Organizational irrationality and corporate human rights violations

Harvard Law Review

Volumn 122, Issue 7, 2009, Pages 1931-1952

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EID: 66749125340     PISSN: 0017811X     EISSN: None     Source Type: Journal    
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References (138)

1. Cf. HENRY J. STEINER ET AL., INTERNATIONAL HUMAN RIGHTS IN CONTEXT 1388 (3d ed. 2008) ("[Wal-Mart's] 2003 sales of $256 billion made it larger than the economies of all but the world's 30 richest nations.").
2. Radu Mares, Introduction to BUSINESS AND HUMAN RIGHTS xv, xv (Radu Mares ed., 2004).
3. Id. at xvi.
4. See, e.g., Surya Deva, Human Rights Violations by Multinational Corporations and International Law: Where from Here?, 19 CONN. J. INT'L L. 1 (2003);
5. Steven R. Ratner, Corporations and Human Rights: A Theory of Legal Responsibility, in YALE L.J. 443 (2001).
6. Under the Universal Declaration of Human Rights, corporations can be held accountable for direct violations of human rights that take place "within their area of control and sphere of influence." Irene Kahn, Sec'y Gen., Amnesty Int'l, Understanding Corporate Complicity: Extending the Notion Beyond Existing Laws, Speech at the Business Human Rights Seminar (Dec. 8, 2005), in STEINER ET AL., supra note 1, at 1389, 1390;
7. see also Universal Declaration of Human Rights, G.A. Res. 217A, at 71-72, U.N. GAOR, 3d Sess., ist plen. mtg., U.N. Doc. A/810 (Dec. 10, 1948). The difficulty arises in attempts to hold corporations accountable when their complicity is more indirect.
8. See, e.g., Beth Stephens, Corporate Liability: Enforcing Human Rights Through Domestic Litigation, 24 HASTINGS INT'L & COMP. L. REV. 401, 401 (2001) ("There is tremendous profit to be made from abusive behavior, and in the absence of effective regulation, corporations often seek to maximize profit at the expense of basic rights.").
9. Diane Vaughan, Rational Choice, Situated Action, and the Social Control of Organizations, 32 LAW & SOC'Y REV. 23, 23 (1998).
10. See id. at 24.
11. See Michael B. Metzger, Corporate Criminal Liability for Defective Products: Policies, Problems, and Prospects, 73 GEO. L.J. 1, 16 (1984).
12. See IAN AYRES & JOHN BRAITHWAITE, RESPONSIVE REGULATION 22 (1992);
13. David A. Skeel, Jr., Shaming in Corporate Law, 149 U. PA. L. REV. 1811, 1811-12 (2001).
14. See Metzger, supra note 8, at 16-23.
15. For an attempt to develop a rational choice model for corporations that incorporates environmental norms, see Michael P. Vandenbergh, Beyond Elegance: A Testable Typology of Social Norms in Corporate Environmental Compliance, 22 STAN. ENVTL. L.J. 55 (2003).
16. See U.N. GLOBAL COMPACT & OFFICE OF THE U.N. HIGH COMM'R OF HUMAN RIGHTS, EMBEDDING HUMAN RIGHTS INTO BUSINESS PRACTICE 31 (2004), available at http://www.unglobalcompact.org/ docs/issues-doc/human-rights/Resources/embedding.pdf (quoting statements by business leaders).
17. See Tarek F. Maassarani et al., Extracting Corporate Responsibility: Towards a Human Rights Impact Assessment, 40 CORNELL INT'L L.J. 135,159 (2007).
18. See Lance Compa & Tashia Hinchliffe-Darricarrère, Enforcing International Labor Rights Through Corporate Codes of Conduct, 33 COLUM. J. TRANSNAT'L L. 663, 686 (1995).
19. Even where there is more direct involvement, such as when a manager orders a particular action, the decision could still be irrational if the manager miscalculates the corporation's interest.
20. See Maassarani et al., supra note 13, at 163-64.
21. Id. at 164.
22. This three-part framework tracks the one used by sociologist Diane Vaughan in her study of organizational misconduct. See Diane Vaughan, The Dark Side of Organizations: Mistake, Misconduct, and Disaster, 25 ANN. REV. Soc. 271, 274 (1999). However, the discussion within each of the strands draws on a variety of sources and fields.
23. See, e.g., Ward Edwards & Detlof von Winterfeldt, Cognitive Illusions and Their Implications for the Law, 59 S. CAL. L. REV. 225 (1986);
24. Christine Jolis et al., A Behavioral Approach to Law and Economics, 50 STAN. L. REV. 1471, 1477-79 (1998).
25. Donald C. Langevoort, Organized Illusions: A Behavioral Theory of Why Corporations Mislead Stock Market Investors (And Cause Other Social Harms), 146 U. PA. L. REV. 101 (1997).
