Multinationals tend to pay very little attention to the impact of their operations on their host countries. This is confirmed by cases such as those of Apple, notorious for exploitation in the gold and coltan mines of the Congo and in the factories of its Chinese supplier Foxconn, or the abuses reported in the Indian sweatshops of suppliers for fashion brands, such as H & M and Benetton. OTROS EJEMPLOS DE MÉXICO?
These cases make us question just how much multinationals care about the social development of the local communities in which they operate. But what about Latin American multinationals, also known as multilatinas? Do they behave differently with the communities they serve in Latin America?
In the article “Engaging Stakeholders in Emerging Economies: The Case of Multilatinas” (Journal of Business Ethics, 2018) I analyze, together with IESE professors Marta Elvira and Carlos Rodríguez-Lluesma, the practices described in the Corporate Social Responsibility reports of 28 multilatinas included in the América Economía ranking. We particularly studied companies’ relationships with stakeholders.
Beyond the traditional stakeholders that are pertinent to the multilatinas, such as clients, suppliers, shareholders, employees, government and community, we identified other relevant stakeholders whose representation is not the norm, stigmatized groups that probably do not have the resources to be heard, such as employees’ families or indigenous peoples.
We conducted a thematic analysis of the activities reported, having previously identified the key elements for gaining legitimacy with stakeholders, using the international standard provided by the Global Reporting Initiative (GRI).
The three main elements that comprise the framework of relationships with stakeholders, according to the corpus of CSR literature, are:
- Association with stakeholders, in order to be effective, relevant actors from the local community must stand out for the organizations.
- Dialogue with stakeholders, understood as frank, two-way communication, constituting the mechanism that is most likely to engage stakeholders in a profound, lasting manner.
- Volunteering by employees, which is usually part of the CSR programs.
The problems of multinationals in Latin America
Western multinationals are usually criticized for their practices in developing countries, in particular their inability to understand, far less address, the real needs of the local communities.
Even though they have been present in the region for a long time, many multinationals report minimal involvement with local communities, and some do not report any CSR activities at all in the region, even though they do have them in other regions, such as Africa, Asia and Europe.
These are some of the main issues faced by multinationals when implementing CSR policies in Latin America:
- They apply their CSR guides across the board, thus generating difficulties for their affiliates in developing countries, owing to a lack of experience and the cultural shock that can be produced by such initiatives.
- The role of multinationals in society has not been well established by the parent of affiliate companies.
- Some multinationals exploit their power and act insensitively to the local community or resort to self-interested philanthropy that is only concerned with assuring their operations in minimal human conditions.
- The profile of these multinationals is distant from Latin American communities. Some lack the knowledge to respond to the communities’ needs and others maintain minimal contact. Moreover, the affiliates seem to restrict their attention to the most important stakeholders.
- They fail to meet the expectations of the local communities of committing to improve living conditions and prosperity, which would assure relationships of trust.
Multinationals in western countries need to analyze the institutional dynamics, maintain constant communication with the community, and assure operational sustainability while the community’s living conditions improve.
Why do multilatinas have the edge over multinationals?
Given Latin America’s long tradition of commitment to social development, multilatinas face a lower risk of being criticized, mainly as a result of their extensive knowledge of the region.
For example, the history of Mexican companies has fostered the institutionalization of social activities, a more family-oriented leadership style and a focus on social benefits for workers, such as free accommodation, schools, basic medical services or recreational facilities. This approach was adopted as the result of the precarious working conditions that existed in Latin American countries before industrialization. Moreover, some multilatinas established worker cooperatives that functioned as mutual welfare companies. It is worth noting that despite these services, economic and social inequality conditions persist.
Another factor that explains multilatina-stakeholder relationships is the underlying social contract between the company and stakeholders, which leads to mutual expectations and obligations for both parties. Under this social contract, certain stakeholders could possibly have legitimate petitions, but are not capable of making themselves heard, such as indigenous groups who have traditionally been ignored, especially by the multinationals.
In Latin America, many stakeholders seek greater social integration and expect companies to play a role not only in economic but also social development. These expectations originate from: Latin Americans’ strong sense of community owing to the combination of the indigenous-Ibero-American colonization, the search for a national identity and a social structure based on primary social relationships.
Paternalism also plays a major role in these relationships, thus implying concern for workers that goes beyond the workplace to include their families and, by extension, the communities. These stakeholder relations transcend government regulations, focusing strongly on community engagement.
This is also due to institutions’ failure to protect work relations and the shortage of available resources to enforce labor laws and workers’ rights. Therefore, employees have to rely more on forging personal relationships with their superiors.
Multilatinas often reach out to their stakeholders by implementing diverse social activities that frequently differ from those established in the standardized guides applied in developed economies.
In our study, we found that the socioeconomic development of communities in which multilatinas operate came up as a recurring concern, with vocational education or training as the most common activities in the workplace.