Multinational corporation

A multinational corporation (MNC) or multinational enterprise (MNE) is hard to define precisely to obtain consensus from different professions For example, when a corporation that is registered in more than one country or that has operations in more than one country may be attributed as MNC !sually, it is a large corporation which both produces and sells goods or ser"ices in "arious countries #t can also be referred to as an international corporation $hey play an important role in globali%ation Arguably, the first multinational business organi%ation was the &nights $emplar, founded in ''() After that came the *ritish East #ndia Company in '+))and then the ,utch East #ndia Company, founded March (), '+)(, which would become the largest company in the world for nearly ()) years

,efinition of -Multinational Corporation . MNCA corporation that has its facilities and other assets in at least one country other than its home country /uch companies ha"e offices

and0or factories in different countries and usually ha"e a centrali%ed head office where they co.ordinate global management 1ery large multinationals ha"e budgets that exceed those of many small countries /ometimes referred to as a 2transnational corporation2 #n"estopedia explains -Multinational Corporation . MNCNearly all ma3or multinationals are either American, 4apanese or 5estern European, such as Ni6e, Coca.Cola, 5al.Mart, A78, $oshiba, 9onda and *M5 Ad"ocates of multinationals say they create 3obs and wealth and impro"e technology in countries that are in need of such de"elopment 7n the other hand, critics say multinationals can ha"e undue political influence o"er go"ernments, can exploit de"eloping nations as well as create 3ob losses in their own home countries

Economists are not in agreement as to how multinational or transnational corporations should be defined Multinational corporations ha"e many dimensions and can be "iewed from se"eral perspecti"es (ownership, management, strategy and structural, etc ) $he following is an excerpt from Fran6lin :oot (#nternational $rade

and #n"estment, ';;<) 7wnership criterion= some argue that ownership is a 6ey criterion A firm becomes multinational only when the head>uarter or parent company is effecti"ely owned by nationals of two or more countries For example, /hell and !nile"er, controlled by *ritish and ,utch interests, are good examples 9owe"er, by ownership test, "ery few multinationals are multinational $he ownership of most MNCs are uninational (see "ideotape concerning the /mith.Corona "ersus *rothers case) ,epending on the case, each is considered an American multinational company in one case, and each is considered a foreign multinational in another case $hus, ownership does not really matter Nationality mix of head>uarter managers= An international company is multinational if the managers of the parent company are nationals of se"eral countries !sually, managers of the head>uarters are nationals of the home country $his may be a transitional phenomenon 1ery few companies pass this test currently

Conflict of laws

Conflict of laws is a set of procedural rules that determines which legal system and which 3urisdiction-s applies to a gi"en dispute $he term conflict of laws itself originates from situations where the ultimate outcome of a legal dispute depended upon which law applied, and the common law court-s manner of resol"ing the conflict between those laws #n ci"il law, lawyers and legal scholars refer to conflict of laws as pri"ate international law ?ri"ate international law has no real connection with public international law, and is instead a feature of local law which "aries from country to country $he three branches of conflict of laws are= 4urisdiction @ whether the forum court has the power to resol"e the dispute at hand Choice of law @ the law which is being applied to resol"e the dispute Foreign 3udgments @ the ability to recogni%e and enforce a 3udgment from an external forum within the 3urisdiction of the ad3udicating forum it is sometimes against go"ernment policies $ransnational corporations A transnational corporation ($NC) differs from a traditional MNC in that it does not identify itself with one national home 5hile traditional MNCs are national companies with foreign subsidiaries, $NCs spread out their operations in many countries sustaining high le"els of local

responsi"eness An example of a $NC is NestlA who employ senior executi"es from many countries and try to ma6e decisions from a global perspecti"e rather than from one centrali%ed head>uarters Criticism of multinationals Main articles= Anti.globali%ation and Anti.corporate acti"ism Anti.corporate ad"ocates critici%e multinational corporations for entering countries that ha"e low human rights or en"ironmental standards $hey claim that multinationals gi"e rise to large merged conglomerations that reduce competition and free enterprise, raise capital in host countries but export the profits, exploit countries for their natural resources, limit wor6ers- wages, erode traditional cultures, and challenge national so"ereignty

