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How Change Happens$

Duncan Green

Print publication date: 2016

Print ISBN-13: 9780198785392

Published to Oxford Scholarship Online: October 2016

DOI: 10.1093/acprof:oso/9780198785392.001.0001

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Transnational Corporations as Drivers and Targets of Change

Transnational Corporations as Drivers and Targets of Change

(p.151) 8 Transnational Corporations as Drivers and Targets of Change
How Change Happens

Duncan Green

Oxford University Press

Abstract and Keywords

This chapter focuses on transnational corporations (TNCs), not only as economic heavyweights, but also as influential players in political and social change. It traces the origins of the modern TNC to the East India Company, which was established in 1600 and grew to become a trading empire that encircled the globe. The chapter next looks at the ways in which TNCs drive change, arguing that they do so both through their normal business operations, and through their behaviour as political players. The world of TNCs is seething with expressions of power, hidden in their political connections, and invisible in the extraordinary influence on consumers exerted by brands and the values they claim to embody, as well as the apparently mesmerizing authority of giant corporations in the eyes of policy makers. With this in mind, the chapter also discusses the ways in which activists can in turn influence TNCs.

Keywords:   transnational corporations, TNCs, business operations, political connections, brands, East India Company

Brian was in an expansive mood. Relaxing over dinner in the Bangladeshi capital of Dhaka, he explained why he had abandoned a British émigré’s retirement in Florida to run a large garment factory, where some 2,000 women stitched sportswear for Nike. ‘I’m not doing this for the money, I don’t need it’, he mused. ‘It’s providing jobs for all those women that makes it worthwhile.’

I was in an awkward position. Thanks to Brian, I had earlier toured the factory (off limits to most visiting NGOs), now I was bonding with him as a fellow Brit. But I could hardly let this pass. After a quick mental calculation, I made a mischievous suggestion: ‘Well, why don’t you give your salary to the women? It would double their wages—all 2,000 of them!’ ‘No way’, he retorted. ‘It’s all about keeping count.’ He meant that once you get to his level, salary is more about status and peer competition than mere income.

Staying friends with Brian wasn’t the only source of awkwardness that day. I was researching a report for a campaign on exploitative transnationals. Yet the garment workers I interviewed, both onsite and off, told me how much they prized working at the clean, modern factory in one of Dhaka’s export processing zones. It was infinitely preferable to a sewing job in one of the dingy, dangerous local factories in downtown Dhaka, the women said, let alone a life of domestic servitude back in the village.

(p.152) Ubiquitous global brands like Nike epitomize widespread concern about globalization and have become the favoured target of campaigners. Transnational corporations (TNCs) certainly hold significant power. The TNC universe now spans some 103,000 parent companies with over 886,000 foreign affiliates.1 In 2014, these generated an estimated $7.9 trillion in value added2 and employed some 75 million workers. The total annual sales of TNCs’ foreign affiliates rose from $4.7 to $36.4 trillion between 1990 and 2014.3

Anxiety over their sheer size has prompted critics to argue that corporations ‘rule the world’.4 One of the most widely visited posts on my ‘From Poverty to Power’ blog is a World Bank table that shows the world’s top 100 economies:5 fifty-three are countries (measured by GDP), thirty-four are cities (ditto), and thirteen are corporations (measured by turnover6). Strictly speaking, this is comparing apples and pears; value added is a better (and lower) measure than turnover. But it remains a fact that a number of firms rival medium-sized countries in economic might.

This chapter focuses on TNCs, not only as economic heavyweights, but also as influential players (for good and ill) in political and social change. Small and medium enterprises (SMEs) account for many more jobs and may well be more important in the daily lives of poor people, but these tend to be less active in consciously pursuing and preventing (p.153) change. I see SMEs, like markets in general, more as part of the context within which activists operate than actors in their own right. TNCs, on the other hand, behave more like activists.

This chapter is probably going to get me into trouble with some colleagues. Opinions on TNCs seem to be more polarized than on any other subject in development. These run on a spectrum from contempt for corporations as the shock troops of capitalism, destroying lives and cultures in a frenzy of corporate greed, all the way to a Blairite infatuation with their power, scale, and dynamism. Whether through experience or because I’m getting on in years, I have moved from nearer the former to nearer the latter. But this chapter won’t seek to pass judgement, rather to sketch out what we need to know to understand TNCs as a system, their history and incentives, and the range of their behaviour.

Some history

The East India Company, established in 1600 with a trading empire that encircled the globe, was the mother of modern TNCs.7 While its imports of spices, textiles, and teas wrought a lifestyle revolution in the UK, the company became a byword for corporate malpractice and general skulduggery, conquering nations and ruling over millions with its private army. When China tried to stop the firm from flooding the country with smuggled narcotics, two Opium Wars ensued.

