Taking a Stand on Corporate Social Responsibility

Source: Law.com, by Zusha Elinson The Recorder

Three weeks ago, Gap Inc. got a call from a journalist in India with some damning allegations: The San Francisco-based clothing company was contracting with a manufacturer that used child labor.

Not unfamiliar to child labor problems, the company immediately formed a team to deal with the situation. But the team wasn't headed by the public affairs department -- it was headed by an in-house lawyer, said Wilma Wallace, associate general counsel at Gap, who told the story Thursday at the General Counsel West Coast Conference in San Francisco.

Wallace and others on a panel called "Corporate Social Responsibility: The Real Issues" emphasized that in-house lawyers should be involved whenever a company is the target of human rights allegations or anything else that might foment activists and concerned consumers.

"At one time, this was the province of public and government affairs," said Charles James, top lawyer at Chevron. "Now it's migrated to the general counsel."

Difficult situations, like the one Gap faced, can be just as risky as any lawsuit.

Because the company has dealt with "ethical sourcing issues" -- as Wallace likes to call them -- the in-house lawyers tried to get out in front of the problem, she said. They launched an investigation in India and quickly confirmed what the journalist had told them. Then they talked with nongovernmental organizations to explain that they hadn't known it was happening and that they were taking steps to remedy the situation.

"The success was attributed to third parties reaching out and speaking on our behalf so we didn't have to," Wallace said.

Chevron's James said the Gap incident illustrated that the biggest issue in corporate responsibility is not what's going on at the company but instead what's going on with third parties that contract with the company.

Another threat, James said, is corporate campaigns -- focused efforts by activists that want to change companies. James laid out the "vicious circle" created by corporate campaigns where a big event, like a boycott or a strike, is followed by demands, which if met are followed by shaming the whole industry into doing the same thing, which is followed by turning the "concessions" into laws. And then it begins again.

James said companies that do "capitulate" to the demands of activists often use it to their advantage by trying to pass on the costs of whatever changes they've made to the rest of the industry.

He advised in-house lawyers to pay more attention. "I think general counsel are very unknowledgeable about these issues," James said.

Ronald Perkowski, senior counsel at Halliburton, sat on the panel along with Wallace and James.