Mitsubishi: An Early Proponent Of Corporate Social Responsibility

Monday, May 1, 2006 - 00:00

The Editor interviews James E. Brumm, Executive Vice President and General Counsel, Mitsubishi International Corporation.

Editor: Mr. Brumm, would you tell our readers something about your background and professional experience?

Brumm: I graduated from Columbia Law School in 1968 and joined Reid & Priest in New York. After working on general corporate and finance matters during my first year, I began to work for Fred Tsuchida, who represented Japanese corporations. After four years I left the firm and, following three months of political campaign volunteer work and nine months traveling in a van through Europe, I went to work at Logan, Takashima & Nemoto in Tokyo, where I was engaged in a variety of international and maritime work. I was then recruited by Mitsubishi to be their first in-house counsel in New York. Following stints in New York, Tokyo and Australia, I became General Counsel at Mitsubishi International Corporation (MIC) in New York, which is the North American wholly-owned subsidiary of Mitsubishi Corporation. In 1991 I became Executive Vice President of MIC, with responsibility for corporate communications and legal matters. In 1995 I became a director of the parent corporation and served on its board for seven years.

Editor: What are the core businesses of Mitsubishi International Corporation?

Brumm: We are a general trading and investment company, something that is unique to Japan. We started out in 1918 as the overseas purchasing and distribution arm for other Mitsubishi companies in Japan. At the end of World War II Mitsubishi was broken up, and when our company was re-established it was engaged in importing and exporting. We then began to take equity positions in companies and projects and to carry on a variety of operating activities through joint ventures. Today we are a conglomerate. We have a Chemicals Group which not only trades in chemical products but also owns a number of companies in that sector. There is a Machinery Group which sells heavy machinery, builds IPPs and has interests in the automotive sector. We have an Energy Group that trades in oil and owns equity in a number of liquefied natural gas (LNG) projects around the world. We have a Living Essentials Group - primarily food - which trades in grain commodities and, among other things, owns half of Kentucky Fried Chicken in Japan. A Business Innovation Group looks at new technologies. Finally, we have a Metals Group that owns interests in copper, coking coal, aluminum and other metals.

Editor: Please tell us about the responsibilities of Executive Vice President and General Counsel.

Brumm: I have been with the company since 1977. During the early years, I occupied what was purely a legal position. In 1987, when I became General Counsel, I became the principal legal advisor to the senior management of MIC and supervisor of the legal staff. When I was promoted to the office of Executive Vice President I became somewhat divorced from the day-to-day legal work, although I do get involved in large projects, major litigation and important matters requiring legal advice.

Editor: What have been the high points of a career now approaching 30 years?

Brumm: Being involved in a Japanese company as a non-Japanese has been an ongoing high point. It has given me a different perspective on a wide variety of corporate issues and has been an underlying theme over the course of my career. Working in a multicultural environment has enabled me to experience different ways in which to approach a variety of issues and, perhaps, to serve as a bridge in helping different cultures work together in resolving those issues.

Perhaps the most professionally challenging period of my career involved a year in Australia negotiating a seven-party LNG joint venture. That was a 10 billion dollar project and involved a number of complicated issues. It also involved, in addition to Mitsubishi, the participation of Mitsui, Shell, BP, BHP, Woodside, and Chevron, people from different countries and cultures. That was a fascinating time, and it helped that I had the luxury of being focused on a single transaction rather than on several at once.

Another high point was working on a project in Venezuela for several years. During that time I once shared a platform with President Chavez and even managed to get a few words across to the audience.

Finally, being deeply involved in environmental and corporate social responsibility issues over the last fifteen years has been the most rewarding part of my career.

Editor: Having joined a Japanese enterprise almost 30 years ago, you have witnessed an emerging world economy from the front lines. Would you give us your thoughts on globalization?

Brumm: As a trading company we depend on being able to invest around the world. We have to worry about trade barriers. And the rule of law - or the absence thereof - is an important consideration as we seek out places with a stable investment climate. To the extent that globalization has reduced trade barriers and furthered the rule of law, we have been the beneficiaries of what now appears to be an irreversible process.

Having said that, I must acknowledge the contentious issues before us. Technology, corporate interrelationships and the increasing integration of world business all combine to accelerate the trend toward globalization. The real question, however, is how globalization will manifest itself. Will it reflect a recognition of the stewardship responsibilities we must exercise if the planet is to survive? Will it drive the environmental and human rights agendas, or will it be driven by an overriding demand for profits? What role will China and India play in the process of globalization?

Editor: Mitsubishi's involvement in corporate social responsibility undertakings goes back many years. What is the origin of that involvement?

