The effect of leadership commitment and firm visibility on company abuse allegations

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The Effect of Leadership Commitment and

Firm Visibility on Company Abuse Allegations

Name: Stuart van der Lee Student Number: 10003126

Date: June 27, 2014

Track: International Management Supervisor: Michelle Westermann-Behaylo Second Reader: Lori DiVito

Abstract

A qualitative study was conducted as to the relationships between leadership commitment, environmental company abuse allegations and health company abuse allegations, as well as the relationship between firm visibility, environmental company abuse allegations and health company abuse allegations. Participation in voluntary corporate codes of conduct was predicted to moderate these relationships. Six organisations were analysed, with the results contradicting the predictions in the most extreme cases.

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Introduction

In the 1990s there was a huge increase in the use of corporate codes of conduct as a consequence of change in the economic role of the state, as well as change of policies regarding transnational corporations (TNCs) and foreign direct investment (FDI). During the 1970s, many national government were regulating activities that were undertaken by TNCs as opposed to the strong deregulation that took place during the 1980s. During the 1980s, there were also many increased efforts in order to attract FDI (Jenkins, 2001; UNHRC, 2011).

This is the background against which the recent surge in the use of voluntary codes of conducts must be set. In the early 1990s, US companies began introducing these voluntary codes, with European companies following in the mid-1990s.

The concept of voluntary codes is very broad, since they can vary from vague declarations of business principles to concrete efforts of self-regulation. Voluntary codes mainly focus on the impact of activities undertaken by TNCs in two main areas: social conditions and the environment (Jenkins, 2001).

Heightened human rights activism, more media coverage and scrutiny, and the increase in the ease of communication through the growth of the Internet are all reasons beside the institutional environment for organisations to use voluntary codes of conduct (Spar, 1998).

The reasons mentioned above might be categorized as causes for organisations to use voluntary codes. However, there are also incentives for organisations, which take the form of benefits that are derived from the use of voluntary codes. One of these incentives is

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5 that organisations may choose to participate in voluntary codes because of their willingness to become a good corporate citizen. When an organisation pursues this goal, voluntary codes are normative (Bondy, Matten and Moon, 2004). Another incentive is instrumental in essence, with the objective being to preserve or even improve the image of the organisation. Another incentive to use voluntary codes is to simply make more profit and yet another incentive to participate in voluntary codes is to avoid government interference or gain rewards for participating in voluntary codes (Brereton, 2002; Potoski and Prakash, 2004). The idea behind this is quite simple: organisations can set their own codes of conduct and be as lenient as they want in pursuing them, or governments impose concrete rules, which usually have higher standards than voluntary codes, that must be complied with.

But the main driver for the use of voluntary codes just might be stakeholders’

expectations. While shareholders want better financial performance, employees want higher compensation and job security and consumers demand higher product quality, other

stakeholders are requesting more support for human rights and a higher concern from organisations for the natural environment. This puts an enormous strain on corporate leadership. However, if a voluntary code of conduct is only incorporated by an organisation to satisfy stakeholders, this is highly unlikely to yield any meaningful results. In order for these codes to work, clear statements from organisational leaders are needed about the core values and principles that should guide conduct (Logsdon and Wood, 2005).

This paper will seek to answer the following questions: Is there a relationship

between leadership and allegations of human rights abuses? Is there a relationship between firm leadership and allegations of human rights abuses? When an organisation participates in voluntary codes, does this influence the relationship between leadership and allegations of

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6 human rights abuses? When an organisation participates in voluntary codes, does this

influence the relationship between leadership and allegations of human rights abuses? The paper will first review the literature on the subjects of human rights, voluntary codes, leadership and firm visibility. Then, a theoretical framework is introduced. The research design will be discussed next, as well as a work plan.

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Literature Review

Human Rights

The first thing that is needed, is a definition of human rights, because without one, there would be no way of measuring any outcomes of the research that will be performed. The most complete definition of human rights is of course the Universal Declaration of Human Rights (The Universal Declaration of Human Rights, 1948). With 30 articles, ranging from the right for every human being to be born free and equal, to the prohibition of states, groups or persons to engage in activities that are aimed at destroying the rights and freedoms of others. Although it is the most complete definition available, it is also undoubtedly too ambitious to try to research human rights in this paper in this form.

Donnelly (2013) provides a very broad, and simple, definition of human rights: “the rights that one has simply because one is a human being” (Donnelly, 2013, p. 10). Underlying characteristics of this definition of human rights are that someone is either a human being or not and following this, human rights are equal rights in the sense that everyone has the same human rights or when someone is not a human being, they have no human rights at all. They are inalienable rights since no one can stop being a human being. Human rights are also universal rights, since all members of the Homo sapiens species are considered to be human beings and therefore have human rights.

Still, more specificity is needed for this paper. Poe and Tate (1994) divide human rights up into several categories, such as the integrity of the person, economic rights, political rights, and social rights. Following this line of reasoning, it is not unthinkable that there are other types of categories possible for the categorising of human rights. For

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8 instance, the research performed in this paper will use human rights abuse allegation types, also called company abuse allegations (CAAs), used by the Corporations & Human Rights Database Project (CHRDP) to mark the boundaries of the types of human rights that will be researched for this paper. More information on the CHRDP will be given in the theoretical framework section. The types of human rights abuses that the CHRDP uses are: physical abuse, health, environment, labour, and development and poverty (“Methodology”).

Physical abuse CAAs have to do with the abuse of people, such as intimidation or threats, violence, disappearances, and even deaths. Health CAAs involve the access to medicine, health concerns that are related to pollutions and other sorts of health problems. Environment CAAs refer to contamination of the natural environment, such as water, air, and land contamination, but also deforestation and the destruction of natural resources. Labour CAAs involve the working conditions of the employees involved, but also whether there are types of employees involved that should not be employed, such as children. Finally, development and poverty CAAs are about the denial of development by the

organisation involved in the activities, with regard to the people involved. Theses CAAs can involve denying access to basic needs, denial of freedom of expression and the destruction of local economies (Olsen and Payne, 2013). This paper will focus on health and environment CAAs.

Voluntary Corporate Codes of Conduct

During the 1990s, the use of voluntary codes surged. This was mainly due to the negative media attention to topics such as support for oppressive regimes, environmental damage, and outsourcing to countries where inferior labour conditions were in place (van Tulder and

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9 Kolk, 2001). In response to this negative attention, organisations drew up voluntary codes in which they committed themselves to certain norms and values.

