1、CHAPTER 4THEMULTINATIONALENTERPRISECHAPTER 4THE MULTINATIONAL ENTERPRISETopics for this chapter:lStrategies for Doing Business GloballylThe Business FormlThe Multinational OrganizationlInternational Regulation of Multinational EnterpriseslHome State Regulation of Multinational EnterpriseslHost State
2、 Regulation of Multinational EnterprisesStrategies for Doing Business Globally:Exporting and Importing Exporting does not require having a subsidiary in a foreign nation,nor does it require a joint venture or partnership with a foreign business entity.Exporting creates issues of transportation,finan
3、cing,contracting,and obtaining correct export licenses.An exporter will need an export manager,foreign sales agent(国外销售代理）,or a foreign distributor（分销商）.Cargo ship loaded for another oceanic crossingStrategies for Doing Business Globally:Branches（分支机构）&Subsidiaries（子公司）Branch offices can be set up b
4、y foreign companies in the US by registering with the appropriate state agency.A company may hire a foreign agent to act as a company representative.The agent may:Conduct market analysis Engage in product promotion Serve as an import representative The laws of the host country determine what an agen
5、t may or may not do.Company is not subject to foreign nations regulations when all they have is an agent.Strategies for Doing Business Globally:Bank Branches China Merchant Bank has received approval from the Federal Reserve to open a NY branch.With the heightened threat from unstable banks,the Fede
6、ral Reserve is tightening the application process to establish foreign branches in the U.S.The foreign parent bank must be subject to comprehensive supervision by banking authorities in the home country.（母国）Licensing Intellectual Property（知识产权）and Franchising（特许经营）Licensing a companys intellectual p
7、roperty rights is a common way to gain entry into a foreign market.A license is a contractual grant of a legally recognized right.In addition to allowing use of material that is protected by patent,trademark,or copyright,the licensee may also be allowed to use:trade secrets（商业秘密）trade dress（商业外观设计）t
8、echnological methods,or（技术方法）business plans and processes.（商业计划和程序）The Business Form:In Civil Law States In civil law states,every form of business organization is a company（社团）.A company is an association of persons or of capital organized for the purpose of carrying on a commercial,industrial,or s
9、imilar enterprise.These companies may be a corporation or a partnership.Business Forms in Civil Law States In some civil law states like France,all companies are viewed as juridical entities(法人法人),meaning they have a legal existence independent of their owners.In Germany and the US,corporations are
10、juridical entities,but partnerships are not.A partnership(合伙)is a company of two or more persons who co-own and manage a business and are each liable to the full extent of their personal assets.Civil Law Partnerships In a limited partnership（有限合伙）（有限合伙）,at least one partner must be a general partner
11、（普通合伙人）with unlimited personal liability for the debts of the business.There must also be at least one limited partner（有限合伙人）who is liable only up to the amount of their investment.Some countries allow silent partnerships（隐名合伙）（隐名合伙）where one partner carries on the business in his or her own name wi
12、thout revealing the participation of a limited liability partner.Civil Law CorporationsTwo basic types of civil law corporations:1.Stock corporation（股份公司）:Can raise money in the public marketplace through the sale of freely transferable shares.Financial statements（财务报表）must be disclosed to the publi
13、c.a.Articles of Incorporation（公司章程）:instrument creating and defining a particular corporation.Must be filed with state agency at time of formation.Formation of Stock Corporationb.By simultaneous incorporation,promoters（发起人）form a syndicate to purchase the shares.Only after formation are the shares s
14、old to the public.c.A minimum capitalization（最低注册资本）is required.Civil law states generally do not recognize authorized but unissued shares.Entire capital must be subscribed（认购）before formal organization.Formation of Stock Corporationd.Once subscriptions have been paid,board of directors（董事会）are elec
15、ted at organizational meeting.e.After registration of Articles of Incorporation and notice of registration is published,the stock corporation comes into existence.f.Must be more than one subscriber,but shares can be transferred to anyone.France requires at least seven shareholders.Formation of Stock
16、 Corporationg.Once subscriptions have been paid,board of directors are elected at organizational meeting.h.After registration of Articles of Incorporation and notice of registration is published,the stock corporation comes into existence.Formation of Stock Corporation i.Shareholders:1)Elect board of
17、 directors2)Review annual statements3)Declare dividends（红利）j.Quorum（法定人数）:Number of persons or number of total shares represented,that must be present at a meeting for official action to be taken.k.Financial statements（财务报表）are public.Civil Law Corporations2.Limited Liability Company（有限责任公司）（有限责任公司）
18、:A corporation that does not issue negotiable share certificates and is subject to minimal public disclosure laws.a.Popular corporate business entity.b.Widely used for setting up subsidiaries.c.Formation is similar to corporate formation in France and Germany.The LLC files Articles of Incorporation,
19、capital is subscribed,organizational meeting is held,board of directors is elected,articles are registered.Limited Liability Companiesd.Minimum required capitalization varies from country to country.e.Investors are called members,not shareholders.f.Members do not own shares,they own a participation.
