30 Kasım 2012 Cuma

The Multinational Companies (MNCs)

A multinational corporation (MNC) or transnational corporation, also called as multinational enterprise, is a corporation or enterprise that manages production or delivers services in more than one country. It can also be referred as an international corporation. These companies organization extends employment contracts over national boundaries. They have cross national interdependencies.[1]

The first modern MNC is generally thought to be the Poor Knights of Christ and the Temple of Solomon, first endorsed by the pope in 1129. The key element of transnational corporations was present even back then: the British East India Company and Dutch East India Company were operating in different countries than the ones where they had their headquarters. Nowadays many corporations have offices, branches or manufacturing plants in different countries than where their original and main headquarter is located. This is the very definition of a transnational corporation. They have the multiple operation points that all respond to one headquarter.

This often results in very powerful corporations that have budgets that exceed some national GDPs. Multinational corporations can have a powerful influence in local economies as well as the world economy and play an important role in international relations and globalization. The presence of such powerful players in the world economy is reason for much controversy.

The emerging global order is spearheaded by a few hundred corporate giants, many of them bigger than most sovereign nations. As an example Ford’s economy is larger than Saudi Arabia’s and Norway’s. Phillip Morris’s annual sales exceeded New Zealand’s gross domestic product. The new giant firms of the 21st century have achieved something that no other nation could manage today. They have reached millions of people through different kind of global webs like shopping, culture, workforce and finance. These worldwide webs of economic activity have already achieved a degree of global integration never before achieved by any world empire or nation state. So that the actors on the top of these webs like Microsoft, IBM, Airbus or Boeing, now have a say on many different political issues and have the power to cause economic effects on many different areas, which never had before.[2]

The MNCs should be subject to some regulations due to their oversea operations. Although they are subject to the local regulations in different countries, due to their influence on the world trade they are also subject to OECD regulations. The restrictions and the regulations are in the OECD regulations as follows:[3]

“Enterprises (MNCs) should take fully into account established policies in the countries in which they operate and consider the views of other stakeholders. In this regard, enterprises should:
  1. Contribute to economic, social and environmental progress with a view to achieving sustainable development.
  2. Respect the human rights of those affected by their activities consistent with the host government’s international obligations and commitments.
  3. Encourage local capacity building through close co-operation with the local community, including business interests, as well as developing the enterprise’s activities in domestic and foreign markets, consistent with the need for sound commercial practice.
  4. Encourage human capital formation, in particular by creating employment opportunities and facilitating training opportunities for employees.
  5. Refrain from seeking or accepting exemptions not contemplated in the statutory or regulatory framework related to environmental, health, safety, labour, taxation, financial incentives or other issues.
  6. Support and uphold good corporate governance principles and develop and apply good corporate governance practices.
  7. Develop and apply effective self-regulatory practices and management systems that foster a relationship of confidence and mutual trust between enterprises and the societies in which they operate.
  8. Promote employee awareness of and compliance with, company policies through appropriate dissemination of these policies, including through training programmes.
  9. Refrain from discriminatory or disciplinary action against employees who make bona fide reports to management or, as appropriate, to the competent public authorities, on practices that contravene the law, the Guidelines or the enterprise’s policies.
  10. Encourage, where practicable, business partners, including suppliers and sub-contractors, to apply principles of corporate conduct compatible with the Guidelines.
  11. Abstain from any improper involvement in local political activities.”        
These items show that OECD is monitoring the activities of MNCs whether they are adding value to the local economy or not. The aim of OECD is to balance the needs of the local country and the MNC and maximize their shared interest.

[1] Christos Pitelis, Roger Sugden, The Nature of the Transnational Firm, US, Routledge, 2000, p.72.
[2] Evren Köksal, “The impact of multinational corporations on international relations - a study of American multinationals”, Master Thesis, ODTÜ SBE, 2006, p.57.
[3] OECD, The OECD Declaration and Decisions On International Investment and Multinational Enterprises: Basic Texts, US, OECD, 2000, p.11.

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