The East India Company pioneered the cycle of corruption, bubbles, and bail-outs that has been an all-too-frequent feature of the corporate landscape in recent years. It also launched the shareholder model of corporate ownership, which allowed companies to burst beyond the bounds set by family wealth and led to an explosion of new corporations in Europe and the US in the last third of the nineteenth century.8

(p.154) That was when recognizably modern TNCs spread across the developing world, initially concentrated on transport, building railways to facilitate the extraction of raw materials and the marketing of their manufactures. Soon, TNCs expanded into communications (telephones, radio, movies), energy (oil, gas, electricity),9 and subsequently manufacturing.10

The first wave of TNC expansion peaked just before global markets fragmented in the Great Depression and the Second World War. In the post-war era, TNCs expanded again, even though the larger developing countries in Latin America and later Africa placed limits on their operations in order to protect nascent local industry. Many countries nationalized industries, making TNCs much more wary of investing.11

In the wake of the oil shock of the 1970s and the debt crisis that followed, developing-country governments began relaxing restrictions as they competed to attract foreign investment, setting off a renewed wave of TNC expansion. Manufacturing and extractive industries led the way, but the wave really took off in the 1990s in services like finance, management consultancy, tourism, hotels, and fast food. As of 2014, services accounted for 63 per cent of global foreign direct investment, more than twice the share of manufacturing (26 per cent); the primary sector (farms, mines, gas, and oil) accounted for less than 10 per cent.12

The past thirty years has also seen the rise of new TNCs from emerging economies in South and East Asia and Latin America. In (p.155) 2013, southern TNCs held assets of $460 billion, compared to the $858 billion in assets held by their northern counterparts.13

In 2011, nine of the top ten African telecommunications companies were from other developing countries.14 According to the UN, ‘developing Asia’ (i.e. excluding Japan) now invests abroad more than any other region.15 Compared with their developed-country counterparts, more southern TNCs are state- or family-owned and more are based in the primary sector or resource-based manufacturing, such as iron, steel, and cement.16 Developing-country TNCs make greater use of ‘intermediate’ technologies that are more labour intensive and so create more jobs.17 Like their northern counterparts, their performance on social and environmental responsibility varies widely.

While China’s growing investment in extractive industries in Africa (and its less publicized surge in Southeast Asia and Latin America) is well known, Chinese companies have also taken on a significant number of infrastructure projects deemed too risky by European or US firms.18 In Sierra Leone in 2005, within two years of the end of a (p.156) bloody civil war, China was already investing $270 million in hotel construction and tourism.19

Southern TNCs have also become major investors in northern economies. In the UK, India’s Tata Steel now owns Corus while Tata Motors owns Jaguar; Brazil’s Vale mining conglomerate bought Canada’s second largest mining company, Inco, in 2006; Mexico’s dynamic cement company Cemex has built a global network through mergers and acquisitions. Chinese companies’ attempts to buy US firms have provoked a nationalist backlash on several occasions.

The rise of southern TNCs challenges activists’ traditional approach to advocacy. These firms seem less susceptible to threats to their brands, and the family-owned ones are not susceptible to shareholder pressure. Later in this chapter I look at what a new model of influencing might look like.

Most modern TNCs bear little resemblance to the vertically integrated corporations of yesteryear, where, for example, United Fruit directly owned and managed its banana plantations and Ford its factories. Today TNCs sit atop complex ‘global production networks’, coordinating a web of interconnected firms in multiple locations, through a mind-boggling combination of subcontracting, outsourcing, offshoring, partnerships, and mergers and acquisitions. Global production networks accounted for 80 per cent of international trade in 2012.20

The political significance of TNCs is hotly disputed. The acronym ‘TNC’ is actually somewhat misleading, since few are genuinely transnational: most retain a high degree of linkage to their home countries, particularly in terms of where decision-making power lies and where the high-value end of research and design is located. That home identity shapes their corporate cultures, sometimes leading to hybrid (p.157) forms: when Japanese TNCs set up a factory in Europe, they blend Japanese and European work practices.21 And sometimes causing friction: when I visited the Pacific island nation of Vanuatu, local people expressed annoyance that Chinese construction companies not only import Chinese workers, but those workers even grew their own vegetables, minimizing the benefits to local businesses.22

Nevertheless, the top echelons of TNCs (not unlike the top positions at big NGOs) are staffed by an international elite that is largely insulated from local environments. They shop at the same luxury boutiques, send their kids to international schools, and move effortlessly around the globe in a business class bubble (jealous? me?). In the 1980s, a hot topic for leftists across Latin America was whether their countries still possessed a truly ‘national bourgeoisie’, or whether the region’s elites had become so Americanized and rootless that they would rather exploit their compatriots and shop in Miami, than build flourishing economies at home. That question is still an open one everywhere, as far as I can tell.