Abstract
Multinational corporations (MNCs) ha"e pro"o6ed considerable debate about the issues of 2efficiency2 and 2social 3ustice 2 $he simultaneous surge in economic growth and ine>uality has led to serious implications for economic rights in de"eloping countries !sing a rights.based perspecti"e, we argue that in the human rights area the responsible party is generally the state #n the context of neoliberal globali%ation, howe"er, the wrongdoers are often corporations :eliance on state duties alone may not be sufficient to

broadly protect human rights Certain corporate beha"iors are detrimental to internationally recogni%ed norms of human rights Although pri"ate actions, media exposure, and lawsuits based on ci"il law appear to be the only practical way to put the pressure on MNCs, it is important to examine the possibility of an outside go"erning body to hold in chec6 unfettered global capitalism and to bring accountability to MNCs- policies that are socially detrimental

Multinational Corporations, /ocial :esponsibility and Conflict

B$he international business community will increasingly need to promote greater economic inclusion and social 3ustice in its operations, or it will be blamed for contributing to the conditions that lead to "iolent conflict C #t is not a coincidence that the 5orld $rade Center and the ?entagon were part of the same attac6 #n an increasingly global economy, these pillars of business and go"ernment are now tied together as the symbol of a growing lin6 between the

public and the pri"ate sector $he attac6s are e"idence of a rising perception that globali%ation creates po"erty and ine>uality, which in turn create the moti"e for much "iolence #n response, the pri"ate sector is becoming more public.minded, while the public sector is becoming more business.minded $he e"ents of /eptember '', ())', the demise of Enron and a worsening recession clearly demonstrated that good corporate go"ernance at home and abroad, promoting economic inclusi"eness and community goodwill, are important elements of international security $his interwea"ing of roles calls for new partnerships between business and go"ernment, in which sharing s6ills and expertise can be "aluable in promoting regional and global stability $he security operations normally associated with peace6eeping are uni>uely go"ernmental responsibilities, which corporate actors acti"ely a"oid Conflict is endemic to failed states, where "iolence becomes the predominant means to express grie"ances and to secure control o"er wealth and 6ey economic goods 5hile go"ernments ha"e the primary concern in pre"enting "iolent conflict, businesses and financial institutions ha"e an important role to play in a"oiding or resol"ing conflicts that are associated with economic production $hese include conflict

situations that stem from the brea6down of traditional social framewor6s, in"ol"ing an influx of immigrants and the rapid emergence of cash economies Do"ernments are also responsible for responding to conflict and post.conflict situations 9owe"er, globali%ation and the mounting number of conflicts occurring in regions where multinational corporations (MNCs) operate ha"e prompted international organi%ations, the media, human rights groups, social in"estors and consumers, as well as some corporate executi"es, to discuss the responsibility MNCs share in promoting peace and a"oiding conflict Corporate social responsibility and business ethics groups assert that corporations ha"e an interest in le"eraging their s6ills and impact to promote stability in their areas of operation, not only because it is the right thing to do, but also because it ma6es good business sense $he more traditional human rights groups ma6e use of international law to ensure that businesses are not complicit in human rights abuses, while conflict resolution groups offer their problem.sol"ing s6ills and their expertise in identifying root causes of conflict All these players agree that multinational companies operating across borders should bear some responsibility for the effects

of their operations on the local en"ironment and population $he role of business in conflict pre"ention, crisis management, post.conflict reconstruction and peacebuilding was the focus of se"eral conferences held in ())' by organi%ations ranging from large multilateral agencies such as the !nited Nations, the 5orld *an6 and the 5orld Economic Forum to the smaller non.go"ernmental organi%ations such as the #nternational ?eace Academy and $ransparency #nternational #n 7ctober ())', at a 5orld Economic Forum wor6shop on security and political ris6s, participants agreed that businesses

