Conscience of Corporations
Ways
in which companies function can cause a lot of problems to the environment and neglect
human rights. Since these issues are subject to a lot of legal regulations yet are
of public concern, why do companies still cause the most damage in these areas?
The
core factor for this would be, because companies have a separate legal personality.
This means that they can, employ people by their own judgements and standards
within legal means, are able to sue and be sued and even enter a contract, all in
their own name.
This
makes it even more vital that the corporate
corpora uphold its own continuing rights, yet bear in mind how much it
impacts the good of the public.
Therefore,
if one company’s subsidiary, located in a country with poor environmental
standards, damages the environment through its activities, there is close to no
accountability held by the parent company. Besides, it may also be difficult to
make claims against a subsidiary in a developing country, because they may not
have the resources to compensate for the damages caused due to lack of legal
provisions in that country relating to the environment.
An example
of its practice in a case in real life was the Bhopal
disaster. Union
Carbide Corporation in America set up its subsidiary in
India. It operated a pesticides plant which had a gas leak in 1984. Shockingly,
3,787 people died as a result, and some died later due to diseases that were
created by the very incident. Unfortunately, safety standards were very low,
but the parent company in the US were not allowed to be sued because, that
subsidiary in India, was considered to be judged under a separate legal entity.
This means that a British parent company, with a branch in Africa, could be
aware that it employs children, but have no legal responsibility to do anything
about it.
Although,
this law can be criticized for being unjust, the parent company should by every
means at least, be able to influence its subsidiaries to prevent any action negatively
impacts human rights or the environment.
Due to
the separate
entity of subpoenas made possible, a middle road is created
where parent company’s need not be held liable for their subsidiaries’
violation of human rights and/or detriment to the environment.
Likewise,
the duties of companies’ directors can also be a source of environmental
issues. In countries such as Great Britain, Ireland, Australia and the US, it
is a fiduciary duty of a director to act in the best interests of the company.
Existence of these duties gives assurance to investors that their money will be
dealt with for the primary purpose of making profit.
This
practice can, unfortunately, can negatively impact the environment, as
directors would set their profit margins as their first priority. This corporate
law prevents directors from acting in consideration of environmental protection.
It could be argued, however, that a company with environmentally-friendly laws for
their decision making, could in fact, motivate investors to want to invest in
them more than any another company. However, in the real-world, it is unlikely,
as investors are more focused on profit-making and most directors would rather not
risk making expensive investments for just protecting the environment alone.
In any
case, the long-term sustenance of a company’s success depends primarily on
profit-making. In companies, where environmental protection standards are in
place, it is by law, that directors should make decisions ensuring profit, even
when there is a conflict between the two laws. Although, there are different
laws in each country, this profit-making principle of law remains a common
denominator.
Therefore,
one could argue, that as long as a director’s main priority is to focus on
profit-making, there will be a continuous negative impact on human rights and
on the environment. This would be the natural consequence of making decisions without
seriously considering its ulterior affect.
This
makes it crucial to prioritise what is more important: money OR human life and
the environment. However, laws make it difficult for directors of companies to
make morally apt decisions.
This
is where public opinion comes into play.
The
public and investors can put pressure on companies to act with respect to human
rights and the environment.
This
all comes with the hope that it would make a difference to ensure the
protection of human life and our natural surroundings, without falling prey to
the laws set by money-makers.
Also available at: https://theinflectionist.com/2016/02/25/conscience-of-corporations/
