Has there ever been a better time to be a corporation? I doubt it. Corporations might disagree, and we’re all familiar with corporate lamentations regarding the increasingly challenging web of federal regulations (Dodd-Frank; the FCPA) they supposedly struggle to navigate. Yet, it’s hard to dispute that these are good times for big business, and “Exhibit A” could easily be the utter dearth of criminal prosecutions for corporations that are guilty of pollution.
Funding Woes. According to a recent study published by the Crime Report (TCR), criminal prosecutions of corporate polluters are becoming less and less common by the day. One explanation for this phenomenon is the dwindling funding allotted to the government entity responsible for the protecting the environment, the Environmental Protection Agency (EPA).
In case you missed it, Congress has made a recent habit of slashing EPA funding. (Yes, this is the same do nothing Congress that is currently contemplating spending American tax dollars on a lawsuit against the President.) Unsurprisingly, these cuts have come primarily at the hands of Congressional Republicans, whose most recent transgression has been the approval of a 9 percent decrease in EPA funding, but President Obama has done some damage as well (the President’s proposed 2015 budgetlowered EPA funding by some $300 million). And this is not just a 2014 trend. As Congressional Republicans boasted when the federal government nearly imploded (again) in January, they have successfully cut the EPA’s funding by 20 percent since 2010.
One result of these money troubles is a serious lack of manpower. For instance, the Department of Justice’s Environmental Crimes Section is equipped with just 38 prosecutors, and the EPA’s Environmental Crimes Section has just 200 agents. These are the folks who are given primary responsibility for monitoring environmental violations across the country. Yet, with such a pitifully understaffed roster, the federal government’s capacity to pursue America’s worst environmental offenders is seriously hampered.
A group of McDonald’s franchise operators in Puerto Rico is alleging that the fast food giant violated federal law and a Federal Trade Commission (FTC) rule that regulates the behavior of franchisors.
According to the Puerto Rican franchisees (the Plaintiffs), McDonald’s first violated the Franchise Rule when it sold its Latin American franchises — and, consequently, McDonald’s franchise rights in the Puerto Rican market — to the Latin American company, Arcos Dorados, in 2007. Subsequent actions by Arcos Dorados in Puerto Rico have caused additional harm to the Plaintiffs, in further violation of federal law.
Plaintiffs allege the various harms and violations have occurred. Specifically, they claim that McDonald’s “cut off all ties with Puerto Rico operators” after the sale to AD, after which the new owners (Arcos Dorados) began downgrading services to the franchise owners, absent disclosure to the FTC and in violation of FTC Act 5 Section 5 (unfair competition) and the Franchise Rule. Plaintiffs further allege that AD is neglecting to conduct sufficient sales analyses before opening new McDonald’s locations, leading to areas with a glut of McDonald’s restaurants and the resultant supply-and-demand problems for Plaintiffs’ businesses.
More than McDonald’s, though, the real villain in this story is Arcos Dorados (AD), a McDonald’s franchising behemoth.
As the world begins to awaken to the looming food crisis — how we will feed 2 billion more people by the year 2050 — investors are turning to a place not typically associated with its agricultural bounty, but a region that National Geographic Magazine (NatGeo) is calling “The Next Breadbasket”: sub-Saharan Africa. In its July edition, NatGeo’s Joel K. Bourne Jr. (aided by predictably stunning photos from Robin Hammond) points a wide lens at the issues raised by the creation of giant agricultural developments in sub-Saharan Africa, including some of the potential benefits as well as the likely pitfalls.
First, why sub-Saharan Africa? The short answer is that the region has the most potential upside, or what is referred to as “yield gap,” on Earth. This essentially means that Africa is home to an enormous amount of arable land, yet the continent produces “roughly the same yield Roman farmers achieved … in a good year during the rule of Caesar.” Put another way, less than 5 percent of arable land in the sub-Saharan area is currently irrigated, and farms in the region are not reaching anything near their potential output.
This is likely true for a number of obvious reasons, and NatGeo’s Bourne lists the clear culprits: poor infrastructure, limited markets, weak governance and brutal civil wars. The other key ingredient is the amenability of African governments, some of which are willing to overlook (or inadequately safeguard) the property rights of their citizens in favor of influxes of foreign cash and the attendant benefits.
The “why now” is two-fold. On the one hand is the impending food crisis, which is centered on the African continent and which, for most of Africa, is not really impending but has been plaguing the region for years. Second, there’s the real driving force: the potential monetary upside for investors. As Bourne puts it, “Since 2007 the near-record prices of corn, soybeans, wheat, and rice have set off a global land rush by corporate investors eager to lease or buy land in countries where acreage is cheap, governments are amenable, and property rights often ignored.” Large Chinese and Brazilian companies have eyed the “millions of acres of fallow land and plentiful water available for irrigation” and seen the potential for massive profits. It seems only a matter of time before others join the party as well. In fact, Bourne points out that a recent conference in New York for agricultural investors drew some “800 financial leaders from around the globe who manage nearly three trillion dollars in investments.”
