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THE INFLUENCE OF MULTINATIONAL CORPORATIONS ON DOMESTIC
POLITICAL PROCESSES AND POLICY-MAKING
I. Historical Context
1.1 Early Influence
The impact of MNCs in host country politics can indeed be traced back even to the colonial
period where the British East India Company was practically ruling the colonized territories.
Unlike most trading corporations that it was a contemporary of, the British East India Company
was a commercial enterprise that in many ways resembled a government or colonial
administration since it governed large parts of India and had a say in the formulation of the
policies governing that part of the world. This company not only dominated the trade and
economic facet but also the military entangling both commercial and political sectors (Jones,
2017). Having full control over the Indian economy, the British East India Company was able to
influence Indian policies to fit the company’s economic needs. Particularly, the company could
lobby for trade policies and tariffs favorable to its business operations regardless of their impact
on the local economies or populace. Some of the economic actions entailed having an influence
over local labour and land markets in order to increase productivity and earn profits (Marshall,
1987). This frequently implied substantial socio-economic changes in local polities due to the
company’s interference in politics. For example, after winning the Battle of Plassey in 1757, it
was able to exercise political power over Bengal to obtain revenues in the form of land taxes that
greatly impacted the agrarian societies. Such economic exploitation and policy manipulation
created a historical record of how these MNCs could play with the domestic political structures
to advance their cause (Dirks, 2006). This early example of British East India Company marked
the start of world’s globalization and the modern influence of the MNCs. Some of the practices
set during the colonial period acted as antecedents for today’s MNCs as they exert significant
influence over the formulation of domestic polices for streamlining with their business strategies.
This historical background shows that MNC interference has always been dynamic, and has been
as old as the existence of these organizations in other countries.
1.2 Evolution Over Time
Multinational corporations also known as MNCs or international business firms have undergone
a rapid growth due to factors such as globalization and the liberalization of the world economy.
After World War II, there was formation of important institutions like the IMF and the World
Bank and these facilitated export of capital to other countries. These institutions that enabled
MNCs to gain a more integrated level of global economy as these institutions established the
basic infrastructure for the expansion of these companies across different nations. These
organizations were created at the Bretton Woods conference in 1944 intending to establish
conditions that would facilitate economic stability that supported global trade and investment
(Gilpin, 2001). As McLachlan puts it, as the process of globalization advanced MNCs started to
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harness more and new growth opportunities. The early 1980s and the following nineties are
known as ‘post-Fordist’ or neoliberal epoch, which implies the retreat of the state apparatus from
the economic regulation, liberalization, and integration. Many countries adopted these policies in
the framework of IMF and World Bank proposals that offered loans with predetermined
conditions including austere structural adjustment measures. This liberalization process provided
a signal to the international monetary fund and world bank to open up the global economy, for
MNCs to expand their markets and to establish production facilities in various part of the globe
(Harvey, 2005). As Gugler & Meredith (1999:300) summarized, the neoliberal shift also
improved the capacity of MNCs to impact domestic policies while extending their geographical
influence. This influence was specially observed in developing countries where the roles of
MNCs investments where crucial in policies for economic development. These powerful MNC’s
were more than happy to guide government policies that would help them to attract more
investments from these multinationals (Sassen, 2001). Further on, liberalization of global trade
through the liberalization of trade through such treaties as NAFTA or the formation of WTO
acted as a boon for MNCs.
1.3 Key Historical Cases
Such an MNC impact relates to the actions of the United Fruit Company in Guatemala in the
1950s. The company thus held absolute control over the economic infrastructure of Guatemala; it
either directly owned substantial pieces of land or controlled most of the means of producing and
transporting products through rail-road and port. When Árbenz, a legitimate president, proposed
reforms to address the issue of land ownership with the view of bringing it closer to the peasants
in a bid to distribute it from the large companies owning several tracts of it, it was a threat to the
lure of the United Fruit Company. Consequently, the company sought the support of the U.S.
government representing the reforms as communism during the era of communism war. For its
lobbying effort, this came to fruition in 1954 when with support of the U. S, Guatemala was
plunged into a coup d’état with the aim of overthrowing Árbenz and replace him with a military
regime that was more amicable to United Fruit business (Schlesinger & Kinzer, 2005). Thus,
seven major oil companies also have deeply influenced the American policy in the Middle East.
These companies including Exxon Mobil, Chevron, and BP had created interested in the oil
resources of the region. Hence, State and corporate strategies would merge often as their interests
would coincide with US global objectives. OPEC’s formation and the oil crises witnessed in the
1970s year showed the strategic importance of oil in the international politics. These crises were
showing how MNCs in determining political and economic contingencies can shape foreign
policy, both regionally and globally (Yergin, 2008). All these cases provide a clear indication of
how MNCS’ operate to a very large extent, not only within their domestic environments but
within the global arena as well. The economic power by MNCs has dictated the kind of actions
by governments, polluted political systems and in some cases triggered overthrows of these
governments.