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Do"ernment is defending itself against a guerrilla insurgency $he plaintiffs accused the company of participating in human rights "iolations against them 5hile the trial 3udge, in a ruling now on appeal, dismissed the case against !nocal, the 3udgeEs opinion was important because it ac6nowledged that Bthe e"idence does suggest that !nocal 6new that forced labor was being utili%ed and that 3oint "entures benefited from the practice C $alisman, CanadaEs largest energy company, was sued in No"ember ())' in federal court in New For6 City by citi%ens of

the /udan, where the company is in"ol"ed in oil operations, as ci"il war rages between the Muslim.dominated go"ernment in the North and the predominantly Christian communities in the /outh $he plaintiffs ha"e accused $alisman of facilitating what appears to be the /udanese go"ernmentEs ethnic cleansing campaign against blac6 and non.Muslim minorities by supplying financial and logistical support to the go"ernment in its oil operations $he >uestion arises whether an MNC should continue to operate in a region where its business might be directly or indirectly aggra"ating an existing conflict /ome leaders of MNCs facing this dilemma ha"e argued that lea"ing the area will simply allow a less scrupulous corporate actor to partner with a corrupt go"ernment, thus diminishing the prospect of respect for human rights MNCs cannot and should not replace go"ernments as the primary actors in international peace6eeping 9owe"er, multinational corporations wor6ing in partnerships with go"ernment, ND7s and ci"il society can use their business s6ills and financial le"erage to promote regional stability /ee ,oe " !nocal, Case No C1 ;++;G;, pending in !/ ,istrict Court for the

Northern ,istrict of California, and ?resbyterian Church of /udan " $alisman Energy, Case No )' City ;HH(, pending in the !/ ,istrict Court for the /outhern ,istrict of New For6, both of which are discussed in eMonitors 8egal

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According to one obser"er, the pri"ate sector can contribute to pre.conflict or conflict pre"ention strategies in stable and peaceful regions in three ways= Bthrough its core business acti"ities, social in"estment programs, and engagement in policy dialogue and ci"ic institution building C< *usiness can play a role in conflict pre"ention through acti"ities that incorporate social and en"ironmental policies or guidelines on human rights Managing pre.conflict or conflict situations in higher ris6 regions is more challenging but can be accomplished through Bpre"enti"e diplomacy, fact.finding and mediation missions,CG although it is extremely rare for a company to become in"ol"ed in actual peace6eeping operations or military deployment unless it pro"ides logistical support ser"ices as a core business acti"ity An MNC can also contribute to crisis management in conflict %ones through commercial or philanthropic support for humanitarian

relief and responsible management of security arrangements for the companyEs operations, thereby minimi%ing the ris6s of human rights abuses Finally, businesses can support post.conflict reconstruction and reconciliation by participating commercially in rebuilding infrastructure and in"esting in 6ey producti"e sectors $hey can help create the conditions for resuming trade, impro"ing sa"ings rates, increasing domestic and foreign in"estment, promoting macroeconomic stabili%ation, rehabilitating financial institutions and restoring appropriate legal and regulatory framewor6s Currently, many cross.sector partnerships promote international security and explore conflict pre"ention, crisis management and post.conflict reconstruction strategies that address the three principal causes of conflict= corruption, po"erty and social ine>uality 4ane Nelson, $he *usiness of ?eace (8ondon= ?rince of 5ales *usiness Forum, #nternational Alert and Council on Economic ?riorities, ())))

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Corruption stems from the lac6 of an honest, transparent and accountable go"ernance system Corruption may result in go"ernmentEs loss of control and order, leading to institutional brea6down and conflict Conse>uently, multinational organi%ations and ND7s are increasingly drawing the pri"ate sector into the global initiati"e against corruption in order to encourage good go"ernance and conflict pre"ention Financial institutions that once considered themsel"es remo"ed from social and en"ironmental contro"ersies ha"e suddenly found themsel"es the center of attention $he financial industry has become a ma3or focus of the global anti.terrorism mo"ement, as e"idenced by the !/ and European go"ernmentsE efforts to free%e the assets of suspected al.Iaeda supporters and other terrorist organi%ations #n ())), the anti.corruption organi%ation $ransparency #nternational con"ened a meeting of '' international pri"ate ban6s, including Citiban6 and Chase, to agree upon a set of B6now thy customerC anti.money.laundering guidelines, which became 6nown as the 5olfsberg ?rinciples + $ransparency #nternationalEs integrity pact calls for businesses to control extortion,

bribery and corruption and to adopt policies of full transparency regarding funding arrangements in go"ernment contracts J /imilarly, the !N 7ffice of the Dlobal Compact is examining the issue of transparency in re"enue sharing as a tool for conflict pre"ention *?, /tatoil and Newmont Mining Corporation ha"e begun acting on these principles #n ';;J, *? recogni%ed that the companyEs in"ol"ement in Angola could become problematic, Bif the go"ernment fails to li"e up to the commitments to increase democracy, accountability and transparency, and if oil re"enues continue to be the main

