SOME IMPLICATIONS OF THE WORLD COMPANY
BILDERBERG MEETING 26-28 April 1968
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I propose to approach the subject of the "internationalization
of business" by considering what I shall arbitrarily call the
seems to me more descriptive and less awkward than such
expressions as the "international" or "multinational"
corporation or company.
A "world company," as I use the term, is a corporation,
organized under the laws of a domiciliary country, that
characteristically engages in some industrial activity or
activities and that meets two standards:
does business all over the world - or at least in
substantially all non-Communist areas - obtaining its
capital and procuring its raw materials wherever they
are available under the most advantageous conditions,
producing wherever its goods can be most efficiently
manufactured, and selling its products in all the
markets of the world
management of the world company shapes its policies not
in terms of national economies but of the overall world
As thus defined, the
world company is perhaps more archetypal than real, but more and
more corporations are approaching the prescribed standards and
there will be even more tomorrow, since the evolution of the
world company responds to needs that are every day becoming more
At a time when the
demand for goods of every kind is multiplying almost at a
geometric rate while world resources remain finite, we must find
the means to use those resources with a maximum of efficiency
and a minimum of waste or face a Malthusian debacle on a global
It is to this end that the world company makes its unique
contribution, by enabling men for the first time in history to
deploy resources freely throughout the world in accordance with
principles of comparative advantage measured by the objective
standard of profit.
The inarticulate premise of the world company is that the
political boundaries of nation states are too narrow and
constrictive to provide adequate scope for modern world economic
in a thoroughly
pragmatic spirit businessmen have improvised the institution
they need to shake free from strangling political impediments.
To serve the global
activities of modern business they have exploited and extended
the fiction of the corporation - that artificial person which
lawyers invented so that entrepreneurs could do business with
limited liability and could thus mobilize capital from diverse
Originally the corporation was conceived as a privilege granted
by the state to serve its own political purposes, but over the
years the widespread acceptance of the institution has enabled
giant corporations to roam the world with substantial freedom,
producing and selling their goods in a multiplicity of national
markets, and begetting corporate offspring of various
nationalities in unlimited numbers.
Today we are just beginning to realize the potential of this
emancipated corporate person. For more than half a century a
handful of great companies have bought, produced and sold goods
around the world.
But since the Second
World War their number has multiplied manifolds.
Today a large and
rapidly expanding roster of companies is engaged in transforming
the raw materials produced in one group of countries with the
labor and plant facilities in others to manufacture goods it can
sell in third country markets - and, with the benefit of instant
communications, quick transport, computers and modem managerial
techniques, is reshuffling resources and altering the pattern on
almost a month-to-month basis in response to shifting costs,
prices and availabilities.
in these terms the world company provides mankind with an
instrument of high value.
Our task in these
proceedings, as I see it, is to consider how and to what extent
we can best preserve and advance that value within the present
and prospective world political structure without excessive loss
to other values in which many men place considerable store.
To be productive we must begin our inquiry by explicitly
recognizing the lack of phasing between the development of the
world company - a concept responding to modern needs - and the
continued existence of an archaic political structure of nation
states, mostly small or of only medium size, which is evolving
only at glacier pace in response to new world requirements of
scope and scale.
This lack of phasing
is responsible for most of the problems confronting the world
company, which, in broad terms, can best be considered with
respect to two sets of relationships.
The first concerns relations between the government of the
country in which a world company is organized and the
governments of the various host states in which it operates.
For a variety of
reasons - such as the desire to prevent evasion of its own laws
or the wish to extend its own jurisdiction as far as possible -
domiciliary governments frequently seek to control activities of
world companies even though those activities take place outside
their geographic boundaries.
Although the extraterritorial application of national laws -
which sometimes embody unshared national prejudices - is
inherently abrasive, bureaucracies arc frequently obtuse about
My own Government
created a sense of outrage particularly in Ottawa when it tried
- unwisely, I think - to restrict foreign subsidiaries of
American companies in their dealings with Red China.
Our Canadian friends
understandably resented this - though, to be quite fair about
it, they have, in their turn, not always shown maximum
sensitivity in their treatment of American companies.
