Myths of our time: globalisation

[Ned]

JohnT, I got most of that from the NYTimes

http://www.nytimes.com/2003/12/25/business/worldbusiness/25euro.html?th

[St Leo]

WTO is anti-globalisation and pro-transnationalisation. It should be protested.

[JohnT]

Thanks, Ned.

Choice quotes...

"Europeans used to say, 'This could never happen here; such greed is limited to America,' " recalled Sophie L'Helias, a French lawyer who advises shareholders. "Now, for the first time, they are saying, 'This can happen here.' "

European corporate scandals have been wide-ranging, including a $1.2-billion fraud at Royal Ahold, the Dutch retailing giant; an uproar over executive compensation at Skandia Insurance of Sweden; and accusations of fraud at Vivendi Universal, which the company and its ousted chief executive, Jean-Marie Messier, settled this week with the Securities and Exchange Commission.

All these scandals had a strong American component. Ahold's accounting irregularities occurred at its U.S. Foodservice division. Skandia's problems came to light after a disastrous expansion in the United States. Mr. Messier's moves were driven by his hunger to turn a 19th-century French water utility into an American-style media conglomerate.

Note that of the three, only one of them is stated to have occured in America and none of the three are linked to "weak" American laws or regulations. As far as I can tell, "disastrous expansions" are not against the law, nor is a revamping of your corporate structure and purpose.

But let's ignore these little facts for a bit of foolishness:

All this has made some here skeptical that the answer to Europe's problems is to move toward an American-British style of corporate governance.

Me thinks that the skepticism comes from the following, not the above:

Some European companies have bucked demands by the United States that they comply with post-Enron rules, like a requirement that senior executives swear to the accuracy of their financial statements. Porsche, the German maker of sports cars, shelved its plans to list its shares on the New York Stock Exchange last year, rather than going along with the American regulation.

However, the following might be true now, but generally these tendencies swing back and forth:

Pliant boards, with too many insiders, are seen as another weak point in European companies.

This is a weak point in a lot of companies - for example, GM almost went under* in the early 1990's because of a rubber-stamping board, but after Roger Smith left and new chairman and CEO Bob Stempel did nothing to change GM's course (negative cash flows, too many investments in non-critical enterprises, insane union contracts, personnel issues including an odd bit of cronyism involving a most singularly inept officer, Lloyd Reuss), the outside directors, under the advice of their legal counsel Ira Millstein, did the unthinkable and literally took over the Company and the Board, even to the point of giving day-to-day orders to Stempel. This set a precedent that was soon followed by a number of America's blue chip companies, including IBM, Kodak, and American Express.

Sounds like the same thing needs to happen in Europe.

*That's probably a bit exaggerated, but the situation was quite bad.

[Tripledoc]

Well. A problem with European corruption versus American corruption is that I think Corporate America are much more vulnerable, since in all actuality they are relying heavily on foreign investors. So while corruption in Europe will have bad consequences for the European investment climate, corruption in the American economy will have a much more profound negative impact on the world economy as a whole. If you then add the structural weakness, the declining dollar, the trade deficit and it is clear that the demand for a squaky clean American business environment is much higher, than the demand for a similar European one. Not that I in any way would defend European corporations over American. Just making a reality check.

[Q Classic]

honestly? i'm all for globalization.

why does the sweatshop not bother me so much? because japan and korea had to go through it. england, germany, america, france, they had to go through it. is it possible for things to be any different? perhaps, if they bypassed industrialization and leapfrogged straight into info-based economies, almost like how parts of india are doing. is everybody going to be able to do that? no.

sweatshops suck, yes. so if you don't want to support those companies that use them, send your money elsewhere. others aren't so picky--or they don't have the luxury of being so picky, with stretched budgets and all. it's the way capitalism works. sooner or later, conditions will improve.

that said, there are parts of globalization that are just not good. such as those damned agricultural tariffs in europe and america. get rid of them.

[JohnT]

"structural weakness"? A phrase that says everything but signifies nothing. Definition, please.

Actually, I think that the demand for a "squeaky clean" business environment is necessary for both regions. It's interesting how the situation described in the NY Times article is akin to conditions in the US from 1865-1911 - no overarching "national" authority, with the states a hodge-podge of rules and regulations, some more severe than the others. I wonder who's going to play New Jersey and Delaware over there?

[Tripledoc]

By structural weaknesses I meant the declining dollar, and the trade deficit. The sentence was a bit confused I know.

I dont get the Delaware and new Jersey joke. Do you mean who will become de-industrialized basketcase states?

[Imran Siddiqui]

I dont get the Delaware and new Jersey joke.

From 1865-1911, Delaware and New Jersey attempted to out-do each other in having business friendly laws so corporations would come there.

[JohnT]

NJ and Delaware are two states that are known for "softer" corporate government laws than the others - that's why so many US corporations are chartered there (especially Delaware) even though they are based elsewhere in the country.

Back in the 19th century the State of Ohio convicted Standard Oil of monopolistic practices. In response, the Standard Trust was broken up into 20 companies (though the same owners were in control) and was recharted in New Jersey as Standard Oil of New Jersey. The reason why is because NJ was the only state that allowed "holding companies", companies who existed merely to hold stock in other companies, something disallowed by law in all other 40-odd states of the time.

[Tripledoc]

I see. Well, Denmark is the New Jersey of Europe then.

AND NO HAMLET QUOTES!

[Imran Siddiqui]

NJ and Delaware are two states that are known for "softer" corporate government laws than the others - that's why so many US corporations are chartered there (especially Delaware) even though they are based elsewhere in the country.

Not exactly true. For example Delaware has some stricter corporate laws. They pick Delaware to incorporate because of the history of corporate common law and familiarity of the judiciary with that law. Also some of the stricter corporate law allows for stability.

[JohnT]

Yeah, that should've been in the past tense... "were known..." My bad.

[Tripledoc]

Parent Corporations per capita.

http://www.nationmaster.com/graph-T/eco_tra_cor_par_cap

[JohnT]

Hey! Great site! Thanks for the link!

[Dinner]

Originally posted by Q Cubed
that said, there are parts of globalization that are just not good. such as those damned agricultural tariffs in europe and america. get rid of them.

How are agricultural tariffs part of gloablization? Globalization is the opening of markets to increased trade & commerce; tariffs would hinder that. Tariffs & subsidies are a hinderence to free trade.