Makalah International Conference 1

26 Apr 2013 Mukti Fajar Makalah

Corporate Social Responsibility in Indonesia :

Regulation and Implementation Issues[1]

 

Mukti Fajar ND[2]

 

Abstract

Indonesian Government already made the regulation regarding Corporate Social Responsibility in   Invesment Act 2007, Limited Liability Company Act 2007, and State Owned Corporation Act 2003.  The basic idea of it was the mandate from the Constitution of Republic Indonesia 1945 concerning the national economic and social welfare has to be protected by the Government. Besides that, the government of Indonesia would like to prevent and reduce the environmental violation that had been made by corporation’s activities.

This research aims to answer and elaborate the questions as follows; First, which one better, whether the CSR will be the mandatory or voluntary merely? The second question is how far the scope of CSR in Indonesia? Third, how is the implementation CSR in Indonesia? The study was analyzed with the reflexive-law theory that used to be handled the limitation of formal law   approaching as the intervention of  state  in the area of private law, including the corporation. The reflexive law theory also trying to find the solution of the limit of law with the self-regulation, hence corporation obliges to report the social reporting to the states.

Using the socio-legal research and comparative law as a methodology, the object of this paper object is the implementation of CSR of the MNCs, National Private Corporation and State Owned Corporation. The respondents of this research are the company and government officer and also from the expert and NGO officer, that was used to do further analysis, descriptively with qualitative analysis. The empirical study found that :  first, CSR as the corporation activity can be legally bound by the regulation in Indonesia, based on Constitution of Republic Indonesia 1945 and the moral value. In another side, the research also found that the government needs to support the corporation doing CSR with the tax deduction policy, in order to eliminate operational cost of corporations. Second, within that obligation, the most important thing is that to give an authority to corporations to have self regulation and to give social reporting toward the society. Third, definition of CSR in the Limited Liability  Company Act 2007 and Invesment Ac 2007 must be revised with similar concepts and definitions of CSR and more clearly as a reference.

The diversity of the  CSR implementation models and motives by corporations should be appreciated, since it is difficult to avoid. Corporations should have a freedom to implement the CSR in accordance with the circumstances faced.

 

Key Word : corporate social responsibility, social reporting, self regulation

 

  1. I.            Introduction

Corporate social responsibilities is strictly regulated in Indonesia, there are Law No.25 year 2007 concerning Investment (Invesment Act 2007),[3] Law No.40 year 2007 concerning Limited Liability Company (LLC Act 2007),[4] and Law No.19 year 2003 concerning State Owned Corporation (SOC Act 2003).  This condition happens regarding to the Constitution of Republic Indonesia 1945 which stated that national economic and social welfare must be regulated by the government in order to the biggest society’s wealth.  Besides, in line to continuous developing principle, government wants to prevent and decrease the environmental damage which caused by corporate operation without caring the environment and society condition.[5]  But, this condition raises many controversies.

First, many parties stated that CSR is done based on voluntary principle.  Hence, CSR can not measure up to mandatory.[6] For example, International Labor Organization stated that:

“CSR is an area of voluntary initiatives in which enterprise develop their own approaches that go beyond legally required action to consider the impact of their activities on their workers, communities of operation and stakeholders.”[7]

 

As stated by Europe Union, which that “CSR is concept whereby companies integrated social and environmental concerns in their business operations and their interaction with their stakeholders on a voluntary basic.”[8]

Second, make CSR compulsory is contradicted with the nature of companies which is profit taking, not to do such a social activities.[9] “A business corporation is organized and carried on primarily for the profit of the stakeholders.  The powers of directors are to be employed for that end.”[10]

Third, the wide range of CSR both theoretical and practical is rapidly increased.  CSR which in the very beginning only purposed to protect the labor, it has included the environmental system,[11] human right issues,[12] until anti-corruption.  [13]Therefore, it is become not easy for “law” to regulate CSR; it is because law has limitation.[14]

Forth, related to the financial sources.  In the act of government business organization article 88 subsections 1 SOC Act 2003, stated that:

“BUMN can set aside some part of their net profit to develop the small business/koperasi  and development of society surrounding government business organization.”

Meanwhile LLC 2007 Act article 74 subsections 2 explicitly stated that:

“Social and environment responsibilities are an obligation for each corporation which is budgeted and calculated as corporate expenses which fair and proper.”

Yet basically, forcibly taking the assets of corporation to do CSR is contradict with private right, as it stated in Constitution of Republic Indonesia 1945 article 28 subsection 2: “every person have a private right and cannot be arbitrary interfere by anyone”.  Besides, it is also contradict with efficiency principle.  Efficiency is a basic rule in business operation, which is making the best use of limited sources to get the optimal profit. [15] Do CSR is reputed as improvidence.

Fifth, regarding the variance of CSR.  Before it is obligatory programmed in Indonesia, there were many corporate which already run this program in so many motif and its model.  There are several corporate did it for “do well and to look good”, part of promotion, up to corporate sustainability strategies.[16]  It has so many forms. There were donations, partnership, or community development society empowering.[17]

From above explanation, research of CSR in Indonesia became important to be done, in order to answer these several questions.  First, how the CSR regulation in Indonesia, it is a must or voluntary? Second, how regulation of the area of CSR implemented in Indonesia? And third, how are the problems during the implementation CSR in Indonesia?

This research used reflexive law theory for the needs of analysis.  Reflexive law theory is used to overcome the deadlock condition of formal law approach.  Formal law is any kind of government interference in regulating the private right of corporation tough acts, such as act of labor, act of environment, act of consumer protection, and others.[18]  Reflexive law theory is trying to minimize the complexity and diversion of society trough extensive law.  Reflexive law theory tries to solve the limit of law in controlling the society which is complex and effective.  The purpose of regulation whish based on reflexive law theory is to support the proactive and responsive management toward the social problems, by directing the corporate behavior pattern by self regulation.[19]  To inspect CSR, reflexive law theory is a law which tries to make the corporate to evaluate their operation which has been done, by giving the most up to date information regarding to social effect in social reporting to society.[20]

The research method which is chosen is socio legal research and law comparison.  Low socio research is used to observe the empiric evidence, the effect of law implementation toward social behavior or related with social behavior which influences law formation.[21]  The behavior which is observed is verbal trough interview, physical behavior trough observation and observing the inheritance or related archives.  Comparison method is used to compare the law product in the substances part.[22]  This effort was done in order to found the differences and the similarity of regulation and execution CSR characteristic which already become national, regional, or even global movement level which can not be dichotomy separated in that the inter state law system.[23]  The object of this research is CSR implementation of (1) Multi-national corporation; (2) National Private Corporation; (3) State Owned Corporation.  The respondents are competent parties from corporation, government, and society.  The analysis of this research is descriptive and qualitative approach. [24]

 

  1. II.          Regulation and Implementation Issues on CSR
    1. A.      Regulating CSR in Indonesia: Mandatory or voluntary ?

The discussion of CSR whether it should be obligated or voluntary was started from the basic purposes of cooperation.  Basically a corporation was formed in order to get profit for the shake of shareholders.  Meanwhile, CSR pretend to push the corporate to be aware toward the society’s needs (stakeholders).  The very first discussion was started by Adolf Berle and E. Merrick Dodd at the beginning of 1930 in United State.[25]

Adolf Berle is focusing in the importance of law protection to the shareholders which should be prioritized.[26] This argument thinks out shareholder primacy and fiduciary duty doctrine.[27]

Shareholder primacy doctrine was supported by the master of the law which stated that the shareholders have to get an absolute law protection as the consequences for these four reasons ; (1) hold the residual claims ;(2) have the greater risk ; (3) have the greatest incentive to maximize firm value, and; (4) have the least protection. [28]

Frank Knight stated that, firms profit taking action is a logic consequence of business which always faces uncertainty business environment and threatened by loss possibility.[29]  This concept is one of the explanations that profit taking becomes a normative right because of the risk and uncertainty in business itself.  Profit is the reward for risk taking; profit is due to take assumption of risk.[30]

The court’s decision also supporting the doctrine, as it showed in Dodge versus Ford Motor Company case.  Ford was claimed by Dodge for very low priced selling action.  Ford argumentation is: ” general purpose of corporation is plan benefit mankind by lowering prices and making cars available to the masses”. But at the end of court session, the case law in Michigan Supreme Court said: “A business corporation is organized and carried on primarily for the profit of the stockholders. The powers of the directors are to be employed for that end.”[31] The case law clarify the main purposes of corporation is to maximize the shareholders interest, not the needs of society.[32]

