Doing business in countries with questionable human rights records may expose companies to potential shareholder actions and regulatory fines.
A recent report from Ecclesiastical Investment Management (EIM) suggests that 48 percent of countries around the world have questionable human rights records, placing millions of citizens at risk and exposing companies that do business in those countries to potential shareholder actions and regulatory fines.
The EIM study says Sudan, the Democratic Republic of Congo, Somalia, Afghanistan and Pakistan are among the worst human rights offenders. While those countries may seem obvious offenders, it should not be overlooked that almost half of the world’s nations have some issues relating to slavery, gender and racial discrimination, labor abuses, and other cultural rights violations. The problem may be much larger than some want to acknowledge.
Companies that violate human rights are being targeted by shareholder groups – the recently released As You Sow Proxy Preview 2013 Report showed that of the 365 shareholder proposals on environmental and social issues filed so far this year, 8 percent dealt with human rights and decent work issues. Perhaps of bigger concern for companies is the possibility of running afoul of the Securities & Exchange Commission’s Conflict Minerals Rule, which gives issuers until May 2014 to research their supply chains and disclose whether they manufacture or produce products that use metals from the Democratic Republic of Congo or nine other neighboring countries. Many companies may not even realize they are subject to the rule (which covers the use of tin, gold, tungsten and tantalum from the ‘conflict’ countries) because their suppliers may be the actual users of the conflict metals.
This additional scrutiny of how companies deal with human rights violations may have an affect on shareholder values. Institutional investors have raised the bar on this in recent years, deciding not to purchase shares of certain companies based on their human rights and environmental records. Experts expect this area to receive more attention in years to come, so it is important to have a prepared response. The Organization for Economic Co-operation and Development (OECD) has resources to help companies deal with the Conflict Minerals Rule that can help.
