Multinational Monitor

JUL/AUG 2002
VOL 23 No.7

FEATURES:

Introduction: The Corporate Reform Moment
by Monitor Staff

Commons Sense: Community Ownership and the Displacement of Corporate Control
by David Bollier

An Answer to Marketization: Decommodification and the Assertion of Rights to Essential Services
by Patrick Bond

28 Words to Redefine Corporate Duties: The Proposal for a Code for Corporate Citizenship
by Robert Hinkley

The Dormant Power of the Purse: The Failure of the Government to Use its Purchasing Power to Promote Corporate Compliance with the Law
by Seth Morris

The Sunshine Standards: The Powerful Potential of Corporate Disclosure Requirements
by Ralph Estes

The Corporate Crime Scorecard
by Monitor Staff

INTERVIEWS:

Overturning the Economic Aristocracy: Toward New Models of Corporate Control
an interview with
Marjorie Kelly

Ownership and Sustainability: The Case for Shareholder Activism to Promote Corporate Responsibility
an interview with
Robert Monks

Corporate Codes of Conduct Regulation, Self-Regulation and the Lessons from the Baby Food Case
an interview with
Judith Richter

DEPARTMENTS:

Letter

Behind the Lines

Editorial
It's Worse Than You Think

The Front
The Great Hormone Hoax - Fish and Empire

The Lawrence Summers Memorial Award

Names In the News

Resources

Corporate Codes of Conduct: Regulation, Self-Regulation and the Lessons from the Baby Food Case

An Interview with Judith Richter

Judith Richter is a long-time consumer and public health activist, who has written extensively about corporate power. Her most recent book is Holding Corporations Accountable: Corporate Conduct, International Codes and Citizen Action.


Multinational Monitor: What was the UN Code of Conduct for TNCs (transnational corporations)?

Judith Richter: The UN Code of Conduct was a very broad, nonbinding code, which tried to ensure that corporations would contribute to national economic development and to prevent harm to citizens all over the world. It was proposed in the early 1970s, but never finalized.

MM: What happened with negotiations over the Code?

Richter: There was a very drawn out process trying to work on it. Corporations were actually included in the negotiations. In 1992, it was said that the work would be abandoned, because it was not possible to come to any consensus. But those who had worked on the UN Code said actually it was nearly complete. Their assessment is that change in the balance of power following the end of the Cold War made it much harder to push for control of corporations. The other political change was that the notion of allowing corporations to regulate themselves had made more and more inroads since the election of Reagan and Thatcher. Both of course pushed for deregulation of the corporate sector rather than international regulation.

MM: How did the theory of self-regulation evolve to replace the idea of external regulation?

Richter: That is a long and ongoing story. I think many factors came together. A turning point was definitely the Earth Summit, held in Rio de Janeiro in 1992. At that moment, a very big industry lobby said that industry of course can regulate itself and put forward its own code of conduct. The conference actually was chaired by a corporate manager, and the UN retreated from the idea of regulation of corporations.

The U.S. government has also put a lot of pressure on different UN agencies involved in different efforts to regulate corporations. There was not only the very broad UN Code for Transnational Corporations, but also sectoral codes just for specific industry practices. During the late 1970s and early 1980s, there were about 30 codes proposed for transnational corporations, but to my knowledge very few ever saw the light of the day.

MM: One which did is the Code of Marketing of Breast Milk Substitutes. What is that?

Richter: It's a very broad framework which tries to ensure that corporations do not harm the health and life of children. It tries to ensure that the caretakers are able to make decisions on infant feeding based on unbiased and complete information.

But the code goes beyond just trying to ensure that transnational corporations which market infant food are being regulated by nations. It talks, for example, about the role of health professionals and corporations' attempts to buy health professionals as endorsers of their products.

Around one and a half million children in developing countries died a year just because their mothers had been persuaded to give them artificial breast milk substitutes rather than to breastfeed them. In developing countries, very often mothers would not have access to safe water, so the product would be mixed with contaminated water and children would ultimately die of diarrhea. The other issue was that poor families would often not have enough money to buy the product. They would use too little of the powder, so the child would actually be starved.

What really outraged the public and drove the Code negotiations were images of children in developing countries who died because their mothers had been persuaded that it was better to give them artificial breast milk substitutes rather than to breastfeed them. So of course people asked how companies could market a product that kills the consumer of the product, and moreover, these consumers -- babies -- are in no way able to make their own decisions.

