LEGAL OBLIGATIONS OF COMPANIES REGARDING HUMAN RIGHTS AND CORPORATE GOVERNANCE

This article is written by Advocate Bhawna Puri, an intern under Legal Vidhiya

ABSTRACT

This research article explores the legal obligations that companies have in relation to human rights and corporate governance. It delves into the importance of fair and responsible practices within businesses, emphasizing the need for respect and protection of human rights. The article highlights the various legal obligations companies must adhere to, including providing safe working conditions, fair wages, and non-discrimination policies. Additionally, it examines the significance of corporate governance in ensuring transparency, accountability, and ethical decision-making. Companies have a duty to respect and protect human rights, not only within their own operations but also throughout their supply chains. In terms of human rights, companies are expected to uphold principles such as providing safe working conditions, fair wages and non-discrimination policies. They should also respect the rights of indigenous communities, protect the environment, and avoid any involvement in human rights abuses. It’s important for companies to stay up-to-date with these laws and adapt their practices accordingly. Overall, the legal obligations of companies regarding human rights and corporate governance aim to create a fair and ethical business environment that respects the rights and well-being of all stakeholders. It’s a crucial aspect of responsible and sustainable business practices. The research article concludes by emphasizing the role of these legal obligations in creating a fair and ethical business environment that respects the rights and well-being of all stakeholders.

Keywords

Company, Human Rights, corporate governance, laws, business

INTRODUCTION

In today’s globalized world, companies are increasingly being held accountable for their impact on human rights and the environment. Governments, international organizations, and civil society have recognized the need for legal obligations to regulate business practices and ensure that companies operate ethically and responsibly. Companies have a responsibility to respect and uphold human rights, both within their own operations and throughout their supply chains. This means treating employees, customers, and communities fairly and ethically. In terms of corporate governance, companies are expected to have effective systems in place to ensure transparency, accountability, and responsible decision-making. This includes having a clear code of conduct, promoting diversity and inclusion, and maintaining strong ethical standards. Now, let’s dive a bit deeper into these topics. Human rights obligations for companies can include things like ensuring safe working conditions, fair wages, and non-discrimination policies. They should also respect the rights of indigenous communities, protect the environment, and avoid any involvement in human rights abuses. On the corporate governance side, companies are expected to have a board of directors that oversees the company’s activities and ensures compliance with relevant laws and regulations. They should also have mechanisms for stakeholders to voice their concerns and hold the company accountable. It’s important to note that the specific legal obligations can vary depending on the country and industry. Laws and regulations related to human rights and corporate governance are constantly evolving, so it’s crucial for companies to stay informed and adapt their practices accordingly.

OBJECTIVE

The objective of legal obligations for companies regarding human rights and corporate governance is to ensure that businesses operate ethically, respect human rights, and maintain responsible practices. This includes promoting fair working conditions, non-discrimination policies, and environmental sustainability. Companies should strive to uphold transparency, accountability, and ethical decision-making in their operations. By meeting these legal obligations, companies can contribute to a more equitable and sustainable business environment, fostering trust and positive social impact.

WHAT ARE HUMAN RIGHTS?

Human rights are the basic rights and freedoms that every person is entitled to simply because they are human. These rights are inherent and should be respected and protected by governments and societies. They include things like the right to life, liberty, and security of person, the right to be free from torture or cruel treatment, the right to freedom of thought, expression, and religion, the right to education, and many more. Human rights ensure that every individual is treated with dignity, fairness, and equality regardless of their background. These rights are universal and apply to all human beings, without any form of discrimination. International human rights law plays a crucial role in guaranteeing and protecting these rights. It establishes obligations for states to promote and safeguard the fundamental freedoms and human rights of individuals and groups. Treaties, customary international law, and general principles form the basis of international human rights law.^[1] The Universal Declaration of Human Rights, adopted in 1948, serves as the foundation of modern human rights law. It was created to prevent the recurrence of the atrocities witnessed during World War II. The Declaration is further reinforced by the International Covenant on Civil and Political Rights and the International Covenant on Economic, Social and Cultural Rights, both of which were established in 1966. In the realm of workers’ rights, the International Labour Organization (ILO) plays a significant role. These include freedom of association and collective bargaining, the elimination of compulsory labor, the abolition of child labor, and the elimination of employment and occupation discrimination. The ILO has developed eight core conventions that cover these principles and rights. It’s inspiring to see the global commitment to upholding human rights and ensuring fair treatment for all individuals. ^[2]

