OECD: Tough rules for multinationals By Kevin Brown in London
Multinational companies face tough new restrictions on their international activities under a draft code of conduct drawn up by the 29-nation Organisation for Economic Co-operation and Development and other countries.
In the most far-reaching review of OECD guidelines on multinationals for a quarter of a century, officials are proposing new standards on corporate governance, workplace conditions, environmental safeguards, bribery and protection for whistleblowers.
Business lobbies and some member states are understood to have criticised the proposals privately because they would apply to all international activities by multinationals based in the OECD or in Brazil, Argentina or Chile, which are also taking part in the review.
The OECD's Business and Industry Advisory Committee, which represents employers' groups, has told officials that applying the rules outside the OECD could put companies at a competitive disadvantage against companies not based in member states.
Some member states, including Australia, are also thought to have pointed out that monitoring multinationals' compliance with the rules is likely to be difficult in developing countries, some of which have little interest in enforcing corporate standards.
The rules, drawn up by a working party chaired by Rien Sikkel, a Dutch economics ministry official, are not legally binding. However, OECD governments are expected to promote compliance, and national law in many countries has developed in line with the original guidelines drawn up in 1976.
The guidelines, which are being released in draft form this week, are scheduled to be approved by an OECD ministerial meeting in June, although divisions over scope and implementation may prevent agreement.
The draft includes many references to the positive aspects of multinational activities, including the importance of cross-border investment and the potential for using company-wide standards to improve environmental and social protection in different countries.
However, it also says that globalisation has reinforced public concern that multinationals may take advantage of differences in standards between countries on the environment, working conditions, and the environment, and may even be powerful enough to challenge national sovereignty.
Officials say the generally tough tone of the draft reflects concern among member governments about growing public hostility to multinationals, reflected in demonstrations at the World Trade Organisation talks in Seattle last year.
"The mood among the OECD countries is that the new rules have to be applied worldwide to address public concern about the activities of multinationals, and ways will be found to make sure that it works," a senior OECD official said.