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The OECD Guidelines for Multinational Enterprises

Policy BriefOrganisation for Economic Co-operation and Development OECD 2001 June 2001 The OECD Guidelines for Multinational EnterprisesIntroductionInternational investment has spearheaded the globalisation process, strength-ening and deepening the ties that bind the world s regions together. Multina-tional Enterprises (MNEs) are one of the main conduits through whichinvestment is channelled and their evolution has reflected broader develop-ments in OECD economies. The rise of service and knowledge-intensivesectors has been associated with a push by service and technology firms intothe international market place. Although large multinationals continue todominate international investment, numerous smaller firms now play a morevisible role on the international scene.

4 Policy Brief The OECD Guidelines for Multinational Enterprises development agenda. With the addi-tion of recommendations relating to the elimination of child and forced

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1 Policy BriefOrganisation for Economic Co-operation and Development OECD 2001 June 2001 The OECD Guidelines for Multinational EnterprisesIntroductionInternational investment has spearheaded the globalisation process, strength-ening and deepening the ties that bind the world s regions together. Multina-tional Enterprises (MNEs) are one of the main conduits through whichinvestment is channelled and their evolution has reflected broader develop-ments in OECD economies. The rise of service and knowledge-intensivesectors has been associated with a push by service and technology firms intothe international market place. Although large multinationals continue todominate international investment, numerous smaller firms now play a morevisible role on the international scene.

2 Advances in technology and in thedesign of organisations have increased the diversity of business forms and thecomplexity and speed of economic transactions. This has tended to blur theboundaries of the firm and to heighten the value of transparency in policy environment for international investment has generally becomemore favourable and countries now compete actively for such , MNEs are an integral part of the international economy, as agents forbeneficial investment flows and for diffusion of technology and as an impor-tant source of tax revenues. At the same time, public concerns remain abouttheir activities and many initiatives are under way that aim to address theseconcerns. Since 1976 when the OECD Guidelines for Multinational Enter-prises (the Guidelines ) were originally adopted as part of the Declaration onInternational Investment and Multinational Enterprises the OECD has pro-moted co-operation in this field through a balanced framework of non-binding principles and standards addressed to governments and other elements of the Declaration contain commitments by governmentsto provide national treatment for foreign-controlled Enterprises , to avoid con-flicting requirements on Enterprises and to co-operate regarding investmentincentives and disincentives.

3 Besides the OECD members, four non-OECD countries (Argentina, Brazil, Chile and the Slovak Republic, the latter havingsince joined the OECD) have adhered to the Declaration (including theGuidelines) and others that are willing and able to meet the disciplines set outin the Declaration would be Policy Brief describes what the Guidelines are and how they are imple-mented by the different parties involved. It also underlines the importance ofthe 2000 Review in making the Guidelines a more complete and betteradapted instrument. However, this Policy Brief being necessarily general, acopy of the full texts should be consulted for a more comprehensive under-standing of the matters covered by the Guidelines and how they relate toparticular issues (see contact details at the end).

4 What are the OECDG uidelines forMultinationalEnterprises?What is the importanceof the 2000 Review?What has changed?What is the institutionalmechanism forimplementing theGuidelines?How are the Guidelinesimplemented?For further informationFurther reading2 Policy BriefThe OECD Guidelines for Multinational EnterprisesWhat are the OECD Guidelines for Multinational Enterprises ?The Guidelines are recommendationsaddressed by governments to multina-tional Enterprises operating in or fromadhering countries (the OECD mem-bers plus Argentina, Brazil and Chile).They provide voluntary principles andstandards for responsible businessconduct, in a variety of areas includ-ing employment and industrial rela-tions, human rights, environment,information disclosure, competition,taxation, and science and technology(seeThe OECD Guidelines for Multina-tional Enterprises : Chapters).

5 Although many business codes ofconduct are now publicly available,the Guidelines are the only multilater-ally endorsed and comprehensivecode that governments are commit-ted to promoting. The Guidelines recommendations express the sharedvalues of governments of countriesthat are the source of most of theworld s direct investment flows andhome to most Multinational enter-prises. They aim to promote the posi-tive contributions multinationals canmake to economic, environmentaland social Guidelines have several distin-guishing features that helped themgain acceptance and continue toensure they are supported. First,observance of the Guidelines is volun-tary. Their non-binding nature, how-ever, does not imply less commitmentby adhering governments to encour-age their observance.

