3.4.3 Can MNCs be controlled

Question 1

pressure groups

Answer 1

Attempt to influence public policy and gov legislation regarding their concerns

Question 2

why are MNCs hard to control

Answer 2

• No world gov to keep them accountable
• EE especially lack legal institutions and regulations needed to protect both consumers and employees
• Need a combination of factors to keep them in control
• Public opinion and pressure groups and Gov intervention

Question 3

political and legal control of MNCs

Answer 3

• Politicians are aware of MNCs downsides, and countries with strong legal systems and labour law can take action
• ILO → global standards for working conditions
• OECD’s guidelines on multinational enterprises provides advice for developed countries govs
• Trade unions vary in strength but can protect members and hold MNCs to account if they do not comply to established regulations

Question 4

why are political and legal influences not always affective when dealing with MNCs

Answer 4

• Size and power of host matters → china vs zambia
• Some countries need FDI due to lack of internal investment and will overlook low pay/poor working conditions
• Govs that have a weak position may choose to overlook MNCs damage
• Legislations: aim to rectify damage after event, are not effective in preventing deaths/environmental damage
• Large MNCs can pay fines easily with little damage To them, and hard to enforce a foreign countries law, like with union carbide in India
• Size of MNC → larger MNCs can be less affected by outside pressure, and can afford publicists, PR agents and legal teams
• Importance of MNC to host country → smaller or emerging economies may be reluctant to confront a company that may be important to it both economically and in terms of employment
• National objectives may override concern for local communities
• Trade unions may be weak or the country may have weak regulations

Question 5

pressure groups and social media to control MNCs

Answer 5

• Eg Oxfam and improving working conditions
• Social media has given PG opportunities to reach out into wider communities→ helps pressure groups stay connected to supporters
• Also mobilises public opinion and focuses attention on specific situations

Pressure groups and the internet
- Smaller pressure groups have little resources and rely on shocking and attention grabbing tactics eg viral adverts
- Work if firm is consumer facing or have ample completion that threaten to take away their market share eg nestle versus Cadbury, who are more ethically responsible in comparison

Question 6

what does the impact of PG and social M depend on when dealing with MNCs

Answer 6

• Strength of public opinion and level of public awareness → number concerned with the issue affects degree of influence public opinion has
• How much public opinion matters to MNC → consumer facing firm is more likely to be influenced by protests and boycotts than one in a supply chain
• Social media and internet can be used by business to promote themselves
• Some pressure groups are stronger than others and campaigns may be more successful

Question 7

pressure groups and self regulation

Answer 7

• MNCs think about their impact
• Some attempt to limit negative impact they have on weaker individuals
• Some MNCs make a show and set up program that have little lasting impact
• CSR has made MNCs concerned for their images
• Some care genuinely, some care about their image to avoid scandals
• Some do not care and put in minimal effort → comply with the law at the very leats

MNCs subcontracting to local suppliers
- Cheaper than setting up local production facilities
- Cuts costs but suppliers employees have low pay

Question 8

why is it good for MNCs to self regulate

Answer 8

• Preserves public pr and keeps competitive advantage
• Csr has high costs in short run but less legal and mitigation costs in the long run
• Reputation and stakeholder relationships (eg supply chain) improve, increasing productivity and revenue

Question 9

summary of factors that can control MNC behaviour

Answer 9

• Public opinion
• Pressur groups → influence political and legal process, can organise direct action, protests etc
• Social media and the internet → speed up flow of information and make group actions more effective
• Media → mount campaigns and mobilise public behaviour
• Self regulation → code of conduct made internally
• Gov regulation and control → set up regulatory bodies or insist MNCs join joint venturs (like in china)
• Legal enforcement —> legal codes that put MNCs subject to proesuction if broken
• Shareholder groups → can affect MNC behaviour through protests as they own part of the business