Why hating multinationals is like hating the weather

Hating multinationals is like hating the weather. It's gonna be there. Know what they what you do and It's got good aspects and bad aspects Now clearly when you wake up every day and it's gray like the previous day and the previous day and the previous day and the previous day It at some point it gets on your nerves. Yes But that's that's English weather for you multinational corporations are a fact of life people start with Conceptions that are either mildly negative or strongly negative in fact these days nobody starts with a positive Impression of multinationals when we talk about this But first of all let's let's try and have a thought of What is it that makes a multinational? So when we're saying that we were dealing with a multinational corporate group? What is it actually made of? What character what are characteristics would something need to have in order to be called a multinational? I mean, what do we what do we understand the corporate group to be in the domestic setting? I mean who what actually connects if we're saying we'll have a parent company and the series of subsidiary companies that form a corporate group What connects the subsidiaries to the parent? So the parent company will be the shareholder either the whole shareholder or a main shareholder in the virus subsidies It's also possible that the subsidiary companies have got share folding in each other There might be some degree of coordination in strategy and behavior within a corporate group But you need to remember that each one of the components is an individually registered company and for it to be truly Received as an independent company then it needs to have its own management So we cannot have a set a situation where The head of the corporate group completely controls the behavior of the subsidiaries directly Because in that case they wouldn't be subsidiaries. They would be acting as an agent for another entity When we were discussing or in if you've come across these discussions on the benefits of incorporation being separate corporate personality limited liability and all the rest That only works if we're talking about an independent company that has got its own presence You remember reading about the case of Adams and Cape? You remember that one? So he was the case where a multinational corporate group had extractive activities. They were mining virus chemicals in South Africa then they were Manufacturing them in the United States. They were selling them all over the world They head of the corporate structure was here in London But of course the virus subsidized the recombinies either the retail parts of the business or the wholesale parts of the business or the extractive parts of the business were in other places a little What happened is that because they were dealing with as best was primarily which is a dangerous chemical that causes cancer and all of that stuff The workers in the US got sick They should they American entity for not having complied with self-health and safety regulations and having taken care of the workers they won But the subsidiary there didn't have enough money to pay compensation to those workers So then they came and sued the British parent here that had the bulk of the money Of course they needed to do this because otherwise they would be left uncompensated The whole debate was Can we make the parent responsible for the behavior of the subsidies? So yes, these guys were a corporate group So the parent was the major shareholder in the virus entities around the world But because they are separately incorporated entities they did benefit from limited liability and they did have separate corporate personality So the lawyers from the the workers tried a variety of arguments to try and say This actually doesn't matter because this was as a multinational corporate group It was so well integrated that Whatever the parent was doing who had consequences in the other countries on the other subsidies Therefore the parent was directly responsible for what was happening and what the other subsidies were doing around the world and they tried The variety of arguments to try and convince the court and They said well this was a scheme So they set it up in a way to purposely evade liabilities and or they said that the Subsidious because they were directly controlled or were acting as agents There was a variety of issues around those lines now all of these arguments failed Because they claimants had actually failed to establish that they were direct lines of control So the agency argument that would have been the best argument didn't work out and then all the other arguments that were alleging Throat and inappropriate behavior and against you know the interests of justice and so on it just It is an appealing argument But the law actually does allow this thing to happen it does allow separately Incropriated businesses with their own personality that benefits from limited liability So even though everybody was sympathetic to the argument it was actually going against the law So that case is left now as an illustration at least in domestic company law as to how Committed the courts are to the idea of limited liability and how they don't like to lift the corporate fail But it also tells us something about the behavior of corporate groups in the way that they're organized so In effect a multinational corporate group is just like any other corporate group, but just process borders So the traditional idea that you establish a variety of corporations and then the links are links of ownership works the links There are links on management and strategy up to a level But if you have two close connections or Management and coordination then you might actually create a situation where the parent the parent runs everything and then the virus subsidies are Agents for the parent that would have the consequence that whatever they do They're not actually in it for themselves, but they are representatives of the parent So the parent ends up in contractual relations or indirect liabilities in relation to what they do Which is what everybody tries to avoid so they're actually quite careful In the way that they structure their operations within corporate groups to avoid these direct connections So the sensible thing to do would be to have different people in the corporate board So if you have the same people on