Breastfeeding is now seen as even more important, because much more knowledge has accumulated about the benefits. Breast milk substitutes are only the second best food for small children. Breast milk contains antibodies protecting babies from all kind of diseases, and has the best nutritional composition.

So the distinction between harms of aggressive marketing of breast milk substitutes in developing countries versus industrialized countries has become smaller than it was at that time. Nonetheless, the international Code of Marketing of Breast Milk Substitutes was conceived as a universal instrument, valid for all countries, all over the world.

MM: Who implements the Code?

Richter: The implementation is the task of the various national governments. But there is also a clause which says that corporations, irrespective of whether and how countries implement the code, are themselves responsible to ensure that their practices conform to the international code.

MM: How did the Code come to be?

Richter: UNICEF and the World Health Organization (WHO) called a meeting in 1979 on the issue. That meeting gave WHO a mandate to work on a code. There were four drafts. The World Health Assembly, the decision-making body of WHO, adopted the Code in 1981, and a few months later the UNICEF executive board also approved the Code as an international regulatory instrument.

MM: What was the role of health activists in pushing for the code?

Richter: Their role was absolutely instrumental, and this has been recognized by leaders of various UN agencies. Activists first put the issue on the public agenda. A crucial U.S. Senate hearing on the issue in 1978 would not have taken place without the pressure of groups such as INFACT, which started the Nestle boycott, or church organizations. The UNICEF-WHO meeting would not have taken place without that pressure either. Without the health action and solidarity groups, our public institutions would not have been able to withstand industry pressure as much as they did at that time.

MM: To what extent have countries implemented the code?

Richter: Not very many countries have fully implemented the code. This is in very striking contrast to the fact that the code in 1981 was adopted by the very great majority of the countries present at the World Health Assembly. Only one country voted against -- the United States -- and three abstained. One hundred eighteen voted for the Code.

Why is there this divergence between commitment to the code and actual implementation? We really have to see that the 1980s were the decade when, as I said, political balances started to shift, neoliberal ideas increasingly started to shape policies the world over, transnational corporations got bigger and bigger, and the United States used its leverage to tell the UN not to be so supportive of regulation of transnational corporations. Countries were left to implement a Code when regulation of transnational corporations was coming to be seen as something that was not a positive public measure.

MM: To what extent is the Code followed, both in the countries that have adopted it in part or whole, and in the countries that have not?

Richter: There is only anecdotal evidence. Even among countries which have adopted the Code in national legislation, quite a lot do not have a good monitoring system in place. So much of the monitoring actually is done by civil society organizations, in particular by IBFAN [the International Baby Food Action Network]. IBFAN brings out monitoring reports about every two years, and they show that companies continue to violate the code. Another report by a coalition in the United Kingdom found more compliance with the Code in countries which had adopted it in law than in countries where there is just a voluntary agreement between the government and corporations.

MM: To what extent do the companies feel bound by the code, even in countries that have not adopted it in law?

Richter: We recently had a panel discussion at the World Civil Society Forum, and Nestle's communications director was asked why Nestle says it respects the Code only in developing countries. The company representative argued that the company is so much for national sovereignty that it would be an interference with national sovereignty to question the potentially weak implementation of the Code.

The United States is one of the few countries which has even said it will not implement the Code because it would go against so-called freedom of commercial speech. Nestle finds that a good thing because it doesn't want to interfere with U.S. national sovereignty.

But the paradox is that I have seen quite a number of letters where companies were not very impressed by national sovereignty -- mainly when countries try to implement very strong legislation based on the Code. There are instances where they lobby countries not to implement legislation based on the full Code. So there seems to be a very selective respect for national sovereignty.

Also interestingly, a number of companies say their failure to comply with the Code reflects the failure of governments to regulate them. That is a very interesting argument, because one of the mainstays of so-called corporate social responsibility is the alleged ability of corporations to regulate themselves, with the corollary assertion that it is therefore unnecessary for government to regulate corporations.

This argument does not seem supported by experience in the infant food debate. There, the corporations do not feel that they should regulate themselves. They simply shift the whole burden onto the governments.

MM: What could be done to make the Code stronger or more effectively enforced?

Richter: For the details, it would be good to address that question to IBFAN, because they have worked so much on the Code.

