Inequality in the World and the Reduction of Labor Income

The world is facing its biggest financial and economic challenges since World War II. The benefits of growth for the poor can erode if income distribution worsens (World ^{Bank, 2008}). Since 2010, 1% of the richest individuals in the world have increased their share of wealth globally. In 2014, they reached 48%, with virtually all the 52% in the hands of the richest 20% of the world’s population, with the remaining 80% holding only 5.5% of the world’s wealth. The projection is that, in keeping with the trend, by 2020 the richest 1% of the population will own more than 54% of the world’s wealth, while the remaining 99% will have to compete for less than 46% (Oxfam, 2015). The overall income inequality distribution is also very high, fluctuating around 0.7 in the Gini Coefficient and still with a tendency to continue to accentuate (^{Milanovic, 2013}). For comparison purposes, the Gini Index for a country considered relatively equitable in relative terms as Norway was 0.226 in 2012. Meanwhile, South Africa showed an index of 0.630 in 2009 and was among the most unequal countries in the world. Spain, in turn, is the fifth country in the EU-28 with the highest level of economic inequality (6.3), meaning that the income of Spain’s richest 20% was 6.3 times as much as that of the poorest 20%. In 2004, the value of such indicators in Spain was 5.5%, which reflects the way the income has been distributed in that country.

The world’s elite group (64.3% of the wealthiest individuals) lives almost exclusively in North America, Western Europe, and the wealthiest countries in Asia and the Pacific, with Japan representing the largest share. The poorest are in China, Brazil, Africa, and India (with 0.9% of the total world wealth for 15.4% of the world’s population). Among the 10% of the poorest people in the world, 26.5% are in India, 6.4% in China, and 2.2% in Brazil. The United States has only 0.2% of its population in that group, with a total wealth of less than US$ 178 (^{Davies et al., 2008}).

The main source of income for households is labor income, which sustains the greater part of the world’s population. However, labor incomes have been decreasing steadily over time. The share of wages in Europe’s GDP dropped from an average of 75.5% in the period 1971-1980 to 69.6% in 1995. In Spain, wages at the end of 2006 represented 46.4% of the GDP, 3.2 points less than 10 years ago, causing salaries to be at historic lows (ILO, 2009). Since the 1980s, most countries have experienced a downward trend in the share of labor income, which means that a smaller proportion of annual income has been earmarked for the remuneration of the workforce and a higher proportion of capital income (ILO, 2013). Also, there is a precarious labor market, which has spread over the last 30 years in developed countries, impregnating different employment situations with insecurity and uncertainty, degradation of working conditions, and problems of reduced social protection (^{Cano, 2007}). At the global level, employment rate trends (employment-population ratio), which indicate a country’s ability to generate employment, show that economies are simply not generating enough employment opportunities to absorb the increasing working-age population growth (^{Ortiz and Cummins, 2012}).

Among those living in poverty, the numbers of adult women and girls are alarming. Approximately half of the world’s young girls and young women live in poverty on less than $2 a day (^{Ortiz and Cummins, 2012}). More than one woman out of four is employed on low wages, while the figure does not exceed 6% among male workers (^{Concialdi, 2001}). On the other hand, billionaires are a group composed mainly of men: 90% (^{Hardoon, 2015}). According to ^{Torres-López (2009}), the parties that act in the labor market are in very unequal conditions. The hiring of wage labor does not occur by a desire for cooperation in production processes but to obtain benefits from its use. This implies that work has become a commodity from which to obtain the maximum yield.

^{Piketty (2014}) points out that, since capital incomes are higher in a small part of the population, capitalists or owners of capital tend to accumulate more wealth over time. Thus, the trend towards inequality of capital income is confirmed, so that the capital-labor ratio should be brought to the fore in the analysis of CSR.

All this shows that the problem of inequality is first observed in the distribution of primary incomes, in which enterprises are involved not only because of their natural condition as coordinators of the production process but mainly because of the deliberate practices of concentration of income. However, no CSR reference document mentions this. The responsibility of companies in the process of distribution of income is ignored leading to the increasing wealth-concentrating momentum of these agents. This occurs, for example, in the renewed EU Strategy for 2011-2014 on Corporate Social Responsibility (European Commission, 2011), which states the objective of maximizing the value creation for its owners/shareholders and, although it incorporates the word shared, it makes no mention of the ways to share the value created.

