www.europeaninancialreview.com 25 he Dark Side of the Moon: Power and Politics in the Multinational Corporation By Christoph Dörrenbächer & Mike Geppert Multinational corporations can be breeding grounds for internal political tension. Struggles for control between head quarters and their subsidiaries can negatively affect both parties and lead to major profit loss for the corporation as a whole. Instead of sweeping political differences under the rug, Christoph Dörrenbächer and Mike Geppert argue that acknowledgement of each other’s interests and identi- ties is the first step towards better management. I n a recent contribution to The European Financial Review, Anil K, Gupta and Haiyan Wang sketched out a blueprint for the Global enterprise in 2020. 1 Based on the assump- tion that the bulk of current and future growth is in emerging markets, they guess that 90% of the world’s largest 500 com- panies have neither adequate strategies nor appropriate struc- tures in place to cope with the new economic geography. We do not doubt this. There are enough examples of companies seriously struggling with ‘winning in emerging markets’ (title of a best seller), some are even giving up, such as the German electronics retailer Media-Saturn, which recently withdrew from China. 2 We also do not doubt the many thought provok- ing recommendations made by Gupta and Wang such as glo- balizing the leadership architecture of the multinational corpo- ration (MNC) or creating a web of global hubs by relocating headquarters functions from the western industrialised world (and Japan) to new boom locations in emerging markets (such as Singapore, Bangalore or Shenzhen). What we would like to point out in this contribution, however, is that these new strate- gies and ideas for organizational change in MNCs only go half way. Still in the shadows is how these things happen, in other words, power and politics. Power and politics in organizations are often conceived as dirty business that keeps organizations away from proper task fulfilment. However, in reality power and politics is the raw truth of any organization. It is born from the interests of indi- vidual and collective actors and becomes virulent if something important for any of the actors is at stake. The 500 largest cor- porations are no exception to this truth of human behaviour, rather the opposite is the case, as they are large, nationally diversified organizations that harbour many diverse interests, management styles and cultures. What is power and politics in multinational corporations? Let’s take a look at Scanfood, a Norwegian multinational food company that recently has invested heavily in Central and Eastern Europe (CEE). 3 From the outset, the newly acquired subsidiaries in Poland and the Czech Republic ran into seri- ous conflicts with the Norwegian operations over quality stan- dards. The Norwegian operations were reluctant to share their knowledge and to invest time and effort in improving the qual- ity at the Czech and Polish plants, as they feared both a further relocation of production to these low cost locations as well as a decreasing effectiveness of their own operations. For their part, the Czech and Polish plants did not trust the Norwegian operations. They felt frustrated by missing transfers from the Norwegian operations but also by the fact that the Norwegian operations ignored or even actively repudiated existing best practices at CEE subsidiaries. Mistrust went so far that the CEE subsidiaries were reluctant to report problems in produc- tion, as they feared sanction due to lingering quality problems. This example reflects what is the heart of organizational politics: namely, to engage in activities that are not required as part of one’s formal role, but that influence, or attempt to influence, the distribution of advantages or disadvantages within an organization. 4 The headquarters task is to keep such Management