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Friday, November 11, 2011

Corporate Democracy Now (Grown up version of my response to John Morrison, who is very definitely all growed up.)


Corporate Democracy Now

I am honored to accept the invitation of John Morrison, Executive Director of the Institute for Business and Human Rights, to “join in working more actively with the growing movement to make respect for human rights part of mainstream corporate practice.”  You won’t find me at the upcoming Conference on Implementation of the Guiding Principles, in DC next month though.  

Instead, inspired by the upswelling of democratic spirit exhibited by the Occupy movement, I am fostering an initiative focusing on the democratization of corporate governance and determining the rightful role of corporations in society.  As an activist investor, I have found that a fundamental cause of corporate irresponsibility boils down to deficits of democracy.  As every manager knows, only what gets measured gets managed, so I’m working on developing metrics to assess the “democracy quotient” of publicly traded corporations.  Rather than continue working on this project from the comfort of my office, I believe that the more perspectives that can be incorporated in the metrics, the more useful the index will be.  

Too few of my fellow citizens understand the levers of corporate power.  (Did you know that shareowners can’t even nominate the corporate directors that are supposed to represent their interests?  Did you know that on many proxy ballots you can’t vote “no” to oppose a management nominated director?) We would all have a greater voice if we were to democratize corporate governance.    


We the People grant corporations their license to operate.  We the People are owners of these corporations.  Our retirement accounts fund their operations.   If we put pressure in the right places (Securities and Exchange Commission, US Congress, proxy aggregators), we will be able to assume more direct control over them.  Corporate governance is a complicated topic and there are a lot of people who are hungry to learn about it, so please consider this an invitation to join me.

That said, here’s why I’ll be doing the above rather than writing comments to the UN or attending Business and Human Rights conferences any time soon:  

The extent to which the latest and greatest UN convention/framework/statement/process on human rights makes any elite institutions of power (see the penultimate paragraph of John Morrison’s piece for an incomplete list) more responsive to the rights and needs of human beings will be dictated by democratic force.  I am happy to note that after a long time in the wilderness, democracy is making a comeback.

While the Ruggie-led process has been extraordinarily thorough in its consultations, consultation does not equal influence.  I don’t know how we all got confused about that.  Consultation means “talking”; the Greek root of democracy is literally “people power.”  We’ve done plenty of the former, now let’s try the latter.

Effective human rights policies will not be achieved by semantic sparring between corporate lawyers and would-be reformers unless the whole process is prodded by well-considered popular demands and implemented with hard law.  Let’s all head in that direction.

Agreements negotiated based upon existing power relations are the problem, not the solution.  Upon reflection, I was wrong to have characterized the Protect, Respect and Remedy Framework as “patently worthless.”  In fact, I think the document holds promise BUT ONLY IF WE THE PEOPLE DEMAND IT.   Let’s take a break from the inside baseball and reclaim some public spaces.  In my view, today’s most promising human rights leaders are Occupying public spaces all over the world.

I will be ecstatic if the Ruggie Framework ushers in a new era of corporate accountability, but I fear that it will become yet another distraction from the underlying problem of democratic deficits within and without corporations.  I can point to too many agreements/frameworks etc. that have yielded great publicity for corporate persons but no significant benefit to natural people. I’d also like to point readers toward a rather scholarly scolding recently given to the Global Compact process by the Deputy Director of Australian Human Rights Centre:

The softly, softly approach of the United Nations to engendering greater respect for rights by business carries the risk of subverting the public purpose of the organization. Close relations between the UN and big business provides ample scope for capture such that the United Nations—the supposed rule setter—wittingly or otherwise begins to adopt the agenda of business partners without debate and due democratic procedure.

While I have the utmost respect for Mary Robinson and congratulate John Ruggie for helping establish, as Mr. Morrison says, the “first internationally agreed standard clarifying baseline business responsibilities for actions which negatively impact on human rights” -- I frankly don’t know what that last part means.  Does it mean that the victims of corporate crimes will be empowered to confront multi-national corporations on equal terms?  Because if that is really what it means then I apologize for speaking out of turn.

Corporations don’t have to be coddled all the time.  Sometimes they need to be shoved with the noble arm of popular sentiment.  I hope the corporate social responsibility complex (to which I admit belonging) is finally prepared to acknowledge the new reality that popular patience has worn thin for the naive strategies we’ve championing all these years.  

That the above statement is news to anybody only lends further credence to my earlier blog posting on this subject.  Discontent with gradualist and elite-led approaches is manifesting on the streets of cities all around the world, but somehow leaders just aren’t getting the message that it is time to change tack.  

The simple fact is that corporations and economic elites have too much power over governance and governments.  Power is never relinquished voluntarily.  Power must be met with power. I am not suggesting violence, but I am suggesting coercion.  Laws are coercive, binding bylaw resolutions are coercive, civil disobedience can be coercive, democratic elections are coercive.

Multi-stakeholder negotiated non-binding agreements might be more aptly called: “occasional marginally enforceable agreements in principle.”  They can be enforced only to the extent that the aggrieved and structurally disempowered parties are somehow able to muster impressive publicity campaigns or underfunded lawsuits.

Frameworks are not coercive, but they do take an awful lot of scarce non-profit and public sector resources to negotiate.  Now that we’re done with drafting the framework, let’s re-channel all of that energy and smarts toward more empowered forms of engagement.  

The Ruggie Framework holds promise, but it is time to change approaches.  Corporations are obviously stakeholders in the creation of laws and regulations that govern them, but we don’t have to presume that corporate managers should have an equal say in the drafting of human rights policy.  We need to remind ourselves and our leaders that one of the greatest accomplishments of Western Civilization has been to hold out the hope that one day human beings will not live and die at the will of undemocratic institutions.

Smart leaders are about to pivot away from frameworks and toward empowering democratic action.  Let’s do this together.