Implementing The New UN Corporate Human Rights Framework Implications For Corporate Law

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Implementing the New UN Corporate Human Rights Framework: Implications for Corporate Law,
Governance, and Regulation
Peter Muchlinski
Business Ethics Quarterly / Volume 22 / Issue 01 / January 2012, pp 145 - 177

DOI: 10.5840/beq20122218, Published online: 23 January 2015
Link to this article: http://journals.cambridge.org/abstract_S1052150X00000105
How to cite this article:

Peter Muchlinski (2012). Implementing the New UN Corporate Human Rights Framework: Implications for Corporate
Law, Governance, and Regulation. Business Ethics Quarterly, 22, pp 145-177 doi:10.5840/beq20122218
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Implementing the New UN Corporate
Human Rights Framework: Implications for
Corporate Law, Governance, and Regulation
Peter Muchlinski
School of Oriental and African Studies
Abstract: The UN Framework on Human Rights and Business comprises the

State’s duty to protect human rights, the corporate responsibility to respect human
rights, and the duty to remedy abuses. This paper focuses on the corporate respon-
sibility to respect. It considers how to overcome obstacles, arising out of national
and international law, to the development of a legally binding corporate duty to
respect human rights. It is argued that the notion of human rights due diligence
will lead to the creation of binding legal duties and that principles of corporate
and tort law can be adapted to this end. Furthermore, recent legal developments
accept an “enlightened shareholder value” approach allowing corporate manag-
ers to consider human rights issues when making decisions. The responsibility to
respect involves adaptation of shareholder based corporate governance towards a
more stakeholder oriented approach and could lead to the development of a new,
stakeholder based, corporate model.
Key words: business, human rights, corporations, corporate governance, mul-

tinational enterprises
T he UN Special Representative of the Secretary General on Human

Rights and Business (SRSG), John Ruggie, has set in train what is perhaps the
most comprehensive discussion to date of the relationship between corporations
and human rights. The SRSG has developed a three pronged approach to this issue,
known as the “Protect, Respect and Remedy Framework” (the Framework). This
is based on the state’s duty to protect human rights, the corporate responsibility to
respect human rights and access to an effective remedy.1 The present paper focuses
on the second pillar, the corporate responsibility to respect. It considers its implica-
tions from the perspectives of external corporate regulation and internal corporate
governance, the main elements of corporate accountability. The responsibility to
respect has significant, if not revolutionary, implications for both elements. These
have not yet been fully mapped out or debated.
The SRSG has himself sponsored research on the corporate law implications of
the Framework. The overall conclusions are that while current corporate and securi-
ties laws offer some room for the consideration of human rights issues as factors in
the governance of the company there is as yet very little official guidance as to the
precise parameters of this relationship.2 The present paper is in broad agreement
©2012 Business Ethics Quarterly 22:1 (January 2012); ISSN 1052-150X pp. 145–177
08--Muchlinski.indd 145 11/21/2011 2:43:38 PM

146 Business Ethics Quarterly
with these findings and attempts to make a further contribution by highlighting some
of the significant legal, regulatory and governance implications of the corporate
responsibility to respect.
In this connection the paper does not discuss whether corporate actors ought to
have human rights responsibilities, a matter already extensively debated elsewhere.3
It accepts the assumption that the corporate responsibility to respect human rights
is based on a normative moral duty and not merely on an instrumental political or
legal duty.4 Rather, the paper argues that the corporate responsibility to respect,
as framed by the SRSG, has real legal consequences. It may prove impossible in
practice to establish such a corporate responsibility without creating consequential
legal duties. In particular the SRSG’s framework envisages that the responsibility
to respect will be carried out through a due diligence mechanism used to assess the
human rights risk involved in an investment project and to develop strategic responses
to control that risk. As will be shown below, due diligence mechanisms normally
create direct duties of care upon the entity carrying out such an assessment. Once
a due diligence obligation is accepted, failure to use due diligence is evidence of a
breach of such a duty as is the careless operation of such a process.
Such duties of care do not exist in a legal vacuum. The responsibility to respect is
being developed in the shadow of existing structures of corporate law and corporate
governance theory. The argument in this paper is that existing legal structures, and
the theories supporting them, are capable of relevant adaptation to operationalise
the SRSG’s framework. Corporations are creatures of law. Collective bodies can
exist without proper legal form but, historically, it has been usual to place such
bodies under some form of official legal organisation.5 The corporate form is one
such method. The act of legal incorporation facilitates the operation of the economic
enterprise and outlines the permissible legal scope of its operations. The SRSG’s
framework represents a novel attempt further to develop the regulatory agenda of
corporate law, so far as changes in national legal environments are concerned. Al-
though the corporate responsibility to respect is not framed as a binding legal duty,
due to the absence of legal personality for corporations under international law, it
can be seen as informing the legal form of the corporation and the need to define
its legitimate functional limits.
In this connection, as will be developed below, certain key issues arise. In particular
three questions need to be borne in mind: should corporate directors have a duty
of care, based on human rights due diligence, in relation to addressing the human
rights responsibilities of their corporations, should those affected have enforceable
rights and remedies against directors and the corporation, and does the extension
of human rights responsibilities to corporate actors challenge the dominant agency
costs theory of corporate governance and necessitate a shift towards stakeholder ap-
proaches?6 These questions will be discussed using selected illustrative approaches
to corporate regulation and governance, taken from a number of jurisdictions studied
by the SRSG as part of his “Corporate Law Tools Project” as well as at the level of
corporate governance theory.7 The paper begins with a brief overview of the ele-
ments of the SRSG’s approach, so that the interactions of the various elements can
be fully appreciated.

Implementing the New UN Human Rights Framework 147
I. The “Protect, Respect and Remedy” Framework
In his Report to the UN Human Rights Council of April 2008 the SRSG asserted
that ‘international law provides that States have a duty to protect against human
rights abuses by non-State actors, including by business, affecting persons within
their territory or jurisdiction.’8 In his Report of April 2009 the SRSG re-emphasized
the States duty to protect as one grounded in international human rights law.9 In his
latest Report of 2010 he continued to explore the relationship between corporate law
and human rights protection and the possible impact of trade and investment agree-
ments upon the States duty to protect human rights.10 The most recent restatement
of the SRSG’s position can now be found in the Guiding Principles on Business and
Human Rights: Implementing the United Nations ‘Protect, Respect and Remedy’
Framework (Guiding Principles) which asserts that
States must protect against human rights abuse within their territory and/or jurisdiction
by third parties, including business enterprises. This requires taking appropriate steps to
prevent, investigate, punish and redress such abuse through effective policies, legislation,
regulations and adjudication.11
The Guiding Principles elaborate this general duty by encouraging States to develop
policies that foster respect for human rights by business enterprises domiciled in
their territory and/or jurisdiction, by ensuring policy coherence between government
departments, ensuring that State-owned enterprises respect human rights, encourage
human rights due diligence by export credit agencies, use commercial transactions
with corporations as a means of ensuring respect for human rights as well as helping
business enterprises operating in conflict zones to avoid committing or contributing
to human rights abuses.12 Finally, the Guiding Principles exhort States to maintain
adequate domestic policy space to meet their human rights obligations under invest-
ment treaties and contracts and to use their membership of multilateral institutions
to ensure that they do not hinder member states from meeting their duty to protect
nor hinder business enterprises from respecting human rights and encourage busi-
ness respect for human rights.13
As regards the corporate responsibility to respect human rights, the SRSG em-
phasizes that while corporations can be considered “organs of society,”
they are specialized economic organs, not democratic public interest institutions. As such,
their responsibilities cannot and should not simply mirror the duties of States. Accordingly,
the Special Representative has focused on identifying the distinctive responsibilities of
companies in relation to human rights.14
Thus the SRSG turns to the economic functions of corporations as the starting point
for the “responsibility to respect.” This is seen as a “responsibility” rather than a
“duty.” The SRSG does this so as to underline the fact that, as a result of the inter-
national legal doctrine that non-State actors, such as corporations, are not subjects
of international law, there is currently no general legal requirement for corporate
actors to observe human rights under international human rights law.15 Thus the
responsibility to respect under international law remains “a standard of expected

conduct acknowledged in virtually every voluntary and soft-law instrument related

to corporate responsibility.”16 To call this a “duty” would be to misrepresent the
extent of the obligation to respect human rights that a corporate actor has under
international law.17 This does not mean that no binding legal duties can arise for
corporate actors under the Framework. There is nothing to stop a State, in the exer-
cise of its duty to protect human rights, from imposing legally binding duties upon
business enterprises operating in its jurisdiction or even outside, as in the case of
claims made under the US Alien Tort Claims Act. Thus the SRSG can say that the
Framework is not “a law-free zone” to the extent that State action under domestic
law can create legal duties for corporations.18
The corporate responsibility to respect is a standard independent of the State’s
duty to protect, even though a corporate actor could infringe any of the rights con-
tained in the main international human rights instruments and even though they
are addressed to States.19 This raises the question as to what we mean by “human
rights” when applied to corporate actors. The Guiding Principles avoid a full answer
to this question by selecting certain international instruments as representing the
“core internationally recognised human rights.”20 This approach is problematic as
it leaves out many important international human rights instruments, such as, for
example, the UN Convention on the Elimination of all Forms of Discrimination
against Women, which can create issues of corporate respect for human rights. This
approach also appears to side step the question of how the progressive development
of international human rights law through new instruments will be met by the Guid-
ing Principles. For now the Guiding Principles state only that,
[d]epending on circumstances, business enterprises may need to consider additional stan-
dards. For instance, enterprises should respect the human rights of individuals belonging
to specific groups or populations that require particular attention, where they may have
adverse human rights impacts on them. In this connection, United Nations instruments
have elaborated further on the rights of indigenous peoples; women; national or ethnic,
religious and linguistic minorities; children; persons with disabilities; and migrant workers
and their families. Moreover, in situations of armed conflict enterprises should respect
the standards of international humanitarian law.21
For the purposes of this paper the use of references to human rights will be un-
derstood to mean the human rights covered by the instruments mentioned in the
Guiding Principles and any other rights contained in international human rights
instruments that may, in given circumstances, give rise to a human rights violation
risk as a result of corporate action or inaction.
One important change from earlier Reports of the SRSG is that the “do no harm”
basis of the responsibility to respect has given way to a more comprehensive foun-
dation for the concept. The responsibility to respect human rights now means that
business enterprises should “avoid infringing on the human rights of others and
should address adverse human rights impacts with which they are involved.”22 Thus
a positive element of action is required not just a passive avoidance of harm. This is
significant given the SRSG’s listing of a number of legal compliance problems that
may confront corporate actors, and which will require positive moves to respond

