What is the Definition for Globalization? Top Answer Globalization can be defined as growth to a global or worldwide scale.

It is commonly used as a precise way of describing the spread and connectedness of production, communication, and technologies across the world, which has involved the interlacing of economic and cultural activity. Sometimes the term can be used by some institutions to refer to their efforts globally, such as the World Bank, in creating a global free market for goods and services.

Advantages of Globalization? Top Answer In globalization, there is integration of markets which brings about cheap products for the consumers; outsourcing leads to job creation in less developed areas; it also prevents the saturation of goods in a specific market. Globalization means increasing the interdependence, connectivity, and integration on a global level, with respect to the social, cultural, political, technological, economic, and ecological levels. It is the collaboration of countries to provide a boost to trade practices, and also to reduce cultural differences. Its various advantages can be felt all across the globe by one and all, and also to a very large extent in our daily lives. Obviously, now we understand that globalization is here to stay. Here are the most common and important advantages that globalization, over time, has brought about for mankind. These have been listed in no particular order, and are all vital in their own way. Peaceful Relations Most of the countries have resorted to trade relations with each other in order to boost their economy, leaving behind any bitter past experiences if any. Nations now try to raise capital and fortify their stand in international trade, rather than hosting a war. Thus, globalization has induced international peace and security in a big way.

Free Trade Free trade is a policy in which a country does not levy taxes, duties, subsidies or quota on the import/export of goods or services from other countries. There are countries which have resolved to free trade in specific regions. This allows consumers to buy goods and services, comparatively at a lower cost. Global Connectivity Globalization has promoted international connectivity. With the use of the Internet, the world has definitely become a smaller place. There has been exchange of thoughts and ideas which has morally boosted and interlinked the mindset of people all round the world. New Markets The opportunities for new markets has increased dramatically. Numerous companies have started investing in different countries and luring customers for their brands. These ever-expanding markets have helped countries to raise capital in terms of foreign domestic investments, thus improving the economy of the country. Employment Opportunities One of the most advantageous factors of globalization is that it fosters the generation of employment. This happens due to the emergence of new companies and new markets, where lots of skilled and unskilled labor is required. Immigration between countries also increases, providing better opportunities for people all round the world. By providing employment, globalization helps in increasing the standard of living of the people, and also reduces poverty. Quality Products

The competition among different companies finds place at an international level. It becomes important for the companies to focus on quality goods and services, in order to have a strong foothold in the market. The consumer is benefited in the process, and gets quality products at cheaper rates. He/she also gets the opportunity to select his goods from a large variety available in the market. Environmental Protection Mutual trade carried out by countries has brought about an understanding for the protection of the environment from which they benefit so much. It has been accepted by most countries that action needs to be taken in saving natural resources and wildlife, without thinking about the boundaries that separate them. Global environmental problems like cross-boundary pollution, over-fishing in the oceans, climate change, etc., are solved by discussions and conventions. Good for Developing Nations It is claimed that globalization increases the economic prosperity of developing nations. Developed countries invest in such countries with an aim of capturing new markets, which helps them improve their infrastructure and technologies to international levels. A lot of capital is invested in such projects, which in turn proves fruitful to the economy of the developing nation as well. Equality for All Globalization has helped in creating international criminal courts, and international justice movements are also launched to provide justice to people at a global level. Disputes are solved through global standards such as patents, copyright laws, and world trade agreements. Thus, it has ensured that people do not get discriminated with regard to country, caste, creed or sex.

Ease of Transportation With the advent of globalization, there has been an immense increase in the transportation of goods and services worldwide. Things which took weeks for conveyance, can now easily be availed within a couple of days. Due to the development of containerization for ocean shipping, transportation costs are reduced to a great extent, lowering the cost of products in world markets. Travel and Tourism Globalization has promoted tourism to great heights. There are many places that have tourism as their main source of capital generation. International trade among different countries also helps in increasing the number of tourists that visit different places around the world. Unity in Diversity Globalization has helped in bringing about integrity and social understanding everywhere. The dream for a global village becomes realistic after looking at the impact of globalization. It has helped in removing some barriers that had kept the world divided on various grounds. There has been propagation of democratic ideas among countries. Cross-cultural contacts grow and cultural diffusion takes place, which helps in minimizing differences, and promotes companionship. External Borrowing It has often been seen that a poor country is unable to provide adequate financing to its companies, which proves to an obstacle in the development of the country on the whole. With the help of globalization, there is opportunity for corporate, national, and sub-national borrowers to have better access to external finance, with facilities such as external commercial borrowing and syndicated loans.

It is a common belief that globalization plays a role just at international levels of trade and commerce, but the fact is that it has played an important role in making our lives much more comfortable too. The phones, apparels, gadgets or accessories that we use in our day-to-day life are be available to us through globalization. Knowingly or unknowingly, we are all under the impact of globalization, and more importantly it has helped in bringing international peace and justice to mankind. Read more at Buzzle: http://www.buzzle.com/articles/advantages-ofglobalization.html

NEGATIVE IMPACT OF GLOBALISATION Globalization is the buzzword of today. Economies of the world are being increasingly integrated as new technology and communication has brought people together. We often hear the phrase that the 'world has become a global village' - which itself signifies how much has changed in the world in the past few decades. American businessmen are investing their time in studying the culture of the Middle East, so that they can negotiate with their counterparts in a better way. Young graduates in India are being taught how the Americans roll their R's, so as to make a seamless conversation with their clients in many of the call-centers! The phenomenon that is globalization, has brought new dimensions to this world, and people are mingling with each other like never before. The social, economic, and political changes that globalization has brought have been accompanied by some challenges. We will not approach its negative effects as a cynic, but as a student or an observer, so that we are free of any kind of prejudice and bias, and understand the topic in a better way. The Negative Effects of Globalization In order to cut down costs, many firms in developed nations have outsourced their manufacturing and white-collar jobs to Third-World

countries like India and China, where the cost of labor is low. The most prominent among these have been jobs in the customer service field as many developing nations have a large English-speaking population ready to work at one-fifth of what someone in developed world may call 'low-pay'. This has caused a lot of resentment among the people of developed countries, and companies have been accused of taking their jobs away. Another problem is that many Americans are not satisfied with the level of customer service that they are subjected to, and this has caused a lot of animosity among people and has added to the dissent that people already have against outsourcing. There are various schools of thought which argue that globalization has led to an increase in activities such as child labor and slavery. In countries with little or no accountability, corporations employing children can work smoothly by bribing the officials, which may result in an increase in illegal activities. Critics opine that globalization has resulted in a fiercely-competitive global market, and unethical practices in business is a by-product of this. Globalization may have inadvertently helped terrorists and criminals. At the heart of globalization is an idea that humans, materials, food etc. be allowed to travel freely across borders, but 9/11 was a ghastly reminder that people with evil intentions can use it as an opportunity and cause damage. It is not only the developed nations that are complaining about its negative effects, people in developing nations - where most of the industries have been set up, have their own set of reasons against globalization. They often complain that their cities have been reduced to garbage-dumps where all the industrial waste is accumulated and pollution levels are sky-high. Fast food chains like McDonalds and KFC are spreading fast in the developing world. People are consuming more junk food which has an adverse impact on their health. Apart from the health concerns, there is something else that globalization has been criticized for, and it is the accusation that it has opened floodgates for restaurants and eateries which are insensitive to the religious beliefs of the host nation. For example, a lawsuit had to be filed against McDonalds in India, after it was

