A worldwide financial crisis of enormous magnitude continues to unfold rapidly. Unlike other crises in recent decades, the current episode is rooted in industrial countries' financial systems and is affecting low-income and middle-income countries (MICs) alike. Defaults on securitized sub-prime mortgages as a real estate market bubble burst led to failures or near-failures of several large financial institutions and a collapse of inter-bank and commercial paper markets. A tightening of credit, combined with declining consumer confidence, has brought on worldwide recession with growing unemployment, and many fear that the downturn will be severe and protracted. At the same time, the rapidly multiplying signs of contraction are prompting strong responses, including fiscal stimulus packages and reductions in benchmark lending rates, on the part of several of the affected developed countries. The Bank Group is well placed to help mitigate the impact of the current crisis with financing and advisory services, and its clients are already requesting increased support. A rapid, high-quality response that combines financial and advisory support can do much to ease the inevitable ramifications of the crisis. Lessons from evaluations of previous Bank Group responses to past crises can help inform the response to the current crisis in order to increase its effectiveness.
Panama's economic growth has been at the top of the Latin American and Caribbean (LAC) region in recent years. The country s rapid growth has been largely pro-poor and translated into significant poverty reduction. The new Administration is well placed to tackle these challenges, with its commitment to maintaining an open and diversified economy and redressing social imbalances. Looking ahead, the country s main challenges are to maintain the current growth performance and ensure that its benefits are extended to all. The World Bank Group s (WBG) new Country Partnership Framework (CPF) seeks to support Panama s continued high growth, while ensuring inclusion and opportunities for marginalized groups, and bolstering resilience and sustainability. These themes are highlighted as priorities in the Government s 2014-2019 Strategic Development Plan (SDP) and in the WBG s Systematic Country Diagnostic (SCD). The CPF seeks to maximize over a six-year period, the comparative advantages of the WBG, through packages of innovative public and private financing options based on cutting edge global knowledge and experience.
Botswana has been one of the most successful countries in the developing world over the last 40 years by many measures. Incomes have grown at a sustained pace, poverty has fallen, and the citizenry has become more educated. To be sure, poverty and income inequalities remain a problem, but rising standards of living have meant a better life for this generation of Batswana than any before it. The question facing the country leadership is whether this commendable performance can be sustained into the next generation. There are clouds on the horizon that cannot be ignored. Diamond earnings, the life blood of decades of prosperity, have flattened out. In per capita terms they are falling. Moreover, because revenues from diamonds going to the public sector have been falling for more than a decade, a growth model predicated upon an ever expanding state presence is not viable. Diamond earnings accruing to the state for subsequent redistribution have peaked. Employment and wages in the public sector have reached their natural limits as a share of Gross Domestic Product (GDP); recycling revenues from mining into the private sector, either directly or through the financial sector, has been inefficient with low social returns; and redistributive mechanisms to support social safety nets are also likely be approaching their limits. The country confronts the challenge of looking for new sources of growth outside of government.
The Philippine economy has emerged as one of the fastest growing economies in East Asia, with growth accelerating to 7.1 percent in the third quarter. The acceleration of domestic demand since the first quarter of 2012 reflects the country's strong macroeconomic fundamentals, stronger government finances, and high confidence in the Aquino government's commitment to reform. Sound macroeconomic fundamentals, as seen in low inflation, and large current account surpluses and foreign exchange reserves, have continued to shield the economy from external headwinds, while a more diversified export basket allowed total exports to grow, despite the decline in electronics exports. Overall, the economy is expected to expand by over six percent this year, up from 3.9 percent last year. However, more structural reforms are needed to create more and better jobs, as the overall labor market outcome has been less responsive to the higher economic growth. The economy needs to shift from consumption towards investment, both public and private. The special focus sections of this update demonstrate that the implementation of such reforms can have high payoffs in terms of jobs and inclusive growth. Finally, by scaling-up and broadening several open government/open data initiatives in the country, the strengthening of inclusive institutions would be greatly enhanced, in line with the core principles of this government.
Inhaltsangabe: To introduce this work the author refers to the World Economic Forum Annual Meeting 2011, which took place in Davos from the 26th - 30th of January 2011, its agendas and reports (The World Economic Forum, 2011). At first view this meeting looks like a get-together of several leaders from different backgrounds, meaning leaders from different industries as well as political and religious leaders. But the huge amount of attendees and their position in the world turns this get-together into a platform to discuss strategies and solutions for the world's future economy and how to overcome the latest issues regarding the financial crisis. The theme of this year's meeting was 'Shared norms for a new reality', indicating, that the world has reached a turning point where change is important to assure a sustainable future. Abhisit Vejjajiva, Prime Minister of Thailand, for example states 'Governments and businesses should start revising their social contracts with their stakeholders in the light of the new realities of the post-crisis world". Furthermore his concern is that today's leaders are mostly just focused on the short-term success, due to the high pressure from their shareholders and thus work in their own borders without caring about the common good outside the borders in order to generate sustainable success. This concern gets a higher emphasis by Indra Nooyi, Chairman and CEO of PepsiCo, who actually attacks today's businesspeople and want to send them back to university because they just aim for short-term profits, rather than worrying about a sustainable future. In addition it is about the future leadership role of China considering multi stakeholders to achieve win-win solutions (Victor Chu, First Eastern Investment Group), leadership for people (Christine Lagarde, French Minister of Finance) and finally an optimistic outlook for the future, especially Europe, and the request of change and more transparency by David Cameron, Prime Minister of the United Kingdom. At the end buzzwords like stakeholders, sustainability, partnership, social responsibility, growth, balance and responsible leadership, just to name a few, can be found throughout all statements. As a matter of course all these statements are in a broader context meaning global issues, but can easily transferred to normal businesses. Reason for this project: Sustainability has become, as seen above, a huge topic paired with a more social behaviour for the common good and let the feeling arise that a new era has begun, that some of the main leaders have started to develop a new 'Zeitgeist". The question now is how this dissertation can contribute to the on-going change in order to achieve sustainable success. Sustainable success is depended on the competitive advantages, which is often tried to gain through reengineering, process improvement, etc. According to Huber, Scharioth, Pallas (2004) this is initially a good idea, but even if there are differences putting these into practice, the performance standard is often quite similar and the competitive advantage, which is won by these initiatives, is not as significant as desired. That is why they are putting the emphasis on stakeholder management with the purpose to not left the relationships with stakeholders on its own. Stakeholder management is actually an idea developed within the 80's by Freeman (1984) in order to strategically align the stakeholder's interest, using a rough framework, finally resulting in improved success (Stoney Winstanley, 2001). Success is nowadays often seen in form of financial benefits and at least in this point Berman, Wicks, Kotha, Jones (1999) see a positive impact on the part of stakeholder management. Nonetheless sustainable success is not just about finances and thus it is interesting to investigate what sustainable success is and how stakeholder management nurtures all its components. But why is each stakeholder so important? Giving some examples according to Huber, Scharioth, Pallas (2004), it points out that no matter if employees or suppliers they all have an essential impact on the business. Employees for instance have a high impact on the customer retention and company's profitability (improvement of 20% - 50%) and therefore put before customer by Nayar (2010). On the other hand suppliers need a lot of attention, due to 'Outsourcing', 'Lean' and scarcity of raw materials, to get required quality, quantity and delivery time. But also other external stakeholders are from high importance to avoid higher financial risks, as already pointed out in the 1990s by McGuire in Savage, Nix, Whitehead, Blair (1991), and thus must be managed well in order to not loose the support of a specific group and thus getting hindered on the journey to sustainable success (Reynolds, Schultz, Hekman, 2006). This is where 'managing", also understood as 'balancing" (Avery, 2005), the different interests comes into play, whereas it can become difficult, if the company is highly depending on one specific stakeholder. This could be an investor, who is holding a lot of shares, or a supplier, who is having a monopole, leading to generated bias and an exposure of sustainability (Savage, Nix, Whitehead, Blair, 1991). Furthermore a company or a company network respectively, is seen as an alliance of stakeholders (Freeman, Harrison, Wicks, 2007), and their sustainable success is ensured by sticking together and behaving like a moving target (De Wit Meyer, 2005), in order to withstand evolutions in the industry and the corresponding challenges. It also could be refereed to a company as organisation, an amalgamation of people or groups of people with the aim of