Attorney, LL.D., Finland, Partner
Hannes Snellman Attorneys Ltd.
Helsinki
Finland
Professor of Practice
Hanken School of Economics
Helsinki
Finland
klaus.ilmonen@hanken.fi
Introduction: An evolving world order
A more volatile political environment has affected the relationship between states and corporations and their respective roles in comprehensive security. As modern societies increasingly rely on critical infrastructure provided by private corporations, states are viewing corporate policy from the perspective of strategic state interests, reflected in EU policies on strategic autonomy and economic security [1], for example. With their growing impact and international reach, corporations, on the other hand, have become less accountable to individual states and political actors in their own right. Corporations are integrating political considerations in managing corporate affairs while states are looking for means to align corporate enterprise to serve strategic state interests, leaving corporations to struggle with divided fealties and states with increasing security concerns in a fractured world order.
Corporations as political actors
Corporations have a central role in serving the complex demands of modern societies, including functions vital for strategic state interests from telecommunications to healthcare. Corporate enterprise increasingly includes social and political elements that affect society directly and that are beyond the scope of public authorities or formal political institutions. Importantly, corporations are accountable to their key stakeholders, and do not necessarily subscribe as citizens of any single state, nor do they always owe fealty to the interests of the state.
On the international level, reliance on institutional frameworks has decreased [2] with continued global power rivalry. Global governance has also become disaggregated with a broader variety among participating actors. Individual states are less able to shape the conditions for corporate enterprise and corporations are finding they must take responsibility for their security environment independently to protect their infrastructure, their intellectual property and their value chains. [3] Corporations have emerged as important political actors, both domestically and internationally, sometimes at par with states in matters related to corporate affairs.
The securitisation of the economy
Globalization and international economic integration have resulted in global value chains and economic interdependencies that have raised national security concerns. Access to foreign raw materials, technology and know-how can be restricted and “weaponized” for strategic purposes, for example. Economic factors have become an increasingly important aspect of global power rivalry, as rival blocks seek relative strategic advantages by pursuing or maintaining access to critical assets – and by denying access to others – through protectionist policies, by promoting national production and by restricting exports or foreign investments. [4] The securitisation of the economy is changing the division of labour between states and corporations as corporations have become important actors for comprehensive security.
States recognize that the pursuits of increasingly multinational corporations are not necessarily aligned with state interests and are struggling to integrate corporations in comprehensive security arrangements. Commercial assessments may result in business pursuits that compromise state interests – such as transfer of strategic products, technology or know-how to rival powers. The effects of corporate enterprise on state security can be seen as a corporate externality warranting policy responses. The EU, for example, has taken significant steps to strengthen its strategic autonomy and resilience through regulation and policy initiatives related to the central role of corporations in national security priorities. Importantly, mandatory regulation has in many cases been applied in tandem with favourable industrial policy and commercial arrangements in efforts to mobilize corporations to serve state interests in a pivot towards “strategic capitalism” [5].
Towards corporate statecraft
In a less-structured international framework, corporations cannot rely on states or existing institutional frameworks alone but need to manage their interests independently. New tools are needed to integrate political aspects of the corporate enterprise in corporate management. Corporations must manage fundamental political and regulatory changes as a part of their strategies and business models. Corporations will need to strengthen their resilience to geopolitical changes, assess their role with respect to strategic state interests and to societal expectations, and build competitive business models and strategies adapted to an evolving operating environment.
As political actors, corporations may apply tools of statecraft in their interaction with states and other political institutions. Corporate statecraft can be seen as a part of corporate strategy related to interactions regarding the political aspects of the enterprise. Relationships between corporations, states and other political actors are characterized, in many respects, by asymmetric interdependencies. Formally, corporations are subject to laws and other political decisions of sovereign states. However, in many cases, states are dependent on corporations for investments and revenue, as well as matters of strategic importance, such as research and development and critical infrastructure. A key element of corporate statecraft is the management of these interdependencies.
Corporations can be expected to maximize their influence on political decision-making in matters critical for their business, while seeking to insulate their business from the impact of political decisions. The promise of significant investments, for example, may be used to ensure favourable treatment over the long-term. Corporations may also look to diversify their operations geographically to avoid exposure to a single jurisdiction and to promote competition with regard to political decision-making affecting their business. Altogether, to hedge for political risks, it may well be in the interests of corporations not to be overly exposed to any single state. Some corporations have already sought to ringfence operations in China, for example, in order to build supply chain resilience and to manage regulatory requirements. Corporations may seek to increasingly decentralize business models so that they can adapt to varied political and regulatory requirements. In this regard, corporations may also deliberately seek to build a political identity independent of state affiliations.
Conclusions: Divided fealties in a new international (dis)order
In an era where states and corporations would need increased mutual reliance and cooperation, they are being driven apart as they remain affixed in roles based on a political order that has come to pass. In their pursuit to redefine their respective roles, states and corporations are well-advised to manage their interdependencies by finding synergies and long-term common interests. Importantly, corporations are increasingly accountable to their key stakeholders with political and security needs directly linked to the state. Thus, corporations may find alignment with state interests as they approach the political implications of their enterprise based on the long-term welfare of key stakeholders. [6] States, on the other hand, may seek to strengthen incentivises for corporations to contribute to state interests by industrial policy and by creating competitive business environments.
The political challenges of states and corporations are not subsiding. Geopolitical developments have resulted in the erosion of established international state-centric institutions and frameworks, and the emergence of a less structured and more multifaceted political environment. This allows new actors to emerge on the international arena, including multinational corporations, who will be better able to form international interaction to serve their interests. [7] In the current geopolitical environment, multinational corporations are increasingly in a position to set “their own conditions and destinies” [8]. In this regard, comparisons have been made to historical periods preceding the dominance of nation states when the international stage was shared with “merchant-republics, wealthy oligarchs, and early joint-stock-companies” [9]. In a potential return to a pre-mercantilist order, both state security and corporate statecraft will be of considerable importance.
This article relates to a pending research project on the evolving role of private corporations in comprehensive security in Finland and the EU. [10]
[1]European Commission High representative of the Union for Foreign Affairs and Security Policy, Joint Communication to the European Parliament, the European Council and the Council on “European Economic Security Strategy”, JOIN(2023) 20 final, Brussels, 20 June 2023.
[2] Tuomas Tapio, Geotalouden Paluu [The Return of Geoeconomics], 2018, pp. 142-150.
[3] George Haynal, Corporate Statecraft and its Diplomacy, 9 Hague J. of Dipl. (2014), p. 393-419.
[4] Anthea Roberts, Henrique Choer Moraes and Victor Ferguson, Toward a Geoeconomic Order in International Trade and Investment, 22 J. of Int’l Ec. L 655-676, 657 (2019).
[5] Henrique Choer Moraes and Mikael Wigell, The Emergence of Strategic Capitalism, FIIA Working Paper 117/2020.
[6] Oliver Hart and Luigi Zingales, Companies Should Maximize Shareholder Welfare Not Market Value, J. of L., Fin. and Accounting, 2017:2, 247-274.
[7] Milan Babic, Jan Fichtner and Eelke M. Heemskerk, States versus Corporations: Rethinking the Power of Business in International Politics. The International Spectator, 2017: 4, 20–43.
[8] Colin Reed, Developing a “Corporate Foreign Policy”: The Urgent Need For Boardroom Geopolitics Strategies, Encyclopedia Geopolitica, 3 November 2022.
[9] Reed (2022).
[10] See Klaus Ilmonen, Geopolitics and Corporate Law in the EU, Law & Geoeconomics, 2025:2.