How TNCs drive change

TNCs drive change both through their normal business operations, and through their behaviour as political players. Using a ‘poverty footprint’ methodology,23,24 Oxfam sought to measure the economic impact of Unilever’s (a producer of consumer goods that owns brands (p.158) like Marmite and Domestos) presence in Indonesia. The study arrived at some unexpected conclusions: more than half of the 300,000 jobs that Unilever’s operations generate in Indonesia are in the company’s ‘downstream’ distribution and retail chain, and only about one-third in the part that makes inputs for the company’s products (campaigners’ usual focus).25 Although direct employment was better paid than most, in the less formal parts of the company’s activities, away from the comparatively ordered world of permanent jobs, wages, conditions, and the right to organize were found to be weakest.

Beyond the direct impact of a company’s capital investment, jobs, and taxes (when they pay them), there can be spill-over effects on the local economy from training of local staff and the introduction of new technology, both of which can influence local firms, especially when the TNCs source their materials and services from local suppliers.

Many TNCs provide products and services that people living in poverty not only want, but can use to improve their lives.26 Southern-based companies have proven adept at producing and marketing products for poorer consumers. In Tanzania, the Swahili name for cheap motorbike rickshaws is ‘bajaji’, a corruption of Bajaj, the Indian firm that makes them. When India’s Tata Motors launched its $2,500 ‘people’s car’ in 2008 it followed in the footsteps of the Volkswagen Beetle or the Model T Ford, promising to bring automobiles to new generations of consumers in the rest of the developing world.27

TNCs not only follow consumers’ desires; they also shape them, often to resemble those of the former colonialist powers (think McDonald’s) and sometimes in ways that are controversial. Perhaps the most notorious is Nestlé’s aggressive effort to persuade mothers in (p.159) poor countries to abandon breast-feeding in favour of formula milk, despite the expense and the risks arising from dirty water. It sparked a global boycott28 that has done lasting damage to the company’s previously impressive reputation.

While many firms are diligent in obeying the law and treating their employees and customers with respect, others abuse their power, causing lasting damage to the environment, public health, and local politics. Some undermine the potential for development in a less visible way, by moving operations from one jurisdiction to another to dodge taxes and state regulation. Organizations like Global Witness publish regular exposes of more blatant forms of corporate malpractice. The top stories on its website in January 201629 included: allegations of TNC bribery in Nigeria’s notorious oil and gas sector; an exposé on TNC purchases of ‘conflict minerals’ in the Democratic Republic of the Congo; and ‘How Southeast Asia’s biggest drug lord used shell companies to become a jade kingpin.’ World Bank figures suggest that $1 trillion in bribes is paid annually by international companies to secure lucrative deals.30

TNCs as influencers

In early 2016, I interviewed Paul Polman, the CEO of Unilever about his approach to change. Polman is active on social and environmental issues well beyond the boundaries of his company, which is why he spared the time to talk to me. He told me that his firm’s business model calls for each individual brand to reach ‘mission targets’. ‘A brand like Domestos’, he said, ‘wants to build 25 million toilets. (p.160) We want to reach five million people in providing livelihoods. We want to improve the lives of 5.5 million women in our value chain. We want to reach one billion people with health and wellbeing—things like handwashing.’

Polman’s view of how change happens echoed many of the arguments in this book:

The job of a CEO has totally changed. You have to be able to work in partnership with national governments and others. I don’t want to work with just businesses any more. We discovered quickly that we can’t do everything alone. We need to use the size and scale of Unilever to get transformational (i.e. systemic) change. If you want to move the world out of deforestation or transform the tea or palm oil market, you have to focus on the right 30 players. You get a flywheel going,31 with all these alliances, getting everyone—governments, business, NGOs—together.

Polman, a natural systemic thinker, emphasized the importance of feedback loops and critical junctures:

If you’re smart you can predict maybe one out of ten things, but in the other nine something happens to which you need to react, new competitors, a natural disaster, a new law is passed—things that happen outside of your control. And the world is getting more volatile everywhere. What you have to do as a company is have quick feedback loops from the market that pick up these signals, and a structure that is very agile and externally focussed. So we have delayered and decentralized to the countries. It’s the supertanker to speedboat transition, while you are moving.

