No one is perfect – and neither is corporate governance. Human rights abuses are systematically reported within companies of all sizes and industries. Leaving aside legal proceedings, what are the ways to efficiently resolve such conflicts? Professor Maximilian Schormair, Trinity Business School, and Lara Gerlach, Project Officer Controlling & Compliance Asia at Plan International, with a focus.

How Companies Deal with Human Rights Violations, by CoBS Editor Olga Panashchenko. Related research: Corporate Remediation of Human Rights Violations: A Restorative Justice Framework, Maximilian J. L. Schormair & Lara M. Gerlach. Journal of Business Ethics (2020) 167:475–493 https://doi.org/10.1007/s10551-019-04147-2

The rising voice of moral awareness

As the number of people employed in multinational companies reaches a record high, the public has begun paying closer attention to the ethical side of their business. Large multinationals have a shaky reputation in addressing the needs and rights of workers, with of them notorious for neglecting safety standards or exploiting cheap labour in the pursuit of higher profits. Unpaid wages, abnormal working hours, discrimination, harassment… The list of corporate human rights violations is long, and financial problems that have arisen as a result of the COVID-19 crisis do not make things easier.

The issue of modern slavery has been largely discussed over the Internet over the past decades. In this regard, the image of garment industries has particularly suffered: no one was happy to discover that their clothes had been made by Filipino kids toiling for pennies at dirty factories. But the last straw came in 2013, when industrial accidents in Pakistan and Bangladesh killed more than 1,100 workers and injured thousands more. For the global community, the problem could no longer be ignored.

So far, the UN Guiding Principles on Business and Human Rights (UNGPs) have been the main guideline for both states and businesses to prevent, address and remedy human rights abuses. However, it remains a general orientation with unspecific principles and much room for interpretation. The vague language and the lack of clarity are especially apparent regarding remediation.

Even though the UN recently launched a new phase of the project that explores the efficiency of corporate remedy mechanisms, multinationals still rule the game. While there are no legally binding international instruments that call upon companies to deal with human rights issues, it’s up to them to address these issues in a proper way or ‘turn a blind eye’ when things go wrong.

Well-trodden path

The lack of comprehensive regulatory framework leads to the lack of comprehensive understanding on how companies can provide effective remedies after human rights violations. Up to now, alternative dispute resolution (ADR) has been the prevailing non-judicial mechanism for companies to react to human rights abuse. ADR is an umbrella term for many dialogue-based conflict-resolving procedures, from which the most common are:

• Negotiation: direct information exchange between parties until decision-makers come to an agreement
• Mediation: facilitated form of negotiation guided by a neutral third-party (mediator)
• Arbitration: alternative of a standard adjudicatory procedure as an arbitrator takes the final decision for the conflicting parties.

ADR is an internationally recognized approach to settling commercial disputes. It is faster, more efficient and involves lower transaction costs for companies than going to court. It is therefore largely used worldwide to resolve disputes with internal and external stakeholders. However, the question is whether the most common practice is the best possible one.

The jury is still out regarding the role of ADR, namely whether it actually deserves to be regarded as a benchmark of corporate remediation. In fact, ADR, just as many other things at the discretion of corporate governors, is subject to manipulation. Initiated and led mostly by a company, it has a significant risk of creating power imbalances.

Since companies are better funded as well as more skilled and experienced in formal processes than community members, the latter may find themselves in a “take it or leave it” situation. ADR critics point out that it is a pragmatic approach confined to bargaining: companies are seeking for possible win–win solutions, instead of” addressing rights as an inalienable minimum standard”. Remediation through ADR is therefore no more than a pragmatic model grounded on the logic of the “business case for respecting human rights”.

To illustrate the controversy of remediation through ADR, the researches explore the company-based grievance mechanisms of the Canadian gold mining company Barrick Gold Corporation (Barrick). Between 2005 and 2011, numerous cases of physical and sexual abuse by security guards against local women were reported in the area of Barrick-owned gold mines.

Under legal pressure, Barrick initiated a company-based grievance mechanism in 2012. They implemented a classical ADR scheme: third-party facilitators, compensation payments to the victims, new monitoring systems and training for mining personnel.

Yet, the majority of victims remained unsatisfied with the remediation effort made by the company. The financial restitution was perceived as unfair and insufficient, let alone the fact that many victims were unable to read and/or understand the remediation plan and thus were unable to agree on it. Neither did they get an explicit and direct apology. In such a case, how can this conflict be considered successfully resolved?

