Beyond public relations: bringing the rule of law to corporate codes of conduct in the global economy

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PurposeThis paper aims to examine the impact of a US law, called Alien Tort Statute (ATS), on the overseas operations of multinational corporations with regard to human rights abuses. The law has the potential of creating substantial financial liabilities and operational risks for the multinational corporations (MNCs) by allowing foreign citizens to bring cases in the US courts for acts committed in a foreign country.Design/methodology/approachThe paper reviews the relevant case law and the decisions of the US highest court in outlining the expanding scope of corporate culpability and financial liability.FindingsThe paper undertakes a careful critique of the arguments made by the MNCs as to the scope and reach of the law. It concludes that these arguments are not tenable in terms of MNCs' own professed commitment to protecting human rights. It also finds that the law's intent as interpreted in various decisions of the US federal courts has led to further clarity and specificity as to obligations of the MNCs.Originality/valueMNCs must take concrete steps to ensure that their overseas operations are not implicated in human rights abuses. Specific approaches are suggested to comply with the law.