accomplishing productive activities, which is seen as difficult on an individual basis (Chemers, 1997). However there are also arguments against stakeholder management as enabler for sustainable success (Stoney Winstanley, 2001), at which the only purpose of a company is seen by Friedman (1962) in Stoney Winstanley (2001) in making profit and thus stakeholder management is an attack on the individual wealth of shareholders (Sternberg, 1997). In addition stakeholder management has found one of its biggest critics in Stoney Winstanley (2001) who complain about the complexity of this approach and finally its misuse as just a new tool to control the participants. Nonetheless these concerns are generally based on traditional and old-fashioned views and the question arises if the time is ripe for change, meaning the move away from just sustainable shareholder success. Considering the criticism above it seems that one of the biggest drawbacks of stakeholder management is the actual realisation, meaning the consideration of everyone's interest. This is why De Wit Meyer (2005) see good leadership skills as crucial to balance the discrepancies mostly between shareholders and other stakeholders, and lead through an alliance with different partners, affected by mistrust, due to fear that others always want a bigger part of the cake. So one major pitfall of leaders regarding stakeholder management is that of avoiding bias. There are differences between the stakeholders, for instance regarding the flexibility. Employees are mostly depending on their workplace, whereas shareholders can always choose from a wide range or portfolio of possible investments and therefore the risk of favouring shareholders is quite high (De Wit Meyer, 2005), caused in their higher direct influence (Savage, Nix, Whitehead, Blair, 1991). Additionally it should be born in mind that CEO's and the board often hold a share of the own company or are even obligated to, according to several financial reports (e.g. Finsbury, Reckitt Benckiser). Thus the own opulence is affected by the profitability of the company. In this case a bias is self-evident. On the other hand advocates of stakeholder management see the necessity for shareholder value (Freeman, Harrison, Wicks, 2007), but state that it can be just sustainably realised if it is not seen as the main purpose, according to William George, chairman of Medtronic, in De Wit Meyer (2005). Instead of focusing on shareholder value, the actual focus should be concentrated on 'customer satisfaction" and 'integrity" as stated by Porras Collins (2005). In addition a motivated workforce can be seen as a crucial aspect of sustainable success, due to difficulties of competitors to copy it (De Wit Meyer, 2005). Buying in the workforce, but also other stakeholders, by creating a vision, maintaining it and finally make it live through the whole company is seen as one of the major and most difficult tasks of a leader (Ware, Michaels, Primer, 2004) and thus leaders often lacking clear direction during this task and therefore fail (Wheeler, Fabig, Boele, 2002). In order to make the organisation in a highly competitive market successful it is important to have a stable financial support, but also a highly trained and motivated workforce (Post, Preston, Sachs, 2002), often requiring a crucial change in the fundamental structure, like financial and/or ownership model (Avery, 2005). These changes are hindered by insufficient human resource models and techniques, the question how to get the employees aboard and finally the persuasion of the upper management, shareholders, etc. (Simmons, 2003). This can be eased the more the leader is convinced of the performance improvement using stakeholder management (Stoney Winstanley, 2001). The fact that people already having assets and power are not willed to share this (Gamble Kelly, 1996) and thus will defend it with all legal means or maybe also illegal, does not make it easier for the leader to put stakeholder management through. The globalisation and the expansion of companies throughout the world held another challenge for the leaders. Business policies must be kept flexible, as basis to deal with different countries, cultures and thus unusual competitive and social conditions and at the same time stick to the fundamental values and principles of the organisation (Post, Preston, Sachs, 2002). Talking about flexibility, it is important to see the flexibility of stakeholders in terms of changing from a supporting to a hampering position (Savage, Nix, Whitehead, Blair, 1991) and therefore the necessity to always reassess the importance and influence of stakeholders (Reynolds, Schultz, Hekman, 2006). In addition leaders need to focus on the right stakeholders in the right situations, different from the CEO of Eastern Airlines who was focusing during a strike just on the stakeholders with the loudest voice, and thus ran into serious trouble regarding the other parties of the strike (Savage, Nix, Whitehead, Blair, 1991). Additionally an issue arises that stakeholder may get the feeling that the decision-making regarding stakeholders is negatively influenced by divisibility of resources, saliency, incentives and sanctions (Ogden Watson, 1999) and let fade away the initial willingness to find a fair balance (Reynolds, Schultz, Hekman, 2006). This is why leaders must be prepared for the future challenges, which are a lot more complex, due to a wider range of expectations by the stakeholders, globalisation and more common pressing problems. So finally wrap the power of all stakeholders to a 'value network", considering the creation of social capital and a benefit for every participant (Maak, 2007) is the responsibility of the leader. Stakeholder Management provides a framework, a concept, which can be used by leaders, who are at the end the persons decide how stakeholder management is understood and what is the driving motivation behind its implementation (Stoney Winstanley, 2001). It was even thought about legislating SM and thus make it compulsory for companies, what is seen critical by Stoney Winstanley (2001), because in their opinion company's leaders should practice stakeholder management voluntary and chose their driver for motivation themselves. Today's environment and the resulting circumstances are continuously changing and require a leader who is always questioning the current status of a company and its direction in a constructive and meaningful way (Ware, Michaels, Primer, 2004). Therefore the leader is seen as a key catalyst in defining success of a company (Shinkle, Gooding, Smith, 2006) and also in order to make change happen to the benefit of sustainable success. Seeing sustainable success as a long-term goal leaders are confronted and hindered by external requirements, like the publication of financial reports (Avery, 2005) and thus it becomes a challenge for them to remain committed and thus have the required authentic 'tone at the top" (Freeman, Harrison, Wicks, 2007). They will decide about success or failure of changes while acting as a role model and therefore have the requirement of caring about ethics and social responsibility, rather than just on making quick money. Finally it is about the ensemble of stakeholders and leaders who need a practical guideline to make their contribution for the organisation's and common good, leading to the following research question and its supporting objectives. Research content: Research question: 'What elements and characteristics of leadership would help organisations to achieve missing sustainable success through effective stakeholder management?' Supporting objectives: - Investigate and define sustainable success, stakeholder management and leadership with the purpose to identify what is understood by it and what are their characteristics. - Investigate the correlations and dependencies between sustainable success and stakeholder management to approve their complementarity. - Identify how leadership can overcome possible barriers of balancing stakeholders and creating sustainable success. - Investigate existing guidance and frameworks for the creation of sustainable success, in order to underpin their validity or propose modifications. Scope: The scope of this work is chosen very broadly, due to the nature of the project and its research areas. It is about management in general and is not aiming to be specialised on a specific industry or region. Reason therefore is the involvement of several parties, eventually coming from different industries and indeed the globalisation that does not allow investigating management tools with a narrowed regional view. However the scope is laid on business organisations. Therefore the outcome is neither focused on politics, an area worth investigating in the context of stakeholder management, nor religion. Purpose and contribution: The purpose of this work is to show companies and their leaders a way to manage their stakeholders in form of a proposed framework, to achieve sustainable success. As already mentioned in the introduction, an atmosphere of departure has arisen, due to the last happenings within the economy as well as in the politics. The outcome of this work will be an initiation to change by showing leaders how their characteristics can help to establish a win-win situation between stakeholders. Furthermore it shows the need for today's leaders to care about all stakeholders and that this is not just a matter of instruments, concepts and tools to achieve a balanced stakeholder environment, it is more about the mind-set, behaviour and confidence of the leader itself. It requires a lot of energy and stamina to achieve sustainable success and leaders will face a lot of problems and confrontations. Presenting these issues and discuss them in depth will hopefully support them to defend their view of organisational success.Inhaltsverzeichnis:Table of Contents: LIST OF FIGURESVI LIST OF TABLESVII LIST OF ABBREVIATIONSVIII 1INTRODUCTION1 1.1BACKGROUND OF THE TOPIC AN REASON FOR ITS CHOICE1 1.1.1INITIATION FOR THE PROJECT1 1.1.2REASON FOR THIS PROJECT2 1.2RESEARCH CONTENT8 1.2.1RESEARCH QUESTION8 1.2.2SUPPORTING OBJECTIVES8 1.2.3SCOPE8 1.2.4PURPOSE AND CONTRIBUTION9 1.2.5CHAPTER OVERVIEW10 2THE MANUAL - RESEARCH METHODOLOGY12 2.1FOREWORD12 2.2RESEARCH THEORY12 2.2.1RESEARCH PHILOSOPHY12 2.2.2RESEARCH APPROACH14 2.2.3RESEARCH STRATEGY14 2.2.4THE TIME HORIZON15 2.2.5THE ENQUIRY16 2.3RESEARCH IN PRACTICE17 2.3.1RESEARCH AREA17 2.3.2RESEARCH GUIDELINE18 2.3.3RESEARCH INFORMATION RESOURCES21 2.3.4RESEARCH KEYWORDS24 2.3.5USABILITY OF DATA27 2.3.6HANDLING OF FINDINGS30 2.4CONCLUDING REMARKS31 3THE AIM - SUSTAINABLE SUCCESS32 3.1SUBSTANCE32 3.1.1THE COMPONENT SUCCESS32 3.1.2THE COMPONENT SUSTAINABILITY34 3.1.3THE OUTCOME SUSTAINABLE SUCCESS40 3.2THE IMPORTANCE OF SUSTAINABLE SUCCESS42 3.2.1GENERAL42 3.2.2AFFECTING PEOPLE42 3.2.3AFFECTING FINANCES43 3.2.4AFFECTING REPUTATION44 3.2.5AFFECTING ETHICAL RESPONSIBILITY45 3.2.6AFFECTING RESPONSE TO