Brumm: Japanese business society is paternalistic and group-driven, and that provides a kind of framework for the corporate social responsibility concept. In addition to having developed CSR principles in the 1920s, the reason that Mitsubishi is ahead of a number of other Japanese companies in the area of corporate social responsibility is a result of having been targeted early on by NGOs. In 1989 the Rainforest Action Network ran a large full-page ad in a number of leading publications that included pictures of people - including the then President and CEO of Mitsubishi Corporation - alleged to have harmed the rainforest. That got our attention. Many of the claims against us were groundless, but the ad caused us to examine our practices. We went from reacting to charges like this to reaching out and taking proactive positions on the issues. That entailed developing an environmental and social responsibility department, adopting an environmental charter, screening our investments and financial commitments to determine their environmental and social impact, and the like.

With respect to my personal involvement, I am on the governing boards of the American Bird Conservancy and Forest Trends, among other organizations, and I have become friends with a number of leading environmentalists, including the heads of the Rainforest Action Network and Greenpeace Russia.

Editor: I understand that you are President of the MIC Foundation. How does the Foundation fit into this agenda?

Brumm: The MIC Foundation is the corporate foundation of Mitsubishi International Corporation and has a focus on conservation and environmental projects in the Americas. Through the American Bird Conservancy, for example, we have made grants to enable a local environmental organization, Pro Natura, to purchase shore bird protection areas in Mexico. In Brazil and Mexico we are looking at ways in which indigenous and other poor communities can develop a stake in preserving forest areas. At the moment, economic value in many cases appears to favor cutting down the forest, but there are ways - such as eco-tourism or carbon emission credits - in which the local community can benefit economically from preserving it. We are funding programs which attempt to identify realistic and viable alternatives to the destruction of forests by the development of payments for ecosystem services (PES).

Editor: You recently returned from Budapest and the IBA's International Corporate Counsel Conference, where you moderated a discussion on corporate social responsibility. What are the key issues in this area?

Brumm: There are several themes. One has to do with whether the company truly embraces the concept of corporate social responsibility or whether it is merely "window dressing." Small enterprises do not, in all probability, generally engage in CSR. Large companies do pay attention, however, because reputation is associated with corporate responsibility and that connects to value. A related theme has to do with how corporate social responsibility, even if embraced by senior management, becomes embedded in a company's culture. In the ideal situation, everyone within the company - from the executive offices down to the shop floor - considers the environmental and social aspects of what they are doing.

Another major theme concerns whether corporate social responsibility should be mandatory or voluntary. The International Corporate Counsel Conference discussed the OECD Guidelines for Multinational Enterprises, which are voluntary at the moment. There is a state contact structure and a complaint resolution mechanism for companies in the OECD countries, but the entire system is voluntary. At the other extreme, there are draft UN Norms on the Responsibilities of Transnational Corporations, which, if adopted, could translate into a right to reparations where the company does not abide by the normative human rights and environmental provisions.

My view of corporate social responsibility is that it deals with certain subject matters related to companies: the environment, labor conditions, human rights, bribery and corruption, consumer protection, and the like. In all of these areas it is important to analyze the existing legal requirements and the best practices standards that exceed those requirements, and then to determine to what extent company obligations should be mandatory and to what extent they should be voluntary. I believe that it is incumbent on the company to commit itself to more than the legal requirements.

Editor: I think our readers would be interested in hearing your thoughts about the connection between corporate social responsibility and the morale of a company's work force.

Brumm: There are many factors that go into why a person joins a particular company and then chooses to stay. Some factors are measurable - salary, opportunities for promotion, and so on - but others are more difficult to measure. Our company is engaged with the Earthwatch Institute, which offers marvelous volunteer environmental programs throughout the world, and each year we pay for a number of our people to participate in an Earthwatch trip. These are life transforming experiences - I have been on one in Namibia with my wife and can attest to that - and at the very least they engender a real appreciation for the environment and what can be done to support it. I think that the people who are privileged to have such an experience feel not only gratitude to the company for the opportunity but also a sense of identification with the values that the company is attempting to project. This certainly contributes to workforce morale.

Along these lines, our parent company recently set up a scientific project dealing with the impact of global warming on coral reefs in three locations around the world, the Seychelles islands, the Northwest Hawaiian Islands and Okinawa. Beginning this year, we will select a number of our people to participate in the volunteer programs associated with these projects, and I am sure the enthusiasm they will bring back to the company will be infectious. Clearly there is a connection between this kind of activity and the pride people take in being part of a company that actively supports it.

Needless to say, support for corporate social responsibility exists at the top - our President in Japan, Mr. Kojima, has embraced it - and our stakeholders appear to be in favor as well. The identification between Mitsubishi and corporate social responsibility is serving us well.