HUMAN RIGHTS AND CORPORATE GOVERNANCE

Human rights are becoming increasingly important in corporate governance, as they are closely tied to business ethics and enterprise risk management. When companies neglect human rights practices, it not only violates the rights of individuals but can also have significant consequences for the company itself. In some cases, it can even pose a risk to the company’s reputation and relationships with stakeholders. Considering human rights as simply a reputational or non-financial risk is not enough. Poor human rights practices can have a direct impact on stakeholder relations, financial performance, and the long-term value of a company. That’s why it’s crucial for long-term investors to pay attention to human rights as part of their investment analysis, valuation, and engagement with companies. In this Viewpoint report, the focus is on how companies and boards should oversee and manage human rights practices, as well as how investors can better understand and address material human rights risks and concerns. It raises important questions that need to be addressed to ensure that human rights are given the attention they deserve in corporate governance.^[3]

THE UNGUIDING PRINCIPLES ON BUSINESS AND HUMAN RIGHTS

In June 2011, the United Nations Human Rights Council gave its endorsement to the Guiding Principles on Business and Human Rights, which were presented by Professor John Ruggie, the Special Representative of the United Nations Secretary-General. This endorsement made the Guiding Principles the global standard that all countries and businesses are expected to follow when it comes to business and human rights. Although the Guiding Principles themselves are not legally binding, they provide a detailed explanation of how existing standards and practices should be applied by both governments and businesses. They cover various aspects that are addressed in international and domestic laws. So, while the Guiding Principles may not have the force of law on their own, they serve as a valuable framework for understanding the responsibilities of States and businesses in relation to human rights. It’s an important step towards ensuring that business activities are conducted in a way that respects and protects human rights. The Guiding Principles have three main parts, or pillars: protect, respect, and remedy. The protect pillar is all about preventing human rights abuses in company operations. It means that governments and companies should take steps to make sure that human rights are not violated. The respect pillar focuses on treating everyone fairly and not harming their rights. It means that companies should be respectful and not discriminate against anyone. The remedy pillar is about providing solutions if human rights abuses happen. It means that governments and companies should have ways to address the harm caused and help those affected. By following these pillars, governments and companies can work together to prevent human rights abuses and take action if they do occur. It’s about being fair and accountable.^[4]

The State Duty to Protect

Guiding Principles are established in international human rights law that governments have a responsibility to protect against human rights abuses by all actors, including businesses. This means that governments must take action to prevent, investigate, punish, and provide remedies for any human rights violations that occur within their own country. They suggest that governments should clearly communicate their expectations to companies based in their territory. They should expect these companies to respect human rights in all countries and contexts where they operate. Governments have a duty to make sure that businesses don’t violate human rights. They should take action if any violations occur within their own country. They should also tell companies based in their country to respect human rights wherever they do business.

Business Enterprises Should Respect Human Rights

The responsibility to respect human rights is a global standard that applies to all business enterprises, regardless of where they operate. It goes beyond the obligations of states and compliance with national laws. Even if states are unable or unwilling to fulfill their human rights obligations, businesses still have a responsibility to respect human rights. When it comes to addressing adverse human rights impacts, businesses should take adequate measures to prevent, mitigate, and, if necessary, provide remedies. While businesses can undertake additional commitments and activities to support and promote human rights, this should never be used to offset a failure to respect human rights throughout their operations. It’s also crucial for businesses not to undermine states’ abilities to fulfill their human rights obligations. This means avoiding actions that could weaken the integrity of judicial processes.

The Corporate Responsibility to Respect Applies to all Internationally Recognized Human Rights

Business enterprises have a responsibility to respect all internationally recognized human rights. This means they need to make sure they don’t do anything that harms people’s rights, like their right to be treated fairly, their right to be safe, or their right to have a good standard of living. There are certain important human rights that everyone agrees on, like the right to life, freedom of speech, and the right to work. These rights are outlined in documents like the Universal Declaration of Human Rights. Business enterprises should follow these rights as a standard for how they treat people. It’s also important to remember that respecting human rights is different from following the law. Even if something is legal, it doesn’t mean it’s always the right thing to do. Businesses should go above and beyond the law to make sure they’re respecting human rights. In some cases, businesses may need to pay extra attention to specific groups of people who might be more vulnerable to human rights issues. This could include indigenous peoples, women, minorities, children, people with disabilities, and migrant workers and their families. During times of war, businesses should also follow the rules of international humanitarian law.