Milton Friedman stated that: “there is one and only one social responsibility of business — to use its resources and engage in activities designed to increase its profits”.[33] In implementing CSR, business morality aspect should be clearly re-defined. If the director or management of corporate, such donation in the name of company, in truth he did a personal action, because director is an agent of the share holder (fiduciary duty doctrine).[34] Just like what Friedman said:

“In a free-enterprise, private-property sys­tem, a corporate executive is an employee of the owners of the business. He has direct re­sponsibility to his employers”.[35]

 

This means basically use the corporate asset for social is immoral because it betrays and steals the shareholder rights.  Management does not have any right besides maximally effort in profit taking and there is no obligation to do social action by using the corporate asset.[36]

CSR as a form of obligation to propoerties chanelize is reputed contravene corporate private property right.[37]  Corporation as private institution has an owning right which fully protected by the law.  Private property right has to be secured by the state law as the sacred rights (sacred rights of private property).[38]

The same conception also stated by Ramello, which clerly said:

”Property rights have been a powerful device for promoting trade development, market existence and efficiency through human history. What is not owned cannot be traded. Hence, a well-defined set of property rights is central to the existence of trade”.[39]

 

Meanwhile E. Merrick Dodd argumentation said that the purpose of corporation is not merely for the shareholder, but society protection also.[40]  Dodd stated that:

“managers “should concern themselves with the interests of employees, consumers, and the general public, as well as of the stockholders, the business corporation has a social service as well as a profit-making function.”[41]

 

Dodd opinion has born stakeholder theory.  This theory is established based on opinion, if the management of corporation only looks for as much as profit for the shake of shareholder, that so the business will go out of the line.  Corporate will exploit labor and push the consumer and business partner.  Hence, the profit taking of corporation should be expanded to stakeholder needs fulfilling also.[42]

Based on Beth Stephens, profit taking is not the only one of company purpose, but it just their main business. Besides, corporate should also consider the social and environment needs as the part of company purposes.  It is grounded on: (1) negative impact of corporate operation, and (2) more complexity of society and corporate relation, so it is needs to be intervened by government to regulate the corporation activities.[43]

Owen D, CEO and founder of General Electric Corporation, stated that there are three parties which should be considered by the corporation, there are:

That there are three groups of people who have an interest in that institution. One is the group of fifty-odd thousand people who have put their capital in the company, namely, its stockholders. Another is a group of well toward one hundred thousand people who are putting their labor and their lives into the business of the company. The third group is of customers and the general public. Customers have a right to demand that a concern so large shall not only do its business honestly and properly, but, further, that it shall meet its public obligations and perform its public duties.[44]

 

Gary von Stage said that corporation is not allowed to take a profit only for their personal interest; a corporation which established under the law of an area should abdicate their self to the society interest where the law is. [45] Hence, corporate should make a balance interest between shareholders and society.[46]

Corporate assets are private owned, but it should be purposed to society.  Just as John Rawls related with gifted character:

 

“Gifted talent and natural ability, do not consider it as personal asset, but it is should be considered as public assets.  Gifted character of someone is public asset which entrusted to him. Every benefit of it should be fortunate all parties, especially for poor (least advantage).”[47]

 

As it stated by Mahatma Gandhi:

“Land is owned by God and it was given to human to be utilized for together prosperity.  In truth all of the land is belong to public. So, those lands have social function from privately owned. Ownership has a same meaning to all of excess of assets should be utilized for social prosperity.”[48]

 

Related with philanthropy, in truth it is come from Greek: philos (love) and anthropos (human) which mean love of fellow being.  Philanthropy was founded in all of religion (theological approach) as a morality.[49]  Islam knows zakat , infaq, and sodaqoh,[50] in Christian knows misericordian,  Jewish knows Tsedaqah, Hindus knows dartra darteva and danaam parmrath, Buddhist knows thambun and thantaan which the core is  set aside some asset to others.[51]  This precept illustrated that in some part of owning there were the right of anyone else who need it is a universal moral value.[52]

Hence, the change of the corporate purposes paradigm from only to profit taking.[53]  Reconstruction of corporate law should create a space in order to social justice.[54]  The corporate asset is not privately owned, but also it should useful for others, especially for poor people.[55]

Kenneth Boulding quotes the past paradigm by cowboy economic, such as:

“A cowboy lives in an open wide area. He will take anything in anywhere he can found it.  The area is wide and the source seems never run out. He will litter along the way. The cowboy economics vision illustrated as an open wide unlimited land which provide any kind of natural sources and throwing garbage”.[56]

 

Unfortunately, those things are create social gap , because as time goes by the natural sources is getting decreases.  Kenneth Boulding illustrated the world economics condition today by spaceship economics, which is:

“The vision is same with a spaceship which flies in space with the cosmonaut and limited time and valuable sources.  Their supporting life system is very depended to sources conservation in the spaceship.  Logically, the improvement of cosmonaut welfare is depend to the effective and efficiency of continues sources usage and recycling to fulfill their needs.  If there is cosmonaut who uses the sources carelessly, it will create the problems toward the other passengers”.[57]

 

Hence, a new paradigm is needed in order to change this condition, it is called sustainability development.[58] Sustainability development is a convergence between economics, environment, and social welfare.  It is familiarly called triple bottom lines.  [59]

 

 Triple Bottom Lines Diagram.

 Nowadays, profit taking action for the sareholder is still became a strong norm in corporate law of several countries.  But, there are some countries which try to optimized CSR in their constitutions.  England have the 2003 Corporate Social Resposibilities Bill (CSR Bill)[60] and Companies Act 2006. [61] Filiphine has regulate CSR in Corporate Social Resposibilities Act 2007.[62]  meanwhile in Netherland, nows CSR draft is being processed to be investigated is it possible to regulate it by using Dutch Company Act.[63]  and also Spain, CSR has been discussed in the Spanish Parliament Summit Meeting retlated with “a draft  corporate social responsibilities act”.[64]

Besides the purpose of corporation, CSR regulation debate beetween obligate constitutively or voluntary moral obligation, so far it is tends to morality rather than constitutively.

Because of the voluntary character and it is in ethics area, several countries and international organization regulate CSR in code of conduct (and then it is welknown as softlaw).[65]  OECD define code of conduct as: commitments voluntary made by companies, association or other entities, which put forward standards and principles for the conduct of business activities in the marketplace. [66]

Besides it is controlled by code of conduct, many companies committed their self to do CSR in self regulation (self governance).[67]  But, both two things are considered ineffective because it has no strength compared to constitution.

Morality is not a law problem.  Basic difference between law and moral are [68]:

1)     Morality is divine law which came from the god or universal value meanwhile law is human being made.

2)     In morality, the enforcement was done by the human itself, meanwhile in the law there is sanctions which obligate the law.

3)     In the implementation, someone who lie is contradict the morality, but based on law, someone is blamed when he was lie in order to broke the law or harm others.

Besides, there are several questions: is corporation a moral agent just like a human? Moral agent simply defined as a party who has a responsibility to act as a morality.[69]

Daniel J.H. Greenwood give his overview that there are similarities between corporation and individual, if it is seen from their responsibilities as a society member toward government.  He said that:

In liberal states, individuals have autonomy rights against the government. The citizens are the ends of government; the government is merely a means to our end. Here too, we treat business corporations as more analogous to citizens than to government. Our business corporations have virtually every constitutional right against governmental control and regulation humans have, except for the right not to testify against themselves. Further, corporations have rights that human citizens lack”.[70]

 

Technically, Joel Feinberg explain that in the past moral obligation was only obligated to personal, it is moved into collective obligation of corporation. Any activities of part or corporate partner become moral collective obligation.[71] Based on Joel Freiberg, collective moral obligation is not because of there is an error, but it is more tends to morality or group liability without fault, such inappropriate action or embarrassing action.[72]

But, there is an ancient words of Rome: :Quid Leges Sine Moribus?” which means “what is the meaning of law if there is no morality”.  Moral have to be always become the spirit of law.  Whether in the process of law formation or the execution of constitution, ethics taka a very important role.[73]

The acceptance of businessman is a minimum acceptance, but it is still not enough.  Not all of the business activities have an ethic character, moreover it is only for law activities.  Based on John R. Boartright, it will be much better if we use this motto: “if it’s morally wrong, it’s probably also illegal”. in another words we can said “better if we focusing on morale first, because moral is a better standard rather than law”.[74]

Next, obligate the corporate to do CSR is considered as contradict with efficiency principle.  Efficiency is optimalization of the existence sources to get maximum profit.[75]  But, mostly this principle create a dangerous excess, Corporation will be more tends to use lower price of raw materials but it is harm the environment, exploit labor, and others.  Eficiency could be dangerous and ignore the existence of human being..  Sir Richard Ivor stated that:

“A society where everyone is intent on maximizing their own wealth has its limitations.” Efficiency may require killing off the excess humans or enslaving some other humans.[76]

 

Constitutively in Indonesia, in the article 33 subsequence 4 of Indonesian Constitution 1945 stated that:

“National economics is run based on democracy of economics by cooperation, fair efficiency, continuous development, environmental overview, independent, and also balancing of development and unity of nation.”

