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Corporate value and human rights

2016.06.09




Motohiro Hashimoto
Professor, Faculty of Law, Chuo University
Area of Specialization: Public Law

This work was supported by JSPS KAKENHI Grant Number 15K03220. (Public Relation Office)

The Yawata Steel Case

In Japan, the term “black corporation” is commonly used to condemn corporations if they fail to comply with laws and regulations, engage in actions which obviously violate corporate ethics, or continue to engage in activity which appears to prioritize only company profit. Furthermore, if a corporation abuses human rights (in this article, the term “human rights” is not limited to basic human rights as guaranteed by the Japanese Constitution, but also includes all rights required to protect human dignity), in addition to a decrease in corporate value, a negative evaluation will be attached to the very existence of that corporation in society.

Previously, in the Judgment of the Grand Bench by the Supreme Court of Japan (Minshu Vol. 24, No. 6, p. 625; dated June 24, 1970) in regards to the case of political contributions by Yawata Steel Company, it was ruled that human rights are also guaranteed for corporations. This judgment was based on how corporations are a social reality similar to a natural person. During the same period, in the Judgment of the Grand Bench by the Supreme Court of Japan (Minshu Vol. 27, No. 11, p. 1536; dated December 12, 1973) in regards to the Mitsubishi Plastics case which disputed the freedom of hiring by corporations, it was ruled that corporations do indeed possess the said freedom, and that there is no direct application of Constitutional human rights provisions to human rights issues which arise between corporations and private individuals. In other words, although Constitutional human rights are also guaranteed for corporations, Constitutional law is not applied to human rights violations by corporations. This was the birth of the logic which stated that since private individuals are not obligated to uphold Constitutional law, the national government should not intervene in human rights issues occurring between corporations and private individuals, except in extraordinary cases.

Even so, there are quite a number of laws which obligate corporations to uphold human rights. Some example of laws which require corporations to protect human rights are the Act on Securing, Etc. of Equal Opportunity and Treatment between Men and Women in Employment, the Act on the Protection of Personal Information, and the Disability Discrimination Law. Perhaps this is a strategy to use laws to compensate for areas to which Constitutional law does not apply. In retrospect, the situation could have been greatly simplified if the Supreme Court had stated that “corporations are artificial constructions which differ from natural persons; indeed, corporations possess great power which exceeds that of natural person, and therefore are entities capable of oppressing human rights in the same way that a nation might do.” I still do not know how to explain the relationship between human rights laws and the Supreme Court judgments which were introduced above. From these Supreme Court judgments, it does not seem possible to devise logic in which obligations which cannot be placed on a natural person can be placed on a corporation.

On the other hand, the following explanation is given in the Judgment of the Grand Bench by the Supreme Court of Japan in regards to the Yawata Steel case.

“Generally speaking, activities which are affiliated with social action are not worthless or useless to corporations. It is possible to recognize the equivalent value and effect of such social activities to corporations seeking smooth growth. In this respect, such actions, even when indirect, may be defined as required for carrying out objectives of the corporations. Some appropriate examples include donating funds for disaster relief, providing service to regional society through property, or cooperating in the financing of social welfare activities.”

If a corporation does not protect human rights, that corporation will be labeled with a negative image. A negative social evaluation of a corporation will decrease the corporate value. Based on the premise of the judgment stating that corporations are entities which possess human rights but are not in the position of protecting human rights, the reason that corporations comply with the laws listed above is most likely to maintain their corporate value. The reason that the social responsibility theory of corporations appears empty may be because of such judicial precedent.

Nike vs Kaskey, 539 US 654 (2003)

Of course, regardless of whether it is done in order to smoothly conduct corporate activities or in order to eliminate factors which interfere with corporate activities, a corporation attitude of respecting the values of human rights is of great importance to employees and other stakeholders. Conversely, an image of oppressing human rights will lead directly to being labeled as a “black corporation” as discussed in the introduction to this article.

Let’s look at an example. It was reported that a certain famous sporting goods manufacturer abused local workers at overseas factories and hired workers at conditions which were below minimum wage. In opposition to these reports, the sporting goods manufacturer in question explained its position through the mass media and issued explanations to major business partners. In response, citizens of the state of California sought suspension of the manufacturer’s PR activities based on the Business and Professions Code of California, asserting that the manufacturer’s PR activities contained falsehoods (Nike vs Kaskey, 539 US 654 (2003)).

The United States Supreme Court rejected the lawsuit based on the reason that the plaintiffs lacked standing to sue. In that respect, the manufacturer had won the case in court. However, the corporation was forced to incur a large cost in order to restore its corporate image. From the perspective of the plaintiff, this is akin to having lost in court but won the battle. (For details of this case, refer to page 125 of my work Freedom of Expression: Theory and Interpretations (Chuo University Press). Now that lawsuits by consumer groups have been institutionalized in Japan, there is the possibility of such suits being filed in our country as well. This also creates the possibility that a certain group will seek suspension of corporate PR activities based on the reason that the said corporation engages in activities which violate human rights.

