Case study: the impact of MNC and NGO empowerment programs on power relations

Abstract

Corporate social responsibility (CSR) is becoming an essential aspect for many multinational corporations. Many multinational corporations (MNCs) recognise that CSR can improve the efficiency of an organisation by creating sustainable competitive advantage. However, research shows that the implementation of CSR programs in multinational corporations has been problematic for decades. It is suggested that the lack of governance models, accountability, standards and a common CSR definition, are at the root of this problem.

Multinational corporations are currently facing significant challenges in terms of increasing competition and consumer demands. Non-governmental organisations (NGOs) are putting significant pressure on MNCs. NGO pressure has had significant implications for business operations and activity.

The purpose of this thesis is to evaluate the impact MNCs have on NGO sponsored empowerment programs. It aims to focus on the change in labour division within the household; access to services within the community; and changes in political activity that NGO participants experience after attending an empowerment program.

The MNC chosen is the hotel chain Sol Meliá. The NGO is CEPIA. CEPIA is based in Guanacaste Costa Rica. The research interviewed a Sol Meliá CSR coordinator; CEPIA"s president; current and former NGO participants as well as non-NGO participants for triangulation purposes. Having analysed the findings, key challenges facing Sol Meliá and CEPIA in implementing the empowerment program will be identified. These findings will be compared with academic findings. The recommendations suggested will be beneficial to Sol Meliá, CEPIA, and will contribute to the academic research in this field.

Chapter 1:

Introduction

Globalisation and the state"s failure to manage change have constrained the state"s practices. Businesses are more integrated in the political process as governments struggle in an increasingly more volatile political market. Corporate social responsibility is becoming an important aspect for many multinational corporations. Many recognise the innovative benefits of implementing CSR that can create sustainable competitive advantage. However, the implementation of CSR has been problematic for decades. Problems could be due to the lack of governance models, accountability, standards and a common CSR definition. These problems could have given MNCs the power to enhance their political influence and shape society positively or negatively. Consumer and NGO pressure on business has increased corporate competition and MNC–NGO partnerships over the years. However, the process of understanding the politics of MNC and NGO practices has been largely ignored. Practices have not always been fully transparent. Nevertheless it is believed that MNCs and NGOs have enormous impact on local people"s lives and globalisation.

This thesis aims to better understand the impact of Sol Melià"s sponsored empowerment programs, run by the NGO CEPIA in Costa Rica, on power relations. The flow of knowledge, ideas, and funding will be analysed. The study will focus on the impact on power relations within the home and in the community. Do programs that try to empower and liberate people manage to change how participants view themselves and their relationship with others? How is the personal connected with the political? How do technologies of control influence our daily lives as our relationships among associations, the state and citizenry change? These questions will be analysed to help formulate guidelines to ensure responsibility and accountability of MNCs and NGOs. These guidelines aim to help control against potential abuse of power.

Chapter 1 gives a brief overview of the thesis. Chapter 2 introduces the key themes of the study, such as power, empowerment and actors. Chapter 3 introduces the multinational corporation, Sol Meliá. Chapter 4 presents the NGO, CEPIA. Chapter 5 introduces the country, Costa Rica. Chapter 6 explains the research methodology used for the study. Chapter 7 presents and analyses the results. These findings are used to formulate the conclusion in chapter 8.

1.1 Background to the study

It is believed that globalisation and the gradual disintegration of established political structures has reduced the state"s ability to exercise power. Businesses are more integrated in the political process. Governments struggle in the increasingly more volatile political market (Lunde, 2000). Economic strength has allowed corporations decide where to do business, where to invest, and what technology innovations to focus on. It concurs with Blau"s statement that economic strength gives power to restrict or alleviate the regulation of service provision through political means.

