ITT-Heavy-Handed Interference in a Foreign Government
A respected journalist published an expose that implicated ITT in tampering with elections in Chile, by attempting to stop the election of a socialist candidate and, when that failed, to engineer his overthrow in the next election.
ITT began as a telecommunications company, but later diversified into a wider range of businesses, acquiring hotel chains, food manufacturers, service companies, financial services, and industrial companies. The company was very supportive of the Republican party in the United States, and was alleged to receive favorable treatment in return.
In Chile, ITT managed the national telephone and electric companies, and made a tidy profit on both, but began to fear that its operations could be nationalized by the Chilean government and the firm would receive only a fraction of their value (which had already happened to them in Peru).
This problem grew when a split decision in the popular election led to the appointment of a socialist president who was very hostile to foreign businesses, and had publicly stated his intention to nationalize the company's holdings.
When this was exposed, the Chilean president accused the company of interfering with the politics of the country, undermining the rights of its people, and attempting to incite strife culminating in civil war.
ITT had not acted alone, but in concert with the Central Intelligence Agency, and in the international community, the US took the brunt of the blame for tampering in the politics of Chile, which severely damaged the nation's relations with Latin America.
However, ITT's part in the affair cost it greatly. Nto only did Chile nationalize the company, but ITTs facilities were the subject of attacks in many countries overseas - not just in Latin America, but also across Europe and Asia.
ITT was also condemned by the congress and penalized heavily in the US courts for damages done overseas - in short, it was made scapegoat for the actions of the government.
By most standards, the conduct of ITT was reprehensible, and resulted in a tainted public image and the loss of millions of dollars, as a result of their recourse to unethical means to protect their business operations overseas.
Lessons Learned
A multinational corporation should be wary of taking a heavy-handed posture in foreign environments, especially emerging countries where the government has a tenuous hold. The atmosphere can change rapidly from a government that welcomes foreign investment as a source of income and wealth for its citizens to that of a hostile opponent who paints the company as an economic imperialist that is seeking to drain the wealth of the nation.
A corporation should likewise be cautious of its political affiliations in the United States. Some business advantages can be gained by supporting the party in power, but when power shifts, the opposing party can become a dangerous enemy.
When a company enters a foreign market, it may be helped or hindered by its association with the United States. The benevolence or hostility felt toward the American government will color the public opinion of an American company. But it's also true that the actions of a company can also have an impact on the reputation of their home country - and may find their home country working against them if taking a hostile position to the company can exculpate the nation.