 

Hence, efficiency principle has to give an advantage also toward society.  Every corporation activities which create disadvantages for society is considered as contradict condition toward law.[77] In this case, the ideal CSR regulation is the regulation which is not contradicts to the business principle, but also aware to social interest.  Because however, the most efficient regulation, if can not give justice, should be annihilate.[78]

If the implementation of CSR becomes a burden and inefficiency, the solution could be give an tax deductive for the corporate which implement it.  In United State, tax deductive is given for the person or corporation which give donation.  The form of those taxes was regulated in US code: title 26.170. Charitable, etc, contribution and Gifts which is well-known as Internal Revenue Code section 170 (IRC 170).[79]

In the Investment Act 2007, Law No.17 Year of 2000 concerning Income Tax (Income Tax Act 2000) and Regulation of Financial Ministry No.95/PMK.03/2006, tax deduction is given to the corporation which give donation toward natural disaster, aware to the environment, give a scholarship or maintaining small medium enterprises.  So, CSR is not contradicting with efficiency principle.

Based on reflexive law theory, the most important thing in obligate CSR for corporation is obligation in social reporting.  It will give a chance to the society to evaluate the implementation of CSR and corporation, that happen in the society through social reporting will be more effective.

 

  1. B.       The scope of CSR regulating

The scope of CSR is greatly improved.  At very beginning it is only in the term of employer, consumer, and partner right protection and also related with the society surrounding the corporation.  Nowadays, the scope of CSR requests the corporation to be aware to the environment, respecting the human rights and run the clean business from bribe and corruption.

  1. 1.        CSR and Labor Right

CSR related with the human resources issues, it is raised because of the right of labor which unprotected.  At beginning of industrialization in Europe and United States, labors are hardly exploited just like a slave (modern slavery).[80]  At that time there are no work schedules, age limitation, working safety, salary system, and others labor rights protection.[81] Workers are acted like a machine which can be exploited arbitrary by the business owner.[82]  Workers were roughly acted with a poor condition of work and did not be given the well safety working facilities (sweatshop workers).[83]

Time goes by, and the right of labor are started to be considered.  IN England for example, they announce the limitation of working hours for 10 hours per days, and well-known as the ten Hours Bill (1846).[84]

In United States, Franklin Delano Roosvelt, legalized the employers right protection,[85] which regulate the minimum payment and safety of works by including the economics policy which consider the improvement worker rights protection trough National Labor Relation Act 1935 (NLRA).[86]  In several Asia countries such as Taiwan, China, Korea, and Vietnam, anti sweatshop movement, minimum salary standard and work hour limitation is created.[87]

Indonesia regulates the Labor Act through Law No.13 Year of 2003 Concerning Labor Relation (Labor Act 2003)  . In the article no. 67 until no.101 which consider the under age, woman, and invalid  workers, work hour limitation, wealth and work safety, also salary and prosperous.[88]

There is an up-to-date approach in giving the rights of workers in the term of CSR, by giving the employee stock opinion plan (ESOP).  This ESOP concept gives a chance for the workers to joining in keep some of companies stock.[89]  Workers are motivated to give a good performance in order to increase the productivity of corporation, and on the other hand, workers will receive some part of company profits. Win-win solution.[90]

  1. 2.        CSR and Consumer Protection

In United States, the rights of workers are firstly enforced by the president, John F. Kennedy, trough Consumers Bill of Right 1962.  the protection of consumer in that regulation are: (1) Right to choose; (2) Right to safety; (3) Right to be informed; (4) Right to be heard; (5) Right to satisfaction of basic needs; (6) Right to redress; (7) Right to consumer education; (8) Right to healthy environment.  Next, for the shake of law enforcement and consumer protection, government establishes Federal Trade Commission (FTC) and Federal Communication Commission (FCC).[91]

In Indonesia, consumer is protected by Law No 8 Year of  1999 Concerning Consumer Protection (Consumer Protection Act 1999).[92] Consumer Protection Act 1999 also includes the responsibilities and obligation of companies.  In the article no. 19 sub sequence 1 stated:

“Business actors are responsible for providing compensation for the damage, pollution, and / or loss of customers due to consumption of goods and / or services produced which traded”.

 

But consumer protection, if it is seen from the concept of CSR is not only the issue of violation of the law or not. Moreover, the losses of assets. But it is more that that, the concept of CSR in consumer protection is a moral obligation to provide the best  service for the consumer, of course, without law violation.

  1. 3.        CSR and Environment

The scope of CSR is often associated with environmental problems. In many countries, the fact is that law of the environment is formally conducted by constitution.[93]  In the international level there are many agreements and declarations in the form softlaw (code of counduct) voiced by NGOs and by international organizations. [94]

United States has issued the Refuse Act of 1899 which regulates water pollution.[95]  Enhanced with the National Environmental Policy Act (NEPA) in 1969,[96] and the establishment of the Environmental Protection Agency in 1970 as a federal institution in charge to supervise the utilization of natural resources and environment.[97] In Japan was begun to set about the Clean Air Law in 1968 and the Clean Water Law in 1970. [98]

In Indonesia, the environment is regulated in the Law No. 4 Year 1982 Concerning Main Provisions of Environmental Management. Next it is renewed by Law No. 23 Year of  1997 Concerning  Environment Management (Environment Act 1997).[99] The targets which want to be achieved with these regulations is to achieve harmony, and balance between humans and the environment, and; ensuring the interests of present and future generations.[100]

But environmental problems are global problems. Many international agencies consider these issues by making various regulations or agreements. Universal Declaration of Human Rights for 1948 includes the right to a healthy environment.[101]   Stockholm Declaration of 1972 which contained clauses that the use of natural resources carried out with discretion and calculate the needs of future generations.[102]   United Nations Conference On Environment And Development (Rio Declaration) in 1992 which produced 21 agendas (Earth Action Plan).[103] In 21 agendas, there are 3 areas of study: (1) social and economic dimension (2) conservation and resource management for development and (3) Strengthening the role of major groups in society from the executor parties.[104] International Covenant The Kyoto Protocol 2005, which contains an agreement to reduce emissions or production of carbon dioxide and the greenhouse gases effect as an effort to prevent global warming .[105]

But environmental issues which associates with CSR in essentially is Sustainable development. This is to ensure that the recent needs and preservation of natural resources , without any compromise, should consider also the needs of future generations.[106]

  1. 4.        CSR and Human Right

The cognitionof economic power which able to endanger the human dignity has becomes various parties thought. In the last decade, a lot of evidence and testimony of human rights violations, as the impact of corporate operations, [107]especially Multi National Corporation (MNC).  Some of them are violations of Human Rights in India by Enron Corporation,[108] Shell, Mobil, and several international oil companies which operates in Nigeria,[109] and Unocal and Freeport-McMoRan which is claimed by Burma and Indonesia citizens,[110] for violating the human rights of local communities.[111] This is a crucial argument for linking the presence of MNC and it is very potential to be a subject of national and international laws that is subit to the legal regime of human rights.[112]

The European Union has recommend to consider human rights for private business toward society.[113] United States use the Alien Tort Claims Act 1789 (ATCA) to overcome the human rights abuses by corporations.[114] some of them are Chevron which is claimed by Nigeria cirizens in Niger Delta at 1999. Equador citizens claimed Texaco trugh U.S. Federal Court in 1993. Tom Beanal, a leader of West Papua Amungme Society, in 1996 claimed Freeport-McMoRan in U.S. Federal Court. In the same year also Yosefa Alomang claimed to Louisiana State Court.[115]

Talking about human rights in the context of CSR, oftenly linked with the issue of civil rights such as economic rights, political rights and cultural rights.[116] Universal Declaration of Human Rights which contains several articles related to the CSR, there are [117]:

Article 22. (social security and economic rights)

Everyone, as a member of society, has the right to social security and is entitled to realization, through national effort and international co-operation and in accordance with the organization and resources of each State, of the economic, social and cultural rights indispensable for his dignity and the free development of his personality.

 

Article 25. (about the standard of living and health)

 

(1) Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control.

 

Article 26. (the education right)

 

Everyone has the right to education. Education shall be free, at least in the elementary and fundamental stages. Elementary education shall be compulsory. Technical and professional education shall be made generally available and higher education shall be equally accessible to all on the basis of merit.