20、g.Members meet informally if agreed.h.Transferring ownership is difficult and may be subject to“right of first refusal”（优先购买权）of other members to purchase.Business Forms in Common Law States:Common law states include England,the US,and British Commonwealth countries.Common Law Partnerships:Associati
21、on of two or more persons who co-own and manage a business for profit.Each partner is liable to the full extent of their personal assets for debts.Not a tax-paying or juridical entity.Income of partnership is allocated to partners as personal income.Common Law Partnerships Limited Partnership（有限合伙）C
22、onsisting of one of more general partners who manage the business and are liable to the full extent of their assets and one or more limited partners whose liability extends only to the amount of their investment.Limited partnership is not a juridical entity.Secret partnership（隐名合伙）participation of o
23、ne or more partners is not disclosed to the public.All of the partners have unlimited personal liability.Common Law Partnerships:The Limited Liability Company Recognized only in the United States.The LLC is an unincorporated association that is treated as a partnership for tax purposes and provides
24、limited liability for its members.Popular because not subject to corporate taxation.Members in LLC may participate in management without subjecting themselves to personal liability.Limited Liability Company May delegate management to managers who do not need to be members of the LLC.Formed by filing
25、 Articles of Organization with the state.Must file yearly report but pays no yearly franchise tax or income tax.Management set out in Operating Agreement that is not a public document.Agreement deals with voting rights,right to distributions,and restrictions on transfer of members interests.Common L
26、aw Business Trust（商业信托）Business arrangement that exists only in the US in which:Owners of a property,known as beneficiaries（受益人）（受益人）Transfer legal title（普通法上的所有权）to that property to a trustee（受托人）（受托人）Trustee manages property for them Beneficiaries hold transferable trust certificates entitling the
27、m to income generated by the property and a residual equitable share at the time the trust is terminated Trustee has unlimited personal liability Beneficiaries have limited liabilityCommon Law Corporations The three kinds of common law incorporated business entities are:Public corporations Private c
28、orporations Limited liability company Some common law countries also recognize:Unlimited liability corporations No liability corporationsPublic CorporationsRecognized throughout the common law world.Organized by filing two documents:1.Memorandum of Association（组织大纲）describes the basic details of the
29、 firm.2.Articles of Association（组织章程）describe the internal regulations of the corporation.In England,only two subscribers are needed but there is a minimum capitalization requirement of 50,000.Public Corporations In the US,there only has to be one subscriber and there is no minimum capitalization re
30、quirement.May issue a larger number of shares than are needed to start.Authorized but unissued shares are allowed in addition to the issued shares that constitute the corporations capital.Par shares（额面股）（额面股）are the only shares allowed in England.No par shares are the norm in the US.Their price is s
31、et by the board of directors.Public Corporations:Stock Stock issued in US and England can be classified.Preferred stock Entitles owners to:guaranteed dividend priority at the time of liquidation priority over common shares The U.S.allows cumulative voting（累积投票）（累积投票）,a system of voting by which a vo
32、ter,having a number of votes equal to the offices to be filled,may split their vote as they see fit.Public Corporations:Shareholder MeetingsFormal shareholder meeting required in England while actions in the US can be by written consent rather than at a formal meeting.Quorum（法定人数）for meetings:Englan
33、d two shareholders US simple majority（1/2以上）of voting shares,though Articles of Incorporation may set at lesser amount,such as a third or a fourth of voting shares.Public Corporations:Shareholder MeetingsIn US,board of directors may set dividends subject to requirements that:1.The corporation be sol
34、vent.2.Issuance does not violate the Articles of Incorporation.3.The source of the dividends be of a certain type(i.e.,earnings surplus).Private Corporations(U.K.)Corporation that may not ask the public to subscribe to its shares,bonds,or other securities.It is subject to less stringent public discl