Reduction of State Participation

The insufficiency or lack of labor income must be complemented by the redistributive action of the state. Public interventions redefine the distribution generated by the market through social benefits - mechanisms that have a direct impact on the distribution of available income of households; also, through mechanisms that can be considered indirect, such as public spending on education and health that do not affect current household disposable income, but have a very relevant impact, insofar as they promote human capacities and facilitate future insertion in the labor market (ECLAC, 2015).

However, almost 80% of the world’s population does not have comprehensive social protection such as pensions and unemployment insurance and almost 800 million people are at risk of returning to poverty in a setback. The inadequacy of social benefits tends to worsen, even in Europe (UNDP, 2014). In 158 countries, since 2010, governments have been adopting austerity measures, with cuts in public spending on social programs, transfers to families, wages, social security and public pensions (^{Ortiz and Cummins 2012}). The policies of austerity, while incurring in the aggravation of social inequality, are also a consequence of it. According to UNDP (2014), extreme economic inequalities inevitably lead to political inequality, the result of which is that governments are less likely to provide social protection systems that can safeguard the most disadvantaged from the consequences of major crises.

In addition to effective action in the redistribution and provision of services essential to welfare, the state is responsible for regulating the actions of economic agents. Regulation of the negotiation between workers and companies, as well as the maintenance of minimum wage standards, are relevant measures to help in the balance of forces in the market and contribute to diminishing disparities. However, according to ^{Santos (2001}), the effects of such relations of exploitation inequality and poverty, are perpetuated and intensified by the absence of effective action by the state, not only in the redistribution of wealth generated in the economy but mainly in the regulation of the actions of economic agents to prevent such exploitation.

According to ^{Roberts and Dörrenbächer (2016}), national and international regulations as well as institutional contexts are vital factors influencing MNE's activities. However, the international capitalism model has weakened the state performance in its role in the national regulatory context, resulting, in the case of labor, in the erosion of protection, increasing job insecurity and declining working conditions.

^{Banerjee (2014}) claimed that for CSR to produce social outcomes that are not necessarily constrained by corporate rationality there needs to be a change in the normative framework of public decision-making at the institutional level.

Globalization of Companies and Social Impacts

The process of globalization, according to ^{Neffa (1998}), has progressed in three stages: in the first one, international exchanges developed, but under the control of states, which wished to direct, regulate and control trade to prevent internal imbalances. It ends after World War II. The second stage is characterized by the growing influence of MNEs that operated worldwide and developed the cycle of their products, taking advantage of the resources of each country where they were implemented, mainly between the second postwar period and the early years of the crisis of the 1970s. MNEs make decisions autonomously concerning national states, which consequently lose much of their economic sovereignty. In the third stage, which has run from the mid-eighties to the present day, globalization in the financial sector is consolidated, using new information technologies, while at the same time taking advantage of the process of deregulation of these markets.

The liberalization of international trade is the key component of the globalization model, the most important progress being made through rounds under the General Agreement on Tariffs and Trade (GATT), from 1948 to 1994 and then in the World Trade Organization (WTO), whose main function is to ensure that trade takes place in the most fluid, predictable and free way possible (WTO, 2013).

In trade negotiations taking place within the WTO, treaties are produced, which in many cases go against the interests of peripheral countries, such as the imposition of much larger tariffs - four times as high on average - on developing countries than on the developed ones, and provide massive subsidies to agriculture to the latter, impacting even the primary sector, the main area of economic activity in poor countries (^{Klein and Tokman, 2000}). Unequal transactions result in even greater disparities in wealth and income among countries.

Developed countries offer great business opportunities for large companies from developed market economies. With this, MNEs do not passively adapt to such institutional environments but are often powerful actors that seek to change and créate institutional environments in emerging markets. They do this through the management of institutional settings that could systematically diverge, depending on the home-country institutional contexts of these companies (^{Becker-Ritterspach, Lange, and BeckerRitterspach, 2017}). The opening of markets facilitated the pressures for the sale of public companies and their subsequent privatizations, which has contributed strongly to increase the presence of MNEs in underdeveloped countries since their purchasers are mainly international capitalists. In this way, globalization is essentially a mechanism for the expansion of large corporate groups for the various economies, where they can obtain advantages and maximize their profitability, and the flexibility to continue to move their operations in search of increasing competitive advantages.