 

Human Rights is the right of personal that have to be protected by all countries in the world, so that the state has the authority to manage all of the components of the nation hence it can not be violated. One of the strong reasons why the state should regulate corporations to be socially responsible through a human rights issue, because the corporation (especially MNCs) has become a global actor which has the strength and power alsi influence in society, both economic power and political power. [118]

In Indonesia has also regulate about Human Rights through Law No. 39 year of 1999 (Human Right Act 1999)  . Some of human rights issues which are oftenly associated with CSR, for example, in Article 9 states:

1)     Every person has the right to life, survive and improve their standard of life.

2)     Everyone has the right  in srene, secure, peace, happy, prosperous and well spirited.

3)     Every person has the right to a good environment and healthy.

Continued in Article 40 that: “Every person has the right to live and decent life”. Meanwhile, in Article 41 subsequence (1) says: “Every citizen has the right of social security which is needed for decent living and for his personal development as a whole”.

This means that CSR has been regulated in human rights laws and constitutions in Indonesia.

  1. 5.        CSR and Anti-corruption Movement

Recent developments in the scope of CSR is about corporate involvement with the issue of corruption.[119] In business, corruption has highly increase the economic costs.World Bank recorded cases of corruption and bribery in business worth nearly $ 1 trillion U.S. dollars.[120]

The business world is shocked, when the incident of  Enron Corp. bankruptcy in October 2001, suddenly collapsed and had to bear the loss more than U.S. $ 50 billion.[121] Tragedy was followed by WorldCom who lost up to U.S. $ 11 billion and declared lost assets worth U.S. $ 110 billion. Global Crossing, Adelphia Inc. Tycon and then follow to collapsed.[122]

Corruption is a crime that has a very wide impact. Not only the destruction of the economic system but also have an impact on the social situation. The cases above have shown that corporate bankruptcy because of manipulation and corruption led to a lot of unemployment and social welfare issues. As the World Bank’s statement that:

 

“Corruption as among the greatest obstacles to economic and social development. It undermines development by distorting the rule of law and weakening the institutional foundation on which economic growth depends. The harmful effects of corruption are especially severe on the poor, who are hardest hit by economic decline” [123]

 

Besides corruption can destroy the market system and social development. Ethan S. Burger and Mary S. Holland argues:

“[C]orruption distorts markets and competition, breeds cynicism among citizens, undermines the rule of law, damages government Legitimacy, and corrodes the integrity of the private sector. It is also a major barrier to  international development–systemic misappropriation by kleptocratic governments harms the poor.”[124]

 

At first the anti-corruption movement in business was conceived in 1970 – by the Congress of the United States. Finally, in the year 1977 the United States Congress issued the Foreign Corrupt Practices Act (FCPA) to overcome bribery and corruption which is done by the corporation (MNC) outside the jurisdiction of the United States.[125]

Furthermore, several other international instruments are creted, namely: Financial Action Task Force on Money Laundering in 1990, the OECD Anti-Bribery Convention in 1997, the OECD Guidelines for Multinational Enterprises 1997 (revised in 2000), OECD Principles of Corporate Governance 1999 (revised in 2004 ), 2000 Wolfsberg Principles, Business Principles for Countering Bribery 2002, and the UN Convention against Corruption in 2003 (updated in 2005).[126]In 2004 the United Nations Global Compact launched the business movement Anti-Corruption namely: Businesses should work against all forms of corruption, including extortion and Bribery.[127]

Indonesia had regulates the corruption of corporation, through Law No. 31 Year of 1999 concerning Eradication of Corruption (Anti-Corruption Act 1999). New development in this Law which was not regulated by the previous law which is Law No. 3 Year of 1971 concerning Eradication of Corruption, is corporate as a corruption subject can be punshied by sanction.

But in fact, the existence of various regulations issues related to CSR is not working properly, because CSR is something beyong the rules. According to the reflexive law theory this is the failure of formal law in dealing with complex conditions. To overcome this problem, it is important to make special rules on CSR.

  1. C.      Implementation  of CSR by the Multi National Corporation, State Owned Enterprises and the National Private Enterprises

There was confusion and differences in definitions and concepts of CSR in the legislation in Indonesia, causing difficulties in the implementation.

In the elucidation of Article 15 letter b of Investment Act 2007 mention:

“The definition of” corporate social responsibility “is the responsibility inherent in any investment company to continue creating a harmonious relationship, balanced, and in accordance with the environment, values, norms, and culture of local communities”

 

Meanwhile, in Article 1 number 3 of LLC Act 2007 mention:

“Social Responsibility and the Environment is the Company’s commitment to participate in sustainable economic development to improve the quality of life and environmental benefit, either for the Company itself, local communities, and society in general”.

 

In comparison the World Business Council for Sustainable Development (WBCSD), gives the definition of CSR:

“Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large” [128]

 

Therefore, at this time, corporations in Indonesia implement CSR with vary motives and models, such as donation (charity), community development , and business strategy. Multi National Companies have a strong commitment to implement CSR as sustainable business strategy. Because of regulatory uncertainties, MNC refers to code of conduct that is made by international institutions or self regulation that is in the corporate regulation. National Private Companies are also doing the same thing. There are various motives in the  implementation of CSR. Such as donations, community development program and community empowerment. For state-owned enterprises have a clearer reference. Through the Regulation of the Minister of BUMN  No.: Per-05/MBU/2007, CSR of state-owned enterprises conducted by the Partnership Program and Community Development (Program Kemitraan dan Bina Lingkungan / PKBL).

Another problem arising in the implementation of CSR is about the source of funding. Article 74 paragraph (2) of LLC Act 2007 mentions that:

 

“Social Responsibility and the Environment is the obligation of the Company that is budgeted and accounted as Company’s cost and the implementation due regard to decency and fairness.”[129]

 

Whereas, the funding of CSR for state-owned company (SOC)in Article 88 verse (1) SOC Act 2003 mention that “State Owned Corporation could set aside part of its net income for development of small business / cooperatives and community development around the SOC “. This is clarified in Article 9 verse (1) – (3) Per-05/Mbu/2007, that PKBL funding sourced from shelve of its profits after tax for a maximum of 2% (two percent).

Regulatory differences are caused debate. Indonesian Chamber of Commerce objected if the CSR is budgeted, because companies that have not got profit yet, should not  be burdened  to implement  CSR. It means that CSR funding would be fair if it is  taken from some profits. However, the source of CSR needs to be budgeted, because the social impact caused by the corporation has occurred since they operate.

But for large corporations such as MNC, financial sources of CSR issues is not so important to talk about. As Katamsi Ginano (Strategic Stakeholder Relations Manager), and Rubi W. Purnomo (Head of Corporate Communications) said from PT Newmont Pacific Nusantara (PT NPN) as follows:

“For Newmont, CSR is company’s  commitment, a vision, mission and be a part of the corporate sustainability strategy, the issue of financing sources is absolutely a part of the operational budget of the corporation” … “CSR is not just about programs to help people, but has become a basic consideration of corporate policy since starting operations, including the amount of CSR budget.”[130]

 

Sinta Kaniawati (General Manager of Unilever Foundation of Indonesia), representing PT Unilever Indonesia Tbk convey:

“It doesn’t really matter for us, whether CSR is taken from profits or operating budget. A companies do CSR considering  how  the company is, how are the influence to people and environment. Because of that, CSR is a part of the business. So, we have CSR budget for for the community activities. ” [131]

 

According to the author, if the CSR viewed as corporate activities to improve the people’s quality of life (contribute to economic development while improving the quality of life of the local community and society at large), it is not always associated with costs. CSR can be done by hiring employees from the local community, cooperation building with a small business, or developing partnerships with local farmers.

It seems difficult to set a formal law due to the diversity of CSR practices since formal law has various limitations. Antony Allott explained that there are text limitation  to regulate all of social phenomena in the rule of law. Because the law can work effectively influenced by: (1) instrument legal term and ; (2) contextual interpretation .[132]  To overcome the complexity of these social activities, reflexive law theory provides solutions for  corporate (social institution) to be given an authority to regulate themselves (self regulation). It means that CSR implementation motives and models should be determined by each corporation themselves.