all the boards that really looks bad So you need to have separate people who are independent from each other and the decision-making Can serve an overall corporate strategy, but the focus always needs to be The best outcomes for the company that the board is in charge of And returning profits to the shareholders and if the shareholder of course is the parent company that kind of helps with coordination But it's not the same thing as saying that The head of a group in London is making decisions for everybody all around the world This is what corporate groups are and how they operate this isn't anything spectacular It's a direct consequence of corporate organization at domestic level What makes multinational corporations is the fact that this now crosses borders So you have at the instigation of some group usually in a major economy, but not necessarily The establishment of sort of satellite businesses across borders Now company law is very much a domestic Creature so in order to have a company in a different country you need to incorporate on the basis of the rules of the country that you want to be settled in There are limited opportunities to run corporations if you have establishment in another country I mean there are rules in which you can have a branch of a foreign corporation in the UK And then you still need to make some returns to companies house and publish information and so on Um in Europe perhaps it is a little bit Easier if we're talking about corporations that are placed within the European area because that counts as one jurisdiction But still you will find that you need to deal with the local regulatory authorities in which have a member state european rating To be sure that your company is compliant with everything that it needs to do the difference is that in Europe You have access to all the customers for services and products across the union without needing to get special permissions But the fact remains that If you want to set up in Germany you need to talk to the German authorities if you need to set up in France You need to talk to differential authorities Why do businesses Want to set up across borders One reason could be that it may it is a Necessity in terms of regulation Because you might not be able to access particular markets unless you registered there think about financial services for instance These are a lot more controlled that other types of services and certainly a lot more controlled and trading goods So if you want to offer financial services you need to be registered in the jurisdiction that the client is otherwise they won't allow you to do business So it could be a regulatory or legal reason for you to be there it could be a tax compliance region But there's also some benefit to be had out of leveraging differences in the regulatory criteria and the regulatory standards between one place and the next. The reason why multinational are getting such bad press and that everybody's initial impression of a multinational organization is that something negative is because they are known to establish in a variety of locations in order to take advantage of both gaps in regulatory standards. Let's have a think about the multinational that we kind of work with. Which multinational are you personally engaged with? Google is a good example of a complex corporate structure that goes across a variety of jurisdictions. Actually, it didn't start off like this. They created this structure like a few years ago. So now the set of the group is called alphabet and then there's a variety of sub divisions within this that are separately incorporated. For instance, some have to do with the presence in the internet, some have to do with the provision of cloud services, some have to do with other specific components of the businesses within Google. For instance, YouTube has its own presence and the deal about the home automation and these products has got its own presence as well. Another example is in the retail sector. So Google is mostly services and cloud services and the things that you carry with you on your phone. In the retail sector, you have companies like Mondalez, for instance, that are these enormous retail chains. These are enormous retail groups. And the world of products, retail products, the things that you see in the supermarkets is dominated by a bunch of known but very, very spread out corporations. So you got Mondalez, you got Nestle, you got Procter and Gamble, Pepsi, Coca-Cola, Kellogs, Unilever, Johnson and Johnson. These are some of the biggest groups. And out of those, you've got a cascade of other corporations and the brands that are associated with the products. Now each brand doesn't necessarily mean a separate corporation but very often a brand is run by its own independent corporate structure. So it is surprising. If you have a look at what's available here and you see like a map that breaks down the various products and brands and trademarks that you will recognize and you realize that they all actually belong to the same people. Very often they're all made by the same factory. Now it could be that the products are not saying that the products are the same and they just package differently. They could genuinely be different products but people don't appreciate this and it's very funny. For instance, the English one, when I was young, they had two main bottles of European beers like they had Heineken and they had Amstel and they came in different color bottles. Heineken was green, Amstel was brown, quite distinct bottles. Now supposedly the beer tastes different. There are people who feel very strongly about this people who don't. Okay, I want to agree that the taste is a little bit different but you know, you wouldn't really, as you're stuffing your face with the kebab, you wouldn't really notice. But people were very kind of committed. These brands kind of associations with kind of people's social status, political preferences was very interesting. The right wing people would drink the Heineken, the left wing people would drink the Amstel. Yeah. And they were all made in the same factory by the same company. Yeah. It was very funny. But of course, the corporate structure behind the brand was the same but the brand itself was very distinct. The aspirations of the consumer actually meant something very different. Do you guys see a difference between Pepsi and Coke? Are you the sort of