In the 1990s many companies saw what could happen if global citizens" demands were ignored. For example, in 1994-1995 Shell clashed with lobbying groups over the decommissioning of the Brent Spar Oil platform at sea. Shell was also criticised for the assumed compliance or inaction during the excesses of the Abacha regime in Nigeria. Shell saw no choice but to invest in a corporate social responsibility agenda. Other companies followed suit (Lunde, 2000). It is possible that the effects of consumer politics have encouraged partnerships between MNCs and NGOs. Partnership has become more common where businesses are running projects that resemble those of NGOs (Murray, 2007).

1.2 Current Issues

The main issues with CSR and NGO programs are the lack of standards; lack of accountability; unclear intentions, lack of knowledge of the impact of NGO and MNC practice.

1.2.1. Lack of enforcement

High profile scandals have attracted public attention. It has called for the development of standards of how to structure and manage programs (Blowfield, 2005) to ensure accountability (Naidoo, 2003). Standards would include transparent governance structures, hiring practices, participatory mechanisms (Naidoo, 2003).

1.2.2 Lack of Corporate Governance Models

Furthermore, there are no corporate governance models in place to guide companies. Sometimes the CSR methods used by corporations vary within the corporation itself (Hopkins, 2007:33). According to Slack, empirical evidence shows that irresponsible CSR is becoming a real financial risk for multinational corporations. The financial risk is a criterion that could be used for banks to ensuring greater responsibility from multinational corporations (Slack, 2006).

1.2.3 Limitations to CSR Implementation

Implementing reforms to integrate CSR can be costly and time consuming. The implementation of new technology could be difficult for small to medium size companies to manage. Furthermore, the lack of know-how can discourage companies from implementing a CSR program (Utting, 2000: 26-27). These findings confirm the disparity that exists in defining CSR and providing clear business guidelines to show how to implement CSR. It assumes that implementing a CSR program involves costly investments, although CSR does not necessarily mean the implementation of new technology.

1.2.4 Lack of knowledge in assessing MNC and NGO practice

The processes to understand the politics of MNC and NGO practices have been largely ignored because practices have not always been fully transparent (Rondinelli, 2002). It is speculated that community leaders, associations and international development agencies, government agencies have an enormous impact on local people"s lives and on globalisation. Political scientists have started to evaluate the role and the impact of NGOs and the channels of participation that affect power relationships between society and the state (Fisher, 1997).

1.3 Objectives of the Study

This thesis aims to understand the impact of NGO and MNC empowerment programs on power relations within the family and in the community. How do technologies of control influence our daily lives when our relationships among associations, the State and citizenry change? How do these associations change when processes of association evolve (Fisher, 1997)? The thesis also aims to provide meaningful results for the academic world. It aims to identify guidelines to ensure responsibility and accountability of MNCs and NGOs. These guidelines can be used to guard against potential abuse of power.

1.4 An overview of the methodology

A cross case comparative case study was chosen. A case study provides more flexibility to analyse a broad range of multiple observations such as cultural, institutional and cognitive causal variables (Bennett and Elman, 2007). These multiple observations can help analyse and explain a complex phenomenon (Bennet and Elman, 2007) such as changes in power relations.

1.4.1 Research objectives

The qualitative and quantitative data collection focused on the following research questions:

ü What level of influence do MNCs have on NGOs in practice?

ü What is the impact of empowerment programs on power relations within the family and in the local community?

ü Do programs that try to empower and liberate people manage to change how participants view themselves and their relationship with others?

ü How is the personal connected with the political?

ü How do technologies of control influence our daily lives as our relationships with associations, the state and citizenry change when processes of association evolve?

These questions were used as a basis to evaluate:

• The level of MNC influence on NGO programs

• The NGO practice

• The empowerment program

• The influence of empowerment programs on power relations at home, in the local community and the level of political activity.

1.4.2. Sample Selection

The study focused on rural families in Guanacaste, Costa Rica, who attended CEPIA"s empowerment programs. It also focused on rural families that have not been in contact with CEPIA. The targeted rural families were in a similar economical situation. They also had similar educational backgrounds; lived in the same region and were in similar employment conditions.

1.4.3 Primary Data Collection

Primary data was collected through individual interviews. A survey was included. Interviews were used to better understand the participants" situation. Interviews would allow CEPIA participants create knowledge through their insight. This knowledge might not be included in any academic literature. The participants" insight is therefore invaluable for the social sciences field.