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II. Mechanisms of Influence
2.1 Lobbying Activities
MNCs utilize professional lobbyists in its efforts to have favorable legislation and regulations in
the affected countries. These lobbyists particularly those who have been in practice for sometime
are always in good books of the policy makers since their job is to relay the information of their
clients to the policy makers. This makes sure that all complaints and goals of the MNCs are
heeded and considered in the legislation form. For example, major technology companies
including Google and Facebook have significantly up their spending on lobbying in the United
States to influence matters cut across issues such as the freedom of data, and the laws governing
monopolies. As [these companies] became largerrey and began encountering questions about
privacy and market dominance, these forms of lobbying grew. In 2019 for instance, Google
alone dedicated over million to the lobbying efforts making Google one of the most proactive
technology companies in this process according to Drutman (2015). Some methodologies used
by tech company lobbyists include direct lobbying which involves going to floors, halls, and
other full-service offices to directly present their case to lawmakers and government officials,
while the other form is indirect lobbying which entails using media campaigns and observers to
pressure legislators into getting the required vote in a specific way. For instance, when
discussions on the General Data Protection Regulation (GDPR) in the European Union were
taking place, these industries successfully sought to regulate and create laws that would least
affect their data processing blueprints (Barker, 2018). These lobbying efforts are not solely for
the purpose to fight against some new restriction; they also advocate itself for good laws. For
instance, the MNCs in the financial markets have lobbied for ability to lobby to be deregulated in
order to increase the returns on investments. This success results in policy change that helps the
lobbying efforts for the benefit of the industry and may be against the interest of the larger
population (Johnson & Kwak, 2010).
2.2 Political Contributions
Through their contribution to political party campaigns, MNCs fund candidates who are likely to
pass economical favorable policies. This enables corporations to make sure that their views are
considered in the legislative processes as well as guarantee the advancement of policies that are
favorable to them. These contributions can greatly affect the success of campaigns and determine
the political environment as per the wishes of those corporations. Among all political decisions
made in the United States, the most striking and which changed political contributions’ map was
made in January 2010. It allowed corporations to donate money with no limit to fund political
campaigns, by distinguishing between spending and an individual right in speech (Mayers,
2016).This ruling removed previous restrictions on corporations' ability to directly finance
political candidates and causes, enabling MNCs to use their considerable financial resources to
gain greater political access. As a result, political action committees (PACs) and their more
powerful counterparts, super PACs, funded by corporate money, have become significant players
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in the U.S. political landscape.Citizens United decision allows more political responsibilities and
says that corporations have more rights to raise money than individual citizens, this can result in
a corrupt political setting where corporations are more influential than what is needed for the
welfare of the public. For instance, the example that has been given is that through the political
influence where through cash pharmaceutical companies have been able to have a say in making
laws concerning the price of drugs and some specific-healthcare regulations. This industry in
2019, for example, used more than . 5 billion to lobby and donate to politicians to make sure the
environment is created to its advantage, which at the disadvantage of consumers means
extremely expensive drugs yet profitable for the industry (Fang, 2020). Thus the donation by
MNCs is notbias in nature but has no specific side or party that it supports. Influencing the
society: corporations donate to candidates regardless of the ideologies to increase their reach
when in power. For example, the energy sector has made contributions to both Democrats and
Republicans because the consequences on the sector’s regulation and its environmental impact
affect it as well (Brulle, 2018).
2.3 Regulatory Capture
Regulatory capture is a phenomenon that is quite hard to define and even more challenging to
combat as it presents huge challenges to the overall performance of regulatory authorities across
the globe. It happens when watchdog agencies charged with the role of protecting the public, are
infiltrated by or become too close to the industries they regulate. A major way in which they
capture happens is via the development of either a vertical relationship or a mutually beneficial
partnership between a regulator and members of the regulated industry. This closeness can
happen in the following ways; revolving doors where the regulators switch between working for
government agencies and corporate entities, which is inflammatory and implies that the
regulators are more inclined towards the firms than the government that employed them. On the
one hand, such movements can lead to excessive identification of the regulators with the
industries they monitor so that they become highly sympathetic towards them and act more as
advocates of the industries rather than impartial regulators. An appalling example is the financial
sector where regulation was subjected to capture by the very entities it was supposed to regulate.
This is not the first example of failures from key regulators, who were duly seduced by industry
narratives, to oversee a situation that eventually culminated in the near collapse of financial
institutions and the global economy in 2008. Due to its role as the body responsible for the
regulation of the securities industry and protection of investors, several stakeholders accused the
SEC of not preventing excessive risk-taking and enforcing the rules that led to the crisis.
