Case study: the impact of MNC and NGO empowerment programs on power relations

Abstract

Corporate social responsibility (CSR) is becoming an
essential aspect for many multinational corporations. Many
multinational corporations (MNCs) recognise that CSR can improve
the efficiency of an organisation by creating sustainable
competitive advantage. However, research shows that the
implementation of CSR programs in multinational corporations has
been problematic for decades. It is suggested that the lack of
governance models, accountability, standards and a common CSR
definition, are at the root of this problem.

Multinational corporations are currently facing
significant challenges in terms of increasing competition and
consumer demands. Non-governmental organisations (NGOs) are
putting significant pressure on MNCs. NGO pressure has had
significant implications for business operations and
activity.

The purpose of this thesis is to evaluate the impact
MNCs have on NGO sponsored empowerment programs. It aims to focus
on the change in labour division within the household; access to
services within the community; and changes in political activity
that NGO participants experience after attending an empowerment
program.

The MNC chosen is the hotel chain Sol Meliá. The
NGO is CEPIA. CEPIA is based in Guanacaste Costa Rica. The
research interviewed a Sol Meliá CSR coordinator; CEPIA"s
president; current and former NGO participants as well as non-NGO
participants for triangulation purposes. Having analysed the
findings, key challenges facing Sol Meliá and CEPIA in
implementing the empowerment program will be identified. These
findings will be compared with academic findings. The
recommendations suggested will be beneficial to Sol Meliá,
CEPIA, and will contribute to the academic research in this
field.

Chapter 1:

Introduction

Globalisation and the state"s failure to manage change
have constrained the state"s practices. Businesses are more
integrated in the political process as governments struggle in an
increasingly more volatile political market. Corporate social
responsibility is becoming an important aspect for many
multinational corporations. Many recognise the innovative
benefits of implementing CSR that can create sustainable
competitive advantage. However, the implementation of CSR has
been problematic for decades. Problems could be due to the lack
of governance models, accountability, standards and a common CSR
definition. These problems could have given MNCs the power to
enhance their political influence and shape society positively or
negatively. Consumer and NGO pressure on business has increased
corporate competition and MNC–NGO partnerships over the
years. However, the process of understanding the politics of MNC
and NGO practices has been largely ignored. Practices have not
always been fully transparent. Nevertheless it is believed that
MNCs and NGOs have enormous impact on local people"s lives and
globalisation.

This thesis aims to better understand the impact of Sol
Melià"s sponsored empowerment programs, run by the NGO
CEPIA in Costa Rica, on power relations. The flow of knowledge,
ideas, and funding will be analysed. The study will focus on the
impact on power relations within the home and in the community.
Do programs that try to empower and liberate people manage to
change how participants view themselves and their relationship
with others? How is the personal connected with the political?
How do technologies of control influence our daily lives as our
relationships among associations, the state and citizenry change?
These questions will be analysed to help formulate guidelines to
ensure responsibility and accountability of MNCs and NGOs. These
guidelines aim to help control against potential abuse of
power.

Chapter 1 gives a brief overview of the thesis. Chapter
2 introduces the key themes of the study, such as power,
empowerment and actors. Chapter 3 introduces the multinational
corporation, Sol Meliá. Chapter 4 presents the NGO, CEPIA.
Chapter 5 introduces the country, Costa Rica. Chapter 6 explains
the research methodology used for the study. Chapter 7 presents
and analyses the results. These findings are used to formulate
the conclusion in chapter 8.

1.1 Background to
the study

It is believed that globalisation and the gradual
disintegration of established political structures has reduced
the state"s ability to exercise power. Businesses are more
integrated in the political process. Governments struggle in the
increasingly more volatile political market (Lunde, 2000).
Economic strength has allowed corporations decide where to do
business, where to invest, and what technology innovations to
focus on. It concurs with Blau"s statement that economic strength
gives power to restrict or alleviate the regulation of service
provision through political means.