Today the United
States Government is again stretching the principle by requiring
the repatriation of a substantial part of the monies that
foreign subsidiaries of American companies earn in various parts
of the world, thus creating anxiety among governments permitting
free movement of funds that countries restricting the
repatriation of earnings may benefit unjustly.
Much more serious problems surround the second type of
relationship - that between a world corporation and the
governments of the host states in which It does business.
International good manners would require that the corporation be
accorded "national treatment," which means that it should be
permitted to enjoy the same privileges, and be required to
accept the same responsibilities, as any citizen of the host
The Government of the
United States is a party to forty-four
Treaties of Friendship,
Commerce and Navigation or similar treaties which incorporate
Abstractly stated, this is sound doctrine, yet sometimes,
because it does not fully respond to reality.
It is honored more in
the breach than the observance. No words in a treaty can alter
the fact that the absentee management of a world company will
not view its problems within the same frame of reference as a
The concern of a corporate management is with the total
operation of a wide-ranging enterprise, only part of whose
activities take place in the host state.
The responsibility of
a local government, on the other hand, is for the health and
progress of the national economy to which the world company
frequently contributes only a very small share.
In addition, it is
subject to emotions of national pride, to pressures from local
interests claiming special advantages, and - if it is the
government of a newly independent state - to an almost
pathological fear of foreign economic dominance that might lead
to what is mystically referred to as neo-colonialism.
Obviously the world company creates quite different problems for
the new, poor nations of the Southern Hemisphere than for the
industrialized countries of the North.
Since a world company is
more likely to be the dominant element of economic power in a
small nation than a large one, the prosperity of many
less-developed countries is left heavily dependent on decisions
made by managements of world companies located five or six
thousand miles away.
When as is so often
the case - an extractive industry is involved, the problem is
given an additional emotional overlay by the fact that the world
company disposes of what is traditionally regarded as the
Problems of this kind have been brought into sharper relief as
countries just emerging into industrialization have begun to
make national development plans.
Often one of the principal assumptions underpinning a four- or
five-year plan is an estimate that a world company will do more
of its business in the host country than the distant management,
in fact, Intends.
Because these problems are part of the uneasy context of
North-South relations, they are confused by a wide range of
For purposes of our
discussion, therefore, we would probably be well advised to put
prime emphasis on the less cluttered problems encountered and
created by world companies in the industrialized nations of the
Even here, the context tends to confuse the answers.
The fact that, at
least for the time-being, most world companies arc domiciled in
America is a significant political element that infects economic
arrangements with national jealousies and resentments, in a
world bemused by symbols, some otherwise sophisticated Europeans
have been tempted by the cliché of "American economic
If, as I believe, the
world company has a great potential for good as an instrument
for efficiently utilizing resources, there need certainly be no
apologies for the sensible and vigorous way American industry
has organized itself to serve an expanding world economy.
entrepreneurs are doing, as I see it, is exactly what European
industrialists should be doing if the conditions existed in
Europe that would make this possible.
Hopefully these conditions are in the making.
Next summer for
the first time in history, goods will move with full freedom
throughout six nations of Western Europe to serve the needs of
200 million people.
Nor is this the end of the process, since,
in spite of the counter winds of nationalism blowing with gale
force from one European capital, I have no doubt that within a
few months or a year
the European Community will be expanded to
include Great Britain and very likely several other important
European trading nations.
Yet, great as is the achievement up to this point, it still
falls far short of what is needed. I do not believe that
European business will be able to hold its own under the
conditions of the future unless an environment is created that
will make Europe a seed bed for new world companies.
the so-called "technological gap" and concern at the so-called
"American invasion" reflect little more than the fact that many
American companies possess the size and resources necessary to
play an efficient world role while most European enterprises do
Until Europe achieves greater political unity I doubt, however,
that European business will be able to make adequate progress
toward a more ample structure.
It is deeply disappointing, for example, that, with the
of Rome already ten years old, social, fiscal and legal
complications still make mergers across national lines
difficult, if not impossible.
Yet until such
international concentration does take place and a modern
structure of enterprise is created, few European companies will
achieve the scope and resources needed to serve our modem world
economy with full efficiency.