Polman’s commitment and idealism contrasts with the suspicion in which ‘big business’ is widely held. TNCs’ long track record of blocking progressive changes or actively pursuing regressive ones has made many activists cynical about the professed desire of some CEOs to address the world’s problems. Corporations usually welcome the creative bit of the market’s ‘creative destruction’, the constant evolutionary churn as new ideas, products, and companies rise and fall, since it provides the raw material companies can turn into global (p.161) empires. (I still remember the first time someone recommended Google’s nice clean search engine homepage.) But they do everything they can to avoid the destruction part, including a plentiful resort to ‘rigged rules and double standards’, in the words of one Oxfam report.32

Corporations have lobbied extensively for government handouts, excessive patent protection, exclusive contracts, tax breaks, trade rules, and other state interventions that favour their bottom lines (the net profit or loss on a company balance sheet). As one financial executive admitted to The Wall Street Journal at the time of the Latin American debt crisis of the 1980s, ‘We foreign bankers are for the free market system when we are out to make a buck and believe in the state when we’re about to lose a buck.’33

As the banker implied, when it comes to specific regulation that restricts their freedom to operate as they please, most TNCs fight tooth and nail to block it. From laws that protect minimum wages, health and safety or freedom of association to rules on product quality, corporate governance or consumer protection, corporate stonewalling has been nearly universal. In 2015 the erstwhile plucky outsider, Google, was reported to have enlisted members of the US Congress (whose election campaigns the company funded) to pressure the EU to drop a €6 billion antitrust case against it, while it raised seven-fold its EU lobbying budget to €4 million a year.34

Often individual TNCs opt to keep their heads down and leave the dirty work to business associations (organizations founded and funded by businesses that operate in a specific industry). In the words of Unilever boss Paul Polman, when it comes to climate change lobbying ‘the disparities between trade associations and individual (p.162) companies are huge. The companies say “Yes yes yes”, but the trade associations say “No no no”. The oil companies are notorious for it.’35

Relative bargaining power shapes the nature of the deals struck between particular governments and TNCs. If the host country has something the TNC wants (natural resources, markets, skilled labour, access to export markets), the government’s hand is stronger and it will be able to insist on benefits for local people and firms. The more desperate the government, the harder the bargain a TNC can drive.

Because corporations want reliable infrastructure, a healthy, educated workforce and sizable domestic markets, direct investment is heavily concentrated in richer countries. These are also the ones that can bargain more effectively: Brazil, China, India, Mexico, and the Russian Federation received 52 per cent of foreign direct investment (FDI) inflows to developing countries in 2014.36 By contrast, the poorest states are easily bullied with threats of moving somewhere else. The painful paradox is that the more a government needs foreign investment, the worse the deal it is likely to get. However, the balance of power tends to shift over time: a TNC is most powerful in initial negotiations, less so once it has invested capital and leaving becomes more expensive.

International institutions (discussed in Chapter 7) often intervene to set the rules and shape the balance of power between states and TNCs. While the relatively weak UN agencies provide training and advice to buttress state negotiating and monitoring capacity, the World Bank and IMF attach riders to their loans that protect TNCs from what they view as interference by the state. Loan conditions have required such measures as eliminating capital controls and export taxes, unilaterally reducing tariffs and privatizing state companies and public services. Since the 1990s, a web of bilateral investment treaties and regional and global (WTO) trade agreements has further constrained states’ ability (p.163) to regulate TNC behaviour, for example, by proscribing the basic elements of industrial policy.

Corporate lobbying behind closed doors is a key driver of the way trade agreements have evolved. On one of my first visits to the WTO, I burst out laughing when one besuited gent introduced himself in a meeting with officials by saying ‘I’m from British Invisibles’. It turned out he was speaking for a powerful association of finance firms that was an extremely effective lobby; true to its name, the general public was largely oblivious of its existence.

One of the most vigorous lobbyists at both global and national levels is the pharmaceutical industry. In the USA, pharmaceutical companies employ 3,000 lobbyists and spend millions to influence national laws and the US position in trade negotiations.37 In the Uruguay Round that led to the creation of the WTO in 1995, the pharmaceutical lobby steamrollered through an agreement on intellectual property whose implications were unclear to many of those involved. Only after it came into effect did developing countries realize they had signed up to a major extension of corporate monopolies and high-priced drugs that would amount to a death sentence for thousands of sick and dying people.

One huge controversy was over access to medicines for HIV/AIDS, especially in South Africa, the epicentre of the pandemic in the early 2000s. When the Indian generic drug firm CIPLA offered to supply AIDS medicines at a fraction of the cost charged by the big companies, South Africa’s Treatment Action Campaign, MSF and Oxfam pressed for action and won a new South African law allowing the importation of the cheaper generic medicines. Then in 2001 nearly three dozen international pharmaceutical corporations precipitated a PR disaster by suing to overturn it, prompting an upsurge of activism that gave them such a public battering they were forced to drop the case.38

(p.164) However, pharmaceutical companies have not given up. They continue to push countries to accept more stringent intellectual property rules that further restrain access to medicines. The opportunities for what economists call ‘rent seeking’ are colossal. In 2015, the company Turing became notorious when it raised the price of Daraprim, a 62-year-old treatment for a dangerous parasitic infection, to $750 (£488) a pill from $13.50 (£8.79). The medicine once sold for $1 a pill.39

How do TNCs change?

