Multinational enterprises: Better guidelines for better lives

The OECD Guidelines for Multinational Enterprises have just been updated. What are the main changes and how might they affect international corporate behaviour?

Among the headline topics swept into the mainstream by globalisation has been the proliferation of multinational enterprises and the effects they have had on the places where they operate. Today, MNEs account for a large portion of global trade and investment, and are also major employers. Their ability to influence the well-being and practices in the places they operate in is significant.

To be sure, MNEs can be a force for betterment. A 2008 OECD report on pay and conditions in MNEs found that in general, foreign multinationals pay 40% higher in average wages than local firms, with an even higher differential in low-income countries of Asia and Latin America.

But how well behaved are MNEs in their host countries and what standards do we have to influence their conduct? The evidence of the benefits they bring to host countries in terms of jobs, capital and technology transfer is too often marred by abusive wage practices, poor working conditions and child labour. This problem applies not only to companies that come from developed countries, but increasingly to those from emerging markets, too.

Part of the problem is governance, both in firms and among public authorities competing for investment. This relationship can be imbalanced, as some large firms may have more financial clout than the regions or countries where they are based. They can be particularly influential in countries where there is conflict, or where governance is weak. In such circumstances, it is not hard to see how exploitative and even corrupt relations may develop.

Many international firms are acutely aware of these risks and have developed their own internal codes of behaviour in a bid to ensure high standards. Take Cadbury, the leading chocolate manufacturer. They have created a code of practice under which the company voluntarily refrains from marketing to young children or selling through vending machines in primary schools. Similar codes have proliferated at industry and sector levels too.

Governments also have codes, and chief among them are the OECD Guidelines for Multinational Enterprises, or MNE Guidelines. Originally drawn up in 1976, these guidelines provide a comprehensive set of voluntary recommendations on good corporate behaviour. They seek not only to protect rights, but to foster good governance and better risk management through provisions on anti-corruption, transparency, disclosure and tax. A total of 42 countries adhere to the guidelines, including all OECD members plus Argentina, Brazil, Egypt, Latvia, Lithuania, Morocco, Peru and Romania. Seven more countries are on course to adhere: Colombia, Costa Rica, Russia, Jordan, Serbia, Tunisia and Ukraine. All of these countries together represent over 85% of global foreign direct investment.

While not legally binding, all multinational enterprises headquartered in adhering countries are bound to comply. And adhering governments are required to deal with allegations of violations. These government-endorsed voluntary standards have been embraced by firms the world over to demonstrate their commitment to corporate social responsibility and sustainable development. They complement national laws and have inspired legislation in several countries. They work because they are designed to build an atmosphere of confidence and predictability between businesses, governments, labour unions and civil society.

The MNE Guidelines form part of a wider OECD Declaration on International Investment and Multinational Enterprises. They define an ideal set of investor responsibilities in a host country, while the Declaration contains commitments by governments to avoid discrimination against multinational enterprises, to avoid imposing conflicting requirements upon them and to co-operate on issues affecting investment.

A key challenge for the OECD has been to keep the MNE Guidelines fresh and relevant, while maintaining their consistency and authority. The MNE Guidelines were already updated four times through 2000, and the financial crisis that struck in 2008, by eroding trust in global business, hastened the need for a fifth review. In 2009 OECD ministers called for revisions that would “enhance their relevance and clarify the responsibilities of the private sector”.

Meanwhile, the landscape for international investment has changed since the start of the 21st century. New patterns of production and consumption have arisen, old ones have become more complex, and emerging giants like Brazil, China and India are attracting a larger share of world investment. This added pressure to other needs, such as addressing climate change, boosting development and improving human rights, all of which call for the highest standards of international business conduct.

So, it was with some anticipation that the new update of the OECD MNE Guidelines was finally issued at the 50th anniversary Ministerial Council Meeting in May 2011. All G20 countries were invited to fully participate in the update, while business and trade unions, as well as civil society, were involved. What has changed?

First, firms must now address both current and potential adverse impacts of their operations as an integral part of their management processes. This applies not only to the enterprise’s own operations, but to those of its suppliers too. No longer can firms turn a blind eye to how their suppliers operate, and indeed, are bound to conduct “due diligence” to ensure the firms they deal with abide by the OECD guidelines, too.

A second notable change has been to add human rights to the existing principles and standards, which already include disclosure, employment and industrial relations, environment, combating bribery, consumer interests, science and technology, competition and taxation. A new section draws heavily on the 2010 Guiding Principles for Implementing United Nations Framework for Business and Human Rights. In fact, the author of those principles, John Ruggie, worked closely with the OECD in drafting the new chapter, which establishes that firms should respect human rights in every country in which they operate, even if the host country has a poor record on human rights itself.

The guidelines also urge firms to maintain a vigilant eye, seeking out potential breaches of human rights, on an ongoing basis. As chair of the OECD’s annual meeting of ministers in June, US Secretary of State Hillary Rodham Clinton pointed to this important stipulation as she voiced support for the MNE Guidelines, and more specifically the section on human rights, saying that “…they will be helping us determine how supply chains can be changed so that it can begin to prevent and eliminate abuses and violence.”

The 2011 update has also expanded the scope of the key chapter on employment and industrial relations, which now stipulates that firms pay a decent wage that “should be at least adequate to satisfy the basic needs of the workers and their families.” This important add-on is in part thanks to ongoing efforts by the Trade Union Advisory Committee to the OECD (TUAC), which in its statement on the update considers that “…these elements significantly increase the relevance of the guidelines and their potential to raise the standard of responsible business conduct in a global context.”