26. Id. at 135 (internal quotation marks omitted).
27. Id. at 137.
28. Id. at 139-40.
29. But see Jolis et al., supra note 19, at 1525 (suggesting that overoptimism is likely to have a smaller effect on firms than on individuals, because "firms that make systematic errors in judgment will be at a competitive disadvantage").
30. Langevoort, supra note 20, at 140.
31. Id. at 142.
32. John M. Darley, How Organizations Socialize Individuals into Evildoing, in CODES OF CONDUCT: BEHAVIORAL RESEARCH INTO BUSINESS ETHICS 13, 21 (David M. Messick & Ann E. Tenbrunsel eds., 1996).
33. Langevoort, supra note 20, at 144.
34. See id. at 145.
35. Vaughan, supra note 18, at 280-81.
36. IRVING L. JANIS, GROUPTHINK 9 (2d ed. 1982).
37. RONALD R. SIMS, ETHICS AND ORGANIZATIONAL DECISION MAKING 62 (1994).
38. Cass R. Sunstein, Deliberative Trouble? Why Groups Go to Extremes, no YALE L.J. 71, 74 (2000).
39. Russell B. Korobkin & Thomas S. Uleh, Law and Behavioral Science: Removing the Rationality Assumption from Law and Economics, 88 CAL. L. REV. 1051, 1085 (2000).
40. Kenneth A. Bamberger, Regulation as Delegation: Private Firms, Decisionmaking, and Accountability in the Administrative State, 56 DUKE L.J. 377, 417 (2006).
41. Darley, supra note 26, at 17-18.
42. See id. at 18.
43. Bamberger, supra note 34, at 418.
44. Id. at 419.
45. Langevoort, supra note 20, at 120.
46. Vaughan, supra note 18, at 277.
47. Id.
48. Vaughan, supra note 6, at 36;
49. see also id. at 40 ("Reduced funding had converted the R&D space agency into one that operated like a business, complete with production cycles and concerns about cost and efficiency.").
50. Vaughan does not discuss individual cognitive biases separately, but one can readily imagine that they were operating in conjunction with the culturally induced distortions that she does emphasize.
51. Vaughan, supra note 6, at 39.
52. Id. at 41.
53. Id.
54. Id. at 45.
55. Diane Vaughan, Regulating Risk: Implications of the Challenger Accident, in ORGANIZATIONS, UNCERTAINTIES, AND RISK 235, 240 (James F. Short, Jr. & Lee Clarke eds., 1992).
56. Id.
57. Vaughan, supra note 6, at 42.
58. Id. at 43.
59. EPA & CHEM. MFRS. ASS'N, DOC. NO. EPA-305-R-99-001;
60. EPA/CMA ROOT CAUSE ANALYSIS PILOT PROJECT 24 (1999), available at http://www.epa.gov/compliance/ resources/ publications/assistance/sectors/rootcauseanalysis.pdf.
61. It is conceivable that some of the irrationality mechanisms could operate in the other direction -for example, overoptimism about the reputational gains that follow from human rights compliance efforts. The proposals here could presumably be tailored to avoid interfering with any such pro-human rights tendencies. A separate project might consider ways to harness those tendencies to achieve additional human rights gains.
62. See JEFFREY L. DUNOFF ET AL., INTERNATIONAL LAW: NORMS, ACTORS, PROCESS 93 (2d ed. 2006).
63. See id. at 94.
64. Id. at 93.
65. See John Gerard Ruggie, Business and Human Rights: The Evolving International Agenda, 101 AM. J. INT'L L. 819,819 (2007).
66. ORG. FOR ECON. CO-OPERATION & DEV., THE OECD GUIDELINES FOR MULTINATIONAL ENTERPRISES 2 (2001), available at http://www.olis.oecd.org/ olis/2000doc.nsf/LinkTo/ NToooo2Fo6/$FILE/JTooii5758.PDF.
67. Id. at 11.
68. See, e.g., id. at 18 ("Enterprises should . [o]bserve standards of employment and industrial relations not less favourable than those observed by comparable employers in the host country.").
69. For example, the environmental recommendations include the "[adoption of technologies and operating procedures in all parts of the enterprise that reflect standards concerning environmental performance in the best performing part of the enterprise." Id. at 29.
70. Ruggie, supra note 57, at 834.
71. Id. at 820.
72. Id. at 819-20.
73. U.N. Global Compact, The Ten Principles, http://www.unglobalcompact.org/ AboutTheGC/ TheTenPrinciples/index.html (last visited Apr. 4, 2009).
74. See id.
75. Evaristus Oshionebo, The U.N. Global Compact and Accountability of Transnational Corporations: Separating Myth from Realities, 19 FLA. J. INT'L L. 1, 14 (2007).
