Employment Policy
Potential conflicts in employment policy may arise at numerous points, Foreign countries for example,, are often sensitive to lay-offs or retrenchments.
For example, Raytheon, an American-based company, invested about $25 million in Raytheon-Elsi SpA in Palermo, Sicily and owned almost 100 percent of it. The company in 1968 had about 1,000 workers making Cathode ray tubes for television sets and other electronic gear for the North Atlantic Treaty Organization, Faced with sizable losses in 1957 and 1968, the company tried to reduce operating expenses by laying 250 workers (about 25%) This action was intolerable to Italian government, which retaliated by seizing the factory and putting Palemo’s mayor in charge. Raytheon reacted by selling it out in 1969.
Foreign countries are also sensitive to the employment of home talent. Foreign corporations, generally are accommodating when unskilled workers are concerned, but are less willing to rely on local technicians when they can move their own skilled workers to the country, Many companies are also unwilling to rely on local managers. Nevertheless, pressures from foreign countries, and the obvious benefits to the company, lead corporations more and more to train and use local managers,
Changing Trade and production Controls
Host countries are anxiuos to encourage foreign investment that will lead to the home production of items hitherto imported. This has obvious benefits. Corporations have often entered foreign countries to produce ail end item requiring imports of components from the company’s home base, only to find, after a short period of operations, that a prohibition tariff has been placed on the importation of the components.
In 1947, for example Sears Roebuck and Company entered Mexico with a plan to import 80 percent of its merchandise for resale in Mexico. By 1954 however, 80 percent’ of its merchandise was manufactured locally because of the erection of new import walls.
Pressures From Competitors
The entry of MNC into a foreign country may, of course, be viewed with alarm by local, competitors, who in turn may put pressure on the host government to take action on their behalf.
This was the situation Sears Roebuck and Company encountered in Mexico. Local retailers found themselves unable to compete with Scars for employees as well as customers and tried (though unsuccessfully) to have foreign companies stopped from engaging in retail trade in Mexico.
Balance of Payment Problems
Balance of payment problems in host countries often lead to restrictions, many of which may create other problems. Regulation of profit outflows, for example, may deaden the enthusiasm for foreign investment in the host country, which in turn may cause a decline in general economic activity, on the other hand, if a local investment yields high profits which exceed the investment after a few years, the withdrawal of all profits may also have a depressing economic consequences.
In an effort to control their economies’, a natural objective, many countries develop a series of restrictions, on imports and exports, currency exchange, and capital outflow that impede the free movement of international goods and cash.
Balance of payments conflicts can from other decisions, a country may want the foreign-owned subsidiary to increase its exports so as to improve the balance of payments position. It may be however, that the costs of the subsidiary are higher than those of another subsidiary in another country.
The rational economic decision of the headquarters would be of course, to export the product from the second subsidiary. The first host country, how ever would consider, this decision contrary to its best interests and could retaliate by promulgating a law or decree that would adversely affect the operations of the MNC.
Foreign Control over Local Activities
Most nations of the world want their industries controlled by their nationals. This desire is based on the mixture of nationalism, national security and few of arbitrary decision-making in a far off land. Nigeria, for instance, for a long time has been concerned that large investments by British or American owned companies which might result in decision over which Nigeria had no control and which adversely affect Nigerians.
For this reasons Nigeria, decided to regain control by introducing the indigenization decree in Which Nigerians should own at least 60% share of the foreign companies with Nigerians holding same of the key positions in the company.
Another Good Example: Europeans have been concerned about American control of technology of local firms. Because of this, some Europeans have gone far as to prevent American companies from investing in certain industries.
They feel the American companies control basic industries like nuclear energy, electronics, especially microcircuits, and computers would block European research in these areas and lead, to technological dependence upon America.
