The Power of Corporate Social Responsibility

March 2007


Michael Hopkins


The Power of CSR


Corporate Social Responsibility (CSR) is a powerful tool. Its shape has been defined and redefined but the main thrust is still the socially responsible treatment of stakeholders (see I have argued, ailment elsewhere (‘CSR an International Development: Is business the solution?’ (Earthscan, London, 2006), that corporations are more important than the UN in spending on development and the quality is rising. It is a strange phenomenon that as a strategic concept such as CSR gains in weight and prominence, the number of sceptics also rises. Indeed, corporations are generally viewed cynically by the public and the comment that corporations will do anything to make a profit is held by most.

Yet, there is not much doubt that this new millenium has embraced the private sector while, at the same time, bringing increased concerns about its power and lack of democratic control. There are other concerns as well in this new century, terrorism and climate change being the most prominent. Yet these two latter concerns have their roots in exploitation, ignorance and greed. Can CSR also help progress in these great societal challenges? I believe it can.

The terrorism of today had its roots in the exploitation of societies in the past. I am not an apologist for terrorism. There is no way any sane person can tolerate the destruction of people’s lives through indiscrimnate acts. As Thmoas Friedman wrote in the New York Times (March 2, 2007) recently ‘a suicide attacker disguised as a health worker blew himself up near “a crowd of about 150 people who had gathered for a ribbon-cutting ceremony to open an emergency ward at the main government hospital in the city of Khost.” A few days later, at a Baghdad college, a female suicide bomber blew herself up amid students who were ready to sit for exams, killing 40 people.’ Could CSR have helped prevent any of this? This is demanding a lot but, turning back the clock a little, there are two important occurrences that illustrate what happens when CSR is not practised.

BP and Iran in the 1950s

Arguably, many of the problems the West has with Iran today, stem from the West’s meddling in its politics. In his new book ‘Nemesis‘, former CIA analyst and author Chalmers Johnson argued that US military and economic overreach may actually lead to the nation’s collapse as a constitutional republic. He describes (see how a democratically elected Government was destroyed because of private sector interests.

In March 1951, Fadayan-e Islami assassinated Prime Minister Ali Razmara, who was against oil nationalisation. In April 1951, a nationalisation bill was passed and the AIOC, from which the British government had been earning more than the Iranian administration, left the country. The Prime Ministership was taken up by Muhammad Mossadeq, who had spearheaded the nationalisation campaign. Iran’s economy was badly affected immediately by the plummet in oil production, but popular opinion was firmly behind Mossadeq’s policy.

However, economic pressures, made worse by a British embargo, were contributing to a degree of unrest which Mossadeq responded to by assuming autocratic powers. By dissolving the Majlis, the alienation felt by the clerics was a spur to yet further radicalisation of religious aspirations.

The AIOC took its complaints over Iran’s oil nationalisation to the International Court of Justice at The Hague, but despite sending a powerful contingent of its best lawyers, Britain lost the case, the ICJ ruling that Iran had not broken international law. The AIOC was unsuccessful in its subsequent attempts at achieving its demands from the Iranians, and strategy took a darker turn, then aiming for the very overthrow of Mossadeq and the return to power of the western-compliant Shah. This, despite the acknowledgement by Britain’s ambassador in Iran that Mossadeq’s National Front party had the most political integrity at the time, being comparatively free from the taint of having amassed wealth and influence through the improper use of official positions.

The Americans were not especially interested in Britain’s losses. However, the Britain played on America’s Cold War fears of Soviet influence in the region, and they eventually set out together, covertly, to subvert Mossadeq’s government. Plans for the eventual coup, Operation Ajax, were drawn up with claims that the AIOC instigated this final action, although BP’s historian, in a footnote, denies the accusation.

On 19th August 1953, forces under the command of General Fazlollah Zahedi, chosen by Britain and the US as a replacement Prime Minister of Iran, eventually overcame the security forces surrounding Mossadeq’s home. Zahedi, the same day, took over Mossadeq’s position, and the Shah was recalled from his hotel in Rome. In London, the shares of the AIOC rose sharply on the Stock Exchange. The AIOC then became The British Petroleum Company, resuming operations in Iran with a forty percent share in an international consortium, which continued until the fall of the Shah.

Today, BP is one of the stars of the CSR movement despite continuing criticisms of problems arising from poor maintenance of its pipelines in the Gulf of Mexico and in Alaska.

If CSR had been as prominent in an earlier time, would BP (or AIOC as it was then) have been able to assist in the overthrow of a Government? Possibly, as the next example shows, it might still have occurred but the company would have come under great scrutiny as its ongoing experience in building a pipeline in Azerbaijan has shown.

