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Corporate Social Responsibility - the legal context

Silow, Jesper (2008)
Department of Law
Abstract
During the last few years increased focus has been given to environmental and social issues due to worldwide changes in the weather and temperature, in some cases leading to natural disasters and dramatic changes in everyday life. Media and politicians have begun to address related problems, acknowledging the fact that human impact on nature is a real problem that poses as a threat to our future. Following this, many organisations and organs, as well as private corporations, have developed different frameworks stipulating behavioural and ethical guidelines for enterprises and independent actors. The participation in these frameworks is voluntary, and there are no means to hold the participants legally responsible for breaking the rules.... (More)
During the last few years increased focus has been given to environmental and social issues due to worldwide changes in the weather and temperature, in some cases leading to natural disasters and dramatic changes in everyday life. Media and politicians have begun to address related problems, acknowledging the fact that human impact on nature is a real problem that poses as a threat to our future. Following this, many organisations and organs, as well as private corporations, have developed different frameworks stipulating behavioural and ethical guidelines for enterprises and independent actors. The participation in these frameworks is voluntary, and there are no means to hold the participants legally responsible for breaking the rules. Instead there are sanctions based on loss of goodwill and upon public disgrace. This type of self-regulating frameworks is usually referred to as ''soft-law''. This thesis aims at examining how these kinds of soft-law regulations relate to certain general principles of corporate law, existing in almost the same shape in most modern national legislations throughout the world. The thesis will present the legal context of the idea of CSR from a corporate law-perspective. In most national legislations the joint-stock company is based upon a profit purpose. Also, the management of the company has a direct obligation not to diverge from the economical interest of the company. Therefore, it is in many situations directly illegal or at least reproachable for a management to perform actions based merely on social or environmental considerations. Conflicts between social or environmental considerations prescribed by the frameworks discussed and the economical interests of companies have been tried in court on a number of occasions. The discretion of the management is traditionally considered to be extensive in Sweden as well as in the U.S. and the UK, but the right directly to transfer funds from the company to other social interests is more narrow, which has been concluded through case-law regarding the gift institute of the SCA. In order to identify socially and environmentally questionable behaviour on behalf of the company, a certain amount of transparency must be present. Most modern national legislations have adopted rules regarding information sharing through frameworks that more or less resemble American Sarbanes-Oxley Act of 2002. Another CSR-related problem is the difficulty to create legal liability for actions on behalf of the corporations. This problem partially originates with the inability of many third world countries to protect their own citizens. If there are no means to gain compensation in the country where the damage was inflicted, the victims must search for jurisdiction in the country where the company is based. This creates a problem of a very legal-technical nature, as the rules regarding jurisdiction usually are very hard to pierce. Establishing liability for the parent company is harder, as a main principle of corporate law is to separate different bodies in a company group legally. The legal status of the CSR frameworks is that they are non-binding, but in special circumstances the U.S. district court of Michigan has found that company policies and oral statements are to be considered binding for the company. The development of this legal area is standing in front of a choice between two directions, where one direction leads to the traditional view of parent company liability and codes of conduct as legal instrument without any real significance. The other direction leads to greater reponsibility for corporations acting through subsidiaries, and creating more responsibility for the statements of adopted company policies. (Less)
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author
Silow, Jesper
supervisor
organization
year
type
H3 - Professional qualifications (4 Years - )
subject
keywords
Förmögenhetsrätt, Associationsrätt
language
English
id
1561908
date added to LUP
2010-03-08 15:55:29
date last changed
2010-03-08 15:55:29
@misc{1561908,
  abstract     = {During the last few years increased focus has been given to environmental and social issues due to worldwide changes in the weather and temperature, in some cases leading to natural disasters and dramatic changes in everyday life. Media and politicians have begun to address related problems, acknowledging the fact that human impact on nature is a real problem that poses as a threat to our future. Following this, many organisations and organs, as well as private corporations, have developed different frameworks stipulating behavioural and ethical guidelines for enterprises and independent actors. The participation in these frameworks is voluntary, and there are no means to hold the participants legally responsible for breaking the rules. Instead there are sanctions based on loss of goodwill and upon public disgrace. This type of self-regulating frameworks is usually referred to as ''soft-law''. This thesis aims at examining how these kinds of soft-law regulations relate to certain general principles of corporate law, existing in almost the same shape in most modern national legislations throughout the world. The thesis will present the legal context of the idea of CSR from a corporate law-perspective. In most national legislations the joint-stock company is based upon a profit purpose. Also, the management of the company has a direct obligation not to diverge from the economical interest of the company. Therefore, it is in many situations directly illegal or at least reproachable for a management to perform actions based merely on social or environmental considerations. Conflicts between social or environmental considerations prescribed by the frameworks discussed and the economical interests of companies have been tried in court on a number of occasions. The discretion of the management is traditionally considered to be extensive in Sweden as well as in the U.S. and the UK, but the right directly to transfer funds from the company to other social interests is more narrow, which has been concluded through case-law regarding the gift institute of the SCA. In order to identify socially and environmentally questionable behaviour on behalf of the company, a certain amount of transparency must be present. Most modern national legislations have adopted rules regarding information sharing through frameworks that more or less resemble American Sarbanes-Oxley Act of 2002. Another CSR-related problem is the difficulty to create legal liability for actions on behalf of the corporations. This problem partially originates with the inability of many third world countries to protect their own citizens. If there are no means to gain compensation in the country where the damage was inflicted, the victims must search for jurisdiction in the country where the company is based. This creates a problem of a very legal-technical nature, as the rules regarding jurisdiction usually are very hard to pierce. Establishing liability for the parent company is harder, as a main principle of corporate law is to separate different bodies in a company group legally. The legal status of the CSR frameworks is that they are non-binding, but in special circumstances the U.S. district court of Michigan has found that company policies and oral statements are to be considered binding for the company. The development of this legal area is standing in front of a choice between two directions, where one direction leads to the traditional view of parent company liability and codes of conduct as legal instrument without any real significance. The other direction leads to greater reponsibility for corporations acting through subsidiaries, and creating more responsibility for the statements of adopted company policies.},
  author       = {Silow, Jesper},
  keyword      = {Förmögenhetsrätt,Associationsrätt},
  language     = {eng},
  note         = {Student Paper},
  title        = {Corporate Social Responsibility - the legal context},
  year         = {2008},
}