In the 1990s many companies saw what could happen if
global citizens" demands were ignored. For example, in 1994-1995
Shell clashed with lobbying groups over the decommissioning of
the Brent Spar Oil platform at sea. Shell was also criticised for
the assumed compliance or inaction during the excesses of the
Abacha regime in Nigeria. Shell saw no choice but to invest in a
corporate social responsibility agenda. Other companies followed
suit (Lunde, 2000). It is possible that the effects of consumer
politics have encouraged partnerships between MNCs and NGOs.
Partnership has become more common where businesses are running
projects that resemble those of NGOs (Murray, 2007).

1.2 Current
Issues

The main issues with CSR and NGO programs are the lack
of standards; lack of accountability; unclear intentions, lack of
knowledge of the impact of NGO and MNC practice.

1.2.1. Lack of enforcement

High profile scandals have attracted public attention.
It has called for the development of standards of how to
structure and manage programs (Blowfield, 2005) to ensure
accountability (Naidoo, 2003). Standards would include
transparent governance structures, hiring practices,
participatory mechanisms (Naidoo, 2003).

1.2.2 Lack of Corporate Governance Models

Furthermore, there are no corporate governance models in
place to guide companies. Sometimes the CSR methods used by
corporations vary within the corporation itself (Hopkins,
2007:33). According to Slack, empirical evidence shows that
irresponsible CSR is becoming a real financial risk for
multinational corporations. The financial risk is a
criterion that could be used for banks to ensuring greater
responsibility from multinational corporations (Slack,
2006).

1.2.3 Limitations to CSR Implementation

Implementing reforms to integrate CSR can be costly and
time consuming. The implementation of new technology could be
difficult for small to medium size companies to manage.
Furthermore, the lack of know-how can discourage companies from
implementing a CSR program (Utting, 2000: 26-27). These findings
confirm the disparity that exists in defining CSR and providing
clear business guidelines to show how to implement CSR. It
assumes that implementing a CSR program involves costly
investments, although CSR does not necessarily mean the
implementation of new technology.

1.2.4 Lack of knowledge in assessing MNC and NGO
practice

The processes to understand the politics of MNC and NGO
practices have been largely ignored because practices have not
always been fully transparent (Rondinelli, 2002). It is
speculated that community leaders, associations and international
development agencies, government agencies have an enormous impact
on local people"s lives and on globalisation. Political
scientists have started to evaluate the role and the impact of
NGOs and the channels of participation that affect power
relationships between society and the state (Fisher,
1997).

1.3 Objectives of
the Study

This thesis aims to understand the impact of NGO and MNC
empowerment programs on power relations within the family and in
the community. How do technologies of control influence our daily
lives when our relationships among associations, the State and
citizenry change? How do these associations change when processes
of association evolve (Fisher, 1997)? The thesis also aims to
provide meaningful results for the academic world. It aims to
identify guidelines to ensure responsibility and accountability
of MNCs and NGOs. These guidelines can be used to guard against
potential abuse of power.

1.4 An overview
of the methodology

A cross case comparative case study was chosen. A case
study provides more flexibility to analyse a broad range of
multiple observations such as cultural, institutional and
cognitive causal variables (Bennett and Elman, 2007). These
multiple observations can help analyse and explain a complex
phenomenon (Bennet and Elman, 2007) such as changes in power
relations.

1.4.1 Research objectives

The qualitative and quantitative data collection focused
on the following research questions:

ü What level of influence do MNCs have
on NGOs in practice?

ü What is the impact of empowerment
programs on power relations within the family and in the local
community?

ü Do programs that try to empower and
liberate people manage to change how participants view themselves
and their relationship with others?

ü How is the personal connected with
the political?

ü How do technologies of control
influence our daily lives as our relationships with associations,
the state and citizenry change when processes of association
evolve?

These questions were used as a basis to
evaluate:

• The level of MNC influence on NGO
programs

• The NGO practice

• The empowerment program

• The influence of empowerment
programs on power relations at home, in the local community and
the level of political activity.

1.4.2. Sample Selection

The study focused on rural families in Guanacaste, Costa
Rica, who attended CEPIA"s empowerment programs. It also focused
on rural families that have not been in contact with CEPIA. The
targeted rural families were in a similar economical situation.
They also had similar educational backgrounds; lived in the same
region and were in similar employment conditions.

1.4.3 Primary Data Collection

Primary data was collected through individual
interviews. A survey was included. Interviews were used to better
understand the participants" situation. Interviews would allow
CEPIA participants create knowledge through their insight. This
knowledge might not be included in any academic literature. The
participants" insight is therefore invaluable for the social
sciences field.

