One of the vaguest and non-confined terms in the legal vocabulary is ‘transnational corporation’. It is so because transnational corporations denote an enterprise which includes several business entities under the umbrella of one global name.

Changing the structure of transnational corporations

There are many categories or forms that these transnational corporations are present among us in today’s time. One of the more traditional structures is that of a parent company having control over its several subsidiaries across the globe. The way these parent companies exercise their control can be through the shares they own. Although these hierarchical structures were popular mostly in the 20th century, they don’t fit in with the modern narrative of how a transnational corporation functions. It happens so that these days many individual business entities choose to be a part of a huge global supply/distribution chain by virtue of long-term contracts. One such example can be cited of a situation when international subcontracting, or contract manufacturing is controlled based on the dependency of economic factors. In knowledge dependent industries where flexibility becomes more vital than control of assets. When seen from the perspective of black and white present on either side of the line, modern transnational corporations are located somewhere between these extremities.

The emergence of such hybrid structures has called for a need to come up with new definitions of transnational corporations. One such definition by ‘Guidelines on Multinational Enterprises’ by OECD says the following:

“…..multinational enterprises usually comprise companies or other entities established in more than one country and so linked that they may coordinate their operations in various ways. While one or more of these entities may be able to exercise a significant influence over the activities of others, their degree of autonomy within the enterprise may vary widely from one multinational enterprise to another.”

The immense role occupied by transnational corporations

Transnational Corporations have been playing a significant role since the 1800s but it is very clear that these gigantic money-making corporations started to stamp their presence with more dominance since the 1980s. Recent history tells us that the world’s proclivity towards liberalisation during this time was the cause for mushrooming of these global entities. As of 2009 according to the World Investment Report, which is a report by UNCTAD, there exist more than 82,000 of these corporations with more than 8,10,000 of their affiliates across borders. These transnational corporations play a huge role when the magnitude of their presence is seen. About a third of the global exports is contributed by these corporations and the number of employees that work for these transnational corporations in 2008 was 77 million and growing according to the UNCTAD report. To put this into perspective, Germany’s total labour force at the time was less than half of that number.

These colossal bodies also contribute immensely to the rise of FDI as can be seen in the World Investment Report of 2009 shows the exponential rise of total FDI inflow from $50 billion in 1980 to almost $2,000 billion in 2008.