accused of serving beef in their burgers. While the rich are getting richer, the poor are struggling for a square meal. If the current Occupy Wall Street protests are a reminder of how angry people are with the current set-up, then those who govern us should take notice, and work towards alleviating poverty. Ideally, globalization should have resulted in creation of wealth and prosperity, but corporate greed and corrupt government has ensured that money is not distributed equally. When the first-known case of AIDS came up in America, only few would have traced its origin to Sub-Saharan Africa. Globalization bought people from various countries together, and this is perhaps the reason that a virus from a jungle was transported to almost every country in the world. Environmental degradation is an issue which has been debated ferociously in various international meetings, and it has to be accepted that globalization is one of the most important factors that has aggravated the situation. The amount of raw materials needed to run industries and factories is taking a toll on the natural reserves of planet earth, and pollution has severely impacted the quality of air that we need so very much for our survival. As we mentioned in the beginning of the article that like everything else, globalization has its own share of kudos and brickbats. We have reached a stage since our evolution that discarding the concept of globalization may not be possible at all, therefore, the strategy should be to find solutions to the threats it poses to us so that we can work towards a better, fulfilling future. By Prabhakar Pillai Read more at Buzzle: http://www.buzzle.com/articles/negative-effectsof-globalization.html

If you look at the tag on your shirt, chances are you would see that it was made in a country other than the one in which you sit right now. What's more, before it reached your wardrobe, this shirt could have very well been made with Chinese cotton sewed by Thai hands, shipped across the Pacific on a French freighter crewed by Spaniards to a Los Angeles harbor. This international exchange is just one example of globalization, a process that has everything to do with geography. Globalization and Its Characteristics Globalization is the process of increased interconnectedness among countries most notably in the areas of economics, politics, and culture.McDonalds in Japan, French films being played in Minneapolis, and the United Nations, are all representations of globalization. The idea of globalization may be simplified by identifying several key characteristics: Improved Technology in Transportation and Telecommunications What makes the rest of this list possible is the ever-increasing capacity for and efficiency of how people and things move and communicate. In years past, people across the globe did not have the ability to communicate and could not interact without difficulty. Nowadays, a phone, instant message, fax, or video conference call can easily be used to connect people. Additionally, anyone with the funds can book a plane flight and show up half way across the world in a matter of hours. In short, the "friction of distance" is lessened, and the world begins to metaphorically shrink. Movement of People and Capital A general increase in awareness, opportunity, and transportation technology has allowed for people to move about the world in search of a new home, a new job, or to flee a place of danger. Most migration takes place within or between developing countries, possibly because lower

standards of living and lower wages push individuals to places with a greater chance for economic success. Additionally, capital (money) is being moved globally with the ease of electronic transference and a rise in perceived investment opportunities. Developing countries are a popular place for investors to place their capital because of the enormous room for growth. Diffusion of Knowledge The word 'diffusion' simply means to spread out, and that is exactly what any new found knowledge does. When a new invention or way of doing something pops up, it does not stay secret for long. A good example of this is the appearance of automotive farming machines in Southeast Asia, an area long home to manual agricultural labor. Non-Governmental Organizations (NGOs) and Multinational Corporations As global awareness of certain issues has risen, so too has the number of organizations that aim to deal with them. So called non-governmental organizations bring together people unaffiliated with the government and can be nationally or globally focused. Many international NGOs deal with issues that do not pay attention to borders (such as global climate change, energy use, or child labor regulations). Examples of NGOs include Amnesty International or Doctors without Borders. As countries are connected to the rest of the world (through increased communication and transportation) they immediately form what a business would call a market. What this means is that a particular population represents more people to buy a particular product or service. As more and more markets are opening up, business people from around the globe are coming together to form multinational corporations in order to access these new markets. Another reason that businesses are going global is that some jobs can be done by foreign workers for a much cheaper cost than domestic workers; this is called outsourcing.

At its core globalization is an easing of borders, making them less important as countries become dependent on each other to thrive. Some scholars claim that governments are becoming less influential in the face of an increasingly economic world. Others contest this, insisting that governments are becoming more important because of the need for regulation and order in such a complex world system. Is Globalization a Good Thing? There is a heated debate about the true effects of globalization and if it really is such a good thing. Good or bad, though, there isn't much argument as to whether or not it is happening. Let's look at the positives and negatives of globalization, and you can decide for yourself whether or not it is the best thing for our world. Positive Aspects of Globalization

As more money is poured in to developing countries, there is a greater chance for the people in those countries to economically succeed and increase their standard of living. Global competition encourages creativity and innovation and keeps prices for commodities/services in check. Developing countries are able to reap the benefits of current technology without undergoing many of the growing pains associated with development of these technologies. Governments are able to better work together towards common goals now that there is an advantage in cooperation, an improved ability to interact and coordinate, and a global awareness of issues. There is a greater access to foreign culture in the form of movies, music, food, clothing, and more. In short, the world has more choices.

Negative Aspects of Globalization

Outsourcing, while it provides jobs to a population in one country, takes away those jobs from another country, leaving many without opportunities. Although different cultures from around the world are able to interact, they begin to meld, and the contours and individuality of each begin to fade. There may be a greater chance of disease spreading worldwide, as well as invasive species that could prove devastating in non-native ecosystems. There is little international regulation, an unfortunate fact that could have dire consequences for the safety of people and the environment.

Large Western-driven organizations such as the International Monetary Fund and the World Bank make it easy for a developing country to obtain a loan. However, a Westernfocus is often applied to a non-Western situation, resulting in failed progress.

IMPACT OF GLOBALISATION IN DEVELOPING COUNTRIES & INDIA mpact on India: India opened up the economy in the early nineties following a major crisis that led by a foreign exchange crunch that dragged the economy close to defaulting on loans. The response was a slew of Domestic and external sector policy measures partly prompted by the immediate needs and partly by the demand of the multilateral organisations. The new policy regime radically pushed forward in favour of amore open and market oriented economy. Major measures initiated as a part of the liberalisation and globalisation strategy in the early nineties included scrapping of the industrial licensing regime, reduction in the number of areas reserved for the public sector, amendment of the monopolies and the restrictive trade practices act, start of the privatisation programme, reduction in tariff rates and change over to market determined exchange rates. Over the years there has been a steady liberalisation of the current account transactions, more and more sectors opened up for foreign direct investments and portfolio investments facilitating entry of foreign investors in telecom, roads, ports, airports, insurance and other major sectors. The Indian tariff rates reduced sharply over the decade from a weighted average of 72.5% in 1991-92 to 24.6 in 1996-97.Though tariff rates went up slowly in the late nineties it touched 35.1% in 2001-02. India is committed to reduced tariff rates. Peak tariff rates are to be reduced to be reduced to the minimum with a peak rate of 20%, in another 2 years most non-tariff barriers have been dismantled by march 2002, including almost all quantitative restrictions. India is Global: The liberalisation of the domestic economy and the increasing integration of India with the global economy have helped step up GDP growth rates, which picked up from 5.6% in 199091 to a peak level of 77.8% in 1996-97. Growth rates have slowed down since the country has still bee able to achieve 5-6% growth rate in three of the last six years. Though growth rates has slumped to the lowest level 4.3% in 2002-03 mainly because of the worst droughts in two decades the growth rates are expected to go up close to 70% in 2003-04. A Global comparison shows that India is now the fastest growing just after China.