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As po"erty and social in3ustice can be root causes of conflict, greater understanding is needed of the ways in which global economic forces increase the ris6 of conflict 5ays to diminish those ris6s also need more attention Many people belie"e that the global economy exploits them and that global business and its symbols, such as the 5orld $rade Center, are legitimate targets of "iolence &ofi Annan asserted at ,a"os in 4anuary ())'= #f we cannot ma6e globali%ation wor6 for all, in the end it will wor6 for none $he une>ual distribution of benefits, and the imbalances in global rule ma6ing, which characteri%e globali%ation today will unra"el

the open world economy that has been so painsta6ingly constructed o"er the course of the past century ; 5hile company operations may be disrupti"e to local communities, they can also help pro"ide stability by addressing the concerns of those who are neglected and excluded from the benefits of the operations ?o"erty reduction plans and business creation programs, as well as re"enue.sharing schemes such as funding for foundations that support social de"elopment and

en"ironmental remediation, can all ma6e a difference Corporate managers feel that dialogue with host go"ernment, home go"ernment, local go"ernment representati"es, ci"il society &ofi Annan, Address to the 5orld Economic Forum, ,a"os /wit%erland, groups, local and0or indigenous community leaders and, when rele"ant, multilateral organi%ations, is important for building bridges for understanding $he 5orld *an6Es Emerging *est ?ractices on Consultation calls for Bgathering rele"ant social and cultural information, designing community relations programs, and de"eloping local capacity to effecti"ely communicate complex issues across cultural barriers C')

Many MNCs wor6 under a social license $hese companies are expected to help de"elop the region where they operate by hiring local employees, pro"iding training programs, sourcing locally and conse>uently supporting the local economy /ome MNCs ha"e a"oidance or do.no.harm mechanisms, which pro"ide compensation for damages to land or costs of resettlement 7thers initiate community outreach pro3ects to build schools, hospitals and roads that may ha"e little to do with their business interests $hese pro3ects often go hand.in.hand with local capacity.

building efforts to ensure the sustainability of these pro3ects beyond the life of the companyEs operations in the area

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*usiness leaders need to be sensiti%ed to the effects of globali%ation *usiness schools still tend to reflect Milton FriedmanEs belief that a companyEs role is only to maximi%e profits for shareholders /uch beliefs are remo"ed from the cutting.edge research of leading ND7s and the real acti"ities of international corporations #n fact, doing business in "arious parts of the world forces executi"es to promote stability by being socially and en"ironmentally engaged in their regions of operation #n April ';;;, in a significant act of corporate leadership, the chief executi"e officers (CE7s) of :eebo6, 8e"i /trauss K Co and ?hillips 1an 9eusen Corp sent a 3oint letter to 4iang Lemin, the ?resident of the ?eopleEs :epublic of China $hey stressed their concern Babout the arrest and detention of Chinese citi%ens for attempting peacefully to organi%e their fellow wor6ers or to engage in non."iolent demonstrations concerning the conditions of their employment C 5hile the ?resident has yet to respond, it does mar6 the first time that CE7s ha"e

banded together in an attempt to ad"ocate human rights More important, some executi"es ha"e recogni%ed the need to learn from past mista6es ?ublic attention to the role of extracti"e companies in ci"il conflict pea6ed in ';;G when &en /aro 5iwa and eight other 7goni were executed by the Abacha regime in Nigeria on trumped.up murder charges Many saw /aro 5iwaEs real crime as ad"ocating the rights of the 7goni people, who opposed /hell 7ilEs operations on their land $he company was destroying the en"ironment and pro"iding little compensation for the local community At the time, a /hell spo6esman asserted that the company could not publicly comment on the Nigerian go"ernmentEs hanging of the 7goni Nine because it was not an appropriate sub3ect Bfor pri"ate companies to comment on Fi"e years later, in ';;;, /hellEs chairman, Mar6 Moody. /tuart, said, B$he demands of economics, of the en"ironment and of contributing to a 3ust society are all important to a global commercial enterprise to flourish C'( $oday /hell is a leading member of se"eral partnerships aimed at a"erting crimes such as the execution of &en /aro 5iwa

