Earlier this year, the 34-member Organization for Economic Cooperation and Development (OECD) updated its “Guidelines for Multinational Enterprises,” a set of principles for transnational corporations (TNCs). For the first time, the “Guidelines” now explicitly include a reference to human rights. The OECD “Guidelines” reflect the “Guiding Principles on Business and Human Rights” prepared by Harvard University professor John Ruggie and officially adopted in a unanimous resolution (co-sponsored by the United States) by the United Nations’ Human Rights Council on June 16, 2011. The resolution states that “transnational corporations and other business enterprises have a responsibility to respect human rights.” The OECD “Guidelines” state that TNCs must “respect the internationally recognized human rights of those affected by their activities.” Affording official U.N./OECD status to this notion is the latest step toward the ultimate goal of many human-rights activists: to make human-rights claims against businesses actionable in national and international courts. As Human Rights Watch has stated, “Non-binding initiatives like the Guidelines are important first steps towards achieving corporate compliance with international labor and human-rights standards.” If accepted, the “Guidelines” would allow anyone affected directly or indirectly by TNCs to challenge anything from production methods, to advertising and marketing, to workplace diversity, to health and safety standards, on vague human-rights grounds. Incredibly, large TNCs such as Ford, General Electric, McDonald’s, Sony, Nike, and Google seem — at least officially — to support this agenda.
Once again, the international community appears to be on autopilot in imposing human-rights standards that make no theoretical or practical sense. The very notion of businesses’ being directly responsible for human rights is in many ways a nonsequitur. From a purely legal point of view, it contradicts the fundamental nature of human rights in claiming that businesses — which are parts of civil society — have human-rights obligations under international law. All human-rights conventions are binding on the states that ratify them, not on private parties within those states. In fact, TNCs are protected by human rights such as private property and the right to respect for domicile.
That states should be the only entities responsible for safeguarding human rights makes sense, because states — unlike TNCs — have a monopoly on the legitimate use of force, which includes coercive powers vis-à-vis citizens and corporations.
For all the wealth of McDonald’s, Coca-Cola, and Walmart, these corporations have no police powers or armies. And while corporations can affect the legislative process through lobbying, they cannot enact legislation binding on citizens. In general, citizens’ dealings with TNCs are voluntary. No one is compelled to work for McDonald’s or to buy its products. A citizen’s (and indeed a TNC’s) relationship with the state is very different, since we cannot simply choose to ignore or opt out of applicable laws. If we do so, we will be met with sanctions that may include the loss of freedom. The general laws and regulations of course bind TNCs as well as individual citizens, and those acting on their behalf may also be subject of criminal liability. This conceptual difference between state and corporation in itself should be sufficient to demonstrate why it makes no sense to talk about the human-rights obligations of businesses.
But even if one accepts a dynamic interpretation of human-rights law, the OECD and U.N. guidelines are deeply problematic. According to the “Guidelines,” the applicable human rights include not only traditional freedom rights such as the right to personal liberty and the prohibition against torture, but also economic, social, and cultural “rights” such as the rights to social security, work, an adequate standard of living, and housing.
Any TNC — as well as its individual directors — engaging in forced labor, torture, or the deprivation of liberty would — at least in liberal democracies — be criminally liable for such practices. It is therefore not clear how anything is gained by describing a violation of criminal law as a breach of human rights.
However, economic, social, and cultural “rights” are inherently vague and really amount to a demand that the international community should decide on how the wealth of a nation should be distributed. It is not clear how privately owned TNCs could be responsible for the right to housing, work, or an adequate standard of living without the state constantly intervening in their decision-making, thus undermining the rights of shareholders and thereby private property.
At best the demand for businesses to respect human rights will result in massive and intrusive regulation driving up the costs of doing business. The only assured winners are the special-interest groups — overwhelmingly dominated by the Left — whose policy preferences such regulation would reflect. And, of course, the army of lawyers who can look forward to thousands of chargeable hours ensuring “compliance” with vague human-rights standards “developed” in a synergy between academics, NGOs, and international courts.
The basic assumption behind the call for businesses to respect human rights seems to be that TNCs endanger rather than enhance the welfare of human beings. This is an odd assumption given the overwhelming empirical data showing that the presence of TNCs is generally associated with both wealth creation and respect for individual liberty and political freedom. Can anyone seriously doubt that the citizens of Cuba and North Korea would benefit if TNCs were allowed to operate there? It is of course true that the beneficial effects of TNCs — such as jobs, foreign direct investments, transfer of technology, and investment in infrastructure — are not the intended consequences of TNCs, which seek capital formation and profits rather than philanthropy, but why should that matter?
It is also true that there have been numerous examples of TNCs colluding with authoritarian governments in ways that result in the repression and even killing of innocent citizens. But such behavior typically takes place in countries where the host state violates basic human rights anyway and operates outside the rule of law. Where basic human rights and the rule of law are respected, TNCs rarely engage in such behavior, as they are held accountable through laws, governmental agencies, independent courts, civil society, the media, trade unions, and so on. Those who worry about TNCs engaging in forced labor, violently suppressing trade unions, or willfully polluting the local environment in poor and nonfree countries should therefore focus on promoting individual freedom and the rule of law in these states rather than on demanding international human-rights standards for businesses.
The American legal system, founded on constitutional rights, has generally been ahead of the power curve of international human-rights standards, and therefore it might be tempting to assume that the “Guidelines” will not have much impact in America. However, the push for subjecting TNCs to human-rights standards is being actively promoted and developed at the elite American law schools that shape the outlooks of future American lawyers, judges, and decision-makers. Moreover, several American TNCs sponsor institutions that actively work toward subjecting their paymasters to human-rights standards. But even if America should prove to be immune to the influence of emerging international standards on businesses and human rights, American TNCs will clearly be affected by this development when operating outside the United States. Therefore American TNCs, politicians, and lawyers who recognize the dangers of this development have a clear interest in resisting the increasingly popular idea that human-rights standards should be directly binding on TNCs.
The energy devoted to this futile and illogical line of thinking is energy that ought to be spent on monitoring fundamental rights and freedoms, and trying to ensure that they are respected. Ideas like this just confuse the concept of human rights and make it easier for abusive governments to survive.
— Jacob Mchangama is director of legal affairs at the Danish think tank CEPOS and external lecturer in international human-rights law at the University of Copenhagen.