Human Rights Due Diligence and Corporate Governance

Abstract

To meet its responsibility to respect human rights under the 2011 UN Guiding Principles and Business and Human Rights, a corporation must conduct human rights due diligence. To be effective, human rights due diligence must be embedded into corporate culture through effective leadership that is firmly grounded in corporate governance. Even in the most shareholder-protective jurisdiction (the U.S. State of Delaware), corporate fiduciaries have a duty of loyalty to act affirmatively in good faith to promote the best interests of the corporation. Meeting this fiduciary duty means applying recognized corporate governance management systems to identify and address the strong business case for respecting human rights, as well as the wide ranging mixture of legal risks of corporate involvement in business in human rights abuse. Legal risks are increasingly arising from the evolution of human rights due diligence from soft law to hard law, and include mandatory human rights due diligence laws, evolving legal standards of duty of care, and private law. As corporate fiduciaries, corporate legal officers play key roles in integrating human rights due diligence into corporate governance, not only by advising the board and senior management on their legal duties, but also by exercising their leadership roles within the company. Examples of leadership by corporate legal officers include going beyond advising on how to avoid legal liability, taking the organizational lead in avoiding involvement in gross human rights abuse, and not abusing legal privilege to chill open discussion of human rights problems. Going forward, two issues to watch closely are the fate EU directors’ duties reform initiative, and the use of human rights due diligence as a defense to legal liability.