corporations → corporate accountability

Corporate Accountability

Corporate accountability is, first of all, a legal subject, both complicated and extensive. There are many tools that fall into the scope of this, which understandably create problems for not only anti-globalization movements, but also for civic activities that deal with this issue. The subject of corporate accountability deserves its own handbook, and that is why we will only briefly acquaint you with the issue and mention only several tools for advocating corporate accountability:

I. Better access to justice for victims of corporate abuses

One of the fundamental tools of corporate accountability is the propagation of right to sue (standing, access to justice) for the victims of the irresponsible behaviour of corporations. This is because of various reasons and points of view:

    a) Right to sue for foreign citizens
A large problem that remains is when a corporation takes very controversial steps leading to the violation of fundamental human rights in developing countries. This area has a limited enforcement of rights and it is precisely this situation that corporations exploit. That is why there should exist, for victims of the irresponsible behaviour of corporations, the possibility of taking their matters in front of a court where the corporation is headquartered, i.e. mostly in developed countries. Understandably, this is not a totally unknown legal tool. A typical example can be the 217-year-old federal law of the United States: the Alien Torts Claim Act.

    b) Right to sue for entities defending public interests
Generally, legal systems are based on the priorities of defending private subjective rights (in other words, the protection of the individual), which understandably has one great shortcoming: that often forgotten is that public interests, which require protection, exist. This should be guaranteed by the state, which however often is not able to do this because corporate influence is so great that the state chooses to rather yield to private interests. Understandably, this situation invokes the need to strengthen the protection of public interests with a law that will establish rights for entities of a different country (typical non-governmental organizations, but also individuals) to demand the protection of public interests via the courts without this entity proving that its rights were violated. Even this is not a new institute (see the Aarhus convention concerning the matters of the environment). In spite of this, it is not utilized in the legal system to a sufficient extent and often is not linked with effective means of legal protection (typically preliminary measures).
II. Legal liability for subsidiaries’ and subcontractors' activities

Limiting the responsibility of trading companies when they violate human rights and harm the environment is a subject unto itself. Legal systems often do not demarcate any kind of trading company responsibility for the activities of its subcontractors and subsidiaries, which understandably is a problem, because the parent company, or possibly the dominant customer, undeniably has direct influence on the behaviour and decision-making of this company; however, usually without having any responsibility for it. This aspect of irresponsibility is further spread if the company operates in more than one country. Understandably, even in this case there exist legal institutes in some legal systems that cover these situations. However, they are not too widespread and there is no possibility of any regulation of the activities of a corporation at the international level.

III. Criminal liability of legal entities

The criminal liability of legal entities is probably the most widespread institute in the legal systems of developed countries, and has also been incorporated into international conventions. Typical sanctions can include:

  • Depriving rights to public allowances and subsidies,
  • Temporary or permanent exclusion from commercial activities,
  • Court supervision,
  • Liquidation of the legal entity
  • Deterrent sanctions

Conventions that incorporate the criminal liability of legal entities include: the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, the Convention on the Protection of the Environment through Criminal Law, and the Criminal Convention against Corruption.

IV. Legal duty to incorporate management system standards that would secure integration of environmental and social standards into the decision-making of transnational corporations

An example of corporate accountability tools can be the implementation of management’s obligation to appraise planned company activities not only from an economic perspective but also from an environmental and social risks perspective.