Organizational Irrationality and Corporate Human Rights Violations

Abstract

Because international law has traditionally been limited to state actors, the literature on business and human rights largely focuses on whether transnational corporations can be held responsible under international law. Less attention is paid to the question of what leads corporations to violate human rights in the first place. When they do address that question, most writers assume that violations occur because corporations make rational decisions to pursue profits without regard to potential victims.

This Note aims to provide a more nuanced account of the reason for corporate human rights violations, drawing from social science research on organizational irrationality. It may well be possible to explain many human rights violations as rational profit-maximizing behavior: if detection is unlikely and enforcement is weak, then a company may perceive a violation to be in its self-interest. However, the literature on organizational irrationality suggests that violations that are against a company’s self-interest may also take place. If corporations do not always act rationally, then current efforts to change the self-interest calculation by increasing sanctions or inculcating norms will not suffice to achieve full compliance. Thus, a comprehensive human rights agenda should include assistance to corporations in overcoming irrational tendencies.

Part I of this Note provides an introduction to and an initial critique of the rational choice model as applied to business and human rights. Part II explores how concepts from the study of organizational behavior can shed light on the problem of human rights violations by transnational corporations. Part III uses this nuanced understanding of irrational organizational decisionmaking to evaluate existing compliance mechanisms and to suggest ways in which they might be improved.

Keywords: corporations, human rights, international law, behavioral economics

JEL Classification: K22, K33