THE case against US-based multinationals accused of making money out of apartheid is making its way through the US court system. The issue raises some questions: should companies take a political stance when taking business decisions? Is the pursuit of morality an aim that should at times take precedence over the profit motive?
These aren't questions that can be answered in a short column on a website. Many books exist on the topic, and the World Bank some years ago devoted an entire issue of its annual World Development Report to the "triple bottom line".
This is the pursuit by companies of three aims: profits, contribution to society's well-being as well as care for the environment.
US-based companies Daimler, Ford, General Motors, IBM and Rheinmetall Group are the only ones left of a list of 20 originally sued in 2002 by victims of apartheid for billions of dollars in reparations. After many delays and much to-ing and fro-ing between different US courts, it was decided that the case could continue in the US against the five companies.
If they lose, they have to pay reparations to victims of apartheid. In a change from the Mbeki era, the Zuma government is supporting the plaintiffs.
From a certain angle, the question whether the five companies should pay reparations is stupid: of course they shouldn't. One need only think of the government debt incurred during the apartheid era, which some argued that the new government shouldn't repay.
The government debts made during the apartheid era went directly towards apartheid, and some activists argued that by repaying the debt, the new government was acting immorally. But, quite simply, if the new government had defaulted on the debt, the SA economy would have been brought to its knees and SA's poorest citizens harmed the most.
Moral compass can be missing
Forcing reparations from multinationals won't bring the economy to its knees, but it will sour relationships with those companies, which are likely to take their business - and their jobs - elsewhere.
Former cabinet minister Kader Asmal has taken much flak for arguing that the reparations lawsuit shouldn't make it in the New York courts. But what seems to have been lost in the accusations against Asmal is the fact that his argument rests purely on legalistic, technical grounds.
Asmal looks at the Alien Tort Claims Act, the US legislation under which the lawsuit has been brought, and argues that the "customary international law" the case depends on doesn't apply to corporations. Asmal doesn't in the published articles really enter into the fairness or the morality of the issue, concerning himself mostly with the legalities of the matter.
But one senses that he, too, believes it's not a good idea to kill the goose that lays the golden egg to make restitution for the past.
But isn't that last sentence an over-simplification of the situation? Is it right simply to argue that, because business creates jobs and adds to national wealth, it should be allowed to act without a moral compass? That it sometimes does so, and that some firms will continue the practice if allowed, is clear.
Just think of multinationals which set up sweat shops with child labour and polluted the environment in the developing world. (If you think this is all far in the past, Apple this week admitted it had used child labourers in developing countries in its most recent fiscal year - by accident of course). Closer to home, think of the miners who got asbestosis from mining asbestos - even when their bosses knew the dangers.
Foreign trade did the trick for China
To some degree, it's up to governments to ensure that the right regulatory environment is in place, both with regard to labour standards and the environment. But this doesn't always happen. China is a case in point. One commentator on a blog about Wal-Mart, the US retailer that imports massively from China, says: "China is a toxic hell-hole run on slave labour."
That's definitely putting it too strongly. But where governments fail to create the right regulatory environment, activists from non-government organisations have a duty to bring conditions to the attention of shareholders.
Wal-Mart has promised to clean up its act in China (on labour standards and the environment) after much bad publicity in the US. Business works for shareholders, and can only be expected to change if its shareholders demand change.
Then there's the question as to whether Wal-Mart should be doing business in China at all, given that the country isn't a democracy and that government action against dissidents is common. (Those dissidents that have the courage to carry on even after the 1989 Tiananmen Square massacre.) Google threatened to pull out of China. But note: it hasn't made good on that threat.
Simply put, it would be sheer lunacy not to do business in China. This applies not only to individual companies, but also to the world economy. China is an economic powerhouse, set to overtake Japan as the second-largest economy in the world (in dollar terms.) China's embrace of a more open economy has been very good for the world - and it's been good for China, where poverty has halved.
Yes, by the standards of a very rich country, China may be a "toxic hell-hole run on slave labour" - but by the standards of a developing economy, it has done exceptionally well. Actually, phenomenally well. And foreign trade and investment have been the key to success in pulling its people out of poverty.
From a practical point of view, we just have to accept that business will and should continue to operate in circumstances that are far from ideal - politically and morally. It's up to politicians, non-government organisations and shareholders to bring the pressure to bear to bring those circumstances closer to the ideal.
- Fin24.com