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Code of Conduct on Transnational Corporations pp 23–43Cite as

An ‘Instrument of Moral Persuasion’—Multinational Enterprises and International Codes of Conduct in the 1970s

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Part of the book series: CSR, Sustainability, Ethics & Governance ((CSEG))

Abstract

This paper traces the codification of international norms for multinational enterprises in three steps. First, critical views on multinational enterprises in the early 1970s (the ‘multinational dilemma’) are examined on the basis of two central UN reports. In response to these reports, negotiations on international codes of conduct started. Section 2 analyses the drafting and substance of the two most prominent codes of their time, the OECD Guidelines for Multinational Enterprises and the UN Code of Conduct on Transnational Corporations. The paper concludes with a few observations on the legacy of the codes.

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Notes

  1. 1.

    The views, thoughts, and opinions expressed in the text belong solely to the author, and not necessarily to the author's employer. The Open Mind 1974, The Multinationals and the Public Interest. Available online: https://archive.org/details/openmind_ep356. Last access on 11 January 2017.

  2. 2.

    There were other terms such as ‘multinational corporation’, ‘supranational firm’, ‘cosmocorp’ etc. (see UNDESA 1973, pp. 118–121). However, ‘MNE’ and ‘TNC’ became the preferred notions at the OECD and the UN, respectively.

  3. 3.

    The terms belief, idea and concept are used synonymously.

  4. 4.

    These were the UN, the OECD, the International Labour Organization (ILO), the European Parliament, the European Commission (EC), and the Council of Europe. Archival material is cited in footnotes.

  5. 5.

    The archival management of the UN is still evolving. When the official United Nations Intellectual History Project started, its lead authors noted that the UN records deserved better management (Emmerji et al. 2001, p. XX).

  6. 6.

    Wikileaks obtained over 1.7 million diplomatic cables dating back to the period between 1973 and 1976 from the National Archives and Record Administration. Wikileaks uploaded them on its own servers and developed a comprehensive search engine: https://wikileaks.org/plusd/.

  7. 7.

    The majority of verbatims, statements and drafts created during the GEP hearings are kept by the United Nations Archives and Records Management Section (UNARMS) in New York: see UNARMS, Box: S-089-148-01; UNARMS, Box: S-089-148-02.

  8. 8.

    Schaffner passed on internal documents and was briefed by the group in order to influence the GEP’s work. He was indeed a vocal advocate of MNEs during the hearings, but was neither able to convince his opponents nor the group as a whole.

  9. 9.

    The so called ‘Rey report’ is an exception (OECD 1972).

  10. 10.

    OECD Archives, Ad hoc Meeting of Experts on Guidelines and Consultation Procedures in Matters Pertaining to International Investment, Paris 1973, document code: CES/73.88.

  11. 11.

    There were two other codes relevant to the code debate in the 1970s. First, there was the Draft Code of Principles on Multinational Enterprises and Governments, elaborated in 1976 in a joint session of the US Congress and the European Parliament (EP 1977, pp. 7–17). This ‘Lange-Gibbons code’, named after its two sponsors, never materialised. Second, foreign ministers of the EEC adopted a Code of Conduct for European Firms Operating in South Africa in 1977.

  12. 12.

    ECOSOC Resolution 1913. Moreover, the UNCTC advised developing countries in their dealings with MNEs.

  13. 13.

    Public Library of US Diplomacy (PLUSD), Fifth XCSS Experts Meeting On Investment, July 8–9, 1974, document code: 1974OECDP16779_b, para. 17. Last access on 11 January 2017.

  14. 14.

    The principle of ‘national treatment’ implies that OECD member countries should treat investments and MNE subsidiaries controlled by nationals of another member country according to international law and not less favourable than domestic companies.

  15. 15.

    PLUSD, Fourth XCSS Experts’ Meeting on Investment, April 29–30, 1974, document code: 1974OECDP10631_b, para. 5. Last access on 11 January 2017.

  16. 16.

    PLUSD, Executive Committee in Special Session (XCSS) Meeting Nov. 25–26: Investment Issues and Date of Next XCSS, document code: 1974OECDP28560_b, para. 2.

  17. 17.

    PLUSD (XCSS Nov. 25–26), para. 3. Last access on 11 January 2017.

  18. 18.