Can a corporation pray? Can it attend religious services? Is it free to don religious garb? In other words, can a corporation exercise religion? All of those are questions raised by the Hobby Lobby case (Sebelius v. Hobby Lobby Stores, Inc., and the related case, Conestoga Wood Specialties Corp. v. Sebelius), likely to be decided by the U.S. Supreme Court in the coming days. More specifically, the issue facing the Court is whether a for-profit corporation be exempt from the Affordable Care Act (also called ACA or Obamacare) requirement that all companies cover certain FDA-approved birth control methods and devices as part of the health insurance packages offered to their workers.
This essential question has been percolating in the federal appeals courts for some time and has resulted in what is referred to as a circuit split – three circuit courts have struck down the contraception coverage rule, while two others have upheld it. This means the federal appeals courts (the highest in the land below the Supreme Court) don’t really know what to do with this aspect of the ACA and the Supreme Court should step in and clarify.
The featured challenger in this case, Hobby Lobby Stores, Inc., is a chain of arts and crafts stores owned by the Green family (devout Southern Baptists, apparently), the members of which have committed to run the company according to Christian religious principles. Hobby Lobby doesn’t have a problem offering its employees insurance that covers most forms of birth control, it only objects to the coverage of drugs and/or devices that “end human life after conception.”
By Michael Kourabas
Last week, 20 CEOs of Ethiopian companies gathered at the United Nations Global Compact’s (UNGC) CEO Roundtable on Corporate Sustainability in Ethiopia. The event was part of “Africa: Advancing Partnerships and Responsible Business Leadership,” a week-long conference co-sponsored by the UNGC. Held in Ethiopia’s capital, Addis Ababa, it aims to promote corporate social responsibility (CSR) in Africa and explore partnerships between the U.N. and the public and private sectors to advance sustainable development in the region.
Topics covered in the roundtable included women’s empowerment, “decent work,” education and job creation. The event was touted by the UNGC as evidence of a renewed “commitment” to sustainability among Ethiopian companies and roughly coincided with the release of the UNGC’s new Africa Strategy document, Partners in Change: U.N. Global Compact Advancing Corporate Sustainability in Africa, which will serve as the UNGC’s overarching plan of action in the region.
There’s good reason for the attention on CSR in Africa. First, according to the Africa Strategy document, by 2050 Africa will have the world’s largest workforce and will account for 25 percent of the world’s population, growing at a faster rate than every other region in the world. Second, despite this growth, “only one-quarter of the top 50 African companies in 2012 are or have been Global Compact participants,” leaving ample room for improvement. Third, according to the International Finance Corp., the private sector accounts for roughly 90 percent of employment in Africa. All of these facts, particularly when considered in conjunction with Africa’s persistent governance problems, lead inexorably to the conclusion that private industry in Africa — as opposed to government — holds the key to sustainable development in the region. For its part, the UNGC views its role in Africa as “paramount to creating the bedrock of social norms that move businesses beyond ‘Do no harm’ principles and towards a greater understanding of how the private sector can contribute to sustainable growth through responsible business.”
Can the primary culprits of global warming be held liable for undermining efforts to combat climate change? That may sound like something a heavier, bearded Al Gore might have scribbled on a napkin in the middle of the night, but there’s reason to believe that it may not be so far-fetched. At least, that’s what a trio of high-profile environmental groups are suggesting.
On May 28, Greenpeace, the World Wildlife Fund and the Center for International Environmental Law sent letters to the executives of 35 fossil fuel companies, including ExxonMobil, Conoco and Chevron, asking the question posed above. They also sent letters to those companies’ primary director and officer (D&O) insurers, asking them a series of questions regarding how coverage for D&Os might be affected by evidence that the insured misled regulators, investors and the public as to the safety and/or risks associated with their products. The full list of targeted companies is here. If you’re an energy executive, you should now be very, very scared (and equally interested in the insurance companies’ responses). The notion even has its own hashtag on Twitter: #climateliability.
In a historic vote on April 15, the European Parliament adopted the most significant corporate social responsibility measure, anywhere, to date. Once passed at the European Council and country level, the directive will require certain large “public-interest” organizations operating in the EU to report on the environmental, social (including human rights) and governance (together, ESG) impacts of their work. What exactly affected companies’ non-financial reporting will look like in practice has yet to be determined, as the directive does not mandate the inclusion of specific language or information; however, the potential impact of the law is clear.