Access to Remedy

One of the key principles of the international human rights system is that when a right is violated, the victims should have access to a fair and effective remedy. The Guiding Principles affirm that it’s the responsibility of the government to ensure that when human rights are violated by companies within their territory or jurisdiction, the affected individuals have access to a proper remedy. This duty of the government includes making sure that domestic judicial mechanisms are capable of addressing human rights abuses committed by businesses. The government should not create barriers, like high administrative fees or a lack of language interpreters that prevent victims from presenting their cases. It’s not just about strengthening the court system; the government should also establish non-judicial grievance mechanisms that can effectively handle complaints related to business-related human rights issues. It’s important to note that the access to remedy principles don’t only apply to governments. They also state that businesses themselves should provide or participate in effective mechanisms for addressing grievances from individuals and communities impacted by their operations. Additionally, collaborative initiatives involving multiple stakeholders and human rights-related standards can also contribute to providing effective access to remedy. ^[5]

The Responsibility of Business Enterprises to Respect Human Rights Applies to all Enterprises Regardless of their Size, Sector, Operational Context, Ownership and Structure

This means all businesses, no matter how big or small, responsibilities to respect human rights have. They need to make sure they don’t do anything that harms people’s rights, like their right to be treated fairly and their right to be safe. It doesn’t matter what kind of business it is or how it’s set up, this responsibility applies to everyone. Businesses should think about how their actions might affect people’s rights and take steps to avoid causing any harm. For example, they should make sure their employees are treated well, that they’re not discriminated against, and that they have a safe working environment. They should also be mindful of their impact on the communities where they operate and make sure they’re not causing any harm to people or the environment. By respecting human rights, businesses can contribute to a fair and just society where everyone’s rights are protected.

Responsibility to Respect Human Rights, Business Enterprises Should have in Place Policies and Processes Appropriate to their Size and Circumstances

When it comes to respecting human rights, businesses need to have policies and processes that fit their size and situation. It means they should have rules and ways of doing things that work for them. For bigger businesses, they might need more complex policies and processes because they’re larger and have more influence. They should have clear guidelines and ways to make sure they’re respecting human rights in everything they do, including their supply chains. Smaller businesses can have simpler policies and processes, but they still need to care about human rights. They can adjust their approach to fit their size and what they can handle. The important thing is that they’re doing their best to respect human rights. The main idea is that businesses, no matter their size, should have policies and processes that make sense for them and help them respect human rights.^[6]

BUSINESS & HUMAN RIGHTS IN INDIA

In India, the protection of human rights is enshrined in the country’s Constitution, which was adopted in 1950. The Constitution guarantees various fundamental rights to its citizens, such as the right to equality, freedom of speech and expression, and the right to life and personal liberty. These rights are essential for promoting a just and inclusive society. Additionally, India is a signatory to various international human rights conventions, which further emphasize the importance of protecting human rights. The government, along with civil society organizations, plays a crucial role in ensuring the implementation and enforcement of these rights. The National Human Rights Commission (NHRC) is responsible for protecting and promoting human rights in India. There are also special commissions for different groups, like women, minorities, and children. The government has made it mandatory for companies to spend a portion of their earnings on Corporate Social Responsibility (CSR), which means they have to do good things for society. The expectations for CSR have grown from just giving money to actually considering how a business can benefit the communities it operates in. The government is also working on a plan to make sure businesses respect human rights. Some companies have already made their human rights policies public and are following national and international guidelines. The National Guidelines on Responsible Business Conduct (NGRBC) are a set of rules that guide businesses in India to contribute to development goals while also making profits they consist of nine principles and their core elements, which are based on the United Nations Guiding Principles (UNGP) and the Sustainable Development Goals (SDGs). The NGRBC encourages businesses to operate responsibly and sustainably and to influence their suppliers, vendors, distributors, partners, and other stakeholders to follow these guidelines. The aim is to make companies more responsible and accountable while creating a whole ecosystem that aligns with the “Protect, Respect & Remedy” framework of the UNGPs. The NGRBC is designed to be a universal framework for all businesses, regardless of their size, sector, ownership, structure, or location. It’s meant to be easy for all businesses in India, including small and medium-sized enterprises (SMEs), to adopt and implement these guidelines. While the National Guidelines on Responsible Business Conduct (NGRBC) aren’t legally binding, it’s expected that all businesses, including foreign multinational corporations (MNCs) operating in India and Indian MNCs with overseas operations, adhere to these guidelines. They outline the following expectations:

• It’s expected when multinational companies invest or operate in India that they follow the NGRBC. If their subsidiary companies are listed in India and rank among the top 500 companies, they have to disclose how they align their business with the guidelines. Additionally, they need to report on mandatory disclosures. This helps ensure transparency and accountability in their responsible business practices.
• If multinational companies are not operating in India but they source products or services from India, it’s important for them to make sure that their suppliers follow the NGRBC. And if these suppliers happen to be among the top 500 listed companies in India, they must report on the mandatory disclosure requirements. This helps promote responsible and sustainable practices in the supply chain and encourages transparency in business operations.
• Indian multinational companies that have operations in other countries should make sure that their entire business operations follow the guidelines and operate responsibly. If these companies are among the top 500 listed companies in India, they must report on the mandatory disclosure requirements for all their operations. This helps promote transparency and accountability in their global business practices.^[7]

HUMAN RIGHTS OBLIGATIONS OF COMPANIES IN INDIA

Companies have legal obligations regarding human rights that come from different sources. These sources include national laws, international laws, and voluntary commitments made by the companies themselves. In India, these obligations can be found in the Companies Act and the Constitution. While it may be argued that other statutes or labor laws address human rights, it is important to recognize that basic human rights and the right to mental health are also crucial considerations. Merely including a few provisions in the Companies Act may not be sufficient to fulfill these obligations. To fully meet their human rights obligations, companies must go beyond mere compliance with the law. They should strive to create a safe and inclusive environment that respects and protects the fundamental rights of their employees. This includes ensuring equal opportunities, fair treatment, and addressing issues related to mental health. By actively addressing human rights concerns and promoting a culture of respect, companies can contribute to the overall well-being and dignity of their employees, while also upholding their legal obligations. For example the concept of “lifting the corporate veil” refers to a legal principle where the company’s separate legal identity is disregarded, and the actions of the company are attributed to its owners or directors. This can happen in situations where the company is involved in fraudulent or illegal activities. Now, when it comes to the right to information for employees, it’s important to consider their role in the company. Employees have the right to know about the company’s operations and how it is being managed. This includes information about its financial health, decision-making processes, and other important aspects. Having access to this information is not only about legal compliance but also about creating a positive work environment. When employees are well-informed and have a clear understanding of the company’s workings, it can contribute to their mental satisfaction and motivation. This, in turn, can lead to better work attitudes, increased productivity, and the overall growth of the company. Ensuring transparency and open communication within the company is not only a legal obligation but also a way to foster trust and engagement among employees.^[8] The three legislations are particularly noteworthy for companies doing business in India:

• Sexual Harassment of Women in the Workplace (Prevention, prohibition and Redressal) Act (SHWW Act), 2013

• Protection of Children from Sexual Offences (POSCO) Act, 2012

• Decriminalization of homosexuality and recognition of transgender as a 3rd gender in a landmark judgment by the Supreme Court of India in 2018 ^[9]

CONCLUSION

In conclusion, this research article has shed light on the legal obligations of companies regarding human rights and corporate governance. It has highlighted the importance of fair and responsible practices, emphasizing the need for companies to respect and protect human rights within their operations and supply chains. This has also explored the significance of corporate governance in ensuring transparency, accountability, and ethical decision-making. By fulfilling these legal obligations, companies contribute to a fair and ethical business environment that respects the rights and well-being of all stakeholders.