This is major improvement given that India is growth rate in the 1970's was very low at 3% and GDP growth in countries like Brazil, Indonesia, Korea, and Mexico was more than twice that of India. Though India's average annual growth rate almost doubled in the eighties to 5.9% it was still lower than the growth rate in China, Korea and Indonesia. The pick up in GDP growth has helped improve India's global position. Consequently India's position in the global economy has improved from the 8th position in 1991 to 4th place in 2001. When GDP is calculated on a purchasing power parity basis. Globalisation and Poverty: Globalisation in the form of increased integration though trade and investment is an important reason why much progress has been made in reducing poverty and global inequality over recent decades. But it is not the only reason for this often unrecognised progress, good national polices , sound institutions and domestic political stability also matter. Despite this progress, poverty remains one of the most serious international challenges we face up to 1.2 billion of the developing world 4.8 billion people still live in extreme poverty. But the proportion of the world population living in poverty has been steadily declining and since 1980 the absolute number of poor people has stopped rising and appears to have fallen in recent years despite strong population growth in poor countries. If the proportion living in poverty had not fallen since 1987 alone a further 215million people would be living in extreme poverty today. India has to concentrate on five important areas or things to follow to achieve this goal. The areas like technological entrepreneurship, new business openings for small and medium enterprises, importance of quality management, new prospects in rural areas and privatisation of financial institutions. The manufacturing of technology and management of technology are two different significant areas in the country. There will be new prospects in rural India. The growth of Indian economy very much depends upon rural participation in the global race. After implementing the new economic policy the role of villages got its own significance because of its unique outlook and branding methods. For example food processing and packaging are the one of the area where new entrepreneurs can enter into a big way. It may be organised in a collective way with the help of co-operatives to meet the global demand. Understanding the current status of globalisation is necessary for setting course for future. For all nations to reap the full benefits of globalisation it is essential to create a level playing field. President Bush's recent proposal to eliminate all tariffs on all manufactured goods by 2015 will do it. In fact it may exacerbate the prevalent inequalities. According to this proposal, tariffs of 5% or less on all manufactured goods will be eliminated by 2005 and higher than 5% will be lowered to 8%. Starting 2010 the 8% tariffs will be lowered each year until they are eliminated by 2015. GDP Growth rate: The Indian economy is passing through a difficult phase caused by several unfavourable domestic and external developments; Domestic output and Demand conditions were adversely affected by poor performance in agriculture in the past two years. The global economy experienced an overall deceleration and recorded an output growth of 2.4% during

the past year growth in real GDP in 2001-02 was 5.4% as per the Economic Survey in 200001. The performance in the first quarter of the financial year is5.8% and second quarter is 6.1%. Export and Import: India's Export and Import in the year 2001-02 was to the extent of 32,572 and 38,362 million respectively. Many Indian companies have started becoming respectable players in the International scene. Agriculture exports account for about 13 to 18% of total annual of annual export of the country. In 2000-01 Agricultural products valued at more than US $ 6million were exported from the country 23% of which was contributed by the marine products alone. Marine products in recent years have emerged as the single largest contributor to the total agricultural export from the country accounting for over one fifth of the total agricultural exports. Cereals (mostly basmati rice and non-basmati rice), oil seeds, tea and coffee are the other prominent products each of which accounts fro nearly 5 to 10% of the countries total agricultural exports. Where does Indian stand in terms of Global Integration? India clearly lags in globalisation. Number of countries have a clear lead among them China, large part of east and far east Asia and eastern Europe. Lets look at a few indicators how much we lag. Over the past decade FDI flows into India have averaged around 0.5% of GDP against 5% for China 5.5% for Brazil. Whereas FDI inflows into China now exceeds US $ 50 billion annually. It is only US $ 4billion in the case of India Consider global trade - India's share of world merchandise exports increased from .05% to .07% over the pat 20 years. Over the same period China's share has tripled to almost 4%. India's share of global trade is similar to that of the Philippines an economy 6 times smaller according to IMF estimates. India under trades by 70-80% given its size, proximity to markets and labour cost advantages. It is interesting to note the remark made last year by Mr. Bimal Jalan, Governor of RBI. Despite all the talk, we are now where ever close being globalised in terms of any commonly used indicator of globalisation. In fact we are one of the least globalised among the major countries - however we look at it. As Amartya Sen and many other have pointed out that India, as a geographical, politico-cultural entity has been interacting with the outside world throughout history and still continues to do so. It has to adapt, assimilate and contribute. This goes without saying even as we move into what is called a globalised world which is distinguished from previous eras from by faster travel and communication, greater trade linkages, denting of political and economic sovereignty and greater acceptance of democracy as a way of life. Consequences: The implications of globalisation for a national economy are many. Globalisation has intensified interdependence and competition between economies in the world market. This is reflected in Interdependence in regard to trading in goods and services and in movement of capital. As a result domestic economic developments are not determined entirely by domestic

policies and market conditions. Rather, they are influenced by both domestic and international policies and economic conditions. It is thus clear that a globalising economy, while formulating and evaluating its domestic policy cannot afford to ignore the possible actions and reactions of policies and developments in the rest of the world. This constrained the policy option available to the government which implies loss of policy autonomy to some extent, in decision-making at the national level. ~

