Transnational Corporation and Corporate Crime

Subject: Law
Type: Classification Essay
Pages: 4
Word count: 1177
Topics: Crime, International Business


Corporations that are registered and operate in multiple countries at a time are called transnational corporations. Another name for a transnational corporation is multinational corporations. Typically, a transnational corporation has its head office in one country and partially or wholly owns and operates subsidiaries in multiple countries. Globalization has occasioned in numerous companies buying or setting up operations in other countries. The majority of transnational corporations originate from more economically developed countries such as the United States and the United Kingdom. Numerous multinationals corporations put up shop in other more economically developed countries, however, transnational also invest in low economically developed countries. Factors that multinational consider before investing in a country include the availability of cheap labor, cheap raw materials, good infrastructure, friendly government policies and access to markets for manufactured goods.

Host Nation Exploitation by the Multinationals

In the host countries, Transnational Corporations employ a more relaxed approach to legal provisions and standards of the host nation, something they would not do while operating from their native countries (Bennett, & Sharpe, 2014). Developing countries which are normally the hosts of these multinationals have less-developed legal provisions that can be easily manipulated. Transfer of the manufacturing actions, production hazards, and industrial violations by the multinationals has caused a lot of distress to the less-developed countries primarily due to these nations’ inadequate consciousness and legal control on pertinent subjects such as employment and labor rights, consumer protection and the environment.

Working Condition

Conditions of the workplace provided by the multinational to host nation have been one of the biggest industrial hazard the transnational corporation export to the less developed countries. While the same company could employ the workers, the working conditions in the host and home nation are very different. Multinational Corporation usually follows the regulatory provisions on employees working condition more strictly when dealing with a worker in the country of resident (Jenkins, 2013). However, they take a laid-back attitude when dealing with employees from the host nation, taking advantage of the less-demanding or strict labor-related laws from the host nation. However, the issue of how the multinational is criminally culpable is complicated and must be viewed from different dimensions. Multinationals could be providing better working conditions to employees in the host nation compared to local companies. Additionally, the employees of the transnational corporations could be rationally remunerated regarding higher wages and allowances, compared to other workers in the same conditions, but working for local companies.

Environment Pollution

Multinational Corporation that operates high-pollution industries favors setting up their manufacturing facilities in countries with lower pollution cost controls and environmental standards, in a case now considered as pollution export (Moore, 2016). Multinationals Corporation portrays a very irresponsible attitude in observing environmental standards of the host nation. However, in the country of residence where the laws are strict, Multinational Corporation tends to behave responsibly. Hazardous waste from developed nations is finding its way into the underdeveloped countries. Most host nation’s environmental authorities lack the capacity or political will to supervise the multinational corporations, further aggravating an already grave scenario.

 Multinationals normally feel justified to act in this manner, sighting the laxity in the regulation formulation and the fact that even the local companies violate these regulations (Baum et al., 2016). Transnational Corporation are expected to use some of the huge profits they generate from the production units in the foreign countries to mitigate some environmental damages they cause even if they appear to follow the lax regulations. Societies from the host nation expect the multinational corporation to set a good example which the local smaller enterprises can emulate, in their endeavor to achieve maintainable development.

Consumer Safety

Sales of unsafe products to the consumer such as non-prescription drugs, products they would never sell in their countries of origin such as the United States or the United Kingdom due to their dangerous contents is a critical issue. However, these products end being sold to a substantial market somewhere else (Leipziger, 2015). Hazardously chemically preserved products, poorly finished mechanical products, insufficient information on products use that have the capacity to cause injuries and even death are among the many examples that are associated with the profit oriented multinational corporation, who lay more emphasis on profit at the expense of consumer safety. Prosecution of these transnational corporations due to these deaths or injuries is hampered by weak or inadequate regulation on consumer safety in the host nation. Multinational corporations are always on the lookout for nations with lax or non-existent laws that govern consumer safety to sell products they would not sell to their nation of origin.

Indirect and Direct Influence by Multinational in Regulation Formulation by the Host Nation

Due to the high competition among the developing countries trying to attract these multinational to set up their activities in their country, they try to put in place numerous incentives and strategies. Unfortunately, some of these incentives include, proposing slack guidelines on environment standards, the promise of lower costs of labor, limiting labor rights and imposing a low tax on pollution control or removing those controls altogether. Host nations in their quest to attract as many multinational corporations as possible even favor the transnational at the expense of the consumers, environment, and workers (Narula, & Pineli, 2016). Multinational Corporation even exerts pressure on the host nation to formulate its regulations in their favor. By application of monetary haggling control and strong influence, multinationals usually apply threats of disinvestment to have their way. 

Multinationals Corporation have been known to threaten investment withdrawal to countries that allow unionization of workers as this would complicate their business environment due to the union’s demand for collective bargaining. As the emerging nations rely on overseas investments to improve their economy, Multinationals corporations abuse such conditions to their advantage to effect political changes to have the friendliest regimes while suppressing the hostile ones who can jeopardize their interests.

Formulation of a Code of Conduct to Regulate Corporate Crimes

International politics have evolved as one of the most significant instrument to control the market process of multinational businesses between all the commercial stakeholders. The assertion that Draft Codes of Conduct on Transnational Corporations and the Guidelines for Consumer Protection under the guidance of the United Nation has altered the cross-border commerce into international politics is naive. In its draft form, however, the United Nation code cannot have the necessary clout to be able to control the behaviors of transnational corporations (Tricker, & Tricker, 2015). Multinational Corporation in developing nations should be encouraged to pursue policies that are designed on the basis of the local culture and conditions for it to generate better economic achievement in accord with the universal standards. A specific and unanimously accepted United Code should be formulated, that takes into account the need to balance ethical business environment and the desperate conditions developing countries find themselves in to mitigate the level of exploitation. International politics and market forces principles should be properly blended to come up with a code that can be acceptable to all stakeholders.

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  1. Baum, F. E., Sanders, D. M., Fisher, M., Anaf, J., Freudenberg, N., Friel, S., … & Sen, A. (2016). Assessing the health impact of transnational corporations: its importance and a framework. Globalization and Health, 12(1), 27.
  2. Bennett, D. C., & Sharpe, K. E. (2014). Transnational corporations versus the state: The political economy of the Mexican auto industry. Princeton University Press.
  3. Jenkins, R. (2013). Transnational Corporations and Uneven Development (RLE International Business): The Internationalization of Capital and the Third World. Routledge.
  4. Leipziger, D. (2015). The corporate responsibility code book. Greenleaf Publishing.
  5. Moore, F. (2016). Transnational business cultures: Life and work in a multinational corporation. Routledge.
  6. Narula, R., & Pineli, A. (2016). Multinational Enterprises and Economic Development in Host Countries: What We Know and What We Don’t Know (No. jhd-dp2016-01). Henley Business School, Reading University.
  7. Tricker, R. B., & Tricker, R. I. (2015). Corporate governance: Principles, policies, and practices. Oxford University Press, USA.
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