ibus week 11 - LISA YANG IBUS20002 Business in the Global Economy Host country\u2019s perspective Love-hate relationship between MNEs and host governments

ibus week 11 - LISA YANG IBUS20002 Business in the Global...

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LISA YANGIBUS20002 Business in the Global EconomyHost country’s perspective Love-hate relationshipbetween 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 powerand neglect of negative nonfinancial impacts (or externalities) Typical ESG issues in international businessEnvironmental 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) PovertyGovernance issues (G) Corruption Bribery (e.g. Siemens, Petrobras, FIFA)RECENT ESG ISSUESVolkswagen’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-complianceandpoor corporate governancearising from a culture of deception Toshiba Accounting Scandal – Sept 2015Admitted it had overstated earningsby over $2bover 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 accountabilityExxon’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 YANGIBUS20002 Business in the Global EconomyBrazil mining tragedy – Nov 2015Dam at Brazilian iron-ore mine
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