I would hope, therefore, that the lesson in M. Servan-Schreiber's
recent book "Le
Défi Américain" will be taken to heart and that the
so-called "American invasion" will be regarded not as a threat
but as an incentive to the achievement of a modem structure of
Such a development would be welcomed in the United States, where
nothing could be healthier than a European counter invasion. If
European companies - at the same time great world companies -
were presently busy buying American corporations and
establishing production sources in Detroit and Pittsburgh and
Kalamazoo, it would be to everyone's advantage.
It would mix more
eggs in the political omelette, while the counter flow of
European direct investment capital would help significantly in
bringing the American balance of payments into equilibrium.
I believe, therefore, that the development of a modem structure
of enterprise in Europe - which is probably not possible without
greater political unity - is far the best way to ease the
problems of the world company in the advanced nations.
To be sure some special difficulties would remain in certain
geographic areas or industrial sectors.
still be encountered were world companies to dominate those
types of industry psychologically associated with national pride
- such as automobiles and computers.
And in Japan, where a
whole industrial economy is balanced precariously on a tiny
capital base by the subtle operation of "administrative
guidance," fears would probably persist that world companies
under absentee management
To realize the full promise of the world company it is not
enough for us to liberalize world trade (we have been making
significant progress in that direction for the past thirty
years), including the free movement of capital (here my own
government has recently backslid).
We will also need to
find ways to assure peaceful co-existence between two
overlapping circles of authority:
corporate managements, and
local host governments.
This problem should not, however, prove beyond the wit of man.
The Roman church, as
M. Jacques de Fouchier reminds us, developed a form of
co-existence with nation states that lasted for centuries, and
Professor Raymond Vernon has recalled also the overlapping
sovereignties of the governments of Europe and
the House of
I doubt, however, that we can gain much wisdom from those
analogies. We are going to have to search for some new and
different techniques to fit the world company into the existing
A limited amount can be accomplished, of course, by improved
Over the past few years many
companies have sought, by trying to establish themselves as
useful citizens of host countries, to mitigate the prejudices
and fears they might otherwise engender.
Most of their thinking
has been in terms of protective coloring.
Should not the
company take local partners?
Should it not
list the shares of its subsidiaries on local exchanges,
employ local managers, and try to behave as though its
corporate children were national companies of host
countries which only distantly acknowledged their
Ideas such as these have been adopted with varying degrees of
Efforts to achieve a local identity should not be
rejected out of hand, though clearly they are more suited to
certain types of corporate activity than to others.
Yet, in many cases, the costs of seeking recognition as a local
citizen can be excessive. The peculiar genius of the world
company stems from its ability to view the world economy from a
single point of vantage and to deploy resources without regard
to national origin in response to a common set of economic
It is the
disadvantage of local partners that they are, in a sense,
enemies of such mobility, since their judgments are based on
benefits to the local subsidiary rather than on the interests of
the world enterprise as a whole.
Put another way, the
scope of their thinking is defined by the national economy
rather than the world economy.
This fundamental difference in attitude is almost certain to
produce conflicts over corporate policy affecting a wide
spectrum of issues that can be reconciled only through an
accommodation of interests at some cost to the full efficiency
of the world company.
Conflicts, for example, are likely to occur with respect to
A local partner may wish earnings distributed while the
management of the world company may wish to plow them back - or
vice versa. Or a local partner may wish particular facilities
expanded, while the world company finds it more profitable to
sell or abandon them.
management of a world company may well find itself wishing to
serve the market of a neighboring country not by production in
the host country but through subsidiaries located elsewhere.
Since the device of local partners is almost certain, therefore,
to hobble the ability of managements to gear their decisions
freely to the world economy, its indiscriminate use should not
Instead - rather than
attempting to develop a whole congeries of national
personalities for subsidiaries of the world company - it might
be wiser to approach the problem centrally by internationalizing
or denationalizing the parent.
Such a suggestion finds re-enforcement when one considers the
problem on a philosophical level as a case study in the
legitimacy of power.
Where does one find a
legitimate base for the power of corporate managements to make
decisions that can profoundly affect the economic life of
nations to whose governments they have only limited
Ever since the publication, in the early 1930s, of
Means' classic study of the divorcement of control from
ownership of great industrial companies, Americans have puzzled
over the problem of legitimacy in the domestic context.
