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Negative criteria

Here is a list of all negative criteria:

N1: Violation of ILO labour rights / standards / human rights (minus 200 points)

Human rights and the core labour standards of the ILO (International Labour Organization) form the societal pillars of global cooperation. To date, many countries have failed to ratify and/or implement these global standards, however.

Thus, in nations where the standards have not been ratified (for ex. China, USA), a pro-active approach on the part of companies in such countries as far as local circumstances permit is necessary to ensure compliance. Potential violation of human rights and effects on a company’s products and services have to be taken into account as well.

In any case, adherence to the principle “equal pay for equal work” and to the anti-discrimination standard must be assessed. Proof of discrimination on the basis of ethnic background, skin colour, gender, creed, political opinions, national heritage, social origin as well as any other “distinction, exclusion or preference” (ILO Convention 111, Article 1, Section 1b) constitute a serious negative criterion.

Core labour standards: http://www.ilo.org/public/german/region/eurpro/bonn/kernarbeitsnormen/index.htm

Editor: Gabriela Edlinger gabriela@abcd.co.at

N2: Inhumane products and services (minus 200 points)

We designate P/S as inhumane which have indirect or direct negative effects on:

  • life
  • the health of living beings, physical and emotional
  • freedom of human beings
  • nature

Orientation is provided by the guidelines for ethical investments issued by banks, for ex.

On the basis of such comparative sources, we have decided on the following exclusion criteria; for sales, a 0-tolerance level applies. If any such inhumane goods generate any part of a company’s turnover, the following percentages of the overall Common Good Balance Sheet score will be subtracted:

Proportion of turnover for P/S

Subtraction

Up to 1% of turnover

50%

Up to 2% of turnover

75%

Over 2% of turnover

100%

We view the following products and services as inhumane[1]:

  • Products and services for the military, in particular manufacture of proscribed armaments (according to the  UN Declaration), CBRN weapons (chemical, biological, radiological and nuclear), cluster bombs, anti-person mines, weapons with the exception of those used at least 90% for civil and police purposes; 
  • Construction and operation of nuclear power plants, nuclear reprocessing plants and repositories, combustion of nuclear fuel and uranium mining;
  • Release of genetically modified organisms (animals and plants)
  • Production of chlorine, organochlorinated substances and substances produced using chlorine, particularly plastics;
  • Manufacture of agrochemicals (pesticides, fungicides, herbicides)
  • Alcohol / drug / tobacco and tobacco products: manufacture of these products with the exception of wine, beer and medicinally used drugs;
  • Manufacture and distribution of pornographic products;
  • Operation of passenger and freight air transport (when exceeding 10% of the company’s business);
  • Products manufactured on the basis of animal experiments which are not legally prescribed (for ex. cosmetics, detergents);
  • Gambling: manufacture and trade of gambling devices as well as betting operations which involve loss of money;
  • Embryonic research;
  • Media whose contents do not serve purposes of education / culture / nonviolent entertainment to at least 75%;
  • Production of raw materials with questionable / controversial environmental impact, for ex. shale gas and oil sands (N7/8);
  • Manufacture and operation of facilities which generate toxic emissions or electro-smog, for ex. operators of mobile phone masts;
  • Conventional production and trade of animal products (exception: animal-friendly and species-appropriate husbandry which at least meets EU organic standards).

Editor: Angela Drosg-Plöckinger: a.drosg@mehrwerte.at

N3: Procurement from / cooperation with companies which violate human dignity (minus 150 points)

The production of many goods for daily use is connected with serious social and ecological problems (for ex. fossil energy carriers, agrarian products, telecommunication and electronics). Consequently, it is almost impossible for any company to rule out violations of human dignity in their sphere of suppliers.

The point at which this negative criterion starts to apply, depends on several factors and in part this differs from case to case. In principal, one can say that this negative criterion applies for all cases where the measure of critical goods is relatively significant (>5 % of expenditures; for a coffee house, for example, the selection of coffee is of greater significance than for a consultancy business) or absolutely significant (if the company in question exerts a high influence on the existent problems) and there are no signs of engagement with consequences or perception of alternatives (for ex. use of certified raw materials, participation in multi-stakeholder initiatives). Use of goods and services which are associated with high ethical risks (gas, petrol, laptops, printers, mobile phones) but to a degree typical of offices or households does not constitute fulfilment of this criterion since this applies for almost all enterprises and we wish to ensure that serious offenses are distinguished from such common use. This negative criterion also applies, if inhumane conditions are known to exist in the added-value chain (for ex. in connection with conflicts with local residents and civic initiatives) and the company (in particularly if it is a relatively powerful market player) maintains a passive attitude or merely takes superficial measures to rectify them (for ex. promoting CSR projects instead of making concrete improvements in the suppliers’ sphere) or even engages in industrial initiatives to resist multi-stakeholder campaigns, for example.

