Spare a thought for the future of multinationals

The glory days of the multinational company are over. The big corporate bruiser that shuffles its profits to a convenient tax jurisdiction, riding roughshod over local politics, and imposing "international standards" over local rules is a creature of the past, a phantom of the '70s.

The expansion of global companies will slow, because political risk for multinationals has increased. In the US, the government has ordered a $20-billion expropriation. BP, one of the world's biggest companies, has been shackled by executive decision.

Forget, for a moment, whether BP is getting its just desserts. The more interesting question is what this means for other big companies that take huge operational and financial risks. The message for those operating at the frontiers of technology is brutal: there will be zero tolerance for error. The Obama doctrine says that the penalty for failure, for mistakes that cause harm, is not just fines and big damages claims, but loss of financial independence.

It is the biggest US government assault on the corporate sector since Standard Oil was broken up in 1911. John D Rockefeller's empire was dismembered by the Supreme Court, but BP is being taken apart without judicial review.

Whatever your view of BP, this has enormous implications for the investment behaviour of large companies. Until now, political risk was something that happened in Africa, Asia, or Latin America, but not in Washington. Multinational companies exist because of legal and fiscal expedience. If BP is stateless, it is because shareholders like it that way. For decades, a company with factories in Shenzhen, research in California, IT in Bangalore, treasury in Amsterdam and headquarters in London was thought to be efficient.

Stateless globetrotting multinationals are now vulnerable. BP wants to be a universal citizen, but in this recession-wracked, fearful and introspective era, a citizen of the world is a citizen of nowhere.

In energy and resources, it is national companies owned by protective sovereigns that are making waves. They invest aggressively abroad and at home they close the door to foreigners. If America is now a political risk, where is a multinational at home? - ©The Times, London