Voluntary codes can be categorised into three types: internal, external, and third party. The differences between these types refer the where the voluntary codes are used. Internal codes, for instance, are to be used by the organisation only. External stakeholders are not to use these codes. External codes often refer to outside groups, often a wide range of stakeholders. With third-party voluntary codes, the perspective changes, no longer do we look through the eyes of the organisation, but we now take the viewpoint of an external third party. Third-party codes are written by a third party of which the organisation becomes a member, after which the organisation carry out those codes in their operations (Bondy, Matten, Moon and 2004). Examples of third-party codes are the United Nations Global Compact (UNGC), and the Canadian Direct Marketing Association (CDMA) (Overview of the United Nations Global Compact; Mandate of the CDMA, 1963).

Voluntary codes can be drafted in three distinctive tones: punitive, principles, and commitments. Punitive codes often take the appearance of sanctions or the threat of sanction for noncompliance. These codes are often quasi-legal. Principles codes are codes that state intentions. Often this involves engaging in corporate social responsibility (CSR), but these statements are vague and broad, with little indication of how an organisation will engage in CSR or why. Commitment codes are codes that state an organisation’s intent to engage in CSR as well, but these are often more specific since commitments are more formalised (Bondy, Matten and Moon, 2004).

As mentioned above, the different types of voluntary codes can roughly be divided into two groups (Bondy, Matten and Moon, 2004): there are normative voluntary codes that

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10 are designed to guide the behaviour when they are active in countries that have different political, economic and social structures, and therefore describe how organisations and its employees should behave (Aaronson and Reeves, 2002).

Besides these normative voluntary codes, there are also instrumental voluntary codes of conduct. Diller (1999) argues that private-sector initiatives for the use of voluntary codes of conduct come from the desire to add value to the organisation, which can be done by forging relationships with customers, intermediary buyers and other business partners. Besides these relationships, there is also the need for organisations to preserve a reputable public image, or the reputation of brand names.

Other instrumental uses of voluntary codes are to avoid government interference. Brereton (2002) provides the example of the Australian Mineral Council Code of

Environmental Management. Organisations that signed up for this code committed to several demands, most notably seven broad principles involving CSR activities. The reason that this codes was drafted was to show government that the industry was capable of improving its performance through self-regulation, without regulatory interference.

Brereton (2002) also argues that organisations participate in voluntary codes because of the organisation’s reputation. Not only can benefits be derived from participating in voluntary codes, but even when there are no advantages to be gained, the threat of public criticism because of not participating can also be a strong incentive to participate in voluntary codes.

Research by Tashman and Rivera (2010) finds that participating in voluntary codes may be associated with adopting new CSR practices. However, their research focuses on the association between corporate social performance (CSP) and membership in business for social responsibility (BSR). BSR helps organisations across different industries and sectors in

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11 addressing many areas of CSP. However, BSR differs from other third-party voluntary codes in that it does not provide any sort of certificate for members. The results of Tashman and Rivera (2010) showed that organisations that are a member of BSR who greater levels of positive social impacts, but did not show any significant changes in their levels of negative social impacts. This indicates that although new CSR practices might be adopted because of the participation in voluntary codes, any entrenched routines that have a negative social impact that organisations may have are not necessarily put aside.

Leadership

For voluntary codes to work, there must be a clear message from the management of an organisation, stating that they support the organisation’s commitment to voluntary codes. This message is usually incorporated in the codes itself, with a specific section on the leadership of the organisation. This section must make clear that senior management must show that they commit to the codes through policy, communications, and resources (Nash and Ehrenfeld, 1996). This view is supported by Logsdon and Wood (2005) who state that employees will be uncertain on how to achieve goals concerning voluntary codes when there is no clear statement from organisational management about the core values and principles that should guide corporate conduct.

Moffet, Bregha and Middelkoop (2004) note the importance of leadership with regard to voluntary codes. In their case study of the Canadian Responsible Care project, a voluntary chemistry industry association for the improvement of health, environmental, and safety performance, they noted that the single most important factor for the success of the project was the role of specific leaders. Several CEOs of Canadian chemical companies helped develop a new vision which suggested to participants in the project that there was a

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12 more proactive approach to the policy making process, contrary to the industry’s traditional defensive approach, which was to adopt codes of conduct to comply with regulation and to prohibit regulatory interference.

Bansal and Roth (2000) find that when pursuing ecological responsibility in an organisation, the decision process was often based on the values of either powerful

individuals within the organisation or on the values of the organisation itself rather than on a general decision rule. When comparing with other firms, firms pursuing this decision process often pursued different and more innovative courses of action than firms who did have a general decision rule.

However, not all organisations that participate in voluntary codes, display

environmental leadership or have an explicit leadership commitment are what they seem. Organisations might engage in greenwashing, a term used to describe an organisation’s participation in environmental projects to manage their public reputations. Other reasons for engaging in greenwashing can be managing regulators, deflecting attributions of fault, reattributing blame to others, and even seeking to appear to be in a leadership position in an industry (Laufer, 2003).

Concurring with this view, O’Donovan (2002) finds that organisations only published environmental decisions with the intention of presenting the organisation in a positive light. Disclosures about social and environmental activities are often not verified and are therefore little more than public relations, used to manage how the public perceives the organisation, respond to public pressures, or reacting to public opinions (Hooks, Coy and Davey, 2002; Adams, 2002).

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13 Firm Visibility

Firm visibility can be defined as the amount of attention an organisation attracts from society. According to this amount, managers estimate how much society expects the

organisation to be a good corporate citizen and then make decisions on how much CSP to is needed accordingly (Chiu and Sharfman, 2011).

Chiu and Sharfman (2011) find that when an organisation is more visible to

stakeholders, it has a higher CSP. An explanation for this finding is that when managers are under more scrutiny by stakeholders, they become more involved in socially responsive projects. Other findings of their research are that the visibility of slack resources, unused resources such as excess staff and retained earnings (Tan, 2003), has a significant effect on an organisation’s CSP, but that this effect differs across CSP dimensions. Higher visibility of slack resources leads to high CSP in dimensions such as community, environment, and diversity programs, but it leads to lower CSP in the dimension of strategically related CSP, involving employee relations and product quality. However, industry visibility had no direct impact on CSP, but they did find a mediating effect: industry visibility leads to higher

stakeholder visibility which leads to higher CSP, as they had found when testing stakeholder visibility.

There is greater pressure for organisations with a higher visibility to engage in more CSP, because not only do they have more stakeholder, industry and slack visibility, but they might also have higher media exposure. Because of this higher exposure, these organisations are under much more scrutiny than organisations with lower visibility, but information asymmetry between managers and stakeholders is reduced as well (Brammer and Millington, 2006). This reduction in information asymmetry gives stakeholders a better

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14 picture of an organisation’s activities, which might cause an increase in the expectations that stakeholders have. This in turn may motivate managers to engage in more CSP so as to address these expectations, which is in line with the findings of Saiia, Carroll and Buchholtz (2003). They find that when organisations have a higher visibility, they are more likely to make larger philanthropic gifts.