Human Rights: The wind of change

As public concern rises, a paradigm shift is brewing. Socially committed stakeholders – corporate governors, customers, communities – all seek to reframe the way we think about wrongdoing and justice. In this context, restorative justice (RJ) represents an approach that is a possible better alternative for non-juridical conflict resolution. Remediation through RJ prioritizes victim engagement and strictly focuses on meeting the human rights standards as set out in the UNGP.

RJ approached is based upon four main principles:

• Focus on needs of victims: Restore, repair and compensate the harm for victimized individuals and communities
• Encourage offenders to acknowledge the guilt, voluntarily commit to victim compensation, and change values and behaviors
• Promote all-side participation by bringing together all relevant stakeholders
• Initiate long-term transformation by building new trust-based relationships between participants.

RJ is a restorative, not a punitive approach. It does not focus on how to punish the offender, but rather on how to bring all parties together to put things right. The restorative dialogue, linked to the above-mentioned principles, address in sequence the information about the harm, the impact of the harm and the resolution. This dialogue lies at the heart of a comprehensive 4-stage process for corporate remediation of human rights abuses through RJ:

• Stage 1 – Discovery – starts when a company receives an external grievance. It is necessary to determine facts about scale, scope and severity of human rights abuse. In the Barrick case, serious shortcomings were revealed at this very first stage already. It took the company several years and external pressure to start the investigation, the scope of which was limited to sexual assaults. The company also failed to establish open communication with communities. In the context of distrust and dissatisfaction, one could hardly expect the conflict to be quickly and efficiently resolved.
• Stage 2 – Process Design & Preparation – aims to find an agreement on the key facts of the grievance and on the way to move forward. Victims therefore need sufficient support to participate in the process. Here Barrick failed again: the remediation process was administrated by local employees.  The victims were perceived as “passive recipients”, community members played only a peripheral role and offenders were not included in the process at all. Does not really look like a holistic dialogue.
• Stage 3 – Restorative Dialogue – is supposed to lead the parties towards a resolution in the form of agreement that stipulates financial restitution, apology, treatment program and assurance of preventing future harm.  High transparency, low information asymmetry and inclusiveness are crucial at this stage. Here again, Barrick was not at their best: few selected victims were visited at home and had the possibility to answer questions about their economic situation. Almost all decisions on the level of impact were based on internal investigations, which were not aligned with the views of victims and other stakeholders.
• Stage 4 – Reintegration – describes the on-going responsibility of the offender after the core remediation process ended. A resolution plan includes a long-term perspective as human rights violations are events with long-term consequences for a person or community. The outcome of a restorative process should contain a strategy to shape or change future behavior and relationships.

As illustrated with the Barrick case, the mere fact that a company acknowledges and reacts to the wrongdoing, does not guarantee efficient conflict resolution. If Barrick had used restorative justice (RJ) rather than alternative dispute resolution (ADR), it could have found solutions together with the victims and community members on how to build a long-term relationship, which is built on trust. This, of course, is more challenging than ADR: RJ cannot be formulated in a “one-size fits-all” approach. However, this is remediation mechanism can be a better way to find a holistic resolution to a human rights conflict.

Slowly but surely from conscience to action

What looks good on paper, it not always as easy to implement in real life. Unfortunately, the RJ approach is not a magic wand. It cannot end up all human right abuses and set everyone happy once and forever. A lot still depends on the vision of corporate governors: whether they are ready to accept the challenge of providing all parties concerned with comprehensive information and encouraging holistic dialogue.

And even if they are, for large multinationals it can also be extremely challenging to identify and hold responsible a concrete offender. However, the fact that the conflict resolution process is challenging, does not mean it is not worth the effort. If you can’t stand the heat, get out of the kitchen.

The efficiency of the RJ approach is not an empty promise. While Barrick left many stakeholders unsatisfied with the remediation results, there is also the case of Severn Trent Water, a UK-based utility company, to draw upon. It managed to gain reacceptance from key stakeholders and to be named “Utility of the Year” by their industry peers just one year after pleading guilty to data manipulation and fraud.

What matters, it seems, is the true willingness to change for the better the way how the things are done. As such, restorative dialogue is the key that paves the way for continuous learning and a general commitment to provide justice for all.

Useful links:

• View Maximillian Schormair’s academic profile
• Link up with Lara Gerlach on LinkedIn
• Read a related article: Children, adolescents and large-scale projects in Brazil
• Apply to study the Trinity P.Grad.Cert. in Sustainable Development
• Discover the Trinity Business School MBA and EMBA.

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