One pivotal, if widely criticised, element of the MNE Guidelines is the National Contact Points (NCP). These government-run offices in signatory countries are responsible for encouraging observance of the guidelines, and for promoting and explaining them to the business community, workers and anyone interested in knowing how the MNE Guidelines work. Anyone may contact an NCP, which acts as a type of mediator.

However, critics have argued that NCPs have not fulfilled their role, pointing to long waiting times for considering complaints, potential conflicts of interest, weak oversight, and shortfalls in the public information effort.

The 2011 update responds to these criticisms by providing more guidance on how to promote the guidelines and make the results better known. It also includes instructions aimed at making the different NCPs act in a more uniform manner and gives them guidance on how best to handle cases that are simultaneously brought up in a national court of law.

The OECD MNE Guidelines have the potential to help level out the international playing field for business, too. Winand Quaedvlieg, who chairs the international investment and MNE group of the Business and Industry Advisory Committee to the OECD (BIAC), said that the “OECD needs to do its part by working closely with governments in order to promote in nonadhering countries the introduction of CSR standards comparable to the guidelines.”

More than just a policy tool for governance, the updated MNE Guidelines testify to the importance of dialogue in building a better world economy. They confirm the OECD’s federating role by having gathered stakeholders, not just around the table, but around the common goal of making sure that everyone benefits from the global investments that underpin so many of our economies and shape our futures.


OECD (2011), OECD Guidelines for Multinational Enterprises: Recommendations for responsible business conduct in a global context, Paris.

Alexander Hijzen and Paul Swaim (2008), “Do multinationals promote better pay and working conditions?” OECD Observer No 269, October.

Ruggie, John (2011), “Global business: To protect, respect and remedy”, OECD Yearbook 2011: Better policies for better lives, Paris.


©OECD Observer No 285, Q2 2011

Economic data


Stay up-to-date with the latest news from the OECD by signing up for our e-newsletter :

Twitter feed

Suscribe now

<b>Subscribe now!</b>

To receive your exclusive print editions delivered to you directly

Online edition
Previous editions

Don't miss

  • Do you know the OECD’s web ending? Or which Serbian American engineer is famous for his electric cars? Try our latest OECD Observer crossword. It’s full of fun facts, simplex in style, and gives you the solution at the tip of a button. You can time yourself too.
  • French Economy Minister Emmanuel Macron came to the OECD on 18 September for a webcast discussion on economic reforms, inequality and the outlook, with OECD Secretary-General Angel Gurría. You can watch the event by clicking on the photo.
  • The UN summit on the Sustainable Development Goals is just over a week away, and the OECD will be there in force. See our special SDG webpage.
  • Climate change: “We should not disagree when scientists tell us we have a window of opportunity–10-15 years–to turn this thing around” argues Senator Bernie Sanders.
  • Passionate about international taxation? The Institute for Austrian and International Tax Law is currently looking for a Research and Teaching Associate at the Christian Doppler Laboratory. For further information, click here.
  • In the long-run, the EU benefits from migration, says OECD Head of International Migration Division Jean-Christophe Dumont.
  • Is technological progress slowing down. Is it speeding up? At the OECD, we believe the research from our Future of ‪Productivity‬ project helps to resolve this paradox.
  • An employee prepares breakfast in front of the Eiffel tower at the Parisian luxury hotel Le Plaza Athenee, France July 30, 2015. Nowhere in the world has more accommodation available on Airbnb than Paris. Now the home-sharing website that has transformed budget travel to the French capital is giving its super-deluxe hotels a fright too (©REUTERS/Stephane Mahe).
  • Is inequality bad for growth? That redistribution boosts economies is not established by the evidence says FT economics editor Chris Giles. Read more on
  • On 19-20 September, come and visit the OECD to learn more about our home and our work.
  • Low interest rates here to stay for half a century, says OECD director Adrian Blundell-Wignall.
  • OECD speak on support it will offer to Greek
  • Bill Gates visited the OECD on 26 June. He met with the Secretary-General Angel Gurría to discuss areas of collaboration with his foundation and participated at a briefing session on official development assistance modernisation with OECD experts.
  • The People’s Republic of China decided to enhance longstanding collaboration with the OECD and to join the OECD Development Centre, in a historic visit by Chinese Premier Li Keqiang on 1 July to the OECD in Paris.
  • In order to face global warming, Asia needs at least $40 billion per year, derived from both the public and private sector. Read how to bridge the climate financing gap on the Asian Bank of Development's website.
  • One dollar in aid for trade generates eight dollars in extra trade for all developing countries and 20 dollars for low-income countries. Read OECD Secretary General's post on the newly released Aid for Trade at a glance 2015.
  • Catherine Mann, OECD Chief Economist, explains on Bloomberg why "too much bank lending can slow economic growth".
  • Interested in a career in Paris at the OECD? The OECD is a major international organisation, with a mission to build better policies for better lives. With our hub based in one of the world's global cities and offices across continents, find out more at .
  • Come va la vita in Italia? How's life in Italy? The OECD Better Life Index is an interactive online platform in seven languages that goes beyond GDP by offering important insights into measuring well-being and quality of life. Try it for yourself!
  • The IMF calls for a decisive energy subsidy reform in order to use the freed resources to meet critical public spending needs and to reduce pollution ahead of the Paris climate change summit.
  • Have a look at these posters representing a world without fundamental rights at work – including child labour, forced labour and inequality. Read more about this ILO image competition here.

Most Popular Articles


What issue are you most concerned about in 2015?

Euro crisis
Global warming
International conflict

OECD Insights Blog

NOTE: All signed articles in the OECD Observer express the opinions of the authors
and do not necessarily represent the official views of OECD member countries.

All rights reserved. OECD 2015