In addition, it facilitates regulatory capture which often leads to the protection of Industrialist at
the expense of citizens. The chosen industry might be influential enough to pressure specific
regulatory agencies into developing and making policies and decisions that cater to the needs and
goals of the industry rather than the particular people in the society. They can result to poorly
protected consumers, degrading of the environment and lowered generally acceptable standards
of health. For instance, the phenomenon of regulatory capture has been associated with cases of
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delayed or watered down regulatory response in sensitive industries such as pharmaceuticals and
energy sectors where the business ‘benefits from greater openness to its arguments and may find
it easier to evade the rules. One strategy employed to reduce the risk of revolving door and
conflict of interest situation includes having a tighter regulation of conflict of interest rule and
also having a certain time period, known as the cooling off period before a regulator could move
over to or from the industry. This include increasing engagement of the stakeholders, seeking
public comment, and carrying out periodic assessments of regulators to determine on areas where
capture may be an issue a. Ethical self-regulation by regulatory agencies, CSOs, and universities
is also crucial as a way of replacing capture investigations by a watchdog. Mechanisms of
independent supervision, including ombudsmen or some other bureaucracy-investigation bodies
like the regulatory review boards, assume the significant importance in oversight of the
regulators and maintenance of compliance with the regulatory norms. Thus, regulatory capture is
a major threat to governance and regulatory agencies worldwide as has been discussed in this
paper. Bearing this in mind along with the mechanisms that lead to regulatory capturing, formal
safeguards and strong measures of accountability based on the principle of public interest can
thus be implemented by policymakers in an effort to promote a culture of responsible regulation
that puts the public interest before commercial advantage and that strengthens the safeguard of
regulatory institutions.
III. Economic Policies
3.1 Trade Policies
MNCs have significant decision-making influence on international trade policies as they are
often financially strong and politically connected to significantly influence the formation of
international trade policies in a manner that suits them best. Closely related is the political power
that MNCs exert, the most common of which is the call for the removal of trade barriers,
particularly through the push for FTAs. All these efforts are with the view of gaining market
access to the international market, reducing cost of production and improving competition
Globally. The lobbying influence of MNCs in trade polities can be best explained through the
NAFTA, where the crucial decision-making and formulation of goals and objectives was tilted
heavily in favor of corporations. These organizations continue to exercise influence over trading
policies since MNCs have strong networks regularly used to shape trade policies. Such foster the
enactment of policies promoting the removals or decreases in tariffs, convergence of regulations,
and increased protection of intellectual property rights –these are all ideals that aid in the
continued expansion of MNCs in into new markets and the integration of longer, efficient global
value chains. During negotiations, MNCs from manufacturing automotive and agriculture
industries engaged policymakers and trade official waging an advocacy campaign which sought
to argue for provisions that would be advantageous to the company’s respective industries.
Within NAFTA, advocates pointed to economic activities claiming that it would assist in
hastening economic expansion; get rid of trade inefficiencies; and sustain employment and
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cement economic partnership among the three nations, that is; United States of America, Canada,
as well as Mexico. However, the critics involved overshadowed influence of the corporate power
in determining the conditions of NAFTA and, therefore, some drawbacks that may be common
when the income inequality, the violation of labor rights, the deterioration of environmental laws
could be expected.
It is important to recognise that MNCs do not confine their leverage over trade policies to FTAs
but expand to other liberalisation processes and global trade agreements. By membership and
political lobbying through the chapter, you companies [MNCs] participate in discussions on
trade policy and amplify the voice for more liberal trade policies and the dismantling of trade
barriers as well as the formulation of business-friendly trade policies that encourage cross border
trade and investment. But all the same their impacts to the trade policies are not without
controversy and criticism from different corners. Opponents have expressed that dominance
means that corporate interests would more than likely be protected at the social expense by
making corporate-friendly trade agreements resulting in environmental degradation, weak labour
standards and no social justice. There are beliefs that large MNCs, on the one hand, and small
enterprises or domestic concerns on the other, may develop inequality in competitiveness and in
consequence create difficulties for development of national economies. To meet these challenges
and to work for fairer rules on trade, involvement of decision makers and other stakeholders with
improved transparency and participation should be undertaken. This involves engaging in
delegations of multilateral organizations with the aim of garnering different views some of which
include labor unions, civil society organizations and Small Medium Enterprises (SMEs) on trade
policy matters. With respect to implementation and supervision measures to control the different
actors that are involved, provisions should be in place to measure the performance of the trade
agreements and correct for any distortion that may arise as a result of the implementation of the
agreements. Finally, MNCs have immense influence in determining the trade policies in most of
the countries mainly because of lobbying for free trade agreements and low tariffs.
3.2 Investment Policies
The policies on investment prove to have a very important role in Investment Regime in
determining a country’s investment environment especially in FDI attraction from MNCs. While
these measures can increase public spending and employment, and therefore help to boost up the
economic growth, it also poses questions to the government especially when economic
consideration is address at the expense of public interest. This has been held that low corporate
tax rates is one of the strategies used by governments to encourage FDI. These authorities have
been able to make this work by offering relatively low taxes to attract MNCs to set up regional
offices or manufacturing plants in their countries: for instance, Ireland. However, the process of
aiming for a favourable tax regime can also result in what is popularly known as ‘paradigm of
variance. ’ In this case, countries are inclined to adopt naked cutthroat measures including
flexibility on minimum regulatory rules, environmental legislation, employee remuneration, and
even corporate taxation to attract, or more appropriately, retain FDI from MNCs. Little or no
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supervision and regulation can promote pollution of the environment, layoffs of employees,
social injustice to the consumers; which are all vices that are destructive to the welfare of the
society.