4-12-2007 Corporate Social Responsibility: Impact of globalisation and international business Kim Kercher Bond University, Kim_Kercher@bond.edu.au Follow this and additional works at: http://epublications.bond.edu.au/cgej This Journal Article is brought to you by the Faculty of Law at ePublications@bond. It has been accepted for inclusion in Corporate Governance eJournal by an authorized administrator of ePublications@bond. For more information, please contact Bond University's Repository Coordinator. Recommended Citation Kim Kercher. (2007) "Corporate Social Responsibility: Impact of globalisation and international business" ,, . http://epublications.bond.edu.au/cgej/4 Corporate Social Responsibility: Impact of globalisation and international business Abstract [Extract] Corporate Social Responsibility (CSR) is associated with the conduct of corporations and in particular whether corporations owe a duty to stakeholders other than shareholders. Whilst the phrase Corporate Social Responsibility may be gaining momentum, the concept itself is not new. The question as to whether corporations owe duties to broader stakeholders has been debated at various times throughout the twentieth century. Keywords

corporate social responsibility, corporations, globalisation, international business This journal article is available at ePublications@bond: http://epublications.bond.edu.au/cgej/4 Corporate Social Responsibility Impact of globalisation and international business By Kim Kercher Date of publication: 11 December 2006 Introduction Corporate Social Responsibility (CSR) is associated with the conduct of corporations and in particular whether corporations owe a duty to stakeholders other than shareholders. Whilst the phrase Corporate Social Responsibility may be gaining momentum, the concept itself is not new. The question as to whether corporations owe duties to broader stakeholders has been debated at various times throughout the twentieth century. The CSR debate has largely revolved around the conduct of multinational corporations (MNEs) and other large private companies which, due to their size, have the ability to significantly influence domestic and international policy and the communities in which they operate. Central to the debate is the perceived deficiency of national and international law remedies regarding corporate accountability, in particular the ability of available regulation to successfully regulate a corporations conduct in jurisdictions outside the corporations home state. Proponents of CSR argue that the efficient functioning of global markets depends on socially responsible business conduct. There are a number of factors relevant to the current CSR debate, including: globalisation and the proliferation of crossborder trade by MNEs resulting in an increasing awareness of CSR practices relating to areas such as human rights, environmental protection, health and safety and anticorruption; organisations, such as the UN, the Organisation for Economic Cooperation and Development (OECD) and the International Labour Organisation (ILO), have developed compacts, declarations, guidelines, principles and other instruments that outline norms for acceptable corporate conduct; access to information and media enables the public to be more informed and to easily monitor

corporate activities; consumers and investors are demonstrating increased interest in supporting responsible business practices and are demanding more information as to how companies address risks and opportunities relating to social and environmental issues; recent high profile corporate collapses have contributed to public mistrust and the demand for improved corporate governance, accountability and transparency; commonality of expectations by citizens of various countries with regard to minimum standards corporations should achieve in relation to social and environmental issues, regardless of the jurisdiction in which the corporation operates; and increasing awareness of the inadequacy of current regulations and legislation with regard to CSR matters and the regulation of MNEs.1 1 Strategis Canada, An overview of Corporate Social Responsibility, Part 1, <http://strategis.ic.gc.ca/epic/internet/incsrrse.nsf/printen/re00120e.html> at 14.06.06 CORPORATE SOCIAL RESPONSIBILITY: IMPACT OF GLOBALISATION 2 Interestingly, the fundamentals of CSR are considered to be universal reflecting the globalisation of business and economies. The traditional ethos of maximising shareholder value without regard to other stakeholders is an outdated notion in todays global environment. CSR not only sits comfortably with the mantra of maximising shareholder value, sustainable CSR practices enhance shareholder value. Definition A single globallyaccepted definition of CSR does not exist, as the concept is still evolving. The language used in relation to CSR is often used interchangeably with other related topics, such as corporate sustainability, corporate social investment, triple bottom line, socially responsible investment and corporate governance. However, various individuals and organisations have developed formal definitions of CSR, including2: The commitment of business to contribute to sustainable economic development, working with employees, their families, the local community and society at large to improve their quality of life (World Business Council on Sustainable Development).

 Operating a business in a manner that meets or exceeds the ethical, legal, commercial and public expectations that society has of business (Business for Social Responsibility). A set of management practices that ensure the company minimises the negative impacts of its operations on society while maximising its positive impacts (Canadian Centre for Philanthropy). The integration of business operations and values whereby the interests of all stakeholders including customers, employees, investors, and the environment are reflected in the companys policies and actions (The Corporate Social Responsibility Newswire Service). It is important to differentiate CSR from charitable donations and good works, ie corporate philanthropy and human rights. The debate The CSR debate broadly focuses on whether a corporations sole purpose is to maximise shareholder wealth (shareholder primacy principle), vs. the ability to consider a broader range of stakeholders in its decision making. The debate has been the subject of commentary throughout the twentieth century and continues to be relevant due to the size and power of MNEs and the globalisation of business operations. The debate in each era has been triggered by different catalysts. Traditionally the debate focused on the power of corporations, particularly large national and multinational corporations, however the debate has evolved over time to consider broader social impacts such as the environment, employee and community rights. Areas of focus throughout the twentieth century included: 1930s general debate as to the role and purpose of corporations, ie solely a shareholder focused vehicle or an entity with wider responsibilities;3 1950s focused on the disproportional power of the US corporation compared to other nations; 2 Australian Government, CSR Defined <http://www.partnerships.gov.au/csr/corproate_csr_defined.shtml> at 16 June 2006. 3 Andrew Clarke, The Models of the Corporation and the Development of Corporate Governance (2005) 1. CORPORATE SOCIAL RESPONSIBILITY: IMPACT OF GLOBALISATION 3

 1960s and 1970s the corporations role in relation to environmental degradation, minority rights and consumer protection; 1980s and 1990s targeted the social impact of the proliferation of corporate raiders and hostile takeovers;4 and the current debate weaves all the elements of previous debates together from a global and community perspective and is focused on whether regulation should be expanded to encompass CSR matters. The following quotes illustrate the consistency of thought over time with regard to corporations having social obligations: In 1932 American commentator, E Merrick Dodd argued companies, like individuals, should strive to be good corporate citizens by contributing to the community to a greater extent than is generally required and therefore the corporation as an economic institution has a social service as well as a profit making function;5 In January 1973 The Confederation of British Industry published the Watkinson Report A new Look at the Responsibilities of the British Public Company which observed that there must be and be seen to be an ethical dimension to corporate activity and concluded companies must recognise that they have functions, duties and moral obligations that go beyond the immediate pursuit of profit and the requirements of law; In 2001 Robert Hinkley observed corporations exist only because laws have been enacted to provide for their creation and give them licence to operate. When these laws were enacted most corporations were small and their impact on society was insignificant Today corporations are our most powerful citizens and it is no longer tenable that they be entitled to all the benefits of citizenship, but have none of the responsibilities6. The shareholder primacy proponent argues that a corporations sole reason for existence is to maximise shareholder wealth whilst obeying the laws of the countries within which the corporation operates. Economist Milton Friedman famously argued that because shareholders own corporations,

the only social responsibility of business is to increase profits. Friedmans argument gained traction, especially after the publication in 1976 of an influential paper, Theory of the Firm, which stated shareholders are principals who hire directors as their agents to manage corporations, and the job of directors is to increase shareholder wealth through every means possible, short of violating the law.7 Proponents of CSR argue that, for a corporations longterm success and profitability, its directors must consider the interests of shareholders and other relevant corporate stakeholders such as employees, consumers and the communities in which the corporation operates. Current proponents of CSR maintain there is demonstrated evidence that corporations which implement relevant and sustainable CSR practices perform better and attain greater competitive advantage. Despite the various arguments, much of the corporate industrialised world has attempted to find a balance with regard to the corporations impact on a wider group of stakeholders, whilst also focusing on maximising shareholder wealth. A recent global survey of corporate executives revealed that, 4 Corporations and Market Advisory Committee, Corporate Social Responsibility Discussion Paper (November 2005) 7. 5 Andrew Clarke, The Models of the Corporation and The Development of Corporate Governance (2005) 3. 6 Kerrie Burnmeister, Corporate Responsibility A Matter or Ethics or Strategy, Blake

