Good Governance in 21st Century, Opportunities, Threats, Weaknesses and Strengths.

1. (Un)Ethical
Corporate Giving:
The Case of Tobacco Industry
Jalal
Presented in MyWATCH-SEATCA’s “Good Governance and Ethical Corporate Social Responsibility Seminar”
Subang Jaya, Selangor, Malaysia
September 4, 2014

2. AGENDA
1.Tobacco Companies’ Social Programs
2.ISO 26000 Principle 3: Ethical Behaviour
3.Cases of Tobacco Industry Philanthropy
4.How CSR Experts View Tobacco Industry

3. 1. Tobacco Companies’ Social Programs
Disaster relief programs
Disaster response
Post-disaster recovery
Environmental programs
Tree planting
Litter reduction
Social and cultural programs
Educational programs (scholarship, libraries, etc.)
Support for music, fashion, theater, other arts programs
“Public health” programs
Youth smoking prevention
Public information campaigns about the harms of tobacco consumption
Development of “reduced harm” tobacco products
Website development for communication with public
Insertion of messages inside cigarette packs
Reduction of public harms associated with tobacco use (dedicated rooms for smokers)
Support of sporting events

4. 2. ISO 26000 Guidance on Social Responsibility and Ethical Behaviour
•Started as discussion of consumer groups’ (COPOLCO) concerns in they year 2000.
•Final version was completed in 2010. Around 93% of ISO (International Organization for Standardization) members support the final document.
•Launched as Guidance on Social Responsibility on November 1st, 2010.
•It is not (yet?) a certifiable standard. Many countries are currently discussing the possibility of having ISO 26000-based national social responsibility standard.
•By far, ISO 26000 is the most comprehensive guidance document for CSR. It will remain as one at least until 2020, according to many experts.

5. ISO 26000:2010 Definition of Social Responsibility
“Responsibility of an organization for the impacts of its decisions and activities on society and the environment, through transparent and ethical behaviour that contributes to sustainable development, health and the welfare of society; takes into account the expectations of stakeholders; is in compliance with applicable law and consistent with international norms of behaviour; and is integrated throughout the organization and practiced in its relationships.”
(ISO 26000: 2010 Guidance on
Social Responsibility)

6. ISO 26000 Principles
1.Accountability
2.Transparency
3.Ethical Behaviour
4.Respect for Stakeholder Interests
5.Respect for the Rule of law
6.Respect for International Norms of Behaviour
7.Respect for Human Rights

7. Principle 3. Ethical Behaviour
An organization should behave ethically. An organization's behaviour should be based on the values of honesty, equity and integrity. These values imply a concern for people, animals and the environment and a commitment to address the impact of its activities and decisions on stakeholders' interests.

8. Expectations in Ethical Behaviour
1.Identifying and stating its core values and principles;
2.Developing and using governance structures that help to promote ethical behaviour within the organization, in its decision making and in its interactions with others;
3.Identifying, adopting and applying standards of ethical behaviour appropriate to its purpose and activities and consistent with the principles outlined in this International Standard;
4.Encouraging and promoting the observance of its standards of ethical behaviour;
5.Defining and communicating the standards of ethical behaviour expected from its governance structure, personnel, suppliers, contractors …;

9. 6.Preventing or resolving conflicts of interest throughout the organization that could otherwise lead to unethical behavior;
7.Establishing and maintaining oversight mechanisms and controls to monitor, support and enforce ethical behaviour;
8.Establishing and maintaining mechanisms to facilitate the reporting of unethical behaviour without fear of reprisal;
9.Recognizing and addressing situations where local laws and regulations either do not exist or conflict with ethical behaviour;
10.Adopting and applying internationally recognized standards of ethical behaviour when conducting research with human subjects; and
11.Respecting the welfare of animals, when affecting their lives and existence, including by providing decent conditions for keeping, breeding, producing, transporting and using animals.

10. •TI does not apply standards of ethical behavior that is consistent with all principles of ISO 26000.
•Top executive of tobacco companies lied under oath that nicotine is not addictive (#2 of corporate scandal of all time, according to TIME).
•TI cases (of stakeholder engagement and advertising) are classic examples of ethical misconduct in any business ethics textbook.
•In Indonesia tobacco lobby went to court and challenged evidence that tobacco is addictive. In the Philippines, tobacco companies export cigarette packs with PHW but sued the DoH for wanting the same for Filipino people.

11. 3. Cases of Tobacco Industry Philanthropy
•Controversial industries, including tobacco industry, tend to reduce CSR to philanthropy/charitable donation, mainly in developing countries.
•As other controversial industries, Tobacco Industry tend to do and communicate more in philanthropic activities to gain status of “socially responsible” industry.
•Communicating philanthropic activities helps tobacco industry to reduce risks, and to gain political influence in public policy formulation.

