Top 10 Emerging Challenges for 2010: Issue 5

Using Corporate Law to strengthen respect for human rights

Corporate law, like other domains which shape business practice, has remained largely outside of discussions relating to human rights. How might corporate law be used as a tool to establish clear obligations on corporate directors or for managers to take into account human rights impacts of their businesses?

Recent national developments point to potentially closer links between corporate law and human rights in the year ahead. For example, Danish legislation adopted earlier this year requires major companies to report publicly on their Corporate Social Responsibility programs.

In the UK, the revised Companies Act now requires directors to "have regard" to issues such as "the impact of the company’s operations on the community and the environment" as part of their duties towards the company.

Similarly, the South African Companies Act allows the Government to prescribe social and ethics committees for certain companies. And in India, a new companies bill includes provisions requiring all publicly listed companies above a certain size to "consider and resolve the grievances of stakeholders".

The UN Special Representative on Business and Human Rights (SRSG), Professor John Ruggie of Harvard University, announced an initiative in early 2009 to explore what is currently expected of companies under corporate law as it relates to human rights. An expert consultation was held earlier this year involving representatives from leading law firms from around the world who have volunteered to survey corporate law provisions in over 40 jurisdictions.

The project seeks to document how human rights are currently addressed by companies and their officers, explicitly or by implication, in laws and guidelines relating to incorporation, directors’ duties, reporting, stakeholder engagement, and corporate governance generally. The review also aims to report on how corporate regulators and courts apply these laws and guidelines, and whether legal or policy reform is being considered.

Using corporate law as a tool in influencing business leaders to ensure respect for human rights will likely be a growing feature of business and human rights debates in 2010 and in the years that follow.