The process of globalization, privatization, and deregulation have had strong effects on social stratification. The volatility associated with the functioning of the open economy added instability mainly to jobs and income because of the impact of policies - the precariousness of working conditions (lack of contracts or social insurance, etc.), outsourcing and computerization, as well as unemployment (^{Klein and Tokman, 2000}). At present, concerns about employment and social exclusion are not ascribed to developing countries but are growing even in the most developed economies of the world.

MNEs are the main players in the globalized economy and have had enormous advantages in the triple process of globalization, privatization, and deregulation in the international arena. To ^{Śliwa (2007}), the language of international corporate strategies and competitive advantages masks issues of poverty and economic exclusion, instead of addressing them from ethics and social responsibility.

The evolution of MNEs over the years of postwar economic growth is due to the interest in controlling the production and markets of raw materials, taking advantage of the variation in the prices of the different currencies and the lower salaries in the capitalist periphery and has been, to a large extent, the cause of the internationalization of economic relations (^{Torres-López, 2009}).

After all, MNEs have proved to be the main beneficiaries of the neoliberal globalization process, which brings in return the universalization of economic and social problems (^{Hernánez Zubizarreta & Ramiro, 2009}). The opening of local markets has guaranteed large corporate groups easy access to the markets of poor countries. According to ^{Stiglitz (2006}), when defending their economic interests in the WTO, the USA, and the EU guarantee, before all else, a space for the expansion of MNEs. The large multinational groups have been the major beneficiaries of the privatization process, whose advantages are initiated by the acquisition value of privatized companies, lower than the real value of their assets, in addition to the fact of being strategic sectors such as electricity, mining, and telecommunications. Deregulation has meant wide freedom to exercise their production strategies to control their markets for raw materials and labor anywhere in the world, insofar as it has reduced protection and state intervention in trade, finance, and labor markets.

Companies in the ‘triad’ or the ‘triangle’ of EU/US/ Japan relations account for approximately 75% of global economic activity. Through a committee of 13 large MNEs, including DuPont, Monsanto, and General Motors, they are also responsible for the design and implementation of the TRIPS Agreement (Aspects Relating to Trade in Intellectual Property Rights), which grants companies the right to protect their intellectual property in all WTO member countries. This measure is of great benefit to companies in developed countries, while at the same time severely damaging the economies of developing countries, forcing market dependence on what is produced by MNEs protected by the intellectual property law.

One of the advantages is the freedom of concentration of capital in which an ever-smaller number of large corporations is formed through mergers and acquisitions, in which a concentration of capital is achieved, which surpasses the capacities and barriers of national borders and gives them great power of control. Most of the economic branches are controlled by global oligopolies composed of less than a hundred corporations.

^{Vitali et al. (2011}) found a nucleus of 1,318 highly interconnected companies that hold most of the shares of the leading companies in the world (the blue chips). These entities account for 95% of the sales revenue of all MNEs and the 737 largest shareholders (0.123% of the total), who have the power to collectively control 80% of the value of MNEs. Of this nucleus, 147 corporations (less than 1%) control 40% of the total wealth of the entire network. Most are US and UK financial institutions, including Barclays PLC, JP Morgan Chase & Co Merrill Lynch & Co., Inc., the Goldman Sachs Group, Inc., Morgan Stanley, Bank of America Corporation, and Lloyds TSB Group PLC. Control is exercised through the chain of shareholder relationships, where a shareholder has control of a company, which controls another company and so on, being a disproportionate power over the global economy that may represent a significant systemic risk. Between 2013 and 2014, the wealth accumulated by billionaires in the financial sector rose from 1.01 trillion to 1.16 trillion dollars in just one year, a 15% increase, according to the ranking of Forbes 2013 (Oxfam, 2015).

The MNEs essence treats the various national markets as if they were one. Their management responds to a single strategy, neither distinguishing between different productive establishments nor identifying with the interests of a single country, but they try to optimize their results worldwide (^{Grosse and Behrman, 1992}). A new managerial stratum has been generated, which tends to apply an international standard to labor relations, ignoring national and local characteristics (^{Klein and Tokman, 2000}).

