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The UN’s global compact is compromised by corrupt members and dodgy directors

Most right-thinking Irish people think the UN is progressive, scrupulous and transparent. They may think the Security Council is compromised by geopolitics but the intiatives emanating from the General Assembly are benign. All that worthy peace-keeping, progressive resolutions ending wars. Climate. Children. Education.

We need then to take at look at the world’s largest corporate sustainability initiative, the UN-managed Global Compact: “a call to companies to align strategies and operations with universal principles on human rights, labour, environment and anti-corruption, and take actions that advance societal goals”.

The self-financing UN Global Compact has attracted 13000 corporate participants and other stakeholders in over 170 countries (including Smurfit Kappa and Business in the Community in Ireland) with two objectives: “to mainstream [10 worthy] principles in business activities around the world” and “to catalyse actions in support of broader UN goals, such as the Millennium Development Goals (MDGs) and the global Sustainable Development Goals (SDGs), or Global Goals, which include a historic pledge in September 2015, to end poverty everywhere. Impressively, this is no empty commitment, you might think: companies have been delisted from the Global Compact because they did not comply with the obligation to report on progress, and the Compact has introduced a differentiation programme allowing businesses to distinguish themselves by going further than the minimum requirements.

The UN Global Compact’s Ten Principles are derived from: the Universal Declaration of Human Rights, the International Labour Organisation’s Declaration on Fundamental Principles and Rights at Work, the Rio Declaration on Environment and Development, and the United Nations Convention Against Corruption.


The Global Compact, however, is not all it appears. Although it can be seen as a reaction to climate change, the Enron debacle and the global anti-capitalism movement, it is also the creature of the business-fetishising wing of the UN, itself generated by some of the most right-wing influences in international affairs and their longstanding detestation of the UN.

For example the Charles Koch-funded Cato Institute, a leading neo-liberal/libertarian think-tank, and the Heritage Foundation were assiduous critics of the UN in the 1990s. They adopted a similar ideological strategy, emphasising the primacy of unfettered market freedoms and calling for unilateral US funding cuts. The Cato 1997 Handbook for Congress described the UN as “a miasma of corruption, beset by inefficiency, Kafkaesque bureaucracy and misconceived programs”.

Reflecting this, the Reagan administration systematically delayed the timing of US payments to the UN by appropriating funds nine months late, in the following US budget year. US payments to the regular UN budget, due on 31 January, began arriving in October or November, at the very end of the UN fiscal year. Since the US is the largest UN contributor, this occasioned the intended stress.

Over the course of more than two decades, neo-liberal propagandists have defined the UN as an inefficient and unresponsive bureaucracy, threatening to impose itself on the world’s people. Again and again, editorial writers and newscasters have repeated the term “vast, bloated bureaucracy,” even though the UN staff is actually quite small.

Boutros Boutros-Ghali of Egypt, who died in February, became UN Secretary General in 1992. Under heavy pressure from the United States and from lobby groups like the International Chamber of Commerce, he immediately set to work reforming the Secretariat and eliminating programmes that most irritated global commerce.

For example, the annual Human Development Report drifted slowly rightwards after 1994 and began to promote economic growth as the main engine of human development. The trajectory was not all one way. Boutros-Ghali outraged the new conservatives by proposing global taxes as a solution to the UN’s financial crisis in a speech in Oxford University in 1996.

Kofi Annan assumed the post of Secretary General in January 1997. Washington had summarily vetoed Boutros-Ghali’s campaign for a second term, saying it wanted a more reform-minded helmsman for the UN. Annan is a graduate of MIT’s Sloan School of Business. In 2004, allegations were made that his son Kojo Annan had received unethical payments but former US Federal Reserve Chairman Paul Volcker led an investigation which found insufficient evidence to indict Kofi Annan of any illegal actions, but did find the UN’s management structure and Security Council oversight deficient. Annan surfaces from time to time as one of the egregious ‘Elders’ with Mary Robinson and Jimmy Carter.

After just three weeks in office, Annan made a pilgrimage to Washington to meet Congress, particularly key conservative Senator, Jesse Helms. He announced he would “streamline” the UN, bringing modern business practices to its management and setting “realistic” goals. He committed to further budget and staff cuts. Almost immediately Annan trundled to Davos, Switzerland, to the annual meeting of the World Economic Forum and also held talks with senior officials of the International Chamber of Commerce. The WEF subsequently kindly installed new video-conferencing technology that it used itself to the cash-starved UN. Extraordinarily, the system worked primarily to connect the Secretary General and other UN leaders with corporate executives, bypassing the intergovernmental process. Around the same time the Secretariat decided to impose an offputting financial charge on NGOs for electronic access to UN documents.

