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Fri October 21, 2011
Prof. Aaron Dhir, York University - Encouraging Corporate Responsibility
Albany, NY – In today's Academic Minute, Professor Aaron Dhir of York University examines the regulatory techniques used to encourage multinational corporations to respect human rights around the world.
Aaron Dhir is an Associate Professor at Osgoode Hall Law School of York University in Toronto, Canada. He has held visiting appointments at Harvard University and the University of Oxford. He currently holds the appointment of Scholar in Residence with the Law Commission of Ontario.
Professor Dhir's research interests include corporate law, governance and theory and the intersections of transnational business activity with international human rights norms. He has published widely in leading journals and has participated as an invited expert in significant policy reform initiatives in the field of corporate social responsibility. Most recently, he co-convened a multi-stakeholder expert consultation on "Corporate Law and Human Rights" in support of the mandate of the United Nations Special Representative on Business and Human Rights, Professor John Ruggie.
Prof. Aaron Dhir - Encouraging Corporate Responsibility
How can the law best respond to concerns that Western transnational corporations may be involved in human rights-violating activity in the developing world?
In the U.S., a new provision proposed in the Dodd-Frank Wall Street Reform and Consumer Protection Act seeks to address the trade in conflict minerals, which has contributed to human rights abuses, through the lens of disclosure.
The legislation directs the Securities and Exchange Commission to adopt rules that will require publicly-traded firms to report on whether they use "conflict minerals" in manufacturing their products and whether those minerals originated in the Democratic Republic of the Congo or an adjoining country.
Rather than overtly prohibiting the use of conflict minerals, this form of regulation has a slightly more subtle approach. It is anticipated that increased exposure will cause corporate actors to reflect on their use of the impugned minerals and cause them to voluntarily pursue corrective measures.
Is there empirical evidence to support this line of thinking? New research originating from the Harvard and London business schools suggests that when states adopt laws that require mandatory sustainability reporting, the "social responsibility of business leaders increases" and "companies implement more ethical practices".
The research, however, is still in its infancy. As transnational business practices are increasingly placed under the microscope, governments will need to grapple with the question of whether disclosure-based approaches in securities law are an appropriate and sufficient means of promoting corporate accountability or if more traditional punitive and deterrence-based measures are justified.