to adverse impacts. These include the need to observe international standards in

weak governance zones, resolving conflicts between international standards and
national laws, adequately assessing stakeholder risks that may require disclosure
and action under national company and securities law and certain categories of
international crimes.23
The positive action element is also found in a more detailed exposition in the
2010 Report of the “due diligence” concept. This requires the company to move
from being a victim of “naming and shaming” to “knowing and showing” that
they understand and internalise human rights through due diligence.24 The 2010
Report goes on to list the main elements of due diligence, including a full human
rights policy, periodic assessments of human rights impacts and proper control and
reporting systems laying stress on effective corporate grievance procedures. Quite
correctly the 2010 Report stresses that this is not like other commercial due diligence
processes, which are in the main transactional processes, as there is a constant need
to engage in communication with the right-holders. In other words the firm must
look beyond the protection of its own interests and focus on the interests of those
it affects by its actions.25 Under the Guiding Principles the due diligence concept is
further elaborated. In particular Principle 17 states that due diligence
(a) Should cover adverse human rights impacts that the business enterprise may cause or
contribute to through its own activities, or which may be directly linked to its operations,
products or services by its business relationships;
(b) Will vary in complexity with the size of the business enterprise, the risk of severe
human rights impacts, and the nature and context of its operations;
(c) Should be ongoing, recognizing that the human rights risks may change over time as
the business enterprise’s operations and operating context evolve.26
Thus the concept is potentially far reaching affecting relations between the enterprise
and those with which it interacts.
The legal implications of due diligence are also considered. In particular the
SRSG argues that properly conducted due diligence will provide strong protection
against mismanagement claims by shareholders and give proof that the company
took every reasonable step to avoid involvement in a violation, which should count
in its favour in litigation. However the SRSG rejects the notion that human rights
due diligence should automatically absolve the company from liability under, for
example, the Alien Tort Claims Act in the US.27 The implications of this due dili-
gence based approach are discussed further in Section III below.
As to remedies, the SRSG is positive in his view that national legal remedies
should be strengthened and made more accessible to claimants.28 Equally the barriers
to effective remedies must be identified and removed.29 The 2010 Report stresses
the value of proper and effective corporate level grievance mechanisms and argues
for a strengthening of national human rights institutions’ involvement as well as a
strengthening of the OECD Guidelines on Multinational Enterprises National Con-
tact Points.30 However, as the Report notes, relatively few States have either type of
institution and this absence encourages reliance on lawsuits against companies.31

As for judicial mechanisms the 2010 Report recommends clarification of the laws
relating to corporate group liability and the rules relating to the exercise of extrater-
ritorial jurisdiction over foreign elements of a multinational group so as to reduce
barriers to litigation against such groups. In addition the need for solutions to the
practical obstacles to such actions are highlighted including costs, the bringing of
class actions and financial social and political disincentives for lawyers to bring
such claims.32 These issues are echoed in the Guiding Principles.33
From the above summary it can be seen that the “Protect, Respect and Remedy”
approach is complex, interactive and nuanced. A number of important implications
stem from this. First, given the interaction between the States duty to protect, the
requirement of an effective remedy and the corporate responsibility of respect, the
latter is more than a self-regulatory obligation though, to a considerable extent, it
requires an autonomous and voluntary commitment from individual enterprises to
take on the responsibility and to make it real. This is in keeping with contemporary
thinking about the relationship between self-regulation and mandatory regulation
which sees these approaches as inextricably intertwined and not mutually exclu-
sive.34 Following from this, the paper will examine the scope of external mandatory
regulation as a means of making the corporate responsibility to respect legally ef-
fective. It is here that the States duty to protect meets the responsibility to respect
and requires the securing of effective legal principles and remedies for corporate
failure to respect human rights.
Turning to internal corporate governance, two issues in particular will be covered.
First, due diligence will be examined to see how this concept, used mainly in com-
mercial risk assessment, can be adapted and developed to deal with human rights
risk. This involves not only reducing the commercial risks arising out of the failure
to address human rights due diligence but also the role that this procedure might
play in reinforcing the responsibility to respect as a corporate policy. In addition,
the relationship between due diligence and a legally binding duty of care for hu-
man rights observance will be considered from the perspective of both directors’
obligations and those of the company itself. Human rights due diligence also raises
more specific questions as to whether all corporate human rights issues should be
treated the same way or whether different claims should give rise to distinctive due
diligence approaches. Secondly, the responsibility to respect human rights raises
fundamental questions as to the nature of corporate governance and how it should
be regulated. Whether a responsibility to respect human rights is compatible with
the overarching concern about agency costs, characteristic of current corporate
governance models used in Anglo-American law, will be considered below.
II. The Responsibility To Respect: A Legal Duty To Respect?
Under existing international law, the State may be indirectly responsible for hu-
man rights violations by non-State actors under the so-called “horizontal effects”
doctrine. This establishes responsibility on the part of the State for the conduct of
non-state actors that violates the human rights of another non-State actor within their
legal jurisdiction. The “horizontal” element may be said to describe the relationship

between the non-State actors themselves while being subject to the law of the State
that stands above them as guardian of their legal rights. There is some evidence
from case-law under the European Convention on Human Rights (ECHR) that the
State may be under an obligation to “secure” the rights of third persons against in-
terference by a non-state actor to whom they delegate activity. Failure to do so may
result in a violation of the Convention.35 Beyond the ECHR the horizontal effects
doctrine is an integral part of the UN International Covenant on Civil and Political
Rights (ICCPR) as by Article2(1), “each State Party . . . undertakes to respect and to
ensure to all individuals within its territory and subject to its jurisdiction the rights
recognised in the present Covenant.” This suggests a positive duty to ensure that,
under domestic law, there exist obligations on the part of the State to protect against
human rights violations by non-state actors which harm the rights of third parties.
As noted above, there is no international legal duty on the part of corporations
to observe human rights. Such a duty can only arise under domestic law at present.
Thus it is in this sphere that the legal development of a binding duty to respect hu-
man rights will first evolve, though future international legal responsibility should
not be ruled out. The development of a binding and enforceable legal duty on the
corporation to observe human rights faces a number of legal obstacles both at the
levels of domestic and international law. Under domestic law these may be listed
as: the limitations on liability arising out of the structure and logic of company law,
establishing the mental element of liability for the corporate actor and the impact
of jurisdictional limits on process and liability. Under international law the main
obstacle remains the absence of legal personality for corporate actors and limited
direct human rights obligations on corporate actors.
Corporate Law and Liability

A major element limiting a binding corporate responsibility for human rights vio-
lations, and, indeed for corporate wrongs in general, lies in the logic of company
law. This is designed to facilitate the formation of a capital fund for investment.
It aims to reduce investment risk by separating this fund from the personal assets
of the company promoter and of its shareholders who are often the same person.
This leads to a legal separation between the owners and the company itself and to
a limitation of shareholder liability to the extent of the value of their shares in the
company. The classical model of the limited liability joint stock company assumes
that the owners are actual persons who require the corporate form to engage in the
risks of business.36 It does not contemplate the situation where one company owns
and controls another, as in the case of a multinational enterprise (MNE) consisting
of a transnationally owned and controlled group of companies. This creates especial
problems in relation to one class of actors: tort victims, who are often referred to
as “involuntary creditors” of the company that has caused them injury. The assets
of the shareholders can only be touched up to the extent of the value of their shares
in the company. It also creates problems relating to the extraterritorial application
of home country liability laws to events occurring outside the home jurisdiction in
the host State of the subsidiary, and issue discussed further below.37

