Failure to Consider Human Rights Suits as a Potential Basis for Derivative Actions

Daniel Augustus Sansone Foe, University of Pittsburgh School of Law

Abstract

Failure to Consider Human Rights Suits as a Potential Basis for Derivative Actions

This note proposes that in instances where corporate boards have knowingly or through their gross negligence allowed potentially costly human rights abuses to occur or where boards have failed to utilize appropriate monitoring standards to ensure compliance with human rights laws, they may be held to account for resulting losses to their shareholders in derivative actions.

In arriving at this proposition the note explores the current prospects for being held liable under the Alien Torts Statute (28 U.S.C. § 1350) and the direct and indirect costs associated with human rights litigation. It then applies the fiduciary duties of corporate directors, officers and board members to a model decision that fails to account for the risks of human rights litigation.

With the pressures associated with an economy in recession there may be an increased temptation amongst corporate boards to take short cuts with human rights as a means of cost saving. This article addresses the dangers of such shortsighted efforts by pointing out an additional consideration that must be taken in corporate decision-making.