CSR And Codes Of Business Ethics In The USA, Austria (EU) And China And Their Enforcement In International Supply Chain Arbitrations

237 Pages·2021·3.196 MB·English

by  Adolf Peter

Adolf Peter
CSR and Codes
of Business Ethics
in the USA, Austria
(EU) and China and
their Enforcement
in International
Supply Chain
Arbitrations
CSR and Codes of Business Ethics in the USA,
Austria (EU) and China and their Enforcement
in International Supply Chain Arbitrations
Adolf Peter
CSR and Codes of Business
Ethics in the USA, Austria
(EU) and China and their
Enforcement in International
Supply Chain Arbitrations
AdolfPeter
ShanghaiUniversityofPoliticalScienceandLaw
Shanghai,China
ISBN978-981-33-6072-3 ISBN978-981-33-6073-0 (eBook)
https://doi.org/10.1007/978-981-33-6073-0
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Introduction
Companies are confronted with an ever-increasing pressure by their customers,
investors, employees, non-governmental organizations and other stakeholders
regardingtheimplementationofcorporateethicsandcorporatesocialresponsibility
(“CSR”)policies.Inrecenttimes,theundeniableclimatechangehasgivenriseto
worldwide in-depth media coverage, heated debates, demonstrations and environ-
mentalactivismleadbypersonalitieslikeGretaThunberg.Consciousconsumerism
andresponsibleinvestingarefurthertrendsthatwillurgecompaniestoadapttheir
business strategies by taking into consideration ethics and CSR aspects. Equally
important, the listing requirements of major stock exchanges increasingly require
listed companies to prepare codes of business conduct and ethics and disclose
CSR reports. The EU Directive on the Disclosure of Non-Financial and Diversity
Informationintroducedrulesformandatorynon-financialreporting.
ThismonographfocusesoncorporateCSRreportingrequirementsandtheimple-
mentationofcodesofbusinessconductandethicsinthelegalsystemsoftheUSA,
Austria and China. In this context, the monograph will demonstrate whether the
respective legal systems lean more towards the shareholder primacy model or the
stakeholdertheoryofcorporategovernance.Itwillintroduceandanalysetherespec-
tivecodesofbusinessconductandethicsofelevenmajorcompaniesheadquartered
intheUSA(WalmartInc.,ExxonMobilCorporation,AppleInc.andBerkshireHath-
awayInc.),Austria(OMVAG,STRABAGSE,voestalpineAGandErsteGroupBank
AG)andChina(PetroChinaCompanyLimited,HuaweiInvestment&HoldingCo.,
Ltd.andPingAnInsurance(Group)CompanyofChina,Ltd.).
Topreventwindow-dressingandgreenwashing,itisnecessaryforcompaniesto
ensuretheimplementationoftheirethicsandCSRpoliciesalongtheentiresupply
chain. For this purpose, many companies involved in international supply chains
issuedsuppliercodesofconduct,contractuallybindingthechainmemberstoadhere
totheprovisionscontainedtherein.AsethicsandCSRpolicies(inparticularenvi-
ronmentalpolicies)willgainmoreandmoresignificancebasedontheever-growing
stakeholders’pressure,disputesinrelationtothecontractuallybindingsuppliercodes
ofconductwilllikelybeontheriseaswell.DuetothefactthatEnglishlaw(orlaw
basedonEnglishlaw)isfrequentlythegoverninglawofinternationalsupplychain
contracts, potential contractual claims for damages arising from the violation of
v
vi Introduction
provisionsofthesuppliercodesofconductareaddressedpursuanttoEnglishlaw.
Internationalarbitrationwillbetheidealmeansforthesettlementofthesedisputes,as
arbitrationawardsmayberecognizedandenforcedinalmostallpartsoftheworld
because of the New York Convention. A fictitious case scenario will demonstrate
suchadisputeinvolvingmultiplechainmembers.Supplychaindisputeswillinall
likelihoodinvolvemultipleparties.Forthisreason,thismonographwillalsotakea
closerlookattherespectiverulesofseveralinternationalarbitrationinstitutionsin
relationtojoindersandconsolidationsoftwoormorependingarbitrations.
