Corporations, Institutions and better Governance

Corporations, institutions
and better governance

By Toby Webb and Meg Carstens

MARCH 2008

CONTENTS CORPORATIONS, INSTITUTIONS AND BETTER GOVERNANCE

Contents

3 Acknowledgements

4 Background to this report

4 Institutions and social capital

5 Roles for business

6 The corporate responsibility agenda

6 Issues to be explored

7 Case one: Customs reform in East Africa: The case of Business Action for Africa

10 Case two: Human rights training in Burma: The case of Premier Oil

13 Case three: Judicial human rights training in Venezuela and Nigeria: The case of Statoil

16 Case four: Economic capacity building in Azerbaijan: The case of BP

18 Trends observed from cases and literature

19 Practical implementation issues raised by the changing role of business

22 Questions raised by the broader boundaries/legitimacy debates

25 Conclusions

26 Epilogue: Outlook for future involvement and unanswered questions

27 References and footnotes

About the authors
Toby Webb is co-director of the Ethical Corporation Institute and founder of Ethical Corporation magazine.
He has a MSc in Corporate Governance and Ethics from the University of London, Birkbeck College.

Meg Carstens is undertaking a MSc in Public Policy at the London School of Economics.

Editing assistance
Ian Welsh

Design
Alex Chilton Design Ltd

2

CORPORATIONS, INSTITUTIONS AND BETTER GOVERNANCE INTRODUCTION

Acknowledgements

The authors would like to thank the following
individuals for their time, comments and assistance
with this report. Peter Davis of the Ethical Corpora-
tion Institute, Professor Sue Konzelmann of Birkbeck,
University of London, Richard Jones, formerly of
Premier Oil, Martin Summers of British American
Tobacco, Richard Morgan of Unilever, Christian Braun
and John O’Reilly. Much of this report formed part
of Toby Webb’s Corporate Governance and Ethics
master’s degree dissertation, reviewed and marked by
academics at the University of London in 2006 and
2007. Meg Carstens undertook several months’
full-time work on broadening its scope during
summer 2007.

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CORPORATIONS, INSTITUTIONS AND BETTER GOVERNANCE

The background to this report

usiness has for some years been criticised by NGOs and picture of the debate from the point of view of
B the media for sourcing and operating in nations where
the rule of law is badly enforced. The absence of an adequate
different actors involved. In doing so, the report aims
to inform the actions and thinking of other large
legal framework, poor enforcement of it, or the lack of multinational companies that are considering how
requisite institutions that publicly encourage such enforce- they might best contribute to the creation, develop-
ment and accountability often mean that labour, ment and support of the necessary government and
environmental and overall human rights standards are civil society related institutions within poorer nations.
lower in many countries where western business buys from
and sells to. There is also a growing recognition that the Institutions and social capital
building and maintenance of essential institutions requires The term ‘institution’ commonly refers to the rules
the help and support of companies, as well as traditional and limits within which individuals and organisa-
NGOs, inter-governmental organisations (IGOs) and tions pursue their desires2 or structure their
governments in order to develop in poorer countries. The interactions. This definition encompasses a varied list
authors believe the subject area of this report fits well with including laws, language, monetary transactions,
the emerging agenda around the links between country social etiquette, and property rights. Institutions can
governance and economic development. It appears obvious include formal, codified rules (the focus of this
to say it, but the same institutions and cultures required to report) as well as informal social norms.
support human rights and effective labour law are very According to (among others) the Nobel prize-
often the same as those needed to protect contracts and winner Douglas North, formal institutions underlie
property rights. economic performance in society and play the key
As a result of the scrutiny under which they role in controlling the welfare of citizens within a
operate and the evolving recognition of a role for state.3 They do this by promoting cohesion and
business in delivering public goods,1 a small number partnership,4 by protecting property rights and
of international companies are increasingly finding
themselves promoting better governance through
contributions to institutional capacity building in
developing countries. Business Action for Africa and
initiatives such as the Kimberley Process, the
Extractive Industries Transparency Initiative (EITI),
the Ethical Trading Initiative (ETI), and the Voluntary
Principles on Security and Human Rights are all
recent larger scale examples of business coalitions
working to influence public policy and encourage the
strengthening of institutions. These partnerships
often consist of corporate contributions of finance,
lobbying, management experience and logistics.
These are combined with NGO monitoring, lobbying contracts, and by managing their exchange.5 Effective
and willing government participation. Because of the institutions also encourage savings and investment,
issues that arise when operating in the intersection of knowledge adoption, resource mobilisation and
private, public, and civil society spheres, however, public service provision by states.6
companies do not necessarily find this role a Institutions are closely linked with the concept of
comfortable one. Rather they deem it necessary and governance, which the World Bank defines as the
prudent given the realities of doing business in “traditions and institutions by which authority in a
certain areas and expectations in their home nations. country is exercised for the common good. This
Through case studies and interviews with includes (i) the process by which those in authority
practitioners, NGOs and academics, this report seeks are selected, monitored and replaced, (ii) the capacity
to explore some recent initiatives in this area. The of the government to effectively manage its resources
authors seek to underline the commonalities that exist and implement sound policies, and (iii) the respect of
between cases and the lessons that can be learned citizens and the state for the institutions that govern
from on the ground experience. The report also draws economic and social interactions among them.”7
attention to the practical and theoretical issues Key institutional and governance barriers to
encountered thus far, attempting to give a balanced greater economic wealth include poor legal systems,

4


corruption, underperforming and onerous bureau- themselves to corporate involvement include protec-
cracy, civil liberty and media suppression, inequality, tion of ownership rights, security of transactions,
ethnic tensions and a lack of property rights and honouring of contracts, respecting of titles and adher-
access to basic services.8 ence to law. Decentralisation strategy, transparency
Another variable connected to effective institu- and legal, fiscal, and administrative capacity are also
tions is social capital. The concept is related to the seen as relevant.
extent of trust, associational memberships, and Determining what kinds of activities in these areas
general social and political participation present in a are appropriate usually comes down to analysing the
society.9 It is “arguably about the capacity to collabo- particular context. In the case of BP’s work in
rate and interact peacefully and with high degrees of Colombia, the company feels that it has made a positive
trust and voluntary co-operation”.10 Ineffective insti- contribution18 but makes clear that its work there has
tutions and pervasive corruption are associated with its limits. “The company is not training the army,”
low levels of social capital.11 notes Christine Bader of BP,19 “which they should not
Linked to social capital is the concept of capacity be…the company has helped to get this (institutional
building, a term increasingly used by NGOs, develop- capacity building on human rights) going…but has
ment organisations, and others to refer to the processes found an appropriate way to fund it… (By funding
by which members of a society – institutional or infrastructure that helps the training take place)…we’re
otherwise – develop the ability to engage in problem not involved in ongoing maintenance of it or the devel-
solving and achieve their objectives.12 Evidence is opment of the curriculum (for soldiers) or the actual
emerging to demonstrate that the people of developing training”. In this case the Colombian government has
countries are beginning to recognise the role business the capacity to perform that role itself.
might play in contributing to better governance by The UNDP’s work on partnerships in development
contributing to the building of this capacity.13 provides guidance on some specific roles that might
be appropriate for business involvement. These
Roles for business include the training of local authorities to cope with
A 2006 report by the International Business Leaders change and improve basic services.20 Practical actions
Forum (IBLF) demonstrates that local companies and such as the development of associations and support
multinational firms are also engaging with the notion structures to encourage co-operation on the issues
of institutional capacity reform.14 Despite this mentioned above are also suggested by business
recognition, there is not yet a template for the organisations as important contributions companies
appropriate and specific roles for business to play. might make to institutional development.21 Through
Lobbying for corporate advantage has a long and such mechanisms, business can enable the creation of
controversial history, but the notion of corporations anti-corruption coalitions, support watchdogs, create
publicly or privately seeking change on wider issues collaborative collective networks to lobby government,
has a shorter lifespan. and enable discussion about key areas of education.22
Recent initiatives not covered in the following cases It is important to highlight that in any institutional
include business groups lobbying governments in the development process, scholars and practitioners note
US and the UK on climate change regulation frame- the importance of partnerships in achieving sustain-
works;15 BP’s involvement in some 8,000 soldiers able gains.23 The UNDP and the UN Global Compact,
undergoing human rights training in Colombia;16 and among others, have demonstrated that their mandate
Infosys’s engagement with the Indian government on has evolved over the last five years to work much more
a broad reform agenda.17 The prominence of John closely with businesses as well as civil society groups.24
Ruggie’s work as the UN Secretary-General’s Special In short, the growing evidence from practice and
Representative on Business and Human Rights also scholarship seems to indicate – if not directly address
points to the importance currently placed on trying – that there is a role for business in governance and
to clearly define the roles and responsibilities of institutional capacity building in developing
business in governance as well as the controversial countries. George Frynas, Professor of Corporate
nature of this task. Responsibility and Strategic Management at
According to the IBLF’s 2006 report, companies Middlesex University and a critic of many corporate
can act as awareness raisers on the need to generally social responsibility programmes, believes that
support human rights, humanitarian activities and companies can play a constructive role in what he
peace building. Other reform areas that lend calls “macro-level” governance and development.25

