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Lecture

Transnational Corporations
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by Anu J
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Department
Social Science
Course
SOSC 1340
Professor
Kean Birch
Semester
Fall

Description
Anushree Joshi DAY 3 LECTURE – September 21 st 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) o Privately organized for personal profits Professor: Kean Birch Business and Society (SOSC 1340) Tutor: Julian Germann Anushree Joshi DAY 3 LECTURE – September 21 st 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 17 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 o Given the ability to grow business, acquire lands and other trading companies o Given the responsibility to exploit foreign territories, bring back to Europe to manufacture, send back to colonies to do business Professor: Kean Birch Business and Society (SOSC 1340) Tutor: Julian Germann Anushree Joshi DAY 3 LECTURE – September 21 st o Example: South Sea Company had a monopoly on South America trading, did no trading, people drove up the price of stocks, and the stock crashed: the South Sea Bubble in the UK  Example: East India Trading Company o Dutch and English o Denmark, Sweden, France o The English company waged wars  The Opium wars between China and Europe (forcefully opening up opium exports through violence)  Example: Hudson Bay Company o Now called “The Bay” o Ran by the British monarchs in the Dominion of Canada o Had initial sole trading rights in Canada  Example: London Company o Founded the Virginia colony - Corporate Revolution o Private business regime  Small, owner-managed firms existed th  Characteristic of British capitalism and industrial revolution in the 19 century  Followed by expansion of the British empire through small- to medium-sized, owner-managed firms o Corporate business regime  Watering down of certain limits in the corporation  Limited liabilities in the corporation  Shareholders not liable for debts of the corporation (unlike old joint- stock companies)  Companies don’t need to ask the Crown for a corporate charter; can incorporate themselves  Corporations are natural persons (one previous reading refers to this)  The owner is the owner  The CEO runs the company for the benefit of its shareholders  Initially, horizontal integration (buying their competitors) but then with the anti- something something, vertical integration came about Growing Overseas Investments - Types of investment o Portfolio investment  Dominant form of investment prior to WWI  Buying of debts or shares in companies overseas o Foreign direct investment  Investing in physical assets of other countries
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