person that you know where the waiter comes very apologetically at the restaurant and you say, "Can I have a Coke?" And they go, "Oh, we have Pepsi. I hope that's okay with you." To which the answer is, "What? Pepsi. For me." I came all the way and you want to give me Pepsi and I have to pay for it. Wait. Everybody just says, "Yes, no problem." Of course, now you guys are probably drinking the light versions of this like nothing anyway. Like who drinks Pepsi Max? Nobody. Okay. Who drinks the Diet Coke? Who drinks the stavia version of the Diet Coke? They've got this in Greece. Is you know that? Yeah, the Greeks who are all very skinny people, they don't eat normal sugar, they eat stavia, which is a kind of substitute to maybe stavia or something to do with them. Yeah. I don't know what's going on there. We are in contact with corporate groups all the time and we're in contact with these multinationals all the time. They are actually essential to our lives. And a great degree of the services and goods that we use on a daily basis are dependent on the existence of this corporation. Currently, the farmers in Europe are very upset. Have you noticed this in the news that there's going to be trucks driving through Paris and virus other European cities by a bunch of people and going to terrible clothing and complaining about stuff? Yeah? Have you noticed what they're complaining about? They're complaining against competition because they're saying that their products are either not purchased by consumers because they're too expensive or they're purchased by the supermarkets and the big brands and the multinationals at very, very low prices because there are alternatives that are coming as imports that are very, very cheap. And the farmers are upset about this. Now I agree that they might be upset about this. On the other hand, that's capitalism. You cannot force the consumer to buy things that they don't want. So you could argue that your product is better than the import and it probably is, but if the customer cannot afford it or doesn't want to pay for it then there's nothing you can do. Maybe if the supermarkets are sourcing goods cheaper that they make available to the customers that the customers prefer to buy, again, that is capitalism. And you could argue that there can be some restrictions in imported things from beyond the EU, but if we're talking about these protests taking place in the EU, they cannot control imports from within the EU. That's the whole point of having a single market. So it isn't very clear to the wider public at least what could be done to address the concerns of the farmers without kind of fundamentally changing the functioning of the economy. Or maybe they just want to be subsidized, be able to make a living while they continue to produce the things that they produce that are relatively uncompetit. Like this is also an option and that's perfectly fine and that's a political choice. Now the question is how can global multinational groups source things that cheap and how is it that they achieve these efficiencies within their productions and their systems to be able to bring stuff cheaply? One answer is efficiency in organization. If you have a presence in multiple countries, then you can get quite good in having efficient supply chains because you're in control of the whole steam. So if you have a company that produces cocoa in Colombia, right? And you have another company that is part of your corporate group that processes this and makes the chocolate, which then is sent to other more elaborate places in Europe that produce kind of high-value chocolate and then you own the entire distribution network, you own the mechanism to actually deliver this from one place to the next. So you take the original agricultural product from Colombia, you pass it through the various manufacturing mechanisms and you can bring it all the way to the customer in a supermarket here. If you are in control of this whole process, then you can make it efficient in a way that minimizes costs. And that probably allows you to offer much better prices or maintain very healthy profit margins or perhaps a balance between the two. I was opposed to somebody that needs to do this through arms length contractual deals. Because if you were starting, if you were an independent shop in London and you needed to trace your way down all these chains and negotiate ad hoc with each one of these levels, then you might find that you're going to get a lot higher prices, both because you don't control the negotiating, but also because you don't have the purchasing power of a massive group. So if Starbucks is ordering coffee for the whole world, they order a lot of coffee. Therefore, they can get better prices than an independent store that just needs to get kind of 50 kilos of coffee a month. efficiency in the production is a normal thing and this is what spares a lot of production over season all these integrated supply chains. But there are other reasons why this could be cheap and this is where we run into trouble. One of the reasons why products could be cheap is that they take advantage of inconsistent requirements in various jurisdictions and then they can produce a lot cheaper by offering worse conditions to the people that they do business with. For instance if you are a manufacturer and you need to produce clothes, if you produce them in Europe then you have to respect things like minimum wage you need to have your factories inspected for health and safety reasons you need to give holiday pay to your workers maternity leave paternity leave all of that stuff up come and bet it in the law and they are normal for every worker in whatever field in in the European area. If you were producing in the US maybe you could give them less of this because then hiring a firing is more flexible than the not all states have got minimum wage requirements not all states have got obligations to kind of cover health insurance costs and so on. So just by choosing a different jurisdiction even if it is in the developed world could cost you less. You could choose to have your manufacturing in Turkey that perhaps costs a lot less because the standards of living are lower or the regulation are lower or even you could take advantage of what you know to be in appropriate conditions that are very cheap either because a country is at the stage of development that doesn't really