Special Report

Wake up, corporate Canada

Whether CEOs like it or not, they must heed the calls for social responsibility

Mary Janigan April 16 2001
Special Report

Wake up, corporate Canada

Whether CEOs like it or not, they must heed the calls for social responsibility

Mary Janigan April 16 2001

Wake up, corporate Canada

Special Report

On the Issues

Whether CEOs like it or not, they must heed the calls for social responsibility

Mary Janigan

In the beginning, as its first hearings bravely commenced in Ottawa two months ago, the fledgling Canadian Democracy and Corporate Accountability Commission mailed 1,000 letters to large Canadian firms. It would turn out to be a quixotic gesture. The commission posed six tough questions to harried executives about how Canada should control corporate behaviour at home and abroad. Essentially, it asked if a firms prime duty was to make money for its shareholders—or if it had a broader social responsibility to such stakeholders as its customers and its community. Not a single company replied. “We hoped we would be able to interest them in supporting our endeavour,” says an exasperated commission co-chairman Avie Bennett, chairman of publisher McClelland & Stewart Inc. “I think, in self-interest, they should.”

That is an understatement. Executives may dismiss the commission as simply another naive chapter in the never-ending debate over a corporations role in Canadian society. But they have missed the point: that debate has changed as radically and as rapidly as the globalizing world of the 21st century. In Quebec City this month, 34 nations of the Western Hemisphere will discuss the creation of a Free Trade Area of the Americas that would include investment protection. Meanwhile, the 140-nation World Trade Organization is attempting to kick-start a round of talks on investment policy.

In response, global activists argue that governments are extending rights with thoughtless abandon to corporations— without imposing responsibilities in exchange. “Free trade will be a vicious spiral downward of corporations abusing countries and communities if we do not have legal requirements that corporations act responsibly,” says Duff Conacher, co-ordinator of Ottawa-based Democracy Watch. “And the only way to get those requirements is to change the law.”

In effect, the commission, which is funded by three private foundations, is on the leading edge of todays trade wars. It is exploring whether federal laws should ensure that Canadian firms behave responsibly abroad. Should Ottawa, for example, curb the activities of Calgary-based Talisman Energy Inc.,

which has controversial oil-production operations in warravaged Sudan? Or should nations work together to develop an international corporate code? “We are trying to bridge the gap between unqualified opposition to global trade and small-c conservatism on the corporate side that says we don’t have to do anything,” says commission co-chairman and former New Democratic Party leader Ed Broadbent. “We want reforms that make human rights and trade compatible, instead of seeing them in opposition.”

So why the corporate cold shoulder? Many firms may have simply dismissed the commission’s approach as naive. Corporations are already held accountable for their domestic social behaviour through everything from labour to environmental laws. It would be difficult and cumbersome to enact laws that insist they take account of vague “stakeholder” interests in all deliberations. Others argue there is no real conflict between social responsibility and shareholders’ profits. “Regardless of what you can get away with, we never operated that way,” says Gerry Maier, chairman emeritus of Calgary-based TransCanada PipeLines Ltd. “I would never let my corporation do anything internationally that I would not do at home. Over the long haul, it was extremely beneficial to us: leaders appreciated it—and did not stand in our way.”

Still, it seems unlikely that governments will continue to rely on trust alone to police firms abroad. If governments can sign deals to protect citizens who invest in other countries, they surely have the right to insist that those investors respect basic labour and environmental standards—even if the host nation does not enforce them. Given the mounting opposition to freer trade, such compliance may be a precondition of further pacts. “We are creating organizations in law which operate overseas outside Canadian laws,” says Leonard Brooks, executive director of the University of Toronto’s Clarkson Centre for Business Ethics. “There ought to be some residual responsibility in Canada when the system is not operating in those other countries.” The current commission may take only the first tiny step towards such laws. But Canadian companies should wake up—and join the debate.