The news that the Swiss company Nestle is bidding $3.5 billion for Hershey is no doubt making some sentimentalists in the US bemoan the passing of a national icon into foreign ownership. There is, however, no place for romance in business.
For multinationals, national boundaries are relevant these days only in terms of marketing. Ownership no longer has anything to do with nationality. Swiss burghers may glow at the news that Nestle or the chemical company Novartis, is gobbling up yet more "foreign" assets, but, in truth, the only thing Swiss about these companies is that their head offices are in Switzerland and that they state their accounts in Swiss francs as well as US dollars. When we talk of multinationals these days, we are actually talking of corporations that are in fact "non-nationals", whose incomes, in quite a few cases, exceed the gross domestic product of some not-so-small countries.
On one level, multinationals are a clear boon. They bring economies of scale and efficiencies to production, establish local manufacturing plants and therefore create jobs. There is also skill and technology transfer. For instance, in banking, worldwide, many leading local financiers, central bankers or ministers of finance, have emerged from the training programs of an international, usually American, bank.
However, at another level, multinationals represent a long-term danger. They have armies of lawyers and accountants whose job is to ensure that the corporate pays as little tax as possible. Thus a complex network of companies and holding companies is created, purely to ensure that the bottom line earnings are booked in the lowest tax domain. This effectively means that a multinational’s top management can open or close the tap on a significant flow of tax earnings to governments.
In the multinational world, nothing is for nothing. The immense financial and job-creating power of these corporate behemoths can be, and indeed is, already used to bully even the "First World" governments into doing what they want. In the United States, given the huge contributions made by big business to election campaigns, it looks to the outside world as if the political process is always for sale to the highest bidder.
What is happening in the US is happening in many other places too. Multinationals have deep enough pockets to change the fortunes of a politician or even a country. Unfortunately, this immense and still growing power is being gathered in by organizations that are actually responsible to no one.
Talk of being responsible to shareholders is nonsense. The small shareholder has as much chance of changing the course of a multinational company as a floating cork has of diverting a supertanker. Even the big investment funds are not by themselves capable of cracking the whip in the normal course of events. Their chance only comes when a company runs into trouble and the funds agree to work in concert, against a multinational management. And some analysts argue that even this power is diminishing, as both multinationals and their diverse shareholder bases continue to grow.
Do we really face a future where real global power will be held by a few mighty multinationals responsible to absolutely no one?