5


This distinction may be useful in discriminating appropriate roles for business are thus far poorly
between two categories of roles companies can play. defined and their implications under-examined.32
The first is of direct benefit for specific entities and
governance institutions via training, policy develop- Issues to be explored
ment and implementation assistance. The second type As corporate involvement of this kind evolves,
is a more general engagement in ‘good’ lobbying for potential problems begin to arise. The most obvious
higher level governance improvements.26 Both types involves potential conflicts of interest (real or
are being undertaken by business, with local govern- perceived) between governments, their citizens, and
ment, national government, and international companies. Institutional capacity building by compa-
governance arrangements (such as the EITI).27 These nies essentially gives unelected foreign actors a hand
in shaping the political agenda. Given this accounta-
bility problem, companies must decide how to engage
with other actors, including NGOs and IGOs, as well
as governments. Sometimes these relationships are
more easily built and maintained than others.
Partnerships such as those mentioned above, between
companies and NGOs and governmental organisa-
tions may do something to address this challenge of
legitimacy. Additionally, thought must be given to
ensuring transparency, monitoring and reporting of
progress, which can be complicated by the long-term
nature of capacity building outcomes.
All of these issues fall under a broader, complex
kinds of collaborations may take place bilaterally debate about the legitimacy of – and appropriate
between companies (or business alliances) and boundaries for – this type of involvement. As Philip
government agencies or make take the form of multi- Crowson’s 2007 report for the Oxford Policy Insti-
stakeholder business initiatives, driven by companies tute phrases the question: “Can the managements of
as well as NGOs, IGOs and governments.28 companies – that are ultimately responsible to
foreign shareholders and which are subject to the
The corporate responsibility agenda campaigns of a variety of pressure groups within
This kind of private engagement with public institu- their home countries – properly assess the public
tional policy diverges from more standard corporate interests of their host countries?”33 On a practical
responsibility and community involvement strategies. level, companies make decisions on a daily basis
In one way it has a much narrower focus, but in about what constitutes boundaries of appropriate
another it goes well beyond traditional corporate “business as a business”.34
responsibility boundaries.29 The majority of corporate The heated nature of such issues was brought to
responsibility strategies for transnational companies light with the strong reaction to the attempt to draw
operating in developing countries are almost up a comprehensive set of standards, or ‘norms’, on
exclusively focused on the workplace, supply chain business responsibilities with regard to human
and local communities, rather than engagement with rights. In his 2007 interim report on the issue, John
national institutions.30 Engagement with government Ruggie states that one of the main problems with
institutions may potentially be more influential in the the UN Norms was their lack of a guiding principle
long run, however, as institutional frameworks with which to divide responsibilities between
typically play a crucial role in determining the corporations and states. This left the responsibilities
business climate.31 to be determined by the concept of ‘spheres of influ-
Furthermore, if the corporate responsibility agenda ence’, which may have practical applicability but
is increasingly moving towards a focus on managing lacks legal grounding.35 While the scope of this
impacts in society – mitigating negative impacts and report does not allow for a thorough theoretical
amplifying positive ones – then engagement with the exploration of these debates, it will attempt to
governance agenda is crucial, as this typically has present a rounded view of the current questions
greater impact on business and society than many being discussed and the viewpoints of a range of
other potential activities. As noted above, however, the actors involved.

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Case 0ne: Customs reform in East Africa:
The case of Business Action for Africa

usiness Action for Africa is an international Practical steps – a timeline
B not-for-profit network established in 2005 after
the G8 Business Action for Africa Summit. Its has
BAFICAA began its work by funding an initial report
on the state of customs in Africa. The report was
three main objectives: to positively influence policies published in June 2006 and written by an experi-
needed for growth and poverty reduction by creating enced independent consultant, Andrew McTiernan.
a platform for a clear African and international It aimed to create an accurate picture of existing
business voice; to promote a more balanced view of practices and reform efforts within customs
Africa by highlighting success stories and balanced administration across 20 African countries. As a
reporting; and to develop and showcase good business result of initial findings, the group decided to focus
practice by facilitating new partnerships and commu- on three east African countries for pilot projects.38
nicating existing ones. The group currently includes A series of private sector workshops facilitated by
over one hundred organisations, composed of approx- PricewaterhouseCoopers (PwC) Kenya were held in
imately sixty businesses, thirty strategic business Uganda, Kenya and Tanzania to discuss the feasibility
organisation partners, and ten civil society groups. of the recommendations from the initial report.
Governments and international financial institutions These initial workshops included 20-30 local and
are also group members. international companies and trade associations. They
Its specific areas of focus are governance and discussed the initial report and established common
transparency in general, the climate for business in agreement on what reforms needed to be made so
Africa, trade, enterprise and employment, and that taskforces then approaching governments would
perceptions of the continent. As part of its commit- have the backing of a representative variety of
ment to increasing Africa’s capacity to trade, some businesses behind them.39 As a result of these
members are working in the specific area of workshops, BAFICAA created country taskforces
improving customs administration to facilitate composed of companies willing to commit to help
international and regional trade. develop these initiatives.
Further workshops in late 2006 and early 2007 were
Business Action for Improving Customs held with BAFICAA taskforce members and customs
Administration in Africa (BAFICAA) officials from the revenue authorities in each country.
Led by Unilever, British American Tobacco, SITPRO According to Morgan, the Kenyan government was
(the UK’s trade facilitation body) and Diageo, very enthusiastic about the proposals presented: “It was
BAFICAA is an “international coalition of businesses pushing against an open door.”40 As a result, the
committed to identifying, promoting and supporting Kenyan Revenue Authority seconded three staff to act
effective measures to improve customs administra- as a bridge between the private companies and their
tion and enhance trade facilitation in Africa.”36 own institution in order to expedite change and
BAFICAA has no formal structure or plans to create capacity building.
a new institution, and it does not consider itself a In May 2007, a regional East African workshop
pressure group. Rather, it is a network of business brought together revenue and customs authorities
partners attempting to complement existing reform from Uganda, Tanzania, and Kenya along with the
work underway in Africa by being an active driver of three country BAFICAA taskforces, representatives of
change and making practical contributions to the East African Community (EAC) Customs Secre-
improving customs capacity. tariat, the Investment Climate Facility (ICF), and the
Its guiding principles also include the importance East African Business Council (EABC), with the goal
of trade facilitations, the removal of regulatory of coordinating efforts and formally introducing the
barriers, and the promotion of improved governance. BAFICAA to the Customs Secretariat and the EABC.
They recognise that part of pursuing their aims effec- Francis Kamulegeya of PwC Kenya is the facilitator
tively will be to persuade governments that of the project, which is funded in large part by the
companies can and should be active and trustworthy ICF as under its remit to encourage business actions
partners.37 In light of this, BAFICAA’s first steps on economic reform in Africa.41 As a well-connected
include measures to build dialogue and trust between local figure, Kamulegeya’s relationships on the
business and governments. Its stated intention is then ground make him well-placed to help the
to help devise and implement practical proposals that project succeed.42 SITPRO, the UK trade facilitation
can improve customs procedures and trade in a body, and the World Customs Organisation will be
sustainable way. involved in the practical training and implementation

