[ppi] [ppiindia] Freeport's Hard Look At Itself

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**http://www.businessweek.com/magazine/content/05_43/b3956122.htm

OCTOBER 24, 2005   .  



        
SOCIAL ISSUES 

Freeport's Hard Look At Itself 
The mining giant's gutsy human-rights audit may set a standard for 
multinationals 


Freeport-McMoran Copper & Gold Inc. (FCX ) has long been tagged as a 
human-rights pariah for its close relationship with the repressive Indonesian 
military. In the mid-1990s, for example, it was linked to horrific acts 
allegedly committed by the Suharto dictatorship against rebels unhappy about 
expansion of the company's gold and copper mines on the Indonesian island of 
Papua. Allegations against the troops included all manner of atrocities, 
including torturing and murdering protesters, as part of what some critics 
called a genocidal war against separatists in what was then known as Irian 
Jaya. Activists accused Freeport of complicity, charging that the New Orleans 
company's security personnel routinely provided transportation for the 
Indonesian military. 
 


Freeport has always denied knowledge of abuses, but it has nonetheless engaged 
in a gutsy human rights review that could become a model for all Western 
multinationals. In 2003 the company quietly asked an outside nonprofit to 
conduct an independent audit of its vast Papuan mining complex. A report of the 
International Center for Corporate Accountability Inc. (ICCA), which examined 
the 18,000-worker operation, is set to be released on Oct. 17. (The full 
133-page audit and Freeport's response, both of which BusinessWeek obtained 
from the ICCA, will be posted on www.icca-corporateaccountability.org.)

Two years in the making, the report details a raft of problems. Although the 
egregious military abuses have stopped, the ICCA found lingering issues, from 
violations of Indonesian laws governing its contract workers to rampant 
mismanagement of a much-praised fund Freeport started to help local Papuan 
tribes. Some of the findings even stunned Freeport management. For instance, 
top execs had no idea that its 700-person in-house security force continues to 
drive Indonesian military around -- a practice management thought it had 
stopped after the mid-1990s' outcry, say ICCA officials. The ICCA didn't look 
into long-standing environmental abuses charges against Freeport.

In a formal reply to the audit, Freeport acknowledged the problems and vowed to 
address them. "We haven't accepted all the recommendations because some aren't 
culturally the right way to go about it, but the findings are right," says Stan 
Batey, Freeport's senior adviser on community relations.

The company's willingness to open up so wide is a major development in the 
corporate responsibility movement. Certainly, no other global mining or oil 
company has come close to such transparency, long a key demand by human-rights 
groups. A few consumer products companies -- such as Nike (NKE ), Liz Claiborne 
(LIZ ), and Toys 'R' Us -- invite independent scrutiny of their overseas labor 
practices, mostly through joint industry-nonprofit groups set up for the 
purpose. But the Freeport audit surpasses these efforts.

Most companies are closed books when it comes to independent scrutiny. A 
majority of U.S. multinationals have codes of conduct that promise good 
behavior in these fields, but there's rarely a way of checking up. Freeport's 
example could set a new standard. "Having third-party accountability like 
Freeport's is critical to corporate credibility," says Arvind Ganesan, director 
for business and human rights at Human Rights Watch. His group, which wasn't 
involved in the audit, has criticized Freeport over the years.

INSTANT UPHEAVAL 
Freeport's audit by the ICCA, based at the City University of New York (CUNY), 
shows how companies that are willing can open up even in the most challenging 
environments. The sprawling complex in Western Papua includes the world's 
largest gold mine and the third-largest copper mine. It sits atop a 14,000-foot 
mountain that gets 300 inches of rain a year. When the mine opened in 1967, 
there were no roads and fewer than 1,000 people in the area, mostly tribes 
recently exposed to industrialization. The mine drew in 120,000 people, some 
from other parts of Papua, others Javanese, brought in by Suharto -- a move 
Papuans saw as Jakarta's attempt to conquer the former colony. All this thrust 
the area into modernity overnight. It also caused friction with seven local 
tribes, and tensions boiled over in the mid-'90s, leading to all the charges.

Freeport responded by vowing in 1996 to quadruple Papuan employment at the mine 
over a decade. And it set up the Partnership Fund for Community Development, 
which gives 1% of mine revenues to locals. It will pump in about $25 million 
this year, bringing the total to $132 million. Freeport later laid out social- 
and human-rights policies and, in 2003, produced detailed standards.

That's when it brought in the ICCA. It was a surprising conversion for a 
company headed for years by combative CEO James R. Moffett, who relinquished 
the title last year but remains as chairman. The ICCA got involved at the 
urging of Gabrielle K. McDonald, a Freeport director who had served as a judge 
at the International Criminal Tribunal in The Hague, and of David Lowry, a 
priest who was Freeport's vice-president for social and community relations 
until he retired in 2004. Lowry says he started with managers at the mine 
before asking top execs and the board to go along. "We wanted an outside audit 
not to please an external audience but to figure out how well we were doing on 
our commitments," says Lowry.

The ICCA's answer: Performance was good in many respects but deficient in 
others. The auditors laud Freeport's human-rights training program, given last 
year to 30% of employees. But interviews showed that 60% of those trained 
couldn't answer basic questions about the policy. Neither could 60% of security 
personnel, even though 90% of them had taken human-rights training three times 
as long as the four hours other employees got.

It was the employee interviews that brought to light the ongoing link to the 
military. The ICCA demanded to know why 29% of the 60 security personnel chosen 
were unavailable. Eventually, it learned they were driving for the military, 
says ICCA founder S. Prakash Sethi, a management professor at the Zicklin 
School of Business at CUNY's Baruch College. "This was against Freeport's 
policy and shocked all of us," says Sethi.

Even though the ICCA dug in deep, it still has plenty of work to do. The audit 
covers about 9,000 employees of Freeport and direct subcontractors. The next 
stage will cover another 9,000 at secondary suppliers. The ICCA also will 
monitor Freeport's follow-up plans.

Critics like Human Rights Watch's Ganesan still insist Freeport could have 
fixed much of what the ICCA found on its own. Even so, Freeport's willingness 
to be exposed puts it in a class by itself. Other companies facing similar 
abuse accusations now may need to follow its example -- or explain why they 
can't while Freeport can.

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Nickname: karmhs 
Review: It sounds like a good start. 
Date reviewed: Oct 17, 2005 4:41 PM 
Nickname: bemused 
Review: As someone who has been to the mine & arrested for just talking about 
the mine, I welcome any honest scrutiny. But when will FCX realise corporate, 
environmental and social responsibility is a moot concept when it mines entire 
mountains, fills rivers and forests with toxic waste, introduces HIV through 
using TNI supplied prostitutes, & gives its TNI cronies millions of dollars to 
perpetuate oppression of Papuans? Right now in Tembagapura the TNI are shooting 
villagers, burning down villages conveniently in the world heritage areas that 
PTFI want to explore. FCX has had it too easy too long, & has an unfair and 
anti-competitive advantage to other producers by not having to follow any human 
rights, labour, or environmental protection laws, & can just make pure profit. 
As long as the Indon military is involved, & Freeport perpetuates an illegal 
invasion, FCX will continue to have the blood of 400,000 Papuans & many 
Indonesian workers on its hands. Merdeka!! 
Date reviewed: Oct 17, 2005 9:34 AM 



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