An Ombudsman to control companies?
The Norwegian experience
By Tarjei Leer-Salvesen
NorWatch, The Future in Our Hands
common strategy for corporations to avoid binding rules, which would tie them to certain social and environmental performance requirements, is to develop their own voluntary codes of conduct. Norwegian companies are no exception when it comes to adopting such a strategy. However, there is a mounting body of evidence which suggests that such codes are ineffective. The main reason being that voluntary codes lack credible monitoring and sanctioning mechanisms which would hold companies to their commitments.
In an effort to address this problem, a group of Norwegian NGOs have presented the government with a proposal aimed at holding Norwegian corporations truly accountable and prevent them from applying double standards when operating abroad.The core of the proposal is to set up an Ombudsman- a well-known institution in Scandinavia whereby an independent official is charged with assessment and oversight of certain standards which government institutions are expected to adhere to. This Ombudsman would be entitled to control the 'positive incentives' given by the government to companies in a way that would influence their adherence to social and environmental standards abroad.
After five years of research on the activities of Norwegian companies in Asia, Africa and Latin-America, it is clear that they are no different than other multinational companies based in Europe and North America. Their complicity in a wide range of conflicts related to environmental degradation, displacement of indigenous peoples, workers' rights abuses, etc., is far worse abroad than what would even be remotely possible for them to get away with in Norway. Yet, due to the weak regulatory framework that currently exists in Norway there is no possibility to prevent these abuses from continuing.
One unique characteristic about Norway, however, is that even in a so-called 'market economy', the government still controls a significant percentage of Norwegian industrial concerns. As such, there still remains a large degree of public control of the private sector. It is important to note too, that many Norwegian companies depend on direct government subsidises such as 'positive incentives' also known as export credits. These incentives were established in order to further Norwegian export and to aid the establishment of trade and industry abroad through counselling, public (political/diplomatic) promotion, and financial support. Export credits have been key in boosting the competitiveness of Norwegian industries in international markets, particularly in the energy sector, and shapes the private sector's international strategy.
For decades now, there have been numerous attempts to establish guidelines for multinational enterprises in many different fora, such as in national governments, regional blocs such as the European Union, the Organisation for Economic Cooperation and Development (OECD), and the United Nations. However most of these initiatives have either been instituted on a purely voluntary basis, or were abandoned completely from lack of political support.
One of the first such attempt was the 1976 OECD's guidelines, which have undergone a new revision process, though still lacking any binding rules or enforcement mechanisms. The same goes for the 1978 rules of the International Labour Organisation (ILO), covering mainly employment and worker's rights. Further UN efforts to regulate corporations were given up after a very active corporate lobby leading to the 1992 Earth Summit, resulting in industry obligations under Agenda 21 being reduced to a minimum.
At the European Union level, the European Parliament proposed in a resolution from 15 January 1999 a legal framework to regulate EU-based corporations' operations worldwide. The resolution called upon the Commission to work towards developing common European guidelines and a 'European Monitoring Platform'. The proposal includes the use of financial incentives such as through the selective use of support funds and other public financing mechanisms, taxes, duty and purchase policies, as a way to encourage European companies to adhere to the proposed guidelines. To date there has been little movement on the part of the Commission with regards to the Parliament proposal.
A National Approach
The Norwegian proposal differs from these others, in that it is nationally focused - looking solely at the activities of Norwegian companies. A national process takes less time to be developed, and if approved we hope it can be a good example for other countries to follow. However, national rules should not be considered as a substitute for international legally binding and enforceable rules.
The core idea behind the proposal is to develop a set of guidelines defining the principles governing the activities of Norwegian corporations abroad particularly where they may have social and environmental impacts in the host country. It will also cover division of responsibility for monitoring between the Norwegian government, host countries and the company involved. In order to avoid a common corporate manoeuvre of dodging responsibility through complex ownership and/or licensing arrangements for a given project, the guidelines would make it so that any investment in a project involves a certain degree of control over that project and therefore the company or consortium must assume full responsibility for the entire operation. Without effective monitoring and sanctioning mechanisms in place, codes of conduct are ineffective, therefore a key component of the Norwegian proposal is the recommendation to establish an Ombudsman.
The Ombudsman: Ensuring Implementation
The Ombudsman would be able take on a company case either at its own initiative or at the request of any interested party, such as worker's organisations, affected communities or NGOs. Initially, it would be the duty of the Ombudsman to assess whether or not such case is in conflict with the guidelines. The procedure for this would involve collecting the relevant information from all available sources, in particular from affected groups with little chance to promote their own cause, such as indigenous peoples or unorganised workers. All results will be made public, and when a company is found to break the rules, the Ombudsman will ensure that the company is sanctioned. This could mean being refused support with 'positive incentives', or other financial mechanisms mentioned above for a period of time, for any operation in which the company is involved. Companies' track records will be considered at any time before granting such incentives.
Governmental institutions with shares in the company can be requested to ensure that the Ombudsman recommendations are implemented. The Ombudsman can also act on a request by a Norwegian company to assess whether it may come into conflict with the guidelines prior to establishment.
Our proposal is currently being considered by the government, but is by no means approved yet. When the idea was launched in 1999, the government was in the process of writing its very first 'Action Plan for Human Rights', where the creation of an Ombudsman was one of the possibilities being looked into. The proposal was supported by the Norwegian Confederation of Trade Unions and by some leading academics. But, due to the controversial approach of the proposal, suggesting that human rights and environmental concerns should be binding on a Norwegian company, may mean a long haul ahead before any legislation stemming from the proposal come into force.
For more information on the track records of Norwegian companies abroad, have a look at the reports and newsletters from NorWatch, published at http://www.fivh.no/norwatch.
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