Reputation Key in FDI

An analysis by Shawn McCarthy in Canada's national newspaper The Globe and Mail of PetroChina Co. Ltd.'s investment in Canada's oil sands (through an investment in Athabasca Oil Sands Corp.) makes this assertion:

Despite some concerns about PetroChina's ultimate control resting in the hands of senior mandarins of China's ruling Communist Party, the company will likely face little opposition from the federal government on this deal.

Just two weeks ago, Finance Minister Jim Flaherty was in Beijing and told officials that Canada welcomed commercial investments in resource development from Chinese companies, so long as they are subject to proper corporate governance.

It is indeed an important test of the Canadian government's new guidelines for state-owned foreign direct investment. But broader public understanding of - and support for - foreign investment by offshore suitors would help the government along. For this to happen, these companies need to do a better job of making their case before announcing a deal. There are at least four things that should guide their reputation building strategies, assuming they care about public opinion:

  1. Being transparent and honest about their global business strategy
  2. Introducing their senior executives to the host country to temper mistrust
  3. Creating healthy sources of information online about the company, its management and its investment and operational track record
  4. Committing to integrity and openness in corporate governance and providing evidence of this  commitment through a world-class and defensible code of business conduct

The alternative is to hope the host government will not experience, or will ignore, public doubt or opposition. And with any elected government that is always a questionable proposition no matter its ideological commitment to foreign investment.

Hubris and the CEO: A Cautionary Tale

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