Financial Daily from THE HINDU group of publications
Monday, Mar 11, 2002

News
Features
Stocks
Port Info
Archives

Group Sites

Opinion - Corporate Governance
Corporate - Social Welfare


Corporate `spin doctors'

Pratap Ravindran

CONSIDER just two — among the many — facts about multinationals compiled by Ms Sarah Anderson and Mr John Cavanagh of Corporate Watch:

  • Of the 100 largest economies in the world, 51 are now global corporations and only 49 are countries; and

  • The combined sales of the top 200 corporates in the world are bigger than the combined economies of all countries — bar nine. That is, 182 countries.

    Plain horse sense is all that it takes for us to conclude that giant corporations, commanding, as most of them do, more economic and, therefore, socio-political clout than very many sovereign nations, have a voice. This voice, collective or individual, may be at pitched at the end of the sound spectrum that lies below the threshold of the human ear. Or, it may be at the other end where, again, it is inaudible. In both the cases, it can be `heard' subliminally. And then again, the voice may be discernible... although you may not be able to tell where it comes from or to whom it belongs.

    But you can bet your boots on one thing: They are getting through to you.

    So what? So a lot of things...

    Let us back up a bit to get things in perspective.

    The history of corporates is one of fraud. They came into being in Britain in the 16th century as not-for-profit trade associations created to assist the state in conducting trade with the colonies. However, from the time of inception, these entities began trading for profit. Subsequently, the State decided to make the best of a bad job and created corporations through Royal Charter.

    The East India Company was the first corporation to operate for profit.

    And then came 1886 in which year the US Supreme Court ruled that corporations are legal persons whose life, liberty and protected are protected by the Fourteenth Amendment. Mr Daniel Brandt, a leading commentator on the darker side of corporates, writes: "Ratified to protect freed slaves, it took railroad company lawyers less than two decades to turn this amendment into a loophole..."

    Let us fast-forward to 1976. It was in that year that the US Supreme Court, in Buckley vs Valeo, decreed that corporations are legal persons with First Amendment rights of free speech.

    The Supreme Court further decreed that corporate cash is a form of speech! Two years later, in First National Bank vs Bellotti, Justice Lewis Powell expressed his opinion that corporate spending to influence votes during a referendum campaign campaign "is the type of type of speech indispensable to decision-making in a democracy, and this is no less true because the speech came from a corporation rather than an individual."

    Three justices, Byron White, William Brennan and Thurgood Marshall, dissented in the Bellotti case and argued that corporations are "artificial entities" whose "special status" has "placed them in a position to control vast amounts of economic power...The state need not permit its own creation to consume it."

    The next thing you know, certain corporate houses in India whose core competency lies in their ability to subvert just about every institution around them will be able to argue that the Prevention of Corruption Act is in conflict with Article 19(1) (right to expression) of the Indian Constitution...

    Pending the litigation of the above in the Indian Supreme Court, let us move on to examine how corporates, guaranteed a voice by law, have sought to modulate it from a stentorian roar to dulcet tones better suited to lull the listener into somnolescence.

    For the most part, they have turned to spin doctors or, in corporatespeak, public relations experts. Spin doctors are usually people who have nothing to say — but are good at amplifying what others have to say.

    They are not very particular about who these others are or, for that matter, what they have to say — as long as the money is right.

    Public relations is today a high-growth industry, led by Burson-Marsteller (B-M) which identifies itself as the world's largest PR firm. Its leadership in the field is as good a reason as any to study its philosophy and modus operandi which, it is safe to assume, has vouchsafed the firm its position of pre-eminence.

    Let us now try and find out how many patently absurd propositions can be packed into one paragraph:

    The concept of corporate social responsibility goes back quite a bit and was not a novelty till a decade ago...it was very much a widely accepted concept. B-M may have recognised it in some dim fashion about a decade ago — but just about everybody else was familiar with it much before that.

    Companies existed more or less from the beginning because they contributed in some way to the good of society. Or, at least, what society thought was good for it. This contribution was not some kind of a by-product of a company's primary objective of...causing harm to society.

    B-M's assertion that, a decade ago, if a company did not contribute in some way to the good of society, no harm was done, is so bizarre that it defies belief.

    That is three and counting...

    Now let us apply B-M's exposition on social responsibility as a corporate imperative and see how it fares.

    This PR behemoth has helped, among others:

  • The Nigerian government during the Biafran war to discredit reports of genocide;

  • The fascist junta that ruled Argentina during the 1970s and early 1980s to attract foreign investment; and

  • The late Romanian communist despot, Mr Nicolae Ceaucescu, to whitewash his image.

    As for its corporate clients, they have, at some point of time or the other, included:

    Union Carbide to handle the public relations crisis caused by the Bhopal gas tragedy;

    Babcock and Wilcox to smooth over the mishap that occurred at its nuclear power plant in Three Mile Island; and

    The Louisiana-Pacific logging company, notorious among environmental activists for its clear-cutting of growth forests.

    And, oh yes, Monsanto. B-M and Monsanto go back a long way to the time when its subsidiary, Nutra Sweet, came out with a genetically engineered synthetic bovine growth hormone called rBGH. This hormone, which stipulates milk output in cows, attracted strong opposition from farmers and environmental groups for two reasons: (a) the use of the hormone to tweak milk output in a market facing a glut would put small farmers in the US out of business and (b) the use of rBGH had been linked to birth defects in calves.

    As chronicled by Carmelo Ruiz on the Web (www.geocities.com/Athens/1527/bmhist.html), B-M's campaign to neutralise the opposition rested on certain distinctly dubious practices, including the use of spies to penetrate activist groups.

    As is well known, no right is absolute. Thus, corporates cannot abuse their right to expression to tell whoppers — or cause whoppers to be told by their agents. Unfortunately, this is precisely what corporates do.

    They cannot tell too many lies in their statutory disclosures as they run the risk of getting caught (like Enron Corporation) — but there is nothing that prevents them from disseminating self-serving fiction through their PR agents.

    And PR agencies in India come under no oversight. Given the stakes involved, it is reasonable to assume that any legislative attempt to regulate them will be litigated till the cows come home. However, as it is obvious that the Indian economy can never recover until its capital market regains credibility, it is essential that the Securities and Exchange Board of India (SEBI) recognise PR agencies as "market intermediaries" or at least vet their activities proactively under its insider trading regulations.

    This is necessary because listed corporates which disclose price sensitive information to the stock exchanges as required under the listing agreement invariably make the information available to the media also shortly thereafter.

    Inevitably, PR agency personnel are given price-sensitive information even before it is given to the exchanges so that they can prepare press notes for dissemination.

    In these circumstances, it is essential that the market regulator ensure that the PR agencies and their staff do not go in for a bit of insider trading to supplement their income.

    The media, for its part, must also boycott PR agencies and refrain from amplifying whatever information they choose to make available for partisan ends till they agree to regulation or self-regulation.

    This is not going to be easy as an uncomfortably large number of journalists work for PR agencies for all practical purposes.

    Send this article to Friends by E-Mail

  • Stories in this Section
    A policy on the move


    The Budget and its fineprint
    Vision 2020: Let us do great deeds together
    Ayodhya: Why PM will fail
    GM food disasters -- Of mice and the Royal Society
    Corporate `spin doctors'
    They did not disclose
    Misgovernance
    Smoke and suffer in Surabaya
    Budget woes
    Small mills


    The Hindu Group: Home | About Us | Copyright | Archives | Contacts | Subscription
    Group Sites: The Hindu | Business Line | The Sportstar | Frontline | Home |

    Copyright 2002, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line