Annan exhorted heads of UN agencies to open themselves to business, and to establish partnerships with corporations. In a short time, the UN High Commissioner for Refugees (UNHCR), the UN Educational, Scientific and Cultural Organization (UNESCO), the UN Development Programme (UNDP) and other agencies announced initiatives of this kind. In 1997, flamboyant media billionaire Ted Turner, who owned CNN, announced that he was making the largest charitable donation ever, a $1 billion contribution to the UN.

In 1998, soon after attending his second Davos gathering, the Secretary General again met the International Chamber of Commerce (ICC) in Geneva. This time, there were 25 corporate enormouswigs in attendance, including representatives of Coca Cola, Unilever, McDonalds, Goldman Sachs, British American Tobacco and Rio Tinto Zinc. ICC Secretary General Cattaui heralded the new relationship. “The way the United Nations regards international business has changed fundamentally”, she gloated afterwards in the International Herald Tribune. “This shift towards a stance more favourable to business is being nurtured from the very top”.

global-compactThe quest for reform goes on though it is now less ideological. The United Nations Commission on Human Rights had long been vilified for its role in promoting member states that did not guarantee the human rights of their own citizens before Kofi Annan in the In Larger Freedom report suggested setting up a new Human Rights Council as a subsidiary UN body. In 2006 a resolution enshrining this was passed by 170 members of the 191-nation Assembly. And in 2011 Secretary General Ban Ki-moon appointed Atul Khare of India to spearhead efforts to implement a reform agenda aimed at increasing UN efficiency, starting with a wide-ranging plan to streamline activities and increase accountability.

The UN Global Compact was announced by Annan in an address to the World Economic Forum on in 1999 that contained all the buzz concepts of partnership with business, “values” rather than rules, the “threat” that grassroots opposition might pose to globalisation. The speech succeeded in its purpose. It drew the attention of many corporate executives and it attracted a good deal of positive comment from the media and was officially launched at UN Headquarters in New York on July 26, 2000. The sequence was suspicious and the initiative was very much Annan’s own.

An academic paper in the 2013 Journal of Business Ethics notes damningly that “all credible and publicly available data and documentation conclusively demonstrate that the UNGC has failed to induce its signatory companies to enhance their CSR efforts and integrate the 10 principles in their policies and operations. The result has been a loss of public trust and support of UNGC from important constituencies among civil society organizations, and those individuals and groups adversely impacted by corporate activities and resultant negative externalities”.

global-compact-chartIt notes that the UNGC is “largely dependent on the corporate sector for its very survival. We conclude that this dependence has in turn impaired and would continue to hinder UNGC’s ability to fulfill its mission. Such an outcome raises serious questions as to the viability, usefulness, and continued existence of UNGC”.

In 2014 the US and EU opposed moves for legally-binding measures to hold corporations to account, at a meeting of the UN Human Rights Council, citing the Global Compact as an alternative approach. The chair of the Global Compact is Ban Ki-Moon but its Vice-Chair is Sir Mark Moody Stuart. He is a non-executive chairman of Anglo American PLC, an ex-chairman of Royal Dutch Shell and a director of HSBC Holdings and of Accenture. He serves on the board of Saudi Aramco.

Chey (Choi) Tae-Won is the Group Chairman of one of Korea’s biggest business conglomorates or Chaebols, SK, and is a convicted fraudster – having served seven months in prison in 2003 for accounting irregularities before he received a presidential pardon. His then father-in-law was a former Korean President. Far from any sanctions being imposed by the UNGC he was actually invited to join its board in 2004. Under pressure from the media the UNGC director, Georg Kell, stated the UNGC was a moral guide dog rather than watchdog, it has ceded any role of invigilating companies subscribing to its core principles.

In 2008 Chey Tae-Won quietly left the UNGC board after he was found guilty of embezzling nearly $47 million from two SK affiliates and diverting the funds to personal wagers on stock futures and options. He served a four-year prison term before being pardoned by Korean President Park Geun-Hye in August 2015. In anyone’s terms this is damaging for the UNGC.

There are shadows over many of the UNGC’s members. The patron sponsor of a 2013 Global Compact ‘Leaders Summit’ in 2013 was Oil and Gas conglomerate, Petrobas, the largest company in South America. In 2014 an investigation by by Brazilian Federal Police and public prosecutors— placed Petrobras at the centre of what may be the largest corruption scandal in Brazil’s history.