have requirements or they just refuse to extend those requirements to the exit to the whole population or they simply don't care. So it could be possible that you have manufacturing capacity in a country that has got very poor implementation and very poor standards and then you can pay people next to nothing you can feel the factor just with kids that are making stuff and are working 24/7. You can produce in a country that uses slave labor you can produce in a country that uses prison labor. So if you can do this and you can do this through separately incorporated affiliates whatever goes wrong is going to be contained to that location and it doesn't affect the rest of your chain but you have the benefits of the very cheap production and Western companies are getting like a bad rap about during this stuff because historically they were the ones behind a great deal of these behaviors but it's not just the Western corporations. You see I'm very diverse in blaming people I've got no problem some of the worst offenders now are Chinese based corporations. So big fashion brands and so on that are coming out of China have created quite a great deal of concern both in the way that they source their their base material from other countries because they don't have the same level of conditionality that perhaps Western corporations might have so they've got no problem taking like cotton or something that's being produced through slave labor and they produce it in China using people in prison camps right they are not compensated at all or people that work in very poor conditions in kind of very low documented areas and they do either there are areas where there are no regulations or they can bribe their way through the regulatory systems so they don't get caught and we have much less visibility here in the West about what these corporations are doing and we have difficult getting the information but they are engaged in a similar level of violation that allows multinational corporate groups to make excess profits so their presence and their profits and the benefits that come out of the work can come both because they are able to achieve efficiencies in production through scale and through organization that is not open to everybody else but also because they can take advantage of all these lacks conditions either to increase their profit margins or to reduce dramatically the price of their products another way in which they can become very successful is by being anti-competitive it could be that big corporate groups that become essential to global infrastructure if they control that infrastructure then they can set prices and the presence of the group in a variety of jurisdictions means that they can coordinate in their attempt to suppress competition I mean good examples are holders of online infrastructure like Apple Microsoft Google they are constantly chase after regulatory authorities for having anti-competitive behaviors yeah Microsoft famously you know has gotten into trouble by trying to prevent competition with its operating systems Apple is getting into trouble all the time by trying to prevent people's access to the Apple store or controlling access to that in in uncompetitive ways Google is frequently getting into problems in the way it uses its intellectual property rights or uses other people's intellectual property rights so there's an ongoing fight between all of these systems but this is also a way to make money so if you're huge and you've got presence in many countries it's very difficult for independent competitors to appear in one area and to sort of become to branch out and become international brands and actually threaten your behavior the final way in which multinational are becoming a problem how they contribute back to the states in terms of taxes and duties and fees for their operations is a very significant issue the presence in multiple jurisdictions gives the opportunity not only for efficiencies but also gives the opportunity for a regulatory tax arbitrage that means that you can set up in the place with the lowest tax exposure if you have an integrated production chain with various parts of that chain being in various countries and you control the flow of goods in the flow of finance you choose where you present profits so we say Starbucks is controlling the whole chain from the Colombian coffee produces all the way to the shop that is selling you your coffee here in London then the way they handle their internal pricing they could choose where they where they shop profitability clearly they don't pay they pay money but they don't pay a great deal of money to the agricultural producers of the coffee maybe they don't pay a great deal of money to the manufacturing parts they generate a great deal of money in western cities where they sell the coffee where they've got the shops but if the majority of wealthy customers that are going to spend a great deal in coffee and are going to show high turnover are in places that are high in taxation exposure then corporations like Starbucks don't want to show high tax high turnover or high profits in these jurisdictions so what they can do is that they can utilize the pricing without the chain to make the profitability appear someplace else so yeah a lot of people are buying coffee and it's very expensive here in London how is it possible that you don't show profits in London because you price the incoming you price the coffee that the shop here is going to use you price the licenses for the intellectual property rights that are used within the franchise you price them super high this means that even though they generate a great deal of turnover they don't actually generate a lot of profit because they've got very very high expenditure and because this expenditure is artificially created this is then going to show the profit in some intermediary company that is based someplace else so the intermediary company is getting the the coffee from the agricultural producers and is doing the processing fairly cheaply is then selling that coffee really expensively to the retail parts of the business alongside the intellectual property rights so all the shops look the same and so on so it generates an enormous amount of profit if that intermediary company that is sitting in the middle of all this chain is placed in a jurisdiction that's got minimal taxation then they can get away without