REGULATIONS AND LEGISLATIONS46 3.4BARRIERS OF ACHIEVING SUSTAINABLE SUCCESS48 3.5CONCLUDING REMARKS51 4THE TOOL - STAKEHOLDER MANAGEMENT52 4.1THE BASICS52 4.1.1DEFINITION52 4.1.2DISTINCTION OF STAKEHOLDERS54 4.1.3PRINCIPLES OF STAKEHOLDER MANAGEMENT58 4.1.4STAKEHOLDER MANAGEMENT THEORIES60 4.1.5PUTTING STAKEHOLDER MANAGEMENT INTO PRACTICE64 4.2LINK TO SUSTAINABLE SUCCESS65 4.3CONCLUDING REMARKS71 5THE ENABLER – LEADERSHIP72 5.1DEFINING LEADERSHIP72 5.2THE LINK OF LEADERSHIP TO STAKEHOLDER MANAGEMENT73 5.3REQUIRED LEADERSHIP CHARACTERISTICS76 5.3.1REALISTIC76 5.3.2INTELLECTUAL / NOUS77 5.3.3DISCLOSING78 5.3.4GENEROUS78 5.3.5GOOD FAITH79 5.3.6SOLID80 5.3.7VISIONARY82 5.3.8RIGHTEOUS83 5.5CONCLUDING REMARKS85 6THE PROPOSAL - TOTAL STAKEHOLDING86 6.1CRITERIA FOR USEABLE FRAMEWORKS86 6.2EXISTING MODELS87 6.2.1FREEMAN'S MODEL REDEFINED87 6.2.2THE EFQM-MODEL90 6.3THE DEVELOPED FRAMEWORK95 6.3.1GENERAL DESCRIPTION95 6.3.2USER'S MANUAL97 6.3.3STAKEHOLDER98 6.3.4LEADERSHIP101 6.3.5SUSTAINABLE SUCCESS101 6.3.6PLAN-DO-STUDY-ACT (PDSA)104 6.4DISCUSSION OF FRAMEWORKS AND VALIDITY OF THE PROPOSED108 6.5CONCLUDING REMARKS113 7DISCUSSION114 7.1SCOPE114 7.2SUSTAINABLE SUCCESS115 7.3STAKEHOLDER MANAGEMENT116 7.4LEADERSHIP118 7.5SPECIFIC LITERATURE119 7.6METHODOLOGY DATA COLLECTION120 8CONCLUSION122 9LIMITATIONS RECOMMENDATIONS FOR FURTHER WORK124 9.1RESILIENCE124 9.2QUADRUPLE BOTTOM LINE124 9.3GROWTH125 9.4CONTRACT THEORY125 9.5ORGANISATIONAL STRUCTURE126 9.6SCORING SYSTEM126 10REFERENCES127 11BIBLIOGRAPHY157 12APPENDICES157 12.1WAYS OF DATA COLLECTION157 12.1.1SURVEYS157 12.1.2CASE STUDIES158 12.1.3SECONDARY DATA158 12.2SEARCH STRING TABLE160 12.3DETAILED STAKEHOLDER LIST161 12.4STAKEHOLDER ALLOCATION TO SUSTAINABILITY ASPECTS169 12.5IDENTIFIED STAKEHOLDER BY FASSIN (2009)170 12.6RADAR ASSESSMENT FOR RESULTS171 12.7RADAR ASSESSMENT FOR ENABLER172Textprobe:Text Sample: Chapter 5.3.6, Solid: The personality of a leader decides whether the leader is anxious of loosing control and power, so that especially wrong strategic decisions are made due to prescient from involving others in the decision-making process (Delbecq, 2008) and not considering their opinion (Avery, 2005:216). Furthermore a strong leader's personality may benefit from a good sense of humour, suggested by (Kets de Vries, Doyle, Loper, 1994) as well as hope, that does not let him give up (Thomas Thomas, 2011). Hope is a crucial point in stakeholder management, with the aim to motivate and therefore overcome the difficulties of making it successful. But finally bravery is a personal characteristic that let the leader stand up fight for the right thing, an important step on the way to stakeholder management (Avery, 2005:79). Collins (2001:21) has done comprehensive research on great leaders and even though he just find a few of them he points out one important characteristic of great leaders: putting the greatness of the company above all. This also means to put it above the own interests, obviously a giant task and thus often doomed to failure. But this does not undermines the importance of this characteristic with regard to stakeholder management. To make this clockwork of stakeholders work the leader must put back the own interest for the benefit of the whole system. Even though it was stated in 4.2 that people are always selfish Mitchell, Agle, Wood (1997) bring forward enough opponents regarding this view, so that it finally depends on the values of the leader (Greer Downey, 1982). Solid in this case indicates that a leader is strong and self-confident in way that he can cope with the previous mentioned. All this results in a characteristic indicated as solid whereas the personality is strong enough to resist external influences. In addition it is pointed to the phrase 'solid as a rock". The leader must be the one standing out of the crowd at least for the followers and keep them grounded. In this position he act as a role model (Oakland, Tanner, Gadd, 2005) an attribute that plays a major role within stakeholder management and sustainable success. The tone at the top is crucial to buy in stakeholders, whereas they must believe in what they are doing to fulfil these expectations (Freeman, Harrison, Wicks, 2007). Being solid in this context also means, as a leader, to recognise that the values are not supported and thus a further collaboration is not efficient. Nonetheless being solid also refers to the time span a leader is staying in its position. In Germany the period in higher management change after 6.1 years whereas it was 8 years in 2003 (Handelsblatt, 2011). Against the trend it is more desirable that leaders stay longer because the biggest problem with changing executives is to find a new one, an undertaking that can become very expensive as well as bear risks (Kennedy, 2000). Research in the 90s showed that the experience of managers has a great impact on their belief and their values, so that the experience of a manager in a company will have a positive impact on his decisions (Höpner, 2003:205) in this context with view to sustainable success. Additionally there is always the risk that new leaders turning the whole company upside-down and even if this is often wanted it is not if the new leader does not support the idea of stakeholder management and sustainable success. So all the hard work could turn out to be useless. Deming, 1986:121) sees an obstacle of long-term success in job-hopping due to the fact that leaders do not develop a sense of commitment and that new leaders unsettle the stakeholders. But long-term commitment also must be understood in the commitment to the approach of stakeholder management. So patience is necessary due to the fact that sustainable success and the necessary organisational behaviour is not achieved overnight (Potter, 1994). This requires an aim in the future that can be established as the one of the main motivator 5.3.7, Visionary: To avoid confusion and to respond to critics on stakeholder management a clear direction is vital for the success as discussed in 3.4. So it is about the leader to establish this direction by introducing a vision (Kets de Vries, Doyle, Loper, 1994), that helps to unify the stakeholders behind it, whilst providing clarity about what the vision is not about (Dubrin, 2007). In order to stimulate high performance and motivate followers a leader must lead passionately (Collins, 2001:20) and pragmatic (Frydman, Wilson, Wyer, Senge, 2000) towards a vision giving him/her the opportunity to have a major influence on the stakeholders. This refers back to the characteristic 'solid" (5.3.6) where a leader act as a role model towards the vision, so that stakeholder can follow (Cyert, 2005). It must be assured that the vision meets the requirements of stakeholder management, in particular balance and ethically correct, referred to as righteous. 5.3.8, Righteous: Righteous refers mainly to ethical and moral, including several 'components'. Morality is a key aspect of stakeholder management, resulting in trust and cooperation of the stakeholders. Indeed leaders should be compensated as every other stakeholder but it must be appropriate and not too high, like the stated 326:1 ratio between average CEOs and workers pay (Tang, Kim, Tang, 2000) in order to sustain trust and goodwill of stakeholders. Against the traditional way of high pay equals high performance (Jones, 1995) the survey of (Kennedy, 2000) reveals that challenging work and open communication are far more important than the pay, supported by Freeman (1984) the father of strategic stakeholder management seeing open communication as one enabler of stakeholder management. So this mind-set actually supports to lead stakeholder management, but nonetheless the salary of managers has increased dramatically. This is mainly caused in more freedom and missing internal monitoring of salary (Höpner, 2003:207), leading to a necessary moral respect of this freedom and do not exploit it. But it is not just about the monetary frugality it is also about recognition and awards, where heroism is not appropriate, acting in silence is what turned out to characterise great leaders (Collins J. , 2001:28). This includes the dispense of awards if things go good and blaming oneself if they go bad, this helps to not become arrogant (Kets de Vries, Doyle, Loper, 1994). This is also true for stakeholder management where the collaboration of the whole clockwork should be recognised and the leader act just as the element holding everything together and is not the centre of everything. Ethics is a fundamental characteristics for stakeholder management leaders, whereas Freeman, Harrison, Wicks (2007) see ethical leadership as the one most suitable, backed by McManus (2006:137) advocating ethical behaviour in order to decide to do the right thing, or ethical judgement respectively (Clarkson, 1995). This is why it is also about humanity (Kets de Vries, Doyle, Loper, 1994) and not seeing the environmental and societal responsibility as nonessential (Avery, 2005:216). Leaders also should be aware that they have fiduciary to all stakeholders and thus this fact should become the basis of the ethical mind-set (Kaufman, 2002). This fiduciary towards all stakeholders lead then towards the need of leaders to use this tool in an appropriate manner and to not justify bad decision with this model (Collins, Kearins, Roper, 2005). In addition this brings with it the desired balance of wealth distribution required by Sachs Maurer(2009).
