“You knock, and you knock, and you knock, and you knock, and you knock, and one day
they are going to hear”
Pakistani Human Rights Lawyer and Activist
With the Corporate Social Responsibility (CSR) movement gaining more and more momentum in the consumer, investment and legal spheres, expectations towards companies have increased significantly. The U.S. is one of the top players not only in what concerns the economic aspects of globalization but also the political ones. Given the important status of the U.S. in this field, is it acting responsibly and leading by example? Is it respecting internationally agreed upon standards and best practices? How did the U.S. decide to implement mechanisms that would allow civil society to bring to light violations by corporations of basic social and environmental rights? This article will analyze these questions to provide an overview of how CSR has been integrated in the American regulatory system and what the current state is.
In the U.S., although corporate law is enacted separately in each individual state, it is possible to say that legislators and courts have largely endorsed the shareholder primacy doctrine. This makes the adoption of integrated and sustainable decision-making processes by CEOs and boards of directors more difficult but not impossible. As stated by the authors of a legal study on CSR relying on the situation in the state of Delaware “ … integrated decision-making is not contrary to the duties and mandate of the directors of a Delaware corporation. However, neither is integrated decision-making required or specifically encouraged. Furthermore …to the extent that it is permitted … [it] is contingent on whether it can be ultimately linked to the best interests of the shareholders”. The shareholder primacy principle is thus foundational in the analysis of CSR in the American legal system.
CSR encompasses issues that can be purely internal, but also situations involving the behavior of corporations doing business abroad. In cases of domestic issues answers need to be found by examining the internal laws and regulations dealing with, amongst others, labor relationships, consumer protection, the environment and corruption. Although it is clear that much still needs to be done on this level, most of the worst violations are committed by multinational companies exercising their activities in countries with a weak rule of law and a lack of good governance. So what are the options that are available to make American corporations accountable for their behavior abroad?
The US has enacted two laws that deal with specific situations concerning corporate behavior outside of its territorial boundaries. The first one is the Foreign Corrupt Practices Act of 1977 (FCPA) which incriminates companies that make corrupt payments to foreign officials to win contracts abroad. The second one is the Alien Tort Claims Act (ATCA) that gives American courts jurisdiction over a civil action brought by an alien for a tort committed in violation of the law of nations (customary international law) or a treaty of the U.S.
While the FCPA is considered a robust legal accountability measure in the U.S. it is limited to transnational bribery. The scope of the ATCA is much broader, but the alleged wrong committed must be severe in order for a victim to be able to make a claim. In fact, a court held that the ATCA applies only “to shockingly egregious violation […] of international law”. An additional limitation is the fact that, while not all, some federal circuit courts have denied subject matter jurisdiction over claims brought against corporations. Because of these and other important limitations less than a handful of cases have proceeded to trial in recent years. Nonetheless, legal experts tend to agree that the mere risk presented by potential liability cases under ATCA is a strong incentive for corporations to behave in a more socially responsible manner.
While this is a positive point in the advancement of CSR in the U.S., it is not enough. In fact, one can easily imagine that the mere risk of prosecution will not encourage all corporations to adopt exemplary behavior. Because of the existence of such a hole in the regulatory systems of many, if not all, developed countries where most Multinational Enterprises (MNEs) are headquartered, states came together to create an international instrument addressing the issue. The result was the adoption of the Organization for Economic Cooperation and Development (OECD) Guidelines for Multinational Enterprises (the Guidelines). The Guidelines are “recommendations addressed by governments to multinational enterprises operating from adhering countries. They provide non-binding principles and standards for responsible business conduct in a global context […]”. Even if the principles themselves are not obligatory for corporations, the MNE Guidelines are unique in that they are supported by an exceptional monitoring mechanism. The establishment of this mechanism is made mandatory for OECD member countries, one of which is the U.S., and other non-members who adhere to the Guidelines, by the Decision of the Council on the OECD Guidelines for Multinational Enterprises (the Decision of the Council). It consists of National Contact Points (NCPs), these are “agencies established by adhering governments to promote and implement the Guidelines”. To exert their implementation function, NCPs will analyze grievances brought forth by individuals or NGOs alleging that a corporation has failed to behave according to the Guidelines in so called “specific instances” and will publish a “final statement”. Besides the fact that countries must establish such a mechanism to promote and implement the Guidelines, the Decision of the Council does not specify clearly what these functions entail and what precisely NCPs are empowered or obliged to do.