paying any tax at all so this is the final the final way in which multinational groups can be extremely successful in making money it is through efficiencies in production and controlling their supply chains is through taking advantage of opportunities to reduce costs in you know proper but sometimes improper ways through these supply chains. And it's also through minimizing tax exposure by having profitability appear in the jurisdictions that have got the lowest tax rates. All of this could be good, could be bad. It could be good because that creates extremely efficient and extremely profitable corporate groups, we can all buy shares. We can all buy shares in Google and in Apple and all the rest of it and participate in the benefits of these efficiencies. On the other hand, the state, if you're in states that they've got a lot of operations but they don't pay a lot of tax, doesn't get to participate in the benefits of this as much. Opulations that are taken advantage of by participating in the production down supply chains and they're getting paid very little and they're working in appropriate conditions in a safe conditions and so on, or they're harassed and suppressed. They probably don't have a great time. Stakeholders, who are people external to the corporation that suffer the consequence, might have problems. It could be that the way the corporate group is structured generates negative external effects. They could be pollution. They could be displacement of populations. People could get killed because of unsafe working conditions. You remember that big building that collapsed in Bangladesh, there was full of people who were working making clothes, so Varys West and brands like the Rana Plaza building. So that was quite a few years ago but it kind of generated quite a lot of literature about this. There wasn't a big building, there was full of workers, it was very unsafe and the whole thing collapsed. In that building, it was full of people making clothes for Western brands starting from the two points going up to the very expensive ones. It wasn't only a prime market and the supermarket, it was actually well-established brands and it made people think because you have the impression that if you go to a shop and you pay a great deal of money for clothes, then probably they're through cleaner supply chains. But in fact that's not the case at all. It just means that the profit margins are way, way higher because the man's deliverance, the brand, as opposed to the other stuff that are produced by the same people in the same places, probably with the same material as well. So the taxation thing is a very significant problem for the state. Now, other negative effects of stakeholders could be negative effects on states but usually are negative effects on particular populations or individuals. Now, what can be done about this? Your primary idea, especially if you're having this discussion in the context of the law school, would be to say, well, we'll figure out what the problem is and change the law. So one example where you can change the law and have impact is you can change the tax rules. This is actually happening after a very, a very long time of very intense negotiations. They have finally managed to agree on minimum tax for multinational corporations. So now this is going to roll out that there is an agreement between various Western jurisdictions on taxing corporations in the places where they do have their operations, so they do have their turnover, not only in the places where they show up profits. This is to deal precisely with this transfer pricing problem that the multinationals can choose where they appear to be profitable. So the new rules that are kindly being passed into legislation across the majority of Western jurisdictions, imply a minimum tax liability for these big corporate groups. Meaning that if you have specific levels of turnover, then you pay a percentage of that as tax, regardless of whether you show profitability or not. And then the rest of it can be taxed normally in the places where you do show a profitability. And the rules have been set up in a system that there is no escape from this, meaning that if enough countries participate, then the corporations cannot threaten to say withdraw from one country altogether not to have to pay these things. But this is very much a collective action problem, and this is why it took so long to set up. And it's actually like a very positive message now that this is beginning to happen in reality. Because corporations always said the first country that tries to do something like this, we will leave and we will go someplace else. And that usually detailed policy makers, because nobody wanted to sort of detail investment or do something like this. But if all the countries are doing it at a relatively close time period, then there's no word for them to go. And I think we go to the point that the big, big corporations have been getting away with it for so long that everybody now is convinced to do something about it. So one area where you can change the law and to have some level of international corporation and consensus and change the law consistently across a number of jurisdictions, then you can have outcomes. So taxation is a good example. Fine. And for other things, we're having a bit of a problem. Because if you change the remember that multinational groups are consisting of independently set up corporations, each corporation is responsible for itself. It is not easy to have responsibility for the parent of the group, for the activities of everybody else, because of things like the corporate veil and so on. And it gets a lot worse, not only corporate buyers, but it gets a lot worse if you crossing national buyers and you're going from one country to the next. So changing the law here can affect the way businesses operate here, great. But if the negative thing that you worried about that you trying to address is not taking place here, but is taking place overseas. And that activity is carried out by a separate entity. You have issues making the parent of the group responsible here. Again, why do you want to do it here and you don't want to do it there because you're here. And the political will to do something is here and perhaps if the parent of the group is here, this is where the money is. Because telling a different country they should change their laws is