In this dissertation I explore the co-emergence of multinational corporations and the consolidation of the discourse on human rights at the level of the United Nations throughout the second half of the twentieth century and analyse the resulting conceptual gap that created tensions in the international legal order. Despite attempts by developing countries to alleviate this imbalance through the New International Economic Order (NIEO), a multitude of soft law initiatives and the reluctance to address human rights issues in MNCs at the level of the United Nations failed to make MNCs incorporate human rights standards in their operations. The merging of the two concepts became increasingly more challenging throughout the 70s and 80s when the world was faced with the oil crisis and the rise of neoliberalism. This shift in the global legal architecture forced the Third World to take a new approach to tackle the conceptual gap, this resulted in the emergence of the Third generation of human rights and ultimately, the concept of Corporate Social Responsibility (CSR). CSR is a concept of international private business self-regulation that aims at merging human, socio-economic, and political rights into the world of the corporation. As a response to the concerns for human rights violations by corporate actors, CSR slowly came to the forefront of the global business scene to enable the continuation of the operation of multinational enterprises. CSR presented a platform for global soft law initiatives to minimise the conceptual gap they had created over throughout the preceding decades. This allowed people such as John Ruggie to develop the Guiding Principles, the most successful initiative to date. This dissertation will provide its readers with a fruitful understanding of the crucial role that international law played in this development and further, what implications this had on the political and economic level. - Introduction In the words of Sundhya Pahuja and Anna Saunders, the second half of the twentieth century staged a 'series of encounters between rival practices of world making, each of which travelled with rival accounts of international law'.[1] Anti-colonial disputes, the Cold War, the rise of developmental issues and the increasing popularity of neoliberalism are only some of the events that generated these competing views of the international legal order. These events brought different coalitions across the Global North and Global South, and different 'alliances of interest between 'public' and 'private' actors'.[2] At the heart of the system that emerged lie two fundamental elements: the modern multinational corporation and human rights. How to conceptualize multinational corporations (MNCs) and how to define their relation to the law and the State was part of these rival stories. In this paper I explore the co-emergence of multinational corporations and the consolidation of the discourse on human rights at the level of the United Nations throughout the second half of the twentieth century and analyze the resulting conceptual gap that created tensions in the international legal order. In particular, I examine how this encounter, which became evident as calls for a New International Economic Order (NIEO) were being advanced within the UN, came to produce the idea of 'Corporate Social Responsibility' (CSR). I show that CSR emerged from the failure of the NIEO, particularly in relation to the roles and responsibilities of private actors in the global economy and how this can be traced to the limits of initiatives addressing the tensions between human rights claims and the interests of multinational corporations. In so doing I provide an understanding of the crucial role that international law played in this development and the implications this had at the political and economic level. The first section of this essay examines the lack of direct use of human rights language in the UN literature focusing on MNCs and their role in world development from the 1960s to the 1970s. This includes an analysis of the report entitled 'Multinational Corporations in World Development'.[3] I demonstrate the emphasis and enthusiasm for multinational corporations displayed at the level of the United Nations and how the concepts of the corporation and human rights were kept separate due to their respective supporters during the Cold War. I then focus on the attempts by the Organization for Economic Co-operation and Development (OECD), the International Labor Organization (ILO) and the 'Group of 77' (G77) to bridge this conceptual gap through the imposition of policies and initiatives, though without major success. The second section analyzes the influence of the oil crisis and the rise of neoliberalism on the shift of the global legal architecture, ultimately promoting the birth of the new developmental state. Here concern is with the new legal structures' attempt to merge the concepts of multinational corporations and human rights through a third generation of human rights, [4] and I engage in theoretical approaches by legal scholars such as Samuel Moyn and Antonia Darder. In the third section investigates the concept of Corporate Social Responsibility (CSR) and analyzes its application and limitations. CSR is a concept of international private business self-regulation that aims at merging human, socio-economic, and political rights into the world of the corporation. As a response to the concerns for human rights violations by corporate actors, CSR slowly came to the forefront of the global business scene to enable the continuation of the operation of multinational enterprises. I demonstrate how CSR aspired to close a gap between human rights and corporate action in a way that would harmonize them through a multitude of soft law initiatives. This leads to the question of whether direct regulations can apply to MNCs under international law and a discussion of the UN Global Compact, at the time the world's largest and most far-reaching CSR initiative.[5] Finally, this paper closes with the most recent developments in the global legal order designed to tackle the conceptual gap between MNCs and human rights, namely through the United Nations Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises[6] and the development of the Guiding Principles. Dawn of co-existence The United Nations lies at the heart of the international regime with its normative, institutional and procedural human rights activities.[7] By adopting the Universal Declaration of Human Rights in 1948, the UN created a milestone document in the history of human rights. The Declaration has had an enormous influence on the world both in terms of 'spreading the philosophy of human rights, and in terms of inspiring legal texts and decisions'.[8] New states have used the Declaration as a basis for their constitutions, while domestic and international courts have invoked the Declaration in their judgments.[9] As human rights law developed, the International Covenant on Economic, Social and Cultural Rights, followed by the International Covenant on Civil and Political Rights, were both drafted under the auspices of the United Nations, adopted in 1966 and entered into force in 1976. Together, these three instruments make up the 'International Bill of Human Rights'.[10] Throughout the 1960s and 1970s, the world became a stage for global changes that altered the legal order. The end of colonialism dawned in the Global South, and during the height of the Cold War the West faced the Soviet Bloc and its mission of 'exporting revolution'.[11] Leaders of nationalist resistance movements received military as well as financial aid from the Soviet Bloc which intensified anti-colonial mobilization for self-determination.[12] Simultaneously, globalization was increasing rapidly, with multinational corporations emerging onto the global scene with heightened awareness of their existence as an entity with legal personality. As outlined by Sornarajah, their distinct bases of power allowed them to assert their interests through the law. With economic resources often exceeding those of their host state, MNCs had the ability to sculpt and manipulate legal outcomes through arbitration processes concerning foreign investment protection. This was done by exerting lobbying pressure on a host state which might be reluctant or even unable to object to the activities of MNCs.[13] The 'Multinational Corporations in World Development', report drafted by the UN Secretariat's Department on Economic and Social Affairs in 1973, considers 'the role of multinational corporations and their impact on the process of development, especially that of developing countries [.] [and] international relations'.[14] From the outset, the Report identifies the emerging phenomenon of the MNC in international economic affairs, how its size and spread has increased, and identifies the wide array of its activities and its use of natural resources which 'rival traditional economic exchanges between nations'.[15] It is surprising therefore, that a Report from the Department on Economic and Social Affairs, does not contain the term 'human rights' throughout the entire document. In the Report's introduction the UN makes a clear distinction between the differing views of impacts MNCs have on host countries. While 'depicted in some quarters as key instruments to maximizing world welfare, [they] are seen in others as dangerous agents of imperialism'.[16] The fact the United Nations recognized the potential neo-colonial nature of multinational corporations further highlights the need for guidance on human rights violations by MNCs. Yet the Report's reluctance to engage in the area of human rights provides a first glimpse into the divergence of the concepts of multinational corporations and human rights. An explanation for this can be identified by analyzing the Conventions, on Civil and Political Rights and on Economic, Social and Cultural Rights, with the UN's reluctance to avoid tensions between the supporters of both Conventions, respectively the United States and the Soviet Union. The US pushed for the development of civil and political rights, reflecting the protection of the freedom and liberties of individuals. Stemming from a Western philosophy, John Locke identified that in a 'state of nature' humans had 'natural rights' including the right to life, liberty and property. Similarly, French legal philosophers such as Rosseau, Montesquieu and Voltaire argued that such rights emerge from the inherent nature and virtue of man.[17] As Joseph and Castan argue, 'natural rights theories were highly influential [.] particularly in the revolutionary fervor of the United States'.[18] The advancement of civil and political rights reflects the capitalist ideology of the United States, conforming to the libertarian nature of Western capitalist societies.[19] In contrast, the Soviet Union pushed for the advancement of economic, social and cultural rights. These included the right to work, the right to an adequate standard of living, and the right to physical health. Contrary to the civil and political rights, these rights were based on the idea of equality, one deeply rooted in the political ideology of socialism. As the US would not commit to a proposition that there is a right to social goods, the US has never ratified this Convention.[20] The Soviet Bloc promoted the right of self-determination by providing military and financial aid to indigenous political activists in their fight for independence; an idea enshrined in Article 1 of the Covenant which states that: 'All peoples have the right to self-determination'.[21] For the Soviets 'national self-determination was an adjunct to revolutionary communism'.[22] They envisioned self-determination as the tool for the transition from dismantling a colonial empire to establishing a socialist state.[23] However, while the United Nations was reluctant to adhere to human rights in the framework of multinational corporations, other international institutions were motivated to develop this area. The OECD attempted to impose human rights on MNCs by adopting the Guidelines for MNCs (hereinafter 'OECD Guidelines') in 1976.[24] These were 'voluntary recommendations for business practices relating to human rights, disclosure of information, anti-corruption, labour relations, taxation, the environment and consumer protection'.