Waldron Dawson
<http://www.bdw.com.au/publications/issues/articles/Issues1Corp_Responsibility.pdf> at 11 June 2006. 7 Prof Lynn A Stout, Shareholders Unplugged, UCLA School of Law <http://www.legalaffairs.org/issues/March April2006/argument_Stout_marapr06.msp> at 18 June 2006. CORPORATE SOCIAL RESPONSIBILITY: IMPACT OF GLOBALISATION 4 overwhelmingly, executives embrace the idea that the role of corporations in society goes beyond simply meeting its obligations to shareholders.8 This view is also supported by a recent survey of global

investment managers which recognised that environmental, social and governance matters may be critical to investment performance.9 Additionally, three quarters of the one hundred and fifty seven global corporate managers surveyed predicted that social or environmental corporate performance indicators would become mainstream investment considerations within ten years.10 CRS and the law Corporate history provides many examples of companys pursing profit without regard to relevant CSR matters, including: Nike factories in Asia were criticised for extremely poor working conditions and for employing young children;11 Nestle received criticism in relation to its practices including unethical marketing and utilising a supply chain that uses child bonded labour; James Hardie has been criticised regarding its failure to provide adequate compensation to people affected by asbestos related diseases resulting from the companys building products; Ford Pinto scandal whereby Ford, although aware of a fatal design flaw, decided it would be cheaper to pay off possible law suits with regard to resulting deaths instead of recalling and fixing the affected cars;12 Shells joint venture with the Nigerian government where, in 1995, Ken Saro Wiwa and eight others were executed largely due to leading a nonviolent campaign against environmental damage associated with the operations of multinational oil companies, including Shell and British Petroleum. Shell was criticised for not using its power to intercede with regard to the executions.13; and; Enron manipulated electricity in order to maximise profits at the expense of Californian citizens. Historically, a narrow view of corporate responsibility has been enforced whereby a corporations responsibility extends only to maximising profits. In Dodge v Ford Motor Co14 the Michigan Supreme Court upheld the shareholders claim that a corporation is carried on primarily for the profit of the shareholders and therefore the powers of the directors are to be exercised on this basis. The decision of

the directors not to declare a dividend to facilitate the expansion of the business and increase the number of employees was considered to be inappropriate. However, subsequent cases have taken a more flexible approach. Decisions made to benefit consumers, the community, employees and the 8 The McKinsey Global Survey of Business Executives: Business and Society, The McKinsey Quarterly (December 2005), conducted the survey in December 2005 and received responses from 4,238 executives, more than a quarter of them CEOs or other Clevel executives in 116 countries. 9 Mercer Investment Consulting, 2006 Fearless Forecast What do investment managers think about responsible investment ( March 2006) at 11. 10 Ibid 11. 11 Global exchange 2005, Nike Campaign <http://www.globalexchange.org/campaigns/sweatshops/nike/faq.html> at 14 June 2006. 12 <http://en.wikipedia.org/wiki/Ford_Pinto#Safety_problems> at 14 June 2006. 13 <http://en.wikipedia.org/wiki/Royal_Dutch_Shell#Nigeria> at 14 June 2006. 14 170 NW 668 (1919). CORPORATE SOCIAL RESPONSIBILITY: IMPACT OF GLOBALISATION 5 environment have been considered as not breaching directors duties where shareholders interests have not been completely disregarded and emphasis placed on the corporations future.15 In Australia, the traditional view is that case law and corporations legislation does not extend a directors obligation to consider stakeholders other than shareholders (other than in respect of creditors when a company is or is likely to become insolvent).10 Acting in the best interest of the company has generally been interpreted by the courts as acting in the best interest of shareholders. However, laws relating to labour conditions, consumer protection and community matters such as environmental protection apply to corporations and therefore any decision by directors in breach of these requirements may potentially lead to a breach of directors duties.16,17 Recently the Parliamentary Joint Committee (PJC) on Corporations and Financial Services Inquiry into Corporate Responsibility and Triple Bottom Line Reporting (Committee) considered whether the legal

framework, viz. the Corporations Act, should be amended to legally oblige directors to consider broader interests. On 22 June 2006, the PJC released their findings, preeminent amongst their findings is the recommendation that there be no amendment to the Corporations Act to require directors to consider the public interest, instead the PJC recommends a voluntary self regulatory approach. During the review, the PJC noted, inter alia: the Corporations Act permits directors to have regard to the interests of broader stakeholders;18 many companies are voluntarily integrating the consideration of broader community interests into their core business strategies; the importance of balancing the long term view of a companys viability and profitability with the focus on short term returns; by international standards, Australia lags in implementing and reporting on CSR; CSR initiatives assist (i) maintain and build reputation and (ii) recruit and retain high quality staff; institutional investors have a strong influence on corporate behaviour and are more likely to take a longer view; support for the adoption of the UN Principles for Responsible Investment; overall reporting should remain voluntary as mandatory reporting would lead to a tick the box mentality; a voluntary standardised reporting framework should be developed and advocated support of the Global Reporting Initiative; and 15 Teck Corp v Millar (1973) 33 DLR (3d) 28. Allens Arthur Robinson Corporate Governance Site, Directors duties and corporate philanthropy <http://www.aar.com.au/corpgov/iss/corp/corpdir.htm?print=true> at 4 June 2006. 16 Allens Arthur Robinson, Corporate Governance Site, Directors duties and corporate philanthropy, <http://www.aar.com.au/corpgov/iss/corp/cpmr[dor.htm> at 4 June 2006. 17 Examples include: various state based environmental legislation, s 299(1)(ff) of the Corporations Act which requires companies to report on environmental performance, legislation regarding occupational health and

safety as state and federal level, Trade Practices Act which promotes competition and fair trading to protect consumers. 18 The interests of the company include the continuing wellbeing of the company. Directors must not act for motives foreign to the companys interests, but the law permits them to consider many interests and purposes, as long as there is also a purpose of benefiting the company. (See JD Heydon, Directors Duties and the Companys Interests in P Finn (ed), Equity and Commercial Relationships (Law Book Company, 1987) 135.) Submission by the New South Wales Young Lawyers Pro Bono and Community Services Taskforce to the Corporations and Markets Advisory Committee, <http://www.lawsociety.com.au/uploads/files/1142226553639_0.5476435755609974.doc> at 7 July 2006. CORPORATE SOCIAL RESPONSIBILITY: IMPACT OF GLOBALISATION 6 ASX Governance Recommendations should be expanded to incorporate CSR sustainability reporting guidelines. Although the committee does not believe it is necessary to mandate either (i) consideration of stakeholders interests or (ii) sustainability reporting, the committee is of the view that there is a need to ensure corporations consider these matters.19 The PJC commented that any hesitation on the part of corporate Australia in incorporating CSR matters into their business practices does not arise from legislative constraints of the Corporations Act. The PJC considers that the interpretation of the current legislation is the best way forward for Australian corporations on the basis that an effective director will realise that the wellbeing of the corporations comes from strategic interaction with outside stakeholders.20 The ASX Corporate Governance council released an explanatory and consultative paper outlining the councils review of Good Corporate Governance and Practice Guidelines in November 2006. The paper considers, amongst other matters, recommendations of the PJC regarding CSR and outlines the Councils proposals regarding same. The major proposed changes relate to Principle 7 which deals with