Reliance on taxes and subsidies as the key driver of FDI can sometimes impose pressure towards
the financial resources of the government as well as fiscal balance in the country. The outcomes
of tax competition for African countries include decline in government receipts for provision of
public services and investment in social amenities like health, education, and other essential
sectors. This can rob the poor nations of a better chance and limit inclusive economic growth if
the FDI generated income is not facilitated to be channeled or re-invested into public capital.
Addressing these challenges, its essential for policy makers to implement proper measures that
will promote investment without compromise the people. Such measures include:
Governments must compromise not just quantity but also quality of FDI by the criteria of
sustainable development goals, It can refer to selecting skills and sectors, such as green energy,
IT, and education, and promoting investments that generate social and environmental benefits.
Strengthening legal standards and their enforcement like labor regulation, environmental
standards, corporate social responsibilities, and governance. The regulatory changes would
thereby assist in increasing investor confidence through increased regulatory standardization.
The governments should put more effort, time, and money in the beautification of the education
health and welfare sector in order to enhance productivity of the workforce, social class and
living conditions.
International collaboration and coordination are required, this can help establish common
objectives. Now due to the increased implementation of the approach, which focuses not only on
the economic value but also social and natural conditions while forming the investment policies,
the governments can get the maximum effects of FDI along with the protection of the public
interest.
3.3 Taxation Policies
Through political influence, politization, and political campaigns in the political arena, MNCs
will lobby and donate to politicians to win their support and influence the government to reduce
corporate tax and tax exemptions that will benefit their competitiveness and profitability.An
example of MNC kinda exposing itself to influence taxation policies is the U. S Taxes Cuts and
Job Act in 2017. This policy initiated by the Trump administration was aimed at cutting down
the corporate taxes rates would help to mobilise business capital investment and employment
opportunities. On the one hand, the liberalization of taxes provided by the stimulus agents
posited several advantages that are as follows: improvement of business competitiveness and
capital investment While on the other hand, the critics of the above tax cuts voiced the following
considerations: The above aspects of the stimulus packages in relation to the tax cuts raised
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alarm among the critics in light of the following consequences: For instance, lowering the
corporate taxation will reduce tax revenues that hampers the availability of collected funds that
could be used to finance public services like education, primary healthcare, infrastructure, and
welfare services. The desire that MNCs have for continuing to seek tax reductions and preferable
tax exemptions can lead to underhand deeds of tax evasion and profit relocation since the
multinationals aim to exploit the deficit of laws across borders when paying taxes. They are
useful in understanding this phenomenon, which is quite common due to intricate corporate
structures and cross-border transactions, where cue multinational enterprises provide
substantially less taxes than other domestic companies and small businesses. Not only does this
deny governments their due money, but it distorts the tax fair share fairness to an equal level.
However, the accumulation of the tax incidence and losses to the large MST and the wealthy
class undermine the cross-sectional equity and social equity goals of the government. Mitigating
the interactional impact of MNCs on taxation policies is not easy, and must be approached from
different angles depending on the particular goal and corporate dictate in view. Key strategies
include:
Fair Taxation Principles: Regional authorities should also acknowledge the aspects of horizontal
equity and maintain the view that firms should contribute to the public revenue budget in
accordance with the carrying out of business activity and realization of earnings. This may entail
reviewing the tax policies, addressing the tax gaps and consulting on specific measures, for
instance the introduction of tax reliefs, sealing off tax evasion techniques, increased openness
and cooperation at the global level.
Progressive Tax Reform: Higher taxes on the affluent through progressive taxation systems, can
assist to reduce our worrying income disparities and also create more public revenue for
investments.
Global Tax Cooperation: Regarding International taxation, which encompasses issues associates
with profit shifting, competitions, further and higher cooperation at the international level is
needed. Joining other forums like the Base Erosion and Profit Shifting (BEPS) project under the
auspices of the Organisation for Economic Cooperation and Development (OECD), as well as
actively engaging in reforms of the international taxation system can contribute to the
determination of unified criteria and fight against evasion of taxes, as well as creation of equal
conditions for companies of different countries.
