The increased ability of transnationals to influence work, family, and individual political, social and economic rights and well being, and to do so simultaneously in more than one country through coordinated operations of companies domiciled in different countries, opens the way for transnational business to effect policy on a global scale. International human rights law provides a unique framework within which transnational corporationsmay develop universally acceptable standards of conduct. By virtue of its widespread acceptance by member states of the United Nations, it has entered the legal, moral, and public discourses of the world's nations, yet, through the medium of the United Nations and other international and regional bodies, it exists beyond the purview of any one national government.

It is usually difficult, if not altogether impossible, for the management of transnational corporations to be abreast of the human rights practices of their suppliers and distant subsidiaries. Nevertheless, in the course of its scrutiny, particularly in western countries, the public will generally overlook this reality and hold transnationals responsible for violations committed by suppliers or subsidiaries. Public reaction to even perceived complicity in a humanrights abuse on the part of a transnational can result in considerable financialconsequences to a transnational corporation. Section IV below outlines examples of situations where transnational corporations have suffered financial casualties as a result of being implicated in human rights abuses, including costs associated with consumer reaction and direct costs such as settlements and litigation expenses. The League contends that proper application and use of the human rights audit will strengthen the sense among the public that a transnational corporation has taken the necessary measures within itscontrol to preclude human rights abuses on the part of their suppliers and subsidiaries, thus curtailing adverse public reaction.

Efficient capital markets cannot exist without accounting, the figuring and recording of financial transactions, and auditing, the formal checking of financial recordings. The layperson's notion of auditing and accounting is typically one of a technical, procedural activity, founded in law (e.g., the 1933-34 Securities Acts and the Foreign Corrupt Practices Act of 1977) and enforced by institutions (e.g., the Securities and Exchange Commission, the Financial Accounting Standards Board). While substantially true, it isreally only half the story. Though audit obligations eventually become enshrined in law, this mandatory phase has usually been preceded by an era of "voluntary" disclosure and audit attestation. Likewise, audit attestations need not be restricted to financial data.

Both the adoption of voluntary codes of conduct and the incorporation of principled responses in postulated situations have come unstuck on the issue of monitoring. Who ascertains compliance? The uniqueness of the League's Project is that it introduces no new relationships into the traditional audit. Rather, it builds on the relationships between corporations and their auditors rather than forcing transnational corporations to expose private records to outside monitoring agencies. The Project takes advantage of theaccepted independence of auditors regarding fiscal operations to ascertain the legitimacy of the Human Rights Audit, assuring the privacy of fiscal documents and encouraging best practices in corporate behavior. The use of the auditing model proposed in this Project breaks the deadlock between non-governmental organizations (NGOs) and corporations over independent monitoring by introducing third-party oversight acceptable tomanagement and amenable to NGOs.

Since the adoption of the Universal Declaration of Human Rights in 1948, an expanding global consensus has evolved about basic universal human rights. In six major treaties and a number of declarations and platforms for action, the member states of the United Nations have established a basis for international human rights law. Although the specific applications of these fundamental liberties may vary from region to region, the body of international law and jurisprudence represents a broad consensus that governments mustrespect individual rights and limit the obligations of individuals to states.

The fact that national governments have ratified human rights treaties promulgated in the United Nations has established the principles of universal human rights within nearly all the world's nation-states. Member states that ignore or transgress ratified treaties violate the Charter of the United Nations, in which they have committed themselves to act in accord with the international treaties ratified under their domestic laws. Indeed, governments have increasingly recognized their legal obligations to respect human rightsprinciples and to implement the decisions of international human rights courts and tribunals.

The principles of non-discrimination embodied in a series of international agreements, including the Universal Declaration of Human Rights, the Convention on the Elimination of All Forms of Discrimination Against Women, the International Convention on the Elimination of All Forms of Racial Discrimination, the Declaration on the Rights of Persons Belonging to National or Ethnic, Religious and Linguistic Minorities, the International Convention on Civil and Political Rights, and the International Covenant on Economic, Social and Cultural Rights, impose an affirmative obligation on states to guarantee equal protection under the law to all citizens and equal access to all rights and freedoms. Underscoring these rights are a series of agreements delineating classes of people considered especially vulnerable to discrimination, notably women and national, ethnic, religious and linguistic minorities. Although the Project recognizes the state-based nature of these treaties and conventions, the underlying principles more broadly and implicitly form the underpinnings of international human rights law. It is based on these principles that the Project will promulgate standards applicable to transnational corporations.

For instance, the principles of paying fair wages, equal remuneration for work of equal value and equal opportunity for everyone to be promoted can be incorporated into a series of auditable policies promoting equality among employees within transnational corporations. While transnationals cannot be held accountable for host country compliance with respect to non-discrimination, they can be held to standards of impartiality and fairness in theirown practices.

Free association issues arise in a number of circumstances. Perhaps most pertinent are those relating to freedoms of thought, religion, political assembly, and the right to organize. Notions of free association embodied in the International Covenant on Civil and Political Rights and the ILO Convention Concerning the Application of the Principles of the Right To Organise and to Bargain Collectively will be used to create Audit standards applicable to transnational corporations. Again, the purpose of the Audit will not be toimpose an affirmative obligation on the part of transnationals to effect change on the part of host countries. Rather, a duty will arise requiring transnationals to refrain from partaking in discrimination or retaliation against employees based on political or religious affiliation or for attempting to organize.

Notions of security of person in international agreements cover a range of issues, including rights to livable wages, freedom from slavery or involuntary servitude, and protection against offenses such as degrading treatment, bodily harm, or invasion of an individual's private life. These rights can be found in the Universal Declaration, the International Covenant on Civil and Political Rights, and several ILO conventions.