Activists seek to influence TNCs with strategies that run from cooperation to confrontation. At one end of the spectrum, NGO types sit with corporate executives, academics and government officials on a proliferating number of ‘multistakeholder initiatives’ on pressing problems like climate change or food security (the hyperactive Paul Polman seems to be on all of them). At the other, activists use litigation or public shaming to oblige governments to act. In between these poles lies the burgeoning realm of lobbying and campaigns to influence particular aspects of corporate behaviour.

According to Erinch Sahan, one of Oxfam’s private sector advocates40: ‘What I’ve learned is this: build the case for why this particular change is inevitable. Make corporates worry that they’re on the wrong side of history. We alone don’t have the gravitas to do this. So we try and make sure companies hear from pension fund managers and industry peers, from shareholders at their AGMs, and hundreds of thousands of their consumers are interested enough to contact them on social media. The surprising number of angles they hear from (p.165) generates questions: “Are we missing something here? Has this become a mainstream issue?”.’

Such approaches can be effective, but as Erinch suggests, more weighty pressures are exerted by the web of regulation, relationships and responsibilities in which TNCs are immersed. Activist organizations are players in this web—known collectively by the unfortunate term ‘stakeholders’, which always makes me think of people trying to kill a vampire—but it also includes shareholders, customers, the state and other companies.

Above all, corporate executives are subject to the bottom line; if the company loses money, it will go bust or be bought out. That brutal discipline can be a source of dynamism and innovation, yet it makes businesses inherently conservative. As business strategist Simon Levitt argues, TNCs’ default mode is to defend the status quo or at least delay change as long as possible.41 The greater their capital investment (e.g. oil companies’ fixed investments in drilling rigs), the more they will resist change.

Levitt identifies four factors that corporations evaluate before supporting progressive change: protecting their brand (especially important for consumer goods companies); the economic cost; the likelihood of impending change in government policy (companies may decide to jump before they are pushed); and whether the firm stands to gain relative to its current or future competitors. Beyond such cost/benefit calculations, leadership at CEO and senior management levels clearly matters in overcoming inertia and inspiring a commitment to change across the company.42

These factors are weighed in light of longer-term tidal shifts. Technology is the most obvious: the expansion of TNCs to their present pre-eminence has been driven by successive waves of technological (p.166) progress in transport, communications and production that first allowed them to trade across geographical distances, then create a global assembly line for their products, and most recently to manage complex global production networks. Economic development is another, as TNCs increasingly see China, India and others as lucrative markets, rather than simply enormous reservoirs of cheap labour.

Other long-term shifts are more subtle. The very idea of what a corporation should be and do has evolved over time. In a 1970 article entitled ‘The Social Responsibility of Business is to Increase its Profits’, economist Milton Friedman accused promoters of corporate social responsibility of ‘preaching pure and unadulterated socialism.’43 Few companies today would agree. The norms governing corporate behaviour (much like human behaviour) have evolved, partly through peer pressure among executives. At the annual gathering of corporate titans in the Swiss skiing resort of Davos, ‘masters of the universe’ swap notes and influence each other, providing an annual snapshot of a global conversation to which ordinary mortals are seldom admitted.

Though Friedman’s words now seem to emanate from a bygone age, shareholders and owners still hold the most power to shape a company’s actions. That may be why some of the more progressive companies on social and environmental issues are owned by families or foundations that are able to take a longer-term view than investors seeking to maximize quarterly returns.44

In companies where workers have managed to organize, trade unions can exert significant influence, especially regarding wages and working conditions. However, unions have struggled to ‘transnationalize’ along with their employers, linking up workers in different (p.167) countries and organizing within global production networks characterized by subcontracting and outsourcing.

Corporations with brand names are highly sensitive to the views of consumers, since bad publicity can quickly destroy brand value painstakingly built up over decades. Activists have found success with high-profile campaigns, such as the Nestlé boycott noted above, and with more nuanced engagement, in which civil society organizations use the threat of consumer pressure to persuade companies to improve their social and environmental record.

Why do different TNCs behave so differently?

Geoff, a senior manager in a major UK supermarket, wandered over to me after the meeting with a startling proposition. ‘Do you think you NGOs could campaign a bit harder against us? My board is thinking of cutting my budget.’ I sat with Geoff on the board of the multi-stakeholder Ethical Trading Initiative to promote labour rights and decent working conditions in his and other firms’ global supply chains. It seems he needed a credible threat (and some dark arts) to keep his company engaged.

That conversation took place in the early 2000s, during a wave of ‘corporate social responsibility’ (CSR) that has since spread across much of the private sector. CSR is controversial: denounced as corporate spin by opponents, it is held up by supporters as a market-friendly alternative to inefficient government regulation. I was definitely in the supporter camp.

