The Danger of Global Companies

Because heads of global companies are more responsive to the wishes of authoritarian regimes, authoritarian values are beginning to take hold in the U.S.
  • Transcript


Question: What should the role of the global corporation be? 

Clyde Prestowitz: We tend to casually talk about American companies. We think of GE as an American company, or Caterpillar as an American company. Of course these companies are headquartered in America—they’re chartered, their corporate charter is in America—but they’re really global companies and the CEOs of those companies, often they’re getting more than half of their sales outside the U.S., often more than half their profits outside the U.S. They have subsidiary companies or branch companies around the world. They have other constituencies. They have workers in China, or in Brazil, or France, or wherever. They have to treat those workers fairly, they have to deal with the Chinese government and the... and Brussels and Tokyo. So in a way, they’re almost quasi-sovereign entities; they're not countries exactly, but they have resources that far exceed those of most countries. And so they’re global players, and they’re allegiance is to their shareholders but not necessarily to any particular country. And I’m not saying that it should be because as I said, the CEOs do have responsibilities to a broad constituency. But, we as American citizens—and particularly officials in the U.S. government—tend to think of them as American companies in the sense having some kind of special allegiance or special obligation to the United States. 

Now, in talking about globalization over the last ten or 15 years we’ve had kind of a mantra—Bill Clinton actually popularized it—that globalization will make everybody rich and being rich they’ll become democratic, and being democratic they’ll be peaceful. Well, it looks as if people can be rich without being democratic, without having the rule of law. We thought that the global corporation would be the transmission bill of democratic values into authoritarian societies. But ironically and perversely, it seems that the transmission could be the other way. The head of a global company in Washington is a big political player, the CEO of a global company makes big political donations. He or she has an legions of lawyers and lobbyists. In the United States, with the rule of law, companies can challenge the government in court and win. They can stop the U.S. government. They can cause legislation to be written, they can cause legislation to be blocked or to be passed. They’re big political players. In Beijing, they’re not; in Riyadh, they’re not; in Singapore, they’re not; they’re supplicants. They don’t deal with a rule of law in Beijing, they’re careful about the relationships they have with officials. They have to stay on the right side. They don’t make political donations. They don’t have, they don’t challenge the governments in court. 

And so, in a funny way, the head of a global company is more responsive to the wishes and the desires of the authoritarian regime than of the democratic regime. And so, what’s beginning to happen is the transmission of authoritarian values into the U.S. regime. And those global corporations, who... frequently are on government advisory committees. So you have this funny thing where the government thinks they’re American companies and we have advisory committees for the U.S. trade representative and other officials and the heads of these global corporations come into advise the American negotiators. But you wonder, are they thinking about the interests of America or are they thinking about the interests of their corporations? And in thinking about the interests of their corporations, to what extent are they beholden to the desires of the authoritarian regimes? Again, I’m not trying to be critical of the CEOs, I think they’re in a very difficult position and I think many of them struggle. Jeffery Immelt of GE has voiced this. He’s talked about GE being a global corporation and yet, understanding that maybe shareholders are not the only obligation, maybe it has other obligations. It’s a difficult position for the CEO, but my main point is that in making policy for the United States, we need to completely understand the role of the global corporation and right now we don't. 

Question: Should there be a global entity in charge? 

Clyde Prestowitz: Well, in conjunction with other countries I’m not sure. That’s an interesting question actually. Maybe there should be some kind of a global chartering, corporate chartering mechanism. But for ourselves, I think that I would like to have corporations chartered with a federal charter, rather than a state charter and I would like to have a rule in the U.S. like the Canadian rule. In Canada, only natural persons can make political donations. I’d like to have only natural persons making political donations in the U.S. And I would like to see a revamping of the advisory committees in the U.S. government so that there’s a better mechanism for defining and considering the American interest rather than the corporate, global corporations interest.

Recorded on May 10, 2010
Interviewed by Jessica Liebman