia: Scandal has put the spotlight on deficiencies.

§         Corporate responsibility: effective boards and well-managed companies go beyond mere box-ticking to face key issues that influence the heart of corporate culture."

"At a glance" summary of a special report by the Financial Times (UK), "Focus on fresh ways to measure best practice that investors can use and trust", December 15, 2004, 4 pp.

[Note: the full Special Report is also on  FT.com at www.ft.com/corpgov2004.]

      IO Watch believes that the creation of a new UN Human rights ombudsman, proposed a decade ago by Erskine Childers and Brian Urquhart but never acted upon, would be a most excellent way for UN senior officials to show that they stand fearlessly shoulder-to-shoulder with their corporate "partners" (although not in any court of law) in honoring Global Compact (and UN) principles.  This topic is discussed further under Where is the Rule of Law?.