For present purposes victims of human rights violations may also be characterised
as involuntary creditors whose main claim against the company will normally lie
in tort. Involuntary creditors have no chance to bargain with the corporation over
the allocation of risks, unlike voluntary creditors, who enter into contracts with the
company.38 Yet they may have to bear the risk of loss if the corporation does not
possess sufficient assets to compensate them for their injuries. Victims of alleged
human rights abuses have brought claims against the parent company of an MNE
in its home State where they cannot obtain redress against the subsidiary in the host
State where they live and where the alleged harm arose. This type of litigation has
come to be known as “foreign direct liability” litigation.39 Such a claim depends for
its success on proof that the parent company was directly involved in causing the
alleged harm. This is not easy given the logic of corporate separation and limited
liability. This may lead to significant under-compensation of victims, or even no
compensation, if the parent has used the separation between itself and its subsidiary
to insulate itself from liability. This position is reinforced by the highly restrictive
conditions under which a judge will “lift the corporate veil” and find the parent
directly responsible for the acts of the subsidiary. Current law only permits this in
cases of abuse of the corporate form.40
This effect of company law has been criticised in that it externalises a risk that
ought properly to be held by the company to the involuntary creditor. Thus the poorer
risk taker assumes the burden of the risk, contrary to well understood notions of
efficient risk allocation in law which stress that the person who has the best knowl-
edge of the risk should bear it, which, in the case of hazardous corporate actions
would be the corporation itself.41 The logic of company law externalises the risk of
liability away from the controlling interest by insulating it from liability except in
the few cases where it can be shown that it has a direct involvement in the events
leading to the violation. This is a clear obstacle to the realisation of the third ele-
ment in the SRSG’s framework, namely, access to effective remedies, as the SRSG
has recognised. It is also a brake on the realisation of the corporate responsibility
to respect as this legal situation encourages irresponsibility by way of increasing
moral hazard. Therefore, one important change in national company laws would be
to extend the cases in which the corporate veil ought to be disregarded to include
cases of human rights violations by the company.
However, veil lifting is a far from perfect solution. It involves judicial discretion
and so it may be difficult to anticipate ex ante whether a particular legal form of
group organisation will survive judicial scrutiny.42 In the alternative, a presumption
could be introduced of parent responsibility for the acts of the subsidiary based on
the actual or potential control exercised by the former over the latter. This could be
achieved by way of a statutory exception to the doctrine of corporate separation.
The approach is shown in the UK Corporate Responsibility Bill of 2002 where
such liability may be introduced by law.43 One important issue is whether parental
liability should be based on a duty of care, requiring proof of negligence on the
part of the parent, or whether, as in Indian “enterprise liability” doctrine, it should
be strict, arising out of the fact that the parent is the controlling entity in the en-
terprise.44 Clearly the incentive to internalise risk on the part of the parent would

be greater if liability was strict. Whatever approach to liability is taken the major
issue in such cases would be to show what the boundaries of the enterprise are for
the purposes of liability. Not only the parent but other affiliates might be relevant
parties in given cases.
Establishing the Mental Element of Liability

A further problem arising out of human rights responsibility for corporate actors is
how to establish the mental element of liability. Human rights violations involve the
commission of criminal acts and/or civil wrongs. Proof of criminal intent will be
required to establish criminal liability while an element of foresight will be required
to prove negligence. In both cases the main difficulty is how to attribute the human
actions and intentions of corporate officers to the company itself. As regards criminal
responsibility one approach is shown in the English law on corporate manslaughter.
Under the Corporate Manslaughter and Corporate Homicide Act 2007 a new offence
of “corporate manslaughter” has been created. This no longer requires proof that
the “directing will” of the company carried the requisite intent and that one actual
person acting as an agent of the company, and who was part of the “directing will,”
committed the act.45 Instead, the offence is committed by an organisation if “the
way in which its activities are managed or organised by its senior management is a
substantial element in the breach.”46 The relevant organisation includes a corpora-
tion among other bodies.47 Senior management is defined as the persons who play
significant roles in the making of decisions about how the whole or a substantial part
of the organisations activities are to be managed or organised or the actual managing
or organising of the whole or a substantial part of those activities.48 A gross breach
arises where “conduct alleged to amount to a breach of that duty falls far below what
can reasonably be expected of the organisation in the circumstances.”49 Thus while
the threshold for liability still remains high it is now possible to find the organisation
liable where no one member of senior management has committed a gross breach
of duty but where the aggregate effects of the actions of different senior managers,
which in themselves do not amount to gross breaches of duty, reach that threshold.
Equally a larger range of managers’ conduct can now be taken into account as the
definition no longer limits itself to the very top of the management hierarchy but
extends to senior divisional managers as well.50
In relation to civil liability, the usual rule of attribution is that of vicarious liabil-
ity. Thus the company is liable for acts of its officers, agents and employees acting
within the scope of their authority or in the course of their employment.51 The ques-
tion arises whether the company can be liable only if an officer, agent or employee
commits a tort or whether the company can be liable regardless of the legal effects
of the actions of its personnel. The better view is that the actions of the personnel
can be attributed to the company and so it can be liable regardless of whether the
individual concerned is also liable.52 Accordingly it is possible to make the company
itself liable for actions of its officers in a manner not dissimilar to criminal liability.

Jurisdictional Obstacles to Liability

In addition to substantive and doctrinal obstacles to human rights liability for corpo-
rate actors, procedural obstacles have arisen out of the mismatch between the national
reach of state legal systems and the transnational reach of multinational enterprise
activities.53 Thus claims against the parent company of the MNE have often been
subjected to lengthy and costly litigation over jurisdiction. This is especially problem-
atic in common law systems espousing the forum non conveniens doctrine. Here the
judge presiding over the case that the claimant has brought before the forum of one
State, can exercise a discretion to remove the case to another, more appropriate, forum
in another State on the basis of a balancing of private party interests in the conduct
of the case (such as the location of evidence and witnesses, the cost of presenting
the case, the balance of procedural advantages between the parties) and the public
interests of the forum and the alternative forum jurisdictions (such as the extent of
regulatory interest in the outcome of the case). This has proved to be an impediment
to the conduct of human rights based litigation against parent companies of MNEs.54
A possible solution to this problem is to develop further the notion of universal
jurisdiction for human rights claims against corporate actors. Universal jurisdiction
is defined as, “the ability of the court of any state to try persons for crimes com-
mitted outside its territory which are not linked to the state by the nationality of the
suspect or the victims or by harm to the state’s own national interests.”55 Crimes
under international law, such as genocide, crimes against humanity, war crimes,
torture, extrajudicial executions and enforced disappearances, just like ordinary
crimes and crimes under national law of international concern, such as terrorist
crimes, are subject to universal jurisdiction.56 Where a corporate actor is implicated
in such crimes universal jurisdiction may be available in principle.57 The principle of
universal jurisdiction may also acquire relevance in civil as well as criminal cases,
should the practice of subjecting MNEs to actions for violations of human rights,
arising outside the forum jurisdiction, become more widespread.58 Should univer-
sal civil jurisdiction for human rights claims against corporate actors emerge this
would represent an act of legal harmonization and convergence that would further
strengthen the emergence of a new transnational order of responsibility. The SRSG
has conducted research seminars on universal jurisdiction but the issue is still open
to significant disagreement and debate.59
International Law and Corporate Liability

Finally, the obstacles created by public international law are not insuperable. Corpo-
rations as legal persons, have, as a consequence of this legal status, duties analogous
to natural persons in law. This is a result of the fact of incorporation which allows
the enterprise to sue and, crucially for this argument, to be sued. Indeed, as noted
above, corporations can be liable for negligence, for breaches of property rights and
under criminal law including the law of manslaughter.60 Thus there is no jurispru-
dential objection to the proposition that a corporate actor is bound to observe human
rights law to the same extent as a natural person given the already extensive range
of corporate liabilities in law or for national law to give sanction against it. The fact

that the obligation arises under international law is then irrelevant. Furthermore in
legal systems where the individual is directly subject to international law there is
again no reason why corporations should be privileged in this regard, especially
where violations of human rights principles are at stake.61
That said considerable obstacles remain in relation to the imposition of direct
international legal obligations on corporate actors in relation to human rights. As
Kobrin notes, such an approach is “anachronistic” in that it tries to fit the MNE into
a State-centric international law and would require a significant disempowering of
States in the regulation of transnational business to which they are unlikely to con-
sent.62 Kobrin thus favours a “transnational solution” by which a new institutional
regime based on both State and non-State elements would emerge and that would
develop applicable standards through a process of learning, persuasion and delib-
eration.63 In this connection it is notable that the SRSG has considered something
of this kind as a means of embedding the UN Framework and building capacity
in this field. The SRSG recommends “that the [UN Human Rights] Council give
consideration to requesting the High Commissioner (or the Secretary-General) to
establish a Voluntary Fund for Business and Human Rights, with the primary purpose
of addressing these capacity building needs.”64 The Fund is envisaged as providing
a mechanism for supporting projects developed at local and national levels that
would, “increase the capacity of governments to fulfill their obligations in this area
as well as strengthen efforts by business enterprises and associations, trade unions,
non-governmental organizations and others seeking to advance implementation of
the Guiding Principles.”65 It could also be a means to provide support to small and
medium sized enterprises in implementing the Guiding Principles, either directly or
through local business associations, national networks of the UN Global Compact,
and national human rights institutions. Proposals might be coordinated and submitted
through UN Country Teams, which could help monitor their results. To ensure its
relevance and representativeness, the activities of the Fund should be overseen by
a multi-stakeholder Steering Committee.66 The Fund may also consider proposals
from the SRSG, submitted in March 2011 on methods of local company-community
dispute resolution.67
III. The Responsibility to Respect

and Internal Corporate Governance
As noted above the introduction of a corporate responsibility to respect human rights

has significant implications for the governance of companies. If the governance
structure of the firm cannot encompass such wider issues then the responsibility
to respect will be a failed concept. At heart is the need to understand human rights
risk and corporate responses thereto. In this regard human rights due diligence will
be analysed both as a managerial tool and as the basis of a general duty of care for
human rights compliance. Then the more theoretical issues concerning the relation-
ship between the duty to respect and approaches to corporate governance will be
considered. This requires a re-examination of the relationship between shareholder
and stakeholder centred approaches to corporate governance.

