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Lecture 2

ECON 1010 Lecture 2: SOSC 1340 - Transnational Corporations


Department
Economics
Course Code
ECON 1010
Professor
Steven Edwards
Lecture
2

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Notes by: ANU J
Professor: Kean Birch Course: Business and Society (SOSC 1340)
Multinational Corporations (MNCs) / Transnational Corporations (TNCs)
- Key agents of globalization (international trade and FDI)
- Rise of capitalism and private corporate powers
- Sidelining the government
o Have the lost power to corporations?
o Erosion of democratic transparency and controllability
- How powerful are MNCs?
o Size of MNCs compared to countries
Walmart’s profits are more than Norway’s total GDP
Exxon > Philippines
GM > Bangladesh
Key Concept: Market Capitalization
- Market capitalization = value of a corporation
o Includes assets and liabilities, but not necessarily related to profits
o Distinguishes a publicly-listed corporation from other businesses
o Not all business are corporations
o Calculated by share price * number of shares
o Shares
Sell shares to increase capital
Shares give the shareholders ownership and voting rights
Pay out a dividend
Splitting up the profit by number of dividends
Companies buy back their own stocks
o Worldwide market capitalization crashed in 2008
Significant fall in the value of corporations
Global financial crisis made them lose about 1/3 of their value
Stocks go up and down all the time
Stock markets declined after the .com crisis and 9/11 in 2001 and 2002,
then rose, then crashed at the global financial crisis again in 2008; slow
growth resumed again
o Toronto Stock Exchange (TSX)
About 4000 currently, publicly-listed corporations in Canada
Why not list?
It’s expensive
Maybe it won’t actually raise capital (if no one wants your shares)
Sectors of the Economy
- Private sector (CORPORATION)

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Notes by: ANU J
Professor: Kean Birch Course: Business and Society (SOSC 1340)
o Privately organized for personal profits
o About 70% of people in Canada work in the private sector
o Sole proprietorship, partnership, private limited company (most common
business form in Canada), public corporation (publicly listed on the stock market)
- Public sector (STATE)
o Run by the state (the government)
o Public goods and collective goods (healthcare, education, etc.)
o Organizations (OPP), profit-making enterprises (crown corporations such as
Hydro One), agencies (food inspection agencies, etc.), government
(local/municipal,
- Third sector (SOCIETY)
o Not for profit
o Independent of the government
o Membership is voluntary: volunteers, donors, etc.
o Services that aren’t available through public or private sectors
Social welfare, environmental services, etc.
o Volunteer groups, charities, social enterprises, NGOs
Origins of Multinational Corporations
- History of MNCs (covered in the Korten reading)
o Starts as a social invention (not natural, they don’t exist outside of us inventing
them)
o Start out as a way to aggregate / consolidate financial resources to achieve a
public purpose (build bridges, canals, drain marshes, etc.)
o They have their own institutional agenda:
Profit-seeking
Self-perpetuation
o Historical origins
European trading companies (from the 17th century, and after) (called
joint stock companies) chartered by the monarchs of Europe in effort to
expand the European empire
Corporate charter given to companies by the crown
o Limits on borrowing money
o Limits on shareholder rules
Shareholders were liable for debts
Equal shareholder rights
o Given the ability to conquer territory (sovereign powers)
o Given a monopoly on trade routes
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