A survey was used to closely evaluate the changes of
labour division and the decision-making process within the
household and in the community; and access to banks schools and
libraries. The survey would also evaluate participants" level of
confidence in regards to acting politically.

The average duration of interviews and survey was 25
minutes.

1.4.3.1 Data Validity

To avoid misinterpretation, ambiguous concepts and terms
were avoided (Shively, 1997:30). Academic language
was avoided to simplify questions for participants. Attention was
given to the structure and sequencing of the questions in the
questionnaires and interviews. The objective was to make sure
questions and objectives were clear (Gray, 2004). Participant
interviews and surveys were therefore conducted in Spanish.
Spanish is the national language in Costa Rica. All questions
were written in active voice, unbiased and open-ended. Questions
required only one piece of information per question.

1.4.4 Secondary Data Collection

The secondary data collection included a theoretical
academic overview of the topics in the study. The review aimed to
establish the topics involved with CSR and empowerment programs.
Empirical findings were included to see if there were any
discrepancies between theory and practice. These findings were
used to outline key issues, key considerations of the topic
studied.

1.4.5 Data Analysis

All interviews were transcribed to MS Excel documents,
to better visualise the patterns and to compare and identify
categories of responses. Non-participant interviews were not
transcribed because a large portion of their interview was taken
up by the survey. The survey results are visualised through
quantitative data presentations such as tables and
graphs. Pattern matching techniques were used in conjunction with
explanation building techniques. These were used to help identify
the combination of variables with the greatest effect on outcomes
(Gray, 2004). Results were compared with literary review findings
after establishing patterns and categories to the responses. The
findings were displayed through the use of narrative text,
tables, charts and graphs.

1.5 Outline of
the Study

Chapter 2 :

Corporate Social
Responsibility and the Power of New Actors

2.1 Introduction

Based on a review of the contemporary literature, this
chapter introduces the theories and concepts of power and
empowerment. It presents key considerations and methods of using
empowerment for development purposes. These considerations use
academic findings and Johnson"s empirical research on women"s
groups in Peru (Johnson, 1992). Drivers of corporate social
responsibility and limitations to CSR implementation will be
discussed. This section is followed by an overview of the role of
NGOs and their key issues will be explored. The chapter concludes
with a summary of the role of new actors and the key issues in
empowering local NGO participants.

2.2 Concepts and
Theories of Power

Power can defined in many ways. Blau, defined power as
the ability to carry out one"s will despite resistance
as well as the possibility to change another person"s conduct
to avoid changing one"s own conduct (Blau, 1967: 115).
Strange described power as direct coercion and violence.
Power could be influence through subtle persuasion
(Strange, 1996:17). What these definitions have in
common is that they describe power as the power to do something
and power over another person (Nelson and Wright, 1995:
8).

2.2.1 Community Power

Early studies on power focused on community power and
the source of power. Theorists focused on the decision-making
process. They thought power could only used in conflict. There
were two ways to rule. People were either ruled by an elite or by
several groups. The community was pluralist if many groups ruled
the community (Hardy and Leiba-O"Sullivan, 1998: 453-454). These
findings make several assumptions. It assumes that no person
makes their own decisions because they are subject to someone
else"s power. The elite are also not defined. A person who makes
decisions does not have to be part of an elite to make their own
decisions. Also, a society is not pluralistic just because
several groups make decisions. It also does not explain why
certain groups in society have little decision-making power in
regards to the community or themselves.

2.2.2 Power and Conflict

Other theorists claimed conflict occurred behind the
scenes. They believed full participation only occurred in
"non-decision making" (Hardy and Leiba-O"Sullivan,
1998: 455). Non-decisions are safe questions that do not
determine anything.

Powerful actors behind the scenes would take real
decisions to protect the status quo (Hardy and
Leiba-O"Sullivan, 1998: 455).

Nevertheless, the theory of power remained
one-dimensional. Power still occurred in conflict (Hardy and
Leiba-O"Sullivan, 1998). However the authors do not define safe
questions, real questions and powerful actors. They do not
explain the process of becoming a powerful actor. The theory
fails to consider the influence of expert knowledge and
leadership position, for example. Expert knowledge and leadership
position can influence the decision-making process, as in the
relationship between the therapist and the patient.