7


of customs reform across the region, organising a Figure 1: BAFICAA suggestions for customs reform
meeting for customs commissioners (without compa-
nies present) to come up with a concrete plan of
action.43 • The need for fast track customs services for
The May workshop was followed by a meeting in compliant and low risk taxpayers and traders.
September 2007, organised by the World Customs • The need to speed up automation of all customs
Organisation and SITPRO, and attended by the processes and procedures.
BAFICAA Taskforces and the heads of customs for all • The adoption of a service charter between customs
the EAC countries (except Burundi). It fulfilled its aim services and the private sector, setting out the
of discussing a regional approach to customs admin- expectations of each party from the other, as well as
istration reform and identifying how best to achieve setting out the parameters for the expected level
progress on introducing the Fastrack proposal, other- and quality of services.
wise known in customs circles as the Authorised • The need for customs to work closely with and
Economic Operator (AEO) concept. The Fastrack consult regularly with the private sector to ensure
recommendation was one of the highest priorities for support for the changes and reforms in customs
reform mentioned in the original BAFICAA report. administration.
The heads of customs for EAC have now agreed to • Removal of duplication and bureaucracy in Post
pilot a regional Fastrack programme, meaning faster Clearance Audits and valuation processes.
clearance times for qualifying firms with ‘trusted • The need for professional training, accreditation and
trader’ status. BAFICAA has capitalised on the appetite certification of clearing, forwarding, and customs
and progress towards customs reform within several agencies.
of the EAC’s own customs services. It has however
made a major difference in raising business issues Source: BAFICAA Arusha Conference Report June 2007
and helping drive a coordinated approach to reform
across the region, which should help intra-regional Revenue authorities in each country have all made
trade enormously if the reforms are implemented varying degrees of progress on their own in creating
effectively. a fast track system for compliant traders. BAFICAA’s
BAFICAA reports that strong interest has been goal is now to coordinate reform efforts. Workshop
expressed in similar programmes in west and participants also suggested creating a legal basis for
southern Africa. Richard Morgan of Unilever believes fast track guidelines that was well publicised so as not
there is the potential – and government interest – for to be seen as favouring particular industries or
this programme, or something like it, to be promoted companies. PwC is now carrying out research as to
in other reasonably stable countries soon, specifically best practice in such systems that will be submitted
Rwanda and Burundi. Because west African nations to the EAC sub-committee on customs.
are not as dependent on one port (as Kenya, Uganda, Workshop participants also stressed the need to
and Tanzania are on Mombasa’s port), it has been ensure that BAFICAA’s taskforces included represen-
decided that specific companies will lead workshops tatives from all factions of the region’s private sector,
and act as catalysts there on an individual basis.44 including the EABC’s members and trade organisa-
Currently Maersk is leading BAFICAA’s work in tions in each country. With regards to making
Nigeria, while Shell is leading in Cameroon, and progress on automation and training, BAFICAA urged
Unilever in Ghana. the revenue authorities, through the EAC sub-
committee, to identify specific areas where the
Proposals for reform private sector could offer support and facilitation.
BAFICAA’s initial aim – in partnership with govern- One of the biggest institutional challenges to
ments and international donors – is to, in their own reform is the current system of revenue targets
words, quickly offer some “definable and measurable within various customs agencies. Targets are often
projects which we could then roll out as ‘best met by the levying of fines for (supposed) discrepan-
practice’ more widely in other regions.”45 Figure one cies in paperwork or goods. Such incentives operate
outlines the six key issues highlighted by the private to slow, rather than speed up, trade and have been
sector that are common to the three countries.46 recognised by BAFICAA as an urgent area for
These issues formed the basis for the discussion at reform.47 During the East African regional workshop,
the May 2007 East African regional workshop. the CEO of the EABC stressed the need to balance the

8


revenue authorities’ primary mandate of revenue Africa is not the daunting, impossible task of
collection with the need to facilitate trade and protect common perception. African businesses themselves
countries from illicit trade.48 There is recognition that have recognised this and given voice to these simple,
streamlining customs processes will ultimately practical, meaningful suggestions to help enhance
increase the volume of trade in the region, and thus their capability to trade and grow. Improvement in
increase revenue for the government. He noted, customs administration in Africa and the consequent
however, that progress still needs to be made in inevitable growth in Africa’s prosperity is now ready
changing the mindset of parties involved and building for take-off. All that’s needed is ignition.”54 Martin
trust between public and private sectors.

A new role for companies
Richard Morgan, an Africa expert from Unilever, talks
of the corporate role being about encouraging the use
of management processes once principles of change
have been agreed between business groups and
Customs institutions. Companies, via the taskforces,
can also provide feedback to customs authorities
about how things are proceeding and where any
delays are still taking place.49 Morgan sees great
potential behind BAFICAA’s work across Africa over
the next five years on customs reform. The aim is Summers of British American Tobacco, summarises
simply to move business and government to being ‘on his view thus: “There has been a lot of positive
the same page’ in areas where reform will bring feedback on the BAFICAA project, not least because
benefit to society and away from ‘mutual suspicion’ to the growing prominence of various global competi-
trade facilitation.50 Peter Kiguta, Director General of tiveness indicators (such as the World Bank’s annual
Customs and Trade for the EAC commended the Doing Business surveys) has made the development
BAFICAA initiative and remarked that “customs community aware that the poorest countries are the
reforms resulting from a shared vision of the private ones with the worst institutional frameworks, so
and public sector will ensure a win-win position for private sector involvement in helping improve these
both parties.”51 frameworks is appreciated as a valuable contribution
Unilever’s costs for the scheme, as with Statoil (see to sustainable development.”55
later case) are low. To date these costs consist of staff
time, travel, and around £15,000 as a contribution to Conclusions from the case
the initial report, similar to other BAFICAA members. The case of BAFICAA and African customs reform is
Corporate sponsors, including Unilever, are also clearly only a nascent one, so assessing its measur-
contributing $500,000 a year into the Investment able impact on trade – or the wider implications of
Climate Facility. Despite the relative low involvement improved African economic rights on the global
costs, SITPRO says that its main task initially was to economy – is not yet feasible. However, local, national
convince some companies that this was an area in and international business participants in the
which they could and should intervene to improve workshops have indicated their enthusiasm for the
conditions.52 Previously, many companies had written project, as have government officials. The project is
off slow customs processes as an unavoidable cost of ongoing, and significant progress has already been
doing business in Africa. SITPRO sees its role in this made in creating a space for dialogue between private
case as initially helping to bridge the gap between sector and government officials in East Africa. The
public and private actors’ attitudes towards the possi- programme is also making inroads in other countries
bilities for customs reform. BAFICAA members see in Africa. The narrow and practical focus of
potential for NGO and academic comment to be BAFICAA’s efforts is in an area where companies
involved in the future, as a way of adding credibility clearly have much experience to offer. This study
to BAFICAA’s work across Africa.53 provides one example of the significant potential for
As Andrew McTiernan, the consultant who wrote private sector actors to facilitate practical reform in
the initial report for BAFICAA, concludes, companies African institutions which often slow down, rather
must act as catalysts for change: “Customs reform in than encourage economic growth and trade.

