Legal Challenges Faced by Multinational Companies
Mulitnational companies, or MNCs, conduct business worldwide. While this model greatly increases the number of potential customers, it also requires companies to know the laws and practices of nations with which they do business. Different nations have different laws on human rights, environmental resources and competition -- all of which could make for greater profits or greater troubles.
Businesses based in the United States must follow strict laws regarding the treatment of workers, minimum wages, antitrust, anti-bribery, discrimination and environmental responsibility. Often, American companies find laws regarding these subjects much more lax in other countries. While U.S. companies remain bound to follow American laws regarding such activities as equal opportunity hiring, they may capitalize on lower local wages or safety practices that save them money. But though activities such as bribery might be expected in some countries, American companies remain bound by U.S. laws against such practices.
Nearly every country has its own tax system designed to earn money from companies doing business there. But though they are technically required to do so, some companies exploit loopholes and vague tax laws in order to duck paying taxes to host nations. Such tactics can cost host nations billions and can generate U.S. Treasury investigations into tax avoidance and evasion.
U.S.-based multinationals technically are forbidden from interfering with the public policies, governments and elections of other countries. Companies can, however, legally contribute to political candidates abroad as they may do at home. Legal and ethical issues arise when mega-corporations exert financial pressures on countries that depend on U.S. aid. Large multinationals may, for example, urge U.S. legislators to cut off aid to a country if certain environmental laws are not relaxed. And illegally influencing foreign policies can carry stiff penalties at home.
No two countries have identical definitions of human rights or treatment of citizens. This can complicate how multinationals operate within the laws of other countries. In the 1990s, clothing makers such as Nike faced domestic investigations over accusations that their foreign manufacturing sites used child labor, even though the practice was within the laws of the host nations. In 2001, a Sudan church sued Talisman Energy for having built roads and airstrips that were used in a civil war.