Foreign Direct Investment
Theory and Political Risk
723g33
Yinghong.chen@liu.se
Political power of multinationals
• The Dutch East India Company was the
second multinational corporation in the world,
was a chartered company established in 1602
(the first, the British East India Company).
• the first company to issue stock and the
largest of the early multinational companies,
possessing quasi-governmental powers,
including the ability to wage war, negotiate
treaties, coin money, and establish colonies.
The downside of Multinational
Corporations
• Dumping strategy. Lowering the price to
compete with small enterprises and later raise
price,
• Price subsidies by government
• Endorsing bribe culture
• Too big to run.
• To big to fail
• Collusion with the local government
• pollution
The Wallstreet occupy protester’s view
1. MNEs are Greedy.
2. MNEs don’t follow the law. They are above
the law. Multinationals possess huge power
and huge cash.
Ex: Rupert Murdoch and News Corp
3. Corporations have no morality. As long as
there is a profit, nothing matters!
Do you agree with them?
Rupert Murdochs Media Empire
Rupert Murdochs Media Empire
Rupert Murdoch's family trust owns 38.4% of
voting class B in News Corp, a company that
publishes books, films and magazines and TV
programs.
“The hacking scandal” using ilegal means to get
to sensitive information
Tried to escape the public scrutiny.
The controversial multinational media
mogul
• Born 11 March 1931
• Attended Oxford University majoring politics
and economics.
• 1953 left Oxford to inherit a controlling share
in News Limited of Adelaide, Australia, upon
his father´s death.
• After 3 years he was making money and could
afford to buy other media firms. One of them,
the Daily Mirror.
The controversial multinational media
mogul, continues
• launched The Fox News Channel in 1996
• In 2005 Murdoch’s News Corp. purchased
Intermix Media Incorporated, owner of the
wildly popular online socializing hub,
MySpace.
• Murdoch also acquired controlling interest of
IGN Entertainment, a multimedia video-based
company that owns websites like AskMen,
GameSpy, and RottenTomatoes.
The controversial multinational media
mogul, continues
Amid controversy, in 2007,
Rupert Murdoch put up $5.6billion US Dollar (USD) bid to
acquire Dow Jones and one of
the most well-respected
newspaper in the country.
• News Corp has it plans to invest in the
Journal's headquarters in New York and
expanding its operations in India and China.
The controversial multinational media
mogul, continues
• While he was powerful, he also managed to
attract powerful enemies.
FOX News Network (FNN), the “fair and
balanced” ? Their right wing view was known.
The slogan “we report, you decide” is under
attack.
News Corp. (NWS)
-Nasdaq GS
19.63 0.05(0.26%) 25 May 21:00
On News Corp homepage:
Corporate Governance
“News Corporation's Board of Directors and
management are committed to strong corporate
governance and sound business practices.”
discussion
What would be the best ownership structure of
News Media?
(to best preserve Jounalist independence, to
best guard the public interest, etc)
What have we missed? Are journalists not the
uncrowned king anymore?
What to come?
“There will be a lot of noise, but at the end, not
a lot of change”.
-----Digby Gilmour, head of
telecommunications and media research at
C.L.S.A. Australia.
Related readings
A good book to read:
Wilful blindness: Why We Ignore the Obvious
at Our Peril
By Margaret Heffernan
Related sites
• http://www.newscorp.com/corp_gov/index.ht
ml
• http://www.youtube.com/capitalaccount