March 28, 2025
Compliance and Risk Management
Corporate Accountability and Human Rights: Aligning South African Business Practices with Constitutional Values
The idea that businesses should be held accountable for human rights violations is deeply rooted in South Africa’s history. The Truth and Reconciliation Commission (TRC), established in 1996, revealed how corporations contributed to human rights abuses under apartheid. More recently, the Marikana Commission of Inquiry, established in 2012, investigated the role of Lonmin mining company in the deaths of 34 miners, highlighting the mining sector’s ongoing human rights challenges. These cases serve as stark reminders that corporate actions have real consequences for human lives and that accountability remains a critical issue in South Africa’s business landscape. Building on this history, this article examines how South Africa’s legal framework holds businesses accountable for human rights violations and why aligning business practices with constitutional values is non-negotiable.
The Legal Foundation for Corporate Accountability
The United Nations Guiding Principles on Business and Human Rights confirm that states must protect citizens from human rights abuse, whether by individuals, institutions, or corporations. These principles provide a global standard for preventing and addressing adverse human rights impacts linked to business activities. In South Africa, the Constitution of the Republic of South Africa, 1996 (“the Constitution”) and the Companies Act, 2008 (“the Companies Act”) serve as cornerstones for corporate accountability, ensuring compliance with the Bill of Rights.
Section 7(a) of the Companies Act states: “The purposes of this Act are to – (a) promote compliance with the Bill of Rights as provided for in the Constitution, in application of company law.”
This provision makes it clear that corporate governance in South Africa is not just about financial success. It must align with constitutional principles. Directors and executives cannot ignore human rights and claim their only duty is to shareholders. The law says otherwise.
Directors’ Duties: Ethics, Accountability, and Legal Consequences
Directors play a key role in upholding constitutional values. Acting in good faith is central to this responsibility. While the term may seem vague, case law provides clarity.
In Charterbridge Corporation Ltd v Lloyds Bank Ltd, the court held that directors must act in a way that an “intelligent and honest person, in the position of a director, could reasonably believe [to be] for the benefit of the company.” Similarly, in Bester v Wright, the court made it clear that failing to comply with legal requirements, whether in terms of the Companies Act or any other law, is a breach of fiduciary duty. This duty requires directors to act in good faith, with care, skill, and diligence, always prioritizing the best interests of the company. It extends beyond financial concerns, encompassing legal and ethical obligations, including corporate governance principles and broader societal responsibilities.
The courts have gone further, holding directors accountable for failing to act in the broader public interest. In Minister of Water Affairs and Forestry v Stilfontein Gold Mining Company Limited, the court-imposed penalties on directors who neglected environmental regulations, reinforcing the principle that corporate leaders must consider more than just profit. They must act responsibly towards society. This principle applies just as strongly to human rights obligations.
By paralleling these principles with human rights obligations, it is evident that the judiciary is prepared to hold directors accountable for any neglect that leads to human rights infringements. Such judicial activism signifies the importance of integrating human rights considerations into corporate governance, ensuring that directors not only comply with legal statutes but also uphold ethical standards that protect human dignity and societal interests.
Corporate Governance, Transparency, and Ethical Leadership
Corporate governance plays a crucial role in ensuring corporate accountability and ethical business practices. It is the system by which companies are directed and controlled, balancing the interests of shareholders, directors, creditors, and customers. Two fundamental principles, accountability and transparency, are at the core of corporate governance and are critical in addressing human rights concerns.
Transparency
Transparency involves making reliable and relevant information publicly available, allowing stakeholders to evaluate corporate practices and decision-making. It includes disclosing financial performance, governance structures, and risk management strategies. In South Africa, the value of transparency is aligned with constitutional principles that uphold the ideals of an open, democratic society. Through transparent operations, companies not only reduce risks but also build a stronger reputation and foster accountability.
Accountability
Accountability ensures that directors and executives take responsibility for corporate actions and decision-making. The Companies Act provides a legal framework for holding directors accountable, particularly through Section 76(3), which requires directors to act in good faith and for proper purposes. Failure to meet these obligations can result in legal and financial consequences, reinforcing the need for responsible corporate leadership.
A lack of accountability can lead to abuses of power, undermining corporate integrity and public confidence. To prevent this, companies must establish mechanisms that promote responsible governance, ethical decision-making, and compliance with legal and constitutional obligations.
Corporate Ethical Leadership and Corporate Citizenship
The King IV Report on Corporate Governance for South Africa offers crucial guidance on ethical leadership and corporate citizenship. Ethical leadership ensures that companies operate with integrity, fairness, and a long-term focus on sustainability. Directors who lead ethically foster a corporate culture that prioritizes human rights, environmental responsibility, and stakeholder well-being.
In addition to ethical leadership, the report emphasizes the concept of corporate citizenship, which reflects a company’s broader societal responsibilities. Businesses must recognize that they do not operate in isolation and have a duty to contribute positively to their communities and environments. By adopting practices that promote economic growth, environmental sustainability, and social welfare, companies can align with constitutional values and demonstrate their commitment to human rights. While the King IV Report is not legally binding, its principles remain essential for fostering responsible corporate behavior and guiding companies toward better governance and ethical practices.
Conclusion
To truly align business practices with constitutional values, companies must move beyond legal compliance and actively engage with the communities they affect. Establishing robust human rights policies, fostering ethical leadership, and ensuring transparency in decision-making are crucial steps in building a corporate culture that respects human dignity and promotes social responsibility.
Corporate compliance with human rights is both a moral and practical imperative. Effective governance systems enable companies to identify and manage human rights risks, ensuring alignment with their obligations under the Constitution and the Companies Act. By integrating human rights into corporate governance, businesses not only comply with legal mandates but also foster a culture of respect and ethical integrity.
The interplay between the Constitution, the Companies Act, and corporate governance principles underscores the importance of corporate accountability for human rights. Transparency, accountability, and ethical leadership serve as key pillars in ensuring that businesses operate in a manner that respects human dignity and societal welfare. By aligning business practices with constitutional values, companies enhance their sustainability, build stakeholder trust, and contribute meaningfully to South Africa’s broader social and economic development.
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