Tuesday, 5 February 2019

Corporate culture: capital vs social capital

Australia is this week absorbing the final report of the Royal Commission into 'misconduct in the banking, superannuation and financial services industry'.

What is at the heart of the disregard shown by retail banks and finance houses for regulation aimed at protecting consumers from the excesses of the pursuit of profit motive?

As ANU's John Braithwaite has said, a core dilemma of regulation is "when to punish and when to persuade" (1992+).

Command and control-style punishment and sanctions are not the only way to regulate. There are many reasons for non-compliance, suggesting that regulators sometimes need to preference dialogue and engagement over knee-jerk automatic punishment. There is a strong case to be made for regulatory designs and institutional approaches that privilege engagement, persuasion, education, capacity-building. Braithwaite's 'responsive regulation' theory would suggest that regulators hold punitive powers in reserve while making overtures to regulatees and seeing how they respond to non-punitive approaches. The regulator then adjusts its own approach. This will be perceived, the theory goes, as more fair and so legitimate. Entities will internalise the regulatory goal, compliance will improve and the regulator can let compliant entities essentially self-regulate, and indeed exceed what is required in pursuit of the social goal underlying the regulation.

What is a lesson from the Royal Commission?

It is that this approach, as influential as it has been, needs to be revisited. Or at least the theory needs to be fully implemented if it is to work. Not surprising, that.

The lesson is that regulators -- even where they have these powers -- appear reluctant to use them, and so err on the side of 'engagement' where sometimes demonstrative penalty seems more appropriate. The issue is whether the regulated entities are responding to signals to change. If they are not, another more intrusive approach is warranted from the regulator.

Standing back, the key word is in the first sentence above: motive.

Incentives matter: we can talk all we want about 'values not just value' and 'engendering a shift in corporate culture'. But when all is said and done, market actors respond to incentives, and clear, credible and consistent signals and actions from regulators about the consequences of non-compliance.

And those consequences sometimes need to be severe.

As Commissioner Hayne wrote, "misconduct will be deterred only if entities believe that misconduct will be detected, denounced and justly punished..." It is not deterred -- for such profitable entities -- by requiring those found to have done wrong to "do no more than pay compensation." It is certainly not deterred by the issue of infringement notices in the hope that the market or consumers will respond to those incidents by withdrawing or conditioning their custom or financing.

Responsive regulation remains a highly appealing theory, if properly implemented. It is bound to fail -- as Braithwaite and his disciples have always said -- if only partially implemented. If all the cuddly dialogic bits are followed, but not the hard and punitive bits. Regulators can and should talk to their regulatees about how to improve compliance. But they are not mere consultants to business. They are regulators. Braithwaite would insist that the regulatee must know that the regulator can escalate things, where fair and appropriate and where there is no response to overtures to comply. They must know and see that the regulator can make life very difficult.

As Braithwaite once wrote, dialogue, engagement and capacity building must take place "in the shadow of the axe".

Australian regulators need to have the axe, even if they need to be smart and fair about when to keep it in the background and pursue a more engaged approach.

This is true from banking conduct in the retail sector, to emerging models on supply chain reporting in the context of modern slavery, on which see earlier posts on this blog.


Wednesday, 5 December 2018

Business and Human Rights in Verse: Poem 3

This is the 3rd in a mini-series of attempts to approach themes of 'Business and Human Rights' in verse. The 1st was 'Big Data' and the 2nd 'Supply Chain' (see previous two posts).

‘Dance the Guns to Silence’: some Business and Human Rights in verse

Dr Jolyon Ford
Associate Professor of Law, Australian National University
                                                                                                                                                November 2018



They came at night. It matters not,
What they did exactly, it does not matter.
Let us not try say what they took or did:
The gun will serve the highest bidder.

Across the valley the rotors’ throb
Tells us he comes to see the mines.
Beneath the ridge the scarred land drops
To where we sit and wait in lines.

The low hills crouch, they have given up.
The land is beaten down.
It too has learned this will only stop
When all sign of struggle is gone.

There is no dawn that brings them home,
No song of comfort sung.
They exist only if we remember them,
When all is said, and all is done.

From the camp we hear the shift bells ring,
This is not a place for dreaming.
You will not hear our voices sing,
But nor will you hear the screaming.

In this rich earth, a richer dust concealed,
Though we dig, it is not for truth.
Grass in the breeze where the scar has healed,
Mocks their futile defiant youth.

Some system did all this for gain,
And made our rivers burn.
It took our very soil away
And so our soul in turn.

And so here now we that remain
Mine the seams of lessons never learned,
Listen to the scoured land in its pain,
Wait without hope for their ghosts’ return.
Cambridge MA, 31 Oct. 2018

Wednesday, 28 November 2018

Business and Human Rights in Verse: Poem 2

This is the second of three attempts to approach 'business and human rights' slightly differently (for a law academic), in verse. The first attempt (previous post) was 'Big Data'. The third attempt (next week's post) is 'Extractive'.

‘Dance the Guns to Silence’: some Business and Human Rights in verse

Dr Jolyon Ford
Associate Professor of Law, Australian National University
November 2018

Supply Chain

In these rooms where dull heat squats,
We sprawl and watch the shared screen flicker
Scenes from your world, worlds apart:
Track the thin truth that ties us together.

