This Blog Essay site devotes every February to a series of integrated but short essays on a single theme. The Ruminations Series in 2009 produced a month long series of aphoristic (ἀφορισμός) essays, meant to provoke thought rather than explain it. The hope was that, built up on each other, the series would provide a matrix of thoughts that together might lead the reader in new directions.
For 2010, this site introduces a new series--Business and Human Rights. The series takes as its starting point the issues and questions raised by John Ruggie, the United Nations Special Representative of the Secretary-General (SRSG) on business and human rights, in a global online forumThe U.N. "Protect, Respect, Remedy" framework is made up of three pillars: the State duty to protect against human rights abuses by third parties, including business; the corporate responsibility to respect human rights, which means to avoid infringing on the rights of others; and greater access by victims to effective remedy, judicial and non-judicial. The forum is currently focused on the corporate responsibility to respect human rights, the second pillar of the framework. The forum is divided into sections, each of which contains multiple topics with space for discussion and comment.New Online Forum for U.N. Business and Human Rights Mandate, United Nations Press Release, New York and Geneva, Dec. 1, 2009. Each of the Essays will consider one of the topics raised in the online consultation. My hope is to help generate discussion and to encourage further discussion of the issues within the framework fo the consultation framework.
Part XIII: Human Rights Due Diligence--Elaboration: Effectiveness.
The SRSG has emphasized that "the components of human rights due diligence in place is necessary but not sufficient to meeting the corporate responsibility to respect human rights; there must also be guidance to support the effectiveness of those components." United Nations Special Representative of the Secretary-General on Business & Human Rights, Elaboration: Effectiveness.
He suggests examples to drive home the point:
- Companies must internalize the fact that human rights due diligence is not a one-time activity, but constitutes an ongoing, dynamic process.
- A company’s management of risks to the human rights of individuals and communities must involve meaningful engagement and dialogue with those communities. (See also the page in this forum on consultation.)
- Because the very purpose of human rights due diligence is for the company to demonstrate that it is meeting its responsibility to respect human rights, a measure of transparency and accessibility to stakeholders will be required. (See also the page in this forum on transparency.)
- Corporate objectives, policies and systems must be aligned with the company’s human rights policy, and not contradict or undermine it. Integration is one component of human rights due diligence, but should be applied to human rights due diligence broadly.
United Nations Special Representative of the Secretary-General on Business & Human Rights, Elaboration: Effectiveness. This raises two questions for the SRSG that are worth considering:
- Are the above suggestions all equally necessary for a company to meet its responsibility to respect human rights?
- What additional guidance would ensure the effectiveness of human rights due diligence?
Id. The answer to the first question is yes, but there are other suggestions that might be equally necessary.
In the United States, as in many other states, monitoring and transparency have come to the forefront of both corporate governance reform efforts at the state level and as a regulatory method in its own right. Backer, Larry Catá, Global Panopticism: States, Corporations and the Governance Effects of Monitoring Regimes. Indiana Journal of Global Legal Studies, Vol. 15, 2007. The basic duty to monitor ongoing operations--not just collecting information in the context of a particular corporate transaction--has become a more central part of corporate governance. Chancellor Allen's discussion in In re Caremark International Derivative Litigation, 698 A.2d 959 (Del. Ch. 1996) is worth remembering in this context: "But it is important that the board exercise a good faith judgment that the corporation's information and reporting system is in concept and design adequate to assure the boardthat appropriate information will come to its attention in a timely manner as a matter of ordinary operation, so that it may satisfy its responsibility." Yet it must also be noted that at least in the United States, this development of a director's duty to implement and monitor a system of oversight does not necessarily translate into a system of liability for breach of that duty. Corporate law tends to place great burdens on those seeking to prove that a breach of that duty can produce legal liability under corporate law standards. See In re Citigroup Inc. Shareholder Derivative Litigation, 964 A.2d 106 (Del. Ch. 2009). For all that, the imposition of a monitoring and transparency norm with respect to the ongoing operations of an enterprise, especially one that focuses on human rights, can be effective with respect to the social rights obligations of corporations, even if their breach does not always produce legal liability under state law. What is clear, though, is that corporations can no longer argue convincingly that monitoring and reporting on an ongoing basis are tasks that are not part of the core practices of business. Corporations know how to monitor. They understand they must monitor. States have increased the scope of mandatory monitoring. Additional monitoring then adds a marginal burden to corporate activity that would be substantially offset by the value added resulting from better compliance with human rights obligations.