35、osure laws.Incorporation documents usually restrict transfer of shares.In US,these small corporations are known as close or closely held corporations.(U.S.)Advantages of Private or Closely Held Corporations Advantages of organizing as close corporation:May dispense with many corporate formalities.In
36、 England,may appoint a single director instead of a board.Shareholder may grant proxy rights（代理权）（代理权）.In US,may entirely dispense with board of directors and corporation run by shareholders.Unlimited liability company(U.K.)Only in England and Commonwealth countries.Members are liable in the event t
37、hat it is wound up and assets are insufficient.Importance of Separate Legal Identity Important consequences of the separate legal identity of juridical entities:Liability of owners is limited to their investment.Rights and benefits accruing to the company belong to the company,not the owners.The com
38、pany can own its own property,trade secrets,formulas,etc.Owners are neither managers nor agents nor representatives of the company.They cannot act for the company or create liability for the company by their actions.Case 4-1Case Concerning Barcelona Traction,Light&Power Co.(Belgium v.Spain)Barcelona
39、 Traction(BT)was Canadian corporation injured by the actions of Spain.Alleged 88%of shareholders were Belgian.Canada chose not to bring suit in the ICJ.Belgium brought suit.Spain objected because only BT was injured and was not a Belgian corporation.Case 4-1Case Concerning Barcelona Traction Court f
40、ound that the injured party was the company and not its owners.Therefore,Belgium could not bring suit against Spain on behalf of the Belgian owners.A corporation is an entity independent of its shareholders.When a shareholders interests are harmed by an act done to the company by a nation-state,it i
41、s the company that must seek judicial remedies.Seal of the International Court of JusticeThe Multinational OrganizationLarge business firms use differing organizational structures to carry on operations internationally.Parent companies take on the following forms:The Non-multinational EnterpriseA do
42、mestic firm that operates internationally through independent foreign agents.The agent（代理人）may act for the principal（委托人）as:A sales representative to sell goods or services,orA factor（代理商）（代理商）to buy good or procure services for the principal.Relationship governed by agency contract law.The Multinat
43、ional OrganizationThe National Multinational EnterpriseAn enterprise organized around a parent firm established in one state that operates through branches and subsidiaries in other states.Branch（分支机构）a unit or a part of the parent(assembly plant,purchasing office,manufacturing plant).Subsidiary（子公司
44、）a company organized as a separate entity that is owned by the parent.The National Multinational Enterprise The following chart demonstrates part of the DaimlerChrysler corporate organization.DaimlerChryslerGerman ParentChryslerUnited StatesDivision of Parent FreightlinerUnited StatesTruck Mfg.Subsi
45、diaryWestern StarCanadaTruck Mfg.SubsidiaryDetroit DieselUnited StatesHeavy Motor Mfg.SubsidiaryThe InternationalMultinational Enterprise An enterprise made up of two or more parents from different states that co-own subordinate operating businesses in two or more states.The Royal Dutch/Shell Group
46、is an example:The Subordinate StructureA company may create the following subordinate entities to establish a foreign presence:Representative office A contact point where interested parties can obtain information.It does not conduct business.Agent An independent person or company with authority to a
47、ct on behalf of another.Branch Unit or part of a company,such as an assembly plant.It is not separately incorporated.The Subordinate StructureDisadvantages of representative offices,agents,and branches are:1.Parent has to assume all of the risk of investing abroad,2.A foreign firm is often taxed at
48、a higher rate,3.Many developing states require local participation in order for foreign firm to invest or expand its local environment.The Subordinate StructureSubsidiary Company owned by a parent or a parents holding company.Unlike a branch,it is separately incorporated.Joint venture An association
49、 of persons or companies collaborating in a business venture.Can assume any type of business form,e.g.,LLC,limited partnership,or association.Can be a specific limited project or a continuing business relationship.Holding company Company owned by a parent or parents to supervise and coordinate the o
50、perations of subsidiary companies.The International Regulation on Multinational Enterprise International guidelines for ethical behavior by multinational enterprises are mostly voluntary.The exception is the Convention on Combating Bribery of Foreign Public Officials in International Business Transa