Due Diligence and Human Rights Risk

In the context of commercial transactions due diligence was first used to describe
the process in s.11 (b) (3) of the US Securities Act 1933, which offers a defence
against a claim arising out of the issue of a false securities registration statement
to anyone who has made a reasonable investigation into matters contained in the
prospectus for the issue of securities and has reasonable ground to believe, and
does believe, that at the time the registration statement was true.68 Since then it has
become a general term referring to, “a process of discovery that is relevant in key
business transactions as well as operational activities.”69 This process has a strong
legal dimension in that the main types of due diligence concern the discovery of
legal liabilities and the integrity of financial information, the latter being essential
to the conclusion of a commercially and legally effective transaction. Due diligence
is normally associated with the buying or selling of company assets, the lending
of finance for a specific project, the assessment of a potential joint venture partner,
the listing of a company on the stock exchange to verify its ability to carry out its
prospectus and the privatisation of state enterprises or state bodies.70 In all these cases
investment risk is involved and due diligence seeks to minimise that risk through a
thorough investigation of the assets and liabilities of the firm or investor in question.
Thus its extension to human rights risks appears to be a novel departure as this is
not a normal aspect of what is generally understood as commercial risk, in that, as
the SRSG points out, it requires a shift form considering the risk to the company to
risk to potential victims of corporate action.
That said, human rights risk is as much a commercial risk as a social or ethical
concern. Firms have become aware through painful direct experience that failure to
identify such risk, and to minimise it through corporate decision-making, can lead to
serious and unwanted commercial consequences, particularly in relation to reputa-
tion and goodwill as well as creating significant clear up costs.71 For example Union
Carbide incurred at least $270 million in punitive expenses alone as a result of the
Bhopal disaster.72 It can also lead to legal liability as highlighted by the rise of foreign
direct liability claims in recent years as well as claims under ATCA. Furthermore, as
studies conducted on behalf of the SRSG show, failure to address human rights con-
cerns may give rise to consequential violations which themselves continue to mount.73
However, to view human rights risk as merely an issue of corporate profitability,
to be controlled by way of due diligence assessments, would be an inadequate
corporate strategy. In particular, unless a corporate culture of concern for human
rights is instilled into the officers, agents and employees of the company due dili-
gence could end up missing the very issues it is set up to discover. At worst it could
degenerate into a “tick-box” exercise designed for public relations purposes rather
than a serious integral part of corporate decision-making. It is here that the ethical
duty to respect human rights is key. The acceptance of such a duty may be said to
“constitutionalise” concern over human rights impacts in the corporate psyche and
culture.74 The due diligence process then allows this concern to be put into operation.
In this regard there is evidence to show that positive management commitments
to such a moral position have a far stronger effect on creating properly integrated

ethics policies than merely responding to external pressures, which may result in
policies that are easily decoupled from other aspects of corporate decision-making
and which may be mainly legitimacy preserving policies.75 That said leaving it to
management discretion is not an option given the risks of inaction and drift.76 In-
deed the logic of the SRSG’s framework and its stress on national legal remedies
among other policies, suggests that moral commitment may have to be induced by
instrumental means as well, even if non-instrumental normative moral preferences
on the part of management are the best way forward in safeguarding corporate hu-
man rights practices.77
As noted above, this goes beyond the SRSG’s earlier exhortation of framework to
“do no harm” and requires positive action to operate investments in a human rights
compliant way and to avoid investments that cannot comply with human rights. In
this regard the human rights due diligence assessment may not sit easily with the
corporate aim of profit maximisation. Whether corporate actors can allow human
rights concerns to trump profit maximisation concerns is open to debate so long as
corporate cultures and, as will be discussed below, corporate governance theories
upon which so much corporate law is based, remain rooted in the prioritisation of
enhancing shareholder value.78
Due Diligence and a Binding Duty of Care

Notwithstanding issues of corporate culture and voluntary approaches to corporate
human rights observance, due diligence has certain important legal implications that
may result in the institutionalisation through legal practice of a legally binding duty
to observe human rights. Due diligence is part of the process of dealing with legal
liability and so has to meet the standards set up in law to discharge a duty of care.
For example in Canada, due diligence has developed beyond a simple commercial
risk assessment process into a basic element of complying with a wide range of
environmental, health, safety and other regulations involving strict liability offences.
It has become analogous to the “reasonableness” element in civil tort cases. To exer-
cise due diligence corporate officers must put in place internal corporate systems to
prevent violations of regulatory requirements and to minimise their adverse effects.
They must also supervise operational personnel effectively and they must be proac-
tive in monitoring and remedying problems rather than merely turning a blind eye.79
Thus due diligence has led, in Canada, to the development of important changes in
internal corporate culture and decision-making processes.80
Equally in the United States, important legal developments have influenced the
behaviour of managers and helped to foster cultures of compliance with regulatory
standards in corporations. For example the Federal Sentencing Guidelines of 1991,
which introduced guidelines for sentencing organisations convicted of Federal
crimes, require the establishment and effective operation of a compliance programme
based on good faith and due diligence.81 The Guidelines list seven requirements of
due diligence, and an effective compliance programme, covering: the standards and
procedures to be followed, the assignment of responsible personnel, communication
to employees, periodic evaluation of the programme, the establishment of a secure

and anonymous system for reporting infringements, procedures for responding to

the detection of criminal conduct and the continuing modification of the programme
in response to periodic risk assessment.82 In determining whether to prosecute for
an offence, Federal Prosecutors will consider whether corporations have made good
faith efforts to develop and operate an effective compliance programme. However,
according to the U.S. Department of Justice,
the existence of a compliance program is not sufficient, in and of itself, to justify not
charging a corporation for criminal misconduct undertaken by its officers, directors,
employees, or agents. In addition, the nature of some crimes, e.g., antitrust violations,
may be such that national law enforcement policies mandate prosecutions of corporations
notwithstanding the existence of a compliance program.83
Nor does the existence of a corporate compliance programme, even one that specifi-
cally prohibits the very conduct in question, absolve the corporation from criminal
liability under the doctrine of respondeat superior.84
In addition to the Sentencing Guidelines, certain laws in U.S. States concerning
stakeholder responsibilities of directors should be mentioned. Statutes adopted by
thirty U.S. states, including New York but not Delaware (the main state of incorpo-
ration for US companies) explicitly permit directors to consider the effect of board
action or inaction on other stakeholders (referred to as “constituencies” in these
laws), including employees, customers, suppliers, creditors, the community and the
economy of the state and nation.85 These laws vary in terms of the weight a direc-
tor may give to non-shareholder interests in determining what is in the company’s
best interests. They have been used by courts to safeguard directors’ decisions to
take into account the interests of non-shareholders.86 As for Delaware, according
to the US Survey for the SRSG, although its corporate law does not include “other
constituency” provisions, “directors of Delaware corporations are generally con-
sidered to have the discretion to consider societal effects in formulating corporate
policies and otherwise making business decisions, in determining what conduct is
in the best interest of the corporation and its shareholders.”87
Constituency statutes have proved controversial in practice.88 The American Bar
Association Committee on Corporate Law argued in 1990 that these laws should
be narrowly interpreted so as to avoid undermining the shareholder interests that
lie at the heart of corporate law,89 while proponents replied that such an approach
would denude the statutes of their proper purpose which was to give stakeholders
other than shareholders enforceable rights.90 The better view appears to be that these
statutes allow for an “enlightened management” approach to be taken which permits
managers explicitly to consider ethics, and to see the consideration of stakeholder
interests as being broadly aligned with long-term shareholder interests, without
risking legal liability for breach of duty.91
The SRSG’s corporate law survey uncovered that such an “enlightened man-
agement” approach is taken by other jurisdictions towards widening directors
responsibilities when considering their duties to their company, which might open
the way for more explicit consideration of human rights impacts of corporate activ-
ity. Thus the SRSG found that,

[i]n Singapore, case law indicates that the company’s best interests can correspond not
only to the interests of the company itself but also to the interests of its shareholders
and employees, creditors, or the group to which the company belongs. In Canada, the
Supreme Court has said that directors’ duties are owed to the corporation and not to
outside stakeholders, but that in considering the corporation’s interests, directors may
look to the interests of shareholders, employees, creditors, consumers, government and
the environment to inform their decisions. In the Netherlands, it is generally considered
that a director is to act in the interest of the company in the broadest sense, i.e.[,] the
combined interests of its shareholders, employees, creditors and even society at large.92
This approach is also seen in changes made to English company law in 2006, an
example that has attracted considerable attention from the SRSG.93 Under English
law directors have a common law-based duty of care to act in the interests of the
company and to fulfil their fiduciary duties towards the shareholders. The duty to
act in the interest of the company has been reformed by s.172 of the Companies
Act 2006 to become a “duty to promote the success of the company.”94 It is framed
in a more inclusive way than the earlier law, though it remains firmly focused on
enhanced shareholder value in that the main duties of the director are still to, “pro-
mote the success of the company for the benefit of its members as a whole.” The
section goes on to list a number of wider factors that directors should have regard
for when making decisions in the best interests of the company:
(a) the likely consequences of any decision in the long term,
(b) the interests of the company’s employees,
(c) the need to foster the company’s business relationships with suppliers, customers
and others,
(d) the impact of the company’s operations on the community and the environment,
(e) the desirability of the company maintaining a reputation for high standards of busi-
ness conduct, and
(f) the need to act fairly as between members of the company.
The reference to the impact of the company’s operations on the community and
the environment has been interpreted as being capable of including human rights
considerations. While s.172 does not amount to a binding obligation to take such
concerns into account it is an advance on the previous law as it accepts that, “com-
munity and environmental impacts along with other considerations in section 172
are now expressly linked to the company’s success—in other words, the legislature
recognized that shareholders may be concerned that the company’s interests could
be harmed by negative social impacts.”95
The list of further factors that the director should consider relate to how the director
should arrive at his or her decision and so “is a more precise articulation of the ex-
pectations arising from the [director’s] duty of care.”96 Turning to the specific content
of the director’s duty of care, this is explained in s.174 of the Companies Act 2006:
(1) A director of a company must exercise reasonable care, skill and diligence.