Whence do corporate
managements (which are in practice frequently self-perpetuating)
derive the right to make decisions affecting not only the
inarticulate mass of shareholders but the economic welfare of
whole communities and the pocketbooks of consumers?
This question is far from simple even in domestic terms; when
translated to the level of world operations it acquires
additional layers of complexity.
Within our own national
boundaries, an industrial corporation is kept under substantial
regulation not only by state laws and regulatory agencies but by
the Federal Government.
For a world company,
however, there is no overriding political authority to oversee
the totality of its operations nor - and this is even more
important - is there any organic arrangement to prevent national
governments from interfering with the fulfillment of its role in
world commerce in the same way that the United States
Constitution - enforced by the federal judiciary - limits the
power of states to interfere with the fulfillment of the
domestic company's role in interstate commerce.
Let me be quite clear. I am not proposing a federal governmental
structure at the world level, or anything like it; I have spent
too much of my life on the exposed steppes of diplomacy and
international politics to have any faith in such ethereal
Yet, if we begin
modestly, there is no reason why world companies might not be
accorded some form of denationalized status by a multilateral
The essence of the suggestion is that those artificial persons,
which I have referred to as world companies, should become quite
literally citizens of the world.
What this implies is
the establishment by treaty of something in the nature of an
international companies law, administered by a body made up of
representatives drawn from signatory countries, who would not
only exercise normal domiciliary supervision but would also
enforce the kinds of arrangements that are normally included in
treaties of establishment.
Such an international companies law could set limits, for
example, on the restrictions that signatory states might be
permitted to impose on companies established under its sanction.
standard defining those limits would be the freedom needed to
preserve and protect the central principle of assuring the most
efficient use of world resources.
In suggesting the possibility of a multilateral treaty of this
kind, I would strongly urge against enmeshing it in the
machinery of the United Nations or even, in the first instance,
attempting to gain signatories outside the small circle of
the GATT it
would be regarded primarily as a mechanism for creating a code
of rules among the major trading nations, reserving the
possibility that, over the years, it might provide a world
charter as more and more of the less-developed countries adhered
to its provisions.
Obviously such an international company would have a central
base of operations.
It would not, like
Mohammed's coffin, be suspended in the air, since it is clearly
necessary that there be a single profit center. And its
operations in its home country would, of course, be subject to
local law to the extent that the organic treaty did not contain
I recognize, of course, that a company will not become
effectively a citizen of the world merely by a legal laying on
of hands. It requires something more than an international
companies law to validate its passport; the enterprise must in
fact become international.
This means among
other things that share ownership in the parent must be widely
dispersed so that the company cannot be regarded as the
exclusive instrument of a particular nation, which, in view of
the underdeveloped state of most national capital markets even
in economically advanced countries, is not likely to occur very
But, over the long
pull, as, in more and more countries, savings are effectively
mobilized for investment, companies should assume an
increasingly denationalized character, while we might, at the
same time, expect a gradual internationalizing of Boards of
Directors and parent company managements.
I offer these suggestions in tentative and speculative terms,
recognizing that these are not the only means through which a
solution may be sought.
One can envisage an
international treaty, for example, directed solely at resolving
jurisdictional conflicts or limiting national restrictions on
trade and investment. Yet an international companies act, as I
see it, has intrinsic merits. It offers the best means I can
think of to preserve for all society the great potential of the
Nor is such a proposal, after all, far beyond the realm of
It is merely an
adaptation in a larger arena of what is likely
to be created within the next few years in
companies law for the European Economic Community together
with a body of regulations to be administered by the
European Economic Commission.
Conceived in these
terms a world companies' law could serve a vital economic
purpose; yet at the same time its larger political implications
should not be wholly ignored.
business from national interference through the creation of
world instrumentalities would inevitably, over time, point up
the inadequacy of our political arrangements.
At least in a small
way it might thus serve to stimulate mankind to close the gap
between the archaic political structure of the world and the
visions of commerce that vault beyond confining national
boundaries to exploit the full promise of the world economy.
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