The U.N.'s Problematic ‘Global Compact'

Harold Furchtgott-Roth  
July 9, 2007
The New York Sun
Original Source: http://www.nysun.com/article/58060
It was a good weekend for environmentalists: Vice President Gore hosted Live Earth concerts, Governor Corzine signed one of the toughest environmental laws in the country, and hundreds of business leaders gathered in Geneva to discuss, among other topics, global warming and climate change. Some even signed a non-binding resolution.
Rather than being sponsored by the Chamber of Commerce or the Rotary Club, the Swiss conference was organized by a club to which businesses may not belong: the United Nations. Its successful wooing of global businesses to deliberate, and even embrace, U.N. policies is a stunning feat of bureaucratic entrepreneurship.
The United Nations calls its business conference the Global Compact, with thousands of participants from businesses to academic and governmental institutions (see unglobalcompact.org). The Global Compact is part of the legacy of a former U.N. secretary-general, Kofi Annan. Participating businesses include 108 of the Financial Times's Global 500 companies. It has received wide praise even from such usually skeptical quarters as the G-8, and several major American firms, including Cisco, Coca-Cola, eBay, Gap, Hewlett-Packard, Microsoft, Nike, Pfizer, Starbucks, and Sun Microsystems.
The Global Compact has 10 principles for good corporate citizenship, most of which could be read to have benign purposes. (For exceptions, see my column in the March 28, 2006, New York Sun.) But the references at the Global Compact's Web site to other U.N. documents are more than a little troubling. For example, the first two principles pertain to human rights, and the Global Compact refers to the U.N. high commissioner on human rights. The 2006 annual report for the commissioner glowingly refers to the U.N. Human Rights Council 81 times in its 2006 annual report.
This is the same U.N. Human Rights Council that, in a wide world of human rights abuses, can find them in only two countries: Israel and, to a much lesser extent, Sudan. Previously, the U.N. Human Rights Commission (recently shut down, with the council taking its place) in its 40-year history focused 30% of its efforts on Israel. The council has recently decided to stop investigating human rights violations in Belarus and Cuba, and instead focus its attention solely on Israel. Not surprisingly, members of Congress have introduced bills that would withhold America's 22% funding of the U.N. Human Rights Council. The bills will likely pass.
In addition to the United Nations's dubious record on reviewing human rights, the Global Compact's repeated characterization of businesses as mere stakeholders should trouble most companies. In governmental parlance, a stakeholder is an interested party in a transaction or dispute that will not be resolved purely by property, contract, or judicial mechanisms. Rather, it will be resolved by governmental deliberation to include the view of those without clear legal rights.
Indeed, the very premise of the Global Compact is that market mechanisms are inadequate to address the 10 principles of corporate responsibility. As the story goes, corporations left to their own devices are unable to be responsible, and thus need outside institutions such as the U.N. Global Compact with its stakeholders to help guide businesses in the right direction.
It is easy to understand why the United Nations. seeks to have large corporate participation in the Global Compact. Large corporations that rarely interact with the U.N. give it a patina of legitimacy that it sorely wants.
Of course, businesses can and do participate in the Global Compact without supporting all of its activities, including links to dubious United Nations human rights organizations and broad standing for those who would have no standing in a court of law. But the obvious question is: Why?
The vast majority of American companies do not participate. For the corporations that participate, the benefit is supposedly public relations, particularly for corporations with spotty records on labor and the environment. Many companies do mention their participation and link to the Global Compact only at secondary locations on their Web sites. Participating companies are not trumpeting their participation in the Global Compact in full-page advertisements in the Wall Street Journal.
More than a few investors must be left mystified about corporate judgment. Surely there are many ways to address public relations problems without descending to the level of a mere stakeholder at the United Nations.
A former FCC commissioner, Mr. Furchtgott-Roth is president of Furchtgott-Roth Economic Enterprises. He can be reached at hfr@furchtgott-roth.com.