A survey was used to closely evaluate the changes of labour division and the decision-making process within the household and in the community; and access to banks schools and libraries. The survey would also evaluate participants" level of confidence in regards to acting politically.

The average duration of interviews and survey was 25 minutes.

1.4.3.1 Data Validity

To avoid misinterpretation, ambiguous concepts and terms were avoided (Shively, 1997:30). Academic language was avoided to simplify questions for participants. Attention was given to the structure and sequencing of the questions in the questionnaires and interviews. The objective was to make sure questions and objectives were clear (Gray, 2004). Participant interviews and surveys were therefore conducted in Spanish. Spanish is the national language in Costa Rica. All questions were written in active voice, unbiased and open-ended. Questions required only one piece of information per question.

1.4.4 Secondary Data Collection

The secondary data collection included a theoretical academic overview of the topics in the study. The review aimed to establish the topics involved with CSR and empowerment programs. Empirical findings were included to see if there were any discrepancies between theory and practice. These findings were used to outline key issues, key considerations of the topic studied.

1.4.5 Data Analysis

All interviews were transcribed to MS Excel documents, to better visualise the patterns and to compare and identify categories of responses. Non-participant interviews were not transcribed because a large portion of their interview was taken up by the survey. The survey results are visualised through quantitative data presentations such as tables and graphs. Pattern matching techniques were used in conjunction with explanation building techniques. These were used to help identify the combination of variables with the greatest effect on outcomes (Gray, 2004). Results were compared with literary review findings after establishing patterns and categories to the responses. The findings were displayed through the use of narrative text, tables, charts and graphs.

1.5 Outline of the Study

Chapter 2 :

Corporate Social Responsibility and the Power of New Actors

2.1 Introduction

Based on a review of the contemporary literature, this chapter introduces the theories and concepts of power and empowerment. It presents key considerations and methods of using empowerment for development purposes. These considerations use academic findings and Johnson"s empirical research on women"s groups in Peru (Johnson, 1992). Drivers of corporate social responsibility and limitations to CSR implementation will be discussed. This section is followed by an overview of the role of NGOs and their key issues will be explored. The chapter concludes with a summary of the role of new actors and the key issues in empowering local NGO participants.

2.2 Concepts and Theories of Power

Power can defined in many ways. Blau, defined power as the ability to carry out one"s will despite resistance as well as the possibility to change another person"s conduct to avoid changing one"s own conduct (Blau, 1967: 115). Strange described power as direct coercion and violence. Power could be influence through subtle persuasion (Strange, 1996:17). What these definitions have in common is that they describe power as the power to do something and power over another person (Nelson and Wright, 1995: 8).

2.2.1 Community Power

Early studies on power focused on community power and the source of power. Theorists focused on the decision-making process. They thought power could only used in conflict. There were two ways to rule. People were either ruled by an elite or by several groups. The community was pluralist if many groups ruled the community (Hardy and Leiba-O"Sullivan, 1998: 453-454). These findings make several assumptions. It assumes that no person makes their own decisions because they are subject to someone else"s power. The elite are also not defined. A person who makes decisions does not have to be part of an elite to make their own decisions. Also, a society is not pluralistic just because several groups make decisions. It also does not explain why certain groups in society have little decision-making power in regards to the community or themselves.

2.2.2 Power and Conflict

Other theorists claimed conflict occurred behind the scenes. They believed full participation only occurred in "non-decision making" (Hardy and Leiba-O"Sullivan, 1998: 455). Non-decisions are safe questions that do not determine anything.

Powerful actors behind the scenes would take real decisions to protect the status quo (Hardy and Leiba-O"Sullivan, 1998: 455).

Nevertheless, the theory of power remained one-dimensional. Power still occurred in conflict (Hardy and Leiba-O"Sullivan, 1998). However the authors do not define safe questions, real questions and powerful actors. They do not explain the process of becoming a powerful actor. The theory fails to consider the influence of expert knowledge and leadership position, for example. Expert knowledge and leadership position can influence the decision-making process, as in the relationship between the therapist and the patient.

