Einde inhoudsopgave
Corporate Social Responsibility (IVOR nr. 77) 2010/2.8.1.1
2.8.1.1 Enforceability of desired conduct
Mr. T.E. Lambooy, datum 17-11-2010
- Datum
17-11-2010
- Auteur
Mr. T.E. Lambooy
- JCDI
JCDI:ADS365786:1
- Vakgebied(en)
Ondernemingsrecht (V)
Voetnoten
Voetnoten
Report re. contribution H.G. Schermers, ' Internationale Ondernemingen en Mensenrechten' [International corporations and human rights], in Verslag van het symposium: Internationale Dimensies van Maatschappelijk Verantwoord Ondernemen [Report of the symposium: International Dimensions of Corporate Social Responsibility], (University of Leiden, Law Faculty: Leiden 2002).
Modernisation Directive Implementation Bill (discussed in § 2.6.1.2), supra, note 63, no. 11, amendment by Dutch MP Douma, proposing to entrench the OECD MNE Guidelines in article 2:391 DCC, obliging corporations to report on their compliance with these guidelines in their annual report, and to justify any deviations, or plans to deviate, from such guidelines. See the amendment debate in the Dutch House of Representatives in TK 47-3031-3035, and the repeal of the amendment in TK 49-3187. See also 'Eerste reactie PvdA op definitieve gedragscode Commissie Tabaksblat' [First Response of PvdA to Tabaksblat Code], PvdA, 9 December 2003, at http://www.or-online.nl/service/enieuwsbrief/2003/44/#4, accessed on 12 may 2010. See also: 'VBDO: code Tabaksblat behoeft aanvulling' [VBDO: Tabaksblat Code needs to be supplemented], VBDO Bericht, 2003-6; M. Koelemeijer, 'Gedragscode: effectief instrument voor maatschappelijk verantwoord ondernemen?' [Code of Conduct: Effective instrument to bring about corporate social responsibility?], in Tijdschrift voor Ondernemingsbestuur, (2004), pp. 11-23.
See § 2.6.1.2.
Examples of this are the codes of the coffee sector, banks, the clothing industry, and the quality mark FSC timber.
. However, the Tabaksblat Code, supra note 32, best practice provision II.1.3 (sub b) does recommend having a code of conduct and publishing such on the corporation's website. The SOX, supra note 81, sections 406/407-6 and the listing requirements for ' New York Stock Exchange, supra note 84, section 303A Corporate Governance Rules (§ 2.6.2.3), no. 10, p. 16 also require businesses to have a code of business conduct and ethics for directors, officers and employees.
L. Timmerman, 'De OECD-gedragscode voor multinationale ondernemingen' [The OECD guideline for multinationals], in TVVS Maandblad voor Ondernemingsrecht en Rechtspersonen, 6, 1982, pp. 137- 143. Koelemeijer, supra note 112. T.E. Lambooy 'Maatschappelijk verantwoord ondernemen en compliance' [Corporate social responsibility and compliance], in Onderneming en Financiering, 63, 2004. L. Timmerman indicates in Inleidende opmerkingen' [Preliminary remarks], Ondernemingsrecht, 4, 2004, p. 108 and in L. Timmerman, 'Kroniek van het vennootschapsrecht' [Chronicle of corporate law], in Nederlands Juristenblad, 31, 2004, § 1 (c) and 4 (b), to be of the same opinion with regard to the Tabaksblat Code. Ibid J. Winter 'In Nederland aanvaarde inzichten omtrent corporate governance' [Generally held views on corporate governance in The Netherlands], H. Schutte-Veenstra, 'Verzamelde 'Groninger' opstellen aangeboden aan Vino Timmerman' (Kluwer: Deventer 2003), pp. 339-341; Raaijmakers, supra note 110, § 8; M. Das, 'Geldt de Code?' [Is the Code applicable?], in Ondernemingsrecht, 4 (2004), p. 128 and Governmental Decree (AmvB), supra note 105, Explanatory Memorandum (Nota van Toelichting), p. 8.
See: Kasky v. Nike, at http:www.supremecourtus.gov/opinions/02pdf/02-575.pdf, accesed on 1 June 2010, opinion piece dated 26 June 2003. Kasky et al. rely on the California Unfair Competition Law and the False Advertisement Law, in order to obtain a conviction against Nike, for, contrary to their own code of conduct, poor working conditions and using child labour in the manufacturing of its products in South-East Asia. Nike invoked freedom of speech as a defence. The California Supreme Court ruled that Nike's code of conduct should be considered ' commercial speech' and that freedom of speech therefore cannot be invoked, which means that the code of conduct can be assessed in the context of unfair commercial practices. Due to legal-technical reasons the US Supreme Court has not (as yet) heard the case.
