Improving Corporate Decision-Making Through Due Diligence Requirements – A Research Programme

Abstract

This paper shows that due diligence requirements have become an important addition to the legal and regulatory tool box. Through such requirements corporate actors are encouraged to set up and operate procedures that prevent certain outcomes from materialising. Liability can then be attached to the failure to have an adequate procedure in place. The United Nations and the OECD have suggested that such requirements are used to encourage companies to ensure that human rights and environmental interests are protected in their businesses, throughout the groups they belong to, and along their supply chains. A number of jurisdictions have recently absorbed due diligence type rules. The EU is currently discussing a proposal for a Corporate Due Diligence Sustainability Directive. The UK has integrated due diligence requirement into the Bribery Act 2010 and into the Criminal Finance Act 2017. The paper observes that there is currently no reason to believe that the UK and the EU will be able to collaborate on this topic at a policy level in the foreseeable future. The paper nevertheless points out that co-operation at an academic level would be very useful in relation to this topic. In corporations, decision-making and action is distributed between different human actors. We have only recently started to appreciate that corporate action can be steered by focusing on internal decision-making processes. The legal discourse would benefit from understanding better how individuals act when they are part of an organisation.

Keywords: due diligence, sustainability, corporate decision making, Brexit

JEL Classification: K22