Editor: Christian Loy – christian.loy@gmx.at

N4: Hostile takeovers (minus 200 points)

The global market is dominated by a “dog-eat-dog” mentality. Stock companies, for example, can experience a “hostile takeover” against the will of a company’s executive and its employees. In the Economy for the Common Good, the strong should not devour the weak. If a takeover is to be made, both management and the workforce must give their consent. If this is not the case, the takeover is to be viewed as hostile.

Regarding terminology also see: http://de.wikipedia.org/wiki/Feindliche_%C3%9Cbernahme

Editor: Eva Nagl-Pölzer + consulting@nagl-poelzer.com (based on the article by Christian Felber)

N5: Blocking patents (minus 100 points)

Many enterprises register patents for a lot more innovations than they have any commercial use for, their goal being to block research in the “vicinity” of their patent. The most blatant examples are automobile manufacturers whose patents for fuel-efficient or solar automobiles are valid but have remained unused for years, because this would introduce a change in paradigm from the fossil to the post-fossil era and destabilize existing power structures. Most cases are less spectacular; the patents in question merely give one company a competitive edge over the competition. The effects are blockage of innovation and detriment to other companies. We currently know of no methods which are able to detect blocking patents and for this reason we want to start out by raising awareness of this very uncooperative practice.

Regarding terminology also see: http://de.wikipedia.org/wiki/Sperrpatent

Editor: Eva Nagl-Pölzer + consulting@nagl-poelzer.com (based on the article by Christian Felber)

N6: Dumping prices (minus 200 points)

Some companies offer products on markets which are new for them at prices which lie below production costs so as to acquire market shares. This contradicts true-cost pricing and fair competition. Dumping prices can be detected by comparing the prices of identical products at various locations or urging companies to reveal their cost calculations.

Regarding terminology also see: http://de.wikipedia.org/wiki/Dumpingpreis

Editor: Eva Nagl-Pölzer + consulting@nagl-poelzer.com (based on the article by Christian Felber)

N7: Illegitimate environmental impact (minus 200 points)

In carrying out their business activities, companies encroach upon ecosystems. If such encroachments1 are inappropriate – in the sense of the societal benefit of the regional population – and done in the service of predominantly private interests, up to 200 points should be subtracted – irrespective of whether the procedure complies with legal law and, in particular, if it would be illegal at the site of the parent company.

The degree should be measured in terms of the use/detriment ratio of the project/enterprise. In cases where illegality at the site of the parent company would be given, the number of points subtracted should be doubled (up to a maximum of 200 points).

1 for ex. destruction of essential habitats, forest-clearing, residue in water, air and soil

Editor: Lutz Knakrügge, lutz@mail.pcom.de; preliminary work: Christian Loy

N8: Violations of environmental regulations (minus 150 points)

This criterion applies if companies violate environmental regulations, for ex. by

  • exceeding threshold values (even short-term)1
  • using impermissible chemicals which are on the banned list (76/769/EWG)
  • knowingly violating laws

The assessment should be oriented to the seriousness or duration of the violation at the discretion of the auditors, with up to 200 points being subtracted.

1 The could also hold for municipalities which exceed ozone limits, for example.

Editor: Lutz Knakrügge, lutz@mail.pcom.de; preliminary work: Christian Loy

N9: Planned obsolescence (minus 100 points)

Description of the negative criterion

“Planned obsolescence” means the reduction of a product’s life cycle through technical means employed by the manufacturer. In addition to product design which renders products irreparable, another well-known example from the 20th century is the Phoebus cartel of light bulb manufacturers, whose goal was to shorten the service life of these products artificially to boost sales. A current example often cited are IPhones whose battery cannot be replaced, which puts a limit on the device’s useful life and operability. For further examples of various forms of planned obsolescence, see: Documentary: Kaufen für die Müllhalde.

Evaluation and gradation

Whether this negative criterion applies, is decided on an individual-case basis; substantiation often proves to be difficult. The following aspects are often indications of planned obsolescence:

  • Non-replaceable components with short service life (for ex. batteries)
  • Use of fast-wearing components despite availability of alternatives with a longer service life (for ex. plastic gear wheels). 