All nations of the world want to grow economically, and therefore welcome foreign inflows of managerial know-how, capital and technology, but they complain if they think the.price is too high. The price to them not solely economic. It can be resistance to a feeling of dependence. The host country knows that the MNC has a base and it is
likely to follow the foreign policy of its home country, a policy the-host country may not accept. If one or few MNCs control most of the capital in a developing country, it has great potential influence over the entire society economic, social and political which may at least lead to apprehensions and at worst to serious conflict with the ways in which the leaders and peoples of the host country want to run their country and see it develop
Expropriation
Expropriation is naturally in deep conflict with interests of foreign investors when-experienced. Up till recent years, expropriation was, not a common practice. It still is not common in light of the world’s total business but it seems to be growing. In recent years, a wave of expropriation has taken place in Latin America.
In 1968, in Peru a group of military officers ousted the government and seized property of the International Petroleum Corporation valued $200 million. Bolivia seized installations of the American-Gulf Oil Company in 1969, Chile, seized American owned copper mines and the properties, of the International Telephone and Telegraph Company.
Charges of Imperialism
The awakening nations look on the foreign businessmen with fear and distrust as followers of old exploitative colonialism not easily forgotten. It is not difficult for the awakening nations to find current illustrations to support their fears. Since 1962, American investors have taken out of Latin American countries m money than they invested.
The same thing applied to British investors in African countries where they took more than their investments. This is called economic imperialism by these nations. Many less developed nations feel doomed to the role of supplying raw materials and cheap labour because they are denied the technology to develop into industrialized nation.
Their frustrations are levelled at the MMCs exporting their raw material and cheap labour. It is however true that foreign business investors in an under-developed countries often turn out to be handy scape goats in political and social crises.
How Can the conflicts be Reduced?
Clearly, one of the first imperative is for MNCs to act socially responsibly. For the MNC, as for corporations at home, however, the question is: what precisely are social responsibilities which they should pursue and how best can they be institutionalised in the decision-making abroad? It can be said, however, that socially responsible actions would embrace a company’s taking measures that:
1. Avoid offending the national sensibilities of the host country.
2. Avoiding actions that raise questions about the self-determination capabilities of the host country.
3. Avoiding unnecessary actions that disrupt the social structure.
4. Acting in ways that are in the self-interests of the host country whenever possible while not violating the basic self-interests of the parent company.
5. The importance of greater employment of citizens of a host country should be given a top priority – That is the training and upgrading of local citizens to fill more responsible skilled and managerial jobs.
6. Providing opportunities for an ownership stake in subsidiaries by nationals is important. Some countries insist that nationals own at least 51 percent (60% in Nigeria) of the companies in which foreign investment is made. The advantages to the host country of national investment are obvious in terms of controlover operations, if that is desired.
7. MNCs can use local suppliers, bankers and managers. On the host country side, it can do many things to ease tensions. These include:
(1) Avoid using the subsidiary as a political weapon to force parent’ company’s country to take some actions desired by the host country.
(2) The host country can assure foreign investors that their company, need not fear expropriation.
(3) The host country can review its tax, production, entry and other laws to see to what extent they can be altered in both its own and the foreign company’s self-interest
(4) It can also assure equal treatment for foreign and local investment
(5) The development of codes of behaviour would facilitate understanding and lessen conflicts.
Scope of Multinational Corporations (MNCs)
It is very difficult to generalise about the scope and activities of multinational corporations because they cover diverse heterogeneous group of companies. These activities may range from thimbles in Mexico to explorating for oil off Coast of Africa from wholly-owned U.S. or British subsidiaries to sales outlets.
Multinational corporations are different not only because of their diverse operations but also because of their degree of ownership, size, geographic distribution, management philosophies and numerous other variables.
Until the 1930’s most countries paid little attention to the capacity of multinational corporations for moving across international boundaries. In recent years, as nations have more clearly defined their goal, and priorities, they have been confronted by multinational entitles that flowed through boundaries established policies and sometimes frustrated the national efforts.
Thus, the question of national and commercial sovereignty, arises. Who has final control over the actions of multinational subsidiary, the patent or the hose country? Who decides whether capital or profits flow freely from one subsidiary to another? Who decides whether a plant closes or stays open?
With this friction between the MNC with its supernational point of view, and the host country, with its national economic concerns, has invited political and economic scrutiny and questioning as to the desired role of Multinational cooperations.