Download Social Responsibilities of Corporations

Corporate Social Responsibilities
and Public Interests Litigation
Zhang Wenguang
I. Development of corporate social responsibility
The social responsibility of corporate have always been a topic in dispute.
Theoretically, as a commercial organization, the primary duties of a corporation are
innovation and production. A corporation should be the creator of material wealth of
the society, providing the society with material products as well as intellectual and
artistic products as its main objectives. A corporation is a basic economic unit
supporting the survival of the human society; a corporation will lose the basic value of
its existence if it loses its functions of production and innovation. Therefore, the
primary substance for any corporation is to do well in production, create market
interests and make efforts to pay more tax to the society so as to fulfill its economic
responsibilities for the society – in this way, a corporation accomplishes its main
tasks. However, as an integrated entity, a corporation is granted certain privileges,
such as the limited liabilities of a corporation (i.e. the discharge of debt is limited to
entire assets of a corporation, etc.), therefore, a corporation has the obligation to
redound upon the society, and bring benefits to the society or host country where it is
located. This is the theoretical basis provided by sociologists with regard to the
corporate social responsibility 1.
The concept of “corporate social responsibility s” originated from Europe, is an
important concept coming forth in various branches of learning and fields since the
20th century, as well as a basic idea in building a harmonious relationship between
enterprises and society. Nowadays, social responsibilities of corporations are used as
important criterions in the western society for evaluating the performance of an
enterprise. The so called “social responsibilities of corporations” means that a
corporation can not take as its sole purpose of existence to maximize the profit or
money for shareholders; instead, it should enhance to the maximum the interests of
other stakeholders. Such social interests include employee interests, consumer
interests, creditor interests, interests of medium and small competitors, interests of
local communities, environmental interests, interests of the disadvantaged group of
society, as well as the public interest of the whole society; it include both the human
rights of natural person, especially the social, economic and cultural rights as

Zhang Wenguang, head of Civil Law Department of the Dongfang Public Interests Legal Aid Law Firm.
Zhu Weiyi “Discourse on social responsibilities of business corporations” – published on Sohu Finance and
Economics Section。
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stipulated in the “International convention on economic, social and cultural rights”
(can be called “social rights” for short), and the rights and interests of corporation
organization and non-corporation organization other than natural person. Of which,
parties interested (especially natural person) that are closely related to the existence
and operation of a corporation, other than shareholders, are the main objects for which
a corporation undertakes its social responsibilities. 2The introduction of the system
of social responsibilities of corporations means that the objectives of a corporation
should be redefined, except the realization of maximum profits, some social values
should be added. In other words, the operators of a corporation should expand their
view on corporation objectives to include the influence of corporation decisions on
other members, such as employees, communities and environment, etc. In another
word, a corporation is expected to operate with social conscience.3
Corporate social responsibility mean that under the conditions of market economy, the
economic functions of enterprise is severed from its social functions; an enterprise
purposely and designedly takes initiative to undertake its social responsibilities
towards employees, consumers and communities, with the results being that the
enterprise, while making profits, also gains excellent brand image and social
recognition, thus realizes the win-win situation where enterprise and society jointly
enjoy sustainable development. A corporation should undertake social responsibilities.
Although the theories vary among different doctrines, but they are all deeply affected
by the idea of replacing “absolutism of rights” with “relativism of rights”; rights are
accompanied by obligations; one should take public interests into account while
exercising their ownership.4
In January 1999, at the World Economic Forum in Davos, Switzerland, Kofi Annan,
UN Secretary General put forward the “Global Agreement” which was officially put
into effect at the UN headquarter in July 2000. The agreement called for corporations
to observe the nine basic principles regarding human rights, labor standards and
environment, with the content being: 1. Enterprises should support and respect the
various internationally recognized human rights; 2.Enterprises should never
participate in any activities that disregard or override human rights; 3. Enterprises
should support freedom of association, and acknowledge the right of collective
bargaining; 4. Eliminate compulsory laboring in various forms; 5. Effectively prohibit
child labor；6. Put an end to any discriminatory act in recruiting and using work force
and in respect of industries; 7. Enterprise should take precautions against
environmental challenges; 8. Take initiative to undertake more responsibilities on
environmental protection; 9. Encourage the development and promotion of science
and technologies that are harmless to environment.5 These nine principles originated
Liu Junhai: “Ponders on legal principle and legislative advice regarding the strengthening of social
responsibilities of business corporations”, published on www.iolaw.org.cn.