The U.S. decided to house its NCP in the Bureau of Economic and Business Affairs at the Department of State. A study of the U.S. NCP conducted in 2010 concluded that, at that time, the NCP was represented only by a website providing “little more than a recital of the basic provision of the OECD Guidelines themselves”. The phone numbers listed on the website were disconnected and no specific instances or other information was available to demonstrate that the NCP was engaging in any sort of activities. Since then things have changed. In September of 2010 the administration engaged in a review process of the U.S. NCP, it held a public meeting and opened up an opportunity for stakeholders to submit written comments concerning this process. A total of 34 comments were received.Today, the NCP webpage includes not only the text of the Guidelines in English, French and Spanish, but also specific information on the role of the U.S. NCP and detailed documents on how to submit a specific instance as well as explanations in English, French and Spanish of the procedures it applies when dealing with one. Since 2012, the U.S. NCP has completed 18 specific instances and three of them went to the mediation stage in 2015 and 2016.
These modifications made under the Obama administration constitute a significant improvement over the previous situation. As one legal expert in the subject points out “This change seem[s] to suggest a greater sensitivity of the application of the MNE Guidelines and a greater openness to the use of specific instance claims […]” However, there is still a substantial way to go. In fact, since the Guidelines are not mandatory, the only impact that specific instances can have over corporations is purely reputational. Thus, it is vital that final statements are not only published but include detailed information on the company involved as well as an affirmation or a rejection of the allegations. Even though some final statements have been published, the information contained in them is very limited and transparency still remains an issue. More importantly, however, is that the U.S. NCP refuses to make a determination on whether the Guidelines were disregarded and merely proposes its mediation services when appropriate.
All these aspects merit further analysis. Does the problem lie in the unwillingness of the U.S. to establish a more powerful mechanism that will allow the public to know when corporations are behaving inconsistently with national and international determined expectations or in the inherit flaws of the international instruments establishing those mechanisms? For instance, there is a risk inherent to the flexibility of the system, the fact that the Guidelines are not legally binding, in situations of important political fluctuations. It is interesting to remark that in 2017, since the change in administration, the US NCP only closed two Specific Instance Cases as opposed to five in 2016. No Specific Instance cases have been closed since the beginning of 2018.
For now, it seems that in the absence of stricter regulations companies are taking things into their own hands, at least to some extend and in matters touching domestic issues.  The question is whether this is enough and, especially, if the same reactions could be seen for grave issues taking place abroad as opposed to ‘next door’ or ‘in our communities’. The answer is certainly much more nuanced.
- Ashley Walter, Introducing Corporate Social Responsibility Law, 42 No. 4 Law Prac. 12 (2016).↑
- Alex Gray, The World’s 10 Biggest Economies in 2017, World Economic Forum (Mar. 9, 2017), https://www.weforum.org/agenda/2017/03/worlds-biggest-economies-in-2017/ (“The economy of the United States is the largest in the world. At $18 trillion, it represents a quarter share of the global economy (24.3%), according to the latest World Bank figures.”).↑
- Ian Bremmer, These Are the 5 Reasons Why the U.S. Remains the World’s Only Superpower, Time (May 28, 2015), http://time.com/3899972/us-superpower-status-military/. Michael Kerr, Richard Janda & Chip Pitts, Corporate Social Responsibility- A Legal Analysis 133- 135 (Lexis Nexis Canada, 2009).↑
- Id. at 136-137.↑
- Id. at 133 (This state was selected by the authors for the study because it is by far the most chosen US state for business incorporation).↑
- Id. at 138.↑
- 15 U.S.C. §§ 78m, 78dd-1, 78dd-2, 78ff.↑
- Bribery, West’s Encyclopedia of American Law 118-120 (2nd ed., Vol. 2, 2005).↑
- 28 U.S.C. §1350.↑
- 3 C.J.S. Aliens § 188 (2017).↑
- Kerr, Janda & Pitts, supra note 5 at 434.↑
- Zapata v. Quinn, 707 F.2d 691, 692 (2d Cir. 1983) (per curiam).↑