IV. Environmental Policies
4.1 Regulation Shaping
Regulation shaping, therefore, has a formative role to play in determining the ESR of MNCs
based on its legal jurisdiction. It involves as we have seen the formulation of regulations and
codes of conduct that MNCs ought to follow in matters concerning the environment. A clear
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example of the way regulation impacting shaping is found by observing the effects of some of
the most rigid protecting environmental rules set out by European Union and their impact on
MNCs. These requirements ensure that the discharge of emissions, proper disposal of wastes and
other products, and other aspects meet the set environmental requirements (Smith, 2019). In this
way, by setting such requirements, the regulating authorities secure the environmental
conservation and at the same time encourage the technological advancement and new
investments into efficient green technologies among the MNCs. From the analysis above, it can
be deduced that regulations do not only apply an outer pressure on MNCs to adhere to their
standard; but rather triggers the practice of being environmentally conscious and attaining
sustainable business responsibility. It has been also observed that where companies have to
operate in the area with stringent rules for environmental protection, such measures become part
of the company’s main strategic plans. This mostly results into strictly observing the legal
requirements as well as adopting cleaner production methods, efficient energy technologies, and
waste conservation efforts. Also, the legal pressure towards achieving highIndexes of states
increases MNCs’ R&D expenditure in companies for developing environmentally sustainable
solutions which in turn fuels innovation within the sector. Furthermore, much as codes offer
guidelines MNCs are supposed to adhere to, regulatory frameworks also ensure that no company
has an unfair advantage over the others through creating a baseline that every business enterprise
is supposed to meet with regard to the environment. This helps to eliminate instances where
some firms have an upper hand over others due to negligence in environmental standards or lack
of consideration for the environment as a limited resource. Therefore, regulation shaping not
only maintains the ecological benefits but also results in a more responsible handling of
opportunities and impacts when procuring a social license in MNCs. Finally, through regulation
shaping, the Firm’s environmental responsibilities are known and positive changes within the
corporate world are enforced by MNCs. Governments, non-governmental and regulatory
agencies should set clear environmental standards, which applied and communicated to MNCs to
ensure they engage in responsible environmental management, supported green innovations and
act as part of the world’s commitment towards environmental preservation.
4.2 Sustainability Initiatives
Today MNCs are incorporating sustainable policies as a part of their business management plans
to support environmental goals and conservation. These initiatives, as exhibited by IKEA among
other firms, are not limited to compliance but signify a paradigm shift towards responsibility to
the environment and a sense of overall company sustainability objectives (Jones, 2020). IKEA,
the renowned multinational retail company that deals with furniture, and home accessories has
been very strategic in its insistence on sustainable practices. Circular economies are based on
strive for minimizing waste and promoting long-life, recurrence, repair, and remanufacturing of
products. This is the key difference between sustainability initiatives and simple compliance with
regulations – the latter exist as a part of a broader sustainability mindset. IKEA is aware that
sustainability is not just a fad but a trend that has to be incorporated in every successful business
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strategy. In addition, sustainability strategies necessarily implicates people including suppliers,
customers, and surrounding people. For instance, IKEA carries out sustainable sourcing where
they partner with suppliers that observe the established environmental and social policies. These
efforts are not restricted merely to following a set of guidelines and legal requirements but
extend to particularly defined notion of sustainability, which would include social, economical
and environmental.
4.3 Policy Changes
With regards to the environmental governance policies it involves dynamic strategies to meet
changing goals and global problems, including climate change. The ever crucial Paris Accord is
a precursor to systemic shifts on policy across the world affecting not only the government but
also large MNCs on the issue of carbon neutrality or improvement in environmental stewardship
(Brown & Miller, 2021). The Paris Agreement which was signed in 2015 was agreement whose
goal is to prevent the global temperature from rising to above 2 degrees Celsius above pre-
industrial levels while striving to achieve achievement of 1. 5 degrees Celsius. This is an
audacious goal and requires systemic policy shifts and concerted efforts from across sectors and
borders. As MNCs are already aware of how crucial the global climate change issue is, those
companies are adapting to the new trends and challenging policy environments. Today, virtually
all businesses are set on carbon neutrality goals, which makes it obligatory for them to minimize
their carbon footprint drastically. Secondly, global supply chains and investments are being
recoded by MNCs in a bid to embrace sustainability.The synchronization of the MNC strategies
with the changing environmental policies present a larger awareness of pragmatic link between
business advancement and sustainability in the environment.