[25] The Guidelines were intended to strengthen the international investment climate by improving the relationship and confidence between MNCs and host countries. National Contact Points (NCPs) were created that bore the responsibilities of enforcing and promoting the Guidelines, and any natural person could make a claim related to the violation of the Guidelines.[26] This aspect of the Guidelines provided an enforcing mechanism accessible to the public. But although the Guidelines were formally adopted by member states as a corporate responsibility instrument, they were subject to widespread criticism in the international legal order. As explained by Cernic, the Guidelines are ambiguous while the NCPs are limited in their influence on host states. Even though they outlined the need to respect human rights, the obligations were not framed in mandatory terms.[27]. Since the Guidelines lacked legal basis, the OECD was unable to assert sanctions on non-compliant corporations, and critics labeled them weak and ineffective. However, it was the intention of the OECD to guide rather than to legislate, because they saw voluntary versus legally binding standards as less of a dichotomy and more a continuum.[28] Although voluntary, corporations would be under scrutiny and potentially harm their reputation if they violated the Guidelines.[29] Yet, the Guidelines were hardly successful in the international legal order. A year later, in 1977, the ILO attempted to bridge this gap by adopting the Tripartite Declaration of Principles Concerning MNCs and Social Policy. These also attempted to 'encourage the positive contribution the MNEs can make to economic and social progress'.[30]. Article 8 emphasizes the respect for the Universal Declaration and the International Covenants. However, its voluntary and non-binding nature, as well as its weak monitoring process made this instrument as frail as the OECD Guidelines.[31] The lack of responsibility and perseverance stemming from international organizations and their disappointing attempt at bridging the gap between multinational corporations and human rights forced national and regional change. On the one hand, developing nations began taking matters into their own hands. To portray unity and solidarity throughout the 'Third World' the G77 coalition, formed in 1964 by developing member countries with the primary intention of promoting its members' economic and humanitarian interests through cooperation at the level of the United Nations, took a strong initiative. In the late 1970s the Group expressed its concern at the 'imbalance of negotiating power between TNCs [transnational corporations] and their host countries and inability on the part of the latter to control the activities of the TNCs within their territories'.[32] Simultaneously, home countries wanted to ensure their investments abroad would be protected, 'specifically from expropriation without a commitment to compensation based on international law'.[33] In accordance with the principles and concerns of the freshly adopted NIEO, developing countries raised the issue of the dominance of MNCs over natural resources and strongly urged the UN for a reaffirmation of their sovereignty over their resources. The NIEO was an attempt by Third World developing states, in the wake of decolonization, to deploy international law to achieve economic justice and improvements in the areas of development and socio-economic rights.[34] Pushed by the G77, the United Nations General Assembly (UNGA) member states devised a set of NIEO proposals in 1974 including (1) that developing states are entitled to control and regulate all activities of MNCs within their territory; and (2) that international trade must be based on equitable, stable and remunerative prices for raw materials.[35] Despite its impressive aims and careful compilation, the NIEO was unsuccessful. It failed 'to displace the power and advantage held by influential states', it failed to alter international law which favoured the economic interests of capital-exporting states and, most importantly, it demonstrated the Third World's acceptance of the economic ideology of the capitalist mindset, inflating the value of foreign capital including the exploitation of local labour in developing countries.[36] Consequently, the UN set up the United Nations Commission on Transnational Corporations which drafted a code of conduct for TNCs, one of the first formalized instruments drafted by the UN that set an obligation upon MNCs to respect human rights in host countries.[37] However while developing countries insisted on the idea of adopting an international instrument that was binding on MNCs, developed countries were not prepared to go beyond the voluntary sets of guidelines already in place.[38] On the other hand, due to the ineffectiveness of the international institutions, some MNCs that sought to abide by human rights law attempted to create some provisions themselves. An example is the Sullivan principles designed by Leon Sullivan, former member of the General Motors' Board of Directors. These principles included the elimination of discrimination based on race, and the concept of equality in the workplace. The objective was that by engaging in human rights concepts like dignity and respect, MNCs could be a lever for the elimination of apartheid in South Africa. However, like the previously established soft law on obligations on multinational corporations, these principles were voluntary and unlike the OECD Guidelines which had the NCPs, there was no enforcement mechanism. The great majority of MNCs that adopted his principles did so with the sole motive of being able to continue to prosper in South Africa.[39] In summary, throughout the 1960s and 1970s, there were attempts at a variety of levels to bring together the concepts of human rights and multinational corporations. Though it was largely absent on the level of the United Nations until the late 1970s there were many first steps by international institutions to bridge this gap. The NIEO was the first set of concrete economic principles that were prescribed in international law 'articulating a form of justice based not on domination of one people over another'.[40] It was an 'effort to assert the sovereign autonomy of the non-western world',[41] exemplifying the importance of linking human rights and development, and the fundamental values of duties of international cooperation. However, there was still much to be done as the new decade of the 1980s saw a drastic restructuring of the global trade and investment system - ultimately ending in massive international debt and a dramatic increase in foreign direct investment. A Change in the Global Legal Architecture An accumulation of capital obtained by the main oil producing states in the Middle East led to the establishment of the Organization for Petroleum Exporting Countries (OPEC) Cartel in 1972. With the intention of creating a monopoly and obtaining major profits, OPEC raised the price of oil by approximately 400%, with its members keeping revenue in US or European banks, from which developing countries regularly borrowed in the form of aid and loans.[42] However, banks were now lending at higher interest rates to these countries as they were deemed less creditworthy. As a result of sovereign debt and the surplus problem in the international banking system, developing states were forced to rely on foreign direct investment (FDI), as opposed to private borrowing. The very principle that developing states wanted to control with the establishment of the NIEO was now negated by Western states selling MNCs to the developing world as necessary for their survival.[43] Simultaneously to the effects of the oil crisis, the political ideology of neoliberalism emerged on the global scene. Conservative governments gained power in western countries, communism collapsed in Eastern Europe with a move towards market economics, and Latin America implemented stabilization policies to boost their economies.[44] This process saw neoliberalism became an enemy for structural equality, political inclusion, economic access and human rights.[45] Prior to the implementation of neoliberal policies, the relationship between multinational corporations and their host state was formed through the conflict between the host country's national developmental interests as opposed to the corporation's global investment interests. The state being the more powerful actor, attempted 'to channel its private investments to serve its own developmental objectives'.[46] However, as Michael Peters argues, neoliberalism provides 'a universalist foundation for an extreme form of economic rationalism'[47], which according to Paul Haslam, was a re-forming of the modern state rather than the perceived notion of the state 'unambiguously withering away'.[48] As a result, power shifted from host countries towards multinational corporations as the era was characterized by liberalization of foreign investment rules.[49] As the United Nations World Investment Report of 2000 showed, out of the 1035 changes made in national legislation regarding Foreign Direct Investment (FDI) from 1991 to 1999, only 5.9% were directed at restricting FDI.[50] Now more than ever before, the existence and nature of human rights were jeopardized in the sphere of multinational corporations led by neoliberal politics. Yet when analyzing human rights and neoliberalism, the two concepts have a plethora of similarities that run counter to this assertion. Samuel Moyn states that human rights and neoliberalism share (1) a predecessor and (2) a target, namely the welfarist West and the post-colonial nation state seeking economic autarky respectively.[51] Both concepts emerged and were formalized in the West. As a target, developing countries need both economic (neoliberalism) and social (human rights) elements to establish economic control. Furthermore, the two concepts share key foundational building blocks. Firstly, the principle of prioritizing the individual 'whose freedoms matter more than the collectivist endeavours' and secondly, their shared antipathy toward the state due to their rejection of its moral credentials.[52] As described by Darder, neoliberalism is characterized by a rampant greed that subsumes any notions of equality and public responsibility.[53] At the heart of this lies the ultimate subversion of human rights. When faced with the powers of global capitalism, human rights struggle to maintain themselves in the Third World. A prime example countering this thesis is the idea that human rights are a handmaiden to neoliberal policies. The argument follows that human rights are so tightly related to the role of a freely functioning market that there could be no socio-economic rights without extreme capitalism.[54] Unfortunately under this notion, human rights fall victim to being seen as dependent upon the capitalist order, creating the illusion that multinational corporations enhanced and promoted human rights in the developing World. What Wolfgang Streeck termed as 'non-market notions of social justice' became impossible to secure. Any attempt to place social commitments over economic ones were expelled, leaving market pressures to form human obligations and be governed by the dictatorship of neoliberalism.