Globalization and Multinational Corporations

Transcript:Globalization and Multinational Corporations:
Globalization and Multinational Corporations Creating Social Accountability Through Voluntary Codes of Conduct 10/5/2012 Copyright © 2012, S. Prakash Sethi 1 S. Prakash Sethi, Ph.D. University Distinguished Professor, Zicklin School of Business, Baruch College, The City University of New York And Forrest Mars, Sr. Visiting Professor of Ethics, Politics and Economics Yale University, New Haven CT Prepared for presentation at a Workshop on the Role of Corporations in a ‘World at Risk’ Norwegian Institute of Science and Technology (NTNU) Trondheim, Norway, November 19-20, 2012 Globalization, Multinational Corporations, and Voluntary Codes of Conduct Over the last 30+ years, there has been a dramatic increase in foreign direct investments, which reached $1.5 trillion in 2011. FDI flows to developed countries increased by 21% between 2007 and 2011 reaching a total of $748.0 billion. During the same period, FDI to developing countries increased by 11% reaching a record total of $684.0 billion. A very large portion of these investments have been made by the institution of large multinational corporations (MNCs). The twin factors of increased FDI and the enhanced role of MNCs have fundamentally changed the process of global economic growth when contrasted with earlier periods of international trade, which primarily focused on exchange of commodities and manufactured goods. Currently, approximately one-third of the world trade consists of intra-firm transactions, i.e., trade among various units (foreign affiliates, headquarters) that make up the increasingly integrated production system of individual MNCs. The global reach of MNCs is further strengthened by their ability to integrate not only global markets but also national production systems. Copyright © 2012, S. Prakash Sethi 2 Impact of Globalization and Growing Influence of MNCs Globalization of economic activities has led to an uncoupling of the corporate persona from its local roots and weakened the traditional bonds of loyalty between the home-grown companies and their local communities and countries of origin. There is growing imbalance in the relative bargaining power of national and regional governance authorities. This has led to a decline in social investments that enhance the quality and supply of public goods. Copyright © 2012, S. Prakash Sethi 3 Impact of Globalization and Growing Influence of MNCs continued… Globalization has facilitated a vast shift in economic activity among various regions and countries. Production and consumption activities have become highly dispersed around the world. Since labor and physical resources are relatively fixed while capital is largely mobile, MNCs have used their increasing