The Era of Corporate Split Personalities

The quip that “cross-border banks are international in life, but national in death” resonates loudly amongst the empty shells of international banks that have since been bailed out by their home countries. This column argues that such tensions will intensify in the coming years.

The saga of securities-exchanges consolidation is a vivid illustration of links between companies and nations in a state of flux. The likes of the New York Stock Exchange (NYSE) are national icons of capitalism. But they are also technology-enabled networks that connect market participants and seek a global reach to maximise economies of scale, just like Facebook or eBay. Thus, in the recent battle over NYSE Euronext, Nasdaq envisaged moving one of its data centres from the UK to France to signal commitment to the place de Paris, but it backed off under opposition from its London-based high-frequency-trading hedge-fund clients, illustrating the tension between symbol and business substance. New York Senator Charles Schumer said he would support Deutsche Börse’s bid only if the NYSE name came first in christening the merged entity. Canadian banks and Australian regulators thwarted bids on the Toronto and Sydney stock exchanges (by the London and Singapore stock exchanges, respectively), seemingly on predominantly nationalist motives.

Debates on corporate nationality are nothing new. In 1967, George W Ball, an American diplomat and financier, predicted that companies would increasingly escape their original home bias and acquire a stateless identity (Ball 1967). In the early 1990s, a memorable controversy pitted Robert Reich (1990), who argued that the US government’s attitudes to corporations should be nationality-blind, against Laura Tyson (1991), who replied that “American ownership still matters” – both later became senior figures in the Clinton Administration.

The great globalisation from the 1990s to 2007-08 gave credence to Ball’s vision. Most large European companies now have only a minority of their operations in their country of origin. Entire sectors, such as telecoms, utilities, and banking, internationalised quickly following partial deregulation and privatisation. After 2000, even R&D and headquarters functions, long seen as mostly tied to the home country, were gradually distributed around the world. Symbolic milestones included Wal-Mart’s relocation of its procurement function to Shenzhen in 2002, followed by IBM in 2006, the move of Halliburton’s CEO to Dubai in 2007, and that of HSBC’s CEO to Hong Kong in 2009. National labels were still routinely attached to companies, but by the late 2000s they looked increasingly like misnomers (Véron 2006).

The past few years, however, have made things more complicated, for two main reasons.

First is the breathtaking rise of large companies from emerging economies. These now feature as prominently as European firms in global league tables, compared with a ratio of one to ten a decade ago, and their share of the global total has surged from 10% to 25% in the past five years (aggregate market values based on FT Global 500 rankings, author’s calculations). They are often subject to hands-on state oversight, if not outright control, and generally carry a stronger sense of national identity than most Western peers, partly but not only because of their focus on high domestic growth at home. As there tends to be less geopolitical alignment with and among emerging countries than among advanced ones, their increased global presence also raises unprecedented national security concerns. Some analysts like Ian Bremmer from the Eurasia Group warn that emerging countries’ “state capitalism” threatens the core of the West’s business model and heralds an “end of the free market” (Bremmer 2010). Even with a less dramatic assessment, strong corporate national identities can no longer be seen as just a thing of the past.

The second factor is the recent financial crisis, and the unprecedented state intervention that resulted in the US and Europe, confirming the dictum (diversely attributed to Charles Goodhart or Mervyn King) that “cross-border banks are international in life, but national in death”. This at times extended to other industries, such as car companies in the US or France. The internationalisation of corporate identities suddenly looked like a mask that could easily fall. This apparent reversal chimes with uncertainties about the future of financial globalisation, most acutely felt in the ongoing Eurozone crisis but relayed by wider concerns about “financial repression” in massively indebted countries (Reinhart and Sbrancia 2011).

These conflicting trends are likely to result in policy volatility. On paper, most public policies do not discriminate according to corporate nationality, a principle on which the EU legal framework is particularly strict. But the attempt to impose “Buy American” provisions in the 2009 US stimulus package and the recent debate in Italy on how to counter foreign takeovers show that it cannot be taken for granted. More insidiously still, companies may find it increasingly difficult to give a clear vision of their national orientation, or lack thereof, to their own staff, clients, and other stakeholders. The personality split between national and global can easily lead to irresponsible behaviour, as with those banks that practiced massive regulatory and tax arbitrage, and then hijacked home-country governments when the system came under threat. It has become received wisdom among foreign-policy observers that the next decade will be one of divided sovereignties, unstable politics of interdependence, and conflicts between national constituencies and globalised elites. It would be naïve for companies to think they can easily escape these tensions.


•Ball, George W (1967), “Cosmocorp: the Importance of Being Stateless”, Remarks at the Annual Dinner of the British National Committee of the International Chamber of Commerce, October
•Bremmer, Ian (2010), The End of the Free Market: Who Wins the War Between States and Corporations?, Portfolio Books
•Reich, Robert (1990), “Who Is Us?”, Harvard Business Review, January
•Reinhart, Carmen, and Belen Sbrancia (2011), “The Liquidation of Government Debt”, NBER Working Paper 16893, March
•Tyson, Laura (1991), “They Are Not Us: Why American Ownership Still Matters”, Berkeley Roundtable on the International Economy Working Paper 48
•Véron, Nicolas (2006), “Farewell National Champions”, Bruegel Policy Brief, July

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About Nicolas Véron 12 Articles

Affiliation: Bruegel

A recognised expert on capital markets, financial services regulation, and corporate strategies, Nicolas Véron has been involved with the development of Bruegel since its inception in late 2002 and works there on a full-time basis as a Research Fellow since 2005.

Véron’s background is in both public policy and corporate finance. In his early career, he worked for the Saint-Gobain Group in Berlin, for Rothschilds in Paris, and as economic aide to the state representative (Préfet) in Lille, France. Between 1997 and 2000, he was the corporate adviser to France’s Labour Minister. He then became chief financial officer of a publicly-listed Internet company in Paris (2000-2002), and in mid-2002 founded ECIF, a financial-services consultancy.

He is the author of Smoke & Mirrors, Inc.: Accounting for Capitalism, a book on accounting standards and practices in a changing financial system (Cornell University Press, 2006), and of several policy papers and essays at Bruegel, including on the internationalisation of large companies, accounting standards, banking supervision, financing of high-growth firms, oversight of foreign investment, and rating agencies. Since March 2005 he also writes a column on business and markets for La Tribune, France’s second-leading business daily. He comments regularly on radio and TV including the BBC, CNBC, and Bloomberg TV.

Véron is a member of the Panel of Financial Services Experts to the European Parliament’s Economic and Monetary Affairs Committee, of the Corporate Disclosure Policy Council of the CFA Institute, and of the Accounting and Auditing Practices Committee of the International Corporate Governance Network. He has initial training from Ecole Polytechnique (Palaiseau, France) and Ecole des Mines in Paris and speaks fluent English, French, German, Italian and Spanish.

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