Ronald McDonald photo via sfxeric on Flickr
When most consumers think of Ronald McDonald – or even a Big Mac – human rights is not the first thing that comes to their minds.
But earlier this year McDonald's Corporation released a “Report of the Sustainability and Corporate Responsibility Committee of the Board of Directors of McDonald's Corporation” on human rights – after a request was made by some shareholders.
Beyond the issue if this was in the best interest of the company’s overall shareholders or its bottom line, human rights is an important global topic and McDonald’s is a global company. So the concerned shareholders told McDonald’s they wanted it to outline how it identifies and analyzes human rights risks in its operations, products and supply chain, according to a recent article by Amol Mehra and Nicole Santiago, appearing on the Huffington Post.
“Shareholders demanded that McDonald's prove that they conduct human rights due diligence,” the article said. On its part, McDonald's said, "the issue of risk management as relates to human rights matters within McDonald's operations may be of interest to some shareholders." So it produced the report.
In one section, the report said, “Management has demonstrated its commitment to identify, analyze and assess its human rights impacts and to respect human rights through the myriad of activities described…. We acknowledge that no program is perfect, particularly in a system as large and diverse as McDonald’s, and that living up to our commitment will require diligent inquiry, continued engagement with stakeholders and improvements in policies and practices over time.”
Other companies, Caterpillar and Halliburton, were asked by their shareholders to produce a similar report for their firms.
Mehra and Santiago praise McDonald’s for taking the step, and argue “it is indisputable that human rights impacts on businesses are real. The direct impacts of litigation, financial penalties for non-compliance with regulations and the reputational risks associated with abuses are just a few of the ways that human rights have a material impact on long-term corporate value.” But they argue that institutional investors have largely been quiet on the human rights front at corporations.
Meanwhile, the U.S. Securities and Exchange Commission (SEC) so far has chosen not “to embrace mandatory disclosure of human rights diligence” – fearing it would cause “information overload” for investors,” according to the Huffington Post article. The authors want to see the SEC issue “interpretive guidance to explain how material human rights-related information should be incorporated into existing reporting requirements, or promulgate a new rule specifically requiring human rights-related disclosure.”
Overall, is this a good idea? There is no doubt that human rights issues touch on McDonald’s employee relations and other operations. For instance, companies should not be exploiting workers. Earlier this year, Inside Counsel reported that “In a country with low labor rates, and very few meaningful labor laws, it is always a concern that the employees of investing corporations will be ill-treated, even exploited.”
But much of the human rights regulations out there do not come from domestic law – with sources often linked to documents originating at the United Nations. For instance, the McDonald’s report references such sources as the United Nations Universal Declaration of Human Rights, the United Nations Guiding Principles on Business and Human Rights (UNGPs), and the OECD Guidelines for Multinational Enterprises.
It could end up be a confusing process for one nation’s labor relations panels or courts – not to mention businesses – if a whole new set of priorities is introduced as part of the regulatory environment. Some time there is overlap. But other times, the focus should be to answer whether a company complies with state and federal law – in a nation such as the United States. As an example, U.S. employers were warned recently to expect more fines from the Immigration and Customs Enforcement's (ICE) regarding workers’ status. Is that not the kind of issue shareholders may be concerned about?