V. Labor and Social Policies
5.1 Labor Laws
MNCs are capable of having a significant impact on labor standards since they engage
policymakers through lobbying or advocating for favorable laws or policies in support of labour
standards. An aspect where they affect labour legislation is through lobbying for the appropriate
bureaucratic policies that favors their companies like fluid labour markets and limited welfare
legislation. For example, MNCs may seek an outcome that would be favorable for labor mobility
and fluidity, which not only tends to be counterproductive to workers’ rights and job security
(Gallagher, 2014). Through their global purchasing muscle and their positioning in national
economies, MNCs have the ability to lobby governments into adopting labor relations policies
that would be conducive to the organizations efficiency and performance. Another domain in
which MNCs interfere with labor legislation is in matters to do with bargaining for collective
employment, the minimum wage and monetary contracts of employment. Firms may pressure the
government not to allow unions to exert too much influence or to support methods of
determining wages that focus on the minimal costs to the employer rather than the due
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remuneration to the employee. This influence means that the governments may end up creating
regulatory conditions that favour MNCs’ main economic objective of profits, rather than
ensuring that workers’ rights and welfare of the workers are protected. For instance, MNCs may
call for legalization of labor market reforms that undermine collective bargaining systems and
thus frustrate the unions in bargaining for better wages and employees’ conditions. Bearing in
mind that the public is the primary consumer of information, MNCs endeavour a lot in public
relation strategies that will ensure that the public support the policies it has in place as far as
labour is concerned. These campaigns can put labour market flexibility in a positive perspective
that is, a requirement for economic growth and employment generation and thus create the
necessary constituency for liberalization. It is also important precisely because the positive
scenarios perpetuated in such fashion can also deflect attention away from the potential adverse
effects on workers, such as job insecurity or stagnant wages. In terms of the direct investment
and business activities carried out by MNCs, labour laws can be greatly affected. Through the
process of investing in nations that recognize more agreeable labor legislation, MNCs can
exercise pressures within the international market system, which pressure encourages other
nations to replicate the equivalent legislation.
5.2 Wage Influence
Thus, the pressure on wages is high when it involves MNCs, especially in those industries in
which the number of MNCs is rather large. When the MNCs pay more or less, they actually are
acting as a reference point versus which other companies, within the local economy, can adjust
their own wages as appropriate. It is equally important to note that MNCs’ wages have overtime
gone further than direct employment to subcontractors and supply chain partners. They may also
cause direct pricing pressures that force the subcontractors to downsize – cut on the wages of its
workers or outsource its labor force with low wages in other regions. This dynamic can
perpetuate wage decline and wage disparities between men and women as well as among
employees in different countries, erode the ability of workers to attain decent wages and fight for
their rights. The onward impact of MNCs’ wage policies therefore reach out not only to their
own employees but the entire supply line of workers. This influence can also worsen the
economic conditions since most local subcontractors and suppliers struggle to balance the tight
financial requirements and demands set by the MNCs they support. As such, some of these
supply chains workers may be exposed to low wages and poor working conditions. This not only
helps keep wages low but also, if pulled off as a strategy to slow demands for higher wages, can
even hamper economic growth as it limits the purchasing power of a good segment of
employees. Further, cost reduction drive weak institutionalization of labour and commodification
of employment leads to more subtle and precarious conditions that re-enact inequalities and
economic vulnerability as dominant colonial legacies. The power MNCs exercises in wage
setting thereby disempowers local groups seeking to make fair wages a workplace reality. It
becomes rather difficult for governments and labor organizations in a host country interested in
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setting minimum wages or fair wages to support workers, as these MNCs are capable of lobbying
against such measures or go around it by using their economic power.
5.3 Working Conditions
The situation concerning working conditions in MNCs’ operations depends on their policies and
practices. Some Multi-National Companies may care more for the worker safety, health and
welfare while others may be more interested in cutting costs and increasing efficiency even if
this means terrible working conditions. For example, issues such as long working hours, absence
of occupational health and safety standards, and weak employment rights got raised with special
reference to some industries and geographical locations where MNEs are most vibrant (Locke,
2013). Moreover, MNCs supply chain is a critical determinant of working conditions especially
in garment, electronics and agriculture industries. This is because MNCs strive to meet their
production targets and costs, and as a result, they engage in labor rights abuses such as forcing
compulsory labor, child labor, and working under dangerous conditions. Many industry suppliers
and subcontractors face cost cutting and time constraints in the construction process and may be
tempted to compromise safety measures or use substandard workforce to retain their contracts.
Strategies aimed at enhancing working conditions in MNCs and their supply chains may involve
multi-stakeholder engagement encompassing MNCs, governments at the country of origin and in
the host countries, civil society, and labor unions. For instance, programs such as the FLA and
the ETI, are basically involved in the development of international standards for labor practices
and enforcement of the same by conducting annual inspections and even producing annual
reviews.
VI. Case Studies
6.1 Tech Giants, USA
In the recent past, leading multinationals like Apple, Google, and Amazon which are based in the
USA provide an example of how MNCs impact on labour laws/employment relations. These
firms are best known for exerting a lot of pressure with aim at influencing the nature of
regulations that can facilitate their operations. For example, in Silicon Valley, high-tech
organizations have supported the legislative frameworks from labor rights policies that
encourage work flexibility and take on union power. The manufacturing aspect of Apple’s
operations, especially regarding Foxconn in China, exemplify another dimension of their effect.
