The Business of Human Rights

Milton Friedman, published his piece over forty years ago in The New York Times Magazine. In this article, Friedman discusses how corporations and their agents should not concern themselves with having social consciences, but should try simply to increase their profitability. Friedman suggests that corporate executives have responsibilities to their employees, stockholders, and principals to maintain the highest financial intake possible while acting within the bounds of the law of social mores, but these executives should not perpetuate their own social agendas (or the popular social agenda of the day) with the corporations’ finances. According to Friedman, if corporate executives start pandering to the desires and whims of society (desires such as ” eliminating discrimination, avoiding pollution and whatever else may be the catchwords of the contemporary crop of reformers”), then they will be elevating socialist doctrines and corrupting the free market economy.

First of all, Friedman contends that corporate executives have a primary responsibility back to her (although, in the ‘70s it would probably have been “his”) employers or principals of the company and not to the overarching notion of the greater good of society. The general primary goal according to Friedman is “to make as much money as possible while conforming to the basic rules of the society, both those embodied in law and those embodied in ethical custom.” He claims that if the executive pursues to mollify social ills with company funds, the executive will be performing something like a tax collecting duty and then a tax distribution all with the proper representation from the people from whom the money is being generated. In essence, Friedman is saying that social responsibility in a business setting sets up a scheme of “taxation without representation.” But, Friedman does not address the idea that people in that industry might choose to maintain aspects that increase the social conscience of the business, nor does he address the idea that some employees or stockholders chose that particular business for its social concerns.

Second, Friedman has little patience for those corporations who seem to practice a form of social responsibility solely for the purpose of covering their tracks or for making improvements in the community mainly for the business’s own self-interest. He makes the example of providing amenities to a community such as parks or recreational facilities or in order to attract desirable employees. Friedman says that while these expenditures are good ones in the long run, it would be better for business if the corporations were honest about them. In the climate in the day he wrote the article and continuing into today, there is a current of the population that thinks of big business as “soulless corporations” and people can have aversions to maximization of profits above all else. Friedman suggests that the goodwill that is generated by those self-interested expenditures would be more aptly placed in business if they were honest about their nature and that might also help the overall image of the business world as a whole.

Lastly, Friedman discusses the “cloak of social responsibility” and how it has done harm to the foundations of free society. According to Friedman, pioneers in business have a “schizophrenic” nature. (This idea of businesses as “schizophrenic” is particularly insightful given Prof. Joel Bakan’s deduction of corporations as psychopathic in the 2000s). While the leaders can be very “far-sighted and clear-headed” about the trajectory of the internal workings of their businesses, they can be “near-sighted and muddle-headed” when it comes to the trajectory of business in general. Friedman says that when these business leaders make decisions based on the modern trend of what is important in the world of social responsibility, they are doing so simply to gain “kudos in the short run.” Friedman fears that these kinds of decisions will lead to more external or government controls or regulations on business, and that would be the death of business as it was once known.

One of the press releases cited from 2010 discussed abuse and exploitations of workers. The editor who was cite checking the article made a note to exclude the press release as not relevant to the subject of my article. Now, a legitimate reason for excluding the release could be that the press release calls for the State (and not the Saudi employer) to take action for the women’s brutalization. Since the release once again focuses on State behavior, I could see how some would question the fit. However, that was not the focus of the editor’s comment. Instead, the editor wrote the following: “Please clarify: this incident involves labor laws that foster abuse and exploitation rather than corporate human rights abuses.” Unfortunately, this view – that labor law abuses and business and human rights abuses are separate issues – is actually pretty common. It’s also incredibly inaccurate.

When I first entered the academy, I realized (thanks to my wonderful LL.M. adviser, Karen Engle) that where I could be most useful is in researching the intersection between corporations and human rights. Prof. Engle pointed out that my corporate and financial background as a former S.E.C. attorney gave me some knowledge on corporations and corporate governance that many human rights attorneys or academics might not have. Jumping on this, I began to develop my scholarship in this area.

Over five years later, I still find that what I do and what I write about is hard for many people to classify. There are scholars with corporate backgrounds similar to mine who write on issues that impact the larger stakeholder community rather than issues that simply affect corporations and their shareholders. They write on issues such as environmental impact, human rights or labor issues, and their scholarship is typically categorized as corporate social responsibility work. While I have nothing but respect for the people who work and write in this area, it is not at all what I do. I write about business and human rights – particularly Transnational Corporations and their responsibility for human rights. most often, I think about corporate accountability structures for human rights violations. Nonetheless, when discussing my work with other academics, I am often mislabeled as aCSR expert.

Intuitively, I knew there was a distinction between what I was doing and the great work of the people engaged in CSR research, but until last year, I could not articulate that distinction. Then last July, in connection with a piece I was writing on the U.N.’s history with business and human rights, I came across a definition that succinctly articulates the difference.

According to Chris Avery the founder and director of he Business & Human Rights Resource Centre and an international lawyer, “A CSR approach tends to be top-down: a company decides what issues it wishes to address. Perhaps contributing to community education, healthcare or the arts or donating to disaster relief abroad or taking steps to encourage staff diversity or reduce pollution. These voluntary initiatives should be welcomed. But a human rights approach is different. It is not top-down, but bottom-up – with the individual at the centre, not the corporation. When it comes to human rights, companies do not get to pick and choose from a smorgasbord those issues with which they feel comfortable.”

The business and human rights landscape has changed tremendously over the last ten years. Traditionally, public international law has been focused on state behavior. The idea of corporations being duty bearers for human rights abuses was originally discussed (and put into a formal resolution by the U.N. Sub Commission) in 2003. However, it was incredibly controversial and quickly defeated. Then, in 2004, Kofi Annan appointed John Ruggie at Harvard to act as a Special Representative on these issues.

Ruggie, after receiving input from businesses, human rights advocates, states and other stakeholders, crafted in 2008 a framework for understanding business and human rights. The Framework rests on three pillars – a State’s duty to protect, a Corporation’s duty to Respect and the role of both in Remedying human rights violations should they occur. The Respect Framework as it relates to corporations, places no legal responsibility on them. However, using the non-legal sense of the word, the Framework articulates aspirational goals that a corporation should follow to respect human rights.

This concept of business and human rights was further institutionalized in June 2011 when the UN human rights council unanimously adopted a set of Guiding Principles to help businesses operationalize this Framework.

Despite their non-binding mandate on corporations, the Respect Framework and the Guiding Principles have the potential to revolutionalize the “business of human rights.” The U.N.’s resolution marks the first time that the idea of corporate responsibility for human rights issues has been explicitly endorsed by the U.N.