ibusweek11 - LISA YANG IBUS20002 Business in the Global Economy Host countrys perspective Love-hate relationship between MNEs and host governments FDI

ibusweek11 - LISA YANG IBUS20002 Business in the Global...

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LISA YANG IBUS20002 Business in the Global Economy Host country’s perspective Love-hate relationship between MNEs and host governments FDI is important for host governments Foreign currency Technology Access to the global market Employment But they often resent the negative impacts MNEs can have on political and social environments MNE perspective MNEs require host government support to allow smooth running of operations Necessitates them complying with host country laws and regulations at the minimum However, MNEs also wield significant power: Strong control over resources Ability to move their operations from country to country Can lead to abuse of power and neglect of negative nonfinancial impacts (or externalities) Typical ESG issues in international business Environmental issues (E) Environmental pollution and sustainability Climate change, water, energy, food, natural resources ( e.g. Shell in Nigeria) Social issues (S) Employment practices Use of child labour (e.g. IKEA, Gap) Working conditions (e.g. FoxConn, Benetton) Diversity and equal opportunity in employment Human rights Freedom of speech Collective action (labour rights) (e.g. Walmart in China) Freedom from political repression (e.g. China National Petroleum in Sudan) Poverty Governance issues (G) Corruption Bribery (e.g. Siemens, Petrobras, FIFA) RECENT ESG ISSUES Volkswagen’s diesel deception – Sept 2015 11 million of its vehicles were equipped with software that was used to cheat on emissions tests $20b wiped out from market capitalisation; facing compensation claims from customers, fines from regulators and reputational hit Non-compliance and poor corporate governance arising from a culture of deception Toshiba Accounting Scandal – Sept 2015 Admitted it had overstated earnings by over $2b over 7 years Accountants pressured by management into creative accounting to hide costs Share price fell 40%, fines of $68m and 7,000 jobs lost Corporate greed and culture of hierarchy and lack of accountability Exxon’s climate denial campaign – Sept 2015 NGO investigation found Exxon’s internal research from 1981 warned of man-made climate change and its dangers Instead, Exxon ploughed $30m into a campaign of climate science denial to preserve its investment in oil and gas Commitment to polluting and unsustainable business model
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LISA YANG IBUS20002 Business in the Global Economy Brazil mining tragedy – Nov 2015 Dam at Brazilian iron-ore mine
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  • '19
  • Business Ethics, Corporate social responsibility, LISA YANG, esg issues

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