9


Case two: Human rights training in Burma:
The case of Premier Oil

n 2001 and 2002, Premier Oil organised and ran lasting change be affected.”62 It was with this in mind,
I training seminars and workshops on human rights
for the Burmese military government and its admin-
writes Jones, that the company created the Premier
Corporate Social Responsibility Programme that led
istrators. They undertook the project because they to their institutional capacity building contributions.63
saw no one else willing or available to coordinate According to Jones, the main drivers for the
such capacity building and felt that they could make company’s activities on human rights in Burma were
a unique contribution in this area. Premier also felt a desire to deal in a consistent and predictable
that such activities would ultimately contribute to its manner with social impacts; to tackle some of the
corporate social responsibility programmes by raising
awareness of key issues around human rights and
providing senior government (military) figures with
an understanding of the basis for human rights
theory, and what such theory means in practice.

Premier’s involvement in a highly troubled country
Premier Oil, a small independent UK oil company,
had a presence in Burma from 1990 until 2002. In
September 2002, it sold its operations in the country
to Malaysian state oil company Petronas. During this
entire time, Burma’s human rights record was the
subject of much criticism. According to Human operational and security challenges the company
Rights Watch’s 1998 report, “respect for human rights faced around its operations; and to demonstrate that
in Burma continued to deteriorate relentlessly” in the action was being taken in light of the criticism the
previous year. In 1999, there were “no signs during company faced for investing in the country.64 He
the year that fundamental change was on the notes that many critics did not make a distinction
horizon”, and by 2002 “grave human rights violations between the small corridor that represented Premier’s
remained unaddressed”.56 Among the many accusa- operational footprint and the wider accusations facing
tions levelled at the Burmese military in this period the security forces throughout the country. For
were the forcible recruitment of child soldiers and Premier, this necessitated “dealing with human rights
village labourers and the rape of Shan minority – and related issues such as security – at a local as
women.57 well as national level”.65
During the early and mid 1990s, campaigners
began to call upon Premier Oil to pull out of Burma Practical steps – making capacity building
because of the political and human rights situation in contributions
the country.58 Attacks on the company from Over a two-year period in 2001-2002, Premier Oil
campaigns focused on three main arguments: first, funded and organised a series of nine human rights
that the company was providing a ‘financial lifeline’ workshops, run by specialist human rights lawyers
for the repressive government; second, that its hired by Premier.66 Approximately 250 participants
presence in Burma benefited from the infrastructure from the army, police, energy ministry, labour and
built by forced labour; and third, that military forces immigration departments were taught in two-day
protecting the pipeline area were likely to commit seminars about human rights issues.67 The
human rights abuses while doing so.59 Aung San Suu workshops were structured to provide the officials
Kyi, the imprisoned Burmese pro-democracy leader, taking part with knowledge about the concept of
stated in April 1998 that, “Premier Oil is doing a great human rights, its origins and nature, and about
disservice to democracy. It should be ashamed of human rights as an international legal system.68
itself.”60 In April 2000, Robin Cook, then UK Foreign They focused heavily on humanitarian law, prima-
Secretary, said: “We do not approve of what Premier rily the Geneva Convention, and outlined the
is doing.”61 minimum requirements for operating within it.
Richard Jones, Premier’s Corporate Social Respon- They were purposely conducted in an interactive and
sibility Manager, explains that they took a different discursive rather than formal format and were
view of the situation: “Only through dialogue and adapted to resonate with attendees’ experiences and
engagement, as well as sustainable development, can background.69

10


The workshops also covered practical issues, such capacity it needed to create and sustain a national
as monitoring and accountability systems, human Human Rights Committee, and supporting Burma’s
rights and armed conflict, the use of forced labour, own stated understanding that “they have an obliga-
and the state’s duties and challenges for imple- tion to look after their people”.76 Another promising
menting human rights obligations in government. development noted in the evaluation of the Australian
Jones said that the workshops were a contributing workshops is the fact that participants began to realise
factor to the Myanmar government’s decision to set that members of the international community were
up a Human Rights Committee and beginning to interested in what was going on in Myanmar and that
develop a framework for educating administrators of through these contacts they could have outside
various departments. Many of these people were support in improving the human rights capacity of
career bureaucrats who, as Jones put it, “were there their organisations, if desired.77
before the current government and will be there
afterwards”. The idea was to build capacity in the Figure 2: Premier’s conclusions as to how it was able
professional civil service as well as with the current to use its position to
government.70
Premier’s aim in convening these workshops was • Influence the Myanmar government in a progressive
to bridge the gap between the theories of human manner.
rights and “equitable and correct law enforcement • Encourage the government of Myanmar to actively
practice”.71 Participants indicated to Premier the participate in human rights and humanitarian law
importance of “practical skills-related instructions” training for a variety of officials.
for the “true application of human rights standards • Encourage the government of Myanmar to
in law enforcement”, according to Jones. During one participate in the establishment of a National
workshop, at which the Minister for Home Affairs in Human Rights Committee.
Burma was present, the Chief of Police stood and • Engage with the State Peace and Development
informed his colleagues that violent crowd control Council in order to begin the eradication of the use
methods, such as beating people with truncheons, of forced labour in the country.
should not be generally permitted from that point on, • Implement a comprehensive programme of human
since it represented behaviour that was now outdated rights monitoring in Premier Oil’s areas of operation.
and not permitted by the country’s laws.72 • Write – and then actively promote – a proposal and
David Kinley was one of Premier’s workshop framework for the government of Myanmar to
facilitators who also conducted similar human rights become a signatory of, and eventually to ratify, the
workshops for Myanmar authorities (not including International Convention of Economic, Social and
military or police) during this time period that were Cultural Rights (ICESCR).
supported by the Australian government. In their • Hold dialogue with the Myanmar authorities in
review of the Australian government’s efforts, Kinley relation to the health and safety of political
and the former Australian Ambassador to Myanmar, prisoners.
Trevor Wilson, note that although impact from these • Hold constructive dialogue with the NLD (and
efforts was very hard to gauge, “in the climate of a groups and individuals in exile) in relation to the
relatively open attitude to engagement (upon which role of business in advancing transparency,
the workshops fed and to which they contributed) governance, environmental protection, and human
other agencies and organisations were able to under- rights in Myanmar.
take human rights initiatives that were not possible
before, including a first-ever visit by a delegation Source: Jones, R. (2006) “Corporate Contribution to Modern Diplo-
from Amnesty International in 2003”.73 macy. In Wilson, T. (ed) Myanmar’s Long Road to National
Reconciliation Singapore: Select Books (p185)
Although its impact on human rights violations on
the ground was never evaluated, Premier called this
programme “an important first step,”74 which was In 2002, the year it left the country, Premier
recognised as a positive contribution by all those planned to increase the breadth and scope of future
involved. By the end of the initiative, the government training programmes. The company also had plans to
was “identifying areas of interest and asking [Premier] put in place a system to monitor how they were
to run workshops on them”.75 Premier was actively documenting and addressing human rights concerns
working with the government in building the and allegations within their “sphere of influence”.78