Website on this topic: http://www.murks-nein-danke.de

Editor: Christian Loy – christian.loy@gmx.at

N10: Misconduct by the company in violation of labour laws (minus 200 points)

The rights and obligations of employers vis-à-vis employees are comprehensively regulated. Documents of labour authorities show that such regulations are often ignored – to the detriment of the employees.

Through use of this negative criterion, violations of labour laws, in particular of employee protection laws, have a negative impact on the Common Good Balance Sheet of the company in question. The Common Good Balance Sheet does not intend to replace legislation but rather supplement and enhance corresponding laws, however.

In this sense, proof of misconduct in regard to labour laws on the part of companies can be supplied by:

  • final conviction of the company due to violation of labour laws;.
  • (repeated) complaints filed by employees in labour courts, even if they were settled out of court.

On the whole, the Arbeitskammer, as the legal representative of employees, provides an important source of information for assessment of this negative criterion in Austria. It makes detailed records of violations against labour laws (see the overview of the AK Oberösterreich from the year 2011, for example, at: http://www.arbeiterkammer.com/bilder/d136/Schwarzbuch_20111.pdf ).

Editor: Gabriela Edlinger gabriela@abcd.co.at

N11: Dismissals / site relocation despite profits

Description:

Companies which serve the Common Good do not dismiss employees or relocate sites in times when profit margins are stable and there are a significant number of job-seeking people. For companies entirely oriented towards making profits, such measures are very common, however. One example of many: the Semperit plant in Traiskirchen was closed 113 years after its foundation. Although it was making money, it was not yielding the kinds of profits targeted by the parent company, Conti. The well-being of the owners was given priority over that of all other stakeholders. This should not be. After all, companies do not exist to merely maximize the well-being of a certain group of stakeholders.

Measuring method:

Is a site being relocated or closed down even though it is yielding profits?

Are employees being dismissed even though the company has a stable profit margin?

Editor: Christian Felber, info@christian-felber.at

N12: Tax evasion (minus 200 points)

Description of the negative criterion

Whereas indicator E2 describes voluntary contributions made by companies which extend beyond the obligation to pay taxes and social security contributions, negative criterion N12 describes all aspects of actions taken by a company aimed towards evading such obligations.

Globalization has led to tax competition between various countries. The OECD lists a series of “harmful tax practices” which make it possible for taxes to be evaded and corruption to spread on a large-scale, global basis (http://www.oecd.org/tax/harmfultaxpractices/1904184.pdf). There are several lists of countries which either tolerate such practices or even actively promote them. See, for example: http://www.oecd.org/document/57/0,3343,en_2649_33745_30578809_1_1_1_37427,00.html) and the Financial Secrecy Index of the “Global Tax Justice Networks”: (http://www.taxjustice.nethttp://www.financialsecrecyindex.com/2011results.html).

Tax havens are characterized by:

  • No or only marginal income or corporate income tax
  • Unavailability or lack of access to information
  • Poor exchange of information with authorities of other countries
  • Lack of transparency

Enterprises which employ this kind of competition take advantage of the benefits offered by the community (for ex. education, infrastructures, health care services, administration, legal system), but they do not make any adequate contribution to establishing and sustaining such community services.

The practices of enterprises which are to be viewed as detrimental to the Common Good encompass, among other things:

  1. transfer of profits within a corporation to countries with low tax rates;
  2. investment of money in countries with low tax on capital;
  3. use of possibilities for taking advantage of “tax havens” to conceal profits;
  1. transfer of corporate headquarters/branch offices to or even establishment of “offshore companies” in tax havens so as to utilize low profit tax.

Evaluation + gradation

The evaluation should orient itself to the taxes actually paid in a country in relation to the theoretical tax payment which would result from the added value.

Since such data are usually not accessible to the public, all activities of a company which seem to indicate attempts at tax evasion must be critically scrutinized. For each of the aforementioned practices, 50 points should be deducted (a maximum of  -200).

Editor: Manfred Kofranek, manfred.kofranek@inode.at

N13: Inappropriate interest returns for partners not employed in the company (minus 200 points)

Description of negative criterion

Capital income is problematic per se (see Indicator E4), because

  1. it compels the economy to grow. Any expectation of yielding returns on capital provided to a company, even if it is only at the rate of inflation, compels the economy to grow; and
  2. approx. 80 % of financial assets are in the hands of 20% of the population. Consequently, at least four-fifths of the capital income is distributed to only one fifth of the population. The proportion is in fact even higher because the richer someone is, the higher his or her capital income will be. Capitalism is a “system based on positive feedback.” The richer someone is, the easier it will be for him or her to get even richer without even working at all. The majority of large fortunes were inherited, not earned through work; and
  3. the more one-sided capital investments are, driven by the incentive to get capital yields, the farther such investments will be removed from the actual purpose of business, which is to satisfy needs, create quality of life and life purpose and increase the Common Good. This constitutes a systemic misallocation of capital which even contradicts the constitutions of some states and nations such as the Constitution of Bavaria, which declares: "Capital accumulation is not an end in itself, but a means for developing the economy.” (Art. 157 (1))

