Bad Business: Why Companies Shouldn’t Trade with Abusive Regimes

Is selling police equipment to a notoriously brutal government tantamount to assisting in torture?


William Schulz believes that it can be, and that these types of sales are one of the principal ways in which businesses can entangle themselves with torturers. Schulz, former executive director of Amnesty International, spoke during a presentation last week sponsored by Wharton’s Zicklin Center for Business Ethics Research.


Seldom are businesses in the developed world implicated directly in torture, but too often they avert their eyes as their products, purchases or independent contractors support abuses, according to Schultz, who is now a senior fellow at the Center for American Progress, a liberal think tank based in Washington, D.C. He cited the case of Taser International, the Scottsdale, Ariz., manufacturer of “stun guns.” Taser’s devices, sold domestically to police departments and private citizens, shoot electrified barbs that cause a flash of intense pain and momentary muscle failure. Police use them in place of pistols and clubs to protect themselves and subdue unruly people.


The U.S. Commerce Department has documented the sale of Tasers to countries, including Saudi Arabia, that are known for using electro-shock devices as tools of torture, Schulz said. He debated Taser’s chief executive, Rick Smith, three years ago at Claremont-McKenna College in California. At the time, he asked Smith to stop selling his company’s wares to countries that the U.S. State Department had classified as torturers. Taser’s president indicated that the company “would sell to any country it pleased,” Schulz stated.


[In a response to Schulz’s remarks last week, Taser spokesman Pete Holran noted that, “For anything that we sell abroad, we have to get a license from the U.S. Department of Commerce…. That licensing process has input from the State Department and many other federal agencies. They are supposed to inform us if there is a region or a regime that should not receive our devices.” In addition, he said, “We don’t know of any direct use of our devices for torture. Amnesty has never been able to bring that direct charge.”


Electro-shock devices, including stun guns, stun belts and stun shields, are the most commonly used tools of torture after the human fist, Schulz said. As far back as 1994, Amnesty International documented their export to repressive foreign regimes. “Export license records revealed that [the U.S. Commerce Department] authorized the sale to Saudi Arabia of handcuffs and stun shields used for torture,” Schulz noted. “In 1996, the department approved a shipment of thumb screws — miniature cuffs that are attached to the thumbs and are useful for nothing except torture — to Russia.”


Selling tools isn’t the only way in which firms find themselves linked to torturers, Schulz said. Sometimes, they hire guards who end up abusing people while protecting a company’s property. Unocal, a California oil-and-gas company, for example, was accused in U.S. courts of employing soldiers in Myanmar (formerly Burma) who tortured, raped and killed villagers while guarding a pipeline. The villagers sued in the United States under the Alien Torts Claims Act, and Unocal settled in 2004.


As a result of disputes like this one, multinationals have become more assiduous in their monitoring of the conduct of security contractors abroad, Schulz said. British Petroleum, for example, has entered into an agreement with the governments of Turkey, Georgia and Azerbaijan to allow the oil company to provide human rights training to their security forces. A BP oil pipeline traverses the three countries.


The Cost of a Diamond


Firms sometimes do business directly with repressive regimes or rebel groups and, in effect, fund their practices, according to Schulz. This predicament arises most often in extractive industries, like mining and oil and gas, where the largest remaining reserves tend to be located in developing countries that either have autocratic governments or are embroiled in civil war, he noted.


Perhaps the most notorious example is the diamond industry. In Sierra Leone and Angola, diamond sales supported insurgencies to such an extent that the United Nations adopted a resolution condemning trade in what it called “conflict diamonds.” Liberia’s former president, Charles Taylor, has been accused of supporting the rebels in neighboring Sierra Leone in exchange for diamonds. The rebels committed a host of atrocities, including intimidating civilians by chopping off the hands and feet of noncombatants. Today, Taylor faces trial in The Hague for war crimes and crimes against humanity.