Another form of pressure for organisations to engage in more CSP comes from the resource-based view perspective (RBV). Barney (1991) argues that when resources are valuable, rare, nonimitable, and nonsubstitutable, they can become a source of competitive advantage. When an organisation invests more in CSP, it may help to develop new

competencies and resources, which will lead to greater shareholder value.

Not only are there pressures for organisations to engage in CSP, there are also incentives. Godfrey (2005) argues that when organisations engage in CSP, they create

intangible assets by generating moral capital. This moral capital can work as an insurance for the organisation, mitigating stakeholders’ propensities for negative actions against the organisation when performance is disappointing for example. But it can also become a source for sustainable competitive advantage because it often takes several years to develop, making it difficult to imitate and substitute (Barney, 1991).

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Theoretical Framework

Based on the literature discussed in the previous section, a gap in the literature has become apparent. Although research has been performed as to how leadership, firm visibility, and voluntary codes relate to CSR, CSP, and human rights abuses, no research has been

performed as to if or how voluntary codes might influence the relations between leadership, firm visibility and CSP, CSR, and human rights. This paper will research the relationships between leadership and environmental CAAs, leadership and health CAAs, firm visibility and environmental CAAs, firm visibility and health CAAs, and whether voluntary codes affect these relations.

Leadership

Leadership will be looked at through the construct of leadership commitment, as proposed by Hamann, Sinha, Kapfudzaruwa and Schild (2009). Leadership commitment has been chosen as a construct because leadership itself is a very broad concept and leadership commitment is a construct that can be measured, as shown by Hamann et al. (2009).

Much like the construct used by Hamann et al. (2009), this paper will rank organisations according to the convincingness of references to human rights in the CEO statement in the annual report. However, this paper will not assign a score ranging from zero to three but will divide commitment into a ‘high’ and a ‘low’ category.

Despite the concept of greenwashing and the need of organisations to preserve their reputation (Laufer, 2003; O’Donovan, 2002), this paper supports the arguments put forward by Moffet, Bregha and Middelkoop (2004), who find that the role of leaders is the single most important factor in the success of the Responsible Care project. Also, this paper

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16 concurs with the findings of Bansal and Roth (2000), who find that firms that pursue

ecological responsibility often base their decision process on the values of powerful individuals within the organisation. This leads to the following two propositions:

1a. Leadership commitment is negatively related to environmental CAAs 1b. Leadership commitment is negatively related to health CAAs

Firm visibility

This paper follows the findings of Chiu and Sharfman (2011) that state that when an

organisation has a higher visibility, they engage more in CSP. Also, the findings of Brammer and Millington (2006) make for a good argument along this line of thought. Since all the discussed literature finds that organisations with a relatively high firm visibility have very little to gain by not engaging in CSR or CSP, this paper agrees with those findings. Again, the concept of greenwashing as well as the need to preserve reputation counter these findings (Laufer, 2003; O’Donovan, 2002), but the case for engaging more in CSR or CSP is a much more compelling one.

Firm visibility will be measured through firm size. Firm size will be determined by net income and the number of employees. This construct has been widely used by previous papers. Firm size has been found to have an important influence on corporate

environmental and community responsiveness (Bowen, 1999; McElroy and Siegfried, 1985; Adams and Hardwick, 1998). Again, many different categories of firm visibility can be thought of but this paper will distinguish between two categories: ‘high’ and ‘low’.

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17 2a. Firm visibility is negatively related to environmental CAAs

2b. Firm visibility is negatively related to health CAAs Voluntary Corporate Codes of Conduct

The participation in voluntary codes will be measured by checking whether an organisation is a member of a third party corporate codes of conduct. For this research, two organisations were chosen as a third party, namely the UNGC and the Global Reporting Initiative (GRI). The UNGC is a platform for the UN to engage with enlightened global business (Overview of the United Nations Global Compact). The reason for choosing only two organisations is that these two are most widely known and used. The reason for choosing only third party voluntary corporate codes of conduct is that almost every organisation has an internal policy, which could all be classified as internal voluntary corporate codes of conduct, which would make the moderator variable of this research redundant.

The GRI is an organisation that developed a framework for the reporting of

sustainability practices for organisations and its mission is to make sustainability reporting standard practice for all organisations (What is GRI?). Although the GRI only provides a framework for organisations in which they can check whether they are complying with certain sustainability standards and not an actual code of conduct, it does act as a self-regulating mechanism since organisations are not obliged to report. When an organisation reports on its sustainability practices, it is given a grade by GRI ranging from ‘C’, the lowest, to A+, the highest. These grades can improve by disclosing more information in a

sustainability report or it can improve by reporting over a longer period of time (FAQs: Application Levels). GRI itself does not provide consultancy on their guidelines because this would create a conflict of interest. GRI does not assure that the reports are based on the

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18 guidelines that they provide and they recommend that reporting organisations use external assurance (FAQs: GRI’s Services).

Participating in voluntary corporate codes of conduct is proposed to have a moderating effect on the aforementioned propositions. This leads to the following propositions:

3a. Participating in voluntary corporate codes of conduct moderates the relation between leadership commitment and environmental CAAs

3b. Participating in voluntary corporate codes of conduct moderates the relation between leadership commitment and health CAAs

3c. Participating in voluntary corporate codes of conduct moderates the relation between firm visibility and environmental CAAs

3d. Participating in voluntary corporate codes of conduct moderates the relation between firm visibility and health CAAs

Conceptual Framework

Based on the proposed relations and propositions, the following conceptual model was developed:

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Methodology

This paper started out with the intention of testing the proposed propositions using quantitative measures. However, since the information required for this was not always available, the approach changed to a case study analysis of multiple cases. One advantage of this change of approach is that a case study allows for a more detailed analysis, which might uncover other important variables. However, a major disadvantage is that results can be more biased for a case study analysis than a quantitative analysis.

First, data was collected for organisations based on available information in the CHRD, the Orbis Database, the UNGC Participants and Stakeholders, and the GRI Sustainability Disclosure Database.

Once enough data was collected, six organisations were analysed in more detail. The analysis focused mainly on the constructs of leadership commitment, firm visibility,

participation in voluntary codes of conduct and whether the organisation was involved in any CAAs. The information needed for the constructs were be present in the annual reports and the sustainability reports that are published by organisations.

This research collected data in the form of reports that cover a period of time. This allowed assessment of a number of factors, such as whether an organisation changes its approach to human rights violations for the better or whether an organisation lapses into its old habits.

