Globe and Mail quotes HI - March 23, 2011

For Canadian companies overseas, a corporate heart of darkness

Globe and Mail
Wednesday, Mar. 23, 2011

When told that The Globe is doing a piece on the laws governing misbehaviour by Canadian companies in foreign countries, John McKay laughs. “That’ll be a short article,” he says. “There aren’t any.”

The Liberal MP was behind a private member’s bill that would have brought in tough new rules on companies operating abroad. It went down to defeat in Parliament last fall, losing by just six votes when the Conservatives opposed it.

The government of Prime Minister Stephen Harper prefers a loose network of voluntary controls and guidelines to keep Canadian companies in check. But can we trust Canadian companies to police themselves when they do business with dictatorships and other dodgy regimes?

Mr. McKay says that is like expecting drivers to obey the speed limit if they knew police would never stop and fine them. Though he concedes most Canadian companies are “good corporate citizens,” some may not be, and laws are needed to ensure they don’t commit abuses in far-flung places. “You don’t create laws for people who obey the law,” he says.

The MP from the Toronto riding of Scarborough-Guildwood says Canada is far behind other countries in regulating the behaviour of its companies overseas.

In the United States, lawmakers passed the Foreign Corrupt Practices Act in 1977 to ban the payment of bribes by U.S. companies doing business abroad. The law was enacted after securities regulators discovered that more than 400 U.S. firms had made dubious or unlawful payments to foreign officials. U.S. justice officials have stepped up prosecutions under the law in recent years, investigating dozens of major companies and levying billions of dollars in fines. By contrast, a similar Canadian statute, the Corruption of Foreign Public Officials Act of 1998, is little known and seldom used.

U.S. rules on corporate behaviour are about to become even tougher under the Dodd-Frank bill, introduced in response to the global financial crisis. It requires companies to report the money they pay to foreign governments, pulling back the veil on deals between U.S. firms and their overseas partners. A sub-bill requires them to reveal if they are using specialized minerals that come from the conflict zone around the troubled African country of Congo.

In Norway and Britain, meanwhile, officials are enforcing guidelines laid down by the Organization for Economic Co-operation and Development for the conduct of their multinationals. Officials with Norway’s National Contact Point, which monitors the OECD guidelines, recently hired investigators to look into a complaint about a proposed nickel mine in the Philippines.

The Canadian approach is much less aggressive. In a policy statement by then-trade minister Stockwell Day on March 26, 2009, the government said it will focus on “promoting internationally recognized, voluntary guidelines for corporate social responsibility performance and reporting.”

Ottawa also set up the elaborately named Office of the Extractive Sector Corporate Social Responsibility Counsellor, under scholar Marketa Evans, to monitor the behaviour of Canadian mining and oil and gas companies abroad. But the office acts only on complaints – there have been none so far – and cannot intervene without the consent of the companies involved. Human rights groups call it toothless.

They lobbied unsuccessfully for the more powerful post of ombudsman, with the right to investigate companies and make reports to government. Karyn Keenan, a program officer with the Halifax Initiative, a watchdog group, calls Canadian policy “a wholesale failure.”

“We haven’t taken the issue seriously. There is no regulatory oversight.”

With Canadian resource companies doing business in so many poor and undemocratic countries, that is bound to be a problem, the government’s critics say. In the latest instance of trouble, Human Rights Watch reported allegations of beatings and gang rapes at the waste dump of a mine in Papua New Guinea run by Toronto-based Barrick Gold. The company said it had investigated the “disturbing” allegations and was taking action.

Company leaders insist they don’t need a gun to their head to act responsibly. They argue that it’s much better when they take it on themselves to respect workers, human rights and the environment.

In Guatemala, the Vancouver-based mining giant Goldcorp agreed to perform a human rights impact assessment of its Marlin mine on the recommendation of an ethical-investment group. Over 18 months, consultants interviewed scores of residents, officials and local interest groups. The company says it is now working on implementing the consultants’ 67 recommendations, including adoption of a corporate responsibility policy.

David Deisley, a Goldcorp vice-president, has met with 40 traditional mayors near the mine to present the results. The result, he says, has been a partnership that not only helps protect the company against disruptive protests but also helps Guatemalan authorities develop standards.

“Rather than try to prosecute companies in Canada for what they do in other countries, it would be much more productive if all three parties – the company, civil society and government – work together to build governing capacity in countries like Guatemala,” Mr. Deisley says.

Ethical-fund manager Bob Walker calls the human-rights impact approach “a new way to get on top of the issues and be more proactive and not to play defence all the time.”

While human-rights groups acknowledge initiatives such as Goldcorp’s, they say the approach won’t work in places such as Tibet or Burma, where local people are so afraid of authorities that they can’t be expected to complain openly to a company about the effects a mine or factory might have on the environment or labour rights.