2.2.3 Critical Theorists and Power

Critical theorists questioned why grievances did not
exist and why inaction did not exist. The lack of inaction could
also be the result of power. Power, therefore, became a method to
prevent conflict. Power was ideological, economical and
structural. This perspective was based on Gramsci"s idea of
ideological hegemony. Gramsci believed that power relations were
part of a system of cultural and normative assumptions (Hardy and
Leiba-O"Sullivan, 1998: 456). Consequently, power was a zero sum
situation, where people gained power at the expense of others.
Therefore power is coercive because institutions of government
use power (Nelson and Wright, 1995: 9) to create constraints and
opportunities in society through social action (Swindler, Ann,
2000: 281).

These findings make the assumption that only
institutions of government hold power. It fails to consider the
influence of corporations and NGOs. It assumes that individuals
cannot be autonomous from the state even if individuals remain
subject to the state. Furthermore, it assumes that using power
prevents conflict, although conflict is not defined. Also, power
cannot create win-win situations where everyone benefits. It
assumes that power legitimises cultural norms. As such it assumes
that everyone agrees with cultural norms and that people cannot
break from norms. These assumptions would not explain why society
and cultural norms constantly change.

2.2.4 Foucault and Power

Foucault"s theory of power/knowledge proposes that
actors are embedded in power relations. Power relations define
every perception, judgement and act (Hardy and Leiba- O"Sullivan,
1998) in everyday social relations (Lemert and Gillan,
1982).

Foucault believed that power was the product of
institutions, actors and events (Nelson and Wright, 1995). Power
relations could not exist without the institutional support of
knowledge that supports power relations. Power covered all human
interactions such as economic and social relations that could
create a social reality (McNay, 1992). Foucault believed people
are socially produced by the system of power (Hardy and Leiba-
O"Sullivan, 1998).

Foucault"s theory implies that the environment creates
the person. He fails to define actors and events. How does a
person become powerful? Why is power concentrated in certain
groups? How is power distributed? What knowledge justifies power
relations? It also assumes that the individual is not capable of
finding alternatives to change their power. Nevertheless, it is
important to understand the complexity of power relations.
Foucault"s insight helps evaluate the possible aspects that can
influence a person"s life and power relations within the family,
local community and the level of political influence. Foucault"s
theory also makes an important proposition: the possibility that
power can change. It means that empowerment is a process of
change, because power exists in relationships and daily events
and actions.

2.2.5 Blau and Power

Blau described power as a conflict between the powerful
and the powerless. Conflicts arise with the powerless people"s
lack of resources, problems of alternatives, political power and
ideological power. The more people gain access to the services
they need, the more powerful they become. The more alternatives
available, the more independent people become. The economically
powerful use power to restrict or alleviate the regulation of the
exchange of services, through political means. Ideological power
describes the struggle between ideologies and social values that
intensify the need of services offered by the powerful. It also
describes the struggle with the ideologies that mitigate the
needs promoted by ideologies and social values (Blau, 1967).
According to Blau, this is why the powerful cannot keep their
power without the support from the powerless, because
differentiations of power are created in the imbalances of
obligations in social transactions. These imbalances create
problems in the exchange process and the
distribution of resources in a community that governs them and
modify them (Blau, 1967). Blau implies that individuals loose
their power because of their own choice to legitimise the
powerful person"s power over you. These findings are important
when evaluating changes in the CEPIA participants" life after
they attended the empowerment program. Do CEPIA"s values change
their needs? What are the ways to acquire power?

All these findings will be used to evaluate the impact
multinational corporations have on NGO activities and how they
influence participants" view of themselves in relation to
others.

2.3. Corporate
Social Responsibility

Andrew Carnegie initiated the notion of CSR in 1899 when
he published "The Gospel of Wealth" (Wulfson, 2001). Carnegie
believed businesses should not only be concerned with profit
making. The idea surfaced at the growing concern of businesses"
growing imbalance and increased power, which led to anti-trust
legislation (UN, 1999: 148). This initiative
produced the first two root concepts of corporate social
responsibility, notably, the charity and the stewardship"s
principle. The charity principle believed that fortunate people
such as businesses should take care of the less fortunate. The
stewardship"s principle believed that businesses should act in
general interest instead of just serving shareholders (UN,
1999).

