Corporate liability for human rights inevitable

Joseph E. Stiglitz, Professor of Economics, Columbia University, Project Syndicate

Wittingly or unwittingly, individuals do things that injure other individuals. For society to function, it must provide individuals with incentives not to do so, through rewards and punishments, regulations and fines. By polluting the air, one harms anyone who breathes. The legal system has an important role here. If I injure you, you should be able to sue me.

Of course, individuals have a moral responsibility not to injure others. Indeed, this is perhaps the central moral imperative -- do unto others as you would have them do unto you, and do not do unto others as you would not have them do unto you.

Immanuel Kant, with his categorical imperative, provided the philosophical foundations for those who wanted an alternative basis for ethics than that provided by religious aphorisms. But modern society cannot and does not simply rely on individuals doing the "right" thing. It provides carrots and sticks.

Motivating corporations to do the right thing is even more difficult. After all, corporations don't have a conscience; it is only the conscience of those who run the corporation, and as America's recent corporate scandals have made all too clear, conscience often takes a backseat to profits.

America's legal system makes sure that firms that produce a defective, and particularly an unsafe product, are held liable for the consequences. Firms are in a far better position than consumers to assess the safety of their product; we all benefit knowing that our legal system has provided corporations with incentives to pay attention to the safety of what they produce.

Similarly, environmental laws make firms liable for their toxic wastes, and many countries, including the U.S., have enshrined the principle that "polluters pay," that is, companies must pay for the damage they cause. It is a matter both of incentives and social justice.

In other realms, however, we are only beginning to think about what corporate responsibility should mean for our legal system. In World War II, German corporations were all too willing to profit from the slave labor of those in concentration camps, and Swiss banks were happy to pocket the gold of Jewish victims of Nazi terror. Recent suits have made them at least pay back some of what they took.

More recently, oil companies have demonstrated little conscience in providing money that feeds guerrilla movements -- so long as their own interests are preserved. When, in Angola, one brave firm, BP, wanted to do the right thing by trying to make sure that oil royalties actually go to the government, rather than to corrupt officials, other oil companies refused to go along.

In the Congo, the profits of mining companies helped maintain the late President Mobuto of Zaire, now the Congo, in power for decades -- enabling him to pillage his country, allegedly facilitated by the secret bank accounts that are the specialty of countries like Switzerland, the Cayman Islands, and Cyprus. World Bank and IMF money also helped sustain Mobuto. These institutions knew, or they should have known, that their loans and aid was not going to help the country's desperately poor people. It would only leave them deeper in debt.

Today, we believe that individuals, corporations, and institutions should be held accountable for their actions. But what should that mean, if it is to be more than rhetoric? For a start, it means debt forgiveness: International lenders may not be able to compensate fully the damage caused when their money helps maintain odious autocrats in power, but at least the victims should not be burdened by a disastrous financial legacy.

In South Africa, it was arguably the economic pressure brought by sanctions which eventually brought down the racist Apartheid system; but by the same token, it was economic support from the outside -- including loans from multinational banks -- which kept the system going for so long. Much the same may be true about Iraq during the 1990s.

Those who contributed to maintaining Apartheid -- and especially those who did not adhere to the sanctions after the UN approved them -- should be held accountable. The Truth and Reconciliation process may or may not work to heal South Africa's wounds, but if corporations are to be provided with incentives to do the right thing, they must now pay the price for the profits that they reaped from that abhorrent system.

If corporations had a conscience, they would act, without being forced to do so: They would estimate their profit from the Apartheid system and pay it back to the country, with interest. For Apartheid's demise has not solved the country's deep economic problems, including an unemployment rate in excess of 25 percent.

So far, there appears to be no rush to make amends in South Africa, and, as elsewhere, the evidence is meager that the corporate conscience runs very deep. But it is to be hoped that the West's legal systems will provide an alternative recourse, one that will not only partially redress past injustices, but provide incentives for corporations to think twice before profiting from brutal regimes in the future.