  1. III.       Conclusion
    1. CSR is a corporate activity that can be obligated by law based on several things: First, the purpose of the corporation which only seek profit, nowadays is not relevant. Therefore, the format of corporate law must be changed, because the corporation incorporated under the laws of the certain area, should in line with the society interests where the law is. Corporations must change the paradigm with the aim of making profit (profit), creating a social welfare (people) and preserving the environment (planet). Second, CSR are based on moral and ethical values in accordance with the philosophy of Pancasila and Article 33 Constitution of Republic Indonesia 1945, and universal moral values. So, there is no normative problem to be regulated by law, even a good law must be based on moral values. .   “Quid Leges Sine Moribus?“. “What does the law mean if not accompanied by morality?. Third, CSR that is  considered contrary to the principle of efficiency might be compensate by providing tax reductions (tax deductive). So there are no reason for corporations to feel burdened. Fourth, CSR that is only based on the principle of voluntary (voluntary) can not be run effectively, and not measurable. It would be better if it is be obligated (mandatory) because it has  a binding force of law (with sanctions) and provide legal certainty. According to the reflexive law theory, these obligations must be accompanied by an obligation to provide reports to the society by creating social reporting.
    2. Since the concept and scope development of CSR, it is necessary to make special regulation about CSR. According to Reflexive law theory, the special regulation is required because of the failure of formal law to regulate complex society. It has limitations in managing the growing of social phenomenon rapidly and diversely.
    3. First, the problem of regulation in LLC Act 2007 and Invesment Act 2007 must be revised with similar concepts and definitions of CSR and more clearly as a reference. Second, related with sources of funding should not be definitively determined because CSR is not always associated with costs, such as hiring employees from the surrounding community or in partnership with farmers and local SMEs. Third, the diversity of the  CSR implementation models and motives by corporations should be appreciated. Because these activities are essentially a form of corporate awareness to address social problems and improve the society quality of life. The diversity is difficult to avoid, because the condition faced by the corporation and the society are very diverse. Corporations should have a freedom to define the scope of CSR in accordance with the circumstances faced. According to the reflexive law theory, the government must give an authority to the corporation to govern themselves (self regulation) in determining the implementation of CSR.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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[1] This paper presented at  9th  International Conference on Corporate Social Responsibility 16-18 June 2010, Zagreb School of Economics & Management, Croatia

[2] Doctor of  Economic Law, Assistant Professor of School of Law University of  Muhammadiyah Yogyakarta

[3] Article 15 letter b of  Invesment Act 2007 mentions “Every investor is obliged implement corporate social responsibility”

[4] Article 1 number 3 of  LLC Act 2007 mentioned “Social Responsibility and  Environment are  the Company’s commitment to participate in sustainable economic development to improve the quality of life and environmental benefit, both for the Company itself, local communities, and society in general “.

[5] Treatise Special Committee Meeting, Draft Bill About Limited Liability Companies, House of Representatives, Session Period I, Friday, December 1, 2006

[6] Michele Sutton, “Between A Rock And A Judicial Hard Place: Corporate Socia Responsibility, Reporting And Potential Legal Liability Under Kasky v. Nike”, UMKC Law Review 72 (Summer, 2004) : 1170

[7] Janelle M Diller, without a tittle,   United Nation Reseach Institute for Social Development, International Labour Office, (Switzerland: 2004),  downloaded from www.ilo.org/public/english/revue/articles/ind99.htm

[8] Green Paper on Promoting a European Framework for Corporate Social Responsibility dalam Saleem Sheikh, “Promoting Corporate Social Responsibilities Within The European Union”, International Company and Commercial Law Review 13 (2002) : 143

[10]Ibid .

[11] Raúl Aníbal Etcheverry, “Corporate Social Responsibility”,  Penn State International Law Review 23 (Winter 2005)  : 497

[12] ISO Working Draft 26000, “Guidance on Social Responsibility”, 23 Juli 2007,  pp 12. Downloaded from http://www.normapme.com/docs/positions/2007/position_ ISO_26000.pdf .  The main issues dicussed concerning human rights in the United Nations Global Compact is as follows : “Business is encouraged to foster human rights by supporting and respecting the protection of international human rights within their sphere of influence and by making sure that their own corporations are not complicit in human rights abuses “,The United Nations Global Compact. Downloaded from http://www.unglobalcompact.org/

[13] UN Global Compact on the last meeting  in July 2007 in Switzerland, they began to discuss the issue of global warming, communit development, anti-corruption (bribery) and CSR in general, “Realizing the UN Global Compact” Kompas Cyber Media, Saturday, 07 July 2007, download from http://www2.kompas.com/ver1/Ekonomi/0707/07/164835.htm

[14] Iredell Jenkins, Social Order and The limit of Law: A Theorretical Essay, (New Jersey : Pricenton University Press, 1980), pp. 43-62

 

[15] Richard A Posner, Economic Analysis of Law,  Fifth Edition, (New York: Aspen Publisher, 1998), pp. 13

[16] Edi Suharto, “Audit CSR”, Business and CSR Magazine Vol 1 No. 5 (April 2008), pp. 193. See also Pamadi Wibowo, “Corporate Social Responsibility and Community”, Tempo Center for Data and Analysis (2004). Downloaded from http://www.pdat.co.id/hg/ opinions_pdat/2004/09/28/opn,20040928-03,id.html

[17] Philip Kotler and Nancy Lee, Corporate Social Responsibility: Doing the Most Good for Your Company and Your Causes (New Jersey: John Wiley and Sons. Inc., 2005) pp. 23-24 See Michael Hopkins, Corporate Social Responsibility & International Development: Is Business Solution? (London: Earthscan, 2007), pp. 113-117, see also Widiyanarti, “Corporate Social Responsibility: Model Community Development Oleh Korporat”, Etnovisi, Journal of Social and Cultural Anthropology (2005). LPM ANTROP-Social-USU. Vol 1. No.2. See also Badaruddin, Implementasi Tanggung Jawab Sosial Perusahaan Terhadap Masyarakat Melalui Pemanfaatan Potensi Modal Sosial: Alternatif Pemberdayaan Masyarakat Miskin di Indonesia, Inauguration Speech, Permanent Professor of Sociology in the Field of Urban Science in the Faculty of Social and Political Sciences, said in Open Meetings of the University North Sumatra at Student Stadium, Campus of USU, April 12, 2008.pp. 4

[18] David Hess,  “Social Reporting: A Reflexive Law Approach To Corporate Social Responsiveness”, Journal of Corporation Law,  25 (Fall 1999): 42

[19]Ibid.,P. 43

[20] Ibid.,p. 50

[21]  Elizabeth Chambliss, “When Do Facts Persuade? Some Thoughts On The Market For Empirical Legal Studies” Law and Contemporary Problems,17 (Spring 2008) : 25 Oliver Brand, “Conceptual Comparisons: Towards A Coherent Methodology Of Comparative Legal Studies”,  Brooklyn Journal of International Law, 32 (2007), pp. 421-435

[22] Oliver Brand, “Conceptual Comparisons: Towards A Coherent Methodology Of Comparative Legal Studies”,  Brooklyn Journal of International Law, 32 (2007), pp. 421-435 Michael P Waxman, “Teaching Comparative Law in the 21st Century : Beyond The Civil/Common Law Dichotomy”, Journal of Legal Education , 51 (June 2001) : 306., See John. C Reitz, “How To Do Comparative Law” , Articles in the Symposium  “New Direction in Comparative Law”, American Journal of Comparative Law, 46 (Fall 1998): 620

[23] Michael P Waxman, “Teaching Comparative Law in the 21st Century : Beyond The Civil/Common Law Dichotomy”, Journal of Legal Education , 51 (June 2001) : 306., See John. C Reitz, “How To Do Comparative Law” , Articles in the Symposium  “New Direction in Comparative Law”, American Journal of Comparative Law, 46 (Fall 1998): 620

[24] Anslem Strauss and Juliet Corbin, Dasar Dasar Penelitian Kualitatif, translation by Muhammad Shodiq, (Yogyakarta : Pustaka Pelajar, 2003), pp. 5

[25] Benedict Sheehy, Scrooge -The Reluctant Stakeholders: Theoretical Problems In The Shareholder-Stakeholders Debate”,  University of Miami Business Law Review 14 (Fall/Winter, 2005): 197, se also  Jill E Fish, “Measuring Efficiency in Corporate Law : the Role of Share Holder Primacy”,  Journal of Corporation Law University of Iowa 31 (2006) : 647-648

[26] Marjorie Kelly Citizen, “The Divine Right of Capital”, Works Corporate Power Discussion Groups, pp. 1. downloaded from http://www.citizenworks.org/corp/dg/s2r1.pdf

[27]C.A. Harwell Wells, “The Cycles Of Corporate Social Responsibility: An Historical Retrospective For The Twenty-First Century”, University of Kansas Law Review 51 (November, 2002) : 90.  See also Benedict Sheehy, Scrooge… op. cit  the meaning of doctrine Shareholder Primacy is that directors working for the shareholders and doctrine  fiduciary duty is that doctrine of the responsibility of directors as a caretaker mandate from shareholders

[28] Benedict Sheehy, “Scrooge -The Reluctant Stakeholders… pp 215

[29] There problem of profit in distributive theoryThe primary attribute of competition, universally recognized and evident at a glance, is the “tendency” to eliminate profit or loss, Frank Knight, Risk, Uncertainty, and Profit Hart, ( New York:  Houghton Mifflin Company, 1964), pp 11

[30] Ibid., P. 16

[32] Joseph Stiglitz, Making Globalization Work: Menyiasati Globalisasi Menuju Dunia Yang Lebih Adil, translated by Edrijani Azwaldi (Bandung: PT Mizan Pustaka, 2006), pp. 279.

