The following is the abstract of this study intended to theoretically analyze and arrange the nature and character of the multinational corporations, explain the structure of the multinational corporations control, closely analyze internationalization...
The following is the abstract of this study intended to theoretically analyze and arrange the nature and character of the multinational corporations, explain the structure of the multinational corporations control, closely analyze internationalization of labor-management relations in line with formation of classification and administration by the multinational corporations and trade unions' countering against them, and finally to bring to the light the multinational corporations and labor problems in Korea.
1
In order to understand precisely the nature and character of the multinations we must understand the character of capital export after the World War II. The postwar capital export can be characterized as follows. Firstly, monopolization proceeded noticeably following rapid renovation of technology. Secondly, while the prewar monopoly capital was based on the combination of the bank capital and industrial capital, the postwar monopolistic capitalism moved toward concentrating on one's own capital or so called "management capitalism." Thirdly, state power worked closely with capital which resulted in acceleration of monopolization. Fourthly, the multinationals appeared as a major form of capital export. Fifthly, unlike previous pattern of colonial control which took the form of subordination of the entire geographical area by a nation, the type of capital export by the multinationals is intended to control industrial structure of countries horizontally with world-wide business organization by means of singular monopoly system. With these characteristic changes in the postwar capital export in the background, the world economy in the 1960s saw noticeably increasing tendency in intensification of international economic link including internationalization of production, and this tendency was even more intensified in the 1970s.
Alongside intensification of internalization in the postwar world capitalism, the role that the multinationals play and its importance in the world economy have become immensely great.
Now we must identify the basic character of the multinationals. There have been presented several ways of classification to concept of the multinationals: 1). Changes in the distribution structure, 2). Change in the behaviour of managers, 3). Quantitative change in the contents of business activities, and 4). Qualitative change in the contents of business activities. From the above four view points we can term the multinationals as having at least some charateristic patterns of behaviour as follows, unfound in the conventional business entity. They are: Firstly, they have found market for their technology and goods abroad as well as domestically. Secondly, in order to take full advantage of resources in management anywhere in the world, they produce, sell and export locally in other countries as well as export by domestic production. Thirdly, in principle, these activities are carried out on the axis of controlling their foreign subsidiaries in the long-term and with international views in mind. Fourthly, in order to facilitate decision-making for their activities, they needed changes in their structure and strategy. Theories on the nature of the multinationals can be largely classified as the theory of direct investment abroad and incomplete competition, oligopolistic model about the international marketing competition, a hypothesis on production life cycle, a theory of capitalization rate and currency premium, and approach by business administration. The problems and logical contradiction built into these theories, however, need re-examination.
Analysis of modern capitalistic order and behavioural pattern of the multinationals is also required in order to understand the nature and character of the multinationals. International restructuring of business system and intensification of international link in production since the 1960s expedited the proceeding of the international capital accumulation and concentration, which resulted in accelerating the proceeding of the former. Based on such structural changes of the world capitalism as mentioned above, the present day direct investment abroad is concentrating on the sectors of ultramodern technology industry, and as for investment, investment in local production is evaluated as more advantageous than in export.
This presents several important matters that need study for explanation in connection with the international market or formation of new world economy. It is also a matter that has close connection with the future of the multinationals. The first one coming into the scene is that whether or not the American economy will continue to lead the world economy as overwhelmingly it does now as in the future. The second one is if such advanced capitalistic countries as EC nations and Japan will move toward the system of competing one another or toward the direction of integration. The third question is the fact that the future inter-relation among advanced capitalistic countries has direct relation to the conditions of the Third World, and to which direction the conditions in the Third World will move. The developmental direction of the world capitalism surrounding the multinationals as mentioned previously will term the character and the role of the multinationals in the world economy in the future.
2
The control structure of the multinationals can be understood in a concrete way through various factors such as management strategy and planning process, business administration activities, organizational structure and centralization of a labor-management administration.
First, decision on the managerial strategy of the multinationals is based on the decision of the headquarters company on production, place of sale and implementation timing of various investment plans. The heart of their managerial strategy is composed of overseas advance and withdrawal therefrom meaning retreat of capital. The overseas advance of the multinationals can be seen in three parts, namely, market development, utilization of labor force and securing resources, of which market development is considered the most central of all. Included in the strategy system of the multinationals on their positive side is, unlike in other business, divestment. In this way they can reduce defect factors in business administration, solidifying their unique pattern of behaviour. The fact that international management plan of the multinationals takes the form of either a long-term or short-term, and its character can be classified into either being strategical or tactical is quite similar to their domestic management planning, except that it is far more complicated than the latter due to its being international. J. S. Schvendiman explained the process of management planning in five stages, such as, assessment of environmental factors (stage 1), assessment of factors on the company side (stage 2), establishment of strategical object (stage 3), long-term activity plan and tactical planning (stage 4), and fixation of budget (stage 5).