[55] The World Bank and the IMF, backed by the United States and other western states, became key in the project for liberalization, privatization, and market-friendly policies, known as the Washington Consensus. MNCs were given the protection they needed to flourish, be it proprietary or intellectual property rights. The interests of human rights on the other hand were not regarded. Though excelling and growing more than ever before, human rights had done so 'on a discrete track spearheaded internationally through the UN'.[56] Directed by developing states, human rights were intentionally dealt with by the United Nations while international economic law was being dealt with by the international institutions where they hold the balance of power.[57] Simultaneously, the developing world saw the third generation of human rights emerge as a result of anti-colonialist movements in the post-Second World War era. Newly born independent nations voiced their concerns over repeating their colonial past and demanded a new set of rights. These included the right to self-determination, the right to a healthy environment and the right to participation in cultural heritage. These are reflected in Declarations and Conventions such as the Declaration on the Granting of Independence to Colonial Countries and Peoples of 1960, the Proclamation of Teheran of 1968 and the Stockholm Declaration of 1972.[58] What makes this generation of human rights exceptional however is that while they reflect neither the traditional individualistic approach of the first generation, nor the socialist tradition of the second generation, they simultaneously demand certain recognitions from the state while being able to be invoked against the state. Most importantly though, as articulated by Vasak, the third generation of human rights 'can be realized only through the concerted efforts of all the actors in the social scene: the individual, the State, public and private bodies and the international community'.[59] In other words, these rights belong to the community as a collective, rather than to an individual.[60] Drafted in 1986 by the UNGA, the Declaration on the Right to Development [61] (DRD) calls for effective international cooperation towards development objectives through the enhancement of human rights and the distribution of benefits.[62] The DRD gained inspiration from the NIEO as it relied on providing equal national opportunity through measures of fair distribution of natural resources and income. Alongside neoliberal policies, the two contradicting concepts were forced to work in tandem. Foreign investment in the developing world could proceed under the neoliberal ideology as long as it did not infringe the DRD. Interestingly, the right to development was coined by the former UN Independent Expert on the Right to Development, Arjun Sengupta, as 'growth with equity'. Growth should not only focus on the economic aspect, but also emphasize human rights and the principles of justice. This focus on equity, would require a 'a change in the structure of production and distribution in the economy to ensure growth was equitable', including the required international cooperation and not having to rely on the market.[63] Though the United Nations are promoting and enhancing the development of human rights, they are disregarding the fact that their work should be focused more on the human rights aspects entailed in the market, rather than solving human rights issues outside of the market framework. The development of human rights and the regulatory frameworks supporting multinational corporations attended very different interests. The new global legal architecture born of the oil crisis and rise of neoliberalism reorganized the relations between the Global South and Global North. At this point human rights and the regulation of corporations, with their distinctive genealogies, were forced to come together, but the failure of this exercise could not be challenged until the late 1980s when the third generation of human rights provided another opportunity for the merging of the two concepts. The outcomes of these new sets of discussions produced a more clearly defined relationship between human rights and multinational corporations which, although more sophisticated, was still unable to produce a satisfactory result. Nevertheless, the right to development began to take root in the corporate world. For the sake of their reputations, corporations were forced to appreciate the power held by vulnerable individuals that could act together as a strong collective.[64] As Claire Dickerson argues, multinationals became more aware of their relationship with human rights not only in regards to the individual, but rather to the society as a collective.[65] These were the first formalized steps to the recognition of what came to be known as Corporate Social Responsibility (CSR). The Heterodox Approach What became apparent in the sphere of business and human rights were two situations, (1) that states were either unable or unwilling to implement human rights; and (2) that multinational corporations acting in such states were unprepared to deal with the risks of harming human rights through their activities. This was seen especially in the private extracting sector, such as oil, gas and coal, using aggressive means to exploit remote areas and leaving large physical and social 'footprints'. Local communities began resisting the activities by the multinationals and the language of human rights became increasingly popular in challenging corporate norms.[66] Some of the world's largest MNCs had become culprits of violating human rights standards, including Nike, Shell or Yahoo. Nike was guilty of using child labour, while Shell misused public funds to practice corruption and theft at all levels.[67] The effects were reflected in local communities that resorted to violence and criminal behaviour, significantly affecting the living conditions of these areas. In the early 1990s, some corporations began adopting measures to comply with responsible business conduct. CSR was a voluntary form of business self-regulation that attended the current societal goals. It involved the creation of monitoring schemes that regulated the workplace standards and policies of the global supply chains. However, what caused CSR to emerge, was not only pressure exerted by nations that felt their human rights had been impinged, but also a wider global political ethos. With its emphasis on privatization and deregulation, neoliberalism promoted CSR initiatives in order for corporations to gain self-control and rely less on direct government initiatives. Due to its voluntary nature, CSR was not conceived as a regulatory instrument but as a learning forum to promote strategies that enhanced socially responsible policies. This included the enhancement of human rights, environmental protection and anti-corruption efforts. [68] CSR had now progressed to the forefront of the global business scene by morphing out of corporate philanthropy.[69] Corporations began adopting voluntary schemes that not only adhered to social policy, but at times even went beyond the standard set by local requirements, which occasionally created conflict between the two.[70] Unilateral corporations produced company codes, with companies such as Gap and Nike adopting theirs in 1992. This involved internal audit teams and ethics officers to be established, verifying that contractors were complying with their company's codes of conduct. Gradually, social audit teams emerged onto the global scene. As one of the most prominent, the Fair Labour Association (FLA) monitored the working conditions for some of the top athletic brands such as Nike, Puma and Patagonia. In the food industry, the label of Fair Trade emerged, ensuring for local farmers the social, economic and environmental standards they deserved. Corporations adopted CSR measures mainly to improve their reputation. However, perhaps a greater incentive for corporations to adopt CSR measures lies in the financial risks posed by community pushback as a result of human rights violations. These pushbacks cause delays in design, operation, construction, siting, granting of permits etc. Further, they can create problems and relations with local labour markets, higher costs for financing, insurance and reduced output.[71] In a study of a large multinational company that wished to remain anonymous, Goldman Sachs found that it had accrued $6.5 billion in such costs over a two year period.[72] A great percentage of these costs could be related back to the staff time in managing conflicts that arise in communities as a result of human rights violations. In some instances between 50% and 80% of an assets manager's time can be devoted to these issues. Thus, it is clear that in this lose-lose situation, where MNCs violate human rights and thus incur losses, it makes sound corporate sense to adopt some sort of CSR measures.[73] Despite the improvements and the clear step forward the business world took in addressing human rights, CSR involved limitations and fragmentations that challenged its success. It was built on the assumption that it is an effective mechanism for a corporation to positively reconnecting with the community it is based in. Thus, in practice, CSR operates under the presumption that society has granted authority to corporations with naturally applying legal responsibilities.[74] In 2000 John Ruggie conducted research in the Fortune Global 500 and a wider range of corporations to assess the extent and success of voluntary initiatives promoting human rights. Staff monitoring schemes had evolved, demands by socially responsible investors had grown, and large public sector funds all aided in this development. However, the research also found 'company-based initiatives fell short as a stand-alone approach'.[75] Most companies still did not have the capabilities of managing human rights risks and instead were acting on a reactive based notion. Moreover, it was within the company's discretion to decide which human rights the company would address and furthermore how to define its measures. Thus, their voluntary nature could often be used as a camouflage to delay real reform.[76] A logical response to such a broad limitation would be to impose direct obligations under international law upon MNCs. Though only states and international organizations have legal standing in international law, the general view on this contention is that it would be possible to impose obligations upon MNCs due to their major economic and political influence as explained earlier, and their capabilities of influencing the enjoyment of human rights.[77] However, as explained by Zerk, the challenge lies in 'developing jurisprudence which refines and makes precise the vague aspirational statements [.] in the CSR debate'.