11


When Premier announced that it was leaving, they Burma’s recently convened Center for Strategic Studies
agreed with the Burmese Home Minister to continue held a conference, inviting Dr Jones of Premier to
to sponsor humanitarian law training for Burmese speak about the development of human rights in
police during 2003 due to the progress that had Burma. Later that year, however, much of the progress
already been made. was stymied as Burma’s military leader purged many
top officials – including the Minister for Home Affairs
– from power in what appears to be a sign of
increasing paranoia concerning the outside world.80
The Human Rights Committee still exists, but has not
been active since the political upheaval of 2004.81

Conclusions from the case
The case of Premier Oil’s involvement in Burma
demonstrates that companies can have some positive
impact – at least on government discourse – in even
the most challenging situations. By building up trust
with individuals and persuading the government that
it should enforce its own signed conventions, Premier
was able to persuade senior government figures of the
Events since Premier’s departure from Burma need for incremental reform. Although the case study
After Premier left Burma in 2002, there was little ended in 2002, it demonstrates the potential for what
opportunity for the company to influence human companies can achieve as conveners and catalysts of
rights issues in the country. Much was accomplished institutional capacity building and change. Had
between 1999 and 2002 on the basis of trust and the Premier remained in the country and had the polit-
relationships that the company had built up in the ical situation remained more stable, their work could
country, particularly with the Ministry for Home have aided in advancing the human rights protection
Affairs.79 An indication of progress came in 2004, when capabilities of the government.

12


Case three: Judicial human rights training in
Venezuela and Nigeria: The case of Statoil

he Norwegian state owned oil company Statoil, in national Norway asked Statoil to officially protest the
T partnership with both local and international
organisations, provided backing for judiciary human
verdict. Statoil felt it could not take a position on this
political issue, but it instead continued to commis-
rights training programmes in Venezuela from 1999 sion a project to train Shari’a judges on the principles
to 2004, resulting in what appears to have been the of fair trial according to the UN Declaration of
training of all active judges in the country.82 Anne Human Rights.
Kristin Sydnes, Vice-President for national risk and According to Ms Sydnes, because many
human rights in Statoil at the time, said that their Norwegians see Statoil as an arm of the state, they
efforts in Venezuela were a pilot project and repre- believe it can and should influence social conditions
sented “a new model for collaboration between in other countries.90 Statoil states on its website that
industry, the UN, Amnesty and the authorities” from it thinks businesses with overt and significant ethics
which Statoil hoped to draw lessons for future practices should be present in nations with troubled
activities.83 They also funded a similar programme in
Nigeria from 2002 to 2006, partnering with a
Nigerian legal rights NGO to train Shari’a judges in
human rights theory and practice.

Rationale for involvement
Statoil, considered a CSR leader by many, officially
incorporated respect for human rights into its state-
ment of values in 2003.84 The company is a founding
member of the Business Leaders Initiative on Human
Rights (BLIHR), and executives and employees have
undergone human rights training themselves.85
This commitment to human rights was one of the human rights situations. By doing so, says Statoil, the
underlying reasons for Statoil’s initiation of the company can then show their commitment to human
programme, along with its desire to help foster a rights and make a practical, positive contribution to
more stable business environment.86 progress.91 The company also believes that its institu-
According to the United Nations Development tional capacity building activities will help attract the
Programme (UNDP), Statoil began the Venezuela right kind of talent to work for it and build a good
project because it wished to fund initiatives which company culture in the long term. They realise,
had a social development component and also however, that they must be cautious in undertaking
covered human rights issues. UNDP suggested that such activities so as not to exceed their legitimate role
the company work with a national chapter of vis a vis the governments in those countries.
Amnesty International to provide training for judges
in human rights.87 At the time, the government, Practical steps in Venezuela
which remains the current administration, was The judges and public defenders training scheme in
seeking to reform Venezuela’s legal system. According Venezuela was officially a UNDP initiative funded by
to a 1998 survey, less than one percent of Venezue- Statoil Venezuela, with the heavy involvement of the
lans had confidence in the legal system, compared local Amnesty International chapter and the
with some 28 and 29 percent for the church and Venezuelan state agency responsible for appointing
private business respectively.88 and training judges. Once a Memorandum of Under-
Another factor contributing to Statoil’s desire to standing had been signed between the parties
undertake these projects is obviously the context of involved, preparations began for the first phase of a
the individual countries. Oil companies in Nigeria, training programme involving twenty-four specially
for example, faced attacks for doing business under selected experienced judges. The week-long intensive
the pre-1999 military dictatorship and for operating workshop was led by specialists in international law
CSR policies that were merely a “sticking plaster” to and covered humanitarian law and regulations as well
the problems in the Niger Delta.89 In 2002, a Nigerian as human rights in general.
woman was sentenced to death by stoning by a After the completion of the first phase, the newly
Shari’a court because she had a child born out of qualified judges traveled around Venezuela to pass on
wedlock. Amid international outrage, Amnesty Inter- what they had learned. This phase covered judges and

13


public defence counsel in the country’s most training be expanded to police and public prosecu-
populous states – Zulia in the west and Anzuatagui, tors in the future, to achieve a greater awareness and
in the east – where Statoil’s business ventures are expertise throughout the system. By 2005 the
located. In late 1999, the total budget for the first two programme was formally completed, and Statoil’s
phases was announced to be some 2 million krone CSR portfolio became more focused on human rights
(approx £167,700). In 2002 the second module of the and business, as evidenced by their work with BLIHR
training was completed. In 2000 the project was and their local work with factories.95
temporarily suspended while the Venezuelan govern-
ment embarked on a comprehensive review of its Figure 3: Three phases of Statoil’s judicial human
legal system. Once this was reviewed and changes rights training in Venezuela
implemented, the programme was restarted in
December of that year. As a result of the reforms, Phase (date) Outcome
hundreds of judges and public prosecutors either
retired or were dismissed and the judges within the 24 criminal court judges from Caracas,
Statoil funded scheme were then retrained under the selected by the Judicial Council and the
new legal system. According to UNDP’s 2004 report: Ministry of Justice, trained in key inter-
“Fortunately, those formerly selected were still in One (1999) national instruments, national
position and eager to continue (a tribute to the high legislation, and practical examples of
standards used in the original selection process).” how to identify abuses and take
By 2003, Statoil was saying on its website that the human rights into consideration in
initiative “appears to be one of the few long running their judgments.
examples of co-operation between an international
organisation, an NGO, a government authority and a Drawing on logistical help from the
company”. After a positive evaluation of the pilot Judicial Council, the 24 newly trained
phase by an independent party, the third stage of the Two (2002) judges share their human rights
training programme was completed by the end of knowledge with over 60 more judges
2004. It was able to reach the rest of Venezuela’s in Anzuatagui and Zulia.
active judges – including those outside Statoil’s areas
of operation – as well as other officials, such as social Training provided for 1,200 judges
workers, who worked with the court system.92 Three (2004) across the country, including all 400
According to Statoil, its continued goal was to criminal court judges, as well as other
“help enhance awareness and professionalism in the officials.
judicial system, and to create a force against human
rights abuses”.93 According to UNDP’s 2004 report on
Source: UNDP (2004) “UNDP and the Private Sector: Building
Partnerships for Development” p44-46

Practical steps in Nigeria
A similar programme has been in operation in
Nigeria since 2002, when Statoil decided that it
wanted to support broader work on the human rights
issues that had long been neglected in the country.
The company has been present in Nigeria since 1992
and was already doing award-winning CSR work
with its Akassa community investment projects in the
southern part of the country.96 After a thorough
the initiative, judges indicated the training had screening and selection process to find the appro-
enabled them to “translate the broad human rights priate partner for its human rights work, Statoil
commitments contained in the new constitution into decided to provide support to the work of the Legal
operational reality” and underscored the seriousness Defense and Assistance Project (LEDAP), a Nigerian
of Venezuela’s pledges to uphold international human NGO composed of law professionals.
rights principles.94 The judges recommended that Between 2002 and 2006, 450 judges from seven