Another issue is how corporations attempt to suppress such lawsuits by filing SLAPP (Strategic Lawsuits Against Public Participation) lawsuits in which corporations seek an enormous amount of compensation for damages (for a detailed discussion of SLAPP lawsuits, please refer to Anti-SLAPP Statute and Freedom of Speech by Natsumi Yoshino (Okayama Law Journal, Vol. 65, No. 3 and 4, p. 709)). Seeking compensation for damages in order to suppress expression which is critical of the corporation will protect corporate property rights and contribute to the profit of shareholders. However, when filing this kind of lawsuit, a corporation is affixed with the negative image of suppressing free speech and becomes widely known as oppressive. It must be noted that there is the risk of this ultimately leading to an extremely negative value and effect in terms of facilitating the smooth growth of the corporation.

In summary, the reason that corporations protect human rights is that doing so leads to corporate profit. This reason must not be underestimated. In the first place, it is unreasonable to share the values of human rights with corporations which do not possess freedom of thought and conscience. Rather, it is more important to straightforwardly create a condition in which corporations which do not protect human rights are expelled from civil society. Corporate ethics differ from the ethics of actual human beings and cannot be constructed as an issue of thought and conscience.

Regarding this point, it should be noted that the United States Supreme Court has issued a similar opinion. In the Citizens United judgment which questioned the constitutionality of political funding controls (Citizens United vs FEC, 558 US 310 (2010)), a strong opinion was stated that the limited liability of a joint-stock company would lead to social irresponsibility. (For a detailed discussion of this position, please refer to page 47 and later of Do Corporations Possess Social Responsibility? by Hiroshi Okumura, Iwanami Shoten (2006)). Justice Stevens gave the following decisive statement regarding the case: “Corporations differ from natural persons. Owners and executives are only obligated with limited liability. Corporations possess an infinite lifespan. Ownership and control are separated. Preferential treatment is received regarding the accumulation and allocation of financial property. In this way, capital is gathered and the ability of the corporation to develop resources for maximizing dividends against investment from shareholders is strengthened. Corporations do not possess conscience, convictions, emotions, ideals, or desires.” (558 US 466) (For a discussion of this point, refer to my article Political Funding Control and the Role of Judicial Review: Reading the McCutheon Verdict in the Comparative Law Review (Vol. 49, No. 1, p. 1)).

Conclusion

When considering issues surrounding corporations and human rights, it is not appropriate to view character and responsibility of corporations in the same respect as those of a natural person. Although a corporation and a natural person may both possess character in terms of a defined capacity which is assigned by law, a different meaning is included when using the term “character” to refer to a natural person. A natural person is a being who obeys categorical imperatives as described by Kant. Complete responsibility is assumed for a natural person. Hence, when connecting corporate value and human rights, we must dispose of the illusion that corporations are entities that are capable of considering human rights or fulfilling responsibility. Instead, similar to the social responsibility theory of corporations, the issues of corporate human rights as well as corporations and human rights must be constructed simply as issues of profit and loss in economic activity.
Motohiro Hashimoto
Professor, Faculty of Law, Chuo University
Area of Specialization: Public Law
Motohiro Hashimoto was born in Tokushima Prefecture in 1959. He graduated from the Department of Law, Faculty of Law, Chuo University in 1982.
After completing the required course work in the Doctoral Program of the Public Law Course at the Graduate School of Law, Chuo University in 1989, he became a Doctor of Law.
He became professor in the Faculty of Law, Chuo University in April 2004 after serving as assistant professor and professor at Kochi Women’s University (currently the University of Kochi).
He was appointed as Dean of the Faculty of Law, Chuo University in November 2009 (served until October 2013).
After serving on the Chuo University Board of Regents from November 2009 until October 2013, he was appointed as vice president of Chuo University in November 2014 (current position).
His current areas of research and activity include the positioning of individuals and organizations in the Constitution, modern society and freedom of information, and questions concerning the right to enact ordinances.
His major publications include Organizations and Individuals in Modern Constitutions [Kindai kempo ni okeru dantai to kojin] (Fuma Shobo and Shinzansha); Petit Seminar Constitution 1 (Human Rights) [Puchi zemi kempo 1 (Jinken)] (Hougakushoin); Concise Local Autonomy Law [Yokuwakaru chiho jichiho] (co-authored, Minerva Shobo); Basics of the Constitution[Kempo no kiso] (Hokuju Shuppan); Explanation of the National Public Service Act [Kokka komuin ho no kaisetsu] (co-authored, Hitotsubashi Shuppan); Freedom of Expression: Theory and Interpretations [Hyogen no jiyu – riron to kaishaku] (Chuo University Press); The Constitution of Japan [Nihonkoku kempo wo manabu] (Chuokeizai-sha) and more.