6 The activesystem under which the Guidelines arepromoted and implemented attests toThe OECD Guidelines for Multinational EnterprisesChaptersPreface: situates the Guidelines in a globalising world. The common aim of the governments adhering to theGuidelines is to encourage the positive contributions that Multinational Enterprises can make to economic, environ-mental and social progress and to minimise the difficulties to which their various operations may give and Principles: sets out the principles which underlie the Guidelines , such as their voluntarycharacter, their application world-wide and the fact that they reflect good practice for all Policies: contains the first specific recommendations, including provisions on human rights, sustain-able development, supply chain responsibility, and local capacity building, and more generally calls onenterprises to take full account of established policies in the countries in which they operate.

7 Disclosure: recommends disclosure on all material matters regarding the enterprise such as its performanceand ownership, and encourages communication in areas where reporting standards are still emerging such associal, environmental and risk and Industrial Relations: addresses major aspects of corporate behaviour in this area includingchild and forced labour, non-discrimination and the right to bona fide employee representation and construc-tive : encourages Enterprises to raise their performance in protecting the environment, includingperformance with respect to health and safety impacts. Features of this chapter include recommendationsconcerning environmental management systems and the desirability of precaution where there are threats ofserious damage to the Bribery: covers both public and private bribery and addresses passive and active Interests: recommends that Enterprises , when dealing with consumers, act in accordance with fairbusiness, marketing and advertising practices, respect consumer privacy, and take all reasonable steps toensure the safety and quality of goods or services and Technology: aims to promote the diffusion by Multinational Enterprises of the fruits of researchand development activities among the countries where they operate, thereby contributing to the innovativecapacities of host.

8 Emphasises the importance of an open and competitive business x atio n: calls on Enterprises to respect both the letter and spirit of tax laws and to co-operate with tax Policy BriefThe OECD Guidelines for Multinational Enterprisesthe importance adhering countries givethe , the Guidelines basic approach isbalanced. The assumption is not thatenterprises need to be controlled but that internationally agreed guide-lines can help prevent misunderstand-ings and build an atmosphere ofmutual confidence and predictabilitybetween business, labour and govern-ments. A continuing, pragmaticapproach has characterised the Guide-lines process and helped make they are addressed to enter-prises, the Guidelines need the supportof the business community, labour rep-resentatives and non-governmentalorganisations in order to be countries adhering to the Guide-lines will work with all of these actorsand there is every reason to believe thatconstructive collaboration will developto help the business community defineand achieve appropriate standards ofconduct.

9 In addition, the post-Reviewperiod is likely to be one of expandingadherence to the Declaration of whichthe Guidelines are an integral non-OECD members havealready adhered to the Guidelines andothers that are willing and able to meetthe disciplines in the Declaration wouldbe , the Guidelines are part of apackage. They come under the OECDD eclaration on International Invest-ment and Multinational Enterprises , abroad political commitment adoptedby the OECD Governments in 1976 tofacilitate direct investment amongOECD Declaration on InternationalInvestment and Multinational Enter-prises promotes a comprehensive,interlinked and balanced approach forgovernments treatment of foreigndirect investment and for Enterprises activities in adhering countries. TheOECD instruments on internationalinvestment and Multinational enter-prises are one of the main means bywhich the OECD assists adheringcountries in working towards a lib-eral regime for foreign direct invest-ment, while at the same time ensuringMNEs operate in harmony with thecountries where they are located.

10 What is the importance of the 2000 Review?The recently concluded Reviewenabled the OECD to respond to theneed for a thorough consideration ofthe Guidelines and to ensure their con-tinued relevance and effectiveness in therapidly changing global economy. Newissues have gained prominence sincethe Guidelines were first issued in 1976and the international consensus onappropriate business conduct is evolv-ing rapidly, spurred in no small part bythe efforts of Multinational firms todefine standards for concerns about the impact ofdeepening globalisation on home andhost societies meant that the mostrecent Review was conducted in acontext of growing interest and visi-bility. The Review benefited fromconsultations with the business com-munity, labour representatives, non-governmental organisations andnon-member governments.


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