76. See GLOBAL COMPACT NOTE ON INTEGRITY MEASURES 2-4, http://www.unglobal compact.org/AboutTheGC/gc-integrity-mesures.pdf (last visited Apr. 4, 2009).
77. See id. at 3-4.
78. Oshionebo, supra note 67, at 38.
79. See Ruggie, supra note 57, at 835-37.
80. THE VOLUNTARY PRINCIPLES ON SECURITY AND HUMAN RIGHTS 2-3, http://www. voluntaryprinciples. org/files/voluntary-principles.pdf (last visited Apr. 4, 2009).
81. Id. at 3-5.
82. Id. at 6.
83. Id. at 6-7.
84. Id. at 7.
85. See Voluntary Principles on Security and Human Rights, Participants + Companies, http://www.voluntaryprinciples.org/participants/ companies.php (last visited Apr. 4, 2009).
86. See Voluntary Principles on Security and Human Rights, Participants + Non-Governmental Organizations, http://www.voluntaryprinciples. org/participants/ngo.php (last visited Apr. 4, 2009).
87. Bennett Freeman et al., A New Approach to Corporate Responsibility: The Voluntary Principles on Security and Human Rights, 24 HASTINGS INT'L & COMP. L. REV. 423, 438 (2001).
88. See id. at 439.
89. See Sean D. Murphy, Taking Multinational Corporate Codes of Conduct to the Next Level, 43 COLUM. J. TRANSNAT'L L. 389, 419-20 (2005).
90. Fiona McLeay, Corporate Codes of Conduct and the Human Rights Accountability of Transnational Corporations: A Small Piece of a Larger Puzzle, in TRANSNATIONAL CORPORATIONS AND HUMAN RIGHTS 219, 221 (Olivier De Schutter ed., 2006).
91. Int'l Council of Toy Indus., Code of Business Practices, in BUSINESS AND HUMAN RIGHTS, supra note 2, at 321.
92. Int'l Council of Chem. Ass'ns, Statement on Responsible Care, in BUSINESS AND HUMAN RIGHTS, supra note 2, at 324.
93. Amnesty Int'l, Human Rights Guidelines for Companies, in BUSINESS AND HUMAN RIGHTS, supra note 2, at 154.
94. See Amiram Gill, Corporate Governance As Social Responsibility: A Research Agenda, 26 BERKELEY J. INT'L L. 452,462 (2008).
95. Joshua A. Newberg, Corporate Codes of Ethics, Mandatory Disclosure, and the Market for Ethical Conduct, 29 VT L. REV. 253, 257 (2005) (internal quotation marks omitted).
96. Gill, supra note 86, at 467-68.
97. Ratner, supra note 4, at 533.
98. See, e.g., Oshionebo, supra note 67, at 38.
99. See, e.g., Gill, supra note 86, at 467-68.
100. Alex Wawryk, Regulating Transnational Corporations Through Corporate Codes of Conduct, in TRANSNATIONAL CORPORATIONS AND HUMAN RIGHTS 53, 62 (Jedrzej George Frynas & Scott Pegg eds., 2003).
101. See David B. Kahn & Gary S. Lawson, Who's the Boss?: Controlling Auditor Incentives Through Random Selection, 53 EMORY L.J. 391, 404-05 (2004).
102. See, e.g., Neil Craik, Deliberation and Legitimacy in Transnational Governance: The Case of Environmental Impact Assessments, 38 VICTORIA U. WELLINGTON L. REV. 381, 383 (2007).
103. See Maassarani et al., supra note 13, at 149.
104. The Danish Institute for Human Rights has taken the lead in developing tools of this sort. For a case study describing the experience of Shell International with the Danish Institute's Human Rights Compliance Assessment tools, see Esther Schouten, Road-testing the Human Rights Compliance Assessment Tools, in U.N. GLOBAL COMPACT & THE OFFICE OF THE U.N. HIGH COMM'R OF HUMAN RIGHTS, EMBEDDING HUMAN RIGHTS INTO BUSINESS PRACTICE n 64 (2007), available at http://www. unglobalcompact.0rg/docs/news-events/8.1/EHRBPn-Final.pdf.
105. See Maassarani et al., supra note 13, at 167 (noting that both the "extra investment and preparation time" should seem reasonable in light of what already goes into major projects like a "$1 billion pipeline").
106. See Christine Jolis & Cass R. Sunstein, Debiasing Through Law, 35 J. LEGAL STUD. 199, 200 (2006).
107. Id. at 209-10.
108. Cf. Andrew K. Woods, The YouTube Defense: Human Rights Go Viral, SLATE, Mar. 28, 2007, http://www.slate.com/id/2162780 (explaining the impact that such media can have for the human rights cause more generally).