Through research carried out, information has emerged showing appalling working conditions
such as long working hours, inadequate safety standards, and low wages even though companies
earns hefty profits (Chan, Pun, & Selden, 2013). However, there is still a sense of doubt
regarding the true nature of these reforms and whether they are sufficient enough to see Apple as
being highly CSR aware and motivated to change. The situation in the Foxconn factories
increased to a level of international concern regarding employee’s working conditions,
particularly with the reports of numerous worker’s suicides due to the incredible pressures they
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faced. To address these concerns, Apple has resorted to conducting audits and offering worker
welfare programs to the suppliers; however, according to the critics, these efforts are largely
inadequate, and at times, can be misleading mainly for the purpose of creating a good image to
the public (Chan et al. , 2013). Amazon has been known to have a vast logistics, and fulfilment
centres have been similarly accused of inhuman treatments. Some of these are fatigue, long hours
of work, high pressure and forced low break times as experienced by the employees. Also,
Amazon has been an anti-unionism company which says that it is better for the workers to
directly discuss with the employers than with a union. It does affect primarily the labor rights
and wages in the context of the provided industry (Evans, 2020). Employees have also claimed
that Amazon ware houses is a harsh workplace where employees are under enormous pressure
through forced targets, surveillance techniques. Attempts to organize have been waged at
Amazon centers, and these attempts have been highly suppressed by the company.
Here, it is pertinent to rediscover that these giants do not only affect the communities in which
they operate in terms of their immediate business and market but also what happens in the labour
market and regulating systems. Google for example has in the past been engaging in lobbying
related to policies such as labor relations and policies, and polices relating to immigration which
are fundamental need for a cheap and skilled talent. The action in polices that are fit for the
operations of the firm may not always harmonize with what is good for labor rights and
protection. Using data on MNCs’ subsidiaries in 118 developing countries on human rights,
democratic accountability, and rule of law, Chu and as pointed out that MNCs seek for a weak
regulation to achieve higher profits for their organizations, but that usually leads to workers’
poor treatment. The calamity experienced by the Bangladeshi apparel industry indeed
demonstrates this point perfectly. Today, retailers such as H&M and Zara have been accused of
sourcing products from factories with work-related that are deadly such as the Rana Plaza
tragedy that took over 1,100 lives in 2013. From this tragedy, it was evident that there should be
stricter labor laws, policies and the capacity to implement those (Barrett, Baumann-Pauly, & Gu,
2018). However, subsequent advancements in curbing adverse compromises in safety standards
have continued to face various setbacks, including the aptly Recognised Workplace Safety
Accord for Fire and Building Safety. In the agricultural sector too, such companies like Nestlé
have also been accused of exploitation in their dealing with workers through cocoa production in
West Africa. Abuse of children through working has been widely reported and as a result of this
there has been put in place legislations such as the Harkin-Engel Protocol meant to address the
worst forms of child labor. Nonetheless, compliance is still rather random, and financial concerns
lead to revisiting local providers, resorting to unfair treatment of employees
and<|reserved_special_token_265|> wage rates (Fitzpatrick, 2018). This is exacerbated by the
fact that currently, many MNC have supply chain systems in the operational countries, within
which they may not have full authority or oversight, and it may be difficult to implement ethical
policies consistently. As observed earlier, the electronics industry in the South-East Asian
nations, such as Malaysia and Thailand, has not been immune to these challenges. Many
corporations in Japan and South Korea have been associated with factories where workers are
14 | P a g e
subjected to working for extended periods and worse receive very little pay and work under
terrible conditions, for instance, Samsung and Sony factories. This is further compounded by the
use of labour brokers, who relate directly with migrant workers, demand for high Recruitment
fees and result to debt bondage and forced labour as highlighted by Moss in 2018. Today’s
technology giants are highly politically influential, and they advocate for policies that deregulate
the labor market and allow their operations to be flexible and innovative, as seen in the American
case. This has led to a regime that fosters high productivity standards, but more often than not,
productivity comes at a Social cost to the working population and firms’ tendency to undermine
the presence of Trade Unions (Waddell 2020; Evans 2020). On the other hand, MNCs use a low-
cost production strategy in developing nations since those nations’ regulatory bodies and
economy have not developed steadfast mechanisms for resisting such actions. The elongated
causal chain at the end of the case of the apparel, agricultural, and electronics sectors unveil that
the poor enforcement of labor laws and pressure from the global economies had compromised
the decent working conditions and labor rights (Barrett et al. , 2018; Fitzpatrick, 2018; Moss,
2018). However, certain theoretical activities have similarities on a strategic level. Int’l business
environment sees MNC adopting low cost drive and operational adaptability even if it means
prejudicing on labor rights. While some progress has been made as a result of public demand and
special interest groups, the improvements that have ensued have typically been piecemeal and in
response to change rather than changeAgents active seeking of innovation.
6.2 MNCs in Developing Countries
The reason being that, MNC’s operating in developing countries tend to exploit relatively more
lenient regulation for asserting higher profit margins, most on the cost of the workers. It is most
markedly exemplified by the apparel industry in Bangladesh. I was appalled to learn that big
brands including H&M and Zara provides their contracts to factories with detrimental working
conditions. This was sadly driven home by the tragedy of Rana Plaza in 2013 which led to over
1,100 deaths. The disaster evidenced the need for better labor relations and very effective judicial
frameworks to safeguard employees in such sectors (Barrett, Baumann-Pauly, & Gu, 2018). In
the agricultural sector, key corporations like Nestlé have been under pressure for their methods
of blanching their employees particularly in West African cocoa fields. Several cases on
exploitation of children through labour and exploitative working conditions have led to such
protocols such as Harkin-Engel Protocol that seeks to eliminate worst forms of child labour.
