Corporate Action and the Failings of the Jesner Decision

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This post is the sixth in the Jesner v Arab Bank special series on this blog. Previous posts are here, here, here, here, and here.

It is a pleasure to welcome Dr Tara Van Ho (@TaraVanHo) on Rights as Usual. Tara is a lecturer in law at the University of Essex. Her research focuses on business and human rights. More information can be found here. This post is hers.

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One needn’t get very far into the Jesner decision before it is apparent exactly how the US Supreme Court was going to rule. Like most #bizhumanrights scholars, I knew the outcome before I even found the first page of the judgment thanks to Twitter. But the outcome of the case is also clear by the end of page 2 when Justice Anthony Kennedy described the question before the Court as this:

“Petitioners contend that international and domestic laws impose responsibility and liability on a corporation if its human agents use the corporation to commit crimes in violation of international laws that protect human rights. … The Court must first ask whether the law of nations imposes liability on corporations for human-rights violations committed by its employees. The Court must also ask whether it has authority and discretion in an [Alien Tort Statute (ATS)] suit to impose liability on a corporation without a specific direction from Congress to do so.”

 Kennedy comes back to the point later in a portion of the decision that is joined only by Justices Roberts and Thomas:

“It is also true, of course, that natural persons can and do use corporations for sinister purposes, including conduct that violates international law. That the corporate form can be an instrument for inflicting grave harm and suffering poses serious and complex questions both for the international community and for Congress.” (p. 24).

The Court that found corporations have the right to freedom of religion because their shareholders do was now portraying corporations as inanimate objects used to do evil, rather than organizations capable of evil themselves.

Jesner is the corporate accountability equivalent of that ubiquitous American saying that “guns don’t kill people; people kill people.” And just as the NRA’s propagandist slogan is inaccurate and incomplete, so is the Court’s portrayal of (1) human rights law, (2) the nature of customary international law, and (3) the need for corporate liability in international law. I’ll treat each of these this week, but split them between posts here (the need for corporate liability in international law) and the Essex Human Rights Centre blog.

The Corporation: Tool or Cause?

The problem with Kennedy’s approach is that often the corporation is not a tool for doing evil but is the reason for doing evil . While it is easy to assume that bad leaders undertake bad decisions for bad purposes, and the rest of the corporation is just caught up in the process, decades of studies in the areas of organizational psychology and behavioural psychology indicate that this is generally not how it works. Instead, the leaders can make bad decisions specifically because they are serving the corporate interest, rather than their own morality.

We know that people make different decisions because of the ‘hat’ or role they play. This was most disturbingly demonstrated in the Stanford prison experiments, but it has been verified by other research. Individuals make decisions differently when they are in their ‘work’ role and when they are acting in their personal role.

We also know that the conditions within the corporate structure can motivate either positive or negative ethical behaviour. This environment at the top of a corporation can influence how any individual leader at the top of the corporation acts – even to the point of encouraging managers to take decisions in their professional capacity that they would never make in their personal capacity so as to serve the organizational culture.

Once the conditions within the corporation are set at the top levels, it is likely to carry down throughout the corporation and influence decisions even when individuals would not make those decisions on their own accord. The ‘Milgram experiment’ receives a great deal of attention for demonstrating clearly that seemingly ‘good’ average people will follow orders to torture other human beings if they are ordered to do so by an authority figure. The fact that they are torturing people – and can hear the person scream – rarely has an impact on their choice to continue the torture. Instead, the direction of the person in a position of authority carries more weight than their own personal morality.

The Need for Corporate Accountability

Given the findings of organizational and behavioural psychology, it is important that judges and policy makers recognize that at times the corporate structure is not simply a tool but can be a cause of criminal conduct. When a company has a repeated history of ignoring the negative impacts it has on the societies in which it operates – regardless of who is at the top of the corporate structure, regardless of changes in personnel – then we need to consider that it is the corporation and not the individuals within the corporation that is responsible for the misdeed.

At the Essex Human Rights Centre blog, I’ll address the problems with Kennedy confusing international human rights law and international criminal law – and finding that the Alien Tort Statute cannot be applied to human rights claims against corporations because international criminal tribunals do not have jurisdiction over corporations (an issue Alessandra De Tommaso raised well in her contribution to this blog).

Kennedy’s opinion shows not just a fundamental misunderstanding of international law, but also of how corporations and corporate environments work. In doing so, he missed or misrepresented the fundamental question of corporate claims: how do we hold the institution accountable for its institutional failures? By assuming corporations are a tool and not the cause, Kennedy shields fundamentally broken organizations from responsibility and suggests instead that it is the individuals within the company – rather than the company itself – that should bear the burden for conduct that breaches international law.

A Current Development to Follow

Kennedy is not alone in his approach. In fact, for civil law states this was long a barrier to corporate criminal accountability. But civil law states are increasingly embracing corporate criminal accountability. This trajectory needs to continue, and there currently is a rare opportunity to push for clearer accountability for corporations.

The International Law Commission and states are currently debating the proposed International Convention on the Prevention and Punishment of Crimes against Humanity. The current draft proposal states that:

“Subject to the provisions of its national law, each State shall take measures, where appropriate, to establish the liability of legal persons for the offences referred to in this draft article. Subject to the legal principles of the State, such liability of legal persons may be criminal, civil or administrative.”

This approach is more honest about the factual realities that cause corporate criminal conduct than what we currently have in international criminal law. It recognizes that it is not simply the individuals who commit the wrong, but that at times a corporation commits its own breaches. It is not a tool; it is the cause. This is a significant development – one that those of us working on business and human rights should follow and support – and should give us hope that Jesner will eventually be a blip on the path to real and reality-based corporate accountability.