3 Wang Hongyi: “Functions of corporation law and sociological analysis of structural method – study on
corporation legislative issues”, version 2002, Beijing University Publishing House, page 129.
4 Yang Junren: “Social responsibilities of enterprises”, published on the Economic Daily of Taiwan, China.
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Zhong Dajun: “Current social responsibilities of Chinese enterprises ”, published on “Observation on Economy
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from: Universal Declaration of Human Rights, International Labor Organization
Declaration on the Basic Principles and Rights of Working and the Rio de Janeiro
Declaration on Environment and Development. These nine principles are related to
human rights, labor standards and environment. 6 The observation of the nine
principles means that, internally, an enterprise should guarantee the dignity and
welfare treatment of its employees; externally, an enterprise should play an excellent
role in the social environment.
Based on international experience, raising the issue of social responsibilities of
corporations is mainly aimed at solving the contradiction between capital and the
public, or the contradiction between enterprise and the public. The essence of social
responsibilities of corporations is the ethic discipline of enterprise on its own
economic behaviors against the background of economic globalization; it’s both the
tenet and operational notion of an enterprise, as well as a management and evaluation
system an enterprise uses to bind the operational behaviors of itself and its suppliers.
At the World Economic Summit in New York in February 2002, there were 36 CEOs
calling for corporations to perform their social responsibilities, with the theoretical
basis being, performing the social responsibilities of corporations is not “making an
unnecessary move”, but a critical part in the operation of core business. There are
three main purposes for multinational corporations to carry out social responsibilities:
firstly, the majority of famous MNCs take the responsibilities toward environment and
society as the tenet for enterprise development, and as the core value of enterprise
culture. Suppliers are not only their production chain, but also their value chain. The
production process and economic behavior of suppliers will also bring direct
influence on the interests and image of MNCs. Therefore, MNCs will promote the
notion of social responsibilities of corporations among suppliers; secondly, MNCs, in
order to avoid moral loss and moral condemnation from all circles of society, have to
promote rules of conduct on social responsibilities among suppliers, so as to bind the
moral behaviors of suppliers during their production and operation process. Thirdly,
MNCs want to have law-abiding partners, so as to reduce investment risk. In this way,
their overall interests won’t get harmed while they enjoy the advantage of low cost.
To achieve this purpose, the implementation of social responsibilities has become one
of the approaches. From long views, the notion advocated by social responsibilities of
corporations actually reflects the notion of coordinated and sustainable development
of economic society, and is in line with the development trend of human civilization.
It is not out of conscience, but out of the strong demand of consumers and market,
which is the most important impelling force, that MNCs attach importance to social
responsibilities.
II. Corporate social responsibility and public interests litigation
and Society”, sixth issue, 2002.
6 Quoted from “Human rights plan of European Union – China: working document”
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At present, China is in a transitional period, with previous systems already smashed,
and new system not established yet. The most prominent problems for some Chinese
enterprises nowadays are reflected in eight aspects: 1. Disregard their role in respect
of social security, evade taxation and social security charges as far as possible; 2.
Give little consideration to social employment, and throw the burden to the society; 3.
Give little consideration to environmental protection, and base their profit on causing
damage and pollution to the environment; 4. Some enterprises, being intent on
nothing but profit, provide unqualified services or false information, vie with
consumers for interests or cheat consumers; 5. Seek profit for enterprise owners by
way of extorting employees’ income and welfare interests; 6. Are devoid of the
mentality of providing public products and indifferent to public welfare undertaking;
7. Are devoid of the mentality of fair competition; some monopoly enterprises left
over from the planned economy period swallow up and monopolize profits in large
amounts, and reject market competition to the utmost; 8. There exists the widespread
lack of good faith; state-owned enterprises are in defect of good faith to the state, and
evade debt by falsifying bankruptcy; non-governmental enterprises seek profits by
selling counterfeiting goods, etc.
In my view, the occurrence of these phenomena is in virtue of the imperfect binding
mechanism. The pressure on performing social responsibilities of corporations should
come from, except self-discipline, outside of a corporation. Lawsuit originating from
outside of a corporation is a key element of pressure. The performing of social
responsibilities of corporations must be endued with rights, so as to counter-balance
rights with rights. Therefore, if one is unable to maintain their rights by filing a
lawsuit at court, then such rights are only malarkey. In view of the above elements,
and in reference of experiences from abroad, the introduction of public interest
prosecution system should be a solution worth considering.