(2) This means the care, skill and diligence that would be exercised by a reasonably
diligent person with—
(a) the general knowledge, skill and experience that may reasonably be expected of a
person carrying out the functions carried out by the director in relation to the company, and
(b) the general knowledge, skill and experience that the director has.
Thus the English law duty of care is both an objective and subjective duty. It al-
lows for a basic benchmark relating to the average reasonably diligent director and
a higher benchmark taking into account special skills possessed by the director
in question. The main feature is that the duty of care relates to the conduct of the
company’s affairs rather than to any wider public interest considerations. Thus the
essential elements of the duty are that the director has a sufficient knowledge and
understanding of the company’s affairs and that the director remains responsible for
the acts of those to whom he or she has delegated responsibilities.97 Is it sufficient
to allow for a duty of care to observe human rights?
Given that s.172 lists community and environmental concerns, and encourages the
company to maintain a reputation for high standards of business conduct, these could
be interpreted to include concerns over the human rights impact of the company’s
actions. Indeed the underlying conception behind s.172 has been termed “enlight-
ened shareholder value” in the United Kingdom, so as to suggest that it goes beyond
the strict enhancement of shareholder value and requires that wider interests are
taken into consideration.98 Such an interpretation is by no means certain. If human
rights concerns were in issue why did they not get an express mention? The OECD
Guidelines for Multinational Enterprises expressly require, in their General Policies
Guideline, that enterprises “Respect the internationally recognised human rights of
those affected by their activities.”99 As an OECD Member, the UK could have used
this as a benchmark for the list in s.172 but it did not. Perhaps the list should use
the OECD Guidelines as an aid to interpretation, given that English law must evolve
in line with the UK’s international commitments, even “soft law” commitments
like the Guidelines, but there is no clear statutory intention that s.172 expresses the
standards in the Guidelines. Such an intention would need to be implied.100
More importantly, even if human rights concerns can be read into s.172 (d) and
(e) the standard of care may not be very exacting. According to the Explanatory
Note to the Companies Act 2006:
328. In having regard to the factors listed, the duty to exercise reasonable care, skill and
diligence (section 174) will apply. It will not be sufficient to pay lip service to the factors,
and, in many cases the directors will need to take action to comply with this aspect of the
duty. At the same time, the duty does not require a director to do more than good faith
and the duty to exercise reasonable care, skill and diligence would require, nor would it
be possible for a director acting in good faith to be held liable for a process failure which
would not have affected his decision as to which course of action would best promote
the success of the company.
Thus so long as a good faith exercise has taken place this should be enough. Bearing
in mind that this duty refers to the success of the company and not to the interests

of third parties affected by the decision, it is clear that the duty of care for human
rights abuses needs some further development.
First, a duty of care for human rights abuses is by definition owed to persons
outside the corporation and is not always instrumentally linked to the success of
the company. Accordingly a wider tort based duty of care applicable to the direc-
tor and to the company would appear more appropriate. The company law duty of
care is too easily met compared to the tort based standard as it is designed to bal-
ance the needs of the company and its members to be protected from incompetent
management and the need to give directors flexibility and freedom to engage in
entrepreneurial activity. That is what acting to promote the success of the company
means in practice. Arguably the company law standard is irrelevant as it does not
cover the question of harm to parties outside the company except to the extent that
such harm materially affects the success of the company, a very vague standard
that is not centered on the effects of corporate decisions on third party victims. By
contrast the tort based duty focuses on the avoidance of harm to the foreseeable
victim and so draws the line of balance differently. Here the general standard of
reasonable foreseeability of harm is a more appropriate guide to the parameters of
the duty of care than specific company law concerns.
Secondly, the relationship of liability between the director(s), or other relevant
company officer(s), and the company needs to be clarified. Arguably, the former will
discharge their duty through the undertaking of the due diligence approach advocated
by the SRSG and the latter will be liable on the basis of the principles discussed
above. Thus the director(s), or other officer(s) or agent(s) of the company, responsible
for carrying out the due diligence, will need to meet the appropriate standard of care
to avoid personal liability. However, the company may be responsible even where
individual officers have carried out their duties but the organization as a whole has
nonetheless caused a violation of human rights. This assumes that personal liability
for failure to carry out due diligence is needed, to encourage responsible conduct
by directors and other company officers. It is arguable that the company itself also
needs to carry liability so as to develop a culture of compliance. Equally, it is es-
sential that due diligence liability is not embroiled in arguments about the legal
separation between the company and its directors, officers and agents, so as to shield
these classes of corporate personnel from personal responsibility, nor the insulation
of corporate liability though the direct and exclusive personal liability of directors.
Thirdly small and medium sized enterprises and members of supply chains will
also have to undertake due diligence although the precise scope and extent of this is
yet to be determined. This may have significant cost implications for smaller busi-
nesses and for the degree of compliance needed in order to come within the duty of
care as is recognised by the Guiding Principles, discussed above. In this connection
it should be noted that s.174 of the Companies Act 2006 requires consideration of
the skill and knowledge of the actual director undertaking the duty of care as well as
applying a more general duty based on the average director. Thus directors in small
and medium sized firms may well be less able to undertake due diligence reviews
than those working in larger firms with developed human rights compliance poli-
cies. This will affect how far their duty of care will go.

Finally, the question whether different human rights risks should be treated dif-
ferently needs to be considered. For example, do human rights relating to labour
lend themselves to the same general concerns for corporate due diligence as do
human rights relating to property or to other human rights? While an exhaustive
analysis is beyond the scope of this paper (it would require a paper of its own!) it
is useful to note that the SRSG’s Guiding Principles address this issue by focusing
on the actual or potential human rights impact of a business enterprises activities
and associated relationships. This includes a number of sub-questions that need to
be considered in the course of the human rights due diligence exercise. Accord-
ing to the Guiding Principles these include typically, “assessing the human rights
context prior to the proposed business activity, where possible; identifying who
may be affected; cataloguing the relevant human rights standards and issues; and
projecting how the proposed activity and associated business relationships could
have adverse human rights impacts on those identified.”101 In this process, business
enterprises are exhorted to, “pay special attention to any particular human rights
impacts on individuals from groups or populations that may be at heightened risk
of vulnerability or marginalization, and bear in mind the different risks that may be
faced by women and men.”102
A further important factor would be to consider direct and indirect contributions
to human rights impacts. For example a direct contribution could involve a com-
pany inducing a supplier to abuse worker rights due to unreasonable time demands
being placed on it for delivery to the company. An indirect contribution may arise
where a company enters into a relationship with a business partner that abuses hu-
man rights even though the activities of the company itself do not make the human
rights situation worse. The distinction is significant for due diligence analysis as
direct impacts can be avoided by changes in the firms own conduct while indirect
impacts can only be remedied by a change of behaviour of the business partner or
through withdrawal by the company from that relationship. The Guiding Principles
expressly recognise this distinction in Principle 13.103
IV. The Responsibility to Respect

and Corporate Governance Theory
The corporate responsibility to respect human rights poses a challenge for corpo-
rate governance theory. It is an important factor in the further development of the
shareholder/stakeholder debate that is common to both law and business ethics
scholarship.104 Indeed the inclusion of a corporate responsibility to respect hu-
man rights suggests, at first glance, that a shareholder primacy model of corporate
governance may be inadequate to deal with the complex changes in governance
and regulation that such a responsibility would appear to impose on corporations.
However, it may be equally difficult to reject outright a shareholder based model
of corporate governance on this basis alone. Not only is this approach strongly em-
bedded in the corporate laws of many countries, most notably those following the
Anglo-American model, but it also contains a strong ethical foundation of its own
so far as the preservation of the legitimate property rights of shareholders against

corporate malpractice at the hands of managers is concerned.105 On the other hand

it is hard to see how the existence of the corporate responsibility to respect human
rights can become a significant element in corporate action unless a more stakeholder
oriented approach is adopted in corporate governance and regulatory developments.
The implications of the shareholder and stakeholder approaches for this type of
corporate responsibility will now be considered in turn.
Shareholder oriented approaches to corporate governance were spurred by the
interaction of corporate strategy with market organisation and stimulus.106 This led to
the development of multi-divisional corporations and to the separation of ownership
and control between managers and shareholders, with the latter remaining at best
nominal owners of the company, while controlling power lay with the managers.107
It was this effect of corporate growth that led to the development of agency based
theories of corporate governance. These sought ways of avoiding the problem that
uncontrolled managers may not act in the best interests of the shareholders but in
their own interests, thereby undermining the basic promise made between the com-
pany and its shareholders that it would be run in their best interests.
Consequently the main thrust of agency based theories is the reduction of agency
costs, that is, those costs which arise when managers fail to act in the best interests
of the company and hence of the shareholders. The principal cost that needs to be
controlled is the misallocation of funds away from the shareholder towards the
enrichment of the manager. Based on the initial promise made between managers
and shareholders, the theory develops a contractual analysis of the enterprise and
posits that it is no more than a “nexus of contracts” between the managers and the
shareholders.108 Those “contracts” aim towards the protection of shareholders as the
residual risk bearers of the company. Thus the main thrust of these arrangements is
to enhance shareholder value. This is justified by the fact that shareholders take the
greatest risks as they have no contractual guarantee of a return on their investment,
unlike voluntary creditors who have entered into contracts with the company.109
The main mechanism for controlling managers in this situation is the market itself.
Inefficient firms will not attract shareholder interest, or will lead to takeovers by
more efficient management teams, and so the market offers the best discipline for
managers to run their companies efficiently. Equally managers are placed under a
moral imperative to protect the interests of shareholders as a result of their fiduciary
duties towards them.110
The value of these arguments can be questioned both from a regulatory and a
business ethics perspective. As John Boatright has asked “what’s so special about
shareholders?” His answer is nothing much, given the erosion of shareholder power
since the 1930s and the rise of public policy shareholder protection regulation.111 As
a result he rejects, as an inadequate characterization of corporate governance law
and practice, the notion that only shareholders can be the subject of fiduciary duties
or that only fiduciary duties can cover shareholder interests, or that managers might
not have responsibilities to other types of constituencies. Indeed given the limited
nature of fiduciary obligations, pertaining to general matters of organisation and
strategy, “in the ordinary conduct of business, where the business judgment rule
applies, the interests of other constituencies may be taken into account without the

