Corporate Governance

Exploring the Roles Corporate and Securities Law Can Play in Encouraging Corporations to Respect Human Rights

By Harvard Law School Program on Corporate Governance

Recently York University?s Osgoode Hall Law School in Toronto convened an expert meeting in support of the Corporate Law Tools Project of my UN mandate, titled ?Corporate Law and Human Rights: Opportunities and Challenges of Using Corporate Law to Encourage Corporations to Respect Human Rights.? The consultation was also supported by the Office of the UN High Commissioner for Human Rights and further assistance was provided by Export Development Canada and PricewaterhouseCoopers.

I was appointed in 2005 by then UN Secretary?General Kofi Annan, pursuant to a broad mandate adopted by the then UN Commission on Human Rights, to identify and clarify standards of corporate responsibility and accountability regarding human rights, including the role of states. In June 2008, after extensive global consultation with business, governments and civil society, I proposed a policy framework to the UN Human Rights Council (Council) for better managing business and human rights challenges. The Council was unanimous in welcoming the framework.

The UN ?Protect, Respect and Remedy? Framework rests on three differentiated yet complementary pillars: the state duty to protect against human rights abuses by third parties, including business, through appropriate policies, regulation, and adjudication; the corporate responsibility to respect human rights, which in essence means to act with due diligence to avoid infringing on the rights of others; and greater access for victims to effective remedy, judicial and non-judicial.

The Council also extended the my mandate to June 2011, tasking me with ?operationalizing? the UN Framework?that is, to provide ?practical recommendations? and ?concrete guidance? to states, businesses and others on the Framework?s implementation. There has already been considerable support of the UN Framework by all relevant stakeholders: unanimous backing in the Council; strong endorsements by international business associations and individual companies; and positive statements from civil society; and uptake by countries, individual companies and international organizations. You can read more about the UN Framework as well as its uptake here.

A core aspect of the UN Framework?s first pillar, the state duty to protect, is that states should foster corporate cultures respectful of rights both at home and abroad, through all available avenues. Key tools for doing so include corporate and securities law and policy.

Corporate 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.

Thus in early 2009 I launched the Corporate Law Tools (CLT) Project. It involved 19 leading corporate law firms from around the world (including Weil, Gotshal & Manges LLP in the United States) helping to identify whether and how corporate and securities law in over 40 jurisdictions currently fosters corporate cultures respectful of human rights. The firms followed a common research template exploring subjects such as incorporation and listing; directors? duties; reporting; and stakeholder engagement. A press release, the research template and law firm reports (as completed) are available here. An overarching trends paper is forthcoming.

The CLT Project forms just one part of my work under the state duty to protect pillar of the UN Framework. It focuses on corporate and securities law in order to explore the challenges and opportunities for states in that area. A designated project was believed to be important given the relatively unexplored nature of the corporate and securities law arena vis-à-vis business and human rights.

As the law firm ?mapping? draws to a close and through continued consultation with all relevant stakeholder groups, I am now beginning to consider what, if any, recommendations to make to states with respect to corporate and securities law and policy.

The Osgoode Hall Consultation was designed as an expert platform for discussing the preliminary findings of the law firms? mapping, as well as brainstorming concrete and practical recommendations for legal and policy reform in this area.

To this end, participants were invited from stakeholder groups such as major corporations; corporate law firms; academia; civil society; government regulators; and the socially responsible investment community. An effort was also made to ensure geographic and gender representation.

The consultation focused on the subject areas included in the law firm mapping: incorporation and listing; directors? duties; reporting; stakeholder engagement; board composition; and policy coherence between corporate regulators and human rights agencies. The consultation?s last session organized participants into focus groups to discuss those subject areas in more detail with a view to providing broad suggestions on what legal and policy tools might be further explored. As expected given the range of experts, a spectrum of ideas was presented, from reluctance to change existing laws, to calls for greater guidance from regulators on existing laws and policies, and suggestions for outright legislative reform.

A summary report of the event is available here. It follows the Chatham House Rule of non-attribution under which each consultation session was held. Readers are encouraged to note the range of opinions expressed at the consultation which I have made every effort to include in this report for the sake of transparency. But none necessarily represents my views, or the views of the United Nations.

For questions about the CLT Project or feedback on the summary report, please contact Vanessa Zimmerman, Legal Advisor to the SRSG, at vanessa_zimmerman@hks.harvard.edu.

Full post as published by The Harvard Law School Corporate Governance Blog on February 10, 2010 (boomark / email).