It’s something of an open secret that America isn’t quite a representative democracy. Sure, we have the trappings of a democratic government — an elected legislative branch; (partially) elected Presidents; an (ostensibly) independent judiciary — and perhaps our system did, long ago, hew a bit closer to the Platonic ideal of our founders, but we have since lost our way.
Fortunately, there has recently been an awakening to this issue in the media. In the wake of the Great Recession and the various Occupy movements — and the realization that nothing has fundamentally changed and nobody meaningful prosecuted as a result of the revelations about how government policies and financial fraudsters aided and abetted the most epic economic collapse since the 1930s — more and more attention has been paid to the relative power of the “1 percent” and the growing scourge of income inequality on our “great experiment.”
Most recently comes a study from political science professors at Princeton and Northwestern, concluding that America is, as the incomparable Hamilton Nolan put it, actually more like an oligarchy. The authors of the study, Princeton professor Martin Gilens and Northwestern professor Benjamin Page, put the conclusion in even more chilling terms: “[E]conomic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while mass-based interest groups and average citizens have little or no independent influence.”
In other words, it is corporations and wealthy individuals — not unions, public interest organizations or regular humans — who control the levers of power in America.
When the U.N. Human Rights Council announced, in June 2011, that it was endorsing the U.N. Guiding Principles on Business and Human Rights (UNGPs), the Office of the High Commissioner for Human Rights had this to say: “The Guiding Principles are the product of six years of research … involving governments, companies, business associations, civil society, affected individuals and groups, investors and others around the world.”
The OHCHR went on to note that the UNGPs were “based on 47 consultations and site visits in more than 20 countries; an online consultation that attracted thousands of visitors from 120 countries; and voluminous research and submissions from experts from all over the world.” In other words, without this kind of extensive collaboration across sectors, countries and industries, the UNGPs may not have been born.
Perhaps because of the UNGPs’ success, multi-stakeholderism is often highlighted as an essential ingredient in the continued progress of the business and human rights (BHR) movement. For example: in February, vice-chair of the U.N. Working Group on Business and Human Rights, Michael Addo, called attention to the importance of multi-stakeholder consultations in the development of National Action Plans; just last week, at an American Bar Association’s Section on International Law panel, Addo again took pains to stress the crucial role of multi-stakeholder participation in the promotion of the rule of law in the BHR context; and the OHCHR recently called for multi-stakeholder consultations in an effort to close the BHR justice gap.
Not surprising, right? After all, presidents get elected by promising to transcend partisanship and bring rival caucuses together. There’s little doubt that multi-stakeholderism is crucial to elements of the BHR movement, but is this type of collaboration always the best strategy? Or, more to the point, is it even realistic? A look at the behavior of the major stakeholders in the coal industry is illustrative and sobering.
“One way to read the injunction for Right Conduct, an essential part of the Eightfold Path, is to see it as calling us—as citizens—to translate the dharma into specific acts of social responsibility.” – Buddhist author and professor, Charles Johnson, writing in the Tricycle magazine.
Mindfulness has been in the news a lot lately, in part due to its infiltration of the board room, and the list of high-level executives and thought leaders who practice mindfulness exercises such as meditation is long. To those of us who meditate, this is not really a surprise (in light of meditation’s myriad benefits), and though the co-opting of an ancient Buddhist practice for profit is slightly disturbing, as the renowned Mindfulness master, Thich Nhat Hahn, recently put it: With mindfulness, the means and the ends are one in the same.
But what is mindfulness? Technically, it is the nonjudgmental observation of the present moment, no matter what that moment may entail, and it is arguably the paramount Buddhist instruction. The essence of mindfulness, though, is simply “paying attention,” the natural byproduct of which is heightened compassion and consideration of the impact of one’s actions on others. Some real-world examples of mindful behavior might include: pausing to think before habitually reacting; choosing to recycle, rather than to litter; or choosing to eat humanely raised chicken, rather than broiler chicken from a factory farm. Put another way, mindful behavior is behavior that is socially responsible.
Mindfulness, corporations and “360-Degree Social Responsibility”
From a corporate standpoint, then, mindfulness could manifest either externally or internally. Corporate policies that are externally mindful (or “externally socially responsible”) would be those that concern how the corporation interacts with the outside world. The type of conduct typically associated with classic corporate social responsibility (CSR) endeavors, in other words. Does the corporation minimize its impact on the environment? Does it incorporate human rights into its day-to-day operations? Does it do diligence on its supply chain?
The conventional wisdom used to hold that nothing was better for an economy than war. Pretty cynical view, built on the notion that the Second World War allegedly helped lift the U.S. out of the Great Depression and, thankfully, a view that has been thoroughly debunked.
