Review Links Corporate and Securities Law and Human Rights

I am pleased to share with you the results of a research project that examined whether and how corporate and securities law in more than 40 jurisdictions around the world currently fosters corporate respect for human rights. This project was prepared as part of my mandate as the Special Representative of the UN Secretary-General on Business and Human Rights.

To my knowledge, this is the first in-depth, comparative study of the links between human rights and corporate and securities law. More than 20 leading corporate law firms from around the world participated in the research on a pro bono basis, with Weil, Gotshal and Manges contributing from the US side.

The project forms part of my work to operationalize what is now commonly known as the UN Protect, Respect and Remedy Framework for business and human rights. The Framework was welcomed unanimously by the UN Human Rights Council in 2008 and it enjoys broad support from all stakeholder groups. It rests on three differentiated yet complementary pillars: the state duty to protect against human rights abuses by third parties, including business, through appropriate policies, regulation, and adjudication; the corporate responsibility to respect human rights, which in essence means to act with due diligence to avoid infringing on the rights of others; and greater access by victims to effective remedy, judicial and non‐judicial. This project focuses on the role of states regarding corporate and securities law and policy, but it is also relevant to the concerns of the other two pillars.

An overarching trends paper from the project is available here.  It has a brief Executive Summary (pages 1-3) and Annexes B and C set out the participating firms as well as the jurisdictions covered. Annex A provides the common research template upon which the firms were asked to base jurisdiction‐specific surveys. The template explores subjects such as incorporation and listing; directors’ duties; reporting; and stakeholder engagement. Please note that the trends paper does not present views on legal and policy reform options in this area, nor does it independently assess the firms’ interpretation of existing law.

Here are the main conclusions:

• 1. Current corporate and securities law does recognize human rights to a limited extent. Put simply, where human rights impacts may harm companies’ short or long term interests if they are not adequately identified, managed and reported, companies and their officers may risk non-compliance with a variety of rules promoting corporate governance, risk management and market safeguards. Even where the company itself is not at risk, several states recognize through their corporate and securities laws that responsible corporate practice should not entail negative social or environmental consequences, including for human rights.
• 2. At the same time, there is a lack of clarity in corporate and securities law regarding not only what companies or their officers are required to do regarding human rights, but in some cases even what they are permitted to do. Moreover, there appears to be only limited (to non-existent) coordination between corporate regulators and government agencies tasked with implementing human rights obligations. As a result, companies and their officers appear to get little if any official guidance on how best to oversee their company’s respect for human rights.

Some of the jurisdiction-specific surveys are already available here on the project website; others will be posted as editing is finalized.

To date, two consultations have been held to inform this project. The first, attended by participating law firms, was hosted in New York by Weil, Gotshal & Manges in June 2009. It explored current state practice, including implementation and enforcement in this area.  A summary report is available here. The second was a multi‐stakeholder expert consultation convened by York University’s Osgoode Hall Law School in Toronto in November 2009. Participants discussed potential policy and legal reform in this area and a summary report is available here.

I am currently working on final Guiding Principles on the UN Framework to be presented to the UN Human Rights Council in June 2011. In doing so I will consider what guidance might be appropriate to include on the issues explored in this project. Accordingly it is important that I continue to hear feedback from experts in the corporate governance field from all stakeholder groups and I encourage you to provide any thoughts you might have on this project. Submissions may be sent to my legal advisor, Vanessa Zimmerman, at [email protected].