2. Definitions Power is commonly understood as having the capability and the right to:  Make decisions and control and consequences (outcome power)  Control the behavior of other people (social power) Power is usually ascribed to political relations, but companies also possess and exercise power (related to the size of their material assets) MNCs are the most powerful business players, because they hold enormous wealth and tend to escape regulation on the supranational level 2

3. Political power In a democracy people delegate the power to rule to the government (agency theory) Government is controlled and accountable to the society (and business) and this is how it derives its legitimacy The government can be peacefully changed (outvoted) 3

4. Corporate power Business has great economic power, because it holds the primary decision of resource allocation Business has power, because it accumulates resources Business power is legitimate, as long as the company is profitable (owner keep the management hired) As a consequence it shapes also the social environment Business may act as a rival of the government, when it comes to power 4

5. Political vs. corporate power Political Corporate Centralized, collective decisions Public interest Ultimate power and obligation lies with PM (President) Governments can be outvoted Government’s power is legitimized by (re)election Decentralized, private decisions Private interest Power and obligation is in the hands of few/many Companies cannot be outvoted Corporate power is legitimized by economic success 5

6. Sources of power French and Raven (1960) identified 5 main types of power 6 Type of powerPoliticalCorporate Legitimate – followers believe the leader has the right to act  Reward – followers expect reward in the event of obedience ?  Coercive – followers fear penalties in the event of disobedience  Referent – followers believe the leader has personal qualities and charisma  ? Expert – leader has specialized knowledge and expertise ?  (Source: http://www.negotiationtraining.com.au/articles/powerful-intrapersonal/)http://www.negotiationtraining.com.au/articles/powerful-intrapersonal/

7. Business vs. stakeholders power Business power vs. direct stakeholders (customers, suppliers, employees) Bargaining power (Porter’s Five Forces)  Customers – consumer sovereignty and ethical consumerism ?  Suppliers – how many are they ? Industrial relations  Employees – trade unions ?  Management – disperse ownership empowers CEOs 7

8. (2)Business vs. stakeholders power Business power vs. indirect stakeholders (CSOs) Civil society can support or criticize business activity NGOs can be an extension of business 8

9. (3)Business vs. stakeholders power Business plays a role in and affects the political arena Business exerts power to shape the policy-making process:  Individual companies (decentralized)  Business associations (centralized)  Lobbies (centralized) 9

10. Pressure groups Resources Influence Size and members Public support Financial resource Expertise and knowledge Personal contacts Policy-making process Links to political parties Campaigns, demonstrations Media Claims to court 10

11. Power relations and pressure groups Business GovernmentSociety Pressure groups Laws Commodities 11

12. Globalization and power Globalization (through trade) and the rise of MNCs underlie the shift of power from governments to corporations:  Exit options  Locational advantage  Too much deregulation and flexibility 12

13. MNCs – the empirics A Swiss study from 2007 found out that 1318 MNCs control 60% of the world revenues Less than 1% (147) are in charge of 40% of world revenue Top 20 of these companies is dominated by investment banks Such an overdependence explains the deepness of the 2008 crisis (Source: PLoS One, The Network of Global Corporate Control, 2011) In terms of value added, 29 out of 100 economies are companies (2005) ExxonMobile is the biggest and most profitable one (value added - $63 billion) 13 (Source: Global Development and Environment Institute: Corporate Power in a Global Economy, 2007)

14. Power measurement of MNCs Industry concentration ratios – calculates how much of the industry revenues go to the four biggest companies. If it is above 40% the industry is an oligopoly. When the ratio rises, power also increases. (Breweries, Tobacco, Pharmaceutical and Petrochemical, Supermarket chains, Telecommunication). Corporate economic data – measures the rise in revenues, profits etc. Top 50 corporations’ assets increased by 700% 1983- 2003. Declining power of trade unions – deregulation after 1980s and increase of service sector Corporate tax decline – based on the business lobbying activities 14 (Source: Global Development and Environment Institute: Corporate Power in a Global Economy, 2007)

15. Drawbacks of oligopoly The biggest MNCs operate in oligopolistic markets: This reduces consumer sovereignty (exit) Firms become price-makers (cartels) and establish entry barriers to new-comers There is huge pressure on suppliers Small-sized companies are eliminated  Management holds total control (power)  It is damaging for the environment (outsourcing) 15

16. Most powerful people in 2011 NamePositionWhy? Barack ObamaPresident of USAMost powerful economy in the world Vladimir PutinPresident of RussiaMost powerful authoritarian leader Hu JintaoPresident of PRC2 nd most powerful economy Angela MerkelChancellor of GermanyMost powerful economy in EU *Bill GatesOwner of MicrosoftSpent the most on charity Abdullah bin Abdul Aziz al Saud King of Saudi ArabiaRichest absolute monarch Pope Benedict XVIHead of Catholic ChurchSpiritual leader of 1.2 billion people Ben BernankeChairman of Federal ReserveIn charge of US money *Mark ZuckerbergOwner of FacebookPosses the biggest personal database David CameronPM of the UK2 nd most powerful economy in EU 16 (Source: Forbes, 2011)