Do you ever just lie awake at night
And feel the ways our lives are close?
What becomes of the traces of our sweat,
In that bright world the camera shows?

What scent of humanity lingers there,
(It is a small world, after all)?
Persistent and intimate, perhaps we share
A story or secret, something small.

Bits of you come to us in waves,
Lying here watching the things you do.
Yet traces of me linger in your days,
Woven in the things we make for you.

I wake unrested and wait to wash,
We cannot leave this place.
Too tired to care where all this goes,
To think of blame, or of consequence.

You are still out there somewhere, doing
Whatever it is People do with Life.
The myriad things that fill your days
Tease our dreams through hot still nights.
The thread that weaves us does not bind,
The link does not connect;
The traces of me in space and time,
The little hope that’s left.

Stains in the hidden lining remain,
Shame too abstract to make a mark.
Something too faint to keep you awake,
Weeps unheard in this squalid dark.

The folly of our tele-dream:
To think we thought you somehow near.
For your Things we gave our self-esteem,
For such a small world, truly far.
                                                                                                     Singapore, 13 October 2018

Friday, 23 November 2018

Business and Human Rights in Verse: Poem I

This is the first of 3 efforts to approach 'business and human rights' issues in another way. Poem 1 is entitled 'Big Data'; Poem 2 'Supply Chain' and Poem 3 'Extractive':

‘Dance the Guns to Silence’: some Business and Human Rights in verse

Dr Jolyon Ford
Associate Professor of Law, Australian National University
                                                                                                                                                November 2018


Big Data

Auden felt it years ago,
His senses taut and pricked with light:
The gloom that gathers when we know
We cannot know truth, or wrong from right.
Aggregate my many selves,
Average out my patterned moves;
Analyze my weakest points,
Accept the truth that the Data proves.

You are more than just the sum
Of your coded self, something more
Than the image that the moment holds.
When this drops in and tells you things
You did not know about your life,
Remember that we yearned for this;
Accept the truth that the Profile tells;
Know that if blame is even worth it now,
In truth we did this to ourselves.

                                                                                                                                 Canberra, 10 October 2018

Wednesday, 7 November 2018

Who is 'business and human rights' for?

Who are those doing 'business and human rights' (BHR) stuff, and for whom are they doing these things?

This post offers two reflections on the BHR 'movement'.

(I'm conscious that I'm at risk of over-thinking things about the BHR movement or 'field'. Examples of this include posts asking 'has BHR lost its way?' or one reflecting on what the field itself comprises.)

The first reflection I've used since 2016 in my Masters (LLM) course in BHR, to stimulate student thinking. It might be framed as who 'does' BHR?

The second reflection is one I offered at a recent talk at ANU's RegNet, my doctoral alma mater. It might be framed as who is BHR for?

Who 'does' BHR?

Many students study human rights with a view to 'making a difference'. Most of my students accordingly focus on classic public law and public international law subjects.

Yet -- and this is what I leave my students with each course-end -- perhaps the most effective BHR lawyers of the future will not be steeped in conventional human rights skills and knowledge. They will be people who understand contract law, corporate law, fiduciary duties of institutional investors, international trade and investment law and negotiations... they will also be students who have grasped that understanding the significance of local political economy dynamics is as important as fluency in the UN Guiding Principles on BHR: law and power, law as power.

BHR could do with more reflection, for example, on expertise, who is doing it, on how 'power law and expertise shape the global political economy' in a David Kennedy (2016) sense.

Many activists (and academics) in this field appear not only not to understand business or corporations, they sometimes seem not to want to understand them. Business and investment is something that happens out there, by some people who are probably not as nice or worldly as us.... Yet one has to question BHR strategies grounded in knee-jerk distaste for the very entities that one needs to understand (and sometimes engage with!) in order to transform problematic patterns.

Who is BHR 'for'?

Two of the BHR topics that perhaps dominate in Australia at present are (i) data, new technology and human rights; and (ii) corporate action on human rights risks in the supply chain under the intended Modern Slavery Act.

Both are important, complex, etc. Yet both, in different ways, have the effect of focusing very much on 'us' (in the first world) rather than 'them' (places where the aggregate of serious, systemic adverse BHR impacts occur).

Take the supply chains focus, which is one I'm part of. (An earlier post linked above noted that BHR is about a lot more than just 'modern slavery', as current and important and hard as that problem is).

There is a possible critique that the orientation of our current 'modern slavery' enquiries is parochial or inward looking. Its dominant vein is as follows: we must act to ensure we -- and our jurisdiction, our supermarket shelves, our wardrobes -- are not 'tainted' by association with modern slavery risk. That is not the same as saying 'we must tackle this phenomenon wherever it occurs'.

Have we succeeded if, through altered purchasing and procurement patterns (etc.) we rid Australia of any tainting trace of modern slavery, even if the phenomenon is alive and well in our region?

At least on Modern Slavery Act matters, is BHR as a movement (and so to a degree BHR scholarship) at risk of framing things as 'what can we do to rid ourselves of this human stain?' rather than 'what raft of measures will best address this topic in its own right?', that is, what works irrespective of how it affects our space?

This second reflection might be viewed as a bit unfair. After all, we (in Australia) are simply looking for ways, within our sphere of influence (so to speak), to address a global problem. And it is natural for analysis to 'begin at home' and focus on such issues. Still, its just a reflection.