Absent Norms on Responsible Exits

Extract from Economic Collapse, Survival and Resistance in Post Coup Myanmar.

“Farewell, Myanmar: Corporate exodus grows, from Europe to India,” a Nikkei Asia October 2021 article details a situation where foreign companies and investors from all over the world suspended operations and orders and divested after the coup. Some chose to exit. Others had no choice but to exit as they were subject to sanctions. After pulling out of Myanmar in March, global retailers, Primark and H&M, began to resume orders in May, a move that was heavily scrutinized. Halting orders once again in June when the third wave of Covid-19 hit Myanmar. Norwegian telecom giant, Telenor, tried to exit, but their attempted sale to the controversial M1 Group was disrupted by the junta, as discussed below.

The partial exodus of foreign companies and investors has been messy. This is especially true on the ground, where the exits left vulnerable people in impossible situations. “Garment workers face a fresh threat: a boycott,” featured in Frontier Myanmar, was one of many pieces that spoke to the plight of workers resulting from order cancellations and closures. They convey scenarios where already vulnerable workers find themselves on the streets, regularly with partial or no wages for recent work done and with no support. The abovementioned research found that up to one-third of unemployed factory workers have turned to sex work to survive.

As a local analyst stated: “It seems backwards. The brands that employ millions of people and provide the best support are gone. But TotalEnergies and Chevron are here to stay, and all they do is stuff the pockets of the junta.” In the end, TotalEnergies and Chevron did choose to withdraw in mid-January 2022. Still, the sentiment remains valid and deserves consideration.

Beyond TotalEnergies and Chevron, fingers have been pointed particularly at surveillance technology providers and weapons manufacturers. Australia’s Future Fund recently made headlines for holding 4.9 million AUD “in 5 subsidiaries of Chinese majority state-owned arms manufacturer AVIC,” which is known to arm the junta.

This is not an argument for or against boycotts or sanctions. The point is that the corporate exodus from Myanmar has been haphazard at best, and the lives of ordinary people have been impacted deeply. The scene has highlighted a pressing normative gap.

The world lacks norms to guide responsible exits.

The authoritative normative framework, the UN Guiding Principles on Business and Human Rights, states: “There are situations in which the enterprise lacks the leverage to prevent or mitigate adverse impacts and is unable to increase its leverage. Here, the enterprise should consider ending the relationship, taking into account credible assessments of potential adverse human rights impacts of doing so.”

The OECD Guidance for Due Diligence Guidance for Responsible Business similarly offers: “In some limited cases, due diligence may help them decide whether or not to go ahead with or discontinue operations or business relationships as a last resort, because the risk of an adverse impact is too high or because mitigation efforts have not been successful.”

Neither the Interpretive Guide on the corporate responsibility to respect human rights nor the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from ConflictAffected and High-Risk Areas offers further clarification on when or how to terminate or exit.

There is a great deal of room for interpretation. The norms call for heightened human rights due diligence and the use of leverage, but those points are also immensely subjective. It is worth noting that a recent investigation found no indications of global brands carrying out any human rights due diligence on the ground after the coup in Myanmar. Put another way, it appears that fateful decisions were being made in the absence of basic responsible business measures.

In the end, the world lacks sufficient norms to determine when, why, and how to end business operations and relationships responsibly, especially in high-risk environments like post-coup Myanmar. Exits can be devastating, especially when they are abrupt. In postcoup Myanmar, immense burdens and hardships were thrust upon the most vulnerable individuals– the very people whose well-being is to be paramount – because businesses simply withdrew without warning or precautions. Some of that suffering was and is avoidable. It could have been avoided through basic measures like ensuring that local workers received their full wages and benefits before getting laid off – something that is fateful for workers who live day-to-day: providing adequate warning so that workers and management can plan for changes; consulting with affected individuals and communities to identify risk mitigation opportunities; and special processing to promote the well-being of the most at-risk or vulnerable in the context of termination. There is likely much more that could and should be done. But even these simple steps can make a significant difference in the lives of affected people.

On the business side of things, Telenor’s predicament in post-coup Myanmar shows the consequences of the normative gaps for all parties. Telenor faced immense global scrutiny for their attempt to sell their Myanmar branch to the controversial Lebanon-based M1 Group. That decision and the due diligence (or lack thereof) surrounding it has made Telenor the subject of a joint complaint through the OECD’s Norwegian National Contact Point. The complaint was filed by 474 Myanmar-based civil society organizations who accused Telenor of failing to sufficiently engage local stakeholders. The junta asked Telenor executives not to leave the country until authorized to do so, prompting a hostage-like standoff that is ongoing as the sale is still not finalised and executives still banned from leaving the country as per this recent Myanmar now story on the subject. Telenor certainly mismanaged the situation, especially in terms of human rights due diligence. However, the lack of norms and guidance on responsible exits set the stage for disaster.