risk management. New commentary seeks to provide guidance on risk management and advises that risk management encompasses legal obligations and the expectation of stakeholders, and notes that an effective risk management involves considering factors that bear upon the companys continued good standing with its stakeholders and community.21 Further the commentary notes that stakeholders may include shareholders, employees, business partners, creditors, consumers, the environment and the broader community in which the company operates.22 The commentary advises that material risks may include operational, environmental, sustainability, compliance, strategic or external, ethical conduct, reputation or brand, technological, product or service quality and human capital, which, if not properly managed, will impact on the company.23 The Council seeks feedback as to the role the council should undertake in assisting companies reporting on risks relating to CSR matters. US reform (like Australia) has focused predominantly on the integrity of financial information and as yet has not mandated CSR. As a result, a majority of US states have adopted, and still retain, corporate constituency statutes, which permit directors to broaden the stakeholders they consider in corporate decision making24,25. Typically the statutes allow the board, in discharging their duties, to consider the impact on employees, suppliers, customers and communities. Many argue that the introduction of prescriptive regulation with regard to CSR matters is unnecessary and would in fact result in directors being less accountable. Interestingly, although many argue that existing regulation allows corporations to conduct their operations in a socially responsible manner, there is less commentary as to how corporations are held accountable in the absence of prescriptive legislation where a corporations domestic or international policy is not consistent with acting in a socially responsible manner. A variety of European legislative and regulatory development (UK, France and Austria) has increasingly required the reporting of CSR, such as the Nouvelles Regulations Economiques introduced

19 Parliamentary Joint Committee on Corporations and Financial Services, Corporate Responsibility: Managing Risk and creating value (22 June 2006). 20 Parliamentary Joint Committee on Corporations and Financial Services Corporate Responsibility: Managing Risk and creating value (22 June 2006) 37. 21 ASX Corporate Governance Council, Review of the Principles of Good Corporate Governance and Best Practice Recommendations Explanatory and Consultation Paper (November 2006) 18. 22 ASX Corporate Governance Council, Principles of Good Corporate Governance and Good Practice Recommendations Exposure Draft of Changes (November 2006) 30, 31. 23 Ibid 30, 31. 24 Corporations and Market Advisory Committee, Corporate Social Responsibility Discussion Paper (November 2005) 7. 25 The Pennsylvania Act (23 December 1983) was the first corporate constituent statute. CORPORATE SOCIAL RESPONSIBILITY: IMPACT OF GLOBALISATION 7 by France in 2001 and the UKs Operating and Financial Review effected in April 2005. Reform in the UK appears to be the most ambitious to date as it will require directors to consider the impacts of their business operations on, amongst other matters, employees, the community and the environment. 26 The UK Government has also committed to publishing advice on how directors should interpret their duties regarding the consideration of social and environmental matters. 27 Other countries have not followed the UKs approach with regard to expanding directors duties to incorporate the consideration of a broader group of stakeholders. Globalisation Twenty years ago, environmental and social issues were for activists. Ten years from now, they are likely to be amongst the most critical factors shaping government policy and corporate strategy. Twenty years ago, we were a series of local states and countries, national and regional businesses that were partially connected. Ten years from now, we will be globally interdependent as individuals and organisations.28 International investment by MNEs is central to corporate globalisation, which

inevitably will lead to a desire to harmonise laws and reporting practices. MNEs tend to be a focal point with regard to CSR due to their size and complexity and the fact that they operate in more than one jurisdiction either directly or via subsidiary entities or in alliances with other entities. The most difficult issues arising with regard to CSR occurs in poor countries with weak and sometimes corrupt governments. Many MNEs are larger and more economically significant than the developing nations in which they operate. Whilst MNEs may facilitate the stimulation of a developing nations economy, they also have the capability of abusing their power in host countries which are often either unable or unwilling to hold MNEs accountable for inappropriate conduct. Poorly regulated international investment in these environments distorts local development, fuels conflict and may contribute to abuses occurring.29 Accordingly, strengthening cross border corporate accountability and more effective international regulation of MNEs is necessary. In addition, developing countries should be encouraged to strengthen their political and economic systems to enable their governments to more effectively regulate the private sector. Historically international law remedies in relation to MNEs are considered weak. This weakness is exacerbated when domestic laws are incapable of holding MNEs accountable for inappropriate conduct in other jurisdictions. This issue is further complicated when the national law in the country where the inappropriate conduct occurred is either inadequate or the judicial system or government is not motivated to commence action against the offending corporation. These issues have led to a common criticism the MNEs operate outside the law and therefore no forum capable of holding MNEs accountable for inappropriate conduct exists. New national and international precedents are challenging the historical view. In the US, the Alien Tort Claims Act (ATCA) of 178930 is being used in a number of cases to sue MNEs for violations of 26 <http://www.governance.co.uk/current/2006/200611ne1.htm> at 3 December 2006. 27 <http://www.governance.co.uk/current/2006/200611ne1.htm> at 3 December 2006. 28 PriceWaterhouseCoopers, Corporate Responsibility: Strategy, Management and Value,

<http://www.pwc.com/extweb/pwcpublications.nsf/docid/B4677BCF42BFBE598525712400 2432FC> at 22 June 2006. 29 David Mepham, Beyond Corporate Responsibility Rethinking the International Business Agenda <http://www.policynetwork.net/php/article.php?sid=4&aid=282> at 30 June 2006. 30 The Alien Tort Claims Act is the only United States law permitting MNEs with significant assets in the US to be held accountable for their unethical behavior elsewhere in the world. Passed in 1789 by the First Congress of the United States, it enables victims of torture, slavery, ethnic cleansing, and other crimes against humanity to put the corporations that are responsible on trial in American courts. In recent history, plaintiffs have used it to CORPORATE SOCIAL RESPONSIBILITY: IMPACT OF GLOBALISATION 8 international law in countries outside the US. Following a number of cases in the UK, MNEs may now be legally liable for human rights violations abroad where access to local justice is restricted.31 Although lasting international precedent has not been established with regard to matters considered under either the ATCA or UK cases, the actions are a positive step towards corporate liability with regard to inappropriate conduct by corporations abroad. During the last three decades there has been a growth in bilateral arrangements which have taken the form of investment protection and promotion treaties. These treaties reflect the desire of home country governments to protect the investment of companies aboard and the desire of host countries to attract foreign direct investment. Early treaties concluded with developing countries emphasised international trade and protection of citizens aboard rather than foreign direct investment. However, from 1960 onwards treaties have focused on foreign direct investment. A criticism of these treaties is that the treaties have marginal impact on the decision making of the MNE and host country. Most attempts to regulate CSR have resulted from public international bodies and non government organisations (NGOs). Codes of conduct relating to CSR matters such as bribery, environment and