109. JOlls g¿ Sunstein, supra note 97, at 205-06.
110. Id. at 210;
111. see also Daniel Kahneman & Amos Tversky, Prospect Theory: An Analysis of Decision Under Risk, 47 ECONOMETRICA 263, 279 (1979).
112. At first glance, this emphasis on loss may seem to contradict the earlier discussion of cooperative versus adversarial approaches. But it is possible for human rights advocates to spread this information in a spirit of cooperation, so long as both sides see improved compliance as the . common goal.
113. July 17, 1998, 2187 U.N.T.S. 90.
114. Ruggie, supra note 57, at 831.
115. 28 U.S.C §1350 (2006).
116. 395 F.3d 932 (9th Cir. 2002).
117. 542 U.S. 692 (2004).
118. The Court alluded ambiguously to this issue in a footnote, stating that "whether a norm is sufficiently definite to support a cause of action," id. at 732, is related to "whether international law extends the scope of liability for a violation of a given norm to the perpetrator being sued, if the defendant is a private actor such as a corporation or individual,"
119. id. at 732 n.20.
120. John E. Howard, Op-Ed., The Alien Tort Claims Act: Is Our Litigation-Run-Amok Going Global?, U.S. CHAMBER OF COMMERCE, Oct. 2002, http://www.uschamber.com/press/opeds/ 0210howarditigation.htm.
121. See id.
122. See Logan Michael Breed, Note, Regulating Our 21st-century Ambassadors: A New Approach to Corporate Liability for Human Rights Violations Abroad, 42 VA. J. INT'L L. 1005, 102223 (2002).
123. The Court said that it would "require any claim based on the present-day law of nations to rest on a norm of international character accepted by the civilized world and defined with a specificity comparable to the features of the 18th-century paradigms we have recognized." Sosa, 542 U.S. at 725.
124. Compare Aldana v. Del Monte Fresh Produce, N.A., Inc., 416 F.3d 1242, 1247 (nth Cir. 2005) (finding that a "claim for cruel, inhuman, degrading treatment or punishment" falling short of torture did not meet the Sosa standard),
125. with Doe v. Qi, 349 F. Supp. 2d 1258, 1322 (N.D. Cal. 2004) (holding, "consistent with Sosa," that if "the specific conduct at issue ⋯ is universally condemned as cruel, inhuman, or degrading," it does not matter whether the general prohibition on such conduct is sufficiently precise).
126. See Teddy Nemeroff, Note, Untying the Khulumani Knot: Corporate Aiding and Abetting Liability Under the Alien Tort Claims Act After Sosa, 40 COLUM. HUM. RTS. L. REV. 231, 232-33 (2008)
127. (illustrating these layers of confusion through the disagreement of three judges in a single case, Khulumani v. Barclay National Bank Ltd., 504 F.3d 254 (2d Cir. 2007) (per curiam), the first post-Sosa appellate decision on the matter).
128. See Brad J. Kieserman, Comment, Profits and Principles: Promoting Multinational Corporate Responsibility by Amending the Alien Tort Claims Act, 48 CATH. U. L. REV. 881, 933-34 (1999).
129. See id. at 934.
130. See Harold Hongju Koh, Separating Myth from Reality About Corporate Responsibility Litigation, 7 J. INT'L ECON. L. 263, 272-73 (2004) (calling for a treaty approach).
131. See Russell B. Korobkin, Behavioral Analysis and Legal Form: Rules vs. Standards Revisited, 79 OR. L. REV. 23,46 (2000).
132. Cf. Joseph Sanders, Firm Risk Management in the Face of Product Liability Rules, in ORGANIZATIONS, UNCERTAINTIES, AND RISK, supra note 48, at 57, 79 (noting that "increasing rule uncertainty" leads to a bifurcation between the management of product design and the management of liability).
133. A possible alternative view would be that uncertain liability will maximize precaution by forcing corporations to err on the safe side. This has some intuitive plausibility, but one should also recall that the mechanisms of organizational irrationality would cut against it.
134. See, e.g., Koh, supranote 117, at 270.
135. See Larry Alexander & Frederick Schauer, On Extrajudicial Constitutional Interpretation, no HARV. L. REV. 1359, 1371 (1997).
136. For example, an updated statute would provide a clearer authorization for U.S. courts to hear such suits and thus would weaken arguments for dismissal on political question grounds. Cf. Rachael E. Schwartz, "And Tomorrow?" The Torture Victim Protection Act, 11 ARIZ. J. INT'L & COMP. L. 271, 311 (1994) (arguing that the passage of the Torture Victim Protection Act indicates the political branches' understanding that "such cases are suitable for judicial decision").
137. Nemeroff, supra note 114, at 255.
138. Cf. Langevoort, supra note 20, at 158 (making a similar argument for securities regulation).