Corporate Governance

The SEC, Social Responsibility, and Conflict Minerals: Crossing a Disclosure Rubicon (Part 2)

By J Robert Brown Jr.

Section 1502 of Dodd-Frank required the implementation of disclosure requirements for "conflict minerals."  It is a narrow approach to disclosure and designed to shed light on a very particular practice.  Moreover, eventually, the disclosure requirements will presumably disappear once the conflict in the Congo ends.  

So what is the impetus for the provision?  The Republic of Congo (aka Zaire) is the third largest country in Africa (behind Sudan and Algeria) with a population of 67 million.  The country is poor and racked with violence but rich in natural resources. 

The resources are, apparently, a funding mechanism for some of the violent groups operating in Congo.  As Amnesty International reported:

• The DRC is rich in natural resources, including large deposits of columbite-tantalite (known as coltan), cassiterite, wolframite and gold, which are used in everyday technology such as cell phones, laptops and digital video recorders, as well as in jewelry. Many of the mines from which these minerals are extracted are under the control of armed groups, especially in the volatile eastern part of the country, where conflict has been ongoing for many years despite the presence of a United Nations peacekeeping mission, MONUSCO.  A recent report by the United Nations Group of Experts on the DRC found that armed groups in eastern DRC continue to control and profit from the extraction and trade of these minerals. Both the conflict and the mining of minerals, itself have led to grave human rights violations, including sexual violence, child and slave labor, and mass displacement.

The UN Report is here. 

Congress responded by adding Section 13(p) to the Exchange Act (15 USC 78n(p)) in an effort to mandate disclosure about "conflict minerals."  Although pitched as a disclosure requirement, the intention was substantive.  As Amnesty International described:  "This legislation will greatly advance the goals of regulating and stemming the flow of conflict minerals, and limit the ability of armed groups to benefit from conflict minerals and perpetuate the conflict."  Ironically, the provision was included at the impetus of Senator Brownback who ultimately voted against the Dodd-Frank. 

We will discuss the requirements in the next post.  

Full post as published by The Race to the Bottom on December 29, 2010 (boomark / email).