The so called public interest prosecution refers to the activities that given state organs
and relevant organizations and individuals, empowered by relevant laws, file lawsuits
to a court against behaviors that infringe, in violation of economic laws and
regulations, the interests of the state, the society or non-specific others, and a court
looks into the legal responsibilities of the opposite party. Public interest prosecution is
not equal to public prosecution. A public interest prosecution can either be filed by a
prosecutorial organization and government agency on behalf of the state, or be filed
by interested parties in the name of a state authorized organization or an individual.
The system of public interest prosecution is actually a kind of judicial impeachment
against violation of law; it uses judicial means to protect interests of the state and the
society, regulate behaviors of all organizations and individuals, and prevent illegal
acts from escaping legal sanction, thus urge legal persons and administrative organs to
willingly observe the law and handle affairs pursuant to law, and thus safeguard the
solemnness and authority of law. Public interest prosecution is not a separate form of
prosecution, but a concept defined with the purpose of action as criterion, with the
aim of describing the litigious activities conducted by public interest lawyers and
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public interest organizations. Public interest prosecution is litigious activities that rely
on the concept of social justice and the intention of regarding law as a tool for social
reform, and is conducted with public interest lawyers and public interest law
organizations as the subject. Since public interest prosecution emerges along with
public interest lawyers and public interest law organizations, therefore, from the very
beginning, the subject of public interest prosecution has been defined as public
interest lawyers and public interest law organizations.
Public interest prosecution is characterized by the promotion or quest of the changes
or application of law by a representative that surpasses individual advantages, thus
bringing influence to the whole society. Jack Greenberg, a famous public interest
lawyer and the Columbia University Professor of Law explained the two effects that
public interest prosecution have on legal system: first of all, public interest
prosecution urges the court to explain the law: in order to correct the unlawful acts
existing in society, and help people suffering losses from such acts, public interest
prosecution urges the court to materialize the rights existing in the constitution and
various laws, or redefine these rights; secondly, public interest prosecution exercises
influence on the court to apply the existing and favorable rules or laws which will
otherwise be ignored or not put into use.7
In our society, all legal systems acknowledge the interests of environmental protection
and fair dealing, and acknowledge the rights in terms of environment and the rights of
consumers; security laws, laws on protecting the rights and interests of consumers,
protecting free speech, environmental protection, freedom of correspondence,
realization of impartial labor treatment and safety standards have stipulated the
establishment of some regulating agencies to endue people with rights, and provide
them with legal and judicial assistance. However, one point has been ignored, i.e. no
matter what interest it is, the valid protection of which always means more than the
formal protection of rights. In a complex society, various interests can only be
protected when the interested parties continuously and effectively take part in making
various decisions of the society. The significance of public interest prosecution rests
with the judicial settlement of disputes in society and realization of judicial activism.
Public interest prosecution can be realized through the following three forms8: (I) is
class action. Class action is created by US legal experts with the real value resting
with the constraints on infringement of the public. Class action effectively enables the
protection of the public interests. In this mechanism, private action is used as one of
the means to execute the public law; when numerous small amount requests are
involved, the purpose of private action is not for getting compensation for damages or
the protection of personal right; but more importantly, or even entirely is for enabling
the person(s) having conducted wrongful act to contribute to the well-being of the
society through paying price for his wrongful act. In other words, the main purpose is
to awe and change the person with wrongful act. (II) is relator’s action. The relator’s
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Xu Hui: A number of theoretical issues regarding public interest prosecution, published on the periodical of the
Chinese Academy of Social Sciences, November 13, 2003.
Xu Hui: “Public interest law and public interest prosecution”, published on initial issue of “Public Interest
Prosecution”, July 2003
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action is a form of action implemented in countries adopting Anglo-American law
system. This is an action that allows an individual or an entity representative to
proceed, on behalf of government, against people with illegal act. After a relator’s
action is filed, if it is won, then the individual relator is entitled to the allocation of
amount of damages. (III) is experimental cases. It is an action filed by the interested
party for the purpose of making certain an important legal principle, legal right or the
constitutionality of law. This form of case is present in countries both adopting
common-law and adopting continental law.