possibility of a successful shareholder suit for the breach of any fiduciary duty.”112
In addition the success of the company cannot be limited to the input of “specific
capital” from shareholders, but is also dependant on the “opportunity capital” that
society provides.113 Thus other interests apart from shareholders can and should be
taken into account to ensure the success of the company, though shareholders remain
special, “to the extent that public policy considerations support the continuation of
the corporation as a private, profit-making institution, with strong accountability
to shareholders.”114
Furthermore, the shareholder primacy approach has been criticised for limiting
the scope for wider claims to be taken into account by corporate managers as a result
of an unfortunate trend of analysis that has sought to overestimate the moral haz-
ards arising out of the agency costs issue.115 In particular a crude kind of economic
determinism has informed the content of agency theory leading to a reductionist
tendency that seeks out underlying economic incentives to ethical choices and that
regards economic self-interest and opportunism as the dominant motives for human
behaviour.116 This in turn leads to the overemphasis on shareholder primacy even
though there is no necessary causal relationship between agency cost problems
and shareholder primacy.117 This approach is a caricature of human reality, and
of corporate activity, and has serious implications in relation to corporate human
rights responsibilities.
Crude “nexus of contracts” and shareholder primacy arguments can be used to
undermine attempts to add human rights obligations to the range of corporate duties.
First, they can be used to prevent seeing the corporation as a collective actor based
on co-ordinated management and so could justify the rejection of a responsibility
to respect human rights since corporations are no more than, “legal fictions which
serve as a nexus for a set of contracting relationships among individuals”118 and
human rights victims by definition have no contractual nexus with the corporation.
Secondly, a crude agency approach is likely to see a commitment to observe human
rights as a threat to shareholder primacy. Should managers take steps to comply with
any corporate responsibility to respect human rights this would be an illegitimate
extension of their actions as it would fall outside the range of actions required to
fulfil their agency obligations toward shareholders. It sets up a competing set of
claimants whose risks in relation to the firm are virtually non-existent, at least in
strict economic terms. The holders of human rights have invested nothing in the
company and so require nothing from managers, while the latter have no right to
exercise their managerial power to meet such third party claims.
In response to such arguments the stakeholder perspective recognises the company
as an institution rather than a bundle of assets, one which has to consider the needs
not only of internal stakeholders, such as the shareholders, managers and employees,
but also the external stakeholders such as customers, suppliers, competitors and other
special interest groups.119 Thus a more socially rooted approach to decision-making
is required and more room is offered to ethical concerns. As Wesley Cragg notes,
“stakeholder theory creates a mechanism and thereby opens the door to bringing fun-
damental moral principles to bear on corporate activities.”120 This requires managers
of investor-owned corporations to acknowledge that all corporate stakeholders have,

“equal moral status and acknowledge that status in all their activities.”121 In relation
to actual or potential victims of corporate human rights violations the stakeholder
model would appear to require that the interests of such constituents should be taken
into account in the decision making processes of the firm. The development of due
diligence and other corporate governance mechanisms for furthering these interests
would be consistent with a stakeholder approach. Equally corporate actors may need
to engage actively in institution building to ensure that certain core public interests
in the preservation of human rights are met so that they do not benefit illegitimately
from a lack of well ordered institutions, as in the case of weak governance zones or
less developed host countries, or from market failures.122
The stakeholder approach has in turn been the subject of counter criticism. Thus
Jensen sees it as flawed, “because it violates the proposition that any organization
must have a single-valued objective as a precursor to purposeful or rational behav-
ior” and that the corporation, “will be handicapped in the competition for survival
because, as a basis for action, stakeholder theory politicizes the corporation, and it
leaves its managers empowered to exercise their own preferences in spending the
firm’s resources.”123 Jensen adds that organisations following a multiple objective
policy, as stakeholder theory would require, cannot succeed and that in corporate
life this is especially true if the value of profit maximization is displaced. The result
is the need to make trade-offs between different interests and the handing of unac-
countable discretion to managers.124 The consequence is that, “stakeholder theory
will reduce social welfare even as its advocates claim to increase it—just as the
failed communist and socialist experiments of the twentieth century.”125 Jensen does
not however dismiss the need for stakeholder interests to be ignored and suggests
an “enlightened value maximization/enlightened stakeholder theory” alternative.
This would give managers and employees incentives to resist maximizing short-
term financial performance and instead to devote themselves to long-term value
creation. This is to be achieved by learning from stakeholder theory to “think more
generally and creatively about how the organizations policies treat all important
constituencies of the firm.”126
Jensen’s ideas appear to be representative of what is actually taking place in
corporate law developments related to stakeholder issues. An “enlightened manage-
ment” or “enlightened shareholder value” approach to directors’ duties was noted
earlier in relation to several jurisdictions, including s.172 of the UK Companies
Act 2006. The UK Company Law Review took the robust position that a company,
“should be run in a way which maximises overall competitiveness and wealth and
welfare for all” but that this, “should not be done at the expense of turning company
directors from business decision makers into moral, political or economic arbiters,
but by harnessing focused, comprehensive, competitive business decision making
within robust, objective, professional standards and flexible, but pertinent, account-
ability.”127 In the light of these concerns the duty to act in the interest of the company
was reformed by s.172 of the Companies Act 2006 to become a “duty to promote
the success of the company.” As noted above s.172 assumes a stewardship role for
directors through the listing of the various other interests that the director should
take into consideration when making decisions. The stewardship element is present

in the assumption that such interests can be taken into account as part of the process
of securing the success of the company. In this sense the “enlightened shareholder
value” model of corporate governance can allow for some room to make human rights
oriented decisions provided that they do not weaken the success of the company.
Other corporate governance mechanisms conducive to respecting human rights
could be developed from existing models. For example continental European models
of corporate governance often allow for worker participation in corporate affairs
whether through works councils or through the use of co-determination laws that
require a certain proportion of the board to be made up of worker representatives.128
Under the Anglo-American model wider stakeholder interests can be introduced
through the appointment of suitable non-executive directors to the board.129 Equally
the use of social accounting devices may assist.130 However, in relation to human
rights concerns the relevant class of stakeholder is potentially very wide. It would
encompass all those affected by corporate actions whether or not they can impact
the corporation. For example it is highly unlikely that existing devices for widening
stakeholder participation in companies could deal with aboriginal groups whose
culture and way of life is threatened by an investment project.131 The identification
of such potential stakeholders or their inclusion in corporate governance structures
is hard to determine. Of course local project specific solutions can be found, such
as local community consultation bodies, but these are outside the mainstream of
corporate governance. This is a field ripe for further analysis.
Finally it may be argued that compelling existing firms, founded on a shareholder
focused model, to undertake additional responsibilities might be considered ethically
objectionable from a libertarian perspective.132 From this standpoint it is unclear
whether the imposition of new human rights responsibilities on such firms could
be said to have the public support necessary to justify such incursions into existing
and accepted arrangements. The argument continues that if support for such new
types of responsibilities exists, employees, investors, customers and other persons
in contractual relations with firms would be willing to make investments in, or
contracts with, a firm with a high human rights culture, or set up new firms with
such a culture as their focus. In response it may be said that such investments are
being made through ethical investment institutions, shareholder activism, consumer
boycotts, or by employee choices as to where they prefer to work.133 For example,
recruitment officers for major companies often stress the social responsibility of
their firm as a reason for seeking employment there.134 Furthermore, it is only re-
cently that concern for the human rights responsibilities of business has become
a mainstream issue. It may take time for all relevant stakeholders to change their
behaviour. Finally many constituencies that deal with corporations have no choice
in the matter of who they contract with due to their relative economic dependency
on the company. The case of employees or sub-contractors working in a recession
comes to mind here.

Concluding Remarks
This paper has argued that the proposed Framework of the SRSG, through the
introduction of a responsibility to respect human rights and of the due diligence
mechanism, may result in certain reforms of corporate organisation that may lead to
significant legal consequences. In particular a binding duty of care towards foresee-
able potential victims of human rights infringements arising out of investment projects
may eventually crystallise. It is inherent in the human rights due diligence concept
and there is no reason in principle why existing laws cannot evolve to contain such
a duty. Equally, it seems clear that any move towards operationalising the corporate
responsibility to respect human rights will involve a departure from a shareholder
based corporate governance model towards a more stakeholder based model.
The holder of the human rights in question will be any one of a number of stake-
holders in the company. Most obviously the employees (both of the company and
of its suppliers and distributors) are the closest example as they are most likely to
be exposed to violations of fundamental rights in the workplace. Other holders in-
clude the local community that is directly affected by corporate actions, whether as
individuals or as a group. However, it is the involuntary creditors of the company,
those who are injured or otherwise harmed by corporate action, who represent the
most problematic group of external stakeholders in relation to human rights duties
of companies. The introduction of managerial obligations to perform human rights
due diligence, based on a binding legal duty of care under tort law for both man-
agement and the corporation, would be a significant addition to the protection of
involuntary creditors and to the recognition that they have an unanswerable moral
claim to consideration in corporate decision-making based on the established and
evolving standards of corporate responsibility, in both national and international law.
Finally, the development of human rights compliance systems, and managerial
structures to achieve this, might go beyond “enlightened shareholder value” and
become a feature of a reformed “civil corporation.”135 Such a corporation could
differ significantly from the shareholder oriented model, encompassing distinctive
value systems that rest upon the view that business and society are not mutually
exclusive or irrelevant to one another and that these values will be informed by the
dominant social discourses of the twenty-first century such as environmentalism,
feminism and human rights.136 Future research may seek to develop further such a
model of the corporation, building upon the implications of stakeholder theory for
the reform of corporate law and regulation, and upon the role which human rights
considerations will play in this process. Increased interactions between corporate
law and business ethics research will be required to achieve this aim.
Notes
This submission to the special issue was managed by former editor-in-chief Gary Weaver.
The ideas developed in this paper were first presented at the Expert Multi-Stakeholder Consultation “Clos-
ing the Governance Gaps: Application of the UN “Protect, Respect, Remedy” Framework, hosted by the
German Federal Ministry for Economic Co-operation and Development, Berlin, 20 January 2010, and at