REFERENCES

1. Dallas, G., & Compere, L. (2015, May 22). Human rights through a corporate governance lens. The Harvard Law School Forum on Corporate Governance https://corpgov.law.harvard.edu/2015/05/22/human-rights-through-a-corporate-governance-lens/ visited on 28 April 2024
2. What are human rights? | Ohchr. (n.d.-a). https://www.ohchr.org/en/what-are-human-rights visited on 28 April 2024
3. Human rights through a corporate governance lens – ICGN. (2015, April) https://www.icgn.org/sites/default/files/2021-05/1.%20Human%20rights%20through%20a%20corporate%20governance%20lens.pdf visited on 28 April 2024
4. OHCHR (n.d.-a). https://www.ohchr.org/sites/default/files/Documents/Publications/HR.PUB.12.2_En.pdf visited on 29 April 2024 
5. The UN Guiding Principles on business and … (n.d.-a) https://www.ohchr.org/Documents/Issues/Business/Intro_Guiding_PrinciplesBusinessHR.pdf visited on 29 April 2024
6. Nations, U. (n.d.) Guiding principles on business and human rights https://www.ohchr.org/sites/default/files/documents/publications/guidingprinciplesbusinesshr_en.pdf  visited on 29 April 2024
7. Kitrhona Cerri et al., 8, Business and Human Rights Gateway (Aug. 2019), https://humanrights.wbcsd.org/wp-content/uploads/2017/11/WBCSD-CII_Business-Human-Rights-in-India_FINAL.pdf  visited on 29 April 2024
8. ARJUN PAL, Company Law and Human Rights: A Necessity or Redundancy?, https://deliverypdf.ssrn.com/delivery.php?ID=321102020088087124084089103025100069021063020068087078105085029089003091108097121119059058002121107109114089103098069112094019050009068002021115004115108017000114029090058030122030096118025074126067069066086118082027107000123020118000079065086077083114&EXT=pdf&INDEX=TRUE  visited on 30 April 2024
9. Kitrhona Cerri et al., 8, Business and Human Rights Gateway (Aug. 2019), https://humanrights.wbcsd.org/wp-content/uploads/2017/11/WBCSD-CII_Business-Human-Rights-in-India_FINAL.pdf  visited on 29 April 2024

---

[1] Dallas, G., & Compere, L. (2015, May 22). Human rights through a corporate governance lens. The Harvard Law School Forum on Corporate Governance https://corpgov.law.harvard.edu/2015/05/22/human-rights-through-a-corporate-governance-lens/ visited on 28 April 2028

[2] What are human rights? | Ohchr (n.d.-a). https://www.ohchr.org/en/what-are-human-rights visited on 28 April 2024

[3] Human rights through a corporate governance lens – ICGN. (2015, April) https://www.icgn.org/sites/default/files/2021-05/1.%20Human%20rights%20through%20a%20corporate%20governance%20lens.pdf visited on 28 April 2024

[4] OHCHR https://www.ohchr.org/sites/default/files/Documents/Publications/HR.PUB.12.2_En.pdf visited on 29 April 2024 

[5] The UN Guiding Principles on business and … (n.d.-a) https://www.ohchr.org/Documents/Issues/Business/Intro_Guiding_PrinciplesBusinessHR.pdf visited on 29 April 2024

[6] Nations, U. (n.d.). Guiding principles on business and human rights https://www.ohchr.org/sites/default/files/documents/publications/guidingprinciplesbusinesshr_en.pdf  visited on 29 April 2024

[7] Kitrhona Cerri et al., 8, Business and Human Rights Gateway (Aug. 2019), https://humanrights.wbcsd.org/wp-content/uploads/2017/11/WBCSD-CII_Business-Human-Rights-in-India_FINAL.pdf  visited on 29 April 2024

[8] ARJUN PAL, Company Law and Human Rights: A Necessity or Redundancy?, https://deliverypdf.ssrn.com/delivery.php?ID=321102020088087124084089103025100069021063020068087078105085029089003091108097121119059058002121107109114089103098069112094019050009068002021115004115108017000114029090058030122030096118025074126067069066086118082027107000123020118000079065086077083114&EXT=pdf&INDEX=TRUE visited on 30 April 2024).

[9] Kitrhona Cerri et al., 8, Business and Human Rights Gateway (Aug. 2019), https://humanrights.wbcsd.org/wp-content/uploads/2017/11/WBCSD-CII_Business-Human-Rights-in-India_FINAL.pdf  visited on 29 April 2024

Disclaimer: The materials provided herein are intended solely for informational purposes. Accessing or using the site or the materials does not establish an attorney-client relationship. The information presented on this site is not to be construed as legal or professional advice, and it should not be relied upon for such purposes or used as a substitute for advice from a licensed attorney in your state. Additionally, the viewpoint presented by the author is of a personal nature.