 

The higher the capital income is, the greater the growth compulsion becomes and the more unfair distribution of profits will be. On average, in the case of an actual two-percent growth of the economy, all incomes could also grow two percent. Higher growth rates are only possible in certain exceptional enterprises and sectors. All enterprises can help solve the problem by minimizing their capital income.

Extreme offenses such as ongoing two-digit returns on equity and borrowed capital from partners who are not active in the company over a period of five years are to be assessed as a negative criterion.

Evaluation + Gradation

All capital (equity and borrowed) invested by partners who are not active in the company is counted. Payouts are defined as the sum of fixed and variable interest and dividends which have been paid out.

If returns on capital invested by partners who are not active in the company are paid out over a period of five years, negative points will be given as stipulated below:

  • Returns on invested capital 10 – 12.5% = - minus 100 points
  • Returns on invested capital 12.5 - 15% = - minus 150 points
  • Returns on capital >15% = - minus 200 points

Editor: Christian Felber info@christian-felber.at with the energetic assistance of Christoph Spahn

N14: Non-disclosure of all investments and subsidiaries (minus 100 points)

Transparency is a basic prerequisite for trust, control, democracy and prevention of power concentration. Ownership of a company is not a purely private matter; it affects the general public. Thus, companies should disclose which subsidiaries exist and who the (co-)partners of the various enterprises are. If there is a lack of transparency here, the gate will be wide open for tax evasion (for ex. anonymous trusts and offshore companies in tax havens), environmental destruction (for ex. tankers of EU companies which sail under a Panamanian flag), crime (for ex. corruption via bogus companies) and undermining of democracy (for ex. through hidden party donations). Companies are social structures too, and as such, they are bound to society’s rules (licensing, a legal base for “legal entities”). Hence, they must be transparent and declare themselves. Data protection is of secondary importance here. After all, “natural persons” must also report their place of residence to the authorities.

Editor: Christian Rüther chrisruether@gmail.com; preliminary work: Christian Felber                 

N15: Obstructing the establishment of a works council (minus 150 points)

The prerequisite for establishment of a works council is that the company has at least five permanent employees (in the sense of § 34 Abs. 1 ArbVG).

Preventing establishment of a works council is given, if management takes various measures to prevent its constitution or the election of its members.

Such measures can only be substantiated in part:

-          It might be helpful to carry out an anonymous employee survey in which employees are asked whether they would like to have a works council, if measures have been taken to prevent one from being established and how employees have been treated who advocated the establishment of one.

-          Statements made by dismissed employees can provide some indication too if such dismissals were made in connection with the establishment of a works council.

-          One could also procure information from labour authorities or respective unions to find out whether any complaints have been filed against the company in question and whether any relevant negative experiences are documented.

The burden of proof could be placed on management in the sense that it would have to prove that it had not engaged in any obstruction of this kind.

It is ultimately the task of the auditor to make a balanced judgment.

Scripts on labour laws/works councils (VOEGB)

Information platform of the OEGB: www.betriebsraete.at

Editor: Christian Rüther chrisruether@gmail.com

N16: Non-disclosure of all financial flows to lobbyists and lobbying organizations / Non-entry in Lobby Register of the EU (minus 200 points)

Lobbying out of self-interest – not in the interest of the public good – is one of the largest threats to democracy. An important step towards disclosure of all lobbying activities is disclosure of all financial flows of a company to lobby groups. Whoever fails to do so, supports the practice of non-transparency to the detriment of democracy. Enterprises in the EU can put an end to such non-transparency by having themselves entered into the EU lobby register. Should this register not apply for the company in question, it is also possible (for quite small companies in particular) to disclose all financial flows themselves.

Editor: Christian Rüther chrisruether@gmail.com; preliminary work: Christian Felber                             

N17: Excessive income divergence (minus 100 points)

No income earned through full-time employment should be more than twenty times the minimum wage of the country in question (see Indicator E4)

For Austria and Germany this means no income should exceed 26,600 Euros (net) or 70,000 Swiss francs (net)

For details on justification of maximum income, see Indicator E4.

Editor: Nonno Breuss, nonno.breuss@gmail.com