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Business and human rights cases remind us that subjectivity counts

Is corporate responsibility now standardised?

With all the codes, frameworks, books, management venn diagrams and corporate speak out there, an alien coming to earth with a specialist interest in corporate sustainability might think so.

But it’s not. The ethics of a firm are still a matter of subjectivity in many cases.

The case of lawyers/Ecuadorians vs. Chevron is probably the most high profile example today.

If you haven’t followed the story, it’s worth reading up about.

For some, it’s ‘Chernobyl in the jungle’ which must be paid and accounted for. For others, it’s trial lawyers funded by hedge funds and private investors to screw money from a giant corporation.

The latest coverage is here, from the FT.

In short, an Ecuadorean court has upheld an $18bn environmental damages award against Chevron.

One “commentator” in the FT article expects the company to have to shell out $2-3 billion to eventually settle the 18-year old case.

The legal judgement is all about who should be responsible for jungle pollution from poorly-managed oil extraction dating back 40 odd years or more, and the results of that for communities and the environment.

Ethical Corporation’s coverage is here, with (earlier) responses from the company here, and activists here.

Note the Wikipedia health warning: “The neutrality of this section is disputed“.

You’ll find that Wikipedia comment on many other areas concerning now ‘classic’ cases of activists vs. corporations that are still running. Dow vs. Bhopal campaigners, Amnesty vs. Shell in Nigeria. There are others too. These three cases are possibly the longest running and best known.

The Chevron/Ecuador case is long, complicated, and filled with what some people might call ‘dirty tricks’ on both sides.

Others might call them smart tactics, mistakes, legal maneuvers and rebuttals.

What you think, inevitably, depends on how you view the case and its history and ramifications.

This New Yorker piece, which looks more at the lawyer fighting Chevron and some of his mistakes in campaigning, provides some valuable insight.

(Take note though: Not all the information surrounding the case is included, so don’t take this as the gospel truth)

What’s my point here? Twofold I suppose:

1) This case, and many others documented on, demonstrate both that perceptions of what corporate ethics look like are still very mixed, depending on where in the world things happen, and who you ask.

Republicans in the US (and perhaps most of your board!) will probably view it as corporate extortion, whilst left-leaning folks see it was a test case for indigenous rights and small countries vs. large corporations.

This is not new, but still relevant: It’s important to remember that perception and subjectivity count for more than codes, management systems and corporate speak. We perhaps forget that sometimes.

2) If you are looking for evidence to demonstrate that corporate environmental/human rights risks are growing, and that they can emerge unexpectedly and drag on for years, damaging your reputation, this case provides good evidence. Risks like this are growing, and not just for oil & gas companies.

So whilst you can’t change the past, you can react to it well should an issue arise, given the Ruggie framework which now exists.

Here’s a video about this, and the business and human rights agenda in 2012:

1 Comment

  1. I liked your even-handed piece.

    However, you failed to highlight that Chevron is now facing not just a huge hit to its reputation but a $18 billion judgment that the communities in Ecuador are just a few steps away from enforcing and collecting in the many countries where Chevron has assets.

    In sworn legal statements, Chevron has admitted that the company faces “irreparable injury to [its] business reputation and business relationships” from potential enforcement of the Ecuadorian court judgment.

    However, Chevron has failed to characterize these risks in its public filings. These choices may lead some shareholders to question the adequacy of Chevron’s public statements and disclosures and whether the board and management are fulfilling their fiduciary duties to properly manage this significant risk to the company’s business and value.

    Chevron’s principal legal defense against immediate enforcement of the $18 billion judgment was to obtain a preliminary injunction from U.S. District Court. That protective injunction was overturned on appeal.

    Chevron has also sought to defend itself though international arbitration against the government of Ecuador under the provisions of the Bilateral Investment Treaty (BIT) between the U.S. and Ecuador. At present, these arbitral proceedings are running concurrently with the case in Ecuador. Although Chevron could conceivably obtain money damages from the Ecuadorean government from this process, the arbitral panel has no jurisdiction over the Ecuadorean plaintiffs or the Ecuadorean court system.

    Shameless plug: read the report authored by me and Sanford Lewis on the subject: