These logos don't run
...in the world's hot spots.
After the Nov. 20 terrorist attacks in Istanbul, the US State Department advised Americans to skip nonessential travel to Turkey. Five other Western nations sounded similar calls.
But one of the bombers' private-sector targets responded quite differently. Within a day of the blast that sheared off the face of its 18-floor Istanbul headquarters, the British bank HSBC issued a release calling business there "almost back to normal." The bold statement underscored HSBC's resolve to remain in Turkey, one of 79 countries served by the firm, and to live up to its slogan: "the world's local bank."
That a big, "branded" multinational would stick it out in a place where business conditions appear to have soured - and where the firm seems fixed in someone's cross hairs - illustrates the increasingly complex ethical dilemmas multinationals face in the world's hot spots. War and instability have long forced corporations to weigh the market opportunity against the risks to employees. Now, however, the issues are getting more complex.
Years of activist pressure have made many Western corporations work to become better global citizens - much more deeply involved with their host communities. Now that shift has made high-profile Western firms less able to withdraw - and more vulnerable. Terrorism has thrown a wild card into the deck. Not knowing where the next attack may be makes contingency planning practically impossible.
"Terrorism against 'soft' targets is creating an entirely new ethical conundrum for companies," writes Dale Neef, a political economist and knowledge-management specialist, in an e-mail. He adds that companies immersed abroad now face a variation of the dilemma often faced by humanitarian groups such as Médecins Sans Frontièrs or the United Nations: Stay and put employees at possible risk, or leave at the expense of the local community. "The reality is, I think, that we are entering a new phase of globalism that is characterized by potential terrorist attacks anywhere - if not Istanbul, it will be Karachi, Hong Kong, Rio, or Pittsburgh - and most companies are still simply winging it."
To be sure, market realities often push firms to remain in troubled areas. Governments can generally withdraw diplomats and be sure that they can one day redeploy them. But a company that ignores a market during tough times - the long financial crisis in Asia, for example, or wars in Africa - can wind up struggling with aggressive new corporate players when recovery or stability finally comes, experts say.
Nor can companies easily choose "safe" regions for expansion. The HSBC building had been identified by Western intelligence agencies as a possible target six months before the attack. McDonald's has been targeted abroad - even in Europe - for what it is seen to represent. Starbucks has weathered recent protests, though the firm shuttered six stores in Israel last spring, worried about suicide bombings.
But a deepening level of corporate commitment to the foreign communities they inhabit - and sometimes serve - has made decisions about operating abroad more complex. The issues go beyond rising insurance costs, and the possibility of employee casualties - or lawsuits. Increasingly, some experts say, staying on has become an issue of integrity.
"The decision to stay may be reflecting, 'Yes, we have a commitment to this community, we have a commitment to these people, and to walk away due to the trouble would be to abrogate that commitment,' " says Sandra Waddock, professor of management at Boston College and senior fellow at the Ethics Resource Center in Washington. "I'm sure they're also thinking long-term in terms of developing their business as the situation stabilizes."
Then, too, many multinationals staff their overseas offices with local residents.
"The very significant majority of our staff in local markets are members of the local community," explains Richard Beck, HSBC's head of group external relations, in London. Even HSBC's chief executive in Istanbul is Turkish, says Mr. Beck. "The notion that somehow HSBC might want to remove itself from a country doesn't quite work, when you consider that the bank is embedded there."
One step many firms appear to be taking is factoring regional politics into their planning, says Richard Ingram, deputy executive director of Overseas Security Advisory Council, an arm of the State Department that provides information to US enterprises with interests abroad.
OSAC now has some 2,300 constituents, a significant increase over the past five years that is only partly attributable to Sept. 11, 2001. The organization has also worked to reach more firms.
But companies appear not to be moving to become any less international, in terms of travel or bases of operation.
"I don't think I've seen the private sector withdraw or curtail their activities one bit," Mr. Ingram says. "They obviously take additional steps to protect their assets, but we don't see a significant flight."
Much is at stake. "When you get started in a country, there's enormous investment, not just in terms of money but in terms of developing relationships and trust and transferring not just technology, but ways of doing business," says Rob Shellow, chairman and managing director of Professional Security Consultants International, a consortium of 30 independent security firms based in Bethesda, Md.
"The whole culture of the corporation has to be learned by other people offshore," Mr. Shellow adds. "That's a very valuable asset, not easily replaced."
So firms have worked to blend in. "I have watched some of the companies that we've worked with devise tactics for staying in [troubled countries], essentially reducing their footprint or their image in a country, developing joint ventures where the in-country national head of the division is more prominent than the US company," says Shellow.
"[But] it's getting exceedingly difficult to try to put up smoke and mirrors and hide behind them, because the target may not just be 'American' or 'British,"' it may be 'modern,' or 'Western' or 'non-whatever you are,' " adds Shellow. "That makes it very difficult to defend."
Adding "hardened" on-site security is a short-term fix, experts say. To find their way forward, firms now must perform a new kind of internal risk analysis. They must adapt to new scrutiny, new danger - and a broadening spectrum of relationships.
"There's no easy answer," says Ms. Waddock. "It's a matter of working through an ethical logic that says, 'OK, how do we want to treat all of our different stakeholders? We've got customers; we've got employees; we've got communities where [other] businesses benefit from having us there. We're giving loans to people; we're supporting business. Who's hurt if we pull out - and what happens if we stay? Which is the greater risk?' "
Historically, deals have often been struck with terms so favorable to multinationals that they simply override almost any risk, including that of war. In 1926, for example, Firestone inked a 99-year lease agreement with Liberia for 1 million acres of land, for a rubber-tree plantation, at 6 cents per acre. (The deal was reportedly renegotiated by Liberia in the 1970s.)
Today, however, overseas corporate actions that are perceived as too self-serving are likely to bring to bear the considerable force of socially responsible investors. And actions that have a positive and immediate effect on local populations - fostering entrepreneurship, for example - can win US firms' local support, and even a degree of protection. Done right, corporate incursions are "a source of new jobs and real wealth in a community," says Waddock, "as opposed to financial wealth that gets shipped back to the home country of whatever multinational."
Meetings of the World Trade Organization may still trigger mass protests over exploitation. But even liberal lions like John Kenneth Galbraith have acknowledged that multinationals are not always the rapacious replacements for colonial nations that many observers felt they were destined to become.
"It has become clear that corporate power ... is not the expression of a new imperialism," Mr. Galbraith wrote in his 1996 book "The Good Society." In the wake of multinational missteps from Africa to Asia to the US, he wrote, concern about corporate omnipotence "has given way, in the frequent case, to fear of its ineptitude."