Political activity and global governance

Alessia ContuAlessia.Contu@umb.edu

Outline of LectureConceptual tools to make sense of political activity

Business as political actors: Scherer and Palazzo argument. Active in shaping global governance the example of Rana Plaza

Political actors: Civil Society Organisations, NGOs & Social Movements

Two examples of political activities From Corporate Responsibility to Corporate

Accountability Direct NGO Activism

Business Responses

Business As Leader

Based on Bower, Leonard and Paine, 2011

Stakeholder Analysis It is part of every manager’s job

Process to identify relevant stakeholders and analyze their interest and power

Asks 4 key questions:

Who are the relevant stakeholders? What are the interests of each stakeholder? What is the power of each stakeholder? How are coalitions likely to form?

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Stakeholder Analysis – Question 1Who are the Relevant Stakeholders?

Answer this question by drawing market and nonmarket stakeholder maps

Recognize that not all of groups are relevant to every situation

Examples: Some businesses sell directly to the public and will not have

retailers A certain stakeholder may not be relevant to a particular

decision/action

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Stakeholder Analysis – Question 2

What are the interests of each stakeholder?

Analyzing stakeholder interests includes addressing: What are the groups’ concerns? What does the group want/expect from their relationship

with the firm?

Examples: Stockholders have an ownership interest, they expect to

receive dividends and capital appreciation Customers are interested in gaining fair value and quality

in goods and services they purchase Public interest groups advance broad social interests

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Stakeholder Analysis – Question 3

What is the power of each stakeholder?

Stakeholder power is the ability of a group to use resources to make an event happen or to secure a desired outcome

There are 4 types of stakeholder power:

Voting power Economic power Political power Legal power Informational power

Also possible to use: French and Raven (1959) theory of power sources: 5 different

sources of power (check which one the stakeholders can mobilise!!)

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Stakeholder Analysis – Question 4How are stakeholder coalitions likely to form?

Stakeholder groups often have common interests and will form temporary alliances to pursue these common interests

Coalitions are very dynamic (can change at any time)

Coalitions are increasing international

Internet has enabled coalitions to form quickly, across political boundaries

International alliances, coupled with media interest, can be a very powerful strategic force for corporations but also for other stakeholders

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Stakeholder Salience and Mapping

Salient – It regard something that stands out from a background; that it is seen as important, or draws attention

Stakeholders stand out (i.e., are salient) to managers when they have power, legitimacy, and urgency

Managers can use the salience concept to develop a stakeholder map – a graphical representation of the relationship of stakeholder salience to a particular issue

A stakeholder map is a useful tool, because it enables managers to see quickly how stakeholders feel about an issue

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Figure 1.4 Stakeholder Map

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The Dynamic Environment of Business

The external environment of business is dynamic and ever changing

The purpose of the firm is not simply to make a profit, but to create value for all its stakeholders – a successful business must meet both its economic and social objectives

Six dynamic forces powerfully shape the business and society relationship: Changing societal expectations Growing emphasis on ethical reasoning and actions Globalization Evolving government regulations and business response Dynamic natural environment Explosion of new technology and innovation

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Figure 1.6

Forces that Shape the Business and Society Relationship

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So far…Focusing on the economic environment and the

relationship between business and government (two sectors framework) = synergistic corruption taking advantage of opportunities for irresponsibility (e.g. Enron, the financial crisis)

Results: some winners but lots of losers Middle class Workers Consumers Shareholders Communities

Les Jeux Sont Faits So is that it?

Not really…

Corporate agency is not (only) efficiency seeking rational actions

A shift in perspective…

It is shaped and influenced by the organizational field in which the firm is situated

The organizational field sets of organizations that, in the aggregate, constitute a recognized area of institutional life; key suppliers, resource and product consumers, regulatory agencies, and other organizations that produce similar services or products

A political institutional perspective:

The field is part of a broader institutional domain with laws, customs and morals which specify a way of life which has formed historically and is sustained by routine, legitimate, normal practices of accepted conduct = historic bloc

The domain is uneven, open and antagonistic, the solidity and continuity one sees (in norms, rules, values, taken for granted way of life etc) is the result of power dynamics and specifies the configuration of power relations.