2.3.1 Defining CSR

There are different meanings to corporate social
responsibility. Some interchange the term with corporate
sustainability, corporate citizenship, or corporate philanthropy
(Hopkins, 2007). The EU definition states: CSR is a concept
whereby companies integrate social and environmental concerns in
their business operations and in their interaction with their
stakeholders on a voluntary basis. The EU aims not to
regulate CSR but to promote market possibilities (Hopkins,
2007:25-26). The voluntary principle, as highlighted by the EU,
has caused difficulties because many companies refuse to agree on
criteria for noncompliance. Some sceptics argue that CSR is just
corporate "greenwash". Greenwash would describe MNCs that pretend
they take CSR seriously, although they have not changed their
practice (Slack, 2006).

Alternatively, the World Business Council
for Sustainable Development defines CSR
as:

A 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 (Hopkins,
2007:25).

This definition indicates that CSR is a new way of
running business. CSR becomes part of business practice when
dealing with its staff and their local community. This definition
highlights that CSR is not voluntary.

Clearly there are problems of terminology (Hopkins,
2007). Business and theorists cannot agree on a CSR definition.
According to KPMG, it appears that the understanding of CSR is
seen as an add-on instead of an integral part of core business
operations (KPMG, 2005). It raises the question if the
understanding of CSR should incorporate MNC political activities
(Bendell and Kearins, 2005).

The difficulty in reaching a common definition of CSR
probably has to do with that the business world remains divided.
It is divided between those who believe CSR is good for business
and those who believe that businesses should only be concerned
with profit creation (Hopkins, 2007). This could explain why the
EU defined CSR as a voluntary add-on to business instead of a new
way of running business.

2.3.2 Key Drivers for CSR

According to KPMG"s International Survey of Corporate
Responsibility Reporting 2005, key drivers for
corporate social responsibility are ethics; economic
considerations; values; reputation; cost savings; market share;
and employee motivation. The survey saw that CSR initiatives
increased due to the amount of corporate scandals that surfaced
in the 1990s (KPMG, 2005: 18-19). Criticism of MNCs goes hand in
hand with the rise of consumer politics. Consumer politics put
pressure on businesses to behave in a more responsible manner
(Utting, 2000). For example, in

1994-1995 Shell clashed with lobbying groups over the
decommissioning of the Brent Spar Oil platform at sea. Shell
received criticisms for assumed compliance or inaction during the
excesses of the Abacha regime in Nigeria. Shell saw no choice but
to invest in a CSR agenda. Other companies followed suit (Lunde,
2000). The effect of corporate scandals explains why
many MNCs implement CSR programs. The implementation of a CSR
program can save costs and increase market share. However, these
findings do not explain why business is motivated to implement
corporate social responsibility programs for ethical reasons or
to motivate staff. It is possible that consumer politics occurs
within companies as well.

2.3.2.1 Ecology & Market
Opportunities

CSR could also be a response to ecological constraints
and market opportunities associated with new technology. New
technology reduces costs and increases productivity as stated by
Murphy and Bendell (Utting, 2000). Utting states that CSR is a
new strategy to differentiate products. MNCs could gain
competitive advantage by behaving in an environmentally and
socially responsible manner. Body Shop is one of many
corporations that changed their strategy to promote ethical and
fair trade products. Findings show that their promotion of
socially responsible products enhanced their brand image and gave
them a wider access to the market (Utting, 2000).

2.3.2.2 Political Influence

Both multinational corporations and NGOs are inspired by
a vision of how they want to shape society. They are capable of
doing good and doing harm. Therefore neither is value neutral.
They are essentially political. Their power is expressed through
the choice of MNC and NGO programs offered (Fisher, 1997) and how
they use their capital. MNCs only sponsor NGOs falling within the
scope of their own commercial agenda (Rondinelli, 2002).
Furthermore, multinational corporations can enhance their
political influence by using social advertising. Social
advertising can influence how governments deal with
socio-economic and environmental problems that affect them.
Therefore CSR programs can enhance the corporate image and expand
the corporate market (Rondinelli, 2002). Some critics see
multinational corporations as a threat to the democratic
decision-making process. MNCs do not necessarily protect the
public interests. For example, in some countries, public goods
such as electricity, telecommunications, education, safety and
security moved from the public to the private sector (Rondinelli,
2002).