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:ecently, go"ernments, businesses and ND7s ha"e begun to wor6 together, de"eloping inno"ati"e strategies that help alle"iate problems in conflict %ones Multilateral 7rgani%ations At the end of the /econd 5orld 5ar, the business community acti"ely promoted the creation of the !nited Nations to further its own interest, and that of the world community, in reco"ering from the destructi"e effects of "iolent conflict #n 4anuary ';;;, !N /ecretary.Deneral &ofi Annan initiated the !nited Nations Dlobal Compact to harness the energy and influence of multinational corporations to act as good corporate citi%ens Annan proposed the idea at the 5orld Economic Forum in ,a"os, /wit%erland, and formally launched it at !N head>uarters in 4uly ())) $he compact calls on companies to embrace nine uni"ersal principles concerning human rights, labor standards and the en"ironment 'M #n its first year, Dlobal Compact focused on business operations in conflict %ones and on ways to enhance cooperation between business and go"ernment #t examined how the pri"ate sector deals with security and human rights issues in conflict %ones and identified tools that

could potentially contribute to the pre"ention and resolution of armed conflicts $he !nited Nations now relies on its partnerships with the pri"ate sector to help fund its de"elopment wor6 around the globe Ericsson, a telecommunications company, has a partnership with the !N 7ffice for the Coordination of 9umanitarian Affairs and the Committee of the #nternational :ed Cross, which pro"ides telecommunications for humanitarian relief wor6 in disaster areas Cisco /ystems supports the !nited Nations ,e"elopment ?rogramme (!N,?) through the NetAid org initiati"e, which has raised more than !/N'J million to support humanitarian causes Microsoft designed computeri%ed registration systems for the !nited Nations 9igh Commissioner for :efugees during the crisis in &oso"o $he 5orld *an6 has created many initiati"es to enhance security for companies willing to in"est in ris6y parts of the world #n ';;H, the 5orld *an6 launched *usiness ?artners for ,e"elopment, an alliance of business, go"ernment and ci"il society $he #nternational Finance Corporation, the pri"ate lending arm of the 5orld *an6, offers the Bsustainability initiati"e,C a ser"ice that targets in"estments that are Bfinancially

"iable, socially and en"ironmentally beneficial and economically en"ironmentally beneficial and economically sustainable,C '< e"en in ris6y and uncertain mar6ets #n countries with wea6 or no democratic structures and widespread human rights abuses, the 5orld *an6 is incorporating conflict pre"ention mechanisms in its lending framewor6 for agreements between multinational corporations and host go"ernments

$he 5orld *an6Es lending re>uirements also reduce companiesE political ris6s in a region that has been plagued by sporadic outbrea6s of ci"il war for most of the past M) years, and encourage companies to in"est in local economic de"elopment As *usiness 5ee6 put it= $he NM J billion pro3ect could bring Chad about N()) million per year for the next (G years, roughly doubling the go"ernmentEs annual budget #f used wisely, it could help rescue Chadians from their crushing po"erty $he pro3ect was upheld as a model for new partnerships to pre"ent oil re"enues from being di"erted to corrupt go"ernment officials, but it was thrown into disarray in ,ecember ())' with the announcement that ChadEs ?resident #driss ,eby had used

