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MNCs ownership structures – typical patterns

2. MNCs ownership structures – typical patterns. Widely held – no dominant shareholder or group of shareholders Ultimately held – controlled by a dominant shareholder or a group of shareholders : family or a private person State widely held financial institution widely held MNC.

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MNCs ownership structures – typical patterns

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  1. 2 Robert Uberman, Multinational Corporations (MNCs)

  2. MNCs ownership structures – typical patterns • Widely held – no dominant shareholder or group of shareholders • Ultimately held – controlled by a dominant shareholder or a group of shareholders : • family or a private person • State • widely held financial institution • widely held MNC Source: La Porta, ..., „Corporate Ownership Around the World”, NBER, Cambridge, MA, June 1998 Robert Uberman, Multinational Corporations (MNCs)

  3. Ownership structures: USA and Germany Robert Uberman, Multinational Corporations (MNCs)

  4. Ownership structures: Japan Robert Uberman, Multinational Corporations (MNCs)

  5. Ownership structure in various countries Source: Aves, ..., „Who Owns the Largest Firms Around the World?”, International Research Journal of Finance and Economics, Issue 21 (2008) Robert Uberman, Multinational Corporations (MNCs)

  6. Ownership structure in the US, Japan and Germany Źródło: Doremus, ..., „The Myth of the Global Corporation”, Princeton University Press, 1998, Table 3.8, str.52 Robert Uberman, Multinational Corporations (MNCs)

  7. Threat of underestimating history • „The farther backward you can look (..) the farther forward you are likely to see” according to Winston Churchill • Ian Morris, „Why The West Rules - For Now”, str. 13 Robert Uberman, Korporacje międzynarodowe

  8. Evolution of ownership structures of American MNCs • American system of transparent financial markets and „shareholders’ democracy” has been strongly enrooted in the US history, it was created by: • Reluctance towards any form of a forced centralisation (eg. restricting banking activities to one state , Glass-Steagall act banning ownership of corporate shares by banks, therefore effectively separeting „commercial” and „investment” banks) • Long years of peace and prosperity allowing for capital accumulation by families (the last war fought on the US soil ended in 1865) • Financial strength of the US corporations • Ron Chernow, „The Death of the Banker”, str. 71 and subs. Robert Uberman, Multinational Corporations (MNCs)

  9. Evolution of ownership structures of GermanMNCs • In formative years of modern economy German political culture was conservative with authoritarian tendencies • Subsequent crises: lost of foreign assets during the WW I, hiperinflation in 1923 and Great Depression 1929-33 forced many companies to convert debts into shares – effectively leading to takeovers by financing banks • Most of Jewish assets were directly or indirectly despoiled by German banks and never returned during Hitler times • Ron Chernow, „The Death of the Banker”, str. 53 and subs. Robert Uberman, Multinational Corporations (MNCs)

  10. Recent evolution of German and Japanese ownership structures and relation to financial markets • Global financial markets have started to influence MNCs behaviour (in 1995 r. Jurgen Schrempf, newly elected Daimler-Benz CEO, calling to the 20 top managers discovered that only two of them had any idea what was an actual quotation of the company’s shares !!!) • Departure of many owners – founders of a string of enterprises created in 50s and 60s • But: • „[..] for all the dismantling of the cross-shareholdings at the heart of Deutschland AG, a system of interlocking directorships still exists” (FT, April 5, 2007, p. 17). Robert Uberman, Multinational Corporations (MNCs)

  11. US shareholding – descent of individual/family owners and ascent of investment funds Source: FT, July, 23, 2007 Robert Uberman, Multinational Corporations (MNCs)

  12. Evolution of ownership structures – development of networks Vitali, …, „The network of global corporate control”, str. 4 Robert Uberman, Multinational Corporations (MNCs)

  13. Evolution of ownership structures – growing concentration in itermediates Vitali, …, „The network of global corporate control”, str. 4 Robert Uberman, Multinational Corporations (MNCs)

  14. Evolution of US MNCs ownership structure – uniformity • Vernon Smith (Noble Prize winner, 2002): increase use of financial instruments by shareholders forces down their interests in operational results of MNCs leading to weaken their control over Boards. (Authers J.,”A formula to survive unknown”, Long-Term Investment, FT, Nov., 29, 2007, str. 9) • A correlation between each individual stock of the S&P 500 and the index itself constantly growths over a long period and reached 86 % in October 2012. • Investors lose interest in individual companies and look at the market as whole. (Authers J.,”No end soon to markets’ herd - like moves”, Long-Term Investment, FT, Feb, 13, 2012, str. 24) Robert Uberman, Multinational Corporations (MNCs)

  15. Old (western continental Europe) – Governmental influence over MNCs • Old continental western Europe has created a complex and multidimensional system enabling governments official to exhort considerable power over MNCs whish is increasingly less based on outright shareholding and more on complex instruments. • „Even if there had been no golden share, for a French company to proceed (with a Total and Elf merger) without a green light from the French government would have been career destroying for the management involved”. Yergin Daniel: „The Quest.Energy, Security and The Remaking of the Modern World” , The Penguin Press, New York, 2012, pp. 100. Robert Uberman, Korporacje międzynarodowe

  16. France – an example a governmental involvement into MNCs’ ownership structure • N. Sarkozy has set up in 2009 r. a new state owned investment fund named Fonds Strategique d’Investissement (FSI) with 2 bln. EUR in equity to act as a, supposedly, minority shareholder in new businesses. • However the real goal of the Fund’s creation was to promote French industry champions, either private or state owned • This Fund has effectively taken over a troubled car parts maker: Valeo„Dirigisme de rigeur”, The Economist, 2nd of January, 2010, pp. 45-46. • Italy plans to follow the French suit, effectively reversing is former policy which peaked up in 2002 with dissolution of the IRI„Italy plans state investment fund to repel invaders”, The Wall Street Journal, April 4, 2011, p. 4. Robert Uberman, Multinational Corporations (MNCs)

  17. MNCs – goals • Enterprises, which in turn become MNCs, are usually funded by profit-seeking investors. • MNCs activities are influenced by various stakeholders (eg. governments, employees) and have to consider their interests but rather as limits not as goals • Therefore it is a value increase which drives and should drive ultimately MNCs’ behavior (Rappaport, str. 1 –13) Robert Uberman, Multinational Corporations (MNCs)

  18. Is the Corporate Social responsibility to make money? – distribution of opinions amongst managers from various countries „Milton Friedman goes on tour”, The Economist, 29th of January, 2011, pp. 57. Robert Uberman, Multinational Corporations (MNCs)

  19. MNCs goals – shareholders and stakeholders Goals Limits Robert Uberman, Multinational Corporations (MNCs)

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