2.2.3 Critical Theorists and Power

Critical theorists questioned why grievances did not exist and why inaction did not exist. The lack of inaction could also be the result of power. Power, therefore, became a method to prevent conflict. Power was ideological, economical and structural. This perspective was based on Gramsci"s idea of ideological hegemony. Gramsci believed that power relations were part of a system of cultural and normative assumptions (Hardy and Leiba-O"Sullivan, 1998: 456). Consequently, power was a zero sum situation, where people gained power at the expense of others. Therefore power is coercive because institutions of government use power (Nelson and Wright, 1995: 9) to create constraints and opportunities in society through social action (Swindler, Ann, 2000: 281).

These findings make the assumption that only institutions of government hold power. It fails to consider the influence of corporations and NGOs. It assumes that individuals cannot be autonomous from the state even if individuals remain subject to the state. Furthermore, it assumes that using power prevents conflict, although conflict is not defined. Also, power cannot create win-win situations where everyone benefits. It assumes that power legitimises cultural norms. As such it assumes that everyone agrees with cultural norms and that people cannot break from norms. These assumptions would not explain why society and cultural norms constantly change.

2.2.4 Foucault and Power

Foucault"s theory of power/knowledge proposes that actors are embedded in power relations. Power relations define every perception, judgement and act (Hardy and Leiba- O"Sullivan, 1998) in everyday social relations (Lemert and Gillan, 1982).

Foucault believed that power was the product of institutions, actors and events (Nelson and Wright, 1995). Power relations could not exist without the institutional support of knowledge that supports power relations. Power covered all human interactions such as economic and social relations that could create a social reality (McNay, 1992). Foucault believed people are socially produced by the system of power (Hardy and Leiba- O"Sullivan, 1998).

Foucault"s theory implies that the environment creates the person. He fails to define actors and events. How does a person become powerful? Why is power concentrated in certain groups? How is power distributed? What knowledge justifies power relations? It also assumes that the individual is not capable of finding alternatives to change their power. Nevertheless, it is important to understand the complexity of power relations. Foucault"s insight helps evaluate the possible aspects that can influence a person"s life and power relations within the family, local community and the level of political influence. Foucault"s theory also makes an important proposition: the possibility that power can change. It means that empowerment is a process of change, because power exists in relationships and daily events and actions.

2.2.5 Blau and Power

Blau described power as a conflict between the powerful and the powerless. Conflicts arise with the powerless people"s lack of resources, problems of alternatives, political power and ideological power. The more people gain access to the services they need, the more powerful they become. The more alternatives available, the more independent people become. The economically powerful use power to restrict or alleviate the regulation of the exchange of services, through political means. Ideological power describes the struggle between ideologies and social values that intensify the need of services offered by the powerful. It also describes the struggle with the ideologies that mitigate the needs promoted by ideologies and social values (Blau, 1967). According to Blau, this is why the powerful cannot keep their power without the support from the powerless, because differentiations of power are created in the imbalances of obligations in social transactions. These imbalances create problems in the exchange process and the distribution of resources in a community that governs them and modify them (Blau, 1967). Blau implies that individuals loose their power because of their own choice to legitimise the powerful person"s power over you. These findings are important when evaluating changes in the CEPIA participants" life after they attended the empowerment program. Do CEPIA"s values change their needs? What are the ways to acquire power?

All these findings will be used to evaluate the impact multinational corporations have on NGO activities and how they influence participants" view of themselves in relation to others.

2.3. Corporate Social Responsibility

Andrew Carnegie initiated the notion of CSR in 1899 when he published "The Gospel of Wealth" (Wulfson, 2001). Carnegie believed businesses should not only be concerned with profit making. The idea surfaced at the growing concern of businesses" growing imbalance and increased power, which led to anti-trust legislation (UN, 1999: 148). This initiative produced the first two root concepts of corporate social responsibility, notably, the charity and the stewardship"s principle. The charity principle believed that fortunate people such as businesses should take care of the less fortunate. The stewardship"s principle believed that businesses should act in general interest instead of just serving shareholders (UN, 1999).