However, there is scanty enforcement that makes it remain an issue of concern to this day. Quite
a number of local suppliers will have to cut corners to be able to create competitive advantages;
this means that they pay the workers poorly and in the process continue the cycle of poor labor
practices as a result of pressure from economic factors (Fitzpatrick, 2018). The electronics
industry in countries like Malaysia as well as Thailand has also experienced the same. Samsung
and Sony are among the companies that have been associated with factories where workers are
made to work for long hours, earn less wages and are not protected from hazards that may occur
in their workplace. The plight is compounded by labor brokers, a loophole that exploitative
15 | P a g e
Migrant workers through high recruitment fees that put them under debt forced labor. Such
practices call for better regulation and sanctions aimed at safeguarding workers in vulnerable
industries across the glob supply chains (Moss, 2018).
As it has been discussed in this paper, MNCs have both positive and negative effects on labor
conditions in DCs, which are worth considering. In the case of the apparel industry for instance,
the pursuit of cheap labor results in outsourcing events to factories that have poor standards
regarding safety. The Rana Plaza disaster, after the disaster there was public and political
pressure and more attention was made on the working conditions in garment factories. This has
led to what can be described as independent efforts such as the Accord on Fire and Building
Safety in Bangladesh which is a legally binding instrument on safety in the sector. In the
agricultural sector, the use of child labor is not the only exploitation but also other working
conditions for all other working adult individuals. Despite the progress made over the past
decades, large companies like Nestlé and its peers have received increased pressure with regard
to labor conditions of their supply chains. Nevertheless, efforts such as the Harkin-Engel
Protocol signify some progress in that respect, but the practical application of these measures is
often complicated by lack of compliance and continuity of the same combined with lingering
economic vices that facilitate exploitation. Essentially, suppliers and growers, focused on serving
large outlets, may decide to employ frail labor as a method of controlling production costs
(Fitzpatrick, 2018). Another sector where labor abuse continues to thrive is the electronics
industry mannered by an intricate and frequently opaque value chain networks. Thus, labor
brokers who often demand high fees for recruitment result in debt equals situations where
migrants become bonded workers who remain in unfree labor for years. This issue can be felt
most keenly in countries such as Malaysia and Thailand since a good number of industrial
workforce in electronics manufacturing hails from other countries. In the comparative analysis of
MNCs in developed and developing countries, it is very apparent that these corporations follow
different trends in relating to the issue of labor. As observed in the tech hub of the USA, human
capital management is increasingly controlled and dictated by the influential political and
economic muscles of tech Players with resulting increased tendency to reproduce models of
labor regulation that align with production requirements without adequate regard to workplace
dignity and rights of workers. In contrast, in the developing countries, because of the minimum
regulation and economy instability, the MNCs continue their low-cost production that actually
violates labor rights in many forms. To address these problems, everyone, right from the
government to the civil society organizations and the MNCs should come up with means on how
they can improve working conditions throughout the world.
6.3 Comparative Analysis
Analyzing MNC’s in the developed and developing world shows them to be different and at the
same time similar in their effects on labor policies and employment status. In the USA, key
technology companies exercise significant political power to patronize labor relations,
privileging business dynamism over standard-setting employee protection. This has led to a
16 | P a g e
favorable regulatory situation that promotes high productivity, though at the cost of employees
and their unions where necessary, as pointed out by Waddell (2020) and Evans (2020). On the
other hand, in developing nations, MNCs tend to leverage compromised legal jurisdictions and
strategic economic susceptibilities to sustain efficient supply-chain operations. The apparel,
agricultural, and electronics industries also show how a weak application of labor laws, along
with the desire to operate profitably, results in poor working conditions and abuses of labor
rights (Barrett et al. , 2018; Fitzpatrick, 2018; Moss, 2018). Nevertheless, there are common
trends in strategising. In both cases, there are tendencies towards cost reduction and managerial
flexibility, sometimes to the detriment of employees’ legal protections. Some changes in nursing
care have arisen out of public pressure and advocacy but such changes are mostly made in a step
wise manner and in response to existing complaints. It is also remarkable that the role of CSR
initiatives is different as well. Concerning the USA and other developed nations, CSR programs
can mainly be used to create the image that the firms are socially responsible as a way of
responding to societal pressure while in the developing nations the CSR can mainly be as a result
of calamities or from immense pressure from the international community (Chan et al. , 2013;
Barrett et al. , 2018). Nevertheless, the ability of CSR to actually change labour relations for the
better remains in doubt if there is no stringent regulation as well as demands for higher corporate
responsibility and ethical compliance. As the circumstances, and the struggles vary, there is one
commonality: companies’ demands take precedence over robust employment rights.
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