14


northern states and representing 19 percent of overall business ventures in Venezuela by creating a
Nigerian Shari’a judges attended training run by more stable operational environment.
LEDAP. The Shari’a system contains provisions for
acts – such as flogging and stoning – that are clearly Figure 4: Overall lessons learned from the judicial
against human rights norms and the prohibitions on training in Venezuela
torture contained in treaties that Nigeria has ratified.97
LEDAP’s challenge in the two-day workshops was to • Clear and appropriate division of roles and responsi-
engage with participants to increase understanding bilities ensures transparency and effective
of basic human rights principles and women’s rights implementation.
as well as how to integrate just interrogation princi-
ples into the practice of Shari’a law.98 According to • Partnerships in which UNDP acts as a neutral
initial evaluations carried out by LEDAP, the partici- intermediary between governments, civil society
pating judges indicated that the material they learned and the private sector can provide legitimacy for
was directly applicable to their daily work.99 Although projects that strengthen governance and build state
Statoil is no longer funding the project, it is still in institutions.
operation, along with LEDAP’s other legal and civil
society human rights training programmes. A forth- • Partnership projects that ‘train trainers’ enhance
coming full evaluation hopes to gauge the overall sustainability and can achieve significant results
impact on the Shari’a administration.100 with relatively small financial resources.

The value of partnerships in institutional capacity • Partnerships based on diverse organisations require
building a personal commitment to encourage continuous
Relationships between human rights organisations dialogue and establish trust.
and oil companies have traditionally been of an adver-
sarial nature, but the strategic partnerships formed
Source: UNDP (2004) “UNDP and the Private Sector: Building
for these programmes proved key in their success.
Partnerships for Development” p44-46
Fernando Fernandez, Amnesty International’s repre-
sentative for the Venezuela project, says that from
their perspective the project was so far a success, but Conclusions from the case
he warns that “NGOs working with oil companies in Although Statoil’s involvement with both cases is
the field of human rights are treading a fine line”.101 now complete, the relative longevity of these initia-
The partnership between LEDAP and Statoil in tives and the feedback they obtained encourage
Nigeria was the first that either partner knew of Statoil to conclude that it was furthering human
between an oil company and an NGO in the country, rights promotion and protection by strengthening
and they took great care to make sure that the fit was institutions in Venezuela and Nigeria.104 Statoil also
right and the provisions for their arrangement clearly believes the initiatives helped maintain its reputa-
understood by all. tion of leadership in social responsibility issues and
The relationship with an international develop- enhanced its operational legitimacy in these
ment agency was also important in facilitating countries generally.105
discourse with diverse actors in the Venezuela One of the major factors that made these initia-
project. UNDP’s capacity to translate abstract ideas tives successful appears to be the multi-stakeholder
into operational reality and its role as intermediary structure and the efficiency with which they were
was critical to establishing and maintaining the carried out. The fact that Statoil is a state owned (and
integrity and independence needed in a project non-American), rather than a private company may
dealing with sensitive human rights issues.102 The have helped its cause in working with the blessing of
government in Venezuela does not trust the private the Venezuelan government, which is deeply suspi-
sector, but UNDP’s support gave the project a legiti- cious of profit seeking foreign business.106 The
macy beyond what could have been achieved by the partnership was also noteworthy for the relatively
company alone and promoted dialogue between low level of investment required and the self-
diverse groups.103 Having a trusted partner such as the sustaining potential of the “training-trainers” model
UN was also critical to Statoil, which was keen to as well as its non traditional approach to corporate
secure its investment in the project as well as its responsibility.

15


Case four: Economic capacity building in
Azerbaijan: The case of BP

P’s substantial business investment in the Caspian Despite this rapid growth, the general economy
B region represents a significant opportunity to
positively influence this socially and economically
has not benefited as much as it could have and infla-
tion has mounted steadily over the last three years.
challenged area. Taking the many lessons it has The Caspian Developments Advisory Panel (CDAP)
learned from other projects, the company is engaged predicts that inflationary pressures could get worse as
in a wide range of activities in and around the Baku- the government increases expenditures ahead of the
Tbilisi-Ceyhan (BTC) pipeline region designed to 2008 elections.110 The war ending in 1994 left the
country with ethnic and religious divisions and a
displaced population of more than half a million.111 In
short, potential for economic and social conflict in
the country and the region remains great.

Rationale for involvement
As by far the largest foreign investor and revenue
generator in the country, BP believes it has a respon-
sibility to contribute to stability and economic probity
in the country, as it does in other nations.112 Given
the risks of operating in unstable nations,113 BP clearly
has a substantial interest in contributing to the
foster stability and growth. They are funding human current and future stability of the country if it wants
rights training for security forces, contributing to to ensure sustainable returns on considerable invest-
local enterprise development and civil society ment over the approximate 40 year life of the project.
capacity building as well as contributing to the provi- It recognises, however, that it must carefully consider
sion of knowledge and training in sound the limits to its legitimacy in contributing to gover-
macro-economic policies for government officials. nance capacity in a region as complex as Azerbaijan.114
This report will only focus on BP’s work within CDAP was set up by BP as a panel of international
Azerbaijan, and specifically on its economic capacity experts tasked to provide public reports on its views
building work. of BP’s approach to the region in terms of socio-
economic and political impacts during the
Political and economic background construction phase of the project.115 This is the first
Azerbaijan, once Europe's top oil producing nation, time that an extractive industry project has volun-
became independent from the Soviet Union in 1991 tarily opened itself up to the level of scrutiny with
amid separatist violence in one of its main regions. The which BP has empowered the panel.116 The CDAP has
current President is Ilham Aliyev, the son of the former pointed out that development of non-energy areas of
President Heydar Aliyev. Both the presidential elections the economy will be extremely important for
of 2003 and the parliamentary elections of 2005 were Azerbaijan in the long term to help it avoid the worst
marred by accusations of intimidation and vote rigging, impacts of what is known as the ‘oil curse’, whereby
and corruption is perceived as a major problem over-dependence on oil income distorts the economy
throughout the government.107 and politics of a nation in a highly negative manner.117
In the last 13 years, many oil and gas companies,
particularly BP, have invested large amounts of money Practical steps to improve government economic
in extracting Azerbaijan's oil and gas reserves. In 1994, capacity in Azerbaijan
Azerbaijan signed an oil deal worth $7.4bn with a One of the CDAP’s biggest concerns is how the oil
Western consortium of companies led by BP. Since oil income generated by BP for the government is spent
began flowing through the Baku-Tbilisi-Ceyhan (BTC) by Azerbaijan and the company’s ability to influence
pipeline – which also goes through Georgia and the transparency of government expenditure.
Turkey – in 2005, the country has experienced a Azerbaijan is a signatory of the EITI, a multi-stake-
rapid increase in public savings, almost exclusively holder scheme encouraged by western governments,
through oil revenues.108 In 2006, the gross domestic oil companies and civil society groups which aims to
product of Azerbaijan grew by 34.5 percent to some foster transparency with regard to sums of money
$20.6bn, making it the most rapidly growing being paid by international oil and gas companies to
economy in the world for the second year running. governments or state oil funds.118 The panel suggested
The IMF’s estimate for 2007 growth is 29 percent.109 that BP pressure the government to further reveal

