New Global Corporation?

By Richard C. Longworth
The Global Corporation

The preceding 20 years have witnessed a widespread restructuring of the corporate landscape. An estimated 50,000 corporations now have operations that are primarily global in scope. Their predecessors were multinational corporations (MNCs), with sales and manufacturing branches abroad, but with all major functions, including the international branches, run from headquarters back home.

The new global corporation typically has a tight, lean headquarters staff, but scatters its other functions—research and development, accounting, procurement, and sales—wherever the people are the best and the costs lowest. This corporation seldom has an international department, because the entire corporation is international. Multinational corporations that have evolved into global corporations include Ford Motor Company, General Motors Corporation, Royal Dutch/Shell Group, BP Amoco PLC, Siemens AG, Nestlé S.A., and Zenith Electronics Corporation, among many others.

Global corporations, in turn, are reshaping the political and social landscape. During the last 50 years, major corporations in the United States and other industrialized nations struck a social compact with their employees and communities, through a web of labor agreements, environmental and tax laws, charitable giving, and other obligations, voluntary or imposed. The global corporation is now mobile enough to escape these obligations and break the social compact. Companies that once competed domestically with other companies sharing the same social obligations now compete with firms halfway around the globe, where environmental laws may not exist and pay scales are a fraction of Western wages.

In the United States, for example, hundreds of corporations—from automakers to electronics manufacturers—have moved jobs from high-wage U.S. facilities to low-wage plants in Mexico and other Latin American nations. In response to this trend, policy makers in the United States have reduced corporate taxes in an effort to keep at least some business operations at home. United States federal tax receipts tell part of the story: Corporations that once paid a full 30 percent of total federal taxes have seen their tax share fall to 12 percent.

Throughout much of the industrialized world, declining corporate taxes mean less money for welfare, unemployment, and other social programs that were initially established to help economically vulnerable workers. In the future, political debates will likely focus on efforts by governments and citizens’ groups to force corporations to resume their economic and social obligations—in a sense, to declare their corporate citizenship—when they no longer are geographically bound to any particular location.

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