Barrick Gold, a Canadian mining giant, that joined the Global Compact in 2005 has been removed from a New Zealand government pension fund for human rights and environmental violations in Papua New Guinea and Tanzania. In Chile, the company was ordered to suspend its Pascua Lama project. Barrick Gold was fined for $16m for environmental violations in the Chilean-Argentinean border region.

Petrochina has been accused of being complicit in supporting the Sudanese Government’s genocidal reign of terror in Darfur which resulted in the displacement of over 2.7 million and the deaths of over 300, 000 people.
Because Petrochina was and is signed up to the UNGC , a formal open letter of protest was published with over 80 signatories from legitimate organisations and the request that the UNGC investigate and if necessary remove Petrochina from its membership. Nothing.

Sinopec is another oil and energy operation, one of the biggest companies in China. It has been mired in controversy for breaking the Western oil sanctions in Syria and Iran. Its former chairman, Chen Tonghai, narrowly escaped the death penalty after his conviction for taking over $20 million in bribes and the conviction of other senior executives at the company didn’t slow the submission of glowing progress reports to the UNGC each year.

For the past seven years, Baby Milk Action has been pursuing complaints against Nestlé for violating the Global Compact Principles in the way it markets its baby foods. Nestlé promotes its infant formula as the ‘natural start’. In 2013, an eight-storey building collapsed near Dhaka, Bangladesh, causing the death of over 200 people. The building accommodated a number of garment factories including some working for Global Compact participant, Mango. However, the Global Compact Office refuses to take action specified in so-called Integrity Measures, or to explain its refusal.

The UNGC Foundation accepts donations from any donor (whether corporate, foundation or an individual) provided that acceptance of the donation would not threaten the integrity of the Foundation, the UN Global Compact Office or the initiative as a whole. In general, it is expected that contributors to the Foundation will be participants or other stakeholders of the Global Compact. There was some peripheralised criticism of the initiative but the leading critic, an ‘informal network’ known as Global Compact Critics which systematically criticised the Global Compact, citing a lack of mechanisms for sanctioning non-compliance or lack of progress, but was strangely formally disbanded in February 2015.

It suggested that interested parties consult the Centre for Research on Multinational Corporations (SOMO) website.

Similarly, the Alliance for a Corporate-Free UN, which also no longer exists, was a campaigning organisation of several international NGOs, led by Corpwatch, which highlighted weaknesses in the principles underlying the Global Compact.

A paper by Irishman Tom Cunningham, of DePaul University, delivered to the Vincential Ethic Conference in Chicago suggests that the UNGC is in denial that it is in effect engaging in moral arbitrage. He told Village that the ‘principles’ should be reframed as aspirational ‘goals’ lest they serve to cloak members with an unmerited ethical imprimatur, from the stringent UN.

None-too-probing self-assessment
None-too-probing self-assessment

He notes that the UNGC is actually a US-based charity and so escapes scrutiny from the UN ethics officer and that it benefits from less stringent accounting obligations than other UN bodies.

Cunningham’s attempts to get details of funding have, on occasion, been stonewalled. He also expressed concern to Village about the over-representation of energy companies and the surprising lack of women, and representatives of environmental and human-rights NGOs, on the board.

In 2010 the UN’s own Joint Inspection Unit published a scathing assessment of the role and functioning of the UNGC, describing it as a “learning tool” not a “regulatory instrument” and acknowledging fears of ‘bluewashing’ (laundering improprietry by using the UN’s name). It made 18 sweeping recommendations starting with the need for immediate resolution of a clear mandate. It also recommended a strategic framework for its objectives and that the UN General Assembly call for institution of a selection process with “pre-set” criteria to mitigate “brand-management risk”.

Former President of Ireland Mary Robinson is both “supporter and a critic” of the UNGC, a self-declared “awkward voice, supporting the goals but pushing for more substance”. In her opinion the commitment made by businesses through the Global Compact principles is too weak. She emphasises: “We cannot continue with business as usual”. However, her criticism is tempered. “I think the very fact that corporations are talking a language of zero carbon, of the need to get rid of fossil fuel subsidies, of the need for carbon pricing – that’s all very important”, she believes. I believe the Global Compact needs to be aware of the risk of setting processes over principles. I think many member companies see the commitment to report on progress towards sustainable development as a sort of box to tick rather than something deeper. It’s too easy”.