fine, but it's probably either not going to happen or if it happens, is not going to be enforced properly so you're never going to get anywhere. This is why we're having all this discussion. How can you make the parents of corporate groups responsible and then bring them to courts or you know bring the regulators after them in these jurisdictions here for something that they've done negative over there. Because over there is not going to work either the court system is not efficient or the government will not cooperate or this like a million other barriers as to why you couldn't do it there. These are types of laws that overcome issues of limited liability and separate personal. Sometimes they're about corruption. So the best examples of penalizing somebody here or creating a sort of universal jurisdiction on something that you consider to be wrong are things I have to do with bribery and corruption. So you got as examples the US foreign Corrupt Practices Act from 1977 you got the bribery act here in the UK from 2010. You got a few international conventions as well now what this tries to do it tries to penalize people here for the behavior they have overseas. So it tells somebody if any of your affiliates is engaging in corrupt behaviors overseas we get a whole new responsible and the law has been structured in a way to enable it to do this despite the fact that the activity was taking place overseas perhaps to affiliates and so. Now with this you need to be a little bit careful because people usually get confused between international and national instruments. The way international law works is that the countries the governments agree to do something and then they sign on to a treaty that says they're going to do something but international law does not create rights and obligations that directly applicable in reality. It creates expectations that the governments are then going to act on these promises and legislate at national level. The only way you can bring somebody to court you can call the police from somebody or do something like this is if you have instruments in national law. Now I'm not saying that international law does not exist or it is not meaningful it is but it is directed to states it is not directed to the actual economic actors. And multinational corporations you will see in a lot of the literature are perhaps as important and as powerful as states in some cases there are a lot more powerful than states but they do not have presence in international law. And technically the way the system is set up they could not have presence in international law. So when you're reading and writing about this keep these distinctions very clear because you're not going to be able to do something like this. because otherwise you get lost. The distinction between what is international law and what impacts a treaty has, and then what is happening on domestic level as a response. And always keep these barriers, these jurisdictional barriers clear. International from national, the different corporate barriers, what it means for separate incorporation both within and outside the jurisdiction. This is very important. But these instruments, both the international ones and the national interpretation as to bribery and corruption are good illustrations about the attempts to have an extra territorial effect of domestic legislation. Now we've gotten better recently than this, because now we've got an evolving array of measures to impose liability for inappropriate behaviors down supply chains. So there's a legislation on supply chain diligence that imposes obligations on the parent of the group that is based here or in Europe for wrong things that happen down the supply chain. It imposes an obligation on the parent to keep an eye that everything is happening regardless of whether it's happening through affiliates, fully owned enterprises, contractual deals or whatever. So the mechanisms through which the parent controls the chain are not material. So they cannot get away with this by saying it was a different company, it was a contractor. They have now an obligation to keep an eye on what's happening down the chain. And if negative things happen down the chain, then the parent can be fined by the regulator for not having put proper sex and balances in place. There's legislation going on as we speak through Europe on this. France and Germany already had the legislation separately, but now they're passing the legislation as a new directive as well that is going to implement these things across the union for corporations of a certain size and a ball. So all that is very, very positive. In a way, it reminds me obligations that we've got for health and safety because here, if there's an obligation on a company to have control over its operations, then they cannot get away by saying, oh, we didn't know about. Because they should have instituted mechanisms that allow them to keep control. Corporate manslaughter, for example, is a criminal offense on corporations that has been set up precisely in this way. You don't find somebody who has done something negligent to then put them in prison. You say the deficient culture in the corporation that allowed an accident to happen where people got killed, that's what's at fault. So the corporation now is liable for a criminal offense due to the defective decision-making and control structures. So similarly, it is defective control structures for supply chains that now can create liability for the parent groups and obligations to compensate and all of that stuff, Tarek. So these are good uses. And to an extent, quite innovative and recent uses of the law at domestic level to address issues. Now, if we can have international cooperation and then everybody-- so there's a treaty-- and then everybody implements the same ideas at the same time, that's even better, but that's a little bit difficult to do. Another level in the law enforcement is in the courts, in the jurisdictions where these things are challenged, take a more loose understanding of limited liability. This has been happening. They're in the US and the UK. The courts are very committed to the idea of separate incorporation and limited liability and all the rest of it. But we do have plenty of examples from other jurisdictions where claimants have been successful in holding the parent of the group responsible for inappropriate behaviors down supply chains