[78] However, as the law stands, the most promising and efficient method for applying obligations on multinational corporations remains to be the national courts. Yet the fact that claims must be raised as a tort-based litigation proving a violation of domestic tort principles rather than claiming a violation under international human rights casts doubt over this method. An interesting exception to this is the US Alien Tort Statute of 1789. The tort states that district courts 'have original jurisdiction of any civil action by an alien for a tort only, committed in violations of the law of nations or a treaty of the United States'.[79] The original intention of the statute was to establish a civil remedy for violation of international law norms such as piracy, mistreatment of ambassadors and the violation of safe conducts.[80] This piece of legislation lay dormant until the 1980s when human rights lawyers discovered its potential for foreign plaintiffs to raise a claim for certain human rights abuses against an individual of any nationality, or a corporation as long as they had a presence in the United States. The question whether the Act could be enforced against a corporation was considered in 2012 in the U.S. Supreme Court case of Kiobel.[81] The court held that there was a presumption against extraterritoriality applying to claims under the Statute. There is therefore no application of the statute abroad unless it is explicitly stated in the international law which is the subject of the claim.[82] As stated by John Ruggie in his advice to the Human Rights Council in 2007 'no single silver bullet can resolve the business and human rights challenge. A broad array of measures is required, by all relevant actors.'[83] Ultimately, as a measure to seek guidance on the matter, this led to the UN Global Compact in 2000, the largest global CSR initiative.[84] The UN Global Compact was a strategic policy initiative posed by the former UN Secretary General Kofi Annan that aimed at improving corporate conditions in areas such as human rights, environmental protection and labour rights.[85] It was a prospective and hopeful initiative that was designed as a learning forum to develop, implement and disclose sustainability principles among corporate actors.[86] At its time, the Global Compact was the most far-reaching, non-governmental set of policies aimed at catalyzing the voluntary nature in the corporate citizenship movement.[87] Legal scholars such as Meyer and Stefanova felt the Global Compact could shape the relationship between MNCs and human rights through 'rewarding responsible TNCs [MNCs], while shaming at least some of the irresponsible TNCs [MNCs] into better promoting human rights'.[88] Their only concern about the extent of the success of the Global Compact lay, in the Global Compact's voluntary nature. Comparing it to the OECD Guidelines implemented 25 years earlier, an initiative like the Global Compact will only be successful if there is commitment to the initiative at all levels of the international system. Thus, the main task is to put a human face on globalization through the values and principles shared by the people, the corporation and the state.[89] However, Aravalo and Fallon dispute this. Published in 2008, their Report uses the Compact Quarterly and UNGC Annual Review to critique the Global Compact's activities and practices throughout its eight years of existence. Published by local networks and the UN respectively, they evaluate new businesses adhering to the Global Compact, as well as Global Compact practices and responses. Aravalo and Fallon found that after evaluating the various progress reports, the Global Compact falls short of being a successful initiative. According to the UNGC Annual Review, there are a multitude of gaps existing in the Global Compact framework. Research instruments for instance, under the principles of human rights and labour protection, have been deemed as inadequate as participants have failed to voice their concern over the protection of such rights within their corporation. The Global Compact has solely used online surveys to administer data, which smaller businesses are often unwilling or unable to provide. The methodology applied by the Global Compact was ambiguous and did not show the extent of the success of CSR initiatives.[90] Alavaro and Fallon argue that it would be highly beneficial for the Global Compact to re-think its methodology process of evaluating its success by introducing a chronological component into its future research models. [91] It would allow for a clearer comparison not only for participants of the Global Compact, but also for the comparison with non-Compact companies in the area of corporate responsibility.[92] As a result of this poor research methodology, the Global Compact has difficulty assessing its direct influence on the broad and voluntary concept of CSR. There are key principles of CSR that fail to receive the attention they deserve in the scope of the Global Compact. However, this is not to say that the Global Compact has been an outright failure. The Annual Review, though lacking quantifiable data, has provided a wide array of case studies providing evidence for the practical influence of the Global Compact on participants. These include programs in education and working relationships the Global Compact has encouraged and facilitated. It can be said therefore, that the Global Compact is making a difference, even if only in these cases. Until shortly after the turn of the millennium, neither company codes nor multilateral initiatives such as Global Compact, successfully achieved the necessary, concrete obligations in regard to human rights and environmental protection demands. This was set to change with the arrival of the United Nations Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises (Norms). Drafted in 2003, the United Nations Sub-Commission on the Promotion and Protection of Human Rights attempted to merge the concepts of MNCs and human rights and transform these newly developed principles into hard law. The intention was to impose human rights obligations upon companies through the domestic legal systems of their host countries. The Norms clearly express that 'states retain primary, overarching responsibility for human rights protection' and that corporations are identified as 'Duty-bearers' based on that expectation of following human rights principles.[93] The expectations expressed by the Norms are supported by enforcement mechanisms for their implementation which address the requirements that MNCs must adopt in terms of their internal practice. Furthermore, there are a multitude of rights that go beyond what is traditionally accepted as international human rights law. Examples include rights associated with consumer protection, the environment or corruption which are covered by different areas of the law.[94] However, the Norms failed to achieve promising results. Described as a 'train wreck' by John Ruggie, the Norms fell under heavy criticisms for a plethora of reasons. Firstly, the Norms fall under heavy scrutiny for attempting to impose obligations upon corporations, while simultaneously imposing parallel obligations on the state. The intention was to address the fact that MNCs operate in a legal vacuum due to their status of acting as a multinational. To alleviate this issue, it was thought that binding MNCs to hard international law would be the best option. On the one hand, minimalists argue that binding multinational corporations to international law is not an appropriate method as this would go beyond the concept of soft law initiatives such as Global Compact. This argument is developed by stating that binding corporations to international law would 'privatise human rights'. The Norms would be placing obligations on an entity that was never democratically elected, nor eligible to make reasonable decisions in regard to human rights at the level of international law.[95] On the other hand, maximalists lobby for a judicial body solely focused on the practice of multinational corporations and argue that corporations should be bound by international law.[96] Secondly, there was severe backlash against the Norms from states, corporations and businesses who argued that there was a lack of consultation from the Sub-Commission when drafting the Norms. However, this argument has since been disputed by institutions such as the Corporate Europe Conservatory or the scholars Weissbrodt and Kruger.[97] In regard to the discontent presented by states, many argued that there was a lack of involvement on their behalf in the Norms' development. As stated by Kinely, Nolan and Zerial, it is of vital importance that in issues revolving around CSR and their wide variety of stakeholders, everyone's voice must be heard when protecting human rights.[98] Thirdly, issues were raised regarding the language used by the Norms. Terms like 'sphere of influence'[99] and 'complicity' were deemed as vague and unclear.[100] It is agreed upon, even by supporters of the Norms, that such terms must be defined more definitively and where possible, draw definitions from more grounded areas of the law like criminal law, tort or contract law. This attitude towards the Norms from corporations shows the extent of their distrust and the scare factor used to attempt to dismantle the Norms.[101] However, even though the Norms failed as a concept, as Kinley, Nolan and Zerial maintain, 'the Norms have been a beneficial and fruitful initiative, reinvigorating debate on business and human rights'.[102] Previous to the imposition of the Norms, CSR had found itself in a position that was stagnant, focusing solely on codes of conduct that should be implemented by corporations using a bottom-up approach. The Norms altered the position of CSR to now provide a top-down approach and provided human rights activists with hope that human rights protection in regard to multinational corporations was now in the hands of the United Nations. However, the reactions to the Norms from the CSR community varied. CSR had been a newly emerging concept which was still unclear when fitted into the international legal order. It was still in its early years of development with highly broad-reaching initiatives in the fields of both soft and hard law. The playing field for CSR was simply too big for such an underdeveloped concept to handle. Further, it was attempted to implement CSR through domestic laws and quasi-legal initiatives raised to the level of international law. It is therefore often perceived that the implementation of the Norms were an attempt to remedy CSR by uniting these various aspects into one document at the level of the United Nations. The Norms conjoined national and international levels of CSR while maintaining that states continued to hold the primary responsibility of ensuring that businesses protect human rights. The world was a 'deeply divided arena of discourse and contestation lacking shared knowledge, clear standards and boundaries; fragmentary and often weak governance systems concerning business and human rights in states and companies alike'.