Last month, a report from the Institute for Economics and Peace (IEP), further makes the case that violence, in all its forms, is economically devastating and downright bad for business (unless, of course, one is in the business of war).
In its report, titled “The Economic Cost of Violence Containment,” the IEP seeks to quantify the global economic cost of violence in 2012 by assessing “violence containment spending” (VCS), which it defines as as economic activity related to either (i) the consequences or (ii) prevention of violence, where the violence is directed against people or property. The report estimates that the total economic impact of violence containment to the world economy in 2012 was roughly $9.46 trillion, or 11 percent of Gross World Product.
This is more than 75 times the amount of foreign aid distributed worldwide in 2012, and just 15 percent of this figure would be enough pay for the completion of the remaining U.N. Millennium Development Goals, repay all of Greece’s outstanding debt and fully endow the European Stability Fund.
Last week wasn’t a great one for companies in the extractive industries. In South Africa, a wage strike by the Association of Mineworkers and Construction Union (AMCU) against the world’s top three platinum producers — Amplats, Lonmin and Impala Platinum – entered its eighth week, with no end in sight.
In Norway, the Ethics Council of the state’s Sovereign Wealth Fund (SWF or the Fund) released its 2013 Annual Report and announced that it was examining the operations of French oil giant Total, in the disputed Western Sahara, to determine whether its activities there are unethical and warrant exclusion of Total by the Fund. Days later, Norway’s Prime Minister proclaimed that the Fund would be investing a greater proportion of its wealth in renewable energy; the Fund is also considering exiting oil, gas and coal investments altogether, for environmental reasons (the arguable hypocrisy of which has been noted).
Norway operates what is by far the world’s largest sovereign wealth fund, with approximately $840 billion in assets under management, so its investment decisions are powerful. For example, the World Wildlife Fund, which has encouraged Norway’s SWF to invest up to 5 percent of its assets in renewable energy, commented that such a move could have a “global impact and redefine how we use money consistent with commitments to limit climate change.”
In May 2013, the Office of the United Nations High Commissioner for Human Rights (“OHCHR”) commissioned Dr. Jennifer Zerk to prepare an analysis of the effectiveness of domestic judicial systems in relation to business involvement in gross human rights abuses. Last week, Dr. Zerk released her report.
The report is damning and a must-read, in part because it does not blindly focus on the failure of businesses to respect — or at least refrain from participating in gross violations of — human rights. As the report illustrates, there is consensus that corporate involvement in human rights violations is a major problem and something that the international community is obliged to address. And, no matter how much energy we pour into attacking businesses and shining a light on these abuses, they will surely continue.
On Feb. 10, as the 2014 Winter Olympics were about to kick off in Sochi, Russia, I wrote a post arguing that the International Olympic Committee (IOC) may have acted contrary to the U.N. Guiding Principles on Business and Human Rights (UNGPs), flowing from the IOC’s decision to allow Russia to host the 2014 Winter Games. That post was linked to by the Business & Human Rights Resource Center, which went on to request comment from the IOC. To my surprise, the IOC actually responded. Given that the IOC found the time to respond to me, I thought it only proper to return the favor.
The IOC’s response can be broken down into two basic arguments:
First, the UNGPs do not apply to the IOC because the IOC is not your run-of-the-mill corporation; and
Second, even if the UNGPs do apply, and to the extent that Russia engaged in human rights violations in preparation for the games (as others have documented and I summarized), the IOC complied with the UNGPs by addressing those violations.
Fast food and wages
According to a 2013 study sponsored by the University of California, Berkeley’s Labor Center and the University of Illinois, the cost of public assistance to families of fast-food workers is roughly $7 billion a year; more than half (52 percent) of families of fast food workers are enrolled in one or more public programs (compared to 25 percent of the total workforce).
Of that $7 billion, McDonald’s employees received the most help: More than $1.2 billion in public assistance each year, from 2007 through 2011. In light of this, Bloomberg Businessweek recently observed that McDonald’s had become one of America’s “biggest welfare queens.” Congratulations, taxpayers. We are effectively subsidizing McDonald’s’ profits!
At the same time, it should come as no surprise that the fast food industry pays its employees a paltry wage. The Berkeley study found that “[m]edian pay for core front-line fast food jobs is $8.69 an hour, with many jobs paying at or near the minimum wage.” The federal minimum wage in the United States is even lower, at $7.25 an hour (though President Barack Obama recently called raising the minimum to $10.10 an hour a “top priority”). Assuming full-time employment, a minimum wage salary amounts to an annual income of roughly $15,000 per year. The poverty line in the United States is $23,000 per year, or $11.33 an hour, well higher than both the federal minimum wage and the fast food median.