N< G million of the go"ernmentEs first oil receipts to buy weapons

Do"ernments
Many MNCs ha"e come to learn that their operations and reputation can become inextricably in"ol"ed when go"ernment security forces commit abuses against local populations /hell in Nigeria, 7ccidental in Colombia and Enron in #ndia all experienced such situations 7"er the past se"eral years, leading human rights, en"ironmental and conflict resolution groups ha"e focused their energies on the extracti"e sector $hey see it as not only complicit in human rights abuses, but also a potential powerful and influential mobili%ing force that could pre"ent the funding of conflict and perhaps e"en promote peacebuilding !nli6e other industries, extracti"e companies are tied to the ground and cannot simply lea"e when conflicts arise $he end of the Cold 5ar has seen superpower confrontation replaced by a growing number of locali%ed conflicts Corporations in"ol"ed in natural resources

extraction, such as oil and mining, fre>uently find themsel"es hea"ily in"ested in some of the most politically and socially unstable regions in the world 7n () ,ecember ())), the go"ernments of the !nited /tates and Dreat *ritain finali%ed the 1oluntary ?rinciples on /ecurity and 9uman :ights, a groundbrea6ing agreement drawn by se"eral ma3or oil and mining companies to support a set of human rights principles go"erning their use of security forces in foreign operations it as part of a continuing dialogue to assist multinational companies in Bmaintaining the safety and security of their operations within an operating framewor6 that ensures respect for human rights and fundamental freedoms C $he ND7s and unions that agreed to the initiati"e were Amnesty #nternational, 9uman :ights 5atch, *usiness for /ocial :esponsibility, Fund for ?eace, #nternational Alert, ?rince of 5ales *usiness 8eaders Forum, the Council on Economic ?riorities, the 8awyers Committee for 9uman :ights and $he #nternational Federation of Chemical, Energy, Mine and Deneral 5or6ersE !nions #n ())', the group expanded to include the go"ernment of

the Netherlands and the #nternational Committee of the :ed Cross Following suit, the !/ /tate ,epartment is now de"eloping other types of security agendas with business leaders, as are se"eral other go"ernments around the world Another go"ernment.led partnership initiati"e is the &imberly ?rocess #n ';;;, the ND7 Dlobal 5itness launched an international consumer campaign in con3unction with two other organi%ations to address and publici%e the issue of conflict diamonds, or diamonds sold in exchange for weapons= ! / ,epartment of /tate, *ureau of ,emocracy, 9uman :ights, and 8abor, B1oluntary ?rinciples on /ecurity and 9uman :ights Fact /heet,C 5here they are mined responsibly, as in *otswana, /outh Africa or Namibia, diamonds can contribute to de"elopment and stability *ut where go"ernments are corrupt, rebels are pitiless and borders are porous, as in Angola, Congo or /ierra 8eone, the glittering stones ha"e become agents of sla"e labor, murder and wholesale economic collapse #n May ())), in &imberly, /outh Africa, African go"ernment officials, diamond industry representati"es and ci"il society

leaders met to discuss how the trade in conflict diamonds could be stopped $he !N Deneral Assembly followed by adopting a resolution calling for the international community to de"elop an international certification scheme to brea6 the lin6 between armed conflicts and trade in rough diamonds

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$hree ND7sO#nternational Alert, $he ?rince of 5ales *usiness 8eaders Forum and $he Council on Economic ?rioritiesO recently published a report, $he *usiness of ?eace, which pro"ides a framewor6 for understanding both the positi"e and negati"e roles that businesses can play in situations of "iolent conflict #n its examination of more than M) countries and a "ariety of industry sectors, the report ma6es a strong argument for the proposition that business has an interest in promoting conflict resolution= B$o /ome Countries, Dems *ring 7nly Misery,C $he #nternational 9erald $ribune, J Apr ())) BFinal Communi>uA,C &imberly ?rocess ##, 8uanda, M) 7ctober ())'

$here are J( countries where the security ris6 for the ma3ority of locations in which foreign business operates is rated medium, high or extreme for ())) $oday, only about < percent of the world-s DN? is military relatedP ;+ percent of the international business community pro"ides ci"ilian products and ser"ices Most of these business sectors ha"e a "ested interest in stability and peace () $he report identifies six principles through which business can ma6e a positi"e contribution to conflict pre"ention and resolution= (i) strategic commitment, (ii) ris6 and impact analysis, (iii) dialogue and consultation, (i") partnership and collecti"e action, (") e"aluation and ("i) accountability $hese principles encourage a company to adopt measures such as creating guidelines to incorporate human rights into the companyEs operations, communicating with people in the community affected by the companyEs operations and examining the impact of its business acti"ity on conflict $he many examples of successful business and ND7 initiati"es pro"ide a clear illustration of the gains that can be achie"ed when both sides are willing to explore existing opportunities for collaboration

