OECD issues updated guidelines on conduct for multinationals

In June 2000, the Organisation for Economic Cooperation and Development (OECD) agreed a revised set of guidelines on responsible business conduct for multinational enterprises. The guidelines, which were adopted by the governments of 33 countries, cover a variety of areas, including employment and industrial relations.

A new and revised set of guidelines for multinational enterprises was agreed on 27 June 2000 by the Ministerial Council of the Paris-based Organisation for Economic Cooperation and Development (OECD). According to the OECD, the guidelines aim to provide "a framework for responsible business conduct in the rapidly changing global economy".

Context

The original guidelines were first published in 1976 and have been updated regularly since, with the most recent revision in 1991. The new guidelines were agreed after more than one year of negotiations between government officials, employers' representatives and trade union representatives, as well as civil society and environmental groups. According to Peter Costello, chair of the OECD Ministerial Council meeting, "the basic premise of the guidelines is that principles agreed internationally can help prevent conflict and build an atmosphere of confidence between multinational enterprises and the societies in which they operate."

The guidelines have been endorsed by the governments of the 29 OECD member countries (which include the EU Member States) and of Argentina, Brazil, Chile and Slovakia. Multinationals that operate from or in the signatory countries will be encouraged to adhere to the principles set out in the guidelines, though observance of the guidelines is voluntary.

The guidelines cover a variety of areas such as information disclosure, taxation, competition, science and technology, consumer rights, corruption and the environment. In the employment and labour field, the guidelines contain general principles on employee relations and an important chapter on employment and industrial relations, examined below. It is also worth noting that, on information disclosure, the guidelines stipulate that enterprises should ensure that timely, regular, reliable and relevant information is disclosed publicly (to groups including employees) regarding corporate activities, structure, finances and performance. This may include information on: "material issues regarding employees and other stakeholders"; the enterprise's social, ethical and environmental policies; and relationships with employees and other stakeholders.

General principles

Under the revised guidelines, multinational companies are now encouraged to adopt policies that create employment opportunities and provide training opportunities for employees. Firms are also encouraged not to breach regulations relating to the areas of health, safety and labour standards. Further, they are expected to promote employee awareness of company policies, including training programmes.

The guidelines also state that companies should refrain from taking discriminatory or disciplinary against so-called "whistleblowers", that is, employees who report to management or public authorities corporate practices that contravene the law, the OECD guidelines or company policy.

Employment and industrial relations

In the area of employment and industrial relations, the guidelines state that companies should act within the law and respect the prevailing employment relations and practices. Companies should also (amendments to the previous guidelines are highlighted in italics below):

• respect the right of their employees to be represented by trade unions and other "bona fide" representatives, and engage in "constructive negotiations", either individually or through employers' associations, with such representatives with a view to reaching agreements on employment conditions;

• contribute to the abolition of child labour (new provision);

• contribute to the elimination of all forms of forced labour (new provision);

• not discriminate against employees with respect to employment or occupation on grounds such as race, colour, sex, religion, political opinion, national extraction or social origin (strengthened provision);

• provide facilities to employee representatives as may be necessary to assist in the development of effective collective agreements;

• provide information to employee representatives which is needed for meaningful negotiations on conditions of employment;

• promote consultation and cooperation between employers and employees and their representatives on matters of mutual concern (new provision);

• provide information to employees and their representatives (formerly just employee representatives) which enables them to obtain a "true and fair" view of the performance of the (employing) "entity" or, where appropriate, the enterprise as a whole;

• observe standards of employment and industrial relations that are not less favourable than those observed by comparable employers in the host country;

• take adequate steps to ensure occupational health and safety in their operations (new provision);

• to the greatest extent practicable, employ local personnel and provide training with a view to improving skill levels, in cooperation with employee representatives and, where appropriate, relevant governmental authorities;

• in considering changes in their operations which would have major effects on the livelihood of their employees - and in particular in cases of closure of an entity involving collective lay-offs or dismissals - provide reasonable notice of such changes to representatives of their employees, and, where appropriate, to the relevant governmental authorities, and cooperate with the employee representatives and appropriate governmental authorities so as to "mitigate to the maximum extent practicable adverse effects". The new version of the guidelines adds the recommendation that, in light of the specific circumstances of each case, it would be appropriate if management were able to give such notice prior to the final decision being taken. It also adds that other means may also be employed to provide "meaningful cooperation" to mitigate the effects of such decisions;

• in the context of "bona fide negotiations" with employee representatives on conditions of employment, or while employees are exercising the right to organise, not threaten either to transfer all or part of an operating unit from the country concerned, or transfer employees from the enterprise's component entities in other countries, in order to influence unfairly the negotiations or to hinder the exercise of the right to organise; and

• enable authorised employee representatives to negotiate on collective bargaining or labour-management relations issues and allow the parties to consult (new provision) on matters of mutual concern with management representatives who are authorised to take decisions on these matters.

Implementation

A key element of the new guidelines, according to the OECD, is the enhancement of implementation procedures. While their (non-binding) recommendations are addressed to companies, governments are responsible through "National Contact Points" for promoting the Guidelines, handling enquiries and helping to resolve issues that arise. The revised guidelines set out mechanisms aimed at promoting transparency, accountability and best practice in this process. The role of the OECD Committee on International Investment and Multinational Enterprises (CIME), which oversees the guidelines' operation, has been clarified.

Commentary

The issue of corporate codes of conduct and international labour standards has been increasing in importance over the past few years among policy-makers, social partner organisations and companies (EU9812134F). A recent example of increasing interest by the social partners in this area is the 1999 agreement between the European-level social partners in the commerce sector on a code of fundamental workers' rights (EU9911213F).

While many individual companies have developed their own unilateral codes of conduct, some have recently been making progress in the area of agreed codes of conduct. For instance, in March 2000, two German multinationals, the Hochtief construction group and the Faber-Castell group, which produces writing, drawing and painting products, concluded codes of conduct with trade unions. These were followed by the Spanish telecommunications group Telefónica in April 2000 (EU0005244N) and in July 2000 by the German manufacturing group Freudenberg (EU0008267F).

Although companies are to be applauded for developing their own codes of conduct, agreed or otherwise, the updating of the OECD guidelines represents a significant step in demonstrating the importance for multinationals of adhering to agreed international labour standards in their business operations. The OECD guidelines are the only multilaterally endorsed and comprehensive, authoritative code for multinationals that governments are committed to promoting. As such, they are a welcome contribution in trying to ensure that multinational businesses operate in responsible ways that take into account the concerns and rights of their employees (Neil Bentley, IRS).