Blog Post

The era of corporate split personalities

The saga of securities exchanges consolidation is a vivid illustration of links between companies and nations in a state of flux. The likes of the New York Stock Exchange (NYSE) are national icons of capitalism. But they are also technology-enabled networks that connect market participants and seek a global reach to maximize economies of scale, […]

By: Date: May 16, 2010 Topic: Finance & Financial Regulation

The saga of securities exchanges consolidation is a vivid illustration of links between companies and nations in a state of flux. The likes of the New York Stock Exchange (NYSE) are national icons of capitalism. But they are also technology-enabled networks that connect market participants and seek a global reach to maximize economies of scale, just like Facebook or eBay. The tension between symbol and business substance has permeated the battle over NYSE Euronext. New York Senator Charles Schumer said he would support Deutsche Börse’s bid only if the NYSE name came first in christening the merged entity. Nasdaq envisaged moving one of its data centers from the UK to France to signal commitment to the place de Paris, but backed off under opposition from its London-based high-frequency-trading hedge-fund clients.

Debates on corporate nationality are nothing new. In 1967, George W. Ball, an American diplomat and financier, predicted that companies would increasingly escape their original home bias and acquire a stateless identity. In the early 1990s, a memorable controversy pitted Robert Reich, who argued that the US government’s attitudes to corporations should be nationality-blind, against Laura Tyson, who replied that “American ownership still matters” – both later became senior figures in the Clinton Administration.

The great globalization from the 1990s to 2007-08 gave credence to Ball’s vision. Most large European companies now have only a minority of their operations in their country of origin. Entire sectors, such as telecoms, utilities and banking, internationalized quickly following partial deregulation and privatization. After 2000, even R&D and headquarters functions, long seen as mostly tied to the home country, were gradually distributed around the world. Symbolic milestones included Wal-Mart’s relocation of its procurement function to Shenzhen in 2002, followed by IBM in 2006, the move of Halliburton’s CEO to Dubai in 2007, and that of HSBC’s CEO to Hong Kong in 2009. National labels were still routinely attached to companies, but by the late 2000s they looked increasingly like misnomers.

The past few years, however, have made things more complicated, for two main reasons. First is the breathtaking rise of large companies from emerging economies. These now feature as prominently as European ones in global league tables, compared with a ratio of one to ten a decade ago, and their share of the global total has surged from 10 to 25 per cent in the past five years (aggregate market values based on FT Global 500 rankings). They are often subject to hands-on state oversight, if not outright control, and generally carry a stronger sense of national identity than most Western peers, partly but not only because of their focus on high domestic growth at home. As there tends to be less geopolitical alignment with and among emerging countries than among advanced ones, their increased global presence also raises unprecedented national security concerns. Some analysts like Ian Bremmer from the Eurasia Group warn that emerging countries’ “state capitalism” threatens the core of the West’s business model and heralds an “end of the free market.” Even with a less dramatic assessment, strong corporate national identities can no longer be seen as just a thing of the past.

The second factor is the recent financial crisis, and the unprecedented state intervention that resulted in the US and Europe, confirming the dictum (diversely attributed to Charles Goodhart or Mervyn King) that “cross-border banks are international in life, but national in death.” This at times extended to other industries, such as car companies in the US or France. The internationalization of corporate identities suddenly looked like a mask that could easily fall. This apparent reversal chimes with uncertainties about the future of financial globalization, most acutely felt in the euro crisis but relayed by wider concerns about “financial repression” in massively indebted countries.

These conflicting trends are likely to result in policy volatility. On paper, most public policies do not discriminate according to corporate nationality, a principle on which the EU legal framework is particularly strict. But the attempt to impose “buy American” provisions in the 2009 US stimulus, or the recent debate in Italy on how to counter foreign takeovers, show that it cannot be taken for granted. More insidiously still, companies may find it increasingly difficult to give a clear vision of their national orientation, or lack thereof, to their own staff, clients, and other stakeholders. The personality split between national and global can easily lead to irresponsible behavior, as with those banks that practiced massive regulatory and tax arbitrage, and then hijacked home-country governments when the system came under threat. It has become received wisdom among foreign policy observers that the next decade will be one of divided sovereignties, unstable politics of interdependence, and conflicts between national constituencies and globalized elites. It would be naïve for companies to think they can easily escape these tensions.


Republishing and referencing

Bruegel considers itself a public good and takes no institutional standpoint. Anyone is free to republish and/or quote this post without prior consent. Please provide a full reference, clearly stating Bruegel and the relevant author as the source, and include a prominent hyperlink to the original post.