the Canadian Business Ethics Research Network (CBERN) Business and Human Rights Symposium 25–28
February 2010 Schulich Business School, York University Toronto, hosted by Wesley Cragg. My thanks
to those who gave me comments and feedback at these events, particularly John Ruggie, John Bishop, and
Stepan Wood. Thanks also to Andrea Schemberg for commenting on my initial draft and to Denis Arnold
and Wesley Cragg for encouraging me to consider the link between moral and legal issues raised by the UN
framework. Finally thanks too to Gary Weaver and the three anonymous referees whose instructive comments
helped me to develop a better interaction between law and business ethics in this paper.
1. See UN Special Representative of the Secretary General on the Issue of Human Rights and Trans-
national Corporations and Other Business Enterprises (SRSG) 2008b, 2009a, 2010a, and 2011a.
2. See SRSG 2010b.
3. See, further, Clapham 2006: chap. 6; Muchlinski 2007: 514–18; Kinley 2009: chap. 4; Kobrin 2009:
351–55.
4. See Arnold 2010.
5. See, further, Foster 2000.
6. See Freeman 1994: 417.
7. See, further, SRSG 2010b.
8. SRSG 2008b: para. 18.
9. SRSG 2009a: para. 13.
10. SRSG 2010a: paras. 20–25.
11. SRSG 2011a: Principle 1.
12. SRSG 2011a: Principles 2–8.
13. SRSG 2011a: Principles 9–10.
14. SRSG 2008b: para. 53. The reference to “organs of society” alludes to the use of this phrase in the
UN Universal Declaration on Human Rights.
15. For a full explanation of this technical legal issue, see Reinisch 2005 and Zerk 2006: chap. 2.
16. SRSG 2010a: para. 55.
17. However, in the future, corporations could have binding legal duties under international human
rights law: see generally Zerk 2006.
18. SRSG 2010a: para. 66.
19. According to the Commentary to Principle 11 of the SRSG’s Guiding Principles, which asserts
the responsibility for business enterprises to respect human rights, “The responsibility to respect human
rights is a global standard of expected conduct for all business enterprises wherever they operate. It exists
independently of States’ abilities and/or willingness to fulfil their own human rights obligations, and does
not diminish those obligations. And it exists over and above compliance with national laws and regulations
protecting human rights.”
20. SRSG 2011a: Commentary to Principle 12. The instruments listed are “the International Bill of
Human Rights (consisting of the Universal Declaration of Human Rights and the main instruments through
which it has been codified: the International Covenant on Civil and Political Rights and the International
Covenant on Economic, Social and Cultural rights), coupled with the principles concerning fundamental
rights in the eight ILO core conventions, as set out in the Declaration on Fundamental Principles and Rights
at Work.”
21. Ibid.
23. SRSG 2010a: paras. 67–78.
24. SRSG 2010a: para. 80.
25. SRSG 2010a: paras. 81–83.
27. SRSG 2010a: para. 86. According to the Commentary to Principle 17 of the Guiding Principles,
“Conducting appropriate human rights due diligence should help business enterprises address the risk of legal
claims against them by showing that they took every reasonable step to avoid involvement with an alleged
human rights abuse. However, business enterprises conducting such due diligence should not assume that,
by itself, this will automatically and fully absolve them from liability for causing or contributing to human
rights abuses.”
28. SRSG 2010a: paras. 83–91, see, too, SRSG 2009a: paras. 86–115.
29. SRSG 2009a: paras. 94–98.

30. SRSG 2010a: paras. 91–102.

31. SRSG 2010a: para. 101.
32. SRSG 2010a: paras. 109–13.
33. SRSG 2011a: Principles 25 and 26. The Guiding Principles also consider non-judicial state based
grievance mechanisms (Principle 27) and non-state based grievance mechanisms (Principle 28).
34. See, for example, Sullivan 2005; Baldwin and Cave 1999: 136–37, 335–36.
35. By Article 1 ECHR, “The High Contracting Parties shall secure to everyone within their jurisdiction
the rights and freedoms defined in Section I of this Convention.” See, for example, Young James and Webster
v UK (1981) E.Ct.HR Series A vol.44; X and Y v The Netherlands (1985) E.Ct.HR Series A vol. 91; Arzte
fur das Leben (1988) E Ct.HR Series A vol.139. See, further, Application No.36022/97, Hatton and others
v United Kingdom, Judgment E.Ct.HR (8 July 2003) at http://cmiskp.echr.coe.int (de-regulation of night
flights at Heathrow Airport did not violate Article 8, right to private and family life). See Charles Bourne,
“I’m Noisy, Fly Me,” New Law Journal 15 (August 2003): 1262. See, too, on state liability for noise and
environmental pollution, Powell and Rayner v United Kingdom (E Ct HR Judgment of 21 February 1990),
Series A No. 172; Lopez Ostra v Spain (E Ct HR Judgment) (9 December 1994), Series A No 303-C; Guerra
and others v Italy (E Ct HR Reports 1998-I). See, generally, Drzemczewski 1983: chap. 8; Clapham 2006:
349–420; Jagers 2002: 36–44 and chap. 6; Reinisch 2005: 78–82.
36. The following paragraphs draw on Muchlinski 2010.
37. Kobrin 2009: 357.
38. Hansmann and Kraakman 1991: 1920–21.
39. “Foreign Direct Liability” may be defined as “[a] new wave of legal actions in the UK, US, Canada
and Australia [that] aims to hold parent companies legally accountable in developed country courts for
negative environmental, health and safety, labour or human rights impacts associated with the operations of
members of their corporate family in developing countries. These ‘foreign direct liability’ claims represent
the flip side of foreign direct investment. They complement campaigners’ calls for minimum standards for
multinational corporations by testing the boundaries of existing legal principles, rather than by calling for
new regulation.” Ward 2001: 1. See, further, Muchlinski 2009.
40. SRSG 2010b: 9 shows that in all of the thirteen jurisdictions surveyed, regulators and courts are
extremely reluctant to lift the corporate veil except in cases such as fraud.
41. Mendelson 2002: 1217–25.
42. Muchlinski 2010: 9.
43. Corporate Responsibility Bill 2003, available at http://www.parliament.the-stationery-office.co.uk/
pa/cm200102/cmbills/145/2002145.pdf.
44. On which, see, further, Muchlinski 2007: 314–16.
45. On which, see R v P&O Ferries (Dover) Ltd (1990) 93 Cr.App.R 72. See, generally, Kershaw 2009:
154–59.
46. Corporate Manslaughter and Corporate Homicide Act 2007 s.1(1) and (3).
47. Ibid. s.1(2)(a).
48. Ibid. s.1(4) (c).
49. Ibid. s.1(4) (b).
50. In addition to direct liability of the company, indirect liability can in principle be established under
the doctrine of aiding and abetting, as is shown by case-law under ATCA; see Doe v Unocal Corp. Judgment
of 18 September 2002: 2002 U.S. App. LEXIS 19263 (9th Cir 2002); 41 ILM 1367 (2002), but this has been
limited to criminal liability by the US Court of Appeal, Second Circuit, in the case of Presbyterian Church
of Sudan v Talisman Energy Inc 582 F.3d 244 (2d Cir.2009).
51. Hannigan 2009: 73.
52. See, further, Stevens 2007. Of course, joint and several liability of the company and its officers is
always possible and to be encouraged in cases of personal deceit by the officer: Standard Chartered Bank
v Pakistan National Shipping Corporation (No.2) (2003) 1 BCLC 244 HL.
53. On which, see, generally, Muchlinski 2007: chap. 4.
54. See Muchlinski 2007: 153–60. See, further, SRSG 2007.
55. See Amnesty International 2009: 13.
56. Amnesty International 2009: 16.
57. See, further, International Commission of Jurists 2009: 64–66.
58. See, further, Donovan and Roberts 2006.

