Governance & CSR

Recent corporate scandals in the sector have raised questions concerning influence and greed not only in private utilities, but in government as well. Although these enterprises have placed a negative spotlight on the sector, they are not exemplary of the industry as a whole. Positive examples of good governance and corporate social responsibility do exist and these organizations should be commended for their performance.

Greed can distort the decision making and regulatory process which have a negative impact on consumers. Influencing the bidding process, the price of the public property to be sold and relaxed regulation are occasions where corruption can occur by both enterprises and government officials. Examples around the globe have shown that opening up the sector to competition can lead to corruption and the manipulation of markets. Companies and Governments are increasingly being called upon by consumer interests, investors, workers and the international community, led by the United Nations and its specialized agencies, to prove good governance and social responsibility.

Palast et al (Gregory Palast et al, 2000: Democratic regulation: A guide to the control of privatized public services through social dialogue, Sectoral working paper No. 166, ILO) emphasize necessary conditions for regulatory institutions to function adequately to ensure sustainable quality service delivery while meeting the principle of universal access. For this the institutions must employ open and democratic processes where pertinent information is made public. Such information may include salaries and benefits, including executive perks, of high-level executives, amount invested, by category of investment (e.g. generating plant, transmission lines, new pipes, etc), profits, amount of pollution emitted by pollutant, labour cost, including hours of labour lost due to injury and so on. There are also some principles that need to be adhered to, particularly during the process of fixing new tariff. They include: (1) observance of “due process” rights of participation and transparency where anyone with an interest in utility rates can participate in the process (e.g. those interested in environmental protection, protection of poor people, economic development and employment and labour issues, for example); (2) just and reasonable rates (e.g. to make it possible for poor families to more easily afford utility services or to hold the level of investors’ profit to a level deemed reasonable given the low levels of risk assumed by them); (3) no arbitrary confiscation of investors’ investments without due process of law, although this does not protect them against bankruptcy due to improvident business decisions and operations; (4) the regulator balancing various interests, with investors on one end of the balancing see-saw and many competing interests (e.g. social equity, environmental protection, labour, consumer protection, etc.) on the other end; and (5) prices must be related to costs.

Good governance and corporate social responsibility can provide strategies and initiatives that encourage and apply best practice. They also demonstrate how efficiency, profitability, pay and good working conditions can go hand in hand. Transnational corporations are continuing to flourish and the need for increased governance, including the public sector, is evident. Governments and employers should promote and respect the principles and rights enshrined in the ILO Declaration on Fundamental Principles and Rights at Work

The Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy is also a useful tool for the policies and practices of ILO constituents. The Declaration shows that companies can remain competitive while addressing employee rights and concerns and is particularly relevant to the globalizing utility sector as it sets out to promote partnerships between MNEs, governments, and employers’ and workers ’ organizations.