One basic lesson I learned at the ETI was not to lump all corporations together. The corporate world is a system, with positive (and negative) deviants, companies that are unusually progressive and others that are the exact opposite. Differences among TNCs often hark back to the combination of institutions, ideas and interests that underlie inertia, as discussed in Chapter 2. The nature of a firm’s business is critical (arms, tobacco or oil companies are uniquely regressive). But within a sector, an individual company’s history and (p.168) culture and the nature of its leadership all weigh heavily in how it reacts to pressure from the public, national governments, international bodies or competitors.45

Even within the ETI, there were obvious leaders and laggards (I won’t start naming names), and the trick was to use the former to put pressure on the latter, since nothing galvanizes action like being shamed in front of your peers and rivals.

Distinguishing between leaders and laggards is also a staple of public campaigns, which make use of brand reputation, corporate rivalry and public pressure to influence corporate behaviour. Oxfam’s ‘Behind the Brands’ campaign produced a league table assessing the agricultural sourcing policies of the world’s ten largest food and beverage companies: (in alphabetical order) Associated British Foods (ABF), Coca-Cola, Danone, General Mills, Kellogg’s, Mars, Mondelez, Nestle, PepsiCo and Unilever. The results surpassed all the organizers’expectations: Between February and October 2014, all of the Big Ten published new policies or assessments relating to the issues covered by the campaign.46 According to Oxfam’s Penny Fowler, the critical success factors included: creating a race to the top between the leading companies, balancing stick and carrot (challenging companies but praising them when they moved; plus insider engagement on solutions), and (echoing Erinch Sahan’s point) making sure that the companies didn’t just hear from Oxfam but also from consumers, investors/pension fund managers, industry peers. Strong and transparent research and methodology also helped, as did filling a policy gap for the companies by setting out a social sustainability framework for agricultural sourcing (which was previously lacking).47 (p.169)


The world of TNCs is seething with expressions of power: one major corporate CEO who preferred not to be quoted in this book recalled how sitting next to the British Prime Minister on a long-haul flight allowed him to successfully lobby for a change of legislation that affected his company—an expression of ‘hidden power’ unavailable to the average activist. TNCs also have invisible power in the extraordinary influence on consumers exerted by brands and the values they claim to embody, as well as the apparently mesmerizing authority of giant corporations in the eyes of policy makers.

TNCs use that power in a system that is growing ever more complex. In a world with more TNCs from more countries, the traditional campaigning approach of targeting large TNCs based in Europe or North America, risks being wrongfooted. Yet many activists have upped their game, shifting their focus from addressing individual companies and their supply chains, toward creating an enabling environment for change by addressing the incentives that motivate companies.

The to-do list is long: overhauling financial markets to end the culture of short-termism that undermines attempts to build sustainability; increasing transparency and reporting requirements to keep corporations from buying politicians and parties; making sure the polluter pays on issues such as carbon emissions; clamping down on tax dodging. For any of these initiatives to prosper, coordinated action between northern and southern activists, and alliances with progressive governments, not to mention exploiting differences among companies, will be essential.

It is not enough for activists to declare ourselves either ‘anti-corporate’ or ‘pro-business’. Whatever the starting point, we need to learn to dance with the TNC system by understanding the traditions and mindsets of particular companies, the new variants, positive deviants and critical junctures that dot the corporate landscape, and the variety of ways corporations can be influenced.

(p.170) As for me, perhaps I’ll have to beg forgiveness from my more anti-capitalist colleagues, because my time at the Ethical Trading Initiative gave me a lasting respect for the dynamism and seriousness of some of the people who run TNCs. Suited and booted in a central London cafe, I once tried to recruit a new garment retailer to join the initiative. I deployed my best corporate speak, stressing the business case for signing up—you can recruit better people and keep them longer, you’ll manage your supply chain better, you’ll avoid damaging your reputation and brand. The exasperated executive interrupted me: ‘Forget all that, I just want to make the world better for my grandchildren’. I still remember my sense of embarrassment and shame.

Further Reading

Bibliography references:

A. Chandler and B. Mazlish, eds., Leviathans: Multinational Corporations and the New Global History (Cambridge and New York: Cambridge University Press, 2005).

G. Cook & J. Johns (eds), The Changing Geography of International Business (London: Palgrave Macmillan, 2013).

A. Flohr et al, The Role of Business in Global Governance: Corporations as Norm-Entrepreneurs (London: Palgrave Macmillan, 2010).

G. Jones, Multinationals and Global Capitalism (Cambridge: Cambridge University Press, 2005).

R. Locke, The Promise and Limits of Private Power: Promoting Labor Standards in a Global Economy (Cambridge: Cambridge University Press, 2013).