Also, the lack of identification with local interests may lead to conflicts with the objectives of national policies. The conflict consists of the fact that the well-being of developing countries, rich in resources, depends on their obtaining much in return for their resources; and the well-being of wealthy corporations of the advanced industrial nations depends on whether they cost them little (^{Stiglitz, 2006}).

These organizations act beyond the internal management of their organizations and seek to interfere in political decisions, both in the international arena and at the internal level of countries. They are political institutions maintaining political relations with civil society (Strange 1996). Political action often occurs in a hidden way, by direct access to people at the highest levels of political and administrative power with considerable success (^{Sklair, 1998}). Efforts are aimed at influencing the conduct of government policies and regulatory measures of business conduct in general, with the common goal of achieving as high deregulation as possible, defining the conditions of their performance in the country where they are settled, and guaranteeing access to the markets of the underdeveloped countries, through lobbying, bribery, and destination of resources to electoral campaigns. An example of the relationship between government activity and the interests of large corporations (Rothkopf, 2008). is the World Economic Forum (Forum of Davos), a private foundation created in 1971, which meets annually at the summit of the most powerful political leaders and entrepreneurs of the world.

The power of pressure groups and the effectiveness of lobbies are defined not only by financial capacity but also by social reputation. The assessment made by the social body of that group management of the different conflicts or episodes in which it acts is a relevant factor in the decision of politicians.

Cooperation initiatives and the development of reference documents and voluntary codes of conduct are also mechanisms for political action, as well as in the elaboration of standards formulated by organisms formed by MNEs to which all countries shall converge, intervening in the markets (also submitting to smaller companies). These standards, in general, aim to reduce the costs of operations, as well as to enable better control of transactions globally, as in the case of the International Financial Reporting Standards (IFRS).

In the displacement of production processes to less developed countries, companies generally go in search of labor and natural resources at a lower cost, less stringent legislation for worker protections and the environment, with lower levels of wages, poorer working conditions, less job security, and longer working hours about the country of origin. In Brazil, for example, in exchange for the establishment of a new automotive plant, state and municipal governments offer incentives that invariably include the donation of land for the installation of the plant; provision of infrastructure for the preparation of the area, including road and logistics infrastructure; rail links; and the development of port terminals; exemption from tax for periods of ten years; the granting of loans by the state at prices much lower than the market; and the creation of government financial and legal guarantees (Arbix, 2000).

For example, Wal-Mart employs 2.1 million workers, which is more than the total number of workers in Denmark, Finland, Ireland, and New Zealand (^{Antunes, 2013}, 33-48).

To move, companies usually receive subsidies and tax incentives from the governments of the destination countries. On the other hand, in their country of origin, where they reduce their activities or close their plants, they often leave social liabilities - many unemployed workers, contraction of the local economy and social stress. The number of workers in some of these MNEs is larger than the number of workers in several countries (^{Antunes, 2013}). Likewise, they seek to obtain advantages by trying to get the government to take care of part of the social benefits due, because of the breach of terminated employment contracts. The same may happen when MNEs close or reduce their activities in the destination country.

The investments they make tend to be temporary, since they remain strategically prepared to move if the situation that justified their investments in the country changes, favored by the context of free movement, with labor and market deregulation. Thus, the jobs created - the main advantage attributed to the permit of implantation of MNEs - have temporary characteristics, since their relocation is continuous. According to ^{Gitli (1997}), a specific form of transnational presence in the maquila. As the transfer of certain parts of the productive process from one country to another is a known fact, companies usually take advantage of the lower labor costs when they have a significant impact on the total costs of production. Reducing the workforce in corporate restructuring processes has become an important negotiating element for MNEs vis-àvis national policies, shaping the design of these companies (^{Ruesga & Bichara, 2008}).

During their activities, MNEs can also benefit from resource transfers through transfer prices. Some (in general their head offices) sell to others intermediate products at high prices, to be passed on to where smaller salaries allow an easier profit recovery, or where the losses of the subsidiary (not the group, which benefited from the high-selling price) are easier to compensate with the aid of subsidies from states seeking to secure employment, or even to make the accounting benefit arise where there is no taxation.