But from my perspective what is needed is a shift in the political climate. We have to get away from the idea that it is good not to have any regulation.

We have to recognize that it is not true that neoliberal policies involve deregulation. Actually, what has happened over the past 10 years or so is re-regulation in the interest of big corporations and wealthy countries. There is no no-regulation; the question is only what regulation, and to whose benefit.

We also need a shift away from work on so-called corporate social responsibility, with much more emphasis placed on corporate accountability and getting back to the task of regulating corporations.

It is often argued now that countries are not strong enough to do that. But to whatever extent this is true, they should not abandon regulation, but work together, including through intergovernmental agencies, to do what they can. They should also ask civil society groups which have experience as watchdog or pressure groups to help them.

But we also need nongovernmental organizations (NGOs) coming together around the theme of corporate accountability, and not getting drawn so much into certifying corporations. This is not just about baby food, it is about regulation of transnational corporations in general.

Additionally, I would think that we would need far more. We need an international court of justice which is able to take on cases against transnational corporations in instances where countries are either unwilling or unable to sue a company. We need good antitrust legislation, so that corporations cannot continue to merge until they are too big to be controlled. And we probably need a revived UN Center on Transnational Corporations to look at the practices of transnational corporations and to make their structures transparent to governments and citizens of this world.

MM: Is there anything specifically that comes out of the experience with the baby food code that suggests lessons for other kinds of regulations of corporations either in particular sectors, as the baby food code is, or for more general kinds?

Richter: I find the infant food case fascinating because this is one of the cases where the groups did not go into the whole discussion about corporate social responsibility. IBFAN always tried to pressure and support UN agencies and governments in establishing legal frameworks for marketing of breast milk substitute.

Many NGOs now say, well, our states are either unwilling or unable to regulate transnational corporations, so we will have our own discussions with corporations and then we will, I call it "co-regulate," with them. Of course, there are different degrees. It is different if an NGO sets up its own model code and then tries to pressure transnational corporations to very often universally accepted minimum demands, or if the NGO from the very beginning intends to discuss and draft the code together with the corporation and then discusses how to implement it with them.

IBFAN always felt that corporations should have their own set of guidelines and should follow them anyway. The important thing for IBFAN is to have effective public overview of transnational corporations.

A lot of the argument today for co-regulation is that states can't do everything and therefore TNCs together with citizens, UN agencies and others should work in partnership under the banner of corporate social responsibility.

The UN's Global Compact [described on its website, www.unglobalcompact.org as "not a regulatory instrument or code of conduct, but a value-based platform designed to promote institutional learning. It utilizes the power of transparency and dialogue to identify and disseminate good practices based on universal principles"] is now being portrayed as a model of how we can move corporations to behave more responsibly. I'm in the camp of those who do not believe that the Global Compact actually helps to shift TNCs in a more socially responsible direction; I think it can be used by corporations just to claim they are behaving in a good way, so that it actually works counter to the efforts of people who try to regulate corporations. During interviews with people within UN agencies, I found that they generally do not want to call for regulation of TNCs, because they see it as something which would run counter to the secretary general of the United Nations. This perception is widespread within the United Nations.

I would recast the argument that the state cannot do everything. The infant food case shows the important role of citizen organizations, which the theory does not take into account. If you look at the history of both the UN Code of Conduct for Transnationals and especially at the infant formula code, you see that these groups are better able than government to name and shame corporations. And government capacity to do this has diminished from the 1970s and 1980s.

That leaves more and more naming and shaming to fewer and fewer NGOs, as many decide that they should bargain with corporations to behave nicer and then wait and give the corporations a chance to prove that they can move in the agreed-upon directions. For the TNCs, of course, it is a game of time.

We know from history that corporations moved most when there was pressure on them to move. Co-regulation is an ahistorical concept, and I think it is a concept which does not describe reality correctly. In the materials of those who advocate for public-private partnerships, we find only what corporations say but not much investigation on what they do.

If we talk about what has to be done in terms of changing institutions, first of all there should be no corporate partnerships. It simply is not a partnership. This doesn't mean that I see corporations as enemies, but that I see them as very big influential and wealthy entities which operate under profit-making logic. Such institutions simply cannot work along public values. Therefore if we work together with them, we must recognize that it is not a partnership. In the infant food case, the action groups found that these partnerships and the money which goes with them took space away from groups which work for corporate accountability.

 

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