We now have to examine what is the characteristic of the multinationals in their business administration activities. In appearance their business administration activities sometimes stress decentralization, but in essence centralization of power by the headquarters company is pushed forward in an absolute means. Although degree of centralization varies according to managerial ability and conditions, the fact that business administration itself is centalized proves that it is a giant monopoly enterprise with which rests decision-making. Administration by an international monopoly enterprise is formed on the basis of combining the principle of centralized direction and the principle of decentralized business activities. This combination adds to the function of monopoly enterprise as a unified whole, and introduces certain flexibility and concreteness in guiding individual rings that form into a huge monopoly enterprise.
The mechanism that supports the business administration activities is the structure of organization. If we put the results of research and study on the structure of organization of the multinationals, we are able to find that they are built on the axis of either international business department type or global organization type under which comes the combination of a). organization by functions, b). organization by region, c). organization by mixture, and d). grid organization as basic types. The tendency of overall centralization appears outstanding even in this kind of structure of organization. Macroscopic factors of the tendency of centralization can include increased integrity of business activities of the multinationals, increase in the speed of technical renovation of industry, and rapid development in the world technology, strategy and information collection. Microscopic factors of the system include existance of many subsidiaries which sometimes share the same market, concentration of business administration ability of subsidiaries, and difference seen among subsidiaries in their actual business, result and previliges.
We can include as factors of centralized labor-management administration 1). degree of an enterprise in the nature of the multinationals, 2). characteristics of industry, 3). how the subsidiaries have been acquired and the ratio of capital ownership, and 4). the nationality of overseas enterprise. Of these the characteristics of industry functions as the most important factor.
3
Analysis and study of the multinationals and internationalization of labor-management relations, which form the heart of this dissertation deal internationalization of employment relations, characteristics of international labor and management relations, confrontation by the international trade union movement, and democratic regulation of the multinationals.
The characteristic of internationalization of employment relations created by the multinationals is international formation of the classification. The proceeding of the multinationals not only form international formation of the classification based on differences in wages and working conditions, but its transfer of production abroad itself reforms greatly the domestic formation of workers in the country to which these multinationals belong, and brings reduction in the employment opportunity and changes in livelihood and working conditions of the lower class workers. Therefore proceeding of the multinationals not only simply establishes a discriminatory formation of the classification between advanced countries and developing ones but also among the advanced countries it creates their own classification by production system and management structure within the enterprise that appear from the relations between the headquarters company and its subsidiaries. Administrative structure of the multinationals for labor and management relations also takes the form of centralization, and reflects strong tendency of anti-unionism. Some people claim that the characteristics in their structure of labor-management administration changes along with the increase in the degree of confrontation by the labor movement and changes in the conditions in the enterprise. Even these changes are limited to advanced capitalistic countries and it is hard to confirm if they also exist in developing countries. Let's review now characterstics of international labor-management relations in accordance with the proceeding of the multinationals. The ILO listed as unique labor-management problems in conjuction with the proceeding of the multinationals: 1). transfer of business and power relations, 2). source of management decision, 3). adjustment of labor-management relations, personnel policy and practices, and 4). accounting practices and business material. Analysis and study of the conditions of these problems provide very important suggestions in the theoretical approach to the internationalization of labor-management relations. As for matters to be studied in the examination of the influence by the multinationals to the labor-management relations system of countries in which they have established subsidiaries are:
1). presence of exclusive representation by unions, 2). degree of collective bargaining, 3). legal binding of collective agreement, 4). influence in the level of bargaining, 5). matters regarding union recognition, and 6). introduction of productivity bargaining method.
