Little Switzerland stands tall

Article as analysis
Swiss corporations are major world market players. Not least of all in developing countries where governance is weak. Using four charts, guest author Markus Mugglin explains why Switzerland in particular ought to be taking global responsibility.

The hallmark of responsible corporate behaviour is that it is practised not only at corporate headquarters but also at subsidiaries and branches. Special attention is paid to business relations with third parties, especially those operating in fields that involve specific (human rights) risks.

1. Headquarters and control centre in Switzerland – at home mostly around the world: large Swiss corporations employ many more people abroad than in Switzerland.

Sources: Handelszeitung, June 21 and July 12, 2018; Annual reports 2017

Most big multinational corporations employ relatively few people in Switzerland. Among the eleven corporations with the highest headcounts, they mostly account for less than 5%. The figure is somewhat higher for the pharmaceutical corporations Novartis and Roche and for the two major banks UBS and CS. "As the location of some world-leading multinationals and sports federations, Switzerland feels duty-bound to champion respect for human rights by the private sector." (Federal Council Dispatch on the popular initiative «Für verantwortungsvolle Unternehmen – zum Schutz von Mensch und Umwelt» [For responsible enterprises – protecting people and environment], page 17)

2. The globalization of the Swiss economy continues unchecked. Corporations are creating more jobs abroad than in Switzerland.

Source: Swiss National Bank

In terms of job creation, Swiss corporations are showing stronger growth abroad than in Switzerland. They have created 41,746 new jobs at home since 2004, whereas the number of employees abroad has skyrocketed 16½ times, in other words by 690,965 jobs. It is noteworthy that most new jobs were in Asia (excluding Japan), where the expansion was highest in China and India. With almost 186,000 new jobs, these two emerging countries account for more than a quarter of all new jobs created abroad. This is three times the number of new jobs in Latin America and Africa combined.

3. Swiss commodity trading firms maintain close business ties with African oil-exporting countries with weak governments and high capital flight. These are countries whose oil wealth is impoverishing the population.

Sources: Case study «Big Spenders», 2014 (1) Natural Resource Governance Institute. Created by this institute, the index measures the quality with which 81 resource-rich countries manage their natural resources. The index covers 81% and 82% of the world's oil and gas reserves respectively, as well as an appreciable portion of worldwide mineral deposits. (2) Political Economy Research Institute Massachusetts

Swiss commodity traders are major players in trade with the state oil companies of African countries with poor governance and massive capital flight. In many countries they are the biggest buyers of crude oil. Their payments make up a considerable portion of the revenues of countries for the most part under despotic rule. By being so highly selective in disclosing their business dealings, they are facilitating corruption. The elites are amassing great fortunes abroad instead of investing in the development of the country.

4. Switzerland is the world leader in the gold trade, gold being a commodity that is especially vulnerable to smuggling and criminal activity. For African gold-producing countries, Switzerland is often the biggest to the third-biggest outlet.

Gold is attractive to criminal elements, the OECD writes in the study “The Economy of Illicit Trade in West Africa”. Switzerland is among the biggest clients for gold from West African countries. For Burkina Faso and Ghana it is the biggest export market in absolute terms, for Mauritania the second largest and for Mali the third largest. Switzerland is also the third biggest outlet for the East African gold-producing country of Tanzania. The OECD cautions that although Switzerland has raised its standard of due diligence, criminal elements could still try use the country as a conduit for smuggling gold into legal channels. As the world's largest gold refining location, special care and accountability are required regarding the origin of gold.