12. • Richard Smith, editor of the BMJ, is
professor of medical journalism at
Nottingham University, which has taken
£3.8m from British American Tobacco to
fund an international centre for the
study of corporate responsibility. He
argues that the university should return
the money.
• The university's vice chancellor, Sir Colin
Campbell, argues the opposite.
• Readers are asked to vote on bmj.com
whether the university should return
the money and whether Smith should
resign if it doesn't.
• Of the 1075 votes cast, 84% said that
the university should return the money
and 54% said that Dr Smith should
resign if it refused to do so.
Case 1.
BAT’s funding
for Nottingham
University’s
ICCSR

13. • In May 2007, the Instituto Carlos de la
Salud—now Instituto Carlos Slim de la
Salud (ICSS)—was endowed with US$500
million to focus on priority health issues in
Latin America.
• ICSS was soon criticised on the grounds
that its funding was derived from tobacco
industry profits and that its founder Carlos
Slim He´lu remained an active industry
principal.
• There is conflict of interest between ICSS’s
health mission and its founder’s
involvement in cigarette manufacturing
and marketing, reflected on ICSS’s website
as a resounding silence on issues of
tobacco and health.
Case 2.
Carlos Slim
and Instituto
Carlos Slim de
la Salud (ICSS)

14. Case 3. BAT’s Partnership with Earthwatch Europe
•BAT sought a partnership with EE to gain a global ally that could provide entrée into the larger NGO community.
•EE debated the ethics of working with BAT, resolving them in BAT’s favour and taking a narrow view of its own overall organizational mission.
•To protect its reputation, EE delayed public disclosure of the partnership.
•Instead, EE promoted it to policymakers and other NGOs, extending BAT’s reputation and reach into influential circles.

15. Six Ways How TI Uses Philanthropy Politically (Fooks and Gilmore, 2013)
1.Developing constituencies to build support for policy positions and generate third party advocacy;
2.Weakening opposing political constituencies;
3.Facilitating access and building relationships with policymakers;
4.Creating direct leverage with policymakers by providing financial subsidies to specific projects;
5.Enhancing the donor’s status as a source of credible information; and
6.Shaping the tobacco control agenda by shifting thinking on the importance of regulating the market environment for tobacco and the relative risks of smoking for population health.

16. 4. How CSR Experts View Tobacco Industry
(1)Categorizing TI as one of the harmful/sinful/controversial industries;
(2)Using its practices as most prominent examples of corporate social irresponsibility (CSI) or Fake CSR as more commonly used by tobacco control (TC) activists;
(3)Naming its investment as irresponsible/unethical one, therefore never pass negative screen of all socially responsible investment (SRI) indexes;
(4)Banning TI’s representatives from speaking in international CSR and/or business ethics conferences; therefore
(5)Calling its aggressive communications as CSR-washing, not CSR communications.

17. Tobacco Industry is sinful, harmful, or at least controversial
Controversial industry sectors defined as those related to ‘‘products, services or concepts that for reasons of delicacy, decency, morality, or even fear elicit reactions of distaste, disgust, offence or outrage when mentioned or when openly presented.’’ Wilson and West (1981)
•TI as controversial industry: Killian and Hennigs (2014) Kotchen and Moon (2012); Lindgren, et al. (2012); Reast, et al. (2013).
•TI as harmful industry: Daube (2012).
•TI as sinful industry: Lal (2013); Cai, Jo, and Pan (2012).

18. TI is socially irresponsible industry,
its CSR is fake
Tench, Sun, and Jones (2012): “we may
define CSI as those business behaviors
and actions that are illegal or legal but
severely unsustainable and/or unethical
thus totally socially unacceptable.”

19. Investing in TI is irresponsible/unethical, therefore TI never pass negative screen of all socially responsible investment (SRI) indexes

20. Since 2004, tobacco companies’ representatives are not allowed to speak in international conferences and seminars on CSR and business ethics.

21. It’s CSR-washing, Not CSR communication!
CSR-washing: “...cases where organizations claim to be more socially responsible than they really are.” (Coombs and Holladay, 2012)
•TI, and other controversial industries, tend to communicate their “CSR efforts” more than other industries (Killian and Hennigs, 2014; Kotchen and Moon, 2012).
•The reason why they communicate more than others: risk mitigation (Jo and Na, 2012), window dressing, and value enhancement (Cai, Jo, and Pan, 2012).
•“Doing well while doing bad” is the ultimate motive for their communication.

22. Thank you! Jalal jalal.csri@yahoo.com; +62-815-13803616