Organisations were divided into two categories, either ‘high’ or ‘low’, for both leadership commitment and firm visibility. After all the analyses have been carried out, the six organisations were placed in the following framework:

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21 Firm Visibility High Low Leadership Commitment High Low

The most preferable corner for an organisation to be in would be in the top left, since both leadership commitment and firm visibility have been proposed to be negatively related to the number of environmental and health CAAs. If an organisation is placed in either the top right or bottom left corner, it would be involved in more environmental and health CAAs than organisations in the top left corner. The least preferable corner is the bottom right, in which organisations will be involved in significantly more environmental and health CAAs according to the proposed propositions.

When the organisations were placed in the framework, an assessment was made as to how many CAAs they have been involved in, if any, and if there was any evidence for the propositions. The participation in voluntary corporate codes of conduct was also taken into account and an assessment was made as to whether it affected the number of CAAs for any organisation.

The research focused on CSR activities regarding the environment and the health of local communities, since this research is interested in these specific CAAs. Other CSR activities were not excluded but were not elaborated on as much.

This paper mainly focused on parent companies, since there was very little information available on the performance of subsidiaries. Virtually no subsidiaries were found to have published any annual or sustainability reports, making an analysis of these subsidiaries impossible. However, when a subsidiary was involved in a CAA, this paper assumed that the parent company is involved in the CAA as well because of the link with the

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22 subsidiary. Also, inferences can be made by analysing the subsidiaries that a parent company is involved with.

The information that was gathered for this paper was kept track of by using NVivo software. The software allowed for the structuring of the data that was used for the analysis, which was unstructured when it was gathered, while keeping it manageable (NVivo).

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Analysis

The organisations that will be analysed in greater detail in this section are Chevron, Oando, Petrobras, Repsol, Shell and Total. All these organisations are active in the oil industry. These companies were chosen for analysis because the reports published by these organisations are fairly complete and provide information that is useful for this analysis.

This section is divided up into six parts, one for each organisation. The six parts are split up further according to the subject of analysis.

Chevron

Chevron is an American oil company, which was founded on the 10th of September 1879. The organisation is active all over the world in multiple business regarding oil and gas. They are active in both upstream and downstream segments of the oil industries. Chevron is involved in the exploration and production of fuels, the manufacturing, transportation and the producing of chemicals, as well as the supply of several products such as refined fuels and finished lubricants (Our Businesses, 2011).

Leadership Commitment

The period that will be reviewed for Chevron ranges from 2004 until 2010. This period is analysed because of the information that is available about the CAAs that Chevron is involved in. Also, this gives a more comprehensive oversight of the development of leadership commitment as well as how firm size may have changed over time.

In the CEO statement in the 2004 corporate responsibility report there is mention of the activities that Chevron undertakes regarding human rights. These activities include

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24 reporting on emissions, safety, environmental care and other CSR activities. However, these activities are not elaborated on in the CEO statement but are simply summed up in the following quote: “We had our safest year ever. We continued to improve our efficient use of energy. We significantly reduced oil spills. We met our greenhouse gas emissions goal. And we issued flaring and venting standards for our international upstream operations” (Chevron Corporation, 2005a, p. 2). The statement mentions that the greenhouse gas emissions goal was met, but there is no concrete information given in the CEO statement (Chevron

Corporation, 2005a). Further on in the corporate responsibility report, the goals are explicitly mentioned and elaborated on, but this research is focused on the CEO statement and as such will not take those elaborations into account. The fact that all of this is mentioned in only one paragraph of the CEO statement, which consists of seven paragraphs, shows a lack of leadership commitment. The language used in the CEO statement is very formal and does not convey a sense of involvement. One example of this is the quote that is used above. The CEO does not state that he is pleased that these goals were met. In fact, it is a summation of their achievements of the past year. All this indicates a low level of leadership commitment. In the 2005 corporate responsibility report, there are projects and accomplishments that are explicitly mentioned. Again, there is the summation of accomplishments of the previous year: “Among our accomplishments were our safest year ever; a relaunch of The Chevron Way, our statement of values that drive all our actions and business decisions; deployment of a global HIV/AIDS policy; the development of a Human Rights Statement; and meeting our goal for greenhouse gas emissions” (Chevron Corporation, 2006a, p. 2). Further on in the statement, the CEO commits the organisation to the HIV/AIDS policy as well as the Human Rights Statement: “Other areas of focus include global implementation of our HIV/AIDS policy and the deployment of our new Human Rights Statement” (Chevron

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25 Corporation, 2006a, p. 2). The statement mentions Chevrons climate change strategy, but fails to elaborate further: “we will continue to implement the climate change strategy we developed” (Chevron Corporation, 2006a, p. 2). The CEO statement consists of eight paragraphs, one and a half of which cover the topics mentioned above. Again, formal language is used and there is no description of the sense of achievement concerning the meeting of goals or deployment of projects. Although there is a bit more specific information given regarding projects in comparison to the previous CEO statement, the fact that there is no sense of ownership concerning these projects as well as the mentioned achievements indicate that there is still a relatively low level of leadership commitment.

Roughly half of the 2006 CEO statement consists of the CSR activities of Chevron. Mentioned are investments in local communities with regard to education and other

developmental goals: “We also invested nearly $91 million to help people improve their lives through education, training and local business development. We partnered on a new

polytechnic school in Indonesia; supported learning centers in Venezuela; engaged with governments, communities and nongovernmental organizations to reach common

development goals in Angola and Nigeria; and launched the Energy for Learning initiative to support public schools on the U.S. Gulf Coast” (Chevron Corporation, 2007a, p. 2). Chevron improved practices for the assessment of environmental, social and health impacts that are associated with its projects and posted results that were better than their set targets concerning the greenhouse gas emissions and energy efficiency. The climate change policy that Chevron had is elaborated upon since they have expanded it and this expansion is covered in the CEO statement: “The statement conveys the company’s views on the principles of economically sound climate policies. These principles recognize, among other things, the need for national frameworks and global engagement by the top emitting

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26 countries of the world; broad, equitable treatment of all emitting sectors of the economy; and actions to enable technology, maximize conservation and ensure energy security” (Chevron Corporation, 2007a, p. 3). Compared to previous years, this CEO statement puts a lot of emphasis on the CSR activities of Chevron. It is refreshing to receive a bit more information on the projects that are mentioned in the statement. In previous years the projects were simply mentioned but this statement mentions budgets and specific locations. However, there is still no sense of ownership regarding these CSR activities. Compared to previous years, this CEO statement indicates a relatively high level of leadership

commitment.

