The Reluctant and Turbulent Birth of Corporate Social Responsibility

For more than five decades, TNCs have not only affected economies of Third World countries, it has also held sway in the direction of national policies and in more sinister ways the deployment of their police and military forces. The clandestine involvement of these TNCs in the governments and economies of Third World countries have become so acute and so damning that the United Nations eventually had to convene a special program and a body to look into if not mitigate the adverse impact of TNCs on host countries.

1960-1976 developing countries in support or with appreciation of Western labor unions and social activists were demanding a "New International Economic Order" to exert pressure on governments to tightly regulate the activity of Transnational Corporations or TNCs.

When pressures from their own countries have not moved these TNCs to take a more responsible view of their operations, a group of 77 developing countries took matters into their own hand and formed an international vehicle within the UN to address the operations of TNCs. This vehicle in the UN became known as the Group of 77 or G-77.

In 1974 the United Nations set up the Commission on Transnational Corporations with the UN Centre for Transnational Corporations (UNCTC) as its special research and administrative body. The Commission was given the task of monitoring and reporting activities of TNCs, propose frameworks for the activities of TNCs and strengthen the capacity of developing countries to deal with TNCs.

The UN Commission on Transnational Corporations drafted a UN Code of Conduct on Transnational Corporation in 1976. TNCs viewed the introduction of this code as a possible international code to limit or restrict the operations of their businesses overseas. If approved the code covers a comprehensive sets of activities and more worrisome to TNCs was the code becoming legally binding.

1998 to today mass anti-globalization demonstrations and high profile corporate scandals the likes of Enron and WorldCom are forcing governments to legislate business conduct. Corporate governance is a concept that is becoming an interest to global corporations and governments alike.

The TNCs now becoming known also as Multinational Corporations or MNCs have to accept certain concessions to lessen the pressure from the G-77. They opted for a voluntary code of conduct but based their compliance on the OECD Guidelines on Multinational Corporations.

The intense scrutiny, hostility, litigations, dwindling confidence in large corporations have forced TNCs to take proactive action to lessen the impact of these developments not only in the host countries they operate but even on the homefront.

There was a growing fear that the attack on TNCs or MNCs in the international forum may become inadvertently an attack on the free market or free enterprise ecosystem. The creativity and aggressiveness of activists and special interest groups powered by a professional media machinery and a concerned population of consumers, will eventually have an impact on the bottomline. Evidence was also mounting that there is correlation between market share and perception of misconduct by companies. Consumers were clearly avoiding products manufactured and distributed by companies known for their misconduct at home and abroad.

The more influential groups among the TNCs or MNCs were starting to play around a concept of a focus and concerted public relations campaign to make the defensive posturing into an aggressive pursuance of opportunity. Public and discrete debates in many boardrooms were taking place about "self-regulation" or "mandatory government" regulations. Somehow a consensus was building that working with UN is not a viable option for TNCs or MNCs.