[103] A range of governments still expressed their demand for further attention to be given to the relationship between human rights and the practices of multinational corporations. Thus, the United Nations appointed a team led by John Ruggie to establish the Guiding Principles. Rather than establishing a new international framework as was previously attempted with the Norms, Ruggie was 'urged [.] to focus on identifying and promoting good practices and providing companies with tools to enable them to deal voluntarily with the complex cluster of business and human rights challenges'.[104] Ruggie moved away from the traditional 'mandatory approach' which involved the compliance of national laws in correspondence to a corporation's voluntary measures and practices, to a heterodox approach. This heterodox approach was devised to create an environment of mixed reinforcing policy measures that provided cumulative change and large-scale success. The Guiding Principles lay on three foundations: (1) the state duty to protect against human rights abuses; (2) the responsibility by corporations to respect human rights and the implied obligation of acting in due diligence; and (3) the need for greater access to remedies for victims. However, there are two things that the Guiding Principles fail to accomplish. Firstly, to create binding international law and instead rely on normative contributions which further elaborate the implications of existing standards. Secondly, the Guiding Principles 'fail to ensure the right to an effective remedy and the need for States' measures to prevent abuses committed by their companies overseas'.[105] Amnesty International goes further by reiterating that aside from lacking accountability measures, the Guiding Principles should mandate a due diligence approach rather than only recommending it, as this would solve internal as well as extraterritorial accountability issues. Alongside Amnesty International, Human Rights Watch criticized the Guiding Principles for not adopting a global standard in corporate responsibility, and instead resort to a 'sliding scale' based on a corporation's size and geographic location.[106] However, when compared to other governance regimes in the past and present, the Guiding Principles seem to be a robust framework. Although various human rights organizations and NGOs identify neglect of human rights in the framework of MNCs, the Guiding Principles reiterate business as an instrument to contribute to societal welfare.[107] Thus, it acts as a basis for the empowerment of society and a benchmark to judge practices and conduct of corporations and governments.[108] Conclusion The discourse of the co-emergence of multinational corporations and human rights took the world by storm. The ongoing globalization of multinational corporations and the evolution of the concept of human rights were born attending different aims in the global legal order. Their greatest challenge however was not necessarily their harmonization and co-existence, but more importantly co-existing under the intentional gap created through the world's largest and most influential actor, the United Nations. This was clearly visible in the 1960s and 1970s. Throughout the various Reports and Declarations that were passed through the international institution, the two concepts were kept separate. While the United Nations was enthusiastic for the growth of both MNCs and human rights, it intentionally avoided discussing the harmonization of both concepts. Due to the underlying pressures imposed on the United Nations by the tensions from the Cold War, the UN was left in a legal vacuum unable to merge the two distinctive genealogies. The global international legal order was unaware of the extent of the importance of such a gap being eradicated before adopting a resolution as complex as the NIEO. Thus, from this point onwards, the NIEO was therefore already bound to be unsuccessful. Not only had international law not developed enough to impose such obligations upon MNCs, the corporations themselves were not aware of the ramifications and necessity for abiding human rights obligations as I showed in the third section of this dissertation. Enthusiasm for further initiatives such as the push by the G77 or the United Nations Commission on Transnational Corporations was only short lived. The events of the 1980s greatly disrupted the already turbulent environment of the global international legal order creating a greater gap between the concepts of multinational corporations and human rights. The 1980s became a stage which saw a great change in the global legal structure. The NIEO was an already broken concept from the outset as the conceptual gap had already created a disparity in the relationship between MNCs and human rights. This meant that although they were not aware of it at the time, the Global South could not rely on the imposition of the NIEO. Fostering the Western neoliberal policies, the conceptual gap between MNCs and human rights was now well established. For human rights to become a globally instructed concept, MNCs are a useful tool to spread, promote and enhance human rights across the globe. This of course is under the condition that the MNC does not violate human rights. From the other perspective MNCs rely on human rights in terms of their societal and financial risks. It becomes clear that when this is not realized by the proponents of both concepts, it can lead to major discrepancies and disparities as was proven in the Global South during this period. If there had not been this conceptual gap, and instead there had been a clear and devised relationship between MNCs and human rights, the effects of the oil crisis and neoliberalism would not have left the detrimental mark in developing countries that they did, potentially allowing the NIEO to prevail. However, the ongoing persistence of developing countries and their call for the third generation of human rights to gain prominence forced MNCs to catch up with their relationship to human rights. What emerged, were essentially the first initiatives and practices of CSR. CSR was heavily affected by the fact that it relied on the voluntary nature of businesses to adhere to as well as practice CSR. Even though corporations had an incentive to adopt CSR measures, weak monitoring systems allowed violations to still occur on a grand scale. The issue was that the multinational corporation as a concept was still unclear and lacked definition and that tying MNCs down with hard international law was not possible due to the diversity of MNCs. CSR allowed for too large a divergence from the issue at hand and required to approach human rights at a different angle. This was the key reason for the partial success of the Guiding Principles. Ruggie's unconventional, heterodox approach provided clarity and distinct concepts that individuals, business and states could adhere to. Although the conceptual gap has still not vanished, the UN has after an array of various attempts, managed to narrow the gap that it had created almost sixty years ago by continuously forcing society to rethink and redefine the relationship. What exactly lies in the future is uncertain and impossible to foresee. It can be said with great certainty however, that if initiatives such as Global Compact or the Guiding Principles are enhanced and given more attention, the world will be faced with a much clearer and concise relationship between multinational corporations and human rights. Focusing on monitoring mechanisms, methodological research and greater transparency and accountability among all actors involved will undoubtedly seal the conceptual gap that has caused the international legal order to experience such unsettling times. [1] Pahuja, Sundhya. Saunders, Anna. Rival Worlds and the place of the Corporation in International Law in Dann and Von Bernstorff (eds). Decolonisation and the Battle for International Law (OUP, 2018) p.1 [2] Ibid. [3] UN, Multinational Corporations in World Development ST-ECA/190 [4] Linarelli, John. Salomon, Margot. Sornarajah M. The Misery of International Law. (OUP, 2018) p.245 [5] Ruggie, John. Just Business. (W.W. Norton & Company, 2013) p.70 [6] United Nations Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises E/CN.4/Sub.2/2003/12/Rev.2 [7] Alston, Philip. Mégret, Frédéric. (eds) The United Nations and Human Rights: A Critical Appraisal (Second Edition, OUP, 2020) p.1 [8] Clapham, Andrew. Human Rights: A Very Short Introduction (OUP, 2007) p.42 [9] (n.8) p.108. [10] ibid . p.109 [11] Allina, Eric. Imperialism and the Colonial Experience in Paul A. Haslam, Jessica Schafer and Pierre Beaudet, Introduction to International Development (3rd Edition, OUP, 2017), pp. 24-42. p.39 [12] Ibid. p. 40 [13] Sornarajah M. International Law on Foreign Investment (CUP, 2010) p.5 [14] United Nations Department of Economic and Social Affairs, Multinational Corporations in World Development, 1973 ST-ECA/190 p.VI [15] ibid. p.1 [16] ibid. [17] Joseph, Sarah. Castan, Melissa. The International Covenant on Civil and Political Rights: Cases, Materials. (3rd Edition, OUP, 2013) p.4 [18] ibid. p.5 [19] ibid. [20] Alston, Philip. U.S. Ratification of the Covenant on Economic, Social And Cultural Rights: The Need for an Entirely New Strategy. The American Journal of International Law Vol.84, No.2 (CUP,1990) pp.365-393, p.4 [21] UN General Assembly, International Covenant on Economic, Social and Cultural Rights, 1966, Article 1 [22] Simpson, Gerry. The Diffusion of Sovereignty: Self-Determination in the Post-Colonial Age (Ashgate Publishing, 2000) p.266 [23] Ibid. [24] Organisation for Economic Cooperation and Development, OECD Guidelines for Multinational Enterprises, 1976 [25] Carasco, Emily. Singh, Jang. Towards Holding Transnational Corporations Responsible for Human Rights. European Business Review Vol.22, No.4, (Emerald Publishing Group, 2010). p.4 [26] Cernic, Jernei. Corporate Responsibility for Human Rights: A Critical Analysis of the OECD Guidelines for Multinational Enterprises Hanse Law Review, Vol.4, No.1, (2008). p.16 [27] Ibid. p. 12 [28] Sanchez, Juan Carlos Ochoa. "The Roles and Powers of the OECD National Contact Points Regarding Complaints on an Alleged Breach of the OECD Guidelines for Multinational Enterprises by a Transnational Corporation." Nordic Journal of International Law (2015) Vol.84, No.1, pp: 89-126 p. 18 [29] Bolt, Cassidy. "Leveraging Reputation in Implicit Regulation of MNEs: An Analysis of the OECD Guidelines for Multinational Enterprises' Capacity to Influence Corporate Behavior." Corporations and International Law, 20 Jan. 2018, Available at: sites.duke.edu/corporations/2018/01/20/leveraging-reputation-in-implicit-regulation-of-mnes-an-analysis-of-the-oec