16


how their vastly increased revenues are being spent, create that capacity by the project’s end so that Azeris
using their dialogue with the government to might better understand the possible future ramifica-
“encourage a more detailed accounting of such tions of current economic decisions.126 BP also
expenditures”.119 confirmed that as part of its contributions to institu-
BP agreed in 2006 that it would maintain its tion building, it had “for some time”, been involved
dialogue with the government on encouraging in an informal advisory group, created by the UK and
revenue transparency, but was at pains to point out US ambassadors in Azerbaijan, that discussed ways of
that there are “quite properly”, limits as to how much improving revenue management by the govern-
a company can influence government decisions on ment.127
how to best manage revenues from oil.120 The To further support objective research on best
company stresses that the biggest impact they can practice in the management of resource revenues, BP
have in combating corruption will result from rigidly has endowed $14m for the BP Chair in Economics at
enforcing their own corporate governance and the University of Oxford. This person will serve as the
encouraging high standards in its enterprise develop- director of the recently launched Oxford Centre for
ment work with the local and national private the Analysis of Resource-Rich Economies. Former BP
sector.121 BP is also engaging with civil society groups Chief Executive Lord Browne explained at the Centre’s
and media to enhance their finance and revenue opening that: “Its role is grounded in the legitimacy
management knowledge in order to improve outside which comes with academic independence.”128
monitoring capability in those sectors.122
BP has also taken measures to directly enhance the Conclusions from the case
economic planning and management capacity of the As with the case of Business Action for Africa, BP’s
government and state oil fund. They have convened work in Azerbaijan is ongoing though still nascent.
two workshops for high level government economics Much of the work around contributions to
and treasury officials in Azerbaijan.123 The first economic capacity building and lobbying for greater
workshop lasted two days and centred on discussion participation in EITI is in its early stages, and it will
of the experiences of other resource-rich countries take some years before it becomes clear just how
in handling increased income from natural resources.
It featured former ministers from other countries,
consultants in resource economics, and the former
head of a petroleum directorate. Its aim was to impart
the knowledge gained from these countries’ experi-
ences without dictating a course of action for
Azerbaijan.124 The second workshop discussed the role
of economic modelling in policy making and was led
by specialist experts from Oxford, Dundee and Sussex
universities. As with the previous cases, BP did not
directly conduct this training but acted as a catalyst
for their creation and covered logistical costs.
Additionally, BP supported work by Oxford much sustainable impact these activities have had.
Economic Forecasting to collaborate with the state oil The case as it is demonstrates, however, the poten-
fund to develop a long-term model of the Azeri tial for contributions that can be made by a company
economy. By 2007 this model had been completed in a powerful position, as BP acknowledges it is in
and was under the ownership of the state, but BP Azerbaijan and the Caspian Region. Peter Eigen,
pledged to continue to provide training to maintain Chairman of the EITI and founder of Transparency
and update the model as the economy develops.125 International, describes BP’s work in Azerbaijan as
The country does not currently have the human “ground breaking” and the company as “one of the
capacity needed to engage in this type of large scale leaders” in the field of working with developing
planning and modelling exercise, but the goal is to country governments in a constructive way. 129

17


Trends observed from cases and literature

hese case studies are based on published sources undertaking the capacity building activities
T reinforced by selected interviews, rather than on
detailed fieldwork. The authors would strongly
themselves, companies are able to use their extensive
local and international contacts to drive action. The
advocate that these cases be further researched and companies in question also excel in project manage-
developed. Nevertheless, despite being ‘work in ment capabilities, and they often have the ability to
progress’, these cases collectively demonstrate that undertake decisions and apply resources quickly.
corporate contributions to institutional capacity Company networks on the ground do not necessarily
building, though nascent, have significant potential involve a representative sample of NGOs and commu-
for contributing to the alleviation of systemic nity representatives, however, and it appears from the
problems within government institutions. As cases that civil society involvement in institutional
mentioned previously, standard corporate responsi- capacity building work is not always well integrated.
bility initiatives, particularly in developing countries, This paper does not attempt to conduct a thorough
often have limited impact on communities and often survey of emerging practices beyond the cases
do not attempt to address the underlying causes of presented, but a few studies that look at other insti-
major problems. The authors would argue that tutional capacity building initiatives are worth
corporate engagement in capacity building is likely mentioning for the trends they identify. The Oxford
to be more beneficial to shareholders in the long Policy Institute conducted a series of workshops in
term, if done wisely. 2006 examining “corporate investments in public
Motivations for involvement vary significantly, but capabilities” specifically in extractive industries.130
in each case, a company or group of companies They find that most companies involved in large scale
decided that there was a specific public sector compe- projects invest in a variety of ‘hard’ and ‘soft’ infra-
tency issue on which they could and should engage structure beyond the narrow scope of their project
governments. These issues – customs reform, but that this investment is usually a by-product of
economic planning capacity, human rights knowledge other corporate objectives rather than a separately
– were generally accepted as developmental articulated policy. They find that the motivation often
challenges in the host countries. Even so, each initia- lies in protecting their investments from the effects of
tive began with government acceptance of the need weak governance, responding to pressure from NGOs,
for assistance, or corporate lobbying to the effect and enhancing their own reputation, among other
that the government is persuaded to engage on a reasons. The extent and type of investment is also
trial basis. “greatly influenced by the character, experiences, and
In each of the case studies, the companies involved interests of their senior managers and directors” as
are (or were) major investors in the host countries. well as the characteristics of the host countries.
This is both a motivation for their involvement and a Multi-stakeholder initiatives (MSIs) such as the
reason for its success. Because of the financial risk EITI, the Voluntary Principles on Business and
associated with operations in certain countries, Human Rights, or the Kimberley Process are also
companies have ongoing budgets to spend on helping concerned with correcting weak governance, though
secure their investments and contribute to creating a they are wider in scope than the cases presented here.
stable operating environment. The ability to apply They often involve entire industries as well as civil
resources in a consistent manner may be an advan- society actors and are usually concerned with negoti-
tage over programmes susceptible to donor demands ating a oversight framework for a particular issue or
and sudden policy changes. In the cases of BAFICAA, industry. A report published in early 2007,131 looks at
Statoil and Premier Oil, the initiatives began on a very the effectiveness to date of MSIs in the oil and gas
small scale, with low risks of time and engagement sector and outlines components that are necessary for
for the governments and companies, before expan- success. In the initial formation stage, they argue that
sion was considered. In the case of BAFICAA, the first six components are necessary: “(i) a clearly stated
companies involved used their experience and initial problem (ii) a commitment for change and a clearly
success to persuade other companies that this was an stated mission (iii) strong political leadership (iv) the
area in which engagement with government could added value of another initiative and a clear time
be useful. frame (v) committed individuals able to carry the
A further commonality is the logistical power of issue into their organisation and (vi) the time and
the companies in each country and how the initia- space for trust to be built amongst participants and
tives are managed. Although they are not often effective dialogue to grow.”