N. Robins, The Corporation that Changed the World: How the East India Company Shaped the Modern Multinational, 2nd ed. (London: Pluto Press, 2012).

J. Ruggie, Just Business: Multinational Corporations and Human Rights (New York: WW Norton, 2013).

L. Stout, The Shareholder Value Myth: How Putting Shareholders First Harms Investors, Corporations, and the Public (Oakland: Berrett-Koehler Publishers, 2012). (p.171)


(1) United Nations Conference on Trade and Development (UNCTAD), ‘Web Table 34. Number of Parent Corporations and Foreign Affiliates, by Region and Economy, 2010’, www.unctad.org/sections/dite_dir/docs/WIR11_web%20tab%2034.pdf.

(2) ‘Value added’ is the amount by which the value of an article is increased at each stage of its production, exclusive of initial costs.

(3) United Nations Conference on Trade and Development (UNCTAD), World Investment Report 2015. Reforming International Investment Governance (Geneva: United Nations, 2015), p. ix and p. 18.

(4) David Korten, When Corporations Rule the World, 2nd edition (Bloomfield and San Francisco: Kumarian Press, Inc. and Berrett-Koehler Publishers Inc., 2001).

(5) Duncan Green, ‘The World’s Top 100 Economies: 53 Countries, 34 Cities and 13 Corporations’, From Poverty to Power blog, 19 October 2011, http://oxfamblogs.org/fp2p/the-worlds-top-100-economies-53-countries-34-cities-and-13-corporations/.

(6) ‘Turnover’ is the amount of money taken in by a business in a certain period.

(7) Nick Robins, The Corporation that Changed the World: How the East India Company Shaped the Modern Multinational, 2nd edition (London: Pluto Press, 2012).

(8) Bruce Kogut, ‘Multinational Corporations’, in International Encyclopedia of the Social & Behavioral Sciences, edited by N. J. Smelser and Paul B. Baltes (Oxford: Pergamon), pp. 10197–204, https://www0.gsb.columbia.edu/faculty/bkogut/files/Chapter_in_smelser-Baltes_2001.pdf.

(9) Alfred Chandler and Bruce Mazlish, eds., Leviathans: Multinational Corporations and the New Global History (Cambridge and New York: Cambridge University Press, 2005).

(10) Alfred Chandler and Bruce Mazlish, eds., Leviathans: Multinational Corporations and the New Global History (Cambridge and New York: Cambridge University Press, 2005), p. 20.

(11) Alfred Chandler and Bruce Mazlish, eds., Leviathans: Multinational Corporations and the New Global History (Cambridge and New York: Cambridge University Press, 2005), p. 40.

(12) United Nations Conference on Trade and Development (UNCTAD), World Investment Report 2015. Reforming International Investment Governance (Geneva: United Nations, 2015), p. 12.

(13) UNCTAD, ‘Trends in outward investments by transnational corporations in 2013 and prospects for 2014–15’, 28 April 2014, http://unctad.org/en/pages/newsdetails.aspx?OriginalVersionID=729

(14) Top Ten largest telecoms companies in Africa, IT News Africa, 21 August 2012, http://www.itnewsafrica.com/2012/08/top-ten-largest-telecoms-companies-in-africa/.

(15) Other strong economies like Taiwan and northern Italy have relied more on networks of SMEs, and failed to produce many global companies. United Nations Conference on Trade and Development (UNCTAD), World Investment Report 2015. Reforming International Investment Governance (Geneva: United Nations, 2015), p. ix.

(16) United Nations Conference on Trade and Development (UNCTAD), World Investment Report 2006. FDI from Developing and Transition Economies: Implications for Development (Geneva: United Nations, 2006).

(17) Dilek Aykut and Andrea Goldstein, ‘Developing Country Multinationals: South-South Investment Comes of Age’, in Industrial Development for the 21st Century: Sustainable Development Perspectives (New York: United Nations, Department of Economic and Social Affairs, 2007), pp. 85–116.

(18) Deborah Brautigam, ‘China-Africa Post-Doctoral Fellowship Opportunity’, The China-Africa Research Initiative blog, 19 January 2016, www.chinaafricarealstory.com/.

(19) Mark Doyle, ‘Tourism Boost for Sierra Leone’, BBC News website, 7 May 2004, http://news.bbc.co.uk/2/hi/africa/3694043.stm.

(20) United Nations Conference on Trade and Development (UNCTAD), World Investment Report 2013. Global Value Chains: Investment and Trade for Development (Geneva: United Nations, 2013).

(21) Peter Dicken, Global Shift: Mapping the Changing Contours of the World Economy, 6th edition (London: Sage Publications Ltd, 2011), p. 122.

(22) Author field trip, Vanuatu, November 2015.

