Guide In the Hurricanes Eye: The Troubled Prospects of Multinational Enterprises

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You have entered an incorrect email address! Inverted-U Theory September 18, This website makes use of cookies to enhance browsing experience and provide additional functionality. Accept Read more. Such an analysis is essential for providing background to and perspective on what either approach can hope to achieve, and how. This article begins to bridge the gap by illustrating aspects of the political power, authority, and relative autonomy of the contemporary multinational enterprise.

The conclusion spells out some implications for the debate itself, and for further research. Precise definitional issues are still debated if not contested. But in a lengthy etymological and philosophical discussion Sheehy , p.

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In short, Sheehy affirms, CSR falls onto the voluntary side of the regulatory scale. Globally, there is no central regulator and national laws where multinationals operate may be weak, poorly enforced, or simply do not exist. Therefore, they propose a new paradigm, one in which the firm is drawn into greater political roles, performing tasks that we traditionally associate with the state.

Thus far, the Working Group has held two annual informational sessions. However, what is missing from that discussion is a current and systematic political analysis of the multinational enterprise in the context of global governance. Such a portrayal seems essential for providing perspective and guidance to what both voluntarism and binding treaty advocates can hope to achieve, and how.

This article helps to bridge that gap by illustrating aspects of the political power, authority, and relative autonomy of today's multinational enterprise. The implication, which I elaborate briefly in the conclusion, is that there is no silver bullet that would fully achieve the objectives of either the voluntary and mandatory side in the global CSR debate as it is currently conceived and practiced.

A paradigmatic shift is required. The discussion proceeds as follows. The first section describes core features of today's multinational enterprise in terms relevant to the corporate responsibility debate. The sections that follow address the multinational's power, authority, and relative autonomy in that order. Surprisingly, there is no legally precise and universally accepted definition of the multinational enterprise. While one or more of these entities may be able to exercise a significant influence over the activities of others, their degree of autonomy within the enterprise may vary widely from one multinational enterprise to another.

As a first step before delving more deeply into the status of the multinational enterprise as a global institution, I briefly describe it first as an economic and then as a legal entity.

Raymond Vernon

By market capitalization, Total ranks as the fourth largest publicly traded integrated oil and gas company in the world Total It operates in countries and has , direct employees. Its business segments cover every aspect of the oil and gas industry, from exploration, development, production, refining, and petrochemicals to marketing, trading, and shipping.

It is also active in specialty chemicals and aims to become a global leader in new energies. But the reach of the enterprise doesn't stop there. As part of its marketing business, Total's service station network includes more than 16, outlets in countries, all carrying the Total brand.

Volume 11, Issue 1, | Historical Materialism

Beyond that set of relationships are countless suppliers of products and services, as well as distributors other than service stations that are contractually connected to individual corporate entities within the Total group. Things become more complex when we look at multinationals through the lens of the contractual ecosystems they continue to generate. These are variously called transnational production networks, supply chains, or global value chains.

Therefore, I use them interchangeably except when a particular source I quote uses one or another. It lies at the simple end of that spectrum. As of , its components were produced by suppliers in 31 countries comparecamp. The product is designed in the United States US and assembled in China, which also had the largest number of suppliers in at , nearly half the total. Many US suppliers also outsourced fabrication of components to companies in Japan, South Korea, and Taiwan, which in turn are sourced from yet other and lower cost locations in South East Asia.

Other forms exist, but these two examples suffice for the present purposes. They illustrate a fundamental transformation that has taken place in the production process of many if not most sectors. The electronics and automobile industries led the way, largely because components can be broken down into so many discrete parts and are easy to transport. But garments and footwear were also early movers, and the list today includes food and beverages, chemicals, mining, furniture, and a host of others.

In view of the complexity of managing these transactions, the role of services looms large logistics, telecommunications, legal services, data processing, accounting, and human resources management, among others. Product and process standards are set by the lead firm and then cascade across its network and down the supply chains.

This is because of the multiple times intermediate goods are imported, a step or two is taken in their processing, and then they are exported again as an intermediate product to the next stop, where the cycle is repeated until the final product is assembled. The world's total labor force in was estimated at 3.

And if we assume that many of those workers have families, the number of directly affected people easily exceeds 1 billion. Intense cost pressures and tightly synchronized delivery schedules throughout these networks and various layers of subcontractors can lead to violations of workplace standards and pose environmental hazards. These, then, are two snapshots of the 21st century multinational seen in terms of the organization of their transnational economic activity. But importantly, this is not how the law conceives of them — far from it.