human rights are voluntary and not legally binding, however, may represent subtle diplomacy by NGOs towards a consensus amongst governments which in turn may be embodied in national legislation or universally accepted standards. The trend in developed nations is to support the reporting of CSR without introducing legislation to mandate CSR practices, instead, governments appear to be content relying on initiatives introduced and championed by NGOs such as the OECD, UN and GRI. OECD Guidelines for Multinational Enterprises The OECD Guidelines for Multinational Enterprises (the Guidelines), first adopted in 1976, are the longest standing initiative for the promotion of high corporate standards. The Guidelines contain voluntary principles and standards for responsible business conduct in areas such as human rights, supply chain management, disclosure of information, anticorruption, taxation, labour relations, environment, competition, and consumer welfare. The Guidelines aim to promote the positive contributions of MNEs to economic, environmental and social progress. sue government officials involved in human rights violations, such as former Philippine dictator Ferdinand Marcos and former Serbian war leader Radovan Karadzic. Most recently, the Alien Tort Claims Act has been used to file suits against multinational corporations complicit in egregious human rights abuses. For example: Burmese villagers have sued Unocal, whose corporate headquarters is just outside Long Beach, California, on charges that its partnerthe Burmese military murdered and raped villagers and forced them to work while assisting with Unocals pipeline project. Nigerian villagers sued Chevron Texaco for its complicity in murders at peaceful protests at a Chevron oil platform and the related destruction of two villages. Eleven Indonesian villagers are suing Exxon Mobil for human rights abuses committed by its security forces. Subcontractors in Iraq involved in the torture and mistreatment of prisoners are being held accountable under the legal authority of the Alien Tort Claims Act.

<http://www.uua.org/actions/immediate/04tort.html> at 7 July 2006. 31 House of Lords judgments in cases involving Rio Tinto in Namibia and Thor Chemicals and Cape plc in South Africa. In addition, a clause in the UK AntiTerrorism, Crime and Security Act 2001 has opened up the possibility that UK companies and nationals, including company directors, could be prosecuted in the UK for corruption offences abroad, regardless of whether they involve public officials or the private sector. David Mepham, Beyond Corporate Responsibility Rethinking the International Business Agenda <http://www.policynetwork.net/php/article.php?sid=4&aid=282> at 30 June 2006. CORPORATE SOCIAL RESPONSIBILITY: IMPACT OF GLOBALISATION 9 The Guidelines express the shared values of 39 countries consisting of the 3032 OECD members and 933 nonmember countries. The adhering countries are the source of almost 90 per cent of the worlds foreign direct investment and are home to most major MNEs. While observance of the Guidelines is voluntary for companies, adhering governments make a formal commitment to promote their observance among MNEs. The most concrete expression of this commitment is the National Contact Point (NCP), often a government office, which is responsible for encouraging observance of the Guidelines and for ensuring that the Guidelines are well known and understood by the national business community and by other interested parties. Critics consider the NCP mechanism weak and ineffective. Accordingly, it has been suggested that the Guidelines and in particular the NCPs be strengthened. The Guidelines are part of a broader package of instruments, most of which address government responsibility and promote open and transparent policy frameworks for international investment.34 Global Sullivan Principles The Global Sullivan Principles (GSP) released in 1999 consists of eight principles. It is a voluntary code of conduct seeking to enhance human rights, social justice, protection of the environment and economic opportunity for all workers in all nations. The GSP originated with suggestions made by Reverend Dr.

Leon Sullivan that a global code be derived from the original Sullivan Principles (which were instrumental in the fight to dismantle apartheid in South Africa). The GSP were developed in consultation with leaders of business, government and human rights organisations in various nations.35 ILO Tripartite Declaration The ILO, founded in 1919, is a specialised agency of the United Nations focusing on labour issues and has 178 member states to date. The ILO Tripartite Declaration (Declaration) also seeks to encourage the positive contribution of MNEs to economic and social progress and states, inter alia, that: MNEs should obey national laws, respect international standards, honor voluntary commitments and harmonise their operations with the social aims of countries in which they operate36; governments should implement suitable measures to deal with the employment impact of MNEs; and in developing countries, MNEs should provide the best possible wages, conditions of work (including health and safety) and benefits to adequately satisfy basic needs within the framework of government policies. Whilst the principles expressed in the Declaration are addressed to governments, employers and workers organisations in both home and host countries, the principles are voluntary37. 32 OECD countries are Australia, Austria, Belgium, Canada, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Spain, Sweden, Switzerland, Turkey, UK, US. 33 The non OECD countries are Argentina, Brazil, Chile, Estonia, Israel, Latvia, Lithuania, Romania and Slovenia. 34 OECD Guidelines for Multinational Enterprises <http://www.answers.com/topic/oecdguidelinesformultinational enterprises> at 25 June 2006. 35 FAQs about the GSP <http://www.unpri.org/files/pri.pdf> at 29 June 2006. 36 Caux Round Table, International Labour Organisation, <http://www.cauxroundtable.org/ILOTripartiteDeclarationofPrinciplesconcerningMultinatio nalEnterprisesand SocialPolicy.html>, at 26 June 2006. CORPORATE SOCIAL RESPONSIBILITY: IMPACT OF GLOBALISATION 10

UN initiatives (i) UN Global Compact Introduced in 1999, the UN Global Compact (Compact) is a voluntary initiative based on 10 core principles relating to human rights, labour standards, the environment and anti corruption. The Compacts 10 principles enjoy consensus across many jurisdictions and are derived from: The Universal Declaration on Human Rights; The International Labour Organisations Declaration on Fundamental Principles and Rights at Work; The Rio Declaration on Environment and Development; and The United Nations Convention Against Corruption. Critics argue that as adherence to the Compact cannot be enforced the Compact may be abused. The Compact itself states that a companys participation does not mean that the Compact recognises or certifies that these companies have fulfilled the Compacts principles. The Compact is considered to be the worlds largest corporate responsibility initiative, with 3000 corporate participants and other stakeholders involved.38 (ii) UN Norms The UN Norms on the Responsibilities of Transnational Corporations and other Business Enterprises with regard to Human Rights (UN Norms) attempts to establish a comprehensive legal framework for the human rights responsibilities of companies. The Norms which endeavour to standardise existing standards are based solely on existing international law regarding human rights and labour standards and deal with issues such as workers rights, corruption, security and environmental sustainability. The UN Norms state that MNEs have an obligation to promote, secure the fulfilment of, respect and protect human rights recognised in international and national law. The UN Norms is not a formal treaty under international law and therefore is not legally binding. (iii) Principles for Responsible Investment The Principles for Responsible Investment (PRI), issued in April 2006, is a voluntary initiative which strives to identify and act on the common ground between the goals of institutional investors and the

