4.4.3 - Controlling MNC's

Question 1

How can political influence control MNC’S

Answer 1

• Governments can apply pressure to attempt to change the behaviour of MNCs
• For example MNCs have been avoiding paying tax in the UK
• Since 2012, when the UK Chancellor at the time, put tax avoidance on the G20 agenda, the UK has helped reform international tax rules and led the way with action to prevent corporations from paying little or no taxes

Question 2

What are the Benefits of the use of political influence to control MNC activity

Answer 2

• MNCs may wish to get political approval from the governments of the host nations, this may help trade and setting up in a new country
• If the MNC gains political approval they may find trading smoother and less troublesome

Question 3

What are the Drawbacks of the use of political influence to control MNC activity

Answer 3

• Politicians can be bribed, not such an issue in the UK but quite common in other countries
• Some MNCs bring so much wealth and employment to an economy that a weaker government might ignore unethical activities, for example:
• Brazil
• Nigeria
• Mali

Question 4

What are legal controls to control MNC activity

Answer 4

• If a country introduces laws to reduce pollution or protect children from child labour then this will all cost the MNC money to improve their practices
• Quite often the MNC may ignore or flout these regulations
• Prime example is the Deepwater Horizon where the US government legally made BP pay compensation to Mexicans affected by the disaster (see video at end of PowerPoint)

Question 5

What are the Benefits of the use of legal controls to control MNC activity

Answer 5

• Laws can be passed at any point to control the actions of a MNC which are already established in a country
• Laws mean that consumers have some rights against the MNC as in the McLibel case
• However even if laws are introduced they may still be broken by the MNCs

Question 6

What are the Drawbacksof the use of legal controls to control MNC activity

Answer 6

• The MNC may simply move production to a country where there are less laws and restrictions
• The host nation does not want to lose the economic input of the MNC so this deters laws being passed
• MNCs can afford expensive legal defence of any challenge

Question 7

How can pressure groups control MNC activity

Answer 7

• Pressure groups are organisations which campaign for changes in the law or new legislation in specific areas.
• Pressure groups can have a strong influence on public opinion and behaviour of MNC, if they want to avoid a PR disaster
• Pressure groups such as
• Greenpeace
• WWF
• Friends of the Earth
• War on Want

Question 8

What are the benefits of using pressure groups to control MNC activity

Answer 8

• Pressure groups can raise public awareness of MNCs activities in host countries
• Pressure groups can create PR problems for MNCs peacefully, which can lead to a change in their behaviour

Question 9

What are the drawbacks of using pressure groups to control MNC activity

Answer 9

• The pressure group needs to be large and organised if it is to have any impact on changing the activities of the MNCs
• The size and wealth of the largest MNCs mean they can easily counter or quieten pressure group activity

Question 10

How can social media be used to control MNC activity

Answer 10

• Tools such as Twitter can see the swift mobilisation of public opinion and hence pressure on MNCs to change their behaviour
• Social media can turn a product scare into a national crisis within hours
• Social media networks can be used to orchestrate a boycott which will affect the sales and reputation of the MNC

Question 11

What are the Benefits of the use of social media to control MNC activity

Answer 11

• Social media can be a very powerful way to change the behaviour of MNCs
• For example twitter can put pressure on large corporations
• Trip Advisor has become a very powerful way for customers to alter policy, activity and services of large hotel chains

Question 12

What are the Drawbacks of the use of social media to control MNC activity

Answer 12

• Social media can only effect short-term change the Internet is a dynamic medium, fickle customers become bored easily and move on to the next scandal
• A MNC can just dust itself down and carry on with very little impact on their activities