Oil and Iraq

The war on terror, at first sight, seems to be conducted outside the remit of large corporations. And the UN is hardly involved either. Iraq is the major issue of our times and the UN manifestly failed to have much influence. The US and UK decision to go to war in Iraq, started by using the UN and its machinery but when this failed the invasion and its consequences went ahead anyway. Whatever the merits of the case – and my own view is that the super-powers should have persisted with the UN before the invasion and should also have prepared much better for the aftermath when they actually did go to war – corporations did turn out to be more powerful than the UN. Bob Herbert of the New York Times tells us why:

‘Dwight Eisenhower, the Republican president who had been the supreme Allied commander in Europe in World War II, and who famously warned us at the end of his second term about the profound danger inherent in the rise of the military-industrial complex. Eisenhower delivered his farewell address to a national television and radio audience in January 1961. “This conjunction of an immense military establishment and a large arms industry is new in the American experience,” he said. He recognized that this development was essential to the defense of the nation. But he warned that “we must not fail to comprehend its grave implications.”

In one of the great deceptive maneuvers in U.S. history, the military-industrial complex (with George W. Bush and Dick Cheney as chairman and C.E.O., respectively) took its eye off the real enemy in Afghanistan and launched the pointless but far more remunerative war in Iraq.

The military-industrial complex has become so pervasive that it is now, all but invisible. Its missions and priorities are poorly understood by most Americans, and frequently counter to their interests.’

The chilling words of Herbert provide the background to how some large corporations have become more powerful than democratic institutions, including the UN. In the case of Iraq, this power has obviously not helped development. But it does imply that the more we can hold corporations responsible for their actions the less likely that large corporations like Halliburton, Bechtel or the Carlyle Group can benefit, and influence hugely, our political processes. Halliburton, which had US vice-President, Dick Cheney as one time CEO, built the Guantanamo prison compound for terrorism suspects and donated $709,000 to political campaigns between 1999 and 2002. Bechtel, considered the largest contractor in the world, donated $1.3 million to political campaigns between 1999 and 2002 and is the earlier employer of former Defense Secretary Caspar Weinberger, former Secretary of State George Schultz, and former CIA Director William Casey. The Carlyle Group had former UK Prime Minister John Major as Chairman of its European Group until 2004, and he continues to serve as a consultant on energy matters. Perhaps, following the lucrative footsteps of John Major, we shall see Tony Blair linked to these companies in the future?

Chalmers Johnson had also noted that Eisenhower was overly praised for his concerns. Despite Eisenhower’s heroic statement, he was the butcher of Guatemala and the person who authorized the overthrow of Mohammed Mossadegh in Iran in 1953 for the sake of the British Petroleum Company. He also presided over the fantastic growth of the military-industrial complex, of the lunatic oversupply of nuclear weapons and, of the empowering of the Air Force. It seems to be only at the end that he realized what a monster he had created.

The UN, of course, also suffered badly in Iraq. Its special representative for Iraq, Sergio Vieira de Mello, was killed when the poorly protected UN HQ in Baghdad was severely bombed in July 2003. The UN continues to be involved, to this day, but its presence is largely based in safer Jordan as its diplomats and civil servants have, for whatever warped reason, become ‘legitimate’ targets of war.

Could CSR have prevented the Iraq war? Yes. The relations between Halliburton, Bechtel, Carlyle and many other corporations in a CSR world would have been intensively examined. Stakeholders would have been held publicly accountable and socially irresponsible actions such as supporting war efforts for personal gain would have been stamped out. Naïve? Perhaps. But right now, large corporations are more powerful than the UN, and more powerful than many nation states.

CSR a restraining hand

The influence of CSR on development, and its restraining hand on the excesses of corporations, is a story that is still unfolding. It is not only corporations, as any institution can be held accountable to its stakeholders in this new CSR world. Of course, to date, CSR has been most prominent in the democracies where dissenting views are allowed to be voiced. It will be interesting to see how CSR will be handled by China, perhaps the most important threat to CSR implementation in the world today. One does not have to look far to see that, in China today, the notion of stakeholder dialogue that is so essential to CSR, is far from the interests of the Chinese Politburo. The recent crash in the Chinese stock market due to over speculation will undoubtedly lead to more centralization of power, in the short term at least. But eventually, and CSR is a long-term issue, even China will have to answer to its stakeholders. At this point the power of CSR will be magnified even more as it contributes to tackling the major issues of the day.

[Contributed by Michael Hopkins]