In these situations, there is a transfer of income from the public to the private sector and from the lowest-income people - whether they need transfers from the state, workers, or the society at large - to the people with the highest income, the capital owners. According to ^{Torres-López (2009}), the presence of MNEs in an economy is not always a favorable fact because multinational investments tend to be used to buy existing companies or to control the production of some goods that are competitive with their lines of production in other parts of the world, which does not necessarily imply an inflow of capital. Also, the benefits to which they give rise are usually repatriated or destined to funds of speculative capital or the investment property (real estate or non-productive assets). On the other hand, the greater presence of MNEs generally implies a greater marginal propensity to imports, which prevents them from being a stimulus factor for national intermediate sectors, being rather an important deindustrialization factor.

Corporate Social Responsibility and the Action of Multinational Enterprises

The concept of CSR has a multiplicity of reference documents for the promotion of company social responsibility. The relevance of the documents is configured not only to serve as a reference and justification to their actions but also for the capacity to legitimize the performance of companies that, in general, obtain a kind of approval and economic benefits from the association of their image to CSR. Among them, the document OECD Guidelines has the greatest impact as a general CSR reference for MNEs and are recommended as a benchmark in CSR in most of the latest documents, which have already emerged for the sake of intense globalization and the generalization of normative promotional instruments such as the UN Human Rights Guiding Principles (UN, 2011) and the renewed EU Strategy for 2011 2014 on Corporate Social Responsibility (European Commission, 2011), among others.

These guidelines form part of the OECD Declaration on International Investment and Multinational Enterprises related to foreign investments and present recommendations addressed to governments and companies from which we have derived some qualities, commented below.

Recommendations constitute minimally advisable precautions, such as those concerning corporate governance (Principle VI); human capital formation (Principle IV); dissemination among employees of corporate policies (Principle VIII); measures or strategies of management and positioning in the market (Principles III), or simply that companies do not evade compliance with the law in those aspects (Principles V and IX).

Throughout the document, concessions are also verified, on which companies can rely not to comply with the same guidelines, such as:

Principle II, on the respect for human rights of persons affected by their activities, contains a threefold ambiguity: it treats as a voluntary procedure the determinations of the UDHR, makes it acceptable that MNE activities affect people, and that respect for the human rights of the persons concerned conforms with the international obligations and commitments of the host government. However, many countries do not subscribe to international obligations or commitments, or simply do not comply with them. Moreover, as we have seen, the most representative document of Human Rights is the UDHR, but the rights provided for in this declaration do not have the same force as the determinations relating to international trade treaties.

Principles VII and X are the closest to the purpose of CSR. Nevertheless, about the conduct with partners and the supply chain, it recommends that companies encourage, where feasible, the application of principles of business conduct consistent with the Guidelines (Principle X), without any mention to social responsibility or even to ethics. In this sense, it is interesting to note that the term ethics does not appear in the writing of any of the principles.

Principle VII, Developing and implementing self-disciplinary practices and effective management systems that promote a relationship of mutual trust between companies and the societies in which they operate, is also presented in an undemanding and ambiguous way. However, the response given by companies to the demands and expectations of society can be based on a responsible position, as far as possible, or rather be achieved thanks to the quality of the organization’s communicative relations with its public, which seems to be what generally happens.

In all documents, as well as everything related to CSR, the disclosure of the information is voluntary, which compromises the presumption of transparency of the companies’ actions. Mainstream discourse in CSR has focused mainly on models of accountability that have privileged the legal fiction of the corporate status of MNEs, in other words, their legitimacy (^{Omoteso & Yusuf, 2017}).

But beyond that, the Guidelines provide for several restrictions on MNE's disclosures. About the disclosure of information to workers, they consider that:

The OECD document foresees that information about the procedures, facts, arguments, and opinions provided in the case denounced before the NCP (National Contact Points) will also be kept secret, as well as the result, under the vague justification of sometimes it is better not to divulge facts publicly (OECD, 2013).

In the Guidelines, there is no mention of differences in the levels of salaries between the subsidiary company in an underdeveloped country and its parent company in the country of origin, nor of the wage differences across the hierarchical levels of the organization. Also, MNEs are exempt from liability for labor abuses that may be committed by subcontractors (Principle X).

