'Companies won’t change by themselves'
By Arend Hulshof
This week, Ronald Gijsbertsen (44) ends his work at SOMO as managing director. Under his leadership, SOMO has grown from a group of seven researchers into a professional organisation with 44 employees. In this farewell interview, Ronald discusses tax avoidance and the short-sightedness of business experts. He also reflects on multinationals that threaten to sue in an attempt to silence SOMO. ‘When they do that, I know we’re on to something.’
As if it wasn’t his last week at SOMO at all, that’s how parting director Ronald Gijsbertsen (44) talks about his organisation. It’s Tuesday morning, and he’s at home, sitting at his computer. He’s just finished the weekly ‘stand up’, an online meeting in which all SOMO colleagues discuss their current work. Now he speaks enthusiastically – also via Zoom – about the SOMO report which will be published today on the practices of oil trader Vitol in Nigeria. ‘Until recently, I had never even heard of that Dutch company’, says Gijsbertsen. ‘But it is one of the largest multinationals in the world.’
He also looks ahead to the report that will appear a day later about one of the largest Ukrainian poultry farmers, which receives public funding but still manages to avoid paying taxes. He predicts that this, too, will create a commotion. He says proudly, ‘SOMO’s researchers really have a nose for relevant subjects and a keen sense of what’s important to investigate.
Letters from well-established law firms
Gijsbertsen’s eyes really begin to shine when, looking back on the seventeen years he has worked at SOMO, he talks about the times when multinationals threatened his organisation with a lawsuit because of a report that was unfavourable to them. ‘If we get such a letter from an established law firm, that really gets me going’, he laughs cheerfully. ‘Then I know we’ve really hooked them.’
The first time he received this kind of letter it was quite intimidating, he admits. It was in the summer of 2005. He was planning to go on holiday the next day, he remembers. ‘In a yet-to-be published report, we had uncovered human rights violations in the supply chain of an electronics company,’ says Gijsbertsen. ‘In fact, the company did not care at all about our accusations. But there was one annex to the report that the management didn’t want to allow us to disclose. It stated how inefficient the supply chain was. And if that were to be published, it could have a negative impact on market value.’
Together with his colleagues, Gijsbertsen reconfirmed whether all the information had been checked and double-checked, and in consultation with SOMO’s lawyer, they eventually decided to simply publish the report. That way, he could still go on holiday with peace of mind.
The company, of course, did not end up suing SOMO, just as no multinational has actually ever taken SOMO to court because of a publication. ‘In the end, they really do know that they can’t touch us,’ he says firmly. ‘We always carry out our work very carefully. We check everything. We test out our arguments, and we never say anything just out of the blue.’
The threats from companies seem to come in waves. There have been years in which SOMO received four or five threats of lawsuits. However, it hasn’t happened at all yet in 2020. ‘Maybe we’re not sharp enough this year,’ he says with a smile. More seriously, ‘Look, if you never encounter resistance in this work, you have to ask yourself whether you may have become too soft. We’re talking about companies with a lot of power that don’t just ignore you.’ According to Gijsbertsen, threatening SOMO with a lawsuit is often just part of the game. Companies sometimes go on the defence when they really they have no case. He relates a story about the CSR manager of a company that SOMO had published a report on. ‘On the record, he said that it was an unbelievably miserable report that was completely wrong. But off the record, he thanked us, because this report made it possible for the company to take action. This shows that it’s really not just NGOs that want change.’
When Gijsbertsen applied for a job at SOMO in 2003, there were only seven researchers working there. They divided up the management tasks among them, Gijsbertsen explains. ‘Many systems and structures were still missing,’ he remembers. ‘So I was really able to indulge myself, management wise.’
Gijsbertsen was 27 at the time. After secondary school, he studied business administration. ‘I wanted to become very rich, very quickly and I aspired to work for a large multinational.’ During his studies, he learned about maximising profits, and how to use marketing to seduce people into buying products they don’t really need. All very interesting’, he says seriously. ‘But what I found peculiar was that they never mentioned where the costs remain that a company deliberately externalises. If, for example, a multinational moves its production to a country because it allows its employees to be paid unliveable wages, social costs don’t disappear. That creates poverty, and poverty costs money. We can solve that with development aid, for example, but that means taxpayers have to make up for a company that does not pay fair wages, while in the meantime making a huge profit’, explains Gijsbertsen.
When he asked questions about this problem during his studies, he was told that these were not business issues. ‘Then I should be in public administration, the lecturers said.’ In other words: the government should come up with regulations to force companies to act differently.
According to Gijsbertsen, that’s where things are lurching out of control. ‘Businesses don’t sit back and wait to see which legislation governments will come up with,’ he says. On the contrary, they do everything they can to influence policy with strong lobbying. ‘Multinationals have much more political power than they want us to believe.’ According to Gijsbertsen, the fact that multinationals fail to take responsibility for their activities is a sign of intellectual poverty. ‘Businessmen are being taught a structural stupidity that I did not want to participate in.’