[33] Milton Friedman, “The Social Responsibility of Business is to Increase its Profits”, The New York Times Magazine, 13 September 1970. Downloaded from http://www.colorado.edu/studentgroups/libertarians/issues/friedman-soc-resp-business.html

[34] Philip R. P. Coelho dan James E. McClure , The Social Responsibility  of Corporate Management: A Classical Critique, Ball State University Muncie, IN,  without  years,  pp. 6

[35] Milton Friedman, “The Social Responsibility of Business is to  …, loc. cit.

[36]Joel Bakan, The Corporation, Pengejaan Patologis Terhadap Harta dan Tahta, translated by Sri Isnani Husnayati (Jakarta: Penerbit Erlangga, 2004), pp. 5.  See Mukti Fajar, ”CSR: Tindakan Amoral Korporasi?”, Kompas, August 15, 2007

[37] CSR is oftenly called corporate philantrophy, which can be interpreted as an effort to help others, charity events, or the charitable habits of the corporation who willingly set aside part of the assets or resources that have to be donated to others in need, Cheryl L Wade, “Lesson From a Prophet On Vocational Indentity: Profit or Philantrophy “, Alabama Law Review. 50. (Fall 1998) p. 127 to 128

[38] Edwin Cannan, Adam Smith : An Inquiry Into The Nature and Causes of  The Wealth of Nation, (New York: The Modern Library, 1965), pp. 149.

[39] Giovanni B. Ramello, Incentives, Efficiency and Social Justice:  the Strange  Case of Intellectual Property and Knowledge, POLIS – Department of Public Policy and Collective Choices Università del Piemonte Orientale ‘Amedeo Avogadro’ (2007), pp. 2

[40] C.A. Harwell Wells, “The Cycles Of Corporate Social…op. cit., : 97. See also  Lee Drutman, “The History of The Corporation”. Citizen Work Corporate Power Discussion Group , (without years) downloaded from  http://www.citizenworks.org/corp/dg/s2r1.pdf

[41] Jill E Fish, “Measuring Efficiency in Corporate Law …op. cit., pp. 643-644.

 

[42] K Bertens, Pengantar Etika Bisnis, (Yogyakarta: Penerbit Kanisius, 2000)  pp. 163

[43] Beth Stephens, “The Amorality Of Profit: Transnational Corporations And Human Rights”, Berkeley Journal of International Law 20 (2002) : 51

[44] J.A.C. Hetherington, “Fact And Legal Theory: Shareholders, Managers, and Corporate Social Responsibility” Stanford Law Review, 21 (January, 1969) : 277

[45] Gary von Stage, “CSR Trought Constituency Statutes: Legend And Lie”, Hofstra Labor Law Journal 11 (Spring, 1994) : 462

[46]C.A. Harwell Wells…, op. cit., pp. 93

[47] John Rawls in the Bur Rasuanto, Keadilan Sosial: Pandangan Deontologis Rawls dan Habermas Dua Teori Filsafat Politik Modern (Jakarta: Penerbit Gramedia, 2005), pp. 80

[48] Francis Alappatt,  Mahatma Gandhi: Prinsip hidup, Pemikiran Politik Dana Konsep Ekonomi , translated by S. Farida (Bandung: Nusamedia, 2005), pp. 123-125

[49] Cheryl L Wade, , “Lesson From a Prophet On Vocational Indentity : profit or Philantrophy”,  Alabama Law Review 50, (Fall 1998) : 6

[50] Quran Surat Al Maarij, verses 24-25, which means: “and those in whose wealth is certain rights for people who beg and those who are not lucky.”

[51] Marianne Querbal dan Nino Terol, An Introduction to Asian Philantrophy and NGOs, Asian Pasific Philantrophy Consortium  (2002) pp 2

[52] Property rights according to Islamic law is: “A peculiarity of something that gives the possibility to the legal owner according to Islamic law ‘to act independently towards something and take advantage as long as there are no barriers syar’iy”, Yusuf Qardhowi, Hukum Zakat, Studi Komparatif Mengenai Status dan Filsafat Zakat Berdasarkan Qur’an dan Hadis,, Seventh Edition (Bogor: litera Antar Nusa, 2004), pp. 55. See Zahri Hamid Harta dan Milik dalam Hukum Islam (Jakarta: Bina Enterprises, 1985), pp. 14

[53]Raúl Aníbal Etcheverry, “Corporate Social Responsibility”,  Penn State International Law Review 23 (Winter 2005) : 498

[54] Mukti Fajar ND,CSR : Tindakan a Moral Korporasi?” , Kompas, August 15, 2007, ppl. 37

[55] John Rawls in the Bur Rasuanto, Keadilan Sosial: Pandangan Deontologis Rawls dan Habermas, Dua Filsafat Politik Modern, (Jakarta: Penerbit Gramedia, 2005), pp. 80

[56] Kenneth Boulding in the  David C Korten, Menuju Abad Ke 21 : Tindakan Sukarela dan Agenda Global, translated by  Lilian Teja Sudhana (Jakarta : Yayasan Obor Indonesia, 2001), pp. 60

[57]David C Korten, op. cit., pp. 61

[58] Ibid., Pp.  110-111. Lihat  Fanny Calder dan Malaika Culverwell,  Final Report , Following Up The World Summit On Sustainable Development Commitments On Corporate Social Responsibility : Options For Action By Governments  Chatham House Report: Following up the WSSD on Sustainable Development Commitments on CSR (February 2005), pp. 13 downloaded from www.chathamhouse.org.uk/files/3327_csrwssdiso.pdf

[59] Noke Kiroyan, “CSR for Better Life” a Learning Forum Series“Integrating CSR as a Business Strategy”,  Indonesia Business Links Resource Centre for Corporate Citizenship, March 28, 2007, pp. 3 downloaded from http://www.ibl.or.id/en/ibl/html/data/File/Notulensi_CSR_LF_28_Maret_2007.pdf

[60] Pradjoto, “Tanggung Jawab Sosial Korporasi”, Kompas, July 22, 2007, in the Ridwan Khairandy, “Corporate Social Responsibility: Dari Shareholder ke Stakeholder,dan Dari Etika Bisnis Ke Norma Hukum”…, op. cit., ppl. 15

[61]United Kingdom , Company Act 2006, pp. 256 downloaded from  www.opsi.gov.uk/ACTS/acts2006/pdf/ukpga_20060046_en.pdf, Margaret Hodge, minister of industry and regional countries England explained, that in the Companies Act 2006 provides the mandate for the directors to carry out corporate social responsibility. She said: “The new expression of the duties is part of the wider recognition and encouragement of change in the Act. The enhanced business review,which for quoted companies must now include information on environmental, employee, social and community issues, is another key example that builds on the growing consensus that it is good business sense for companies to embrace wider social responsibilities”…”I am sure that directors’ duties will continue to evolve as times change and as societal norms are transformed. Corporate social responsibility has developed and evolved over time. The relationship between business interests and the wider world is changing all the time. The best way of achieving lasting cultural change is to go with the tide and the broad consensus of opinion”, Margaret Hodge, (Minister of State for Industry and the Regions),  Companies Act 2006, Duties of company directors, Ministerial statements, June 2007. pp 3. Downloaded from  http://www.berr.gov.uk/files/file40139.pdf,

[62]In the Section 3 stated that :“Any  corporation, whether  domestic  or  foreign,  partnerships  and  other establishments its performing business in the country are hereby mandated to observe corporate social responsibility or the obligation to consider the interests of  society by taking responsibility for the impact of  their activities on customers, employees, shareholders, communities and the environment in all aspects of their operations”.Fourteenth Congress Of The Republic Of The Philippines,  SENATE S.B. NO. 1928, Introduced by Senate President Manny Villar  to  An Act Institutionalizing Corporate Social Responsibility, Providing Incentives Therefor And For Other Purposes, downloaded from www.senate.gov.ph/lisdata/65405784!.pdf