or inappropriate behaviors by affiliates and subsidiaries. So because the courts here are so committed to a kind of rigid understanding of limited liability, it doesn't mean that every court around the world-- even though everybody participates in the system-- but not everybody has to take the same attitude and enforce it in the same way. So if you're looking for cases where the parents, where the money is, have been held responsible for violations, for behaviors down their chains, you can find quite a few of them. We have examples from France, from the Netherlands, from Canada, and so on. It is an evolving jurisprudence. So this thing can be addressed with legal means both through changes in legislation, but also through the activity of the claimants themselves when they have suffered some loss in taking it through the courts and trying to find some redress in that way. So it kind of works. However, the law is not a complete solution to problems that are multifaceted and effectively economic. And they have to do with market organizations. So we need to accept this. It would be great if the law was a solution to everything, but it isn't. So the fact that most of you are lawyers doesn't mean that the law is always the solution. Sometimes economics is the solution. But a lot of people take these things personally. So when you hear Nestle, baby milk and all of that stuff, doesn't bring a positive association or a negative association. When you guys breastfed up till 12, what? And did you have like, did you have formula milk when you were babies? You don't remember. Ask your mothers whether they gave you formula milk and whether it was by Nestle. Yeah. Now people, when they like possibly not your generation, but you know, all their students would go, oh, Nestle is evil. People had the negative association because there was a big campaign against them because they were marketing their products to the whole world to get people to use formula milk. And of course, in the West, formula milk is fine. But in developing countries that didn't have access to clean water, they were trying to make formula milk with dirty water, which then spread disease and lead to babies dying and all of that stuff. Now, I don't know the extent to which this is true. And I don't know the evidence behind it. But what I do know is that this created an extremely angry campaign in the '70s and '80s, which kind of solidified in everybody's mind that Nestle is somehow a bad corporation. So the reason why I'm telling you this is that now, the spread of information is a lot easier. Something nasty happens. Everybody knows about it immediately. Or somebody wants to create the impression that something nasty happened and then everybody knows. And people can get very upset about this. People stop drinking coke. Because people are trying to boycott American corporations, right, in the context of the situation in the Middle East. It's been a revival in Egypt for the local soft drinks which were created by a Greek guy back in the '50s. Did you know this? That the Egyptian cola is made by a Greek guy. See what they tell you at the Greeks invented everything? So negative associations for corporations can have financial impacts. Financial impacts can then change the behavior of corporations. Corporations that have got exposure to environmental impacts. Or are the cause of negative environmental impacts? Are getting a great deal of bad press every time something major hits the news. Like a big tanker sinks and kind of floods with oil all over the place. I grew up with images of birds being plucked out of oil spills. Right? Like it seems that there was nothing in the TV. On TV in the '80s, every time you turned on the news, you just had the burn to be taken out of an oil spill and then people should think it's other than in the Middle East. So in a way, nothing has changed. If you are a petrol company and your ship sinks and kind of floods the whole of Alaska with the petrol and all the animals die, that doesn't look good. If you have a horizon disaster in the Gulf when the BP thing kind of blew up and killed all those people. So this doesn't look good. If behind this, there is concern as to the company's environmental behavior and it's a lack of attention to the interest of its stakeholders. This can then the very, very negative impression on the public can affect the way the corporation makes decisions. And the impact of this is more severe where they're directly exposed to the customer. So clearly, if you're a retail focused brand and everybody can have freaks out about your products and nobody visits your shops anymore, you have a direct impact of this consumer. feeling. Even if you're not directly affected, the negative effect on the brand eventually becomes a problem. So even corporations that are not are retail focused, they're being more careful. So you've got, you know, the aviation industry, the people who make the machines and the planes, they're very concerned about environmental sustainability and all of that stuff. The reason they're concerned is because the public is concerned, but we don't buy planes from Boeing, okay? We buy flights with the airlines, but because we affect the airlines and the airlines affect them, then they have to care about this as well. So pressure through an economic avenue gives power to the customer to actually protest against behaviors that they consider inappropriate. This is not to say that the customer necessarily cares. Do you base your purchasing decisions on ethical considerations? You guys buy clothes from the kind of dodgy Chinese place, from shine and from Timu and all that, do you? Stop this people evil. Shine though is now trying to list in Western stock markets. So there've been falling all other themselves kind of clean up and I produce impact statements and all that stuff. So all the dodgy production has now gone to the other side. Yeah, well that's fine. Now you have the choice. I'm not saying that you have to care. These are like, you know, not everybody cares about these things. Maybe, maybe this is a rich person's problem because to care, you need to be able to afford the alternative. If you need to get food on the table and you've got a limited budget and you're obligated to buy the cheapest things, you don't give a damn when the cheapest things are made. You just need the cheapest things. So there's a bit of hypocrisy as