The CEO statement in the 2007 corporate responsibility report is fairly limited in its mentioning of CSR activities. The Chevron Way is mentioned because it was made available in 14 language for the employees of Chevron. The continuation of the HIV/AIDS policy of Chevron is mentioned as well and a public awareness campaign that was launched, which focused on energy facts, challenges and solutions. The Chevron way is briefly mentioned in only one paragraph, while the other projects are covered in just over half a paragraph. The CEO statement consists of seven paragraphs. (Chevron Corporation, 2008a). Interestingly, there is no mention of greenhouse gas emission goals, which gives the impression that the goals for this year were not met. The greenhouse gas emissions goals were met, to clarify. It is very strange that this CEO statement mentions as little CSR activities as it does, compared to the 2006 CEO statement. This CEO statement feels almost as a sales pitch. Quotes such as “Our mission is to find and produce the energy the world needs today and tomorrow” (Chevron Corporation, 2008a, p. 2) and “We conduct business in a complex global

environment. The energy challenges we face as an industry and as a society are formidable. However, throughout our company’s history, we have embraced challenges as opportunities

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27 to achieve results, the right way” (Chevron Corporation, 2008a, p. 2) may have a nice ring to them, but all they consist of is a lot of talking without actually saying something. This CEO statement is much like the ones from 2004 and 2005, meaning that this statement indicates a relatively low level of leadership commitment.

The CEO statement in the 2008 corporate responsibility report is very

comprehensive. It mentions the partnerships that Chevron has with local communities: “Our partnerships bring together business, community groups, government and nongovernmental organizations with one common goal: to produce sustainable results. To fund these

partnerships, we increased our community investments in 2008 and plan on sustaining that level in 2009” (Chevron Corporation, 2009a, p. 2). The sustainable results mentioned in this quote are questionable since it is not clear whether these results would be sustainable for the local communities or whether these would be sustainable business results. The

community partnerships focus on three areas: basic human needs, education and economic development. For all these areas, extensive examples are provided in the CEO statement: “Global fund: We’re the first Corporate Champion of The Global Fund to Fights AIDS, Tuberculosis and Malaria” (Chevron Corporation, 2009a, p. 2) as an example for the basic human needs. “We have partnered with the Discovery Channel Global Education Partnership to support 55 learning Centers in Angola, Venezuela, South Africa and Nigeria” (Chevron Corporation, 2009a, p. 2) as an example for education. “NovoBanco: In 2004, Chevron and partners launched this microlending bank to spur entrepreneurship among Angola’s low-income households” (Chevron Corporation, 2009a, p. 2) serves as an example for economic development. The fact that the NovoBanco project has not been mentioned in any previous CEO statements is somewhat surprising, since it has become quite a success. The

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28 those goals every year since 2004” (Chevron Corporation, 2009a, p. 3). The Action Plan on Climate Change is explained in a more detail, as will become apparent from the following quote: “We implemented our comprehensive Action Plan on Climate Change, which focuses on reducing emissions, improving efficiency, investing in research, pursuing business

opportunities, and promoting flexible and economically sound policies that protect the environment” (Chevron Corporation, 2009a, p. 3). Previous CEO statements mentioned the policies, but failed to provide further information, which is the major difference between the CEO statement of 2008 and those of previous years. However, it seems as if this Action Plan is more aimed towards a business case rather than an environmental case. The policies have to be flexible and economically sound before they are implemented in order to protect the environment. Finally, the CEO is pleased that the greenhouse gas emissions goal is met. Also, mentioning that Chevron is the first Corporate Champion of the Global Fund conveys a feeling of pride. However, the examples that are given for the areas of education and NovoBanco are simple summations. The fact that nearly half of this CEO statement is dedicated to CSR activities undertaken by Chevron is another indicator that this statement shows a relatively high level of leadership commitment.

In 2009, Chevron saw a change in CEO. The CEO statement of the corporate responsibility report of 2009 provides a few examples of CSR activities that Chevron has undertaken during that year, as well as a preview of activities that will be undertaken in the following years. There is one concrete example, regarding the Gorgon liquefied natural gas project, which is described in great detail: “Gorgon is the largest energy project in our history and will integrate environmental, economic and social benefits for our company, our community, and our business and government partners. It’s a $37 billion investment that is expected to generate thousands of jobs and produce energy for millions of homes and

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29 businesses in Australia, Asia and beyond for the next 40 years. To reduce Gorgon’s carbon emissions, we will include one of the largest CO2-injection projects in the world. At the same time, Gorgon will sustain the environmental integrity of Barrow Island, a Class A nature reserve that has been a model for the coexistence of energy development and biodiversity since Chevron began oil operations there in 1964” (Chevron Corporation, 2010a, p. 3). Although there are different types of benefits mentioned, it is unclear how communities will experience social benefits from this project, since the Barrow Island is a nature reserve where presumably no one lives. The partnerships with the local communities are mentioned: “We work closely with communities to design and implement strategic community

engagement programs to advance health, education and sustainable socioeconomic development” (Chevron Corporation, 2010a, p. 3). A result of these partnerships is the $30 million investment in the Global Fund to Fight AIDS, Tuberculosis and Malaria. A new Human Rights Policy was adopted in 2009, the result of the Human Rights Statement which was mentioned to be in development in the 2005 corporate responsibility report. “We have become more energy efficient in our global business functions, a significant step in reducing our carbon footprint” (Chevron Corporation, 2010a, p. 3). This quote is an indication that Chevron is still committed to its environmental efforts, but the way it is phrased here is not very convincing of the commitment of the CEO to these efforts. The CSR activities of Chevron are covered in five paragraphs in the CEO statement, which consists of eleven paragraphs. The comprehensive description of the Gorgon project is a nice touch, but the whole CEO statement feels quite detached. There is no sense of ownership from the CEO regarding these CSR activities. One quote that expresses the detachment is the following: “I am privileged to see firsthand how our employees get results the right way” (Chevron Corporation, 2010a, p.3). One would feel privileged when winning a prestigious award or

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30 when awarded a prestigious title for example, but in this case, something along the lines of being proud might have shown more commitment. Compared to the CEO statement of 2008, this statement indicates a relatively low level of leadership commitment.

The CEO statement of 2010 focuses on the partnerships between Chevron and local communities: “We make community investments in the three areas that we believe are the foundation of working societies the world over – health, education and economic

development. Our investments in health focus on training, testing and treatment for such diseases as HIV/AIDS, tuberculosis and malaria, which are critical economic and public health challenges in some of our largest operating areas” (Chevron Corporation, 2011a, p. 3). An example of Chevron contributing to economic development is their investment in the Niger Delta Partnership which is “an innovative, multipartner effort to promote economic

development, conflict resolution and capacity building” (Chevron Corporation, 2011a, p. 3). Chevron has committed $50 million to this partnership but it is unclear what its role will be. Is Chevron simply donating money to this partnership or do they get actively involved? An example of Chevron contributing to education is a part of their California Partnership

initiative, with which they have reached more than 245,000 underserved students and 3,900 teachers in California. One thing that did stand out is that the report mentions plans for implementing the Human Rights Policy, which was said to be implemented in the previous year (Chevron Corporation, 2011a). Five of the ten paragraphs of the CEO statement are dedicated to describing the CSR activities of Chevron. Much like the previous CEO statement, there is a sense of detachment of the CEO. This is because the statement is a summation of the CSR activities of Chevron. The CEO never states that he feels proud, or even privileged, of the activities of Chevron. This CEO statement indicates a relatively low level of leadership commitment.

