Person:

Rogge, Malcolm

Corporate human rights due diligence is now a social fact; it is no longer merely an idea or aspiration. This paper uses economist Frank H. Knight’s famous, albeit controversial, distinction between risk and uncertainty to help elucidate foundational concepts and challenges for the theory, practice, and future regulation of HRDD. The EU, France, and Germany, among other jurisdictions, have recently adopted laws requiring large businesses to conduct human rights due diligence (HRDD) in their supply chains. The specific details of these laws, as well as their proper motivations, are contested vigorously in public deliberation. There is no overarching consensus about how legislators should define the scope of HRDD or about what rules should apply to businesses. When it comes to assessing human rights risks, the key question that both corporate decision makers and policy makers must contend with is one that Knight identified a century ago: “how far to go?” There is no definitive answer. This paper clarifies what is at stake. The uncertainties that surround HRDD should not be a cause of paralysis for businesses nor should they prevent policy makers from developing powerful and impactful regulatory tools. The paper concludes that policy makers should give priority to the normative-ethical motivation for corporate HRDD over any instrumental-economic business case that may be made in specific circumstances. Giving priority to ethics does not negate economic reasoning; rather, it recognizes that, when it comes to HRDD, economic reasoning must be led by ethical reasoning, and nested within it, not the other way around.

A manager's job is to make decisions. With Nevsun Resources Ltd. v. Araya, 2020 SCC 5 (Nevsun), the Supreme Court of Canada has changed the way that senior business decision-makers must think about the human rights impacts of their decisions on people abroad. They must now grapple more directly and systematically with issues such as forced labour in the supply chain, abhorrent and dangerous working conditions, cruel and degrading punishment, as well as concerns over due process rights and freedom of association. This is a tall order, yet a necessary one. At the same time, the Court's decision has widened the realm of uncertainty for business decision makers, since the legal risks that have been created are not yet clearly defined. The details will be worked out over many more years of litigation, unless the government sees fit to pass legislation that endorses or negates the direction given by the court. In this essay, I argue that Nevsun puts the multinational corporate decision-maker in an uncertain yet also demanding human rights decision-making 'zone'. This 'zone' is not a physical place; rather, it is a thinking space where business leaders must make judgments among and between the distinct concerns of human dignity and economic profit.' Decisions made in the corporate human rights zone concern processes, ethical values and broad consequences for people inside and outside the corporation over the short term and long term. This is a delicate yet positive change for businesses and for the communities that they have impacts on, as we shall see below.

A battle rages between the partisans of shareholder and stakeholder capitalism; the very heart and soul of corporate governance is at stake. This paper advances the scholarly debate by mapping Amartya Sen's distinction between culmination outcomes and comprehensive outcomes onto shareholder primacy and stakeholder theory. It provides foundational reasons to move away from the untenable idealism of value maximization, characterized here as a culmination outcome-oriented approach, towards a stakeholder-oriented approach that is concerned with broader comprehensive outcomes. It argues that the stakeholder approach more accurately reflects how business decision makers actually make choices; as compared to the shareholder primacy approach, which proposes that decision makers are able to seek (and should seek) to maximize a single-valued culmination score. It is argued that the value maximization approach is flawed because no decision-making space exists where a "maximal" allocation is available in its merely technical sense, free of the taint of politics or constraints of ethics. The stakeholder approach is a more realistic account of what decision-makers are actually able to do in discharging their managerial responsibilities; and thus, it provides a richer account of what they ought to do and how. While imperfect in its own way, the stakeholder approach is a more down-to-earth theory of reasoned and purposive business decision-making for addressing today's critical problems of people and planet.

Corporate human rights due diligence is now a social fact; it is no longer merely an idea or aspiration. This paper uses economist Frank H. Knight's famous, albeit controversial, distinction between risk and uncertainty to help elucidate foundational concepts and challenges for the theory, practice, and future regulation of HRDD. The EU, France, and Germany, among other jurisdictions, have recently adopted laws requiring large businesses to conduct human rights due diligence (HRDD) in their supply chains. The specific details of these laws, as well as their proper motivations, are contested vigorously in public deliberation. There is no overarching consensus about how legislators should define the scope of HRDD or about what rules should apply to businesses. When it comes to assessing human rights risks, the key question that both corporate decision makers and policy makers must contend with is one that Knight identified a century ago: "how far to go?" There is no definitive answer. This paper clarities what is at stake. The uncertainties that surround HRDD should not be a cause of paralysis for businesses. nor should they prevent policy makers from developing powerful and impactful regulatory tools. The paper concludes that policy makers should give priority to the normative-ethical motivation for corporate HRDD over any instrumental-economic business case that may be made in specific circumstances. Giving priority to ethics does not negate economic reasoning; rather, it recognizes that, when it comes to HRDD, economic reasoning must be led by ethical reasoning, and nested within it, not the other way around.