NEW YORK - States and businesses must ensure corporate governance that respects human rights is a core element of implementing the corporate responsibility for human rights, UN experts said today.
"The effectiveness of the application of the Guiding Principles on Business and Human Rights by companies relies on good corporate governance and executive leadership to ensure that decision-making and corporate culture are aligned with respect for people and the planet, and that these are embedded throughout operations," said Robert McCorquodale, Chairperson of the Working Group on Business and Human Rights, presenting a new report to the UN General Assembly.
"Poor corporate governance concerning human rights matters can lead to many human rights abuses, affecting workers, communities and other rights holders. It can also have significant adverse consequences for companies, directors and executives," McCorquodale said.
The report notes that human rights risks, including those arising from environmental damage and climate change, can be material to a company. They should be treated as such in risk management and in reporting to the board, and there should be relevant expertise on the board.
"It must be recognised that corporate governance approaches and decisions made by boards and senior management of large businesses have impacts worldwide, including on small and medium-sized businesses," McCorquodale said.
States must introduce laws to ensure corporate governance frameworks require directors and senior executives to take human rights considerations into account in decision-making, and ensure that corporate purpose and directors' duties frameworks do not operate solely on shareholder primacy where this prevents adequate consideration of human rights impacts.
The report calls on States to provide clear guidance to businesses to include human rights considerations within the remuneration of executives and other senior management. Furthermore, States should enact legislation that includes remediation to rights holders, and sanctions against a company and its directors and executives personally, where there is a lack of effective oversight and management of adverse human rights impacts of a company's activities.
"We call on businesses to integrate respect for human rights, with integrated risk management and human rights due diligence systems, into core corporate governance," the experts said.