Development of international labor-management administration and move toward internationalization of labor-management relations examined previously demands the trade union movement to come up with new counter-measures and design of strategy presentation. Actually, the emergence of understanding of international development of labor-management relations as an important area owes much to the bringing up of the problems and taking the initiative by the trade union movement. Naturally, therefore, the analysis of international labor-management relations must be done taking into consideration the fact that it is an important type of class disposition of the modern capitalism, and the analysis of strategy and types of trade union movement. The basic policies of the International Confederation of Free Trade Unions (ICFTU) on the multinationals as seen in the adoption of "legal restriction on the trade union activities with regard to the control of the multinationals" are as follows: 1). Public accountability, 2). Social obligations of the companies, 3). Control of international direct investment and takeovers, 4). Restrictive business practices and oligopolistic prices, 5). Taxation of the multinationals, 6). Transfer of technology and the role of the multinationals in development, and 7). Conclusion of binding in international agreement on short-term capital movements.
These policies became materialized through the activities of the International Trade Secretariats (ITS), especially those of the International Metal Workers' Federation (IMF), International Federation of Chemical, Energy & General Workers' Union (ICEF) and International Union of Food and Allied Workers' Association (IUF).
As the process of development of the multinationals move from being enthrocentric to policentric and then to geocentric, so are the three stages set by the trade union movement as the international counter force against them, namely, the first stage being that when the local union in a particular country struggles with the subsidiary in that country, the subsidiary receives support from its headquarters company or reversedly the union at its headquarters company renders support to the local union, the second stage being that pural negotiation takes place in several countries with one company, and the third stage being the final one in which a unified bargaining takes place based on joint demand. Despite the said strategy of the international labor movement its activity policies don't seem to be very fruitful. Nevertheless the counter-move of the international trade union movement kept strengthening against the multinationals in the 1960s and 1970s, and the movement was able to record important cases and obtain valuable experiences.
Aside from the counter-move by the international trade union movement against the multinationals, there have been the following regulations: 1). regulations by democratic movement, 2). regulations at national level centering around governments, and 3). regulations by international agreements, organizations and agents. The International Labor Organization (ILO), in particular, has developed international labor standards and social principles providing very objective and just standards and principles in regulating the multinationals.
4
To analyze and examine the multinationals and labor matters in Korea we must study the influences on the Korean economy by the multinationals. The foreign direct investment in Korea contributed greatly to the capital accumulation in Korea, if we think only about the aspect of securing funding source for investment. The foreign dependence of the Korean economy increased along with expansion of the multinationals concluding that capital accumulation in Korea, in part, had to depend on the foreign capital thus increasing degree of foreign dependence of the Korean economy. The contribution made to the improvement of international balance of payment by the multinationals through increased export has been more than offset by increased dependence of import of raw material and their remittance of profit to their headquarters companies by means of "internal company transaction".
The fact that expansion of the multinationals increased employment in Korea cannot be denied. However, due to the nature of the management strategy of the global scale of the multinationals, much instability in the employment structure aspect also exists. Transfer of technology with the advance of the multinationals in much lower than expected as it is closely linked with the method of introduction of capital, and as the technology itself occupies important place in the exclusive possession of the multinationals.
We now move into the area where we will study the character stics of labor problems the multinationals present. The first one corning into this area is the unstable employment of workers employed by the multinationals. It is because the multinationals are sensitive to the change of cycles in the world market and they are mainly engaged in the labor-intensive industries, and, therefore, their production facilities can easily be relocated. The second one is that working conditions in the free export zones and electronics industry is still poor. The third one is that surveys (by Dong-Se Cha and others) show that, of the multinationals, American companies pay the highest wages to their employees while the Japanese firms pay wages actually lower than the average wages in Korea. The reasons why these Japanese firms pay such low wages are because they are mostly small and medium size companies and are concentrated in the labor-intensive industry. The fourth one is that union organizing is restricted under the "special law on trade union and settlement of labor disputes in the foreign invested companies", and the right to labor dispute is also restricted greatly as in the cases of the Korean companies. Fifth one is that often friction arises between the multinationals and their Korean workers when these multinationals try to use their cultural customs on controlling their local em-ployees.
Such labor problems and control-intended behaviour of the multinationals are not effectively regulated or countered in Korea. It is because regulations by the government which has been pursuing after economic development based on favoring foreign investment can hardly be expected, and because labor movement which is supposed to be the major countering force is not active due to various restrictive factors. It is clear, however, that expansion of the multinationals as well as liberalization of capital will continue to grow, and demand for regulation and countering will grow greater. In this regard, establishment of social principles and just labor standards on activities of the multinationals is in demand. Especially, establishment of countering strategy and activity policies by the trade union movement, and their effective implementation are greatly being stressed.