18


Practical implementation issues raised by
the changing role of business

espite the momentum and potential observed In addition to making transparency and a clear
D from this new role for companies, everyone
close to these cases admits that there are major
division of responsibilities and expectations of central
importance, there might also be ways to structure
questions to be addressed, both in implementation programmes from the outset that protect against
and in the underlying legitimacy of such involve- potential abuse by either party. Patricia Feeney at
ment. Turning first to practical implementation RAID suggests that single-company initiatives may
issues, there is an obvious need to avoid situations not be as advisable as coalition-based initiatives.
where one or more partners feel that their ability When acting alone, there is more scope for a
to act in a fair and independent manner is compro- company to use a situation to its own advantage,
mised. Rigorous monitoring and transparency while groups can serve a monitoring function.
are one way to guard against this, but no clear A ‘foundation of foundations’ type arrangement,
framework exists to guide what is ultimately a very whereby several companies fund an independent
challenging undertaking. body to do capacity building work on their behalf,
Even sceptics, however, see the potential for insti- might also be a possible solution. Corporate
tutional capacity building work involving companies. foundations also face questions about their
Patricia Feeney at RAID admits that she can see a independence, however. John Ruggie suggests that a
strong argument for using the personal contacts and wide variety of arrangements, such as MSIs and the
UN Global Compact, are useful possibilities for
structuring business’ response to its human rights
responsibilities.132
No matter how such corporate-driven programmes
are organised, however, there remains the underlying
problem of legitimacy. As Patricia Feeney of NGO
Rights and Accountability in Development puts it:
“Can you be game keeper and poacher at the same
time?” It should ideally be the remit of government
to ensure that all foreign investment is in the best
interests of its citizens. The government’s lack of
capacity to carry out its basic functions, however, is
influence that companies have in regions where they one of the very reasons companies are involved in the
operate. NGOs have been pressuring companies to first place. If they are present and have the resources
take more responsibility with respect to human rights to help, it is difficult to argue against actions that
abuses for some time, and this is one way in which could possibly strengthen legitimate actors’ ability to
they can do so. How precisely they should engage in perform their rightful roles.
order to avoid conflicts of interest and achieve lasting
improvements is just starting to be addressed by Monitoring, reporting, and transparency
practitioners and academics. Companies have arguably engaged in informal
capacity building activities for some time, but
Conflicts of interest modern interpretations of corporate responsibility
In all four cases covered here, the companies had now require that these activities be monitored and
vested financial interests that at least in part drove made public. Exactly how this should be done has yet
their involvement. This was not merely the action of to be legally agreed upon, however. Arvind Ganesan
disinterested or independent parties. Thus, the possi- of Human Rights Watch notes that there does not
bility exists that the programmes they facilitated currently seem to be a great deal of communication
might have had anti-competitive elements or provided as to what companies are doing to strengthen govern-
the opportunity for discreet lobbying on behalf of the ment institutions and what the outcomes are.
company. This is not to say that this happened in Without common and binding reporting require-
these cases, and the authors have seen no evidence ments for non-financial activities, it is up to the
that it did, or that any intention to do so existed, but discretion of each company what they choose to
the implications of such conflicts need to be consid- disclose and which projects they highlight over
ered if institutional capacity building is to form part others. Managers may feel that they stand to lose by
of corporate responsibility strategies more frequently. putting more information than necessary in the

19


public domain. By keeping sensitive or potentially that while partnering with development agencies
controversial information to themselves, companies and governments is central in increasing legitimacy
can move more quickly, avoiding the intransigence of for companies involved in capacity building, it must
official processes and the scrutiny of critics.133 be an equal partnership in which all members feel
Even if reporting and monitoring requirements they have a say in outcomes and processes. Potential
were agreed upon, measuring outcomes in non- non-corporate partners need to be aware of the
financial areas is always problematic. Institutional competitive advantage the company will derive from
capacity is inherently difficult to quantify. This is the alliance and how the programme will affect their
exacerbated by the fact that companies’ time own reputation and capabilities. Some larger
horizons are often quite short term, while public agencies have safeguards in place to ensure that they
capacity building is a slow and incremental process. enter into fair and equal partnerships, but smaller
Furthermore, Virginia Haufler questions whether a organisations may be more easily co-opted. Exactly
focus on outcomes or processes is most appro- how this harmony is achieved can be difficult, and
priate.134 Ultimately, improvements in institutions are Jane Nelson and Ira Jackson note that “successful
determined by a variety of factors outside the control alliances require a difficult balance of idealism and
of the actors involved. Does a negative or inconclu- pragmatism…of self-interest and mutual benefit”.
sive outcome mean the initiative has failed It is unclear how the legitimacy of a project is
altogether? affected when civil society involvement is not
feasible or practical, such as with the BAFICAA case.
Managing partnerships
In some of the cases covered here, partnerships
featured more prominently than in others. However,
it is increasingly obvious that companies are part of
what Jane Nelson and Ira Jackson term ‘relationship
networks’ that include many different private and
public actors.135 Managing these relationships is
central to ensuring that the benefits of engaging in
institutional capacity building are worth the costs.
In practice, Arvind Ganesan of Human Rights
Watch notes that development work tends to take
place in ‘silos’. Different agencies and actors do not
consider the broader perspective and often end up In this instance, the topic was highly specialist and
with overlapping, competing, or contradictory not within the remit of any local or international
approaches. The capacity building contributions by NGOs. Companies should be aware that in these
business will be unlikely to have much impact if cases that they may be asked to justify this absence
they do not align with the strategies and efforts of and prove that they acted in the best interest of host
the UN, donor agencies, governments, and NGOs. country citizens. In BAFICAA’s case, the national
Jane Nelson and Ira Jackson also suggest that all government suggested that a wider spectrum of
alliances between companies and other actors need African companies be involved to increase the legit-
to focus on “purpose, process, and progress”. imacy of the project and its likelihood of success.
Everyone involved should share a common set of While multinationals drove the process, great
goals for the programme, a detailed understanding emphasis was placed on the inclusiveness of the
of each partner’s responsibilities, and the bench- national BAFICAA task forces.
marks by which progress will be measured. Jennifer
Zerk of CSR Vision suggests that signing a Building institutional capacity effectively
‘memorandum of understanding’ or similar Development practitioners admit that there are no
document seems like it would be necessary in order easy solutions for improving a government’s ability
to clarify expectations and responsibilities to protect to function effectively and in the best interest of its
each actor in case a problem arises with the citizens. Patricia Feeney at RAID notes that even if
partnership. programmes are reasonably well intentioned and
Sune Thorsen, Director of Lawhouse.dk and well-executed, the question still remains of how to
expert in legal corporate responsibility issues, notes actually build capacity and fast track governance in

20


countries where is has not already taken root. usually experts in development and institution
Furthermore, it is important that that capacity building. Involving the right mix of local and
building work by outside actors does not undermine expatriate staff is another challenge to creating and
the incentives for government-led efforts. All implementing a genuinely effective programme.
programmes should incorporate a plan for transi- Companies can add value, however, if they are able to
tioning skills over to the government, paving the way approach capacity building with the same rigour that
for the exit of the company and the organic growth they do core business functions. This includes
of institutions. getting commitment at the top, setting clear targets
It is also important to recognise that the relative and metrics, reporting publicly on progress, and
power of each player will shape outcomes and that committing to learning and adaptation.137
this power will evolve throughout the life of a In addition to the previously mentioned problem
project. As previously noted, a company that repre- with measuring outcomes, another tricky situation
sents a large portion of a region’s economy is likely companies may face is what to do when there is
to generate more co-operation and buy-in from ‘backsliding’. In the Burma case, the government was
governments. During boom economic periods, clearly not as serious about human rights as Premier
however, host countries may be less receptive to ‘soft’ would have liked, but does this mean the programme
investment, seeking instead to capture as much should have been discontinued? At what point does
financial rent as possible.136 This potential evolution it harm the company’s reputation to be associated
of power should be recognised in the guidelines for with a ‘failed’ project?
the programme, if possible. Philip Crowson, for the Oxford Policy Institute,
There are quite a few internal constraints that summarises the problem that is central to imple-
companies face when undertaking an activity not menting effective institutional capacity building work:
related to core business. Shareholder expectations, “No matter how strong the internal incentives and the
competing strategic priorities, and the longer term external pressures for companies to invest in the public
nature of these investments make it difficult to sector capabilities, their success relies on the responses
approach them systematically, as does lack of appro- of the host countries. Those in turn depend on how
priate capacity. Even if the actual training is closely the objectives and interests of the government
conducted by outside experts, companies and their in power are aligned with maximising the wealth and
employees who are facilitating the work are not welfare of the nation at large over the long term.”138

21

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