PILCH On CSR Senate Inquiry

Phillip Lynch from the PILCH Homeless Persons’ Legal Clinic says corporations have the potential and capacity to, on the one hand, contribute significantly to, and on the other hand, derogate significantly from, human rights in local, regional, national and even international communities and environments.

His comments come in a submission to joint Senate Committee conducting an inquiry into corporate responsibility and triple-bottom line reporting in Australia.

The push for the inquiry has been initiated by the Federal ALP.

The inquiry has called for written submissions before the closing date of 15 September 2005 from both the for-profit and Not for Profit incorporated organisations under the Corporations Act.

The PILCH submission says that at its best, corporate social responsibility is corporate governance and conduct that contributes to the realisation of human rights.

A range of initiatives in relation to directors’ duties, reporting and disclosure requirements, and government procurement are needed to ensure that corporations consider and act in accordance with the interests, values and rights not only of shareholders but also stakeholders and the broader community.

It says these initiatives should be based on the UN Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights.

Phillip Lynch says that while the extent of corporate social responsibility in Australia has increased significantly over the last decade, it still remains low.

Less than 10 per cent of corporations demonstrate a developed understanding of the relationship between corporate social responsibility and business.

Lynch says there is a manifest need for policy and incentives to promote corporate social responsibility and encourage companies to contribute to the realisation of human rights within their spheres of activity and influence.

He says that Section 181 of the Corporations Act which requires directors to act in good faith in the best interests of the company and for a proper purpose, only permits corporations to act in the interests of social, environmental and broader community interests in so far as those interests are related to the financial interests of shareholders.

PILCH makes seven recommendations to the Senate inquiry including that the Australian Stock Exchange should consider developing a market index that measures the performance of companies.

The Terms of Reference for the inquiry include the extent to which organisational decision-makers currently have or should have regard for the interests of stakeholders other than shareholders and the broader community.

It asks whether current legal frame-works governing directors’ duties encourages or discourages them from having regard for the interests of stakeholders rather than shareholders.

The Inquiry is due to report to parliament in November 2005.

For submission information and a copy of the Terms of Reference click here http://www.aph.gov.au/senate/committee/corporations_ctte/corporate_responsibility/index.htm.

The PILCH submission can be viewed in PDF format on the Senate website at http://www.aph.gov.au/senate/committee/corporations_ctte/corporate_responsibility/submissions/sublist.htm