I was struck on reading about a Scientific American study that rates China's Three Gorges dam as one of the world's 10 best renewables projects.

I have no doubt that in terms of reduced-CO2 emitting energy sources this project deserves the accolade. But the Three Gorges project is infamous for the displacement of over 4 million people, as well as other forms of environmental damage.

There was perhaps no reason why the Three Gorges project should inevitably have led to rights violations. Perhaps it could have been pursued more slowly and on a slightly less ambitous scale and left rights intact. I don't know.

But clearly hard choices between different people's rights are going to have to be made and their conclusion pushed through with vigour. The not-in-my-back-yard attitude that is slowing installation of wind turbines across Europe has to be set against the fact that some 20 million people worldwide have been displaced from their homes by action of climate change. That - as the article points out - is slightly less than the population of Australia.

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Having spent a few years as a compliance professional in the financial sector, I was intrigued to read about the detail of the Pfizer settlement.

The drug company Pfizer, you'll recall, has just settled with the US Department of Justice for a total financial penalty of $2.3 billion - the largest ever. The allegations against Pfizer concerned illegal marketing of painkiller Bextra and several other drugs.

What did not come through in the original reports was that in one part of the settlement, the inspector general  of the US Department of Health and Human Services  (HHS) required Pfizer to change the reporting line of the company's compliance department from the General Counsel to the Chief Executive. 

In-house compliance professionals are often in a bit of a bind. They are supposed to advise the business on how it needs to conduct itself if it is to remain within the letter of the regulations. Their reporting line, however, is often to someone with a strong personal interest in the short-term financial success of the business development to which the advice relates. Although compliance departments inevitably attract the label of "business prevention", their reporting lines (and remuneration and retention prospects) in fact incentivise them to bend over backward to accommodate the concerns of their superior. So much for independence.

In Pfizer's case compliance reported to the general counsel. As Lewis Morris, general counsel for the inspector-general's office put it:

"The lawyers tell you whether you can do something, and compliance tells you whether you should ... We think upper management should hear both arguments."

If that is what the lawyers are there to do, then they will be rewarded on the basis of their overall contribution to business development. Compliance reporting into that setup risk ending up singing the same tune, or leaving.

I predict regulators will become more prescriptive about the precise reporting lines of compliance professionals. I am not sure, though, that instituting a reporting line to the chief executive is the most effective course though. Although the CEO has a group-wide interest and won't want the actions of a particular division to threaten the overall reputation of the group, the CEO is still guided by short-term financial incentives. A better solution might be a reporting line into the audit committee of the board, which should be majority comprised of independent non-executives.

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This is encouraging: the UN Principles for Responsible Investment has taken a stand. 

The UN PRI - as it is known - is an initiative based on a set of principles for responsible investment. Asset managers and major investment institutions (including pension funds, insurers) who sign up to the principles commit to their implementation over time. There are currently 573 signatories.

Each year signatories are supposed to evidence their commitment by completing an annual questionnaire about their progress on implementation. Apparently five did not do so, and so they have been chucked out.

According to Environmental Finance:

The five that failed to respond this year were: DESBAN, a supplementary pension plan for employees of Brazil's Development Bank of Minas Gerais; New York-based Christopher Reynolds Foundation; Australia's Foresters Community Finance; and South African firms Oasis Group Holdings and Trinity Holdings.

Furthermore, three institutions voluntarily left the initiative: Mennonite Mutual Aid, Rapaki Property Group and the New York State Teachers' Retirement System (NYSTRS). The latter is one of the 10 largest pension funds in the US, with almost $100 billion under management.

It took a long time and much criticism before the sister initiative (or is that daddy?) - the UN Global Compact - began to get aggressive with signatories who failed to do anything at all to honor their commitment. Looks like the UN PRI has learnt from that lesson.

The acid test, of course, will be whether they will ever develop a concept of "sufficient progress" towards implementation of the principles. The principles themselves are pretty vague, but there is enough there to make it clear when a signatory is free-riding, provided someone is verifying their annual reports for accuracy.

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Australian investor activists are urging investors to look beyond the headline cash figure when deciding whether a firm is tying pay to performance.

Many companies have said they are freezing or cutting executive compensation in response to the downturn. The devil amy remain in variable pay elements such as short term bonuses and share options.

The real levels of compensation may not be known until next year's report and accounts. The focus now should be on ensuring a tight definition of performance to which executives can be held.

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Investor groups have asked the US Securities and Exchange Commission to make corporations disclose risks related to social and environmental risks.

In a letter signed by some of the country's biggest pension funds, the group called on the regulator to issue guidance on materiality as it relates to climate change risks, and to enforce existing requirements related to the disclosure of climate and other risks.

The SEC has often been criticized in recent years for failing to enforce rules that should result in corporations disclosing material environmental risks.

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At the end of 2003 Norway adopted a rule that boards of public companies must be at least 40% composed of women. So what happened next?

Firstly, Norway has the highest female board representation of any country in the world.

But the quality of corporate governance appears also to have changed. One of the most striking observations recounted in FT analysis is the story of how female directors on Statoil's board asked questions about corruption that led to the resignation of the company's chairman and CEO.

"Women are more willing to ask questions without regard to whether they may be perceived as stupid or awkward questions" explains Grace Reksten Skaugen, one of the country’s most prominent directors, in the article.

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In a bizarre move, British pharmaceuticals and beauty products group Alliance Boots has withdrawn from the Ethical Trading Initiative.

The ETI is a retail industry-recognized commitment to ethical trading standards designed to ban suppliers from using child or forced labour.

There is no press release on the Boots website explaining the move. The company's 2007 corporate social responsibility report made it clear that the company was working to expand its supplier reviews in accordance with ETI standards. The report that came out a year later did not mention the ETI at all.

Boots, previously a FTSE 100 company, was bought by private equity firm Kohlberg Kravis Roberts in April 2007. Union groups and campaigners are suggesting that the withdrawal from the ETI commitment has been driven by its new owners, a suggestion that Boots has apparently denied. Earlier this month KKR posted a $1.19bn (£722m) loss for 2008.

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If you smoke and get ill or die, insurers pay. Could that explain their sizeable investments in tobacco stocks? Talk about Benson & Hedging your bets!

Harvard's Dr. Wesley Boyd asks: do these people have the moral authority to lobby on healthcare reform?

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Following an investor revolt over executive pay at the oil company's annual meeting, board members are setting out on a charm offensive.

A "three strand" roadshow of directors and top executives is planned to rebuild relationships with major investors after shareholders voted 60% against the board's remuneration report. The revolt concerned the payment of £3.6 million in share awards to five top executives even though the group failed to meet the targets that would trigger such payments.

The Guardian report quotes fund managers complaining that companies have not woken up to the realities of the aftermath of the crisis. Fund managers are likely to remain activist for the foreseeable future having come in for criticism for being asleep on the job (as owners) while the crisis was taking shape.

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The latest annual Ivey/Jantzi report on the state of corporate social responsibility in Canada finds some improvement on last year.

From the press release:

"* Banks continue to top the charts in the corporate governance category, while insurance companies continue a two-year decline

* Despite the attention to diversity initiatives in the past few years, the ratings show that firms are still struggling with this aspect of CSR

* Human rights scores have improved slightly. This increase was driven by more attention to policies and reporting"

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