59. See SRSG 2007: paras. 39–52.

60. See Steinhardt 2005: 215.
61. See, further, Reinisch 2005.
62. Kobrin 2009: 365.
63. Kobrin 2009: 365–69.
64. SRSG 2011b: 3.
65. SRSG 2011b: 3.
66. SRSG 2011b: 3.
67. SRSG 2011b: 3.
68. See Securities Act 1993, available at http://www.sec.gov/about/laws/sa33.pdf; see, too, Spedding
2009: 4.
69. Spedding 2009: 3.
70. Spedding 2009: 5–6.
71. See, generally, Spedding 2009: chaps. 4 and 7. For a discussion of the “business case” for corporate
social responsibility, see, further, Dunning and Lundan 2008: 649–60; Cragg 2004: 126–27.
72. Spedding 2009: 125.
73. SRSG 2008a: 100. “Finally, based on this sample, corporate failure to respond to allegations of
human rights impacts may result in further backlash and recurrence of complaints. A number of complaints
that went without company response were resubmitted. At a minimum, this indicates that it is in a corpora-
tion’s interest to respond to these allegations without delay. Even though impacts can be complex and easily
multiply, it is equally simple. Managing respect for human rights at the outset of company activities can
eliminate or mitigate the unintended succession of abuses and accompanying risks.”
74. See, further, Treviño and Nelson 2011: chap. 5, “Ethics and Organizational Culture.”
75. See, further, Weaver, Treviño, and Cochran 1999.
76. Joel Bakan argues that the very nature of the corporation as a singularly self interested entity, “unable
to feel any genuine concern for others in any context” and geared exclusively to the pursuit of profits prevents
corporate social responsibility from being anything more than an instrumental device for legitimating the
corporate function (Bakan 2005: 56–59). Though perhaps exaggerated, this concern is important in accept-
ing that a measure of regulatory compulsion may be necessary to ensure responsible corporate behaviour.
77. On which, see, further, Quinn and Jones 1995.
78. The author is grateful to John Bishop for these points made in discussion at the CBERN Conference,
Toronto, 26 February 2010.
79. On which, see R v Sault Ste.Marie (Supreme Court of Canada [1978], 2 S.C.R. 1299); R v Bata
Industires (Ontario Provincial Court [1992], 70 C.C.C. [3rd] 394); Levis v Tetrault (Supreme Court of
Canada, [2006] 1 S.C.R. 420, 2006 SCC 12). See Industry Canada, Corporate Law and Insolvency Policy
at chapter 5 (c) (ii) and (iii), available at http://www.ic.gc.ca/eic/site/cilp-pdci.nsf/eng/cl00425.html.
80. The author is grateful to Stepan Wood for making these points and introducing him to the Canadian
position in discussions at the CBERN Conference, Toronto, 26 February 2010.
81. See US Sentencing Commission 2010. See, further, Treviño and Nelson 2011: 208–09.
82. US Sentencing Commission 2010: section 8B 2.1.
83. See Department of Justice (N.D.).
84. Department of Justice (N.D.): 15.
85. SRSG 2010c: 13.
86. SRSG 2010b: 18.
87. SRSG 2010c: 13
88. See, further, Orts 1992; Freeman, Harrison, Wicks, Parmar, and De Cole 2010: 164–72.
89. ABA 1990.
90. Millon 1991.
91. Freeman et al. 2010: 170, citing Orts 1992: 44.
92. SRSG 2010b: 14.
93. SRSG 2010b: 16–19, where other countries laws are compared to s.172 of the UK Companies Act
2006, whose contents found the basis of question 11 of the Corporate Law Project: “Question 11: More
generally, are directors required or permitted to consider the company’s impacts on non-shareholders, in-
cluding human rights impacts on the individuals and communities affected by the company’s operations?
Is the answer the same where the impacts occur outside the jurisdiction? Can or must directors consider

such impacts by subsidiaries, suppliers and other business partners, whether occurring inside or outside the
jurisdiction? (See, e.g., s.172 UK Companies Act 2006).”
94. Companies Act 2006 (c46), at http://www.opsi.gov.uk/ACTS/acts2006/pdf/ukpga_20060046_en.pdf.
95. SRSG 2009b: 6.
96. See Kershaw 2009: 350.
97. See Re Barings (No.5) Secretary of State for Trade and Industry v Baker (No5) (1999) 1 BCLC 433
endorsed on appeal [2000] 1 BCLC 523 at 535 CA.
98. See Hannigan 2009: 211–18. Professor Hannigan ends her useful review of s.172 thus: “A respect
for human rights is not likely to be influenced by finely crafted sections of the Companies Act,” which she
describes as “legislation devoted to constructing the legislative skeleton for the corporate vehicle” (Hanni-
gan 2009: 218). Rather she sees the answer to human rights and other social claims in “regulation through
domestic law on matters such as planning, environmental and competition law and, in others, to the work of
international organisations and treaties” (Hannigan 2009: 218). In South Africa, s.7 of the Companies Act
of 2008 expressly refers to the South African Bill of Rights and to its promotion through company law. Ac-
cording to the South Africa Company Law Survey undertaken for the SRSG: “[A]lthough the Companies Act
does not contain provisions analogous to section 172 of the UK Companies Act 2006, section 7 of the New
Companies Act read together with section 76 of the New Companies Act appears to indicate that directors
are required to consider the company’s impacts on non-shareholders, which includes, inter alia, ensuring
compliance with the Bill of Rights in the application of company law. Such consideration is subject, it is
submitted by the authors, to the directors acting in the best interests of the company” (para. 11.6) Available
at http://www.reports-and-materials.org/Corp-law-tools-So-Africa-Edward-Nathan-Sonnenbergs-for-Ruggie-
May-2010.pdf.
99. OECD Guidelines for Multinational Enterprises, II General Policies A 2. The OECD Guidelines
were revised in May 2011 and contain a new human rights chapter (Chapter IV) and a general commitment
to the due diligence standard that applies not only to human rights but to all other aspects of the Guidelines
except science and technology, taxation and competition.
100. In this connection, it may be noted that the UK National Contact Point for the OECD Guidelines has
applied the SRSG’s framework in assessing complaints made under the Guidelines against UK companies:
See, for example, United Kingdom Government 2010, recommending that Vedanta use the due diligence
process in the SRSG’s framework to deal with the human rights issues arising out of its investment in a
bauxite mine in India.
101. SRSG 2011a: 17, “Commentary to Principle 18.”
102. SRSG 2011a: 17.
103. SRSG Guiding Principle 13 states:
The responsibility to respect human rights requires that business enterprises:
(a) Avoid causing or contributing to adverse human rights impacts through their own activi-
ties, and address such impacts when they occur;
(b) Seek to prevent or mitigate adverse human rights impacts that are directly linked to
their operations, products or services by their business relationships, even if they have not
contributed to those impacts.
See, further, Global Compact Network How to do Business with Respect for Human Rights 38.
104. On the relationship between legal and business ethics scholarship, see, further, Hasnas, Prentice,
and Strudler 2010.
105. See Heath 2009.
106. See, further, Chandler 1962, 1977.
107. See, further, Bearle and Means 1967.
108. See Jensen and Meckling 1976.
109. See Williamson 1985: 304–05.
110. See Boatright 1994: 394–95; Goodpaster 1991: 69.
111. Boatright 1994: 405.
112. Boatright 1994: 404.
113. Schlossberger 1994: 461.
114. See Boatright 1994: 405.
115. See Heath 2009.

116. Heath 2009: 499–505.

117. Heath 2009: 506.
118. Jensen and Meckling 1976: 310. Jensen and Meckling define a “legal fiction” as “the artificial
construct under the law which allows certain organizations to be treated as individuals” This definition is
meaningless, as corporations are not individuals but complex collective enterprises, and is at odds with, for
example, the organisation liability approach taken under the English law of corporate manslaughter which
clearly establishes the corporate actor as the guilty party not on the basis of some fictive personality but on
the basis of its organisational actions.
119. See Freeman 1994; Freeman et al. 2010.
120. Cragg 2002: 115.
121. Cragg 2002: 115.
122. See Hsieh 2009: 258.
123. Jensen 2002: 237.
124. Jensen 2002: 241–42.
125. Jensen 2002: 243.
126. Jensen 20002: 245.
127. United Kingdom Company Law Review 2000: para. 2.21. See, further, Hannigan 2009: 211–18.
128. See Muchlinski 2007: 354–59.
129. Muchlinski 2007: 342–49.
130. Muchlinski 2007: 375–82; and see, further, SRSG 2010b: 26–31. The SRSG’s survey of corporate
law concludes on the reporting issue: “Most surveys agree that human rights impacts may in some cases
reach the materiality thresholds applicable to ordinary financial reporting, but there is a lack of guidance for
companies on how and when to make these determinations. The implication is that the absence of this guid-
ance may actually place companies at risk of non-compliance with reporting obligations, as they may not be
reporting material information due to a lack of understanding of its relevance. . . . The surveys also indicate
that only a small number of jurisdictions have created express [Corporate Social Responsibility] reporting
obligations. A greater proportion encourages such reporting through corporate governance guidelines and
listing rules.”
131. That author thanks John Bishop for this observation in discussions at the CBERN Conference,
Toronto, 26 February 2010.
132. See Maitland 1994: 450–51.
133. See, further, on responsible investment, Sullivan and MacKenzie 2006; on consumer boycotts, see
the comprehensive list of current boycotts at Ethical Consumer, http://www.ethicalconsumer.org/Boycotts/
currentboycotts.aspx; on shareholder activism, see Dhir 2012.
134. See, for example, Unilever’s Recruitment Brochure for Graduates, at http://www.unilever.co.uk/
Images/U%20Brochure%20PDF_tcm28-239726.pdf, which stresses at 14: “Unilever is a hungry, driven[,]
commercially-minded organisation. But we’re also a company that wants to do the right thing for our con-
sumers, our people and the planet. When it comes to working responsibly, we don’t follow the crowd. . . .
We’ve developed a new philosophy—‘Doing well by doing good’—which means that our ethics are bound
up with the way we do business.”
135. On which, see, further, Zadek 2007.
136. See, further, Freeman et al. 2010: 182–92 and chap. 7; Wicks Freeman and Gilbert 1994; and Hsieh
2009.
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Implementing The New UN Corporate Human Rights Framework Implications For Corporate Law

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Abstract: The UN Framework on Human Rights and Business comprises the

Key words: business, human rights, corporations, corporate governance, mul-

T he UN Special Representative of the Secretary General on Human

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I. The “Protect, Respect and Remedy” Framework

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conduct acknowledged in virtually every voluntary and soft-law instrument related

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to adverse impacts. These include the need to observe international standards in

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II. The Responsibility To Respect: A Legal Duty To Respect?

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Corporate Law and Liability

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Establishing the Mental Element of Liability

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Jurisdictional Obstacles to Liability

International Law and Corporate Liability

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III. The Responsibility to Respect

As noted above the introduction of a corporate responsibility to respect human rights

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Due Diligence and Human Rights Risk

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Due Diligence and a Binding Duty of Care

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and anonymous system for reporting infringements, procedures for responding to

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IV. The Responsibility to Respect

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corporate malpractice at the hands of managers is concerned.105 On the other hand

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30. SRSG 2010a: paras. 91–102.

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59. See SRSG 2007: paras. 39–52.

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116. Heath 2009: 499–505.

American Bar Association Committee on Corporate Laws. 1990. “Other Constituencies

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. 2009. “The Provision of Private Law Remedies against Multinational

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