Interlocking Directorates Of Transnational Corporations

In modern society, it is evident that the globalization of business worldwide has had an effect on production possibilities. Globalization can have a very positive outcome on developing countries, and can be seen as first world nations lending a helping hand to economically suffering countries. However, companies that expand to a multinational level have been accused of exploiting lower income nations. North America is so advanced economically, that companies have been able to understand how to capitalize on international business opportunities. The board of directors of multinational corporations have power and control when deciding how to maximize business profits. “One consequence of the global economy is that a small number of businesses, operating internationally, now control a vast share of the world’s economic activity. According to one estimate, the six hundred largest multinational companies account for one half of the world’s economic output” (Kidron & Segal, 1991). It has been proven advantageous for companies to network with one another to maximize earnings and benefits.

A company’s board of directors is elected by and responsible to shareholders, but also stakeholders in the company, such as it’s employees and business associates. The board monitors the performance of the CEO and senior management to ensure shareholders’ interests are being served. The board must confirm that the CEO is providing effective leadership for the company both long and short term. As a CEO of a company that is constantly being evaluated by the company’s board, one must prove that his/her greatest concern is for the profit of the company’s shareholders. This implies that the CEO would do whatever he/she could do in order to maximize profitability. One avenue for this, is a global market structure.

Globalization can be an issue for any company with a large number of employees and breadth of countries in which they work. The global industry trend to relocate manufacturing industries to developing countries has many implications. On one hand, the inward investment in these countries is contributing to their economic development and reducing poverty levels in their populations. At the same time, concern and criticism surround the conditions for workers in factories in many of these countries. Standards of environmental protection may also be below progressive norms.

Through the creation of NAFTA, companies have relocated operations to other nations, where labour is inexpensive and employees are forced to work longer hours. In many ways, globalization has increased job opportunities, income levels, and enhanced technology and production in less developed nations. According to Motorola (2008), “the number of mobile customers in developing countries is growing twice as rapidly as in developed countries. Studies show that as the number of people connected to a mobile network increases in a developing country, its gross domestic product (GDP) benefits”. However, large transnational corporations, such as Motorola and General Motors, can increase their profits by exploiting these low-income countries. Quite often there are no political structures in place that protect the worker’s well-being or environment within these countries. Increasing the GDP in many nations does have a positive impact on the net social benefits of a nation as income per capita increases in relation to the increases in production. However, when countries are poorly developed economically, governments may struggle to allocate that income fairly. Thus, multinational companies that increase production in less developed countries help with national income, but may not be benefiting the country on the whole.

With regards to the automotive industry in our local economy, General Motors, the most profitable automotive company in the world is currently the third largest company according to the Top 200 companies in the Financial Post 500 (Finacial Post, 2008). The General Motors website (2008) lists thirteen members in the board of directors:

Percy N. Barnevik

Erskine B. Bowles

John H. Bryan

Erroll B. Davis, Jr.

Karen Katen

Kent Kresa

Ellen J. Kullman

Philip A. Laskawy

Kathryn V. Marinello

Eckhard Pfeiffer

G.Richard Wagoner, Jr.

Alan G. Lafley

George M.C. Fisher

Armando M. Codina

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It is very common that directors on boards not only work for one company, but serve as a director on one or many other boards. This is where capitalist profit-seeking becomes a problem. Board memebers have the resources to indirectly and even directly influence members that can influence others’ business decisions. This interlocking directorship could have a negative effect on the net social benefits of our society. Put into perspective, interlocking directorships are composed of well-educated, wealthy business men and women who have made a living creating the best personal financial situation primarily for themselves, while leading consumers to believe that they are supplying the best product.

George M.C. Fisher is on the board of directors for General Motors, Eli Lilly, Delta Airlines, and is a former president and CEO of Motorola (Eli Lilly, 2008). It is obvious that these are all unrelated industries; there is one automotive, one airline, one pharmaceutical, and one communication industry on his resume of directorships. It is in his own best interest to spread his network as far as possible, reaching into some of the most powerful companies in North America. By expanding this interlocking directorship, he can also influence council members of prominent policy making groups.

Armando M. Codina is another director of General Motors and is a director on three separate boards including GM, American Airlines, and Bell South (Forbes, 2008). Similar to Fisher, Codina is involved in unrelated business industries. There are countless individuals just like these men, that are not necessarily involved in the company because of passion or interest for that industry, but because they are excellent business men and women. They are knowledgeable in maximizing profit for both the organization and themselves, through interlocking separate