Enterprise Division of the Amsterdam Court of Appeal, 21 June 1979, NJ 1980, 71(Batco Nederland), with annotation Maeijer; Dutch Supreme Court, 21 February 2003, NJ 2003, 182(HBG/VEB, Boskalis), inter alia legal ground 6.8.2 and legal ground 6.4.2. See further C. Lo Manto, Corporate Governance (gedragsregels) in (de) strijd met elementaire beginselen van verantwoord ondernemerschap' [Corporate Governance (code of conduct) conflicts with basic priciples of entrepeneurship]',in Verzamelde 'Groninger' opstellen aangeboden aan Vino Timmerman [Collective Papers from Groninger' offered to Vino Timmerman], (Kluwer: Deventer 2003) and Timmerman, supra note 116 (NJB), pp. 1633, 1634 and 1637.
According to Koelemeijer, supra note 112, p. 16. Ibid, S. Bisschop, supra note 34, pp. 78 et seq. Regarding the legally entrenched Tabaksblat Code see the Governmental Decree, supra note 105, Explanatory Memorandum, p. 8.
J.B. Huizink, Rechtspersonen, Artikelsgewijs commentaar [Legal Entities, explanation by article], Article 2:8 DCC, entry 6 (those involved with the legal entity's organisation), updated until 1 March 2003, (Kluwer: Deventer 2003).
M. Brink, Decharge los van de jaarrekening' [Discharge separate from the annual accounts], in Tijdschrift voor Stichting, Vereniging en Vennootschap, 2, 2003, p. 58 and 59.
Directors' and officers' liability towards the company pursuant to article 2:9 DCC will be applicable if and when the company has suffered damage as a result of the director's management. This is not automatically so in case of non-compliance with a code of conduct: sometimes that may even count in favour of the company; however, if the management has resulted in serious loss of reputation it can be maintained that the company has suffered damage. For liability pursuant to Article 2:138/248 DCC (joint and several liability of directors in case of bankruptcy due to mismanagement), a limited discharge, or a discharge refused by the general meeting of shareholders, will not make much of a difference considering paragraph 6 of those articles. The institution of an action shall not be barred by any discharge granted to a director.
Businesses must observe legal norms (including statutory standards of conduct) with regard to environmental protection, employees' rights, human rights, corruption, and other subjects associated with CSR.
This applies to Dutch rules as well as to the rules of any other country a business wishes to operate in. Such rules are enforced by the national government of the relevant country.
Norms with regard to CSR issues laid down in international conventions are, in principle, not directly applicable to businesses. They first need to be implemented in the contracting states through national legislation.1
In the Netherlands, the drawing up of a code of conduct on CSR to which, by analogy with the Tabaksblat Code, the ' comply or explain' principle could apply, has been advocated.2 In the EP a European directive with regard to socially responsible conduct by businesses has been suggested.3 So far, these pleas have not resulted in specific regulations for corporate conduct with regard
to CSR.
Businesses are not only guided in their conduct by legal norms, but also by standards of conduct such as those laid down in codes of conduct drawn up by international organisations (OECD and Global Compact), by business sectors,4 or by a business itself. The drawing up of a code of conduct on CSR, or the adoption of a code of conduct drawn up by an international organisation, is not a requirement of Dutch law.5 Businesses adopt and adhere to such codes of conduct voluntarily. With regard to the OECD MNE Guidelines, it should be noted that these guidelines are based on the principle of voluntary commitment'.
This means that once a business has adopted these guidelines it must adhere to them. Complaints about non-compliance with the norms can be filed with the so-called National Contact Point (NCP), which all OECD Member countries have established in accordance with the OECD MNE Guidelines. Complaints are resolved through consultation between the complainant and the business. The NCP, however, may publish the results of a complaints procedure, which in turn could lead to loss of reputation.
