7 Jul 2020 - by A4ID

Promoting Responsible Business Practices in Kenya: The Role of In-House Counsel

Advocates for International Development (A4ID), the East Africa Law Society (EALS) and the Law Society of Kenya (LSK) recently hosted a joint training webinar on the topic of responsible business for in-house counsel in Kenya. Held on 11 June 2020 and chaired by Yasmin Batliwala, A4ID’s Chief Executive, the webinar speakers included Hanningtone Amol, the Chief Executive of EALS, Ndinda Kinyili, the convener of the LSK In-House Counsel Committee, Howard Morris and Chiraag Shah from Morrison & Foerster LLP, leading corporate governance expert, Catherine Musakali, and Roger Leese, Chair of A4ID.

Over 50 participants attended the webinar, which provided an excellent opportunity for peer-to-peer learning on the best practices for in-house counsel in Kenya. Beyond companies’ legal human rights’ obligations, which in-house counsel are responsible for ensuring their organisations uphold; the webinar highlighted that the potential reputational damage inflicted on businesses when failing to act responsibly can have far greater and longer-term impacts on profitability.

Outlining Corporate Accountability

Head of Morrison & Foerster’s Business Restructuring & Insolvency Group, Howard Morris, started the discussion by referring to the recent history of the UN Global Compact – the largest non-binding corporate sustainability initiative spanning 13,000 corporate entities across 170 countries. Offering ten fundamental principles pertaining to Responsible Business Conduct in the fields of human rights, labour and employment, anti-corruption, and the environment, the UN Global Compact establishes a prerequisite for all international businesses to be accountable for upholding human rights standards.

The UN Guiding Principles on Business and Human Rights, structured around the ‘Protect, Respect, Remedy’ framework, directly correlate with the first two components of the UN Global Compact principles. Firstly, that ‘businesses should support and respect the protection of internationally proclaimed human rights’; and secondly, that businesses should ensure they are not complicit in human rights’ abuses.

Morris stressed that for in-house counsel to avoid human rights’ violations, a ‘know and show’ policy should be actioned. This involves a rigorous process of due diligence when investigating supply chains, or when entering into any relationship with a counterparty, whether by joint venture, acquisition or sale. Through the active dichotomy of mitigation and leverage, a ‘know and show’ approach invites ethical transparency and the opportunity for access to remedy to be enforced during contract negotiations.

Reputational Risks and the Court of Public Opinion

In the last decade, social media has become a virtual arbitrator of right and wrong, alongside judicial and non-judicial remedies. It has reinforced a third means of administering justice: the court of public opinion. Chiraag Shah, Partner at Morrison & Foerster, explained that with mounting public pressure to proactively address Corporate Social Responsibility (CSR), companies will struggle to find suitable investors without guaranteeing the environmental and social standards conveyed by the Equator Principles. These principles serve largely as a risk management framework for financial institutions tasked with due diligence, to ensure the protection of international human rights.

Moreover, whilst court claims may force corporate entities to confront their legal obligations to uphold human rights, reputational risks from bad publicity often pose a more serious threat to the long-term future of a business. In-house counsel are responsible for demystifying the impacts of human rights’ abuses on the long-term performance of a company, and for educating the Board on the best practices to avoid reputational damage.

Environmental Social Governance

Catherine Musakali, a leading Corporate Governance Expert, who formerly served as the Company Secretary at Shell, offered a working definition of sustainability in the corporate sphere. She highlighted the intersection of environmental factors, social issues and governance concerns as key elements of compliance that in-house counsel need to be familiar with. This multifaceted concept of environmental social governance (ESG) engages both stakeholder concerns and intergenerational components, analysing how business entities can nurture loyalty and trust from current stakeholders, whilst considering the long-term implications of their actions on future generations.

Alluding to recent events that saw Tesla’s general counsel at the centre of two serious legal allegations, Musakali emphasised that, when indiscretions are exposed, every acting member of that company, from board members to in-house counsel, becomes answerable to the courts. This prompted discussions about the paramount need for in-house counsel to have a vocal position on the Board, in order to be able to guide responsible operational practices.

“It is the role of in-house counsel to make sure the Board has adopted and embedded [responsible business] policies, because we understand the impact of noncompliance,” Catherine Musakali

Promoting Peer-To-Peer Learning

Following the speakers’ insightful presentations, participants broke out into discussion groups covering six key responsible business topics: legal frameworks on business and human rights; the advantages of peer-to-peer learning; the Sustainable Development Goals; the impact of COVID-19 on human rights’ compliance; access to remedy for victims of business and human rights violations; and support mechanisms to facilitate responsible business practices in the future.

During these group discussions, comparisons were made between binding and non-binding legal frameworks in various East African and European jurisdictions. Parallels were drawn between legal and executive bodies struggling with the enforcement of human rights’ judgments in both regions. Participants observed that access to remedy poses a pervasive, unilateral problem to those in subordinate positions, who suffer abuses and struggle to assert their rights as a result.

Referring to two high profile case studies – the BP Deepwater Horizon Oil Spill and the collapse of BHP Billiton’s Mariana dam in Brazil – participants shared best practices on crisis management, from conducting internal reviews and hosting stakeholder meetings, to undertaking forensic investigations and remedying the community impact. By comparing distinctive legal frameworks and responses to contemporary events, lawyers can collaborate internationally to begin to develop a Responsible Business Checklist to ensure their companies are complying with international business and human rights standards.

Counsel from Kenya communicated the benefits of the peer-to-peer learning facilitated by the webinar and the need to continue to scrutinise current ethical conflicts precipitated by the COVID-19 pandemic across various jurisdictions, such as contested employee leave and pro rata payments. The unforeseen moral quandaries that now face in-house counsel, as a result of the pandemic, have added to pre-existing challenges, such as the legal protection of whistle-blowers, the unlawful termination of employee contracts, and other common conflicts of interest between in-house counsel and Board committees.

Creating A Positive Corporate Culture

A4ID’s Chair, Roger Leese, concluded the webinar by noting that the experiences shared by the participants suggest that the role of in-house counsel has become increasingly important in Kenya. Leese remarked that this is reflective of a global trend over the past 30 years, in which lawyers have gained a central voice in the decision making of their organisations, and are often referred to as the ‘guardians’ of a business’ reputation. However, for in-house counsel to effectively enforce responsible business practices throughout their organisation, the senior management must emphasise their support such principles and expect all of their employees to uphold them. Essentially, Kenya’s private sector must seek to foster a positive corporate culture, which empowers in-house counsel to ensure the business acts responsibly.

Together A4ID and EALS, in collaboration with national bar associations in East Africa, hope to stimulate interactive debate through peer-to-peer learning that responds to the overarching concerns of in-house counsel in East Africa, whilst also tackling pressing matters as they emerge from the COVID-19 pandemic. In the coming months, EALS and A4ID plan to replicate this webinar with in-house counsel and commercial lawyers across Burundi, Rwanda, South Sudan, Tanzania and Uganda.

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