One of the most interesting articles I’ve read recently was a well thought out piece in The Economist on the retreat of the global company, which explores the idea that multinationals are decreasing in importance, with falling profits and ROEs causing sales to grow at a slower rate than domestic companies.
The article also points out that multinationals are now seen as agents of inequality, with the rise of protectionism providing one reason why the global operating model is under pressure. Also, the data show that nearly one in two of the general population agree that free trade agreements hurt a country’s workers, while 72 percent favour government protection of jobs and local industries, even if it means a slower-growth economy.
It’s clear that over the past few years, some, even high-profile, multinationals have contributed to the deteriorating image of globalisation. In fact, they have tended to let it down due to the market-driven and short term arbitrage of procuring resources where they are cheapest here and now and due to their aggressive approach to tax minimisation.
Other than the obvious and hugely worrying protectionist trend, the current retreat towards a more regional or even local approach seems to me to have a lot to do with people seeking trustworthy institutions to believe in and identify with. As neither countries and their governments nor regional supranational institutions such as the EU are fulfilling this role, there is scope for businesses to fill this void: an opportunity – and a responsibility. According to the latest Edelman Trust Barometer, those who are uncertain about whether the system is working for them tend to trust business more than government.
Further good news is that three out of four general population respondents from Edelman’s Trust Barometer agree that ‘a company can take actions that both increase profits and improve the economic and social conditions in the community where it operates’. Thanks to their size, reach and financial might, multinational companies have the potential to play a major, positive role, provided they appreciate what it is that makes people trust them.
One way in which multinational companies can build trust is in easing people’s anxiety about their future, particularly in terms of job losses and employability. Anxiety is mounting, and according to the Edelman Trust Barometer, these are the five key fears pertaining to job loss:
- 60% Lack of training/skills
- 60% Foreign competitors
- 58% Immigrants who work for less
- 55% Jobs moving to cheaper markets
- 54% Automation
These are all fears that companies can address, and my guess is that if companies decided it is a strategic priority to help their people maintain or improve their employability, the rest of the fears would largely dissipate. What might this look like? It could be to build learning platforms that cater for a broad range of skills and a variety of learning preferences. This is is doable for huge companies – and a lot less for smaller, local companies. Being proactive in helping staff reskill in the light of automation including when that means helping them become employable somewhere else is another example of what foresighted companies are already doing.
So let’s not write off global companies just yet – they can still decide to become a ‘business force for good’. As long as they make a conscious decision to do so.