Nevertheless, many multinational corporations assist
governments and NGOs in addressing community issues more
efficiently. For example, since 1985 Coca Cola and
Rotary International raised more than $400 million to
promote polio immunisation, together with WHO and UNICEF
(Rondinelli, 2002).

These findings make the assumption that MNC agenda aims
to change society to protect against government policies that
affects them. Furthermore it implies that government bodies are
not democratic. It implies that MNCs shows the government how to
deal with socio-economic and environmental problems. These
assumptions concur with Hardy and Leiba-O"Sullivan"s statement
that real decisions take place behind the scenes (Hardy and
Leiba-O"Sullivan, 1998). MNCs are therefore powerful actors that
influence community decisions behind the scenes of government
governance. These assumptions also concur with Foucault"s
statement that power relations could not exist without the
institutional support of knowledge that supports power relations
(McNay, 1992). In this case it implies that government
legitimises MNC power. These findings also confirm Blau"s
statement that economic strength can restrict or alleviate the
regulation and availability of service provision (Blau, 1967).
However, the use of NGOs to implement an MNC agenda shows that
restrictions and provision of service do not always occur through
political means, as suggested by Blau.

2.3.3 CSR Trends

Due to the varied understanding of corporate social
responsibility, there are several forms of CSR. The three main
forms of CSR are:

• Philanthropy, which focuses on
charitable donations.

• Development of new products. For
example, investments that benefit the local country or where the
local workforce and resources are used.

• The implementation of company
activities that promote sustainable development. (Hopkins,
2007)

According to KPMG, more companies find it easier to
implement philanthropy initiatives. Companies find it harder to
integrate their CSR strategy into their operations and company
strategy. The integration of CSR in business practice requires
the implementation of international standards (KPMG, 2005).
However, some multinational corporations are starting to take
social concerns into consideration. They want to extend their
influence into more social action that includes state and
inter-governmental intervention in the markets (Bendell and
Kearins, 2005: 377, 381). For example, NIKE has
started to look into ways to support local labour standard
inspections in the countries in which they operate (Bendell and
Kearins, 2005: 376).

2.3.3.1 CSR Reporting

CSR reporting is also an issue because stakeholders need
to decide what is relevant to their interests. This is why in the
1990s CSR reporting only covered environmental, health and safety
concerns (KPMG, 2005). Now, reports include labour standards,
human rights and child labour.

More companies, specifically from middle-income
countries have started to generate more CSR reports, although
there is a lack of standards and regulations (Hopkins,
2007).

According to Schepers, corporations publish reports on
social and environmental behaviour to alleviate the pressure from
NGOs (Schepers, 2006).

Many report community involvement that includes employee
volunteer programs. Philanthropy is also mentioned. Philanthropy
tends to be less strategic and has little relevance to the
company"s profitability (KPMG, 2005). However, many reports do
not include program selection criteria. Nevertheless, reports
follow labour standards as defined by the ILO and other
international standards such as the UNDHR and OECD guidelines for
multinational enterprises. Then again, few provide any guidelines
of how businesses implement these standards (KPMG,
2005).

However, there is a growth in accounting standards for
CSR. Companies are starting to implement accounting standards
such as AccountAbility (Hopkins, 2007).

2.3.5 Key CSR Issues

The regulation of MNC behaviour has always been
disputed. It reached worldwide attention in the 1970s when the
ILO, UNCTC and the OECD tried to design codes of conducts for
multinational corporations. The result was lack of consensus over
the wording and codes of conduct. The codes of conduct ended up
being voluntary instead of mandatory as originally intended (UN,
1999).

In later years, high profile scandals attracted public
attention. It led to calls for the development of standards of
how to structure and manage CSR programs (Blowfield,
2005) to ensure accountability (Naidoo, 2003). Standards
would include transparent governance structures, hiring practices
and participatory mechanisms (Naidoo, 2003).

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