Most of the recommendations in the Guidelines are addressed to governments, which are the signatories and those who undertake the commitments since governments tend to harmonize with the interests and activities of MNEs.

The Guidelines state that public authorities should consult companies on the development and implementation of policies and regulations (one of them being the Guidelines themselves). The OECD itself affirms that the Guidelines are supported by a more effective implementation procedure, where governments bear ultimate responsibility for their implementation. It should be noted that the clear majority of MNEs come from developed OECD countries, operating in the least developed countries around the world.

The demand that governments should act in the interests of MNEs and their participation in the formulation of regulations is constant throughout the document. This is the case of the section on Science and Technology, which advocates the participation of MNEs in the formulation by the host country of frameworks conducive to the development of innovation systems or the determination not to question the comparative advantages of any country in which they invest.

In the OECD Guidelines, governments must adapt to international law the conditions under which MNEs operate in their respective jurisdictions; the recommendations are addressed to MNEs while being completely voluntary.

We understand that these determinations, in addition to the interference in government free action, constitute a protectionist clause in favor of MNEs. According to Sicsu et al. (2005), no country has thrived without a development project that responds to national interests and allows a sovereign insertion of the country in the international economy. This consists of a set of attitudes of governments and citizens to defend the capital and labor of their country in the world where companies compete for new markets and in which, beyond their borders, financial capital seeks to increase its profitability requiring lower risks.

Thus, the Guidelines, which are presented as recommendations led by the government to MNEs, have a rather inverse direction, seeking to ensure that governments align national interests with those of MNEs.

Such conditions intervene in the prerogative of states to introduce the differences that are necessary for the attainment of the general welfare, such as redistributive policies and the development of the internal market. Also, they constitute a form of expropriation of the power of countries to solve problems internally, by their internal regulation and their political, social, economic, and cultural context.

Acting governments are obliged to establish National Contact Points (NCPs), whose main function is to promote the application of the OECD Guidelines and to deal with problems arising from alleged non-compliance with the guidelines. NCPs are established as a unique and indispensable condition for managing conflicts of interest between MNEs and host countries, including trade union matters, with the power to present the final formulation for the conflict, always under the determinations of the Guidelines. They do not indicate any other instance for the resolution of the conflict. That determination conflicts with the ILO Conventions, which stipulate that national legislation ultimately regulates companies’ operations. NCPs may consist of a single person, such as a designated high official, that is, they are integrated into the structure of the State Administration.

In Spain, the NCPs are under the Secretariat of State for International Trade of the Ministry of Industry, Tourism, and Commerce. The Coordination of the NCPs of Brazil oversees the Secretary of International Affairs of the Ministry of Finance. For Hernández Zubizarreta (2009), governments have been more concerned about not bothering MNEs than about perfecting the operation of NCPs to protect the rights of the majority. Indeed, OECD Watch (2005) points out that the NCP processes have been unpredictable and unfair, as well as full of numerous deficiencies in their development, such as:

According to how NCPs are constituted, decisions in this forum will be biassed towards one or another stakeholder. Thus, the political aspect of the composition of these organizations that issue resolutions and criteria for assessing MNE's social responsibility in each country is a key element for the analysis of their conduct.

The rupture of the Fundão Dam in Mariana, Brazil

Samarco Corporation is a closed-capital joint-venture controlled in equal shares by two of the world’s largest mining companies, the Brazilian company Vale Corporation and the Anglo-Australian BHP Billiton. Founded in 1977, this company operates in the Brazilian mining sector through a concession transferred from Samitri (Sociedade Anônima Mineradora Trindade) to Samarco. The company has been playing a prominent role for a long time in the social and economic activities in the municipality of Mariana, in Minas Gerais, a state located in Southeastern Brazil.

Samarco’s main industrial activity is the manufacture of iron ore pellets marketed to the steel industry located in 19 countries in the Americas, the Middle East, Asia, and Europe. The employment generation of Samarco is about 2,969 people. For the past ten years, the results of Samarco have been presented by the Corporate Responsibility Report Guidelines, developed by a Brazilian nongovernmental organization, the Ethos Institute of Business and Social Responsibility and the guidelines of the Global Reporting Initiative, or GRI, which establish a worldwide standard for preparing sustainability reports and for posting social, economic and environmental results.