#n /outhern Africa, the ?eace ?ar6s Foundation helps form partnerships between go"ernments, the pri"ate sector and local communities to promote conser"ation, eco.tourism and 3ob creation across national boundaries $he European Center for Conflict ?re"ention and $ransformation calls for the Eurpean !nion to Bconsult and wor6 with () Nelson the pri"ate sector on issues which address the root causes of conflict, including= institution.building, e>uitable distribution of resources, anti.corruption measures, po"erty eradication, human rights promotion and protection, and security sector reform C #ts secretariat, the European ?latform for Conflict ?re"ention and $ransformation, facilitates cooperation and the exchange of information and de"elops ad"ocacy and lobbying acti"ities among participating organi%ations Many other conflict resolution and peacebuilding ND7s assist companies loo6ing for guidance and partners in this field, including the Carter Center, the Conflict Management Droup, /earch for Common Dround and 9ar"ard !ni"ersityEs ?rogram on /trengthening ,emocratic #nstitutions in the Former /o"iet !nion According to ,a"id 9amburg, president emeritus of the

Carnegie Corporation, Bthe acti"ities of these groups include monitoring conflicts, pro"iding early warning and insights into a particular conflict, con"ening the ad"ersarial parties in a neutral setting, pa"ing the way for mediation and carrying out education and training for conflict resolution C 5hile many of these initiati"es are in"aluable, the duplication of efforts by numerous ND7s and multilateral organi%ations presents a problem

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( Q #*M Corporate 7ffice @ Armon6, New For6, ! / Q $urno"er @ ')J *illion ,ollar Q Employees @ <M<(<+R Q *usiness @ Computer 9ardware , /oftware, #$ /er"ices K Consulting Q /ector . ?ri"ate /ector Q Career 5ebsite . www.)J ibm com0in0careers

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') Q Citigroup #nc Corporate 7ffice @ Manhattan , New For6, ! / Q $urno"er @ J) *illion ,ollar Q Employees @ (GHG))R Q *usiness @ *an6ing K Financial ser"ices Q /ector . ?ri"ate /ector Q Career 5ebsite . careers citigroup com

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' Export stage initial in>uiries ST firms rely on export agents expansion of export sales further expansion U foreign sales branch or assembly operations (to sa"e transport cost) ( Foreign ?roduction /tage $here is a limit to foreign sales (tariffs, N$*s) ,F# "ersus 8icensing 7nce the firm chooses foreign production as a method of deli"ering goods to foreign mar6ets, it must decide whether to establish a foreign production subsidiary or license the technology to a foreign firm 8icensing 8icensing is usually first experience (because it is easy) e g = &entuc6y Fried Chic6en in the ! & it does not re>uire any capital expenditure it is not ris6y payment S a fixed V of sales

$he licensee may transfer industrial secrets to another independent firm, thereby creating a ri"al ,irect #n"estment

#t re>uires the decision of top management because it is a critical step it is ris6y (lac6 of information) (!/ .T Canada) plants are established in se"eral countries licensing is switched from independent producers to its subsidiaries export continues M Multinational /tage $he company becomes a multinational enterprise when it begins to plan, organi%e and coordinate production, mar6eting, :K,, financing, and staffing For each of these operations, the firm must find the best location

Moti"es for ,irect Foreign #n"estment

New MNCs do not pop up randomly in foreign nations #t is the result of conscious planning by corporate managers #n"estment flows from regions of low anticipated profits to those of high returns Drowth moti"e A company may ha"e reached a plateau satisfying domestic demand, which is not growing 8oo6ing for new mar6ets ?rotection in the importing countries Foreign direct in"estment is one way to expand bypassing protecti"e instruments in the importing country European Community= imposed common external tariff against outsiders !/ companies circum"ented these barriers by setting up subsidiaries 4apanese corporations located auto assembly plants in the !/, to bypass 1E:s