III. Suggestions
Public interest prosecution system is a new system for fulfilling the social
responsibilities of corporations, the introduction of which will inevitably lead to
conflict with China’s existing legal system, such as the stipulation on subject in civil
action, and stipulation on limitation of actions, etc. The public interest prosecution
system cannot function without the support of other laws. Therefore, I suggest:
1. When revising the “Corporation Law”，it should be considered to include social
responsibilities of corporations into the clause of legislative tenet or corporation
objectives.
2. Revise the stipulation regarding plaintiff in Article 108 of the Code of Civil Law.
Article 108 of the Code of Civil Law stipulates that “A plaintiff refers to citizen, legal
person and other organization having direct relation with the case.” In public interest
prosecution, the behavior of defendant does not directly infringe the legal interest of
plaintiff, nor does it produce any actual influence on the rights and obligations of
plaintiff. Although the behavior of defendant may infringe the public interests or the
state interests, but public interests or the state interests are not individual interests.
Based on existing laws, ordinary citizens have no right to instigate a prosecution in
such a case. Therefore, most of such public interest prosecution cases are rejected
because the cases do not concern the plaintiffs’ interests. Therefore, the concept of the
interested party should be clarified in the civil actions, and the stipulation in the Code
of Civil Action that plaintiff is interested party having relation of interest with the case
should be revised. It is unrealistic to check out whether the plaintiff has relation of
interest with the case substantially when a lawsuit is filed. A lawsuit should be
accepted as long as the interested party “declares” to have such relation of interest.9
3. Abolish the restriction of limitation of actions. There are stipulations on limitation
of actions in all the existing three major prosecutions of China, requiring that a
lawsuit must be filed on a dispute within a certain time limit, otherwise, the right of
wining a case will be lost, but it is stipulated in the General Rules of Civil Law that
cases involving infringement of state assets that are not authorized to citizen or legal
person to operate or manage shall not be subject to the restriction of limitation of
actions.” In my opinion, this stipulation is made out of the need to protect the state
Huang Guancong: “Set up public interest prosecution system as quickly as possible”, March 4, 2004, China
Youth Daily.
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interests, while public interest prosecution is also a relief channel to protect the state
interests and the public interests, therefore should not be restricted by the limitation of
actions, so that illicit acts infringing the state interests and the public interests can be
investigated at any time.
4. Exercise collegiate system proceeding. With the characteristics of extensive
influence, new types, complicated jural relations of public interest prosecution cases,
it is hard for the system of sole-judge proceedings to be competent for such cases;
therefore, the collegiate system mode should be adopted to fully exert the legal
wisdom of each member of the collegial panel and guarantee the smooth proceedings
5. Adopt special rules on right of disposing. The purpose of plaintiff of public interest
prosecution cases is not for getting their own private interests, but for safeguarding
public interests on behalf of the state and the public; their litigant rights are not
self-generating, but endued by the state and the public, therefore the plaintiff can not
dispose their litigant rights as a plaintiff does in a private interests prosecution. In my
view, unless the defendant has remedied, on their own initiative, their behavior on
infringement of public interests; otherwise, the plaintiff can not withdraw the
prosecution, so as to prevent the defendant from inveigling or reducing the plaintiff
into withdrawing an action and prevent the illicit act from existing as before. During
litigious process, if a plaintiff loses legal capacity or dies, then, in accordance with the
inheritance principle of qualification of subject of litigation, any government agency,
organization or citizen qualified to be the subject of public interest prosecution, can
continue to participate in the prosecution in the capacity of successor of public
interests; if the plaintiff is defeated in first-instance judgment and the plaintiff gives
up his right of appeal, other government agency, organization or citizen who remain
unconvinced by the first-instance judgment, shall have the right to file retrial
application and through retrial channel, look into the legal responsibilities of
law-breaker.
6. Mediation system does not apply. The nature of public interest prosecution
determines that the “volition” of plaintiff is not their own volition, but the volition of
the state and the public that they represent; their rights and obligations are given;
without authorization, they are not entitled to give up and dispose rights on behalf of
the state and the public; it is out of the question for the plaintiff and defendant to
negotiate and compromise to reach amicable settlement during litigious process;
without acceptable conditions and foundation, mediation also loses its value of
existence.
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