The question remains whether a code of conduct that has been drawn up or adopted voluntarily has any force of law. If a company does not live up to the good intentions it has included in its code of conduct it may appear less than honest, or at the very least may create the impression of having an ambiguous policy. However, using such qualifications is not without legal complications. Codes of conduct seem to dwell in a legal ' no man's land'. Courts could use a code of conduct as a (supplementary) source of law when interpreting vague norms in our legal system, but norms in a code of conduct will not automatically have an effect on vague legal norms. A code of conduct entrenched in law, such as the Tabaksblat Code, and on the future compliance with which a business must report in its annual report, will probably have greater legal relevance than other codes of conduct. Such codes may, for example, be helpful where the interpretation of open norms such as unlawfulness, obviously incorrect cause of action, and reasonableness and fairness are concerned, as will be briefly discussed below:6
actions pursuant to article 6:194 DCC (misleading advertising) and article 6:162 DCC (unlawful act) possibly in conjunction with article 3:305a DCC (concerted action). If a company acts contrary to its own published code of conduct, or to a general code of conduct it has publicly adopted, it could be argued that (the content of) that code of conduct qualifies as a misleading publication, that the public announcement about that code of conduct is misleading information, or that the conduct of that company is unlawful. However, it will not be easy to establish a causal connection between the publication of the code of conduct and the occurrence of the damage. Moreover, it may be difficult to quantify such damage if a company has caused damage to the environment or to a group of people. In the case of an action based on article 6:194 DCC it is furthermore of importance whether the court will deem the code of conduct to be aimed at the sale of goods or services;7
actions pursuant to article 2:350 DCC (reasons to doubt a correct course of action) and article 2:355 DCC (incorrect course of action). A company acting contrary to its own code of conduct or to an adopted international organisation's code of conduct, can be accused of inconsistent conduct. The Enterprise Division of the Amsterdam Court of Appeal (Ondernemingskamer) will only allow an application for an inquiry if such inconsistent conduct provides a well-founded reason to doubt a correct course of action. If this proves to be the case, an inquiry will be conducted. The report on the outcome of the inquiry will subsequently establish whether or not the course of action can be qualified as obviously incorrect. The fact that a company has a large margin of discretionary power to conduct its affairs will be given due consideration in this respect. If a company can justify its inconsistent conduct, that conduct will not readily qualify as an obviously incorrect course of action. Nevertheless, in 1979 the Enterprise Division of the Amsterdam Court of Appeal held that Batco Nederland's course of action was obviously incorrect. One of the reasons for this decision was that the company's conduct was contrary to the OECD MNE Guidelines it had publicly endorsed. In a more recent case, HBG v. the Dutch Association of Stockholders and Boskalis, which dealt with non-compliance with a statement on corporate governance in the annual report rather than compliance with a code of conduct, the Dutch Supreme Court (Hoge Raad) ruled that an obvious incorrect course of action had not been established. The Dutch Supreme Court, however, did indicate in its judgement that repeatedly and systematically failing to demonstrate good conduct may constitute a violation of the fundamental principles of CSR. Furthermore, it can be inferred from this judgment that the Enterprise Division of the Amsterdam Court of Appeal may apply a rule or code of conduct when there is an obligation for the company to operate in accordance with that rule or code of conduct, provided that such an obligation is sufficiently supported by, for example, existing or future legislation or by notions about corporate governance accepted in the Netherlands';8
actions pursuant to article 2:8 DCC, possibly in conjunction with article 2:15 DCC (reasonableness and fairness). A code of conduct may also play a role in the interpretation of the norm of reasonableness and fairness within a company's corporate organisation. According to this open norm, the legal entity and those involved with the organisation pursuant to the law and the Memorandum and Articles of Association, must behave towards each other in accordance with the principle of reasonableness and fairness.9 Shareholders, and possibly the works council, might be able to invoke this principle if a legal entity, or its board of directors acts contrary to the code of conduct adopted by that legal entity and in so doing affects the interests of the shareholder or the works council. Other parties that have an interest in the legal entity's compliance with its code of conduct will not be able to invoke this provision.10
Another form of (derivative) enforceability of codes of conduct can be found in private law transaction documents, such as financing and insurance contracts. The tendency nowadays is that financiers and insurers often require the borrower or policyholder to commit themselves to socially responsible conduct, for instance, a commitment to avoid environmental damage or the guarantee that neither the concerned parties nor their suppliers will make use of forced labour or child labour. Failure to honour such a guarantee would then allow the financier or insurer -depending on the terms of the contract- to institute civil legal proceedings against the borrower or policyholder for: the termination of the contract, the forfeit of a penalty, a claim for damages, or modification of the terms of the contract.
Finally, attention is drawn to the annual discharge from liability for directors and members of the supervisory board. Since 2001, the link between the discharge from liability and the approval of the annual accounts has been severed.11 In the case of a discharge from liability, the general meeting of shareholders determines whether the directors and members of the supervisory board have properly executed their management and supervisory duties, and discharges them from internal liability towards the company pursuant to article 2:9 DCC if this is found to be the case. This procedure provides the general meeting of shareholders with an opportunity for debate with the board of directors on the policy conducted and to be conducted, and also provides them with the opportunity to exert influence in this area. Within this context, the new draft ' Décharge Statuut' (discharge statute) is worthy of note.12 This statute states, inter alia, that the board of directors and the supervisory board should be obliged to report on the mission and vision of the company, including the adoption of a set of values and norms, and on risk management with regard to environmental issues, for instance, and on its social policy.
It furthermore states that the board of directors and the supervisory board must encourage and sustain the norms and values within the organisation and formulate and propagate a code of conduct. Should the business have a code of conduct, it may well be that in this context its adherence to the provisions of that code will be examined.13
In sum: even though a company voluntarily adopts a code of conduct regarding socially responsible conduct; voluntarily includes guarantees in contractual documents; and voluntarily propagates norms and values in that area, this does not imply that there are no legal strings attached.