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31 Overall, Chevron shows a relatively low level of leadership commitment. In most CEO statements, there is a summation of CSR activities which makes it feel as if the CEO is not very involved in the specifics of these activities. It is one thing to state all the CSR activities that the organisation undertakes, but when a CEO is able to describe these activities or convey a sense of ownership regarding the activities or the outcomes, it indicates a high level of leadership commitment. Most of the statements also seemed to present CSR activities from a business perspective, as something that Chevron would not engage in if it would cost them money. The language that was used by the CEOs also did not indicate a high level of leadership commitment. Most CSR activities were presented in the same way that business results or general statements were presented. The CEO statement that stood out was in the 2008 corporate responsibility reports. This statement provided much more specific information regarding a few CSR activities, as opposed to providing very little

information regarding a lot of CSR activities. Bear in mind that this research is not about how many or what kind of CSR activities the organisation engages in but rather about how much the CEO is committed to these CSR activities.

Firm Visibility

The Firm Visibility is relatively high. In the following table, the net income and the number of employees of Chevron are presented.

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32 Table 1 – Chevron Firm Visibility

2004 2005 2006 2007 2008 2009 2010

Net Income (in millions of $)

13,328 14,099 17,138 18,688 23,931 10,483 19,024

Number of Employees

47,265 53,440 55,882 59,162 61,675 59,963 58,267

Sources: Chevron Corporation, 2004a; 2004b; 2005a; 2005b; 2006a; 2006b; 2007a; 2007b; 2008a; 2008b; 2009a; 2009b; 2010a; 2010b; 2011a; 2011b

As can be seen from the table, both the net income and the number of employees were already quite high to begin with and increased throughout the years.

Chevron is not a member of the UNGC (Participants & Stakeholders a). All the sustainability reports that Chevron has published were made with the use of the framework developed by GRI. Interestingly, none of the reports made use of external assurance and were not given a grade by the GRI (Sustainability Disclosure Database).

Placement

With the analysis of both leadership commitment and firm visibility taken into account, Chevron has been placed in the bottom left corner of the proposed framework.

Firm Visibility High Low Leadership Commitment High Low Chevron

Chevron is not in the proposed ideal segment, which means that they are expected to have slightly more CAAs.

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CAAs

Chevron is involved in twelve CAAs in the CHRD, eight of which are environmental CAAs and one is a health CAA. Two of these environmental CAAs did not occur during the period that is covered above and for two other environmental CAAs no date of the abuse could be found or specified. However, four environmental CAAs occurred during the period that is covered in this research and will be discussed in more detail below. The health CAA did not occur during the period that is covered above.

Two of the CAAs took place in Kribi, Cameroon. One of these took place in 2007, when COTCO, a business partner of Chevron, reported that a water evacuation system failed, causing water contamination in the local area. Even though COTCO did acknowledge that the system had failed, they had waited five days to inform the public of the failure. COTCO did undertake non-judicial action by installing an artificial reef to repair the damaged environment. However, fish have not yet returned to the local environment (Corporations & Human Rights Database, 2014).

The other CAA in Cameroon took place in 2010 and also involved COTCO. Again, water contamination was at the heart of the incident but it occurred during the removal of crude at a loading station. The leak was stopped on the same day, resulting in a leak of less than five barrels of crude. Neither judicial nor non-judicial action was taken (Corporations & Human Rights Database, 2014).

The third CAA that Chevron is involved in also involves water contamination. In 2003 an oil spill occurred in Managua, Nicaragua. 5,253 gallons of oil were spilled at one of the facilities of Chevron. Judicial action was taken against Chevron, resulting in the ordering for the repair of the local environment. However, Chevron did not comply with this order with

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34 led to a sanction for the organisation. The CAA is no longer ongoing (Corporations & Human Rights Database, 2014).

The final CAA involving Chevron took place in Ilaje, Nigeria in 2004. Again, water was contaminated as a result of an oil spill. Chevron did not respond to this allegation. A local community group tried to reach out to Chevron to have the organisation repair the damage and pay compensation to the affected people, but the outcome of this is unknown

(Corporations & Human Rights Database, 2014).

Discussion

Even though Chevron was not involved directly in any of the discussed CAAs, it is remarkable that the organisation is involved with subsidiaries that do not provide local communities the same helping hand that Chevron claims to do.

It is a surprise that the CAA that took place in 2007 in Cameroon occurred,

considering that the CEO statement of 2006 stated that Chevron had improved practices for the assessment of environmental, social and health impacts that are associated with its projects. In the CEO statement of 2008, there is more information given on the Action Plan on Climate Change. It is possible that this CAA may have urged Chevron to do this.

It is quite different with the 2010 CAA that occurred in Cameroon, since the 2009 CEO statement did mention that Chevron had become more energy efficient, but did so in a way that was not very convincing.

The CAA that took place in 2004 in Nigeria is quite surprising as well, since the 2004 CEO statement stated that Chevron had reduced oil spills. One CAA does not prove this statement wrong, but it is weird that there is only one CAA of 2004 involving Chevron in the CHRD and that that CAA involves water contamination. No mention of improvement of

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35 environmental assessment was made in the 2006 CEO statement. This was an opportunity for Chevron to address this type of CAA.

In the CEO statements, Chevron emphasises The Chevron Way and the investments it makes in local communities but according to these CAAs, they do not seem to screen their subsidiaries and business partners well enough. Although it is unrealistic to expect a business partner such as COTCO to have the same standards regarding corporate codes of conduct, you would expect Chevron to check the standards of its business partners.

Petrobras

Petrobras, or Petroleo Brasileiro S.A., is a Brazilian energy company, which was founded on the 3rd_{of October 1953. The organisation is active in 30 countries across all continents (Our} History a). It is active in multiple businesses concerning energy, gas and oil, such as thermal power plants, refineries, ethanol plants and biodiesel plants (Main Operations).

Leadership Commitment

The period that will be reviewed for Petrobras ranges from 2005 until 2009. This period is analysed because of the information that is available about the CAAs that Petrobras is involved in. Also, this gives a more comprehensive oversight of the development of leadership commitment as well as how firm size may have changed over time.

