In the contemporary world, a large part of the responsibility of economic development has been shifted to the corporate sector from the public sector organisations. The shareholders, directors, managers, creditors, debtors, banks and other financial institutions, workers, vendors and suppliers, buyers, clients or consumers, and the utility services providers are the concerned stakeholders of a corporate entity (Figure 1). Even the tax-collecting agencies, regulatory bodies, and government are stakeholders because they are concerned with the contribution of a corporate entity to tax revenue, investment, employment, and GDP. A misleading decision or strategy regarding governance or financial regulations in the corporate sector may be a cause of heavy distortion in society through volatility in the stock markets, declining employment opportunities, highly uneven distribution of income, and the demand-supply gap in the commodity markets. Now, a crash in the stock market is not simply a matter of heavy losses to investors and speculators. Its trickle-down effects can also create problems for lower-income households. The fluctuation in stock markets, a decline in property prices, unemployment, and dislodgments of workers are the ultimate consequences of the issues in the corporate sector. The corporate structure and financing cannot be segregated from the problems of unemployment, poverty, deterioration in living standards, and diversion from achieving the Sustainable Development Goals (SDGs). It corroborates the growing importance of the role and patterns of investment in the corporate sector.
Global comparison
The role of gigantic transnational corporations in employment and industrial production, the formation of new companies and their listing on international stock exchanges for raising capital through shares and bonds, growing activities of mergers, acquisitions, and corporate restructuring, and the high-level sophisticated research activities in industrial organisations are the indicators of the emergent significant role of the corporate sector in economic growth and development. The size of the corporate sector and its share in global economic activities depict its importance in economic growth, employment, monetary transactions, and tax revenue. Now, a government cannot perform its activities without the corporate sector’s participation in tax revenue, spending in the head of corporate social responsibility (CSR), and creating employment opportunities and support to the financial sector. The size of their employment is more than the public sector. Their aggregate market capitalisation is around 110 trillion USD, with total assets of 254 trillion USD. Their aggregate revenues are more than 55 trillion USD (Over 50 per cent of World GDP). Their cash on hand is more than 48 trillion USD. The annual revenues of the top 10 companies are greater than the GDP of 173 countries. The cash on hand in the top 10 companies is greater than bank deposits of 166 countries, domestic credit to the private sector of 196 countries, and broad money of 200 countries. Table 1 shows the contribution of the top 20 companies in the world economy according to the size of their employment. Out of these top 20 employers, 7 companies belong to the USA, 5 to China, and 2 from Germany, while one each from the UK, India, Hong Kong, Taiwan, Russia and Ireland.
Key takeaway
In the contemporary world, the huge size of a corporation and its cross-border activities may be strategically important for a state. Particularly, the control of a corporation becomes more crucial if it is in a position to affect the economic indicators of a country. The importance of the corporate sector in the contemporary world and its integration with the financial markets and institutions requires extraordinary policy measures to protect the global economy. Socioeconomic issues can be created by the collapse of a large corporation. Not only the shareholders and owners, but also creditors, banks, financial institutions, employees, and consumers are stakeholders in a company. Even the government is concerned because of its effects on tax revenue, investment, employment, and GDP. This is the reason that large corporations are protected by the bailout packages of the national governments. However, using the taxpayers’ money and other public funds to protect large corporations is a highly criticised area. In some cases, intervention may be required to break the monopoly of a large corporation. Sometimes, the dilution in the power of a corporate board or the split of a company is required because of social and administrative reasons. Some legal, financial, or political tactics may be applied to change the governance and control of a corporation. The change in a corporate structure may be voluntary by the shareholders. It may be with or without the intention of the board of directors. To break the monopoly, social justice and security reasons may require changes in corporate bylaws. In this case, legislative amendments are required.
Table 1: Top 20 companies according to the size of employment
Company | Country of origin | Number of employees (000) | Market capitalisation (Million USD) | Total assets (Million USD) | Revenue (Million USD) | Earnings (Million USD) | Cash (Million USD) |
Walmart | United States | 2100 | 556935 | 254054 | 657332 | 28928 | 9405 |
Amazon | United States | 1525 | 2023980 | 530969 | 590740 | 49424 | 85074 |
Foxconn | Taiwan | 827 | 92194 | 118170 | 191605 | 6506 | 40879 |
Accenture | Ireland | 750 | 194574 | 54141 | 64476 | 9379 | 5542 |
Volkswagen | Germany | 651 | 61121 | 671531 | 348140 | 23713 | 84580 |
Tata Consultancy | India | 601 | 181227 | 17567 | 29047 | 7569 | 5243 |
DHL Group | Germany | 595 | 52607 | 73868 | 88745 | 6906 | 2300 |
BYD | China | 570 | 100258 | 93872 | 84709 | 5566 | 13321 |
Compass Group | United Kingdom | 550 | 48503 | 22447 | 37833 | 2130 | 695 |
Jingdong Mall | China | 517 | 43899 | 83351 | 153599 | 4977 | 23821 |
FedEx | United States | 500 | 73583 | 86114 | 87514 | 6819 | 5644 |
United Parcel Service | United States | 500 | 121789 | 67628 | 89739 | 7587 | 4513 |
Gazprom | Russia | 468 | 32049 | 316747 | 0 | 0 | 8078 |
Home Depot | United States | 465 | 356753 | 79230 | 151830 | 21419 | 4264 |
Agricultural Bank of China | China | 452 | 216133 | 5838720 | 96318 | 42334 | 545906 |
China Mobile | China | 451 | 215860 | 276388 | 142378 | 23980 | 52093 |
Jardine Matheson | Hong Kong | 443 | 26071 | 89182 | 37724 | 3223 | 4935 |
UnitedHealth | United States | 440 | 470805 | 284210 | 379487 | 21781 | 32710 |
Concentrix | United States | 440 | 4572 | 12243 | 7881 | 612 | 235 |
ICBC | China | 428 | 275724 | 6592530 | 115672 | 58253 | 696389 |
Source: Author’s compilation based on ‘Companies Marketcap.com’ (2024)
By: Dr Ayub Mehar
Professor at Iqra University