sustainable development objectives of the UN. The audience targeted is the global community, however the focus is on the eleven largest capital markets, with a goal of protecting the long term interests of fund beneficiaries39. The PRI were borne from the perceived disconnect between corporate responsibility, and the behaviour of financial markets, which are often influenced by shortterm considerations at the expense of longer term objectives40. The PRI, developed by leading institutional investors and overseen by the UN Environment Programme Finance Initiative and the UN Global Compact, includes environmental, social and 37 Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy, <http://www.ilo.org/public/english/standards/norm/sources/mne.htm> at 26 June 2006. 38 The UN Secretary General Remarks at the launch of the Principles for Responsible Investment, New York Stock Exchange, 26 April 2006 <http://www.un.org/apps/sg/sgstats.asp?nid=2006> at 1 July 2006. 39 UNEP Finance Initiative <http://www.unepfi.org/work_programme/investment/principles/index.html> at 1 July 2006. 40 Principles for Responsible Investment <http://www.unpri.org/files/pri.pdf> at 1 July 2006. CORPORATE SOCIAL RESPONSIBILITY: IMPACT OF GLOBALISATION 11 governance criteria, and provides a framework for achieving higher long term investment returns and more sustainable markets. The UN Secretary General has stated it is my hope that the Principles will help to align investment practices with the goals of the UN, thereby contributing to a more stable and inclusive global economy. 41 Global Reporting Initiative The Global Reporting Initiative (GRI), convened in 1997, was established to improve sustainability reporting practices, while achieving comparability, credibility, timeliness, and verifiability of reported information.42 The Guidelines, first released in June 2000, revised in 2002 with a revision due during 2006, seek to develop globally accepted sustainability reporting guidelines. These guidelines are also voluntary and are used by organisations in reporting on the economic, environmental, and social

dimensions of their activities. The Guidelines are increasingly becoming a universally accepted method of harmonising CSR reporting in various jurisdictions. Approximately 1000 organisations worldwide incorporate the GRIs Guidelines into their reporting. Conclusion Globalisation and the significant growth and influence of the private sector have highlighted issues such as CSR and the regulation of MNEs. Whilst considerable progress has been made in holding companies accountable for their environmental performance, progress on social issues such as human rights, corruption, corporate transparency and labour standards has been more limited. Although there have been attempts to widen the scope of stakeholders directors may consider, for most companies CSR consists of voluntary initiatives designed to enhance the social impact of their practices, with some of these initiatives actively promoted by government. Many corporations have incorporated CSR into their codes of conduct, sought to work closely with NGOs in formulating corporate policy in undeveloped countries, subscribed to the UN Global Compact and other UN initiatives, and have incorporated GRI guidelines into their financial reporting. However despite these initiatives, there still remains a gap pertaining to legal accountability relating to CSR practices, particularly in relation to MNE operations in jurisdictions outside their home state. There are many factors as to why one solution addressing the issue of corporate accountability pertaining to CSR, particularly with regard to directors duties, may not be feasible, such as (i) the sovereignty of the many nations that make up the global community, (ii) diversity of legislation, regulation, culture and business practices of the various jurisdictions in which corporations operate and (iii) the significant uncertainty as to how to regulate the conduct of corporations in foreign jurisdictions. There is no easy solution, however this does not mean a workable solution concerning these matters is not possible or feasible. It is increasingly apparent that in modern industrialised economies, profit maximisation is facilitated by

a demonstrated approach to corporate responsibility. Paradoxically, focusing solely on the traditional view of shareholder value may have a negative impact on a companys ability to maximise shareholder value by placing too much emphasis on short term performance, whilst neglecting longer tem opportunities and issues.43 To maximise the benefits of international investment corporations must 41 Principles for Responsible Investment <http://www.unpri.org/files/pri.pdf> at 1 July 2006. 42 Global Reporting Initiative, Guidelines, <http://www.globalreporting.org/guidelines/2002/dannex1.asp> at 26 June 2006. 43 Chartered Secretaries Australia, Submission to CAMAC in relation to the discussion paper Corporate Social Responsibility (24 February 2006) at 3. CORPORATE SOCIAL RESPONSIBILITY: IMPACT OF GLOBALISATION 12 operate within a clear framework of governance, underpinned at national and international level by law and regulation enforceable either by the companys home state or by a court of international standing, eg, the International Court of Justice. It addition national laws should be widened to enable corporations to be held accountable for inappropriate conduct, undertaken either by themselves or entities controlled by them directly or indirectly, in jurisdictions outside their home state. It may be naive to believe that a meaningful system of global norms could exist without formal deterrence. Although most jurisdictions appear determined to keep CSR on a voluntary footing, regulatory changes are focusing on encouraging higher standards on CSR at home and abroad.44 In Australia, there is significant resistance from the corporate community and other interest groups regarding the introduction of prescriptive regulation regarding CSR practices and reporting. However, despite the arguments for and against prescriptive regulation regarding CSR matters, the threat of criminal or civil sanctions acts as a powerful deterrent. Robert Hinkley suggests that rather than adopt a prescriptive approach, corporate legislation can still be amended by imposing openended duties on corporate

directors to ensure companies do not (i) damage the environment, (ii) abuse human rights, (iii) undertake actions that are detrimental to public health and safety, (iv) engage in conduct that is detrimental to the welfare of communities or (v) is detrimental to employees rights.45 The UK reforms attempts to codify this requirement into directors duties. Although to date much regulation and law enforcement has been anchored in national economic systems, future international regulation may emerge from a gradual convergence of national practices46 and the strength of initiatives undertaken by NGOs. Globalisation by its very nature should enable international dialogue and cooperation by various jurisdictions to facilitate the development of regulatory frameworks capable of transcending national boundaries.47 The issue of accountability in a global context is complex and manifold. However, it may not be a huge conceptual leap to extend state laws to require parent entities and home states to bear some responsibility for the foreign activities of entities controlled by those parent entities.48 Considerable incentives exist for companies to conduct their operations in a socially responsible manner. The challenge is to implement a workable mix of public and private initiatives which are consistently enforced and capable of ensuring companies are encouraged to act in a socially responsible manner whilst being accountable in a legislative context for inappropriate conduct. 44 Jennifer A Zerk, Multinationals and Corporate Social Responsibility

Limitations and Opportunities in International Law (2006, Cambridge University Press) 309.
45 Robert Hinkley, Twenty Eight Words to Redefine Corporate Duties: The Proposal for a Code of Corporate Citizenship, Multinational Monitor Vol 2, Nos 7 & 8 (July / August 2002). 46 OECD SecretaryGeneral Donald Johnston Promoting Corporate Responsibility: The OECD Guidelines for Multinational Enterprises International Investment Perspectives (2004). 47 Jennifer A Zerk, Multinationals and Corporate Social Responsibility Limitations and Opportunities in International Law, (2006, Cambridge University Press) 309.

48 Ibid.