Transcript Document
MNEs and Risk Management: history 723g33 [email protected] List of content • Multinational Enterprises (MNEs) and its power • The case of News Corp • The importance of corporate governance • Competitive advantage vs. disadvantage of MNEs Political power of multinationals • The Dutch East India Company (VOC) was the second multinational corporation in the world, was a chartered company established in 1602 (the first, the British East India Company, 1600). • Voc is 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 Shipyard of Dutch East India Company at ca. 1750 A bond issued by the Dutch East India Company, dating from 7 November 1623, for the amount of 2,400 florins Replica of the VOC vessel "Batavia" 1620– 1629 A modern reconstruction of the 18th century VOC Amsterdam: National maritime museum in Amsterdam Dutch East India Company • went bankrupt 1799 leaving a debt of 219 million Dutch guilders. • Changing patterns of trade and poor governance were major contributing factors in the demise of the VOC • The VOC failure to issue shares to raise further capital was one of its fundamental failings. Legacy of the VOC: what was left? • VOC offered a bureaucratic model for 19th century trading companies in terms of integrating commercial and colonial interests • VOC offered a paradigm for integrating a consensus and alliance model in the home country with the utilization of the natural and human resources of the host country • Learned from VOC, Dutch legislation requires the adoption of a 'balanced' approach to corporate management, the birth of the stakeholder model! • Having an army in the company is not an efficient way to run a company. Better leave it with the government. 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 Some facts: 1. 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. 2. “The hacking scandal” using illegal means to get to sensitive information. Nothing is sacred. 3. After the scandal broke out, the family 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. James Murdoch: deputy chief operating officer of News Corp 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 The scandal broke out. News Corporation (NASDAQ: NWS) Last Price Change Open 0.20 (0.603%) 33.17 33.37 Volume Previous Close 3,129,900 33.17 4:00 PM ET on May 21, 2013 Day High 52-Week High 33.49 34.12 Day Low 52-Week Low 32.95 18.52 Bloomberg News: James Murdoch sells News shares: May 16, 2012 • • • • • • • • James Murdoch, deputy chief operating officer of News Corp and son of chairman Rupert Murdoch, sold $US25.1 million of nonvoting shares in the company, capitalising on a 65 per cent gain in the stock over the past year. Mr Murdoch sold 752,000 Class A shares at $US33.32, representing more than a fifth of his stake, according to a US Securities and Exchange filing. Mr Murdoch still owns 1,644 Class B shares, which have voting rights in News Corp. The sale comes ahead of a proposed split of News Corp’s entertainment assets from the declining publishing business, where earnings sagged 35 per cent in the most recent quarter from the year earlier. The company’s lucrative cable-network division rose 17 per cent in sales for the period. This is James Murdoch’s second-biggest stock sale in the past six months. The executive, who made $US16.8 million in salary, bonus and stock awards last year, made a gift in December of 402,260 Class A shares to his charitable foundation Quadrivium, which deals in conservation and educational issues in developing nations. News Corp's shares have been on a tear since the company announced in June that it would spin off its newspapers and HarperCollins book publishing house into a separate company. Wall Street cheered because investors had long lobbied for the senior Murdoch to exit the paperand-ink business. The company split is expected to be complete next month. In recent days, News Corp Class A stock hit a 52-week high of $US34.04. Rupert Murdoch also has sold tens of millions of dollars in stock in recent months as the price climbed. Last weekend, Rupert Murdoch bought the Moraga Vineyard Estates in Bel Air. The 82-year-old tycoon announced the purchase on Twitter, but he stopped short of disclosing the price. The property had been listed for $US29.5 million. 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? The owner manager turned a blind eye on all this, is it wilful blindness? 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