But as important, effectiveness suggests the critical role played by linkages among the distinct elements that contribute to the construction of a successful system of human rights due diligence. The SRSG suggests three important linkages--between consultation, transparency and integration. To be effective, a human rights monitoring system must look outward to stakeholders as well as inward to employees, shareholders and supply chain partners. It must be both internalized within corporate culture and externalized as a method of communication and relationship between the entity and the people and institutions with which it interacts. To some extent these linkages may be defined by law--and thus add a linkage between the First Pillar state duty to protect human rights and the Second Pillar corporate responsibility to protect. And monitoring obligations to be effective must be enforceable. This adds yet another linkage, between the Second Pillar responsibility to protect and the Third Pillar obligation to render effective remedy. These linkages are all inherent in the common approaches to monitoring developed under American corporate law. Though the language is not that of human rights or due diligence, the pattern is usefully transposed to the Protect-Respect-Remedy framework.
Lastly, effectiveness suggests measurement and assessment. Effectiveness cannot be understood as a concept unmoored. Effectiveness requires a measure--if one cannot measure effect then there is no basis for judging conduct against objective. Mere measurement is insufficient, however. Effectiveness is devoid of meaning in the absence of a standard against which it can be measured. Thus understood, the American cases remind us that effectiveness requires both measure and standard in two senses. First, one must be able to measure the effectiveness of the system itself against a standard of minimum characteristics and mechanics. Second, one must be able to measure the effectiveness of the system in identifying and mitigating human rights irregularities. Communication of these measures to stakeholders completes the circule and ensures effectiveness through the accountability that follows from disclosure.
In the United States, as in many other states, monitoring and transparency have come to the forefront of both corporate governance reform efforts at the state level and as a regulatory method in its own right. Backer, Larry Catá, Global Panopticism: States, Corporations and the Governance Effects of Monitoring Regimes. Indiana Journal of Global Legal Studies, Vol. 15, 2007. The basic duty to monitor ongoing operations--not just collecting information in the context of a particular corporate transaction--has become a more central part of corporate governance. Chancellor Allen's discussion in In re Caremark International Derivative Litigation, 698 A.2d 959 (Del. Ch. 1996) is worth remembering in this context: "But it is important that the board exercise a good faith judgment that the corporation's information and reporting system is in concept and design adequate to assure the boardthat appropriate information will come to its attention in a timely manner as a matter of ordinary operation, so that it may satisfy its responsibility." Yet it must also be noted that at least in the United States, this development of a director's duty to implement and monitor a system of oversight does not necessarily translate into a system of liability for breach of that duty. Corporate law tends to place great burdens on those seeking to prove that a breach of that duty can produce legal liability under corporate law standards. See In re Citigroup Inc. Shareholder Derivative Litigation, 964 A.2d 106 (Del. Ch. 2009). For all that, the imposition of a monitoring and transparency norm with respect to the ongoing operations of an enterprise, especially one that focuses on human rights, can be effective with respect to the social rights obligations of corporations, even if their breach does not always produce legal liability under state law. What is clear, though, is that corporations can no longer argue convincingly that monitoring and reporting on an ongoing basis are tasks that are not part of the core practices of business. Corporations know how to monitor. They understand they must monitor. States have increased the scope of mandatory monitoring. Additional monitoring then adds a marginal burden to corporate activity that would be substantially offset by the value added resulting from better compliance with human rights obligations.
But as important, effectiveness suggests the critical role played by linkages among the distinct elements that contribute to the construction of a successful system of human rights due diligence. The SRSG suggests three important linkages--between consultation, transparency and integration. To be effective, a human rights monitoring system must look outward to stakeholders as well as inward to employees, shareholders and supply chain partners. It must be both internalized within corporate culture and externalized as a method of communication and relationship between the entity and the people and institutions with which it interacts. To some extent these linkages may be defined by law--and thus add a linkage between the First Pillar state duty to protect human rights and the Second Pillar corporate responsibility to protect. And monitoring obligations to be effective must be enforceable. This adds yet another linkage, between the Second Pillar responsibility to protect and the Third Pillar obligation to render effective remedy. These linkages are all inherent in the common approaches to monitoring developed under American corporate law. Though the language is not that of human rights or due diligence, the pattern is usefully transposed to the Protect-Respect-Remedy framework.
Lastly, effectiveness suggests measurement and assessment. Effectiveness cannot be understood as a concept unmoored. Effectiveness requires a measure--if one cannot measure effect then there is no basis for judging conduct against objective. Mere measurement is insufficient, however. Effectiveness is devoid of meaning in the absence of a standard against which it can be measured. Thus understood, the American cases remind us that effectiveness requires both measure and standard in two senses. First, one must be able to measure the effectiveness of the system itself against a standard of minimum characteristics and mechanics. Second, one must be able to measure the effectiveness of the system in identifying and mitigating human rights irregularities. Communication of these measures to stakeholders completes the circule and ensures effectiveness through the accountability that follows from disclosure.
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