But antagonism and contestation are always present sometimes more than others this is what one can call the ‘political environment’

The Political Environment Civil Society and NGOs

Civil SocietyArea of association and actions independent of

the state and the market in which citizens can organise to pursue purposes that are important to them individually or collectively

(Brown et al. 2000:275)

NGOsNGOs are private, non-profit organizations that aim to

serve particular societal interests by focusing advocacy and/or operational efforts on social, political and economic goals, including equity, education, health, environmental protection and human rights Social Purpose NGOs Club NGOs: business associations, unions and churches

etc.

Give voice and provide services/goods when the market does not step in and the government can’t or will not: the poor, or those marginalized, discriminated etc.

Advocacy NGOsGive voice and provide access to insiders (direct to

decision makers) and outsiders (direct to public opinion) strategies

Representing at decision making tables/events

Lobbying

Doing research

Organizing conferences

Monitoring and exposing action/inaction

Disseminating information

Setting/defining agenda

Developing/supporting code of conducts

Organizing boycotts and direct actions

An example:The Video:

https://act.greenpeace.org/ea-action/action?ea.client.id=1844&ea.campaign.id=29989

The Campaign since July 2014

https://act.greenpeace.org/ea-action/action?ea.client.id=1844&ea.campaign.id=29635

https://secure3.convio.net/gpeace/site/Advocacy?cmd=display&page=UserAction&id=1665

The Resolution: http://www.triplepundit.com/2014/10/lego-end-partnership-shell-contract-expires/

Operational NGOsProvide services and goods

Technical knowledge and expertise

Great reach and penetration

Hybrids NGOsFrom service delivery to capacity building:

Training

Know how and learning

Resource access

They also engage in:Promotion of institutions and norms: The

creation of codes of conduct for example

They campaign to create buy-in and partnerships and then help to write the codes and help “enforcing” them with monitoring, reporting, etc. (our case today…)

In summaryNGOs activism has been responsible for major

changes in corporate behavior and governance (The Economist 2003)

The emergence of NGOs that seek to promote what they perceive to be more ethical and socially responsible business practices is beginning to generate substantial changes in corporate management, strategy and governance

(Doh and Teegen, 2003)

Global governance Example UN Global Compact

http://www.unglobalcompact.org/

Ways to institutionalize corporate social responsibility at the global level through the creation of norms, rules and standardized procedures for responsible and sustainable business practices

Key engine = lack of enforcing agents as transnational regulatory body lack the force of national law so this requires political action of such bodies and NGOs and CSOs to engage MNCs and firms in voluntary actions

Push to move from Responsibility to Accountability

Corporations impact on outcomes of employment, consumption, environmental quality, and social inequality.

The post-2008 era of financial crisis has taught an important lesson: the limited liability of the privately owned corporation has re-emerged as the collective liability of society.

What responsibilities society places on the corporation itself in exchange for the legal privilege of limited liability?

From statements of intent, internal policies and codes to show with hard facts actual responsibility = move to accountability

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What Does it Mean “To be Accountable”?

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“Corporate accountability refers to whether a corporation is answerable in some way for the consequences of its actions”

Crane and Matten, Business Ethics, 2nd edition

What It Is...

• Critics of corporate responsibility argue that firms are exclusively accountable to their shareholders (i.e. financial accountability)

• Accountability calls for transparency of corporate actions related to its financial bottom line, but also social and environmental issues

• The expanded view on accountability is called for because of the increasing influence of corporations on social and environmental issues

KeyFacts

Accountability – Constituting Parts

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Key parts of increasing accountability

1. Transparency: provision of accessible and timely information, and the opening up of organizational processes and structures

2. Evaluation: process by which an organization monitors and reviews its progress against goals

3. Complaint & Response: processes by which an organization enables stakeholders to address complaints

4. Participation: process through which an organization enables key stakeholders to play an active role in decision-making

Supporting Management Processes for Accountability

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1. Accounting 2. Auditing

External Assurance e.g. 3rd party

to bridge credibility gap

3. Reporting

Financial / Social / Environmental Issues

Who Uses Corporate Responsibility Reports?