Contents
1 Definitions ..................................................... 1
1.1 CorporateGovernance ...................................... 1
1.2 ShareholderTheoryofCorporateGovernance(Shareholder
PrimacyModel) ............................................ 2
1.3 StakeholderTheoryofCorporateGovernance .................. 3
1.4 CSR ...................................................... 3
1.5 CorporateCodeofBusinessConductandEthics ................ 4
2 Hypotheses .................................................... 7
2.1 Hypothesis1 ............................................... 7
2.2 Hypothesis2 ............................................... 8
2.3 Hypothesis3 ............................................... 9
3 CodesofEthicsandCSRintheUSA ............................. 11
3.1 FromShareholderValuetoStakeholderValue? ................. 11
3.2 CorporateCodesofEthicsintheUSA ......................... 16
3.2.1 TheU.S.Sarbanes-OxleyActof2002 ................... 16
3.2.2 TheU.S.SentencingGuidelines ........................ 23
3.2.3 CorporateCodesofEthicsPost-SOX ................... 24
3.2.4 The Audit Committee Pursuant to US Law
and the Requirement for an Ethics and CSR
CommitteeComprisedofanEthicsandCSRExpert
andIndependentDirectors ............................. 37
3.3 CSRReportingintheUSA .................................. 40
3.3.1 Positive Financial Impact of CSR Policies
ontheFinancialPerformanceofCompanies ............. 41
3.3.2 RecentSustainabilityIndexEventStudies ............... 46
3.3.3 TheSi2/IRRCIReportontheStateofSustainability
andIntegratedReporting2018 ......................... 48
3.3.4 KPMGSurveyofCorporateResponsibilityReporting
2017 ............................................... 50
3.3.5 Mandatory Reporting of Material CSR Aspects
inFinancialReportsofUSCompanies? ................. 51
vii
viii Contents
3.3.6 TheRequirementforanIndependentCSRandEthics
Committee,MinimumCSR Reporting Standards
andMandatoryExternalEvaluationsofCSRReports ...... 54
4 CodesofEthicsandCSRinAustria .............................. 57
4.1 ShareholderorStakeholderValueinAustria? ................... 57
4.1.1 Section70oftheAustrianStockCorporationAct ......... 57
4.1.2 TheBusinessJudgmentRule .......................... 58
4.1.3 CompensationofMembersoftheManagementBoard ..... 59
4.2 TheAustrianCodeofCorporateGovernance ................... 60
4.3 MandatoryCorporateGovernanceReports ..................... 64
4.3.1 OMVAG ........................................... 65
4.3.2 STRABAGSE ....................................... 66
4.3.3 voestalpineAG ...................................... 67
4.3.4 ErsteGroupBankAG ................................ 67
4.4 CorporateCodesofEthicsorConduct ......................... 68
4.4.1 OMVAG ........................................... 69
4.4.2 STRABAGSE ....................................... 72
4.4.3 voestalpineGroup .................................... 76
4.4.4 ErsteGroupBankAG ................................ 78
4.4.5 DoViolationsofaCodeofEthics/ConductTrigger
CriminalConsequencesPursuanttoSection163a
oftheCriminalCode? ................................ 82
4.5 MandatoryCSRReportinginAustria .......................... 84
4.5.1 Directive2014/95/EUandtheAustrianSustainability
andDiversityImprovementAct ........................ 84
4.5.2 AnalysisofCSRReports .............................. 89
4.6 TheGRISustainabilityReportingStandards .................... 92
4.7 Profit-OrientedMotivesforCSRinAustria? .................... 97
4.8 MandatoryDueDiligenceastoHumanRights,Environmental
andGovernanceRisksAlongSupplyChains ................... 97
5 CodesofEthicsandCSRinChina ............................... 101
5.1 MandatoryStakeholderValueinChina? ....................... 101
5.1.1 TheChineseCompanyLaw ........................... 102
