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Saturday, March 20, 2010

Grievance Processes for Internal and External Stakeholders

The purpose of this post is to consider the issue of internal and external stakeholder grievance mechanisms from a legal perspective.  The impetus was an interesting article I read by John Sherman, a senior fellow with the Corporate Social Responsibility Initiative of Harvard Kennedy School on the topic.

Peaceful dispute resolution through processes of reasoning is fundamental to law and the legal process. Litigation is only one, and most often not the best, avenue for the peaceful resolution of disputes.  As John Sherman correctly points out in his article, lawyers and legal counsel have for decades employed alternative dispute resolution (ADR) mechanisms in order to avoid the time and expense of litigation.

ADR processes traditionally include mediation, arbitration, or negotiation.  Negotiation is a bilateral process whereby parties seek to come to a mutually acceptable resolution of the issues between them through trade-offs, promises and agreements.  Mediation is similar, but involves the use of a disinterested third party to facilitate resolution.  Arbitration entails a binding decision making process, where a third party can impose a resolution on the disputing parties, applying principles that have been set out in advance.

Grievance mechanisms may include any one of these ADR methods.  They may also include more investigatory approaches to complaint or dispute resolution, such as an ombudsman/woman who takes complaints, investigates, and attempts to resolve concerns before they grow into a more adversarial dispute.  Other approaches, often utilized in the employment or consumer complaints contexts, involve the establishment of a complaints hierarchy, whereby a complainant can raise a concern and have that concern addressed up a hierarchy of management. 

The basic principles of any of these mechanisms or procedures are the same.  They involve a defined channel for aggrieved persons to raise their concerns.  The concerns are then heard and considered by some person or panel with the capacity to remedy them.  That person or panel then assesses the complaint based upon some set of principles and reasoning framework that is (presumably) acceptable to the parties.  A decision is then made, which is communicated to the aggrieved party, and a resolution implemented.

There is of course, no guarantee the outcome will be satisfactory to the complainant.  If it is not, they must decide what further action they may take.  This may include litigation, but it could also include other avenues, including more coercive types of responses, such as boycotts or protests.  The effectiveness of a grievance mechanism is not determined by whether everyone is satisfied with outcomes, but more importantly whether all affected parties are satisfied by the process that has been employed - which should be based upon the principles of accountability, transparency and above all fairness.

Internal employment complaints processes are common amongst the best run companies I have worked with.  These complaints processes range from the informal to the formal. Informal mechanisms can include tailgate meetings regarding health and safety hazards and risks; more formal systems may include investigations or even grievance procedures set out under a collective agreement. 

Employment related grievance mechanisms are "internal" to the corporation, but the same principles used in employment related grievance mechanisms can be applied to external stakeholder grievance mechanisms. These may be managed by the company itself, or by third parties. An example of the latter is the Better Business Bureau, which takes consumer complaints that are then responded to by the corporations that are the subject of the complaint.  Examples of the former are provided by the many and growing human rights and community relations grievance mechanisms being implemented by mining companies operating in developing countries (for one example see Barrick Gold Corp.).  These processes apply the principles set out above of hearing, evaluating and resolving, complaints and concerns.

From a legal point of view, the implementation of well thought out grievance mechanisms can be quite prudent.  Whatever legal risks they pose are most often more than offset by their benefits for business and legal strategy.

Contrary to the suggestions of Mr. Sherman that, as a lawyer, I might be disposed to prefer litigation to grievance resolution, I (like most lawyers) view litigation as very unpredictable and undesirable in almost every circumstance.  Mutually acceptable resolution of disputes at the earliest stage is almost invariably the best option, if and wherever possible.

I am not, in fact, overly concerned with the outcomes of a complaints resolution process being used as "evidence" in future litigation.  I believe that such concerns are quite misguided from a legal perspective. The types of disputes dealt with by grievance mechanisms more often than not involve risks that require due diligence (or some variant of that concept) in order to mitigate.  Human rights, health and safety, labour standards, environmental issues, corrupt practices, often must be dealt with on principles of openness and transparency, in order for companies to be compliant with law.

Grievance mechanisms are part of a sound due diligence process.  Stakeholders (internal or external) are in the best position to identify conflicts that present social risks to the business, and as such, grievance mechanisms provide an information gathering function that can be used in risk mitigation. They also allow for the identification of misconduct on the part of corporate officers or employees that creates risks for the corporation itself.  As anyone who reads the papers knows, it is best for the corporation when such information is not swept under the proverbial rug.  "Whistleblower" complaints mechanisms exist "in the shadow of the law" and are often an essential source of information regarding internal malfeasance that can in fact place the entire organization at risk.  In many jurisdictions whistleblowers have statutory protections, particularly when they report to governmental authorities.As such, well designed grievance mechanisms not only make good business or ethical sense, they make good legal sense, or may even be legally required.

Perhaps most importantly, these processes foster a culture of openness and transparency that allows for problems to be identified early on, before they become completely unmanageable and present significant risks to the organization.

If companies are aware, or wilfully blind, to misconduct being perpetrated by their officials, they will gain no legal advantage from that should such facts ever come to light.  Covering up is not a good legal strategy (not to mention unethical in many circumstances) and as such, a due diligence approach to legal risk management is always advisable and more preferable than wilful blindness. Strong grievance and whistleblowing procedures are very useful for effective due diligence.

For these reasons, grievance mechanisms should be seen as an important aspect of an intelligently designed legal compliance and social risk management system. Such mechanisms fit in well with legal strategy, and in fact facilitate due diligence within the organization that will almost invariably serve to bolster, rather than undermine, a legal position in future litigation.

Ignorance is not bliss when it comes to business, risk management, or the law. Ignorance is risky, and the risks posed by ignorance can only be mitigated with sound procedures that encourage openness and transparent communication between stakeholders and corporate decision makers. Grievance mechanisms, and whistleblowing procedures are very useful tools in this regard and can and ought to be integrated into sound legal and compliance management.  It's not just ethical, its good business and good legal strategy.

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