And so Gijsbertsen did not apply to Heineken or Shell after his studies, but instead to a large development organisation. ‘I wanted to stimulate business cooperation there. I really believed that there was really something to gain there. After all, companies also benefit in the long term from a better world without poverty. But unfortunately, they didn’t see anything in my ideas at the time.’
Gijsbertsen then worked as a consultant for an ICT service provider. ‘And there I encountered the limits of my optimism’, he says.
‘The gain I believed in never really turned out to be there. Shareholders simply want a maximum return on their investments. The people at that ICT company were all really good-hearted people, but if they had to choose between a well-paid job at a bank or developing ICT that would benefit welfare mothers, for example, then they always opted for the highest profit margins. You had to be an extremely socially responsible entrepreneur in order to align your business goals with the general interest. In other words, I started to realise that corporate accountability on a large scale was just not possible.’
Speaking two different languages
And then Gijsbertsen saw SOMO’s vacancy. He had never heard of the organisation before, but he applied immediately and was hired. ‘In those first few months I often got into a kind of linguistic confusion with my new colleagues’, remembers Gijsbertsen. They talked about fundamental human rights and about the work of the International Labour Organisation. He laughs, ‘But what does that have to do with doing business, I kept wondering. At the same time, the idea that we can countervail the power of multinationals was very appealing to me.’
Public opinion was on Gijsbertsen’s side in those first years of the 21st century. Corporate accountability was starting to become popular, and was gradually turning into an accepted idea. And supply chain responsibility made common sense… although that did take some time. Gijsbertsen explains how two SOMO researchers visited an electronics conference in Geneva at that time. ‘The companies had just discovered that they were could be held accountable for the conditions under which their devices were being manufactured in Southeast Asia. And then, at that conference, my colleagues started talking about how gold, cobalt and other metals were mined in the Democratic Republic of Congo. Those present started to laugh. They really thought my colleagues were joking. Being responsible for the production itself was okay, but surely HP or Dell couldn’t be held accountable for mining in Africa as well?’
Of course, it wasn’t a joke. ‘The amounts of these metals that are used by the electronics industry for production makes them responsible. And after years of pushing them to see that, they now can see it for themselves.’
Change doesn’t happen overnight, says the level-headed Gijsbertsen. A former high-level government representative once said that the time that elapses between the moment something hits the political agenda in The Hague and the actual policy change is approximately fifteen years. ‘And it takes another two years to be able to get our items on the political agenda.’ He smiles, ‘So in the seventeen years that I have worked at SOMO, I have actually just finished one cycle of policy change.’
Fortunately, other changes have also taken place during this time, for example, the way we view tax avoidance by multinationals. Gijsbertsen perks up when he starts talking about it. In 2006, SOMO published the report ‘Nederland Belastingparadijs?’ [Is the Netherlands a tax paradise? (in Dutch only)]. ‘In it, we mapped out the social consequences of large-scale tax avoidance. And that wasn’t easy on everyone. After publication of the report, SOMO was summoned to the Dutch Ministry of Finance, where we received a thorough dressing down from a senior official. It was pretty intense,’ says Gijsbertsen. At the time, the Dutch Minister Gerrit Zalm (Finance) found the report quite disturbing because five parties in the Dutch Upper House had asked critical questions about our investigation. And those were certainly not just from left-wing parties.’ But Parliament took a different view and even passed a motion stating that the Netherlands was not a tax haven.
‘People weren’t ready for it yet,’ Gijsbertsen says now. ‘The Christian Democrat (CDA) and Liberal (VVD) parties considered favourable arrangements for companies as necessary. Otherwise they would leave our country, we would lose a lot of jobs and that would cost even more money, they argued. But that really is nonsense. Quite apart from that, however, developing countries and other EU Member States where normal tax rules do apply are the main victims of these arrangements.’
The turning point in the debate came when the government wanted to abolish the dividend tax in 2017. SOMO tackled this issue together with other organisations within the Tax Justice Network. The government’s plans were explored, the possible consequences examined and a new report was drawn up.
Gijsbertsen: ‘To our surprise, the plan turned out to be even more outrageous than we already had suspected. The business community would receive a very nice gift from the government without having to do anything concrete in return. We knew from information we had previously obtained from an FOI request that Ministry of Finance officials did not think it was a good idea at all. It would cost the government EUR 1.6 billion a year, and would mainly benefit foreign shareholders, while the domestic budget would bear the burden. In short, any argument in favour of abolishing the dividend tax could be dismissed based on this knowledge. In the meantime, we also uncovered the construction that had prevented Shell from paying dividend tax for years.’
Prime Minister Rutte could only argue that he felt support for abolishing the dividend tax in ‘every fibre of his body’. It was only when Unilever decided not to locate its head office in Rotterdam after all that the government decided to cancel its plans.
