Lloyd Axworthy was running out of ideas.
It was 1997, and Canada’s foreign affairs minister was troubled by how to handle Nigeria’s military government, which was executing dissidents. He had already yanked Canada’s high commissioner out of the African country, but he needed a new avenue to apply pressure. And so he summoned executives from some of Canada largest companies, including Nexen Inc., to the Foreign Affairs building in Ottawa.
Mr. Axworthy tried to persuade the companies to adhere to Canadian standards, such as avoiding corruption and ensuring local communities get a fair share of benefits, when working abroad. But the meeting did not go well. Some of the Canadian executives were furious, angry that their businesses were being disrupted because they could not get visas for their employees with the high commission closed.
Then someone from Nexen spoke up. What happened next would eventually cement Nexen’s reputation as a leader in human rights policies. Rather than rebelling, it accepted Mr. Axworthy’s challenge. Over the following months, it joined about a dozen other companies in writing and adopting the International Code of Ethics for Canadian Business. It was just a piece of paper, but it affected the way the Calgary company did business.
For example, Nexen turned down opportunities in Sudan, the warring African country that dented Talisman Energy Inc.’s reputation, because in order to operate there, it would had to have turned its back on its stated ethics.
Promoting human rights went beyond hard business decisions, too. The company established a corruption-free scholarship program in Yemen, and gave female medical students opportunities that would otherwise be out of their reach.
Nexen’s influence extended beyond its Canadian counterparts. The United Nations borrowed wording from the International Code of Ethics for Canadian Business when it designed the UN Global Compact, the principles it wants companies around the world to follow. (Nexen executives were even invited to the compact’s unveiling.)
Fifteen years later, China’s third-largest state-owned energy company has made a controversial takeover bid to buy Nexen. As the Harper government reviews the deal, weighing whether CNOOC Ltd.’s takeover offer would be a “net benefit” to Canada, some folks who were in the room for that 1997 meeting worry the $15.1-billion (U.S.) deal could unravel Nexen’s human-rights accomplishments. The New Democratic Party also opposes the deal, arguing that CNOOC is just an arm of the Chinese government, whose human rights record has been heavily criticized. Some Conservative caucus members have expressed similar concerns.
“Nexen was really the leader,” Mr. Axworthy said in an interview. “I do recall holding them out as an example of how a company should behave internationally – according to same standards they would follow in their own country.”
The principles in the ethics code that Nexen helped to write in the late 1990s are focused on five key areas: human rights, labour standards, anti-corruption, the environment, and ensuring that others received a fair share of the benefits derived from resources. These points make up the heart of what is now known as “corporate social responsibility,” or the actions companies take to be good corporate citizens.
“For us, it was not only the right thing to do – which is the bottom line: it’s the right thing to do – but I think we also enjoyed some business benefit from this. Companies and countries wanted to work with us when they knew what we stood for,” said Randy Gossen, a recently retired Nexen senior executive who was key in developing the policies. “It was a very positive thing and probably something that was very pivotal in the whole evolution of Nexen to the company that it is today.”
While Nexen and many of its peers have supporters when it comes to their social policies, they will never be without detractors. In Canada, for example, there is a perpetual debate over the environment and communities surrounding oil sands projects. For example, some Canadian firms hire First Nations companies assuming all other factors are equal when stacked up against competing contractors. But on the other hand, the debate over First Nations rights will always hang over the energy industry.
Mr. Gossen spent 21 years at Nexen, advises the UN, and has been the president of the World Petroleum Council since 2005. He deals with Chinese companies through the WPC and is convinced CNOOC will uphold Nexen’s commitments. Chinese executives, he said, realize that if they want to expand internationally, they have to play by the same rules as their Western competitors.
“I don’t think that you can link the alleged abuses that the Chinese government periodically is accused of as something that will follow though in the oil and gas [companies]. I’ve seen no indication of that whatsoever,” Mr. Gossen said. “All I see is a tremendous eagerness to learn, and to learn best practices from the rest of us, as how to address these issues.”
“If anything, the Chinese are so geared up now to do the right that they may even be able to achieve things above and beyond what Nexen has been able to achieve. One of the reasons for it is they got the money to do it.”
CNOOC, PetroChina Co. Ltd., and China Petroleum and Chemical Corp., known as Sinopec, all participate in the UN Global Compact, so they regularly submit reports about their policies. Punishment for substandard behaviour, however, does not exist.
That worries Errol Mendes, a law professor at the University of Ottawa. Mr. Axworthy invited him to join the 1997 meeting because, as an academic, Prof. Mendes came to the table without a business agenda. He worked with Nexen, and later the UN, to develop their policies. He then served as a external integrity adviser to the Calgary-based company for 12 years.
The government, he said, needs to factor in human rights when deciding whether to approve Nexen’s purchase. Ottawa says it will make a decision by Dec. 10, although this deadline can be extended.
“The value that Canadian companies have is not just where their assets are located, but how they promote Canadian values internally and externally,” Prof. Mendes said. Nexen’s legacy, he said, could “evaporate into history with the takeover.”
As for Mr. Axworthy, he, too, thinks the Conservative government needs to look beyond numbers when calculating net benefit. “I think one of the questions that should be asked is to what degree, if a company is owned by a state-owned operator of another country, that you can apply the same persuasion and work with them in a co-operative way,” he said. “That should be one of the criteria.”
In September, Nexen interim chief executive officer Kevin Reinhart assured investors that CNOOC would not ruin the Canadian company’s reputation.
“They’ve committed to carry on Nexen’s social responsibility programs in Canada and in all of the other communities in which we operate,” he said.