There are several aspects of corporate employment that fall within the reasonable purview of the right to security of person. Auditable procedures will be developed to prevent a range of abuses under this category of rights. Examples of work force related matters include in the security of person category include: a) payment of minimum / livable wages, b) worker rights to terminate employment, c) sexual harassment, d) employmentof world-class safety standards, and e) noninterference with and non-discrimination based on a worker's personal or family life.

The Universal Declaration and the International Covenant on Economic and Cultural Rights include protection of property rights. The Audit would look to the policies of corporations with respect to appropriating or using property to determine whether efforts are made to avoid the intentional taking or use of property rightfully owned by an entity other than that with which the corporation is engaged in negotiations. For instance, the Audit would check to see whether property was previously acquired by eminent domain.

If so, an auditor would seek to uncover such basic information, though she would not be required to attest to the fairness of the eminent domain process in the host country. Revealing the use of eminent domain will at least "raise a flag," so to speak, allowing non-governmental organizations to look further into the processes involved.

The Audit will include a section dedicated to the pursual of a corporation's employment practices with respect to children. Using more traditional approaches to children's rights, a part of the children's section of the Audit will inquire as to whether the corporation is in compliance with both local and international restrictions on child labor. Rather than strictly applying a minimum age test, however, and based on evolving standards for childlabor, the Audit will seek out additional information about corporate practices towards children in countries where children may work out of necessity. It will not be the auditor's call to determine whether a country qualifies as an exception, again leaving such subjective decisions to non-governmental organizations and public opinion. However, the Auditor will report on the existence and abidance by corporate policies regarding hoursof work, working conditions, access to and opportunities for education, and exposure to hazards requiring adult discretion.

The International League for Human Rights proposes to establish a Human Rights Audit. Recognizing the complex, and well debated, division between law and accounting, the League intends to develop objective standards incorporating international human rights law against which auditors will be able to conduct an audit without the benefit of a formal legal background. The League, in collaboration with professional accountants, attorneys,non-governmental associations, and representatives of business, investors andcorporations, seeks to accomplish the following:

- review existing human rights monitoring procedures;

- craft human rights audit standards and procedures, built on the foundation of existing accounting and auditing standards and procedures, to render transparent the human rights practices of transnational corporations;

- introduce and familiarize accounting practitioners with human rights auditing standards and procedures;

- institutionalize the Human Rights Audit as a standard fixture of annual corporate reporting as mandated by the Financial Accounting Standards Board, the International Standards of Accounting Committee, and other standard-setting regulatory bodies.

Efforts in the corporate and accounting worlds to construct human rights audits are evolving in accordance with the established precedent of responding to a client's need for more reliable information to mitigate financial risk. Corporations are facing adverse economic consequences resulting from incidents previously considered beyond their scope. During the fall of 1996, the Project began its research. It examined cases where transnational corporations had suffered financial losses or penalties as the result of failureto observe one or more fundamental rights, and it analyzed the cases according to five categories of rights: (1) racial discrimination, (2) gender discrimination, (3) clean environment, (4) secure property, and (5) fair labor practices. The following are examples of cases reviewed by the Project:

- The potential cost of racial discrimination can be gauged from the major financial repercussions suffered by Texaco. The company recently settled a race discrimination class action suit for $176 million, a cost of $.75 per share to investors. This loss does not include costs associated with litigation, the extensive public relations effort, nor the added expense of preparing for the ensuing annual reviews by the United States Equal Employment Opportunity Commission over the next five years.

- Allegations of gender discrimination are still dogging Mitsubishi's American auto manufacturing division. Its sales in the United States dropped 3 percent, in a year when other Japanese automakers were increasing their share of the U.S. market. A class-action lawsuit in the United States may cost the company tens of millions of dollars.

- The right to security of property has become an important issue as transnationals have expanded their operations and thus their need for land and facilities. Daewoo of South Korea became embroiled with Vietnamese peasants when it attempted to seize their land to build golf courses. Daewoo found its Project stalled for months, suffered damage to construction equipment, and received bad press throughout the world.

- Security of property surfaced again in another incident, this time in Europe, where Swiss banks are now reaping the financial and public relations losses of their indifference to the rights of Jewish victims of the Nazi Holocaust. The scandal has caused a drop in the Swiss franc and the Swiss stock market.

- Several multinationals have suffered losses because of allegations that they engaged in unfair labor practices. Nike became the object of protests for its production outsourcing to an Indonesian sweatshop that paid workers less than a living wage and forced them to work overtime. In another case, WalMart and the television star Kathie Lee Gifford had to take drastic public relations measures to defend themselves against charges that they dealt with Guatemalan sweatshops producing clothing bearing Ms Gifford's name.

In each of these circumstances, a comprehensive human rights audit should have disclosed the impending situations providing management with ample time to rectify them. For instance, a hypothetical human rights audit at Mitsubishi would have included random interviews with employees who would have been asked about any incidents of sexual harassment about which they were aware. Given the alleged pervasive climate of harassment at the plant, a human rights audit would likely have uncovered the environment in which such abuses were apparently routine.

The League also has consulted with representatives of ISAC to ascertain the proper procedure for having proposed human rights auditing standards formally reviewed and adopted. ISAC, an arm of the United Nations Committee on Trade and Development, meets annually in Geneva. It entertains only two new agenda items each year, both of which must be proposed and put on the agenda at the preceding annual meeting. Due to lack of funding, however, IASC was not convened in 1997, and its future is in doubt.