7.4 Transnational companies

Along with the ICT industry, transnational companies are major drivers of globalisation. Most of the goodswe buy have been touched in some way or other by transnational companies, including most, if not all, of

The main aim of the great majority of transnational companies is to increase their company profits and thus please their shareholders.

Shareholders are individuals or organisations who own shares (also called stock) in a company.

In a sense, the shareholders collectively own the company. A shareholder, or a group of shareholders, has a say in what a company does – how much say depends on the number of shares they have in the company. The value of a company’s shares is determined by the price at which the shares are sold in the marketplace (the stock market).

Companies gain economic advantages through operating in more than one country. These include:

• having more control over the sources – and therefore the costs – of the raw materials they use
• being able to reduce labour costs, especially in industries that depend on labour rather than machines, such as clothing and assembling electronic goods
• paying lower taxes to governments
• increasing the size of their markets.

These advantages mean that transnational companies can become very large and wealthy.

These very large companies are often much wealthier than the countries they operate in.

This makes them very powerful, because poor countries depend on these companies to employ and provide their people with skills, pay taxes for the mining of their resources, and build factories and road, rail, sea and air transport networks.

Transnational companies can therefore help poor countries develop and protect their environment.

However, as we saw with conflict minerals in the DRC, this is not always the case. Some transnational companies are willing to sacrifice human rights and the environment in order to make a bigger profit.

A principle is an underlying value or rule that an individual or organisation uses to guide their decision making in their day-to-day life and work. For example, if the issue for a car manufacturer is to reduce waste, the principle could be: The motor company will design its vehicles so that all components of their vehicles are either reusable or recyclable. (The value is to eliminate waste and the rule is to recycle and reuse.)