Are all large private companies multinational companies

World trade

Melanie Coni's room

To person

Dr. phil., born 1977; Research assistant in the program area "Private Actors in Transnational Space", Hessian Foundation for Peace and Conflict Research, Baseler Straße 27–31, 60329 Frankfurt / M. [email protected]

Annegret Flohr

To person

Dr. phil., born 1981; Research assistant in the program area "Private Actors in Transnational Space" (see above). [email protected]

The number of transnational companies has increased steadily over the past decades. As a global player, you can have a decisive influence not only on global economic, but also on political and social developments. As central actors in globalization, companies are on the one hand jointly responsible for the emergence and exacerbation of global problems, but on the other hand they also contribute to dealing with them in the context of so-called new forms of governance. The aim of this article is to shed light on the ambivalent role of companies by viewing them on the one hand as the cause of the problem and on the other hand as an intensified one Corporate-social-responsibility-Engagement in the context of global governance takes in view.

The liberalization of world trade and the emergence of so-called global players, i.e. globally active and politically powerful companies, are two sides of the same coin. [1] Companies have a fundamental interest in a trade regime that is as liberal as possible, within the framework of which they seek the "global optimization of value chains" [2]. To do this, they use comparative advantages and relocate production steps to the location that offers the most favorable conditions for them. The increasing internationality of entrepreneurial activity can be seen in a number of indicators: Companies sell their products internationally and thus contribute to increasing foreign trade. In addition, they are constantly looking for the cheapest sources of supply for the preliminary and intermediate products they process (global sourcing). You invest directly abroad in order to secure access to primary goods or to benefit from low wage costs ("new global division of labor").

The United Nations Conference on Trade and Development (UNCTAD) defines transnational companies as those that, in addition to having their headquarters in a country, exercise control over subsidiaries located abroad. Their number has increased steadily and faster since the mid-1980s, until they stalled for the first time with the outbreak of the global financial crisis in 2008. While in 1990 there were 35,000 companies of this transnational nature, the number rose to 63,000 in 2000 and in 2008 it reached its highest level with 82,000 transnational companies with more than 800,000 subsidiaries. [3] While the vast majority of these companies come from countries belonging to the Organization for Economic Co-operation and Development (OECD), the number of transnational companies from developing and emerging countries has also risen sharply in recent times. Between 1995 and 2000 alone, their number tripled from 3,800 to 12,000. [4]

Transnational companies are mostly referred to as global players because of their economic and political power. They are often defined based on resources or finance, i.e. on the basis of their capital, their market value or their turnover. Based on these key figures, they are assumed to have a certain influence on political processes both at national and international level. A popular display tool is a comparison between the annual sales of global companies and the gross domestic product of different countries. In 2011, there were a total of 17 companies among the 100 largest "economies" in the world. Royal Dutch Shell came in 24th as the company with the highest sales, ahead of Taiwan and Argentina. [5] Wal-Mart (USA), Volkswagen and Daimler (Germany), but also PetroChina (China) and Samsung (South Korea) are also at the top.

Companies causing problems

From a political science perspective, these indicators, which reflect the business success of global players, are less relevant than the overall social impact of this trend. From such a perspective, it must first be stated that neither the internationalization of trade nor that of entrepreneurial activity are globally uniform. On the contrary: even if there have been slight counter-trends recently, the vast majority of transnational companies still come from highly developed countries, and the degree of interdependence (through direct investment) between them is still the highest. [6] In particular, direct corporate investments in developing and emerging countries and the effects they have there are at the center of attention and criticism. [7]

One of the major lines of conflict in this context results from the question of what benefits direct investments have for the respective target countries. Skeptics assume that this is very limited, precisely because the purpose of the investment by the parent company is the use of cost advantages and the resulting deduction of profits. Since direct investment is often used to gain access to primary goods or to reduce labor costs, this objection seems highly justified. The raw materials sector in particular is characterized by an "enclave character": it operates largely self-sufficient, receives few inputs from the local economy and consequently only contributes to a limited extent to the growth of the host country's economy as a whole. A widespread political demand to contain the negative consequences of globalization is therefore the creation of extended value chains in the target countries of direct investment.

Globalization, understood here primarily as the liberalization of trade, offers globally active companies not only the potential for cost optimization. It also means that companies are confronted with new problems or contribute to their worsening. This is particularly emphasized in the debate that is critical of globalization, which is mainly carried out by civil society actors. Problem areas that are discussed in this context are, for example, non-compliance with labor and social standards, human rights, environmental and anti-corruption norms, the increase and exacerbation of domestic violent conflicts, but also the avoidance of tax revenues. The problems that companies are confronted with vary greatly from branch to branch, depending on the company's position in the value chain and on the company structure To influence problems.

For example, companies in the textile and clothing industry are particularly confronted with non-compliance with basic labor and social standards, which are anchored in the conventions of the International Labor Organization (ILO), in their supplier companies. Retail companies do not make any foreign direct investments, they are buyers of goods that are manufactured in so-called sweatshops, especially in Asian countries. The problems in these companies include low wages, unpaid overtime, inadequate health and safety measures and child labor. As buyers, transnational companies are also partly responsible for these problems. On the one hand, they have an interest in the lowest possible unit prices and short delivery times; on the other hand, their market power allows them to significantly influence the working conditions - for better or for worse - in their suppliers. [8]

Global players in the extractive industry (oil, gas, mining) are faced with completely different problems. Here, negative consequences for the environment are an important problem area, so in some cases large areas in the affected regions can no longer be used for other purposes, for example for agriculture. Human rights problems arise, for example, in dealing with local population groups or through cooperation with public and private security forces. Since global players such as Shell or Rio Tinto are active in the extraction of raw materials through their local subsidiaries, their direct control and influence on the local situation are much greater. [9]

Company as co-regulator

The perspective pursued so far, which regards companies primarily as the cause of problems, has been increasingly supplemented in the past decade by a second perspective, which focuses on what contributions transnational companies - due to their economic and political power - make within the framework of global governance to solve problems. Global governance in this context means the rule-based processing of problems that affect the public interest by a large number of state and non-state actors. [10] Companies are increasingly meeting these social expectations - even if not all companies to the same extent and not in all areas considered relevant. Such corporate engagement is often called corporate social responsibility (CSR) or also corporate citizenship designated. These are mostly voluntary commitments and measures by companies that affect either the core business or the relationships with stakeholders. Since the 1990s, it has been observed that companies are increasingly developing codes of conduct in which they define standards that they want to adhere to in the course of their business activities, internal structures are being created, and they are increasingly becoming involved in collective CSR initiatives at national and transnational levels Level.

The increasing expectations directed at companies also result from the fact that the state structures in many countries in the global South, in which companies invest or from which they obtain raw materials or products, are weak. The state itself is often unable or unwilling to introduce or enforce applicable laws and regulations, for example to protect employees or the environment. According to the thesis, companies could voluntarily comply with higher environmental and labor standards even without state regulation - also due to pressure from consumers or civil society. [11]