Read about event
 

Past Event

Past Event

Financing for Pandemic Preparedness and Response

How can we better prepare for future pandemics? In this event, co-hosted by the Center for Global Development and Bruegel think tanks, speakers will present "A Global Deal for Our Pandemic Age", a report of the G20 High Level Independent Panel on Financing the Global Commons for Pandemic Preparedness and Response.

Speakers: Masood Ahmed, Victor J. Dzau, Amanda Glassman and Lawrence H. Summers Topic: Finance & Financial Regulation, Global Economics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: July 14, 2021
Read article More by this author
 

Blog Post

SPACs in the gap

Special-purpose acquisition vehicles could fill a gap in European equity markets and lure risk-averse investors off the sidelines.

By: Rebecca Christie Topic: European Macroeconomics & Governance, Finance & Financial Regulation Date: July 13, 2021
Read article More on this topic More by this author
 

Blog Post

The EU green bond standard: sensible implementation could define a new asset class

The proposed EU green bond standard will be less prone to ‘greenwashing’, and the widest possible set of issuers and jurisdictions should be encouraged to use the standard.

By: Alexander Lehmann Topic: Finance & Financial Regulation Date: July 13, 2021
Read about event
 

Upcoming Event

Sep
2
13:00

European banks: under global competitive pressure?

Bruegel Annual Meetings, Day 2 - European banks have lost stature and remain generally low-profitability, low-valuation in comparison to their global peers. Is that a problem? If so, what can EU policymakers do to address it?

Speakers: José Antonio Álvarez Álvarez, Mairead McGuinness and Nicolas Véron Topic: European Macroeconomics & Governance, Finance & Financial Regulation Location: Palais des Academies, Rue Ducale 1
Read about event More on this topic
 

Upcoming Event

Sep
2
14:15

Monetary and macroeconomic policies at the crossroads

Bruegel Annual Meetings, Day 2- In this session we would like to discuss monetary and macroeconomic policies after Covid-19.

Speakers: Grégory Claeys, Per Callesen, Gita Gopinath, Jorge Sicilia Serrano and Lawrence H. Summers Topic: Finance & Financial Regulation Location: PALAIS DES ACADEMIES, RUE DUCALE 1
Read about event
 

Upcoming Event

Sep
3
10:15

Sustainable finance

Bruegel Annual Meetings, Day 3 - In this session on the final day of the Meetings, our panelists will discuss the future of finance and its sustainability.

Speakers: John Berrigan, Maria Demertzis, Alberto De Paoli and Pierre Heilbronn Topic: Energy & Climate, Finance & Financial Regulation Location: Palais des Académies, Rue Ducale 1, Brussels
Read article More on this topic More by this author
 

Blog Post

Banks post-Brexit: regulatory divergence or parallel tracks?

Post-Brexit UK bank regulation is not likely to compromise on international standards, but will place greater emphasis on competition, making close UK-EU dialogue essential.

By: Alexander Lehmann Topic: Finance & Financial Regulation Date: July 6, 2021
Read article Download PDF More by this author
 

External Publication

European Parliament

UK banks in international markets

Implications of UK-euro area divergence in regulation and supervisory practice

By: Alexander Lehmann Topic: European Parliament, Finance & Financial Regulation, Testimonies Date: June 25, 2021
Read about event More on this topic
 

Past Event

Past Event

Multilateralism in banking regulation and supervision

This members-only event welcomes Carolyn Rogers Secretary General of the Basel Committee on Banking Supervision.

Speakers: Carolyn Rogers and Nicolas Véron Topic: Finance & Financial Regulation Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: June 24, 2021
Read article Download PDF More by this author
 

External Publication

European Parliament

What Are the Effects of the ECB’s Negative Interest Rate Policy?

This paper explores the potential effects (and side effects) of negative rates in theory and examines the evidence to determine what these effects have been in practice in the euro area.

By: Grégory Claeys Topic: European Parliament, Finance & Financial Regulation, Testimonies Date: June 9, 2021
Read article Download PDF More on this topic
 

Policy Contribution

Europe should not neglect its capital markets union

The European Union’s capital markets remain very underdeveloped compared to the United States. The market for equity, as measured as the size of the total market capitalisation of listed domestic firms relative to GDP, is much larger in the US and in Japan than in Europe.

By: Maria Demertzis, Marta Domínguez-Jiménez and Lionel Guetta-Jeanrenaud Topic: Finance & Financial Regulation Date: June 7, 2021
Read article More by this author
 

Blog Post

Banks in a net-zero Europe

A net-zero emissions target is a powerful incentive for the low-carbon transition, but for bank supervisors, climate-related risks, not climate outcomes, should remain the focus.

By: Alexander Lehmann Topic: Energy & Climate, Finance & Financial Regulation Date: June 1, 2021
Load more posts