5.1.2 TheChineseCodeofCorporateGovernance ............. 102
5.1.3 ChineseStockExchangeRules ......................... 104
5.1.4 SASACGuidelinestotheState-OwnedEnterprises
DirectlyUndertheCentralGovernment ................. 108
5.2 CorporateGovernanceinChineseCompanies .................. 109
5.2.1 TheParticularitiesoftheChineseTwo-TierBoard
System ............................................. 110
5.2.2 IndependentDirectorsandSupervisorsinChinese
Companies? ......................................... 111
5.2.3 BoardCommitteesinChineseCompanies ............... 113
5.2.4 ThePartyCommittee ................................. 114
Contents ix
5.3 CodesofEthics/ConductofChineseCompanies ................ 116
5.3.1 PetroChinaCompanyLimited ......................... 118
5.3.2 HuaweiInvestment&HoldingCo.,Ltd. ................. 122
5.3.3 PinganInsurance(Group)CompanyofChina,Ltd. ....... 125
5.4 CSRReportinginChina ..................................... 127
5.4.1 Statistics ............................................ 127
5.4.2 LiabilityforInaccurateorIncompleteCSRReports
PursuanttotheChineseSecuritiesLaw .................. 131
5.4.3 The Impact of CSR Measures on Companies’
Performance ........................................ 132
6 SupplyChainArbitration ....................................... 137
6.1 SupplyChainManagement .................................. 137
6.2 ThirdPartyRightsandCollateralWarranties ................... 142
6.3 Possible Contractual Claims for Damages Arising
fromtheViolationofCodesofBusinessConductandEthics
intheContextofSupplyChainDisputesInvolvingMultiple
Parties .................................................... 144
6.3.1 FictitiousCaseScenario .............................. 145
6.3.2 TheSignificanceofEnglishLawforInternational
Contracts ........................................... 146
6.3.3 Privity of Contract and Domestic, Nominated
orNamedSubcontractors ............................. 147
6.3.4 Can a Breach of a Material or Core Violation
ofaCodeofConductBeQualifiedasaRepudiatory
BreachoftheContract? ............................... 149
6.3.5 Foreseeability,CausationandMitigation ................ 150
6.3.6 LossofProfits ....................................... 155
6.3.7 ContractualPenaltiesorLiquidatedDamages ............ 157
6.3.8 Examples for Material Violations of a Code
ofConductTriggeringPaymentUnderaLiquidated
DamagesClause ..................................... 161
6.3.9 ContractualPenaltyClauseinCivilLawJurisdictions ..... 163
6.4 TheNewYorkConvention ................................... 163
6.5 TheConsolidationofSupplyChainArbitrations ................ 164
6.5.1 ConsolidationinSingapore ............................ 167
6.5.2 ICC Arbitration Rules on the Consolidation
ofArbitrations ....................................... 175
6.5.3 TheAIACArbitrationRules ........................... 177
6.5.4 ConsolidationintheUSA ............................. 179
6.5.5 ConsolidationinAustria .............................. 181
6.5.6 ConsolidationinMainlandChinaandHongKong ........ 182
6.6 JoindersofAdditionalParties ................................ 187
6.6.1 SIAC,AIAC,CIETACandHKIACRules ............... 187
6.6.2 ICCRules .......................................... 188
x Contents
6.6.3 ICDRRules ......................................... 189
6.6.4 ViennaRules ........................................ 191
6.7 HumanRightsArbitration ................................... 195
7 Conclusion .................................................... 199
7.1 ConclusionRegardingHypothesis1 ........................... 199
7.2 ConclusionRegardingHypothesis2 ........................... 203
7.3 ConclusionRegardingHypothesis3 ........................... 208
Bibliography ...................................................... 211
CaseLaw ......................................................... 225