Human Rights Must be at the Heart of Corporate Governance and Leadership

The report says human rights risks, including those linked to environmental damage and climate change, can be material to a company and should be treated accordingly.

States and businesses must make respect for human rights a central part of corporate governance, UN experts have said in a new report presented to the UN General Assembly. The report calls for company boards and senior executives to account for the effects of business decisions on workers, communities and other people whose rights may be affected. It urges governments to establish legal requirements that make human rights a clear responsibility of corporate leadership.

Robert McCorquodale, Chairperson of the UN Working Group on Business and Human Rights, said effective implementation of the UN Guiding Principles on Business and Human Rights depends on good governance and executive leadership. Company decisions and corporate culture need to reflect respect for people and the planet, with that commitment embedded throughout business operations. This places responsibility on those directing a company to ensure human rights shape how the business is managed.

Poor oversight of human rights issues can contribute to abuses affecting workers, communities and other rights holders, the experts warned. Such failures can also have significant adverse consequences for companies and for their directors and executives. The report connects the protection of people with the need for informed leadership, effective risk management and accountability for corporate conduct.

Boards Must Address Human Rights and Environmental Risks

The report says human rights risks, including those linked to environmental damage and climate change, can be material to a company and should be treated accordingly. These issues need to be included in risk management and reports to the board, supported by board members with relevant expertise. Giving leadership access to that knowledge helps ensure human rights considerations are reflected in the decisions that guide business operations.

The effects of corporate governance extend beyond an individual company, particularly when decisions are made by large businesses with a worldwide reach. McCorquodale said the approaches taken by their boards and senior management also affect small and medium-sized businesses. That wider influence makes the governance of large companies relevant to the protection of rights across the businesses touched by their decisions.

Laws Should Make Human Rights Part of Directors' Duties

The experts called on States to introduce laws requiring directors and senior executives to consider human rights when making decisions. Corporate purpose and directors' duties should not be governed solely by shareholder primacy when that prevents adequate consideration of human rights impacts. The proposed approach would require governance frameworks to give proper weight to the people affected by company activities.

Governments should also provide clear guidance on incorporating human rights considerations into the remuneration of executives and other senior managers. This would connect human rights responsibilities with the way corporate leaders are rewarded for their work. The recommendation places pay arrangements alongside directors' duties as parts of governance that should reflect a company's responsibility to respect human rights.

Accountability Must Include Remedies and Personal Sanctions

The report calls for legislation providing remediation for affected rights holders when companies fail to oversee and manage adverse human rights impacts effectively. It also recommends sanctions against companies and their directors and executives personally where such failures occur. These measures would make accountability for inadequate oversight part of the legal framework governing corporate conduct.

Businesses are urged to embed respect for human rights directly into their core governance arrangements through integrated risk management and human rights due diligence systems. That requires boards and executives to connect their stated commitments with the processes used to assess risks and manage company activities. The experts' appeal makes effective oversight a central requirement for putting corporate responsibility for human rights into practice.