ICGN Viewpoint: human rights through a corporate governance lens
The International Corporate Governance Network (“ICGN”) has released its latest Viewpoint on the increasing attention to human rights directors and investors ought to be taking… Read more
The International Corporate Governance Network (“ICGN”) has released its latest Viewpoint on the increasing attention to human rights directors and investors ought to be taking when considering corporate governance. The Viewpoint covers the ways companies and boards provide oversight and management of human rights and how investors can influence human rights risks and concerns.
According to the IGCN report, awareness of human rights issues is fundamental to good corporate governance as they are a growing risk for companies and raise questions of business ethics which must be faced in order to cultivate good management and long-term stewardship.
Both investors and a company’s board play roles in assessing human rights and the possible risks they pose to a business. Investors should hold directors to account for ensuring appropriate oversight of human rights risk and should expect that company directors and management understand how human rights risks exist at a company and throughout their various stakeholders, such as supply chain, customers and within the jurisdictions in which they operate. On the investor side, investors need to be alert to public expectations brought about by wider coverage of human rights issues on social and mainstream media; criticism of companies regarding human rights no longer centres on the management, it is increasingly penetrating to the investor level, which heightens reputational risk.
The Viewpoint puts forward a number of options that are available to investors seeking to oversee human rights risk within their portfolio companies. The specific tactics mentioned were:
- Proportionate due diligence: investors should consider focusing on their key holdings, high risk sectors (mining, oil & gas, apparel, electronics, weapons) and regions (conflict zones, occupied territories).
- Develop an appropriate strategy: methods include non-inclusion in investment portfolios of companies linked to high human rights risk, developing engagement initiatives or implementing proxy voting guidelines to bolster human rights due diligence.
- Public disclosure: investors could disclose their governance policies to allow companies and other stakeholders to understand how human rights risks influence the investment decision-making process.
- Public policy engagement and multi-stakeholder initiatives: investors can take a prominent role in thought leadership in the debate around how human rights are considered in corporate governance processes and join with like-minded stakeholders to drive the agenda.
IGCN also suggests that oversight and influence of human rights risks should be combined with measurement of how a company is managing human rights issues. This can be achieved through a company’s reporting policies and processes to build awareness as to how a company manages and governs human rights concerns.
An example of a reporting framework is the Reporting and Assurance Initiative, which provides guidance on how directors, management and investors can understand a company’s outlook on human rights issues and uncover gaps and vulnerabilities in its procedures and business environment.
The full Viewpoint can be read here.
For more information, please contact John Alder, corporate associate.