Companies must strike a balance between human rights and need for profits

Surya Deva says large companies must take a holistic view of corporate responsibility and carry out continuous due diligence to help balance human rights and the need for profits

PUBLISHED : Tuesday, 05 August, 2014, 5:48pm
UPDATED : Wednesday, 06 August, 2014, 4:46am

Customers are always the core of McDonald's Hong Kong" . Until a few days ago, these were the words that greeted visitors to the McDonald's Hong Kong website. But this slogan has disappeared.

In recent days, several business tycoons have denounced Occupy Central as something bad for Hong Kong. Moreover, several chambers of commerce and other business associations have run anti-Occupy Central advertisements in newspapers. Again, the key message was framed in terms of the movement adversely affecting Hong Kong - from the city's overall economy and stability to people's livelihoods.

Do companies really care so much for consumers and their other stakeholders in society? They do care, but only when doing so is necessary for their bottom line, the so-called "business case" for human rights.

If these corporate actions are profit-driven, companies are merely using people and their human rights as a means to achieve the end of profit maximisation.

The corporate pursuit of profit often triggers unethical and sometimes illegal business practices. The list is a long one: from knowingly supplying chemicals and weapons for genocide to insisting on pregnancy tests before hiring women, discharging effluents from factories into rivers, exploiting poor children, bribing government officials to secure deals, evading tax, exposing workers to hazardous conditions, indulging in anti-competitive practices, and using complex corporate structures to evade legal liability.

Developing effective regulatory initiatives to deal with such corporate misbehaviour has not so far proved to be easy at either domestic or international levels, though some progress has been made in the last few years at the international level.

In 2011, the Organisation for Economic Cooperation and Development significantly updated its Guidelines for Multinational Enterprises. Additionally, also in 2011, the UN Human Rights Council adopted the Guiding Principles on Business and Human Rights.

Both these initiatives make it very clear that companies have a responsibility to respect all internationally recognised human rights. Companies should carry out human rights due diligence and seek to prevent or mitigate adverse human rights impacts caused by their partners in the supply chain.

Had McDonald's Hong Kong taken adequate and continuous due diligence measures, it might have been able to avoid the out-of-date meat scandal.

It is anybody's guess whether business associations that are participating in the anti-Occupy campaign have examined the potential impact of their actions on several human rights: freedoms of speech, of association, of assembly, of procession and of demonstration as well as the right to stand for election.

The business community cannot merely focus on its economic interests and ignore human rights responsibilities. Nor should companies pick and choose in speaking out against unlawful activities.

The actions (or non-actions) of McDonald's Hong Kong and other business associations are perhaps driven by a dominant perception that directors are duty-bound to maximise profits for shareholders. However, this perception is divorced from legal realities: neither shareholders nor directors are legally obliged to maximise profits at all costs.

No one has a right to earn profits. There is merely an expectation, and any number of unforeseen natural or human-triggered events (such as typhoons, strikes, financial disasters and communicable diseases) could affect this. A temporary event like Occupy Central is no different.

In fact, if companies take a more holistic view of the situation, the Occupy movement could build space for society to secure valued freedoms.

It is vital for business leaders to reorient the purpose of the corporation and reassert its role in society as a social organ, rather than as a profit maximising machine. Some recent judicial decisions and reform of corporate laws around the world, including in Canada, Britain and India, suggest we have started moving in this direction.

In Hong Kong, too, the new Companies Ordinance now requires that a directors' report must contain a business review outlining, among other information, the company's environmental policies and performance as well as the company's key relationships with its employees, customers and suppliers.

In the current corporate culture, corporate social responsibility is seen as a separate compartment of the business entity. On the McDonald's Hong Kong website, for example, the section on corporate social responsibility lists several philanthropic programmes, while food safety and nutrition are covered in a separate section. Companies should internalise human rights issues into all of their business operations rather than sidelining corporate social responsibility.

The capacity of corporate executives is also part of the problem. With some exceptions, the majority of companies are run by people who are not adequately trained to resolve complex dilemmas that arise between human rights norms and business needs. At the very least, business and human rights or corporate social responsibility should be part of core courses at business schools.

Finally, we, the people - as consumers, investors, employers, employees, students, teachers, and parents - have a critical role to play in humanising business. Burgers with rotten meat are as damaging for society as a political system that restricts people's rights to freely elect their own leader. Hongkongers should fight against anything that threatens their rights and freedoms, no matter what form those threats take.

Surya Deva is an associate professor at the School of Law, City University of Hong Kong. He specialises in the human rights obligations of business