The CEO statement of the 2005 Social and Environmental Report is very much focused on the activities regarding CSR of Petrobras. “At all times we have taken care to maintain our commitment to the health and safety of our employees, the community and our customers, all the while zealously striving to preserve the environment” (Petrobras, 2006, p. 2). This quote mentions the commitment of Petrobras regarding both health and the environment. The following paragraph is about the goal of Petrobras to improve the quality of life in the

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36 community in which the organisation operates. “Our initiatives are in areas such as jobs creation, income generation, combating poverty and hunger, guaranteeing the rights of children and adolescents, the promotion of citizenship and equality in terms of race and gender, as well as preservation of the environment” (Petrobras, 2006, p. 2). Again, this quote shows the commitment towards several areas, among which are health and the

environment. However, there also seems to be some ‘personal’ gain for Petrobras because the organisation is also looking to create jobs. Also, some examples of investments that Petrobras has made would have been a positive addition. Petrobras has also set up a

committee: “We consolidated the operations of the Management Committee for Social and Environmental Responsibility, a decisive step in aligning Petrobras with the principles of the UN Global Compact” (Petrobras, 2006, p. 2). This seems a step in the right direction and the mentioning of the UNGC is a positive addition to the CEO statement. However, another quote that stood out is the following: “The Management Committee for Social and Environmental Responsibility has the important attribution of consolidating Petrobras’ positive results, identifying and indicating possibilities for advances at the social and environmental field” (Petrobras, 2006, p. 2). Although it is positive that Petrobras has a committee dedicated to these activities it seems that these activities have to have some sort of economic soundness to them or else they will not take place, indicating that these

activities are not undertaken because of some sort of underlying values but because they can actually earn money for Petrobras (Petrobras, 2006). This CEO statement shows a

relatively low level of leadership commitment. Although it mentions all the different areas of human rights that the Petrobras is committed to, it fails to elaborate on them. Also there is no real indication of pride of the CEO for being involved in these activities. Four paragraphs

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37 of the CEO statement are committed to the CSR activities with the entire CEO statement consisting of nine paragraph.

The 2006 CEO starts off with the activities of Petrobras regarding the UNGC:

“Petrobras has played its social and environmental role on the basis of the ten principles of the UN Global Compact since 2003. Accordingly, it actively participates in the dissemination of these values in the business world, by believing that sustainable development needs the contribution of the different segment of society and, of course, community participation” (Petrobras, 2007, p. 3). Petrobras also had two other achievement during the year: “The results of dedication to be aligned with international social and environmental responsibility standards, made the Company even prouder: the admission to the Dow Jones Sustainability Index (DJSI) and to São Paulo Stock Exchange (Bovespa) Corporate Sustainability Index (ISE)” (Petrobras, 2007, p. 3). It is quite hard to make out whether the CEO is proud of these achievements since it does not state so explicitly. Not that there is anything wrong with the company being proud of these achievements, but it would have shown a bit of emotional attachment on behalf of the CEO. The statement goes on to mention that many investments have been made in several cultural, environmental, social, and sports projects: “In 2006 alone, 742 projects were sponsored through the Petrobras Zero Hunger Program, with investments of more than R$176 million. Since 2003, when the program was created, 2,058 projects and 18,035 partnerships were based on multi-institutional aspects and the leading social role of citizens, always along the lines of education and professional eligibility of the young and adults, job and income generation, and guarantee of the rights of the child and adolescent, focusing mainly on children and adolescents” (Petrobras, 2007, p. 4). Again, the investments itself are noble but the intentions seem to be a bit more selfish, at least for the part about job creation. Petrobras has also made huge efforts environmentally: “The

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38 development of cleaner fuels, namely Podium diesel, which demonstrates the Company’s commitment to invest in preserving the environment. The International Seminar on Carbon Capture and Climate Change in the Company’s head office was a major event that attracted companies and the scientific community from 17 countries in search of solutions to reduce to a minimum the atmospheric greenhouse gas emissions” (Petrobras, 2007, pp. 4-5). This statement shows a relatively low level of leadership commitment as well. Not only does the statement feel as a summation of the activities and achievements of the previous year, there is also no real sense of ownership of the CEO regarding these activities and achievements. Also, the use of the word ‘Company’ when talking about its activities makes it feel as if the CEO is detached from the organisation. This is not the case every time the word is used obviously, but when the statement mentions the listing on the DJSI and ISE it might have been better to mention that the CEO himself or the people at Petrobras are proud. By saying the company is proud of this achievement it makes it sound very cold. However, the only time when the CEO speaks for himself is when he introduces the Social and Environmental Report and it does somewhat lessen this feeling: “It is with great pride and admiration that I present it to you (Petrobras, 2007, p. 5). The statement consisted of eleven paragraphs, four of which cover CSR activities of Petrobras.

The 2007 CEO statement starts off with the environment: “Petrobras acknowledges and assumes its prime responsibility for the environment. For this reason it invested two billion reais in the environmental aspects of its operations and external sponsorship

projects” (Petrobras, 2008, p. 3). This statement seems very general, but a bit further on in the statement there is one project that is highlighted: “Preserving the Amazon rainforest is a strategic priority for the Company. The Petrobras Center of Environmental Excellence in the Amazon, launched in 2007, combines technology and scientific know-how for the region’s

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39 sustainable development and to prevent and reduce risks caused by the industry’s

intervention” (Petrobras, 2008, p. 3). Although preserving the Amazon rainforest is certainly something that should be done, it seems that Petrobras is only doing it because it is a strategic priority and not because it is the right thing to do. Petrobras continued to invest in communities: “Petrobras invested R$585.8 million in cultural, environmental, social and sports projects” (Petrobras, 2008, p. 3). The investments of 2007 were more than three times as much as the previous year. However, it still seems as if Petrobras is looking to gain something of these investments: “The program’s lines of action are to generate income and job opportunities, professional training education and guaranteeing the rights of the child and adolescent” (Petrobras, 2008, p. 3). The CEO statement closes with the commitment of Petrobras to the UNGC: “Petrobras agrees to align its management with the ten principles of the UN Global Compact, to which it is a signatory since 2003” (Petrobras, 2008, p. 3). The tone and language used in the CEO statement is very formal and serious and it almost makes one read the statement as a business report. Things such as the environment and human rights are serious business of course, but the statement could have done with a bit more emotion. Again, the use of the word ‘company’ makes it feel as if the CEO is very detached from all this. The mentioning of the efforts that Petrobras undertakes trying to preserve the Amazon rainforest is a nice touch to the CEO report. A great deal of this CEO statement was dedicated to the various CSR activities of Petrobras, six paragraphs in total with the CEO statement consisting of eight paragraphs in total. However, simply mentioning these CSR activities does no convey a sense of ownership of these activities and some more examples would have made for a more comprehensive CEO statement. Still, this CEO statement indicates a relatively high level of leadership commitment compared to previous CEO statements.