2.3.1 Defining CSR

There are different meanings to corporate social responsibility. Some interchange the term with corporate sustainability, corporate citizenship, or corporate philanthropy (Hopkins, 2007). The EU definition states: CSR is a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis. The EU aims not to regulate CSR but to promote market possibilities (Hopkins, 2007:25-26). The voluntary principle, as highlighted by the EU, has caused difficulties because many companies refuse to agree on criteria for noncompliance. Some sceptics argue that CSR is just corporate "greenwash". Greenwash would describe MNCs that pretend they take CSR seriously, although they have not changed their practice (Slack, 2006).

Alternatively, the World Business Council for Sustainable Development defines CSR as:

A continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families, as well as of the local community and society at large (Hopkins, 2007:25).

This definition indicates that CSR is a new way of running business. CSR becomes part of business practice when dealing with its staff and their local community. This definition highlights that CSR is not voluntary.

Clearly there are problems of terminology (Hopkins, 2007). Business and theorists cannot agree on a CSR definition. According to KPMG, it appears that the understanding of CSR is seen as an add-on instead of an integral part of core business operations (KPMG, 2005). It raises the question if the understanding of CSR should incorporate MNC political activities (Bendell and Kearins, 2005).

The difficulty in reaching a common definition of CSR probably has to do with that the business world remains divided. It is divided between those who believe CSR is good for business and those who believe that businesses should only be concerned with profit creation (Hopkins, 2007). This could explain why the EU defined CSR as a voluntary add-on to business instead of a new way of running business.

2.3.2 Key Drivers for CSR

According to KPMG"s International Survey of Corporate Responsibility Reporting 2005, key drivers for corporate social responsibility are ethics; economic considerations; values; reputation; cost savings; market share; and employee motivation. The survey saw that CSR initiatives increased due to the amount of corporate scandals that surfaced in the 1990s (KPMG, 2005: 18-19). Criticism of MNCs goes hand in hand with the rise of consumer politics. Consumer politics put pressure on businesses to behave in a more responsible manner (Utting, 2000). For example, in

1994-1995 Shell clashed with lobbying groups over the decommissioning of the Brent Spar Oil platform at sea. Shell received criticisms for assumed compliance or inaction during the excesses of the Abacha regime in Nigeria. Shell saw no choice but to invest in a CSR agenda. Other companies followed suit (Lunde, 2000). The effect of corporate scandals explains why many MNCs implement CSR programs. The implementation of a CSR program can save costs and increase market share. However, these findings do not explain why business is motivated to implement corporate social responsibility programs for ethical reasons or to motivate staff. It is possible that consumer politics occurs within companies as well.

2.3.2.1 Ecology & Market Opportunities

CSR could also be a response to ecological constraints and market opportunities associated with new technology. New technology reduces costs and increases productivity as stated by Murphy and Bendell (Utting, 2000). Utting states that CSR is a new strategy to differentiate products. MNCs could gain competitive advantage by behaving in an environmentally and socially responsible manner. Body Shop is one of many corporations that changed their strategy to promote ethical and fair trade products. Findings show that their promotion of socially responsible products enhanced their brand image and gave them a wider access to the market (Utting, 2000).

2.3.2.2 Political Influence

Both multinational corporations and NGOs are inspired by a vision of how they want to shape society. They are capable of doing good and doing harm. Therefore neither is value neutral. They are essentially political. Their power is expressed through the choice of MNC and NGO programs offered (Fisher, 1997) and how they use their capital. MNCs only sponsor NGOs falling within the scope of their own commercial agenda (Rondinelli, 2002). Furthermore, multinational corporations can enhance their political influence by using social advertising. Social advertising can influence how governments deal with socio-economic and environmental problems that affect them. Therefore CSR programs can enhance the corporate image and expand the corporate market (Rondinelli, 2002). Some critics see multinational corporations as a threat to the democratic decision-making process. MNCs do not necessarily protect the public interests. For example, in some countries, public goods such as electricity, telecommunications, education, safety and security moved from the public to the private sector (Rondinelli, 2002).