Bad publicity from products tainted by links to torture can rebound to retailers, Schulz pointed out. To underscore the connection between diamonds and brutality, for example, Amnesty International and other human rights groups launched an anti-conflict-diamond campaign in the United States. An online video produced as part of the effort showed a woman’s hand stretched out to receive a diamond ring, but then showed her hand being chopped off before the ring could be slipped on her finger. “That influenced a bunch of college students to go into their local jewelers and ask how much blood each diamond cost,” Schulz said. “That was all it took to get the industry to quickly institute new procedures for monitoring the sources of its diamonds.”


A similar conflict rages today in the Sudan, one that has been fueled by oil revenues, Schulz added. There, crude sales sustain a government that has been accused by the United Nations of committing genocide in the country’s Darfur region. More than 200,000 people have been killed in Darfur and about 2.5 million have been forced from their homes. Many Western oil companies now refuse to do business with the Sudanese government, but Chinese oil firms, backed by the Chinese government, have stepped into the void. According to The New York Times, “Chinese oil purchases have financed Sudan’s pillage of Darfur, Chinese-made AK-47s have been the main weapons used to slaughter several hundred thousand people in Darfur so far, and China has protected Sudan in the U.N. Security Council.” Grassroots activists from around the world are trying to use the approaching Beijing Olympic games as venue in which to pressure China to stop supporting the Sudanese regime through oil purchases. 


Schulz stressed that situations like Taylor’s diamond trade and Sudan’s oil both demand action because the link between commerce and brutality is so stark. In each case, trade in a commodity directly supported, or continues to support, a group or government committing atrocities.


In contrast, Schulz said that he doesn’t believe that businesses must refuse to operate in any nation with a poor human rights record. “If I could get every country that commits torture to change their stripes by threatening them with the withdrawal of investment, I would do it,” he said. “But that’s not a practical way to bring about change, and I don’t believe that poverty is a friend of human rights. So we have to make judgments.”


Consider the oil industry. The list of the world’s top producers is crowded with countries that have been accused of torture. (Schulz would add the United States to that group in light of the revelations at the Abu Ghraib military prison in Iraq and the Bush administration’s refusal to forswear waterboarding, a form of torture that simulates drowning.) Today’s world depends too heavily on oil for companies to refuse to do business in any place where torture has occurred or been alleged, Schulz said. “We have to be selective. There are some cases in which the connection is very direct. If oil companies are directly responsible for human rights violations — as it was alleged that Unocal was — then they have to be held accountable.” 


Reebok’s Lead


In making judgments about whether to refuse to operate or invest in a country, Schulz said that firms must consider a variety of factors. The most obvious, besides the directness of the link, is the severity of the abuses. Another is how dependent the country’s government is on the sales of a given commodity. In Sudan, for example, oil is the country’s lifeblood. “I don’t pretend that the ethical questions are easy. You make judgments where you think you can have an impact and where the crime is serious enough.”


In some cases, home governments may make decisions for companies by barring activity via sanctions, Schulz pointed out. Again, the utility of sanctions has to be evaluated case by case. Among the criteria to consider is whether the local activists have asked for sanctions as a way to pressure their government. Schulz also pointed out that sanctions and boycotts have a mixed record of effectiveness. 


Declining to do business somewhere or acceding to sanctions isn’t the only way that companies can forestall torture and other human rights abuses. They can also take active steps to publicize and prevent bad acts — and many of them do. Paul Fireman, chief executive of Reebok, is a case in point. “He intervened actively on behalf of the leader of the labor organization in Indonesia that had given Reebok a load of grief about its factories,” Schulz said. In 1999, Fireman wrote to Indonesia’s president seeking the release from prison of human rights activist Dita Sari. Fireman has also refused to do business in Myanmar, as have many companies, and, in 2005, wrote an editorial in The Wall Street Journal calling on corporate colleagues to follow Reebok’s lead. 


“More and more corporations are recognizing that it’s in their interest to be good global citizens” Schulz added. “One of the most promising developments in the field of human rights during my years at Amnesty was the growing sense that human rights were good business and that countries that don’t respect the rule of law, don’t educate their children and don’t use the talents of half of their populations because of their gender are unlikely to be places where businesses will prosper in the long run.”

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