We are not wrong to think this. Those organizations do exist in the everyday world of economic activity. But they don't exist as entities in the law. In the case of an integrated firm like Total, each of its subsidiaries and affiliates is a separate legal entity, subject to the laws of the particular jurisdiction in which it is incorporated.

Hurricane's Eye

The multinational as economic organization orchestrates and controls the entirety of its global operations. The group of firms or enterprises that make up the multinational as an economic organization is structured using the corporate form; but legally the group itself is not a corporation.


Why is this distinction so crucial? Because national law for the most part governs the separate legal entities, not the single economic enterprise. This means that the corporate parent is generally not liable for risks incurred by a subsidiary, or monetary damages imposed on a subsidiary, beyond the extent of its investment in it.

Moreover, a subsidiary or affiliate may have subsidiaries and affiliates of its own, based on the same principle of limited liability. Some subsidiaries may be listed on stock exchanges in their own right, with the corporate parent remaining the majority or controlling shareholder. In all such cases, the parent company is not liable for harm caused by subsidiaries, other than in exceptional situations such as demonstrable negligence, fraud, or other illicit conduct that the corporate parent directed or of which it had knowledge and did nothing to stop.

The main body of national law governing corporations is domestic corporate law and securities regulation, plus whatever civil and criminal provisions in other areas of substantive law and regulations may be applicable to corporations.

In the Hurricane's Eye

But domestic law is only able to reach beyond its national borders in limited circumstances Zerk , One such exception is the US Foreign Corrupt Practices Act, the scope of which includes the overseas conduct of US firms, as well as foreign firms, if their furtherance of a corrupt act takes place in or through the US. For nearly two decades, the US Alien Tort Statute ATS was also an exception, providing a means for foreign plaintiffs to bring suit in federal courts for egregious human rights abuses committed abroad. A California district court first agreed to extend it to corporations in Joseph More than such cases were subsequently brought.

The net result? The only case to go to a jury trial was won by the corporation. Two were settled for modest sums the ATS is a civil statute, resulting in payment for damages if successful. The rest were dismissed on various procedural grounds, primarily the forum non convenience doctrine that US courts are not the appropriate jurisdiction or with the judiciary deferring to executive branch claims that foreign policy interests would be adversely affected. One case, Kiobel v.

Royal Dutch Petroleum, made it all the way to the Supreme Court. In a divided ruling, the Court held that a presumption against the extraterritorial application of US laws applies unless Congress has specified otherwise, a test the Court said the ATS did not meet Kiobel v. Royal Dutch Petroleum Co However this plays out, as a general rule, unilateral extraterritorial jurisdiction is typically also contested and resented by the other states into whose jurisdiction it reaches.

For its part, international human rights and humanitarian law generally applies to states, and the latter has been expanded to include natural persons accused of war crimes and certain crimes against humanity Ruggie But it imposes the correlative duties on states, not on companies directly.


States then have to ratify the relevant instrument, enact it within their individual jurisdictions, and enforce it as a matter of domestic law. States face considerable collective action problems, however, being economic actors themselves, whether in promoting or attracting foreign investment, which goes a long way toward explaining the relative weakness of public international law in this domain. The fact that public law national and international does not generally encompass the economic unity of the multinational firm is the single most important contextual factor shaping its power, authority, and relative autonomy.

This can occur even when A does not undertake specific actions to achieve that outcome in any particular circumstance. To illustrate the political power of multinational enterprises, I draw on a typology developed by Doris Fuchs Also see Barnett and Duval I briefly illustrate each in turn. In short, instrumental power involves the employment of specific resources to achieve one's aims.

I focus here on lobbying because its evolution closely tracks corporate globalization itself. Lobbying is undoubtedly as old as politics itself. Certain key industries, led by financial institutions, were at the vanguard in advocating the deconstruction and reconfiguration of the international economic architecture that enabled the current wave of corporate globalization to take root and expand since the s, the phenomenon widely depicted as neoliberalism Crouch Here I want to draw attention to three current features of business lobbying that relate to global governance issues.

The first two may be peculiarly prevalent in the US, but they may also involve foreign corporations listed in the US as well as having other international spillover effects.