- 3 C.J.S. Aliens § 188 (2017).↑
- See generally Douglas M. Branson, Holding Multinational Corporations Accountable? Achilles’ Heels in Alien Tort Claims Act Litigation, 9 Santa Clara J. Int’l L. 227 (2011) (Presenting a detailed analysis on the limitations of the ATCA in relation to holding foreign corporations accountable).↑
- Kerr, Janda & Pitts, supra note 5 at 434.↑
- Id. at 431-433.↑
- OECD, OECD Guidelines for Multinational Enterprises, 2011 Edition (Oct. 19, 2011), available at http://www.oecd.org/daf/inv/mne/48004323.pdf [hereinafter OECD Gudelines].↑
- Id. at 3.↑
- Bernadette Maheandrian, Calling for Clarity: How Uncertainty Undermines the Legitimacy of the Dispute Resolution System Under the OECD Guidelines for Multinational Enterprises, 20 Harv. Negotiation L. Rev. 205, 205 (2015) (“[O]ne of the only multilaterally-endorsed grievance mechanisms promoting corporate social responsibility”).↑
- Nicola Bonucci & Gita Kothari, Organization for Economic Cooperation and Development (OECD), in Max Planck Encyclopedia of Public International Law, § 48 (2013) [“The unique feature of the OECD Guidelines is their legally binding implementation mechanism created by means of an OECD decision.”]; see also OECD Guidelines at 29-31.↑
- OECD Guidelines at 3.↑
- Id. at 68.↑
- Id. at 73.↑
- Maheandrian, supra note 21 at 218.↑
- See U.S. National Contact Point, U.S. Dep’t of St., https://www.state.gov/e/eb/oecd/usncp/us/index.htm.↑
- Matthew H. Kita, It’s Not You, It’s Me: An Analysis of the United States’ Failure to Uphold its Commitment to OECD Guidelines for Multinational Enterprises in Spite of No Other Reliable Alternatives, 29 Penn St. Int’l L. Rev. 359, 378 (2010).↑
- Notice of Public Meeting and Opportunity to Submit Written Comments Concerning the Administration’s Review of the U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises, 75 Fed. Reg. 57826 (Sep. 22, 2010).↑
- Notice of Public Meeting and Opportunity to Submit Written Comments Concerning the Administration’s Review of the U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises, U.S. Dep’t of St., Docket DOS-2010-0401, https://www.regulations.gov/docket?D=DOS-2010-0401.↑
- The OECD Guidelines and Due Diligence, U.S. National Contact Point, U.S. Dep’t of St., https://www.state.gov/e/eb/oecd/usncp/oecdguidelines/index.htm↑
- The USNCP’s Three Roles, U.S. National Contact Point, U.S. Dep’t of St., https://www.state.gov/e/eb/oecd/usncp/us/index.htm.↑
- United States National Contact Point Specific Instance Submission Guidance, U.S. Dep’t of St., https://www.state.gov/e/eb/oecd/usncp/specificinstance/filing/index.htm. U.S. NCP Procedures for Specific Instances Under the OECD MNE Guidelines (2011), available at https://www.state.gov/documents/organization/273421.pdf; Procedimientos para casos específicos del Punto de Contacto Nacional de los EE. UU. (PCN EE. UU.) Directrices de la Organización de Cooperación y Desarrollo Económicos (OCDE) sobre las Empresas Multinacionales (EM) (2011), available at http://www.state.gov/documents/organization/273436.pdf; Procédures du Point de Contact National (PCN) pour les États‐Unis en Cas de Circonstance Spécifique ‐ Principes directeurs de l’OCDE pour les Entreprises Multinationales (2011), available at http://www.state.gov/documents/organization/273435.pdf.↑
- Chart of U.S. NCP Specific Instance Cases Since 2000, available at https://www.state.gov/documents/organization/275287.pdf↑
- Larry Catá Backer, Part 13: The U.S. National Contact Point: Corporate Social Responsibility Between Nationalism, Internationalism and Private Markets Based Globalization, Law at the End of the Day Blog (Feb. 14, 2013), http://lcbackerblog.blogspot.com/2013/02/part-13-us-national-contact-point.html. Specific Instance Final Statements, U.S. Dep’t of St., https://www.state.gov/e/eb/oecd/usncp/specificinstance/finalstatements/index.htm.↑
- See The USNCP’s Three Roles, U.S. National Contact Point, U.S. Dep’t of St., https://www.state.gov/e/eb/oecd/usncp/us/index.htm.↑
- See generally Maheandrian, supra note 21.↑
- Specific Instance Final Statements, supra note 38↑
- Julie Creswell & Michael Corkery, Walmart and Dick’s Raise Minimum Age for Gun Buyer to 21, The New York Times (Feb.28,2018), https://www.nytimes.com/2018/02/28/business/walmart-and-dicks-major-gun-retailers-will-tighten-rules-on-guns-they-sell.html. (This news article explains how some major American retail corporations decided to no longer sell items resembling assault-style rifles and to raise minimum age for gun buyer to 21 after the school shooting in Parkland, Fla.).↑