The Collateral Damages of Multinationals
I have been consulting to major corporations as well as to family run businesses for over forty years. My analysis here, in this blog, is not based on “scientific” research. I have not built in a representative sample. I did not conduct interviews. Nor is there an extensive search of the literature on the subject. These are pure observations on my part based on many years of involvement with actual corporate decision-making.
My conclusions, due to the limited sample, might be wrong, and I would appreciate feedback.
It is a very hot subject. We are all worried about the environment and are conscious that we have to protect this “little ball of life” floating in space.
So, we need to stop water, air and land pollution. And stop “polluting people’s health” by feeding them food that makes them obese and diabetic…and in general runs down their health.
Who is more prone to pollute? Will a CEO pollute the air in the community in which he or she lives?
Why? The result would be that he or she will be socially ostracized. It is natural to care about affiliation and how one is regarded by neighbors and friends. Not to mention that a CEO will rarely make decisions which threaten the health of his family which lives in that community.
But what if the plant is thousands of miles away? In a foreign country? In a community in which he knows no one personally? Well, then, he might just allow pollution, especially if that decision will increase earnings per share…and of course increase his net worth.
I find that local companies care about their reputation. Their clients are the neighbors. And usually the name of the founder is on the letterhead. They usually are concerned about what they do and how it is accepted by the community.
Not so for multinationals. Here the story is different. It appears to me that for them “sustainability” is a percentage of their expense budget. It is more of a PR effort.
I just returned from Bled, Slovenija where I attended a conference on Responsible Management, (PRME), an offshoot of the Global Pact of the United Nations. Under the terms set by the Global Pact of the UN, companies sign a pact to be socially responsible.
At the conference I met an endowed chair professor: The Coca Cola Professor on Sustainability.
I could not resist wondering:. Is this not the Coca Cola that provides sugar loaded drinks which cause obesity and lead to diabetes? And is it not the same Coca Cola whose light coke is full of questionable chemicals that make it sweet?
And they are the one to be professing sustainability?
Give me a break.
And how about McDonalds? On the one hand it is deeply involved in philanthropy while on the other hand the company turns out hamburger meat for millions that is loaded with chemicals to fatten the cows more quickly. The resultant beef is then cooked with lots of oil and salt, all of which helps to produce world -wide obesity.
Who is kidding whom?
I bet McDonalds’ CEO does not feed his family Big Macs. He knows better. But feeding people in the inner city, people he will never meet, that does not cause him to lose much sleep…
I believe it is alienation that causes irresponsible managerial behavior: physical, social, emotional, you name it, alienation, the distance between the decision-maker and the consumers. The multinational exhibit it the most because they are large and spread around the globe.
In my consulting, I often come across companies that are branches of a multinational company. The locals would like to democratize the local company, make it more participative. Empower people, etc. But…their authority to make decisions is limited. Very limited. There is a Human Resources VP thousands of miles far away who decides how the local company will run. And this limitation does not pertain only to human resources. It includes marketing efforts as well as new product development efforts…The local management is constrained, disempowered. Its leaders cannot make any decisions that involve change.
So what, you might say.
There are repercussions.
Those constraints over time impact how people feel empowered in general. The entrepreneurial spirit is more limited when you are led rather than when you lead. I suggest to you that this impacts democracy. If people cannot make decisions about their working environment why do you believe they will feel empowered to influence decisions made by their politicians?
More alienation, caused by large, especially multinational, companies.
I do not have to elaborate on this too much because it has been in the news lately. I am referring to news stories about Apple and General Electric, how they have legally avoided paying billions in taxes by moving revenues and expenses between their foreign entities to countries with lower taxes.
How does a businessman who is not running a multinational feel when hit with increasing taxation? How does a small business owner who is struggling to make a go of his company one who carries a significant and increasing burden of taxes feel when he reads how mega giants like Apple or GE legally paid very little or no taxes…? Does he or she believe it is fair?
Does it not broaden alienation between people and their government?
What does it do to trust and respect? Does not alienation destroy it?
The big companies have an advantage when it comes to securing finances. They have more to show; more resources and sophistication to support their requests.
I find that banks are not that interested in the small and even medium-sized companies. By and large the small and medium-sized companies have a hell of a time finding financial resources.
Resources are finite and the more that goes to the big fish the less there is for the small ones.
And this is not insignificant.
Because democracy needs a middle class, needs entrepreneurs. Unless you are a high tech start-up attracting private equity funds, or a large company with a great balance sheet, you will have trouble resourcing finances. And so, not surprisingly, the middle class is shrinking.
Small is beautiful. Not as efficient, granted. There are economies of scale in size. But what we gain economically we lose politically, socially and physically. When standards of living go up, it appears that the quality of life goes down.
Dr. Ichak Kalderon Adizes