Samarco publishes its sustainability report within GRI standards, being classified by GRI G3 guidelines as A+ and states in its annual sustainability reports that it is committed to social responsibility. In 2014 Samarco disclosed its annual sustainability reports based on the GRI G4. The following table 1 summarizes the main data referring to Samarco, extracted from its published Reports, in the last six years before the accident.

On November 5th, 2015, Samarco caused a terrible disaster in Brazil - the Fundão mining dam collapse in the city of Mariana, Minas Gerais, causing serious damage to the environment and the ecosystem: 1,469 hectares of vegetation, along 44.8 miles of watercourses, including the ones in permanent preservation areas, were destroyed. Thousands of animals were killed, 19 deaths, and many people are still suffering the consequences of this tragedy. Experts estimate that nature will take decades to reverse the catastrophic damage caused to the environment.

At least five other episodes of environmental accidents in the structures of the levees of the Samarco mining area, also known as Bento Rodrigues case, occurred and in four of these episodes, mud leaked out, killing fish and paralyzing the water catchment. In addition to these leaks, in 2014 the company was one of those responsible for the serious pollution in the capital of Espírito Santo State, Vitoria city, which resulted in a Parliamentary Investigation called Black Dust.

The loss recorded by Samarco in the year 2015 was due to the disaster with the Fundão dam in Bento Rodrigues, sub-district of Mariana (MG) since the expectation of fines and government requirements due to the disaster had been recorded as operating expenses. Losses amounting to US$2.48 billion were provisioned and a write-off of US$54.74 million was recorded about property, plant, and equipment related to the dam. This implied a total of US$2.74 billion recorded in the line of other operational expenses, resulting in an operating loss of US$2.07 billion. According to Rostás (2016), this negative result was alleviated somewhat by the gains obtained by Samarco with exchange variations (US$285.29 million) and tax credits (US$479.69 million). That is, society also had a stake in the loss of Samarco, which explains the negative part of the government in the added value distributed in the fiscal year of 2015.

Since the accident, Samarco has been prevented by the Brazilian courts from carrying out its mercantile activities and has been trying to close an agreement to recover damages caused by the breakdown of the Fundão Dam in Mariana, to resume its operational activities that have already been paralyzed for three years.

The rupture of Dam I of the Córrego do Feijão in Brumadinho, Brazil

Three years after the rupture of the Fundão dam in Mariana, which left a serious environmental liability, another serious disaster occurred in the state of Minas Gerais, in the city of Brumadinho. This new environmental disaster, which occurred on Friday, January 25th, 2019, was triggered by Vale Corporation (Samarco’s parent company) and has caused the death toll of at least 166 people and left 147 missings, presumed dead.

There seem to be indications that this mining company was aware of the operational problems in the tailings dam structure and reports reveal that it had not taken any kind of appropriate action to solve the defects, preferring to take the inherent risks, both environmental and social, given that the Brazilian laws are very permissive in criminalizing this type of problem (O Globo newspaper, 7/02/2019, p.4).

In addition to the high number of deaths and disappearances, the environmental damage caused poses threats to hundreds of animal and plant species, since the affected area was the Atlantic Forest. Besides, this will cause suffering to most of the local population who had the exploitation of rural tourism as their main economic activity, due to the natural beauty of the place (O Globo newspaper, 03/02/2019, p.9).

Founded on June 1st, 1942, Vale Corporation is a Brazilian private-sector, publicly-traded Multinational Enterprise (MNE), headquartered in Brazil. It is present in approximately 25 countries of the five continents. Operating in the mining sector, it includes the manufacture of iron ore and the production of nickel, coal ore, copper, manganese, and ferroalloys. Also, it engages in mineral exploration and project development. It also operates in other mineral sectors through investments in technology, logistics, and steelmaking.

Vale Corporation reports its sustainability responsibility information by the indicators of the Global Reporting Initiative (GRI) methodology and states in its annual sustainability reports that it is committed to social responsibility. In 2017, Vale Corporation disclosed its annual sustainability report including text and data related to GRI standard indicators and the report content fully meets the GRI standard requirements. The following table 2 summarizes the main data referring to Vale, extracted from its published reports, in the last seven years before the accident. The 2018 financial and sustainability reports have not yet been released to the stakeholders and the users of the entity’s financial statements.