[63] J.J.Graafland, S.C.W. Eijffinger,N.C.G.M.Stoffele,H.Smith and A.M.Coldeweijer, Corporate Social Responsibility of Dutch Company : Benchmarking And Transparency,  downloaded from http://uvtws1.uvt.nl:7779/pls/kubweb/ kw3app.kw3_bin?id=00012175&mime =application/pdf&file=/faculteiten/fgw/cmo/onderzoek/mo/publicatie.pdf

[64] Miguel Ángel Cabra de Luna and Clara Gaztelu San Pio, “Corporate Social Responsibility in Spain”, downloaded from http://www.efc.be/cgi-bin/articlepublisher.pl? filename =ML-SE-10-03-1.html

[65]Ran Goel noted that there are various softlaw that can be used as guidelines to implement CSR , including   Account Ability 1000 Assurance Standard (‘AA1000’),  Ceres Principles   Equator Principles,  Extractive Industries Transparency Initiative (EITI), Global Reporting Initiative Sustainability Reporting Guidelines (‘GRI’),  Global Sullivan Principles,  Greenhouse Gas Protocol (‘GHG Protocol’),  International Labour Organization Declaration on Fundamental Principles and Rights at Work (‘ILO Declaration’),  ISO 14000,  MacBride Principles,  Organisation for Economic Co-operation and  Development Guidelines for Multinational Enterprises (‘OECD Guidelines’),  Social Accountability 8000 (‘SA8000’),  United Nations Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights (‘UN Norms’) dan lain lain, Ran Goel, “Guide to Instruments of Corporate Responsibility: An overview of 16 key Tools For Labour Fund Trustees”, Schulich, Canada’s Global Business School, University of Toronto Canada, (October 2005)

[66]This definition is quoted by Lundbland from OECD in 2001: Corporate Responsibilities : Private Initiatives and Public Goals, Claes Lundblad, Some Legal Dimension of Corporate Code of Conduct (Deventer : Kluwer Law International, 2005), pp. 387  

[67] Koji Ishikawa, “The Rise Of The Code Of Conduct In Japan: Legal Analysis And Prospect”, Loyola of Los Angeles International and Comparative Law Review 27 (Winter 2005)  : 101

[68]Ibid., 38

[69]Roy Halliday, “In Defense of Moral Agents”, Libertarian Nation Foundation, (Spring 2000)  downloaded from  http://www.libertariannation.org/a/f73h2.html

[70] Daniel J.H. Greenwood, “Linking Corporate Law with Progressive Social Movements : Introduction To The Metaphors Of Corporate Law”, Seattle Journal for Social Justice 4 (Fall/Winter 2005): 276

 

[71]Joel Feinberg, “Collective Responsibility”, Journal of Philosophy, vol. LXV, no. 21 (November 1968), hal. 222, downloaded from http://www.iep.utm.edu/c/collecti.htm

[72]Ibid.

[73]K Bartens, op. cit., pp. 22

[74] John R Boartright, Ethics And The Conduct Of Business, (New Jersey, Prentice Hall, 1993), pp. 16   in the K Bartens, Etika Bisnis, op cit,  pp. 27

[75] Richard A Posner, Economic Analysis of Law,  Fifth Edition, (New York: Aspen Publisher, 1998), pp. 13

[76] Benedict Sheehy, “The Importance Models: Economic …,op. cit., pp. 474

[77] M.Stuart Madden, “The Products Liability Restatement Warning Obligations : History,Corrective Justice and Efficiency” Pace University School of Law (1998) : 52 downloaded from http://digitalcommons.pace.edu/lawfaculty/145

[78] John Rawls, Theory Of Justice ( Boston : Harvard University Press,  1973), pp. 1

[79] There shall be allowed as a deduction any charitable contribution (as defined in subsection (c)) payment of which is made within the taxable year. A charitable contribution shall be allowable as a deduction only if verified under regulations prescribed by the Secretary,  Internal Revenue Code, Title 26 , Subtitle A, Chapter 1, Subchapter B, Part VI, § 170 , Downloaded from http://www.law.cornell.edu/uscode/html/uscode26/usc_sec _26_00000170-000-.html

 

[80] Georgina Vaz Cabral, Comparative National Action Against Modern Slavery: The Domestic Workers Issue: Belgium, Spain, France, Italy, Translated by Florence Tamerlo , Daphne Initiative, Commission European (1998).

[81] Marleen A. O’Connor, “Corporate Social Responsibility For Work/Family Balance”, Saint John’s Law Review 79 (Fall 2005): 1200-1201

[82] Georgina Vaz Cabral, op. cit., hal. 2

[83] Joanne Hallare, “Sweatshop Workers Tell Story”, The Independent Student News Paper, Boston College, October 21, 2004, The meaning of “A sweatshop is a working environment with very difficult or dangerous conditions, usually where the workers have few rights or ways to address their situation. This can include exposure to harmful materials, hazardous situations, extreme temperatures, or abuse from employers. Sweatshop workers are often forced to work long hours for little or no pay, regardless of any laws mandating overtime pay or a minimum wage. Child labour laws may also be violated. Sweatshops may be compared to the factories of the early industrial revolution in countries such as the UK and US, where regulations were few and far between…” Daniel E. Bender and Richard A. Greenwald, Sweatshop USA: The American Sweatshop in Historical and Global Perspective, (New York: Routledge, 2003), Reviewed by Jo Ann E. Argersinger, downloaded from http://www.hbs.edu/bhr/archives/bookreviews/78/argersinger.pdf

[84]This Act comes through the struggle of socialists who urged limits on working hours and the use of child labor under age,Frederick Engels,  “The English Ten Hours’ Bill”,  MECW Volume 10 (Maret, 1850) pp  288.  See  Judy Fudge, “The New Discourse Of Labor Rights: From Social To Fundamental Rights?”, Comparative Labor Law and Policy Journal 29 (Fall 2007): 30

[85] Beth M Lewis, “Social Worker’s  Role in Promoting Occupational Of Health and Safety”, in the  Edi Suharto, Pekerjaan Sosial di Dunia Industri: Memperkuat Tanggung Jawab Sosial Perusahaan, (Bandung: Refika Aditama, 2007), pp. 73

[86] Garis Besar Sejarah Amerika, Book mark American Peoples’ Friendship, Dept. Of Foreign Affairs,USA, (2004) pp. 290-291

[87] Anita Chan and Hong-zen Wang, “Raising Labor Standards, Corporate Social Responsibility And Missing Links–Vietnam And China Compared”,  Paper in the Conference: The Labor of Reform: Employment, Workers’ Rights, and Labor Law in China, The Center for Chinese Studies, the Institute of Labor and Industrial Relations, the International Institute, University of Michigan, 21-22 March 2003), pp. 1-2.

[88] Protection for disabled workers set out in Article 67, about child in Article 8-75, women in Article 76 and, limitation of working time in Article 77-85, occupational health and safety set forth in Article 86-87, as well as wages and welfare in Article 88-101 Labor Act2003

[89]Lewis D. Solomon dan Kathleen J. Collins, “Humanistic Economics: A New Model For The Corporate Social Responsibility Debate”, Journal of Corporation Law 12 (Winter, 1987): 345-348

[90] Aditi Bagchi, “Varieties Of Employee Ownership: Some Unintended Consequences Of Corporate Law And Labor Law”, University of Pennsylvania Journal of Business and Employment Law 10 (Winter 2008): 305-308

[91] Brenden E Kendal, Rebecca Gill dan George Cheney, Consumer Activism and Corporate Social Responsibility: How Strong a Connection?, (North Carolina: Oxford University Press, 2007), pp. 243

[92] In Article 4 of Consumer Act 1999 stated that Rights of Consumer mentioned as follows:

a)          The right to comfort, security, and safety in consuming goods and / or services;

b)          the right to choose the goods and / or services and to acquire goods and / or services in accordance with exchange rates and the conditions and guarantees that were promised;

c)          c) the right to correct information, clear and honest about the condition and security of goods and / or services;

d)          the right to hear opinions and complaints on goods and / or services used;

e)          the right to advocacy, protection, and dispute resolution efforts are worthy of consumer protection;

f)           the right to receive guidance and consumer education;

g)          the right to be treated or serviced properly and honestly and not discriminatory;
h) the right to obtain compensation, damages and / or replacement, if the goods and / or services received is not in accordance with the agreement or not as it should

h)          the rights set forth in the provisions of other legislation.