    PLUSD, First Meeting of Investment Committee (IME) March 3–4, 1975, document code: 1975OECDP05832_b, para. 5. Last access on 11 January 2017.

  19. 19.

    PLUSD (IME March 3–4), para. 1.

  20. 20.

    This reasoning did not go unnoticed. For example, a UNCTC staff member explicitly referred to quid-pro-quo deal at the OECD (Sauvant 1977, p. 384).

  21. 21.

    PLUSD (IME March 3–4), para. 6. This idea was reiterated in the State Department’s 1975 annual policy assessment; cf. PLUSD, Annual Policy Assessment, 1975, document code: 1975OECDP16403_b, para. 16. Last access on 11 January 2017.

  22. 22.

    PLUSD, CIME meeting, November 19–20, 1975, paras. 16, 21.

  23. 23.

    The instrument was first used for the Trade Pledge in May 1974, see OECD Archives, Folder 229334, Draft of a Manual on the Declaration by the Governments of OECD Countries […], 29.VIII. 1976, p. 5, fn. 1.

  24. 24.

    The Declaration was adopted by consensus except Turkey’s abstention. Reaching agreement on a Convention would have proved trickier.

  25. 25.

    The decision to avoid legal language was made early in the negotiations, after the UK delegation had proposed the use of ‘straight prose’ at the beginning of the negotiations, see OECD Archives, Folder 230614, Drafting group, 30/4/75.

  26. 26.

    This definition was appropriately called a ‘(non) definition’ by Blanpain (1979, p. 58).

  27. 27.

    Adopted by General Assembly Resolution 35/63 and officially known as Set of Multilaterally Agreed Equitable Principles and Rules for the Control of Restrictive Business Practices.

  28. 28.

    On the development of the Declaration, see ILO Archives, File Series: GB, File Number: 203-100-6, report of the reconvened tripartite advisory meeting on the relationship of multinational enterprises and social policy, document code: MNE/1977/D.8, pp. 1–2.

  29. 29.

    ILO Archives, File Series: GB, File Number: 203-100-6, Statement by the representative of the World Confederation of Labour, May-June 1977, document code: GB.203/6/20.

  30. 30.

    The ILO representative cited earlier called it a ‘technical contribution to the work of the UN’ (Günter 1980, p. 175).

  31. 31.

    The nine foreign ministers of the EEC drafted a Code of Conduct for European firms operating in South Africa in 1977. The code was implemented in each country differently and updated in 1985. For more information, including a reprint of the code, see Wiebalck (1992). Another, non-governmental approach was taken by the Sullivan Principles, a set of norms created by human rights activist Leon Sullivan in 1977. The Sullivan Principles were recommended to all US MNEs with operations in South Africa.

  32. 32.

    An overview of the cases can be found in Blanpain (1979). The author was a member of the Belgian delegation to CIME and acted as an advisor to a case which was opened by his government (‘Badger case’).

  33. 33.

    An article about the OECD Guidelines was accompanied by a cartoon showing the devil visiting ‘Multinational Inc.’ and being told by the receptionist: ‘You are wasting your time—we’re following the new OECD Code of Conduct now!’; see accompanying article by Kransdorff (1980).

  34. 34.

    The mere possibility was discussed in the Governing Body only in 1980, see GB 214/PV (Rev.), IV/5-IV/11. The first request was transmitted to the ILO in 1984, see ILO Archives, File Series: GB, File Number: 228-MNE-101-123, “Follow-up at the Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy” (GB.288/MNE/1/3), pp. 8–9.

  35. 35.

    In 1995 the BCSD and the World Industry Council became the World Business Council for Sustainable Development, which promotes business-friendly concepts for sustainable development.

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  1. University of St. Gallen, St. Gallen, Switzerland

    Thomas Hajduk

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Correspondence to Thomas Hajduk .

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  1. School of Law, University of South Australia , Adelaide, SA, Australia

    Mia Mahmudur Rahim

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Hajduk, T. (2019). An ‘Instrument of Moral Persuasion’—Multinational Enterprises and International Codes of Conduct in the 1970s. In: Rahim, M. (eds) Code of Conduct on Transnational Corporations. CSR, Sustainability, Ethics & Governance. Springer, Cham. https://doi.org/10.1007/978-3-030-10816-8_2

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