So the dividend tax remained. For a time, the VVD wanted to reduce the profit tax instead, but there was no majority for that either. Gijsbertsen: ‘Parties across the whole political spectrum increasingly recognise that it may not be a good thing after all to keep blindly giving the corporate community tax gifts. During this year’s general politic debate, Dutch politicians admitted that they may have gone too far in allowing the market so much control.
Gijsbertsen would like to go even further. He thinks the time has come to use strict legislation to curb multinationals. Many politicians and other policymakers too often assume that companies will change of their own accord, for example through voluntary agreements. But looking back over the past fifteen years, we can only conclude that voluntary initiatives are not enough.
Gijsbertsen cites child labour as an example. ‘Look,’ he says, ‘when it comes to our safety, we set high standards in law. For example, we definitely do not want toys to contain chemicals that could make children sick, and an enormous amount of supply chain management is involved: before such a product reaches the stores, we want to be sure that it is safe for our children. So why would we accept these same toys to be made by children abroad?
Gijsbertsen points to the Van Laar Law, adopted last year in the Netherlands, which asks companies to prevent child labour. ‘But that doesn’t mean we are there yet,’ he says. ‘In order to prevent other abuses as well, broader due diligence legislation is needed. Other European countries also have such laws, or are in the process of passing them.’
‘Human rights due diligence must be mandatory,’ continues Gijsbertsen. ‘Responsibility for corporate abuse will not come from the multinationals themselves. They must be held accountable for human rights abuses. In order to achieve this, a regulator must be set up with the same authority and sanctioning abilities as, for example, the Dutch Authority for the Financial Markets (AFM) or the Consumer and Market Authority.’
‘And perhaps we also need to scale down the size of companies,’ he adds after a moment of reflection. ‘The unprecedented political power that a number of large multinationals exercise often stands in the way of sustainability solutions. And their powerful position in production chains creates such imbalances that a fair distribution of revenues often turns out to be impossible. Small suppliers and farmers simply do not have any negotiating power. We can prevent this through having smaller multinationals.’
Speaking of small scale: a few years ago SOMO also consciously chose not to expand any further. ‘Since my appointment, the organisation has been growing little by little,’ says Gijsbertsen. ‘Every year we acquired new clients for research assignments. Funding was also gradually extended, for example from the EU. We were able to hire new staff – a few new employees every time.’ That is – until a few years ago. Since then, the organisation has decided to stay its same size. Currently, SOMO has 44 employees.
Should his successor again opt for a growth model? ‘Maybe’, says Gijsbertsen. ‘It is also an option for SOMO to operate more internationally.’
But what the organisation should do much more, in his opinion, is to expose what is wrong with large multinationals structurally and how they exercise their power. ‘At the moment we often focus on isolated abuses and casuistry,’ he says. ‘We show, for example, that a garment is made under poor labour conditions or that a bank is involved in money laundering, which ultimately affects many citizens. This is important work and we must continue to do it. But SOMO should also show the whole picture. There is often much more wrong at a multinational than just that one abuse.’
He mentions a recent SOMO report on a pharmaceutical company that avoids paying taxes. The tax researcher decided to work together with a colleague who had been focusing on the pharmaceutical industry for some time. Together they were able to give a much broader picture: the company not only paid too little in taxes, but it also benefitted from public investments in pharmaceutical research, and charged far too high prices for its medicines. In short: there were actually three problems.
Companies are often guilty of more than just one offence, says Gijsbertsen. ‘They exploit workers, manipulate data, intimidate victims and have far too much influence on government policy. If you look at these things in isolation, they may not seem that bad. But if we map out the whole spectrum of abuses in our analyses, you see that it is actually worse than it seems. Then we can show that just tackling isolated incidents is not enough, but that something has to change at the root.
Perhaps it is partly his ‘fault’ that SOMO has not done this enough so far, he acknowledges. ‘I have led the organisation on a project basis. That has had many advantages. We were very flexible. But that sometimes has limited our attention and fragmented it. I’m not saying that my approach was wrong. But I think it’s a good thing if a new director approaches this in a different way. We are experts in the economic field, in human rights, in value chains and in the extraction of raw materials. SOMO is truly unique in this respect. If these different areas of expertise are brought together, the organisation can really take big steps and hopefully have even more impact.’
And what about his own future? Gijsbertsen smiles into the webcam. He doesn’t know yet. He has had some job interviews, he reveals. But nothing is definite yet. Of course, he will miss SOMO dearly, Gijsbertsen continues. His work was ‘addictive fun’. What he was able to achieve with 44 people in a small office in Amsterdam still astonishes him. Research is an essential instrument for a healthy democracy and a way to keep power in check. ‘I hope to be able to do the same in a new job,’ he says. His personal mission will also remain the same, Gijsbertsen promises. ‘After SOMO, too, I still want to contribute to efforts to stop companies from privatising their gains but making society pay for their losses.