(23) Oxfam America, The Coca-Cola Company, and SABMiller, ‘Exploring the Links Between International Business and Poverty Reduction: The Coca-Cola/SABMiller Value Chain Impacts in Zambia and El Salvador’, www.oxfamamerica.org/static/oa3/files/coca-cola-sab-miller-poverty-footprint-dec-2011.pdf.

(24) Rachel Wilshaw, with Erinch Sahan, Gerry Boyle, Katie Knaggs, and Neil McGregor, Exploring the Links Between International Business and Poverty Reduction: Bouquets and Beans from Kenya (Oxford: Oxfam International, 2013), http://policy-practice.oxfam.org.uk/publications/exploring-the-links-between-international-business-and-poverty-reduction-bouque-290820.

(25) Jason Clay, ‘Exploring the Links Between International Business and Poverty Reduction: A Case Study of Unilever in Indonesia’ (Oxford: Oxfam GB, Novib Oxfam Netherlands, and Unilever, 2005).

(26) Coimbatore Prahalad and Stuart Hart, ‘The Fortune at the Bottom of the Pyramid’, strategy+business no. 26 (2002): pp. 1–14.

(27) ‘World’s Cheapest Car Goes on Show’, BBC News website, 10 January 2008, http://news.bbc.co.uk/2/hi/business/7180396.stm.

(28) ‘Nestlé-Free Zone’, Baby Milk Action website, www.babymilkaction.org/nestlefree.

(29) ‘Protecting Virunga National Park from Oil Companies’, Global Witness website, www.globalwitness.org/en/.

(30) Six Questions on the Cost of Corruption with World Bank Institute Global Governance Director Daniel Kaufmann, World Bank News and Broadcast, http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:20190295~menuPK:34457~pagePK:34370~piPK:34424~theSitePK:4607,00.html.

(31) Jim Collins, ‘Good to Great’, Fast Company, October 2001, www.jimcollins.com/article_topics/articles/good-to-great.html.

(32) Kevin Watkins and Penny Fowler, Rigged Rules and Double Standards: Trade, Globalisation, and the Fight Against Poverty (Oxford: Oxfam International, 2002).

(33) The Wall Street Journal, 24 May 1985.

(34) Simon Marks and Harry Davies, ‘Revealed: How Google Enlisted Members of US Congress it Bankrolled to Fight $6bn EU Antitrust Case’, The Guardian, 17 December 2015, www.theguardian.com/world/2015/dec/17/google-lobbyists-congress-antitrust-brussels-eu.

(35) Author Interview with Paul Polman, CEO of Unilever, January 2016.

(36) Calculated from UNCTAD, World Investment Report 2015, Annex table 1 http://unctad.org/en/PublicationsLibrary/wir2015_en.pdf

(37) Joseph Stiglitz, Making Globalization Work (London: Allen Lane, 2006).

(38) E.B Kapstein & J.W. Busby, Aids Drugs for All: Social Movements and Market Transformations, (Cambridge: Cambridge University Press, 2013).

(39) Reuters, ‘Martin Shkreli Announces Turnaround on 5,000% Price Rise for Drug’, The Guardian, 23 September 2015, www.theguardian.com/business/2015/sep/23/us-pharmaceutical-firm-to-roll-back-5000-price-hike-on-drug.

(40) Erinch Sahan, ‘What Makes Big Corporations Decide to Get on the Right Side of History?’, From Poverty to Power blog, 26 February 2014, http://oxfamblogs.org/fp2p/what-makes-big-corporations-decide-to-get-on-the-right-side-of-history/.

(41) Simon Levitt, ‘Under What Conditions do TNCs Lobby for Change?’ (mimeo, undated).

(42) Simon Levitt, ‘Under What Conditions do TNCs Lobby for Change?’ (mimeo, undated).

(43) Milton Friedman, ‘A Friedman Doctrine – The Social Responsibility of Business is to Increase Its Profits’, The New York Times Magazine, 13 September 1970.

(44) Erinch Sahan, ‘How Businesses Can Save the World (When Their Shareholders Aren’t Breathing Down Their Neck)’, From Poverty to Power blog, 9 April 2015, http://oxfamblogs.org/fp2p/how-businesses-can-save-the-world-when-their-shareholders-arent-breathing-down-their-neck/.

(45) Dana Brown, Anne Roemer-Mahler and Antje Vetterlein, ‘Theorising Transnational Corporations as Social Actors: An Analysis of Corporate Motivations’, Working Paper No. 61 (Copenhagen: International Center for Business and Politics, Copenhagen Business School, 2009).

(46) Transparency, gender rights, farm workers and small-scale producers in the supply chain, land rights and access, water rights and access and sustainability, reducing green house gas emissions and helping farmers adapt to climate change.

(47) Penny Fowler, email, January 2016.