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40 The 2008 CEO statement is roughly cut up in half with the first half containing a summary of the performance of Petrobras during 2008 and the second half discusses on the CSR activities of Petrobras. However, only three paragraphs are actually about the CSR activities of Petrobras, with the CEO statement consisting of eleven paragraph. The information given regarding CSR activities is fairly limited and most of it is a repetition of previous years but with different figures. “In 2008, the company invested R$1.92 billion in the environment to upgrade the operational processes, in order to make them safer and more efficient” (Petrobras, 2009, p. 3). Petrobras invested in communities again: “Almost R$556.8 million were invested in more than 2,300 social, environmental, cultural and sports projects” (Petrobras, 2009, p. 3). Apparently the projects that were invested in this year were not selected to generate income and job opportunities. One thing that is mentioned that is new is the Keeping an Eye on the Environment program: “Keeping an Eye on the Environment, which promotes the sustainable development of communities surrounding the operations of the company based on Agenda 21, a methodology for building sustainable societies, reconciling the methods of environmental protection, social justice and economic efficiency” (Petrobras, 2008, p. 3). Much like other activities that Petrobras undertakes, it seems as if these developments of communities should be economically sound first before they will be carried out. The language and tone in this CEO statement are almost the same as the CEO statement of 2007, meaning that it is very formal and almost reads as a business report. With only the addition of the Keeping an Eye on the Environment program and the rest of the CSR activities that are discussed being an almost exact copy of previous years, this CEO statement indicates a relatively low level of leadership commitment.

The 2009 CEO statement is very poor in terms of leadership commitment. The

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41 by Petrobras. The reason for this is that the 2009 Sustainability Report brings together the Annual Report and the Social and Environmental Report. However, the distribution could have been a bit more even. “The company supports cultural, sports, social and

environmental projects, in which it invested about R$464.5 million in 2009” (Petrobras, 2010, p. 7). Again, no specific projects are mentioned and the amount invested has been declining for two years now. The CEO also puts a new plan for Petrobras forward: “Petrobras Strategic Plan for 2020 sets the goal of achieving levels of excellence in the energy industry with regard to the intensity of greenhouse gas emissions in processes and products. Our 2009-2013 Business Plan calls for avoiding the emissions of 4.5 million tons of CO2 equivalent in 2013” (Petrobras, 2010, p. 7). The only thing that is missing here is a quick description of the results that Petrobras has achieved in 2009 regarding this plan. One positive of this plan is that there is no mention of economic soundness. It seems as if Petrobras is executing this plan for the sake of reducing greenhouse gas emissions. However, this CEO statement still indicates a relatively low level of leadership commitment. It feels as if the merger between the Annual Report and the Social and Environmental Report did not result in a report which consists of business results for one half and CSR topics for the other. This was not the case for the CEO statement at least. Much like previous reports, it does not feel as if there is any ownership of the CEO regarding CSR activities.

Overall, the CEO statements of Petrobras show relatively low levels of leadership commitment. Leadership commitment was relatively low to begin with and did not improve over time, with the exception of 2007. One thing that was definitely lacking from these CEO statements was a sense of ownership from the CEO. There was only one instance in which he indicated to be proud and that was when he presented the report to the readers.

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42 The fact that the statements conveyed very little information about the CSR activities that Petrobras is involved in also did not help. In every statement the investments in

cultural, sports, social and environmental projects are mentioned but not once is an example given. It even feels as if the section that discusses these investments are simply copied from one CEO statement into the next.

Along these same lines is the fact that even when a specific CSR activity is mentioned there is no real description of it or it is simply never mentioned again. The Management Committee for Social and Environmental Responsibility is mentioned in the 2005 CEO statement. This makes one wonder whether it was disbanded in following years or whether it was simply not important enough to mention again.

Another thing that was troubling was that most CSR activities that were mentioned were connected to economic soundness or were mentioned as strategic priorities, such as the preservation of the Amazon rainforest. By presenting CSR activities in this way there is a feeling that the organisation is not doing it because it is the right thing to do but rather because they can make money because of doing it, which should not be the main driver for undertaking CSR activities.

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Firm Visibility

Firm Visibility for Petrobras is relatively high. The information regarding net income and the number of employees can be found in the table below.

Table 2 – Petrobras Firm Visibility

2005 2006 2007 2008 2009

Net Income (in millions of R$) 23,725 25,919 21,512 32,988 28,982 Number of Employees 53,933 62,266 68,931 74,240 76,919 Sources: Petrobras, 2006; 2007; 2008; 2009; 2010

The net income fluctuated quite a lot during the period from 2005 until 2009, but it did increase. The number of employees increased quite a lot during this period.

Petrobras has been a member of the UNGC since 2003 (Participants & Stakeholders b). All the CEO statements discussed above come from sustainability reports that have been made with the use of the framework developed by GRI. Of all the reports that are discussed above, only the 2005 report was not given a grade by GRI. All the others were given an A+ grade, meaning that the reports met all criteria set by GRI and that they were externally assured (Sustainability Disclosure Database).

Placement

With the analysis of both leadership commitment and firm visibility taken into account, Petrobras has been placed in the bottom left corner of the proposed framework.

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44 Firm Visibility High Low Leadership Commitment High Low Chevron Petrobras CAAs

Petrobras is involved in fifteen CAAs in the CHRD, eight of which are environmental CAAs. One of the CAAs did lead to health problems among residents of the local area. The violation start date of four CAAs could not be determined, but three of these CAAs were reported in 2006 and continued to be reported on throughout the years. The other CAA that is discussed was reported on in 2004. Therefore, it is assumed that these CAAs took place during the period that is discussed in this paper. All of the CAAs took place in Argentina. None of the other CAAs took place during the period discussed above.

Three of these CAAs revolved around the same incident and involved the pollution of sources of drinking water by dumping waste materials in the water reservoir. Not only did this lead to the pollution of drinking water, but it also lead to contamination of land in the local area and the destruction of natural resources. Petrobras did not respond to the allegations in any way. Judicial action was taken against Petrobras and lead to the court deciding that Petrobras and other organisations that were involved in the dumping of waste materials should pay a fine of $5 billion for the damages caused to the environment and the local communities. Besides this, no non-judicial action was taken (Corporations & Human Rights Database, 2014).

The fourth CAA that Petrobras was involved in also had to do with the pollution of water, leading to health problem among the local residents. Linked to the water

The effect of leadership commitment and firm visibility on company abuse allegations