Rise of Multinational Corporations Research Paper Starter

Rise of Multinational Corporations

(Research Starters)

This article gives an overview of the structure of multinational corporations and tracks the historical transformation of American corporations from locally chartered companies to multinational corporations aiming to serve the interests of their investors. Today, multinationals garner an inordinate amount of credit for the rising affluence of emerging economies in developing countries and criticism for tax avoidance and unfair labor policies.

Keywords Income Tax; Franchise Tax; Liberal Marketplace; Micro-Multinational Company; Multinational Corporation; Post-Industrial; Supply Chain; Tariffs; Third-World

The Rise of Multinational Corporations


Karl Marx (1818 - 1883) believed that corporate capitalism was the most dynamic force available to humanity for creating wealth. He considered America a wonder of economic efficiency and marveled at the possibilities for affluence that the American model presented. For Marx, corporate capitalism possesses two contradictory forces. The first continually created better productivity and promised to free humanity from centuries of feudal poverty and despotism. The second would give rise to international forms of capitalism that would lock the working class in oppression and poverty (Derber, 2000). Perhaps the one thing that Marx understood better than his contemporaries was that the future of corporate capitalism and the plight of the worker would unfold on an international stage (Derrida, 1994). Modern multinational corporations are credited for generating vast wealth in post-industrial countries and the rising affluence of developing countries. At the same time, multinationals are the targets of rigorous critiques, as many political organizations and analysts allege that they damage local economies and the environment.

Once the term "multinational" signified a unique characteristic of a few companies. Today, virtually every large corporation provides goods or services in multiple countries or has a manufacturing supply chain involving numerous countries. In 1990, the United Nations reported that there were approximately 30,000 multinational companies. That figure now exceeds 60,000 (Copeland, 2006). The growth in multinationals is being driven by technology that deems borders irrelevant to providing services and manufacturing, international acquisitions and mergers, and the relevantly new phenomenon of micro-multinationals. Like the high-tech start-ups that preceded them, successful micro-multinationals promise to be gobbled up by powerful multinational corporations who desire access to new markets and efficient low cost manufacturing and service providers. This will only accelerate the international presence and influence of multinational corporations and spurn the debate as to whether this is ultimately good or bad for local communities and the people who live and work there.

Corporate Structure

The construction of the corporate structure arose over many centuries. The Latin word corpus means "body." A corporation actually embodies a business and is able to carry on business like an individual. The Scandinavian corporation Stora Kopparberg is believed to one of, if not the, first corporations granted a charter. Stora Kopparberg was granted a charter in 1347 as a copper mining company. Stora Kopparberg still exists today as a forest-product company named Stora-Enso (Cantwell, Gambardella, & Granstrand, 2004). Stora-Enso is an example of many of the attributes identified with modern corporations. Corporations are formed as entities, or bodies, separate from people who form the corporation. They have a right to own property, make legal agreements, and set up its own rules and bylaws. Corporations have a perpetual life that allows the entity to exist beyond the lifetime of shareholders, managers, and workers. For this very reason, many early churches incorporated and played a critical role in the development of the evolution of corporations (Davis, 1961). Modern corporations can also be formed with no specific business purpose and, like Stora-Enso, completely change their line of business. In addition to these characteristics, corporations enjoy many of the same personal rights as individuals and provide shareholders limited liability for debt, losses, and corporate crimes.

Rise of Corporate Personhood

Corporations did not always enjoy the status they do today. In the middle of the nineteenth century, American corporations applied to local jurisdictions for one to three year corporate charters. At the end of the term of the charter, the company had to prove that it had provided benefits to the local community and its workers in order to have another one to three year charter granted (Derber, 2000). Not only were corporations temporal bodies, but their continuation was based on providing demonstrable local benefits to the community. In 1855, the Supreme Court, in Dodge v. Woosley, stated that local people through State jurisdictions still held power of corporations. This started to change in the 1880s. In 1844, the Supreme Court ruled, in Louisville, C&C.R. Co. v. Letson, that a corporation was capable of being treated as a citizen. Though the ruling was in part to an effort to hold corporations accountable to State jurisdiction, the ruling began the process of granting corporations legal personhood and started the shift away from creating local benefits to seeking personal benefit. In 1886, the Supreme Court, in Santa Clara County v. Southern Pacific Railroad, ruled that corporations could not be deprived due process under the Fourteenth Amendment. The Fourteenth Amendment, which was created to give ex-slaves access to the Bill of Rights, was being used by corporations to gain access to the Fifth Amendment's right to life, liberty, or property (Derber, 2000).

In 1906, Hale v. Henkel granted Fourth Amendment search and seizure rights to corporations making the review of corporations' internal records more difficult to access. In 1908, Armour Packing Co. v. U.S., the Supreme Court granted Sixth Amendment rights to corporations. Though the granting of constitutional rights to corporations continue to this day, the final step in shifting a corporation away from benefitting local communities and under control of the States that grant them the right to exist as a business entity came in 1919. The Michigan State Supreme Court case Dodge v. Ford Motor Co. stated and set the precedent that corporations are primarily organized to carry on business to benefit shareholders. From that point in time, stockholder primacy has superseded the rights of local communities and workers. After this ruling, corporations stood as independent bodies endowed with citizen rights and protected by limited liability. Corporations were now positioned to turn away from local concerns and focus on actions that would financially benefit their shareholders.

The Reach beyond Borders

One of the other early uses for...

(The entire section is 3079 words.)