Cisco's Consequences for Caremark

The United States Supreme Court recently undermined efforts to punish corporate human rights violations and to prevent them in its recent decision in Cisco Systems, Inc. v. Doe I, holding that “courts may not create new causes of action for violations of international law” under the Alien Tort Statute (ATS).  This decision is correctly understood as a major blow to future human rights litigation.  What is less obvious is that it also endangers corporate governance.  By weakening the legal risks that human rights litigation poses to corporations, the Court’s decision simultaneously weakened the Caremark doctrine’s potential to prevent human rights abuses by improving the governance of human rights.  Caremark relies on legal and other risks to elevate issues before a corporate board – risks that the Court’s ruling weakens. By doing so, it influences whether Delaware courts will recognize the oversight of human rights as part of the fiduciary duties of corporate directors and officers. Without this recognition, corporate management may have little legal incentive to improve their governance of human rights, making it all that much more likely that corporate human rights violations will occur.  That is the full impact of Cisco.  It endangers the project of improving corporate human rights practices through both human rights litigation and corporate litigation. The former punishes; the latter prevents. Cisco threatens both.