Nevertheless, many multinational corporations assist governments and NGOs in addressing community issues more efficiently. For example, since 1985 Coca Cola and Rotary International raised more than $400 million to promote polio immunisation, together with WHO and UNICEF (Rondinelli, 2002).

These findings make the assumption that MNC agenda aims to change society to protect against government policies that affects them. Furthermore it implies that government bodies are not democratic. It implies that MNCs shows the government how to deal with socio-economic and environmental problems. These assumptions concur with Hardy and Leiba-O"Sullivan"s statement that real decisions take place behind the scenes (Hardy and Leiba-O"Sullivan, 1998). MNCs are therefore powerful actors that influence community decisions behind the scenes of government governance. These assumptions also concur with Foucault"s statement that power relations could not exist without the institutional support of knowledge that supports power relations (McNay, 1992). In this case it implies that government legitimises MNC power. These findings also confirm Blau"s statement that economic strength can restrict or alleviate the regulation and availability of service provision (Blau, 1967). However, the use of NGOs to implement an MNC agenda shows that restrictions and provision of service do not always occur through political means, as suggested by Blau.

2.3.3 CSR Trends

Due to the varied understanding of corporate social responsibility, there are several forms of CSR. The three main forms of CSR are:

• Philanthropy, which focuses on charitable donations.

• Development of new products. For example, investments that benefit the local country or where the local workforce and resources are used.

• The implementation of company activities that promote sustainable development. (Hopkins, 2007)

According to KPMG, more companies find it easier to implement philanthropy initiatives. Companies find it harder to integrate their CSR strategy into their operations and company strategy. The integration of CSR in business practice requires the implementation of international standards (KPMG, 2005). However, some multinational corporations are starting to take social concerns into consideration. They want to extend their influence into more social action that includes state and inter-governmental intervention in the markets (Bendell and Kearins, 2005: 377, 381). For example, NIKE has started to look into ways to support local labour standard inspections in the countries in which they operate (Bendell and Kearins, 2005: 376).

2.3.3.1 CSR Reporting

CSR reporting is also an issue because stakeholders need to decide what is relevant to their interests. This is why in the 1990s CSR reporting only covered environmental, health and safety concerns (KPMG, 2005). Now, reports include labour standards, human rights and child labour.

More companies, specifically from middle-income countries have started to generate more CSR reports, although there is a lack of standards and regulations (Hopkins, 2007).

According to Schepers, corporations publish reports on social and environmental behaviour to alleviate the pressure from NGOs (Schepers, 2006).

Many report community involvement that includes employee volunteer programs. Philanthropy is also mentioned. Philanthropy tends to be less strategic and has little relevance to the company"s profitability (KPMG, 2005). However, many reports do not include program selection criteria. Nevertheless, reports follow labour standards as defined by the ILO and other international standards such as the UNDHR and OECD guidelines for multinational enterprises. Then again, few provide any guidelines of how businesses implement these standards (KPMG, 2005).

However, there is a growth in accounting standards for CSR. Companies are starting to implement accounting standards such as AccountAbility (Hopkins, 2007).

2.3.5 Key CSR Issues

The regulation of MNC behaviour has always been disputed. It reached worldwide attention in the 1970s when the ILO, UNCTC and the OECD tried to design codes of conducts for multinational corporations. The result was lack of consensus over the wording and codes of conduct. The codes of conduct ended up being voluntary instead of mandatory as originally intended (UN, 1999).

In later years, high profile scandals attracted public attention. It led to calls for the development of standards of how to structure and manage CSR programs (Blowfield, 2005) to ensure accountability (Naidoo, 2003). Standards would include transparent governance structures, hiring practices and participatory mechanisms (Naidoo, 2003).

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