Mar6et competition $he most certain method of pre"enting actual or potential competition is to ac>uire foreign businesses DM purchased Monarch (DM Canada) and 7pel (DM Dermany) #t did not buy $oyota, ,atsun (Nissan) and 1ol6swagen $hey later became competitors Cost reduction !nited Fruit has established banana.producing facilities in 9onduras Cheap foreign labor 8abor costs tend to differ among nations MNCs can hold down costs by locating part of all their producti"e facilities abroad (Ma>uildoras)

#nternational 4oint 1entures

41 is a business organi%ation established by two or more companies that combines their s6ills and assets A 41 is formed by two businesses that conduct business in a third country (!/ firm R *ritish firm 3ointly operate in the Middle East) 3oint "enture with a local firm 3oint "enture includes local go"ernment *echtel Company, !/ Messerschmitt.*oel6ow.*lom, Dermany ST #ran 7il #n"estment Company National #ranian 7il Company 5hyW 8arge capital costs . costs are too large for a single company

?rotection . 8,C go"ernments close their borders to foreign companies bypass protectionism e g = !/ wor6ers assemble 4apanese parts $he finished goods are sold to the !/ consumers ?roblems Control is di"ided $he "enture ser"es 2two masters2 5elfare Effects $he new "enture increases production, lowers price to consumers $he new business is able to enter the mar6et that neither parent could ha"e entered singly Cost reductions (otherwise, no 3oint "entures will be formed) increased mar6et power ST not necessarily good A "iew from the mountain top Many multinational companies are housed in tall buildings in 9ong &ong

!/ $ax ?olicy towards MNCs

7perating in many countries, MNCs are sub3ect to multiple tax 3urisdictions, i e , they must pay taxes to se"eral countries National tax systems are exceedingly complex and differ between countries ,ifferences among national income tax systems affect the decisions of managers of MNCs, regarding the location of subsidiaries, financing, and the transfer prices (the prices of products and assets transferred between "arious units of MNCs) Multiple $ax 4urisdictions creates two problems, o"erlapping and underlapping 3urisdictions 5hen o"erlapping occurs, two or more go"ernments claim tax 3urisdictions o"er the same income of an MNC $he o"erlapping may result in double taxation Con"ersely, when underlapping occurs, an MNC falls between tax 3urisdictions and escape taxation !nderlapping encourages tax a"oidance National go"ernments may choose a territorial 3urisdiction or national tax 3urisdiction or both $erritorial $ax 4urisdiction= $he go"ernment taxes business income that is earned on the national territory

C7NC8!/#7N
Dlobali%ation has winners and losers #n a period when ethnic and religious conflicts are intensifying in many areas of the world, bringing with them the potential for "iolence, the opportunities for MNCs to relie"e existing tensions and to wor6 toward sustainable solutions are increasing $his entails a focus by MNCs on economic inclusi"eness, adherence to economic and social rights and obser"ance of international en"ironmental standards Andrew Mc8ean, ed , ?re"enting "iolent conflict= 7pportunities for the /wedish and *elgian ?residencies of the European !nion in ())' (/afer5orld, ())'P ,a"id 9amburg, #nternational ?eace Forum *usiness and #nternational /ecurity Concepts of business responsibility are not really new in international human rights $he preamble of the !ni"ersal ,eclaration of 9uman :ights states that Be"ery indi"idual and e"ery organ of society, 6eeping this declaration constantly in mind, shall stri"e by teaching and education to promote respect for these rights and freedoms C Mary :obinson, the !N high commissioner

for human rights, has made it clear that these organs of society include corporations= B#t is not a >uestion of as6ing business to fulfill the role of go"ernment, but of as6ing business to promote human rights in its own sphere of influence C MNCs should adopt a code of conduct that includes these norms, to be adhered to at home as well as abroad so that daily operations reflect sensiti"ity to regional differences of color, race or creed as well as a respect for human rights Managers in MNCs find themsel"es operating in areas of armed conflict, indigenous cultural disputes, epidemic disease and other sources of social uphea"al