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Asset Owners / Asset Managers

Risk Management / Investment Decisions

Consumers / NGOs (Civil

Society)

Critical Screening of Companies / Identification of Problems

GovernmentsIdentification of Contractors for Public

Contracts / Enhancing Market Transparency

Assurance Standards / Bodies

Cover auditing, assurance/auditing, reporting certification or advice:

AA1000 AS; Accountability 1000 Assurance Standard; GRI: Global Reporting Initiative; G3: Sustainability Reporting Guidelines Version 4.0; IAASB: International Auditing and Assurance Standard Board; IFAC: International Federation of Accountants; ISA: International Standard on Auditing; ISAE 3000; International Standard on Assurance Engagement 3000; ISEA: The Institute of Social and Ethical Accountability.

UNEP, national governments, business and industry associations (e.g. World Business Council for Sustainable Development and UE Chemical Industry Council Responsible Care Programme) all involved with advice on reporting guidelines.

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Mission: to make sustainable reporting

A standard practice for all organizations

Sustainable Reporting is the practice of measuring, disclosing and being accountable to internal and external stakeholders for organisational performance towards the goal of sustainable development

i.e. meet the needs of the present without compromising the ability of future generations to meet their own need

https://www.globalreporting.org/Pages/default.aspx

Regulation on Non-Financial Reporting

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Hard Law Soft Law• Started in Western Europe in 1970’s.

France the law 77/69 of 1977 introduced an obligation to publish social reports for enterprises with more than 750 employees; in 1982 this obligation was extended to enterprises with more than 300 employees.

• South Africa: listed companies have to produce integrated report (since June 2010)

• Denmark: listed and state-owned firms have to report (since January 2009)

• UK: British Companies Act requires listed firms to report (since 2008)

• Global Reporting Initiative sets out principles and indicators that organizations can use to measure and report on their social and environmental performance

• The third and forth versions, the G3/G4 guidelines, were launched as free standards in reporting.

Nestlé: a PR Disaster (March 2010)

http://www.youtube.com/watch?v=2ExNmhDLsIk

http://www.greenpeace.org/international/en/news/features/Sweet-success-for-Kit-Kat-campaign/

Discussion in TeamWhat are the symptoms of the problem at hand?

(Description)

Who are the key agents, their aims/interests and strategies? (Description + initial analysis)

What are the root-causes of Nestlé problem? (Analysis) (Use the stakeholder analysis to work it out)

What actions/strategies would you put in place to solve the problem(s)? (Analysis and Recommendation)

What happened next… Short term strategy:

Nestle suspended sources from Sinar Mar, the Indonesia supplier

Had talks with Greenpeace to share information on their supply chain and what to do next

Long term strategy:

Have all palm oil supply certified as sustainable by 2015; no deforestation and complete traceability target by 2020

Medium term strategy:

May 2010 join the Roundtable For Sustainable Palm Oil (made up of suppliers and buyers and NGOs)

Partnership with Forest Trust, a non for profit organization which had know-how of the supply chain and auditing

2011 New Post as Global head of digital and social media Peter Blackshaw. He created the “digital accelerated team” to monitor and liaise with interested parties 24 hours a day.

2012 Partnership also with Golden Agri Resources the new main supplier of palm oil to develop a business model based on sustainability principles:

Having a clear source policy, respecting the local and national law, zero palm oil development on peat and high conservation value land and no exploitation of high carbon stock forest land

Conclusions Irresponsibility and synergistic corruption brings to the

forefront the crisis of our historic bloc = we are facing the collective liability of corporations’ limited liability.

Political ferment: Civil society, activism and demands for new rules and new norms including a shift from declaration of responsibility to corporate accountability

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Conclusions 23 management mechanisms to support

accountability = accounting, auditing (3rd party assurance), and non-financial reporting.

the pressure is still on and the playfield is open, with a myriad of initiatives, campaigns and actions of multilateral, UN, NGOs, CSOs, universities and MNCs etc.

….Our best chance as citizens, workers and managers is to engage the pessimism of the intellect keeping alive the optimism of the will