well in the perception of choice. But this is mostly a kind of Western concept. We're talking about people who can buy. So we're talking about the people who have the purchasing power to choose whether they go to prime or core H and M or Zara. Right. Now, and in between situation, between sort of the reality of economics and economic pressure and then the reality of the law and the governments having control of that and changing the law is what we call the voluntary sector and all these ideas behind corporate social responsibility and an attempt to make the corporations themselves more socially responsible. It sounds like a cheap way to get out of the problem and a fake way to get out of the problem, but it doesn't have to be. Remember that people working these corporations, maybe the people who work in these corporations have got an impact on the culture. Would you go work for somebody that has a bad reputation? So if you had the choice, so given the choice between a place, let's say that they're going to pay you similar amounts. By giving the choice between working in a place that has got a terrible reputation and a place that has a more normal reputation, wouldn't you choose to go to the place with a nicer reputation? People will habitually accept lower pay to go to something that is more interesting or something where they think they're going to fit in better or have a nicer time. And we do make this choice very frequently. So it's not we shouldn't discard the human factor in this. People may choose to make their corporations better because they feel happier and more motivated and more content with themselves to work in a place that does positive things. That's why a lot of people quit when like a big multinational will buy a smaller corporation. There are quite a lot of people's fit because they think they cannot fit with that mindset. So not everybody is motivated by money. Not everybody, you know, if we're having a sort of agricultural business and somebody says, you know what, we could save a lot of money instead of buying the cartridges for the stunner guns that we use to kill the cows. Maybe we could just brick them. Like, take a brick and whack them on the edge till they're dead and that would save us the kind of cartridges. I don't think the rest of the company is going to go, "Oh, oh, saving." Many people are going to think, "This is brutal. We don't want to do this and we don't want to have our workers doing this to the poor cows. So we just don't want to do this." Right? And it's just like a legitimate thing to say. So the corporation itself may want to be nicer. And there's a big literature suggesting that people who are having a good time and they want to be someplace are more productive which results in actually better profitability at the end. So and the idea between corporate social responsibility and the company engaging with its stakeholders and the environment around it means that the company wants to remain profitable and successful and competitive but doesn't want to be nasty doing. So they will actually engage in a positive way to minimize negative impacts that they might have in the world around them. It doesn't negate retaining profits to shareholders, it doesn't negate being commercially successful. And of course, you know, all the few cases where there is a choice to be made, you know, can we afford to be nicer or not? Then it's a matter of the board to decide. Now, funny enough, the law actually obliges them to be financially successful first. So the primary built-in requirement for corporate decision making is to make money for the shareholders and then everything else comes second. But the way in which they can interpret what making money for the shareholders means gives them a bit of leeway. And also making money for the shareholders doesn't mean for the shareholders have got now. It also means for the company surviving for the shareholders I'm going to have tomorrow. And if you want to have a company that is successful in the future, a nicer company with a positive brand, positive relationships with its stakeholders, with its suppliers, with its employees, with the government, with everybody else is probably a better avenue to success than a very nasty corporation that extracts the maximum amount of value it can write now. So I think it can work. And even though a great deal of the literature that the companies themselves give out about their CSI engagement is fake, a great deal of it is mighteting. The fact that they're talking about it is a positive thing. It's better to be talking about wanting to be nicer than not to be talking about it at all. So it is part of the normal discourse now to have concern for the interests of stakeholders. Because if it wasn't, the public would be less reactive when something bad happens. The corporations themselves would be less reactive. The employees inside that want to do better, they would feel less empowered to say it. And we've seen what happens when, you know, if bad behavior is normalized or rewarded, it gets worse. So if everybody says this isn't a nice thing to do, it may not stop the bad thing from happening, but at least it creates some background pressure on the people who are doing the bad thing. Or at least it continues to happen and everybody knows it's a bad thing. An example is that, you know, the tobacco companies now are kind of all pretending to shift to things that are nicer for you. Which is ridiculous. That, you know, the main income is producing cigarettes that are going to kill people, but you wouldn't have guessed that they're selling cigarettes. If you go to any of the big tobacco firms on their websites, you read the statements, you all think there's some kind of environmental clarity or something, yeah? It's all about kind of educating kids in Africa and planting forests and things and no yines, identically, we give you cancer with our products. Yeah? All of this is a result of this pressure. So if your starting position is that law is strong, economics is strong, discussion about volunteerism are a way to avoid discussion, I would urge you to think about it. Yeah? So I think there is something to be said about having a positive narrative and how a positive narrative can have some impact in making these things better. Certainly better than nothing, right? So I'm going to make it worse. It has at least the potential to make it better.