 

 

[93] Peter Franz dan Stefanie Pfahl, Corporate Social Responsibility An Introduction From The Environmental Perspective, Federal Ministry for the Environment, Nature Conservation and Nuclear Safety, Public Relations Division, Republic of Germany, (March 2006),  pp. 6

[94] Ritchie P. Lowry, “Transnational Corporations And Corporate Codes of Conduct”, The Social Report published by The Program in Social Economy & Social Justice, Vol. XIII, No.5 (Spring 1996)

[95]Koesnadi Hardjosumantri, Ekologi, Manusia dan Kebudayaan; Kumpulan Tulisan Terpilih, Himawan Pambudi (ed.), (Yogyakarta : Lapera Pustaka Utama, 2006), pp. 94

[96] William H Rodgers, Jr, “The Most Creative Moments in History of Environment Law: The Who’s”, Wahburn Law Journal, Vol 39 (2000): 6 . lihat juga Jeffrey G. Miller, “A Generational History of Environmental Law and Its Grand Themes: A Near Decade of Garrison Lectures”, Pace Environmental Law Review (2002) : 504

[97] Cynthia A. Williams February, “Corporate Social Responsibility In … op cit., pp. 727  … See also United States Environmental Protection Agency From Wikipedia, downloaded from  http://en.wikipedia.org/wiki/United_States_Environmental_Protection_Agency

[98] “Development of an Eco-Oriented Nation : Perspectives on Environmentally Sound Corporate Management and Environmental Businesses”,  Interim Report by The Industry & Environment Subcommittee, Environmental Industries Office Ministry of Economy, Trade and Industry Japan (July 2003).

[99] Ibid., Pp. 94-95

[100]Environment  Act 1997 the  target is written in Article 4 as follows:

  1. the achievement of harmony, harmony, and balance between humans and the environment;
  2. Indonesia as a creation of human beings living environment that has the attitude and acts of protecting and nurturing environment;
  3. guarantee the interests of the present generation and future generations;
  4. achieving sustainability of the environment;
  5. uncontrolled use of natural resources wisely;
  6. to protect the Unitary State of Republic of Indonesia to the impact of business and / or activities outside the territory of which cause pollution and / or destruction of the environment.

[101] the right to a healthy environment was reaffirmed in Principle 1 of the 1972 Stockholm declaration and principle 1 of the Declaration of Rio de Janeiro in 1992.Koesnadi Hardjosumantri, Ekologi, Manusia dan Kebudayaan; Kumpulan Tulisan Terpilih, Himawan Pambudi (ed.), (Yogyakarta : Lapera Pustaka Utama, 2006), pp. 94

[102] Koesnadi Hardjosumantri, op. cit., pp. 120

[103]Mas Achmad Santosa, Good Governance & Hukum Lingkungan, (Jakarta : Indonesian Center for Environmental Law, 2001), pp. 202.

[104] AGENDA 21, Annex II, The Report Of The United Nations Conference On Environment And Development, Rio de Janeiro, 3-14 June 1992, Distribution. General/CONF.151/26 (Vol. I) August 12, 1992.

[105] The aims of the Kyoto Protocol“is to achieve “stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system downloaded from  http://en.wikipedia.org/wiki/Kyoto_Protocol

[106] Kristina K. Herrmann, “Corporate Social Responsibility And Sustainable Development: The European Union Initiative As A Case Study”, Indiana Journal of Global Legal Studies 11(Summer, 2004) : 208-209

[107] Human rights issues associated with employment areas, environmental and other civil rights. But in this writing, human rights will only be discussing about the rights of social welfare only

[108]“Human Rights Watch, The Enron Corporation: Corporate Complicity in Human Rights Violations (1999)”, downloaded from http://www.hrw.org/reports/1999/enron.

[109] “Human Rights Watch, The Price of Oil: Corporate Responsibility and Human Rights Violations in Nigeria’s Oil Producing Communities” (1999), at http://www.hrw.org/reports/1999/nigeria.

 

[110]Christopher Avery, “Lawsuits Against Companies”, at  (Oct. 1, 2001). Doe v. Unocal Corp., 110 F. Supp. 2d 1294 (C.D. Cal. 2000), aff’d, 248 F.3d 915 (9th Cir. 2001) and case of   Beanal v. Freeport-McMoRan, Inc., 969 F. Supp. 362 (E.D. La. 1997), aff’d, 197 F.3d 161 (5th Cir. 1999). Can be see at  http://www.business-humanrights.org/Lawsuits.htm

[111] Steven R. Ratner, “Corporations And Human Rights: A Theory Of Legal Responsibility”, Yale Law Journal 111 (Desember 2001): 447

[112] There are at least 77,000 multi-national corporations operating in every corner of the world, with 770,000 subsidiaries and millions of partners involved.  John Gerard Ruggie, “Business And Human Rights: The Evolving International Agenda”, American Journal of International Law 101 (October 2007): 823

[113] Pall A. Davidsson, “Legal Enforcement Of Corporate ….op. cit. pp. 543-544

[114] Benjamin C. Fishman, “Binding Corporations To Human Rights Norms Through Public Law Settlement”, New York University Law Review 81 (October 2006): 1438.

[115] Global Policy Forum downloaded from http://www.globalpolicy.org/ intljustice/atca/ atcaindx.htm,.

[116]Claire Moore Dickerson, “Human Rights: The Emerging Norm Of Corporate Social Responsibility, (Socio-Economics and Corporate Law Symposium: The New Corporate Social Responsibility. How Do Norms and Empathy Affect Corporation Law and Corporate Behavior?)”, Tulane Law Review 76 (June 2002): 1432.

[117] The Universal Declaration of Human Rights (UDHR) is a statement of recommendations which are adopted by the General Assembly of the United Nations (A/RES/217, December 10, 1948 at the Palais de Chaillot, Paris). This statement consists of 30 articles which raised a thin view of the UN General Assembly on Human Rights guarantees to all people. Eleanor Roosevelt, first chairwoman of the Human Rights Commission (Commission on Human Rights) that make up this declaration, saying, “This is not a treaty … [In the future] it may become the international Magna Carta. Simple, Encyclopedia, downloaded from http: / / id.wikipedia.org /

 

[118] Steven R. Ratner, “Corporations And Human Rights: A Theory Of Legal Responsibility”, Yale Law Journal 111 (Desember 2001): 461

[119] David Hess dan Thomas W. Dunfee, “Fighting Corruption: A Principled Approach; The C2 Principles (Combating Corruption) Symposium: Fighting International Corruption & Bribery in the 21st Century”, Cornell International Law Journal 33 (2000): 549

[120] http://www.unglobalcompact.org/AboutTheGC/TheTenPrinciples/anti-corruption.html, Transparency and Anti-corruption.

[121] “Enron dan Sisi Gelap Kapitalisme”, [Berita], KORAN TEMPO, Wednesday, January 23,  2002.

[122] Aaron Einhorn, op. cit., pp. 10

[123] Ethan S. Burger, Mary S. Holland, “Why The Private Sector Is Likely To Lead The Next Stage In The Global Fight Against Corruption”, Fordham International Law Journal 30 (December 2006): 70-71

[124] Ibid., P. 45

[125] The regulation has been amended again in 1998. This Act and affecting intenasional economic institutions and NGOs to combat bribery and corruption in business… The OECD, recognizing that “bribery… raises serious moral and political concerns, undermines… economic development, and distorts international competitive conditions,” drafted the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions  Likewise, the Inter-American Convention Against Corruption (IA Convention), ratified by thirty three Latin American and Caribbean states, stresses that “fighting corruption strengthens democratic institutions and prevents distortions in the economy.” The Council of Europe Criminal Law Convention on Corruption (CoE Convention), ratified by fifty two countries, and the United Nations Convention Against Corruption (UN Convention), which one hundred forty countries have signed though only fifty one have ratified, express similar concerns. Aaron Einhorn, “The Evolution And Endpoint Of Responsibility: The FCPA, SOX, Socialist-Oriented Governments, Gratuitous Promises, And A Novel CSR Code”, Denver Journal of International Law and Policy 35 (Summer/Fall 2007) : 520

[126] Seb Beloe, John Elkington, “Gearing Up From corporate responsibility to good governance and scalable solutions”, The U.N. Global Compact, (2004), pp. 11

[127] Evaristus Oshionebo, “The U.N. Global Compact And Accountability Of Transnational Corporations: Separating Myth From Realities”, Florida Journal of International Law 19 (April 2007): 13

[128] World Bank Commitment Sustainable Development (WBCSD), 2000, Corporate Social Responsibility: Making Good Business Sense . Diunduh dari http://www.wbcsd.org/ DocRoot/IunSPdIKvmYH5HjbN4XC/csr2000.pdf

[129] Underline by the writer

[130] Interview with Katamsi Ginano, Mochamad Kasmali (Senior Corporate Counsel) and Rubi W. Purnomo, on 17 November 2008

[131] Interview with  Sinta Kaniawati on 7 October 2008

[132] Antony Allott, “The Effectiveness of Law”, Valaraiso University Law Review, Volume 15, Number 2 (Winter 1981)  : 234