Do corporate law and human rights mix?

‘Corporate and securities law directly shapes what companies do and how they do it. Yet its implications for human rights remain poorly understood. The two are often viewed as distinct legal and policy spheres, populated by different communities of practice.’ Discuss.

Reading that aloud leaves one with the aftertaste of an undergraduate law essay. But none other than the UN has taken hold of the matter, and Professor John Ruggie, appointed as special representative on human rights and business by the then secretary general Kofi Annan at the beginning of 2009, was asked to investigate. Using pro bono advice from more than 20 corporate law firms (including the magic circle’s Linklaters and Clifford Chance), Ruggie set out to discover ‘whether and how corporate and securities law in over 40 jurisdictions currently encourages companies to respect human rights’.

Immediately apparent from Ruggie’s recently released report is that companies don’t have any firm obligation to respect human rights beyond what national law already requires. Companies are not generally required to recognise a duty to society or respect for human rights as a condition of incorporation or listing. Directors must act in a company’s best interests when simultaneously considering the human rights of non-shareholders (according to the results of the surveys, a ‘prudent director’ would ‘do well’ to consider human rights, but only when considering reputational, legal or other risks to the company).

This leaves us with the company’s social obligation to respect human rights. In the UK, in many cases, this emerges in the form of corporate social responsibility programmes – something that a number of major law firms have introduced in recent years. Yet even here, despite apparent proactivity, Ruggie’s report finds that while such programmes ‘are starting to deal with these issues, [they] are rarely entirely “voluntary” in practice [but are more driven by business needs], and increasingly rely on international initiatives to help frame any relevant guidance’ – and, ultimately, ‘human rights are rarely expressly referenced in these documents’.

All this leaves one with the feeling that companies, including law firms, need to go well beyond any existing legal obligations to truly respect human rights: corporate and securities laws do not recognise such rights, and corporate social responsibility programmes don’t go far enough. Ruggie will submit his ‘guiding principles’ to the UN Human Rights Council in June 2011, which will decide whether any legal or policy changes should be recommended to member nations. It seems likely he will suggest that more needs to be done.

http://www.lawgazette.co.uk/blogs/news-blog/do-corporate-law-and-human-rights-mix

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