Multinational corporation building standing strong during an economic crisis.

Navigating Crisis: How Global Companies Adapt Employment Strategies

Nico Varela in Business & Economy August 2025 • 4 min read.

"Uncover the surprising ways multinational corporations handle employment relations during economic turmoil. Are legal constraints always the deciding factor?"

The interconnectedness of national economies has never been more apparent than during times of global economic crisis. When financial troubles spread rapidly, even the most established multinational corporations (MNCs) find themselves facing unprecedented challenges. These moments of crisis offer a unique opportunity to re-examine long-held assumptions and thoroughly analyze the strategies employed by these corporations.

A key issue for MNCs during a crisis is how well their headquarters' management can transfer employment practices across national borders to their subsidiaries. The success of this transfer significantly influences their ability to implement strategic changes and can have substantial impacts on national economies. This process involves various factors, from national institutions to individual political dynamics, and has been studied across numerous academic disciplines.

This article delves into the intricacies of organizational processes during a global economic crisis, challenging the assumption that practices cannot be fully transferred to a foreign subsidiary if the host country's laws are inconsistent. By examining the case of General Motors (GM) during the 2008-2009 financial crisis, we will explore how GM adapted its employment practices in its Australian subsidiary, GM Holden Limited (Holden), in the face of varying local laws.

Can Legal Institutions Really Stop a Determined Multinational?

Multinational corporation building standing strong during an economic crisis.

Conventional wisdom suggests that a practice inconsistent with a host country's laws cannot be effectively transferred to an MNC's foreign subsidiary. However, this article challenges that notion by exploring the roles of power and politics within these organizations. Despite legal and regulatory constraints, actors often have more options than initially perceived.

While research acknowledges that MNCs are politically contested spaces, it often concludes that inconsistent host country laws either prevent the transfer of employment practices or allow only partial or ineffective implementation. This prevents MNCs from standardizing practices globally. Yet, some scholars have noted that subsidiary actors sometimes use their knowledge of local laws to avoid these transferred practices. More investigation is needed to understand how national legal institutions act as constraints.

Crisis as a Catalyst: A time of crisis uniquely highlights the negotiated nature of organizational processes. Heightened market conditions increase pressures on actors and test the limits of legal constraints.
Beyond Legal Limits: The crisis exposes a broader range of options available to actors than previously acknowledged in the literature.
Case Study: General Motors: Research from within GM, a major casualty of the global economic crisis, offers insights into how these dynamics play out in practice.

To investigate these dynamics, three employment practices affecting salaried workers were tracked from GM's US headquarters to their implementation in GM Holden Limited. These practices included pay cuts for some employees, pay freezes for others, and the termination of a significant number of workers. The implementation of these directives in the Australian subsidiary was complex and sometimes counterintuitive.

Key Takeaways: Politics, Power, and Resilience

This analysis demonstrates that inconsistent host country legal institutions do not automatically prevent the transfer of employment practices. MNCs can navigate these challenges through strategic negotiation within the political landscape, adapting to both institutional and market contexts. The success of these adaptations depends on the specific circumstances, interests, and power dynamics at play, highlighting the complex interplay between politics, power, and legal frameworks in international business.

About this Article -

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Everything You Need To Know

How do multinational corporations like General Motors adapt their employment strategies during economic crises?

During economic crises, multinational corporations (MNCs) such as General Motors (GM) adapt employment strategies by transferring practices from their headquarters to subsidiaries. This process involves navigating legal constraints, power dynamics, and political landscapes within the host countries. For instance, GM adapted practices in its Australian subsidiary, GM Holden Limited, including pay cuts, freezes, and terminations, despite local laws. The success of these adaptations hinges on strategic negotiation and understanding the interplay between politics, power, and legal frameworks.

What role do legal frameworks play in the employment strategies of multinational corporations during a crisis?

Legal frameworks are a significant factor, but not the only determinant, in shaping the employment strategies of multinational corporations (MNCs) during economic crises. While legal constraints in the host country can pose challenges, the article posits that they don't necessarily prevent the transfer of employment practices. Companies like General Motors (GM) must navigate these legal hurdles by adapting their strategies through political negotiation and understanding the power dynamics at play. MNCs often find a broader range of options than initially perceived, allowing them to tailor their practices to both institutional and market contexts.

How did General Motors (GM) navigate employment challenges within its Australian subsidiary, GM Holden Limited, during the 2008-2009 financial crisis?

During the 2008-2009 financial crisis, General Motors (GM) transferred employment practices from its US headquarters to its Australian subsidiary, GM Holden Limited. These included pay cuts, pay freezes, and worker terminations. Despite potentially inconsistent local laws, GM adapted its strategies through strategic negotiation within the political landscape. This involved understanding and leveraging the power dynamics and the interplay between politics, power, and legal frameworks to successfully implement these directives in the Australian subsidiary. This demonstrates that legal constraints don't always prevent the transfer of employment practices.

What are the key takeaways regarding the transfer of employment practices from headquarters to subsidiaries during times of economic crisis, according to the analysis?

The key takeaways highlight that inconsistent host country legal institutions don't automatically prevent the transfer of employment practices. Multinational corporations (MNCs), such as General Motors (GM), can navigate these challenges through strategic negotiation within the political landscape, adapting to both institutional and market contexts. The success of these adaptations depends on the specific circumstances, interests, and power dynamics at play. The case of GM, and its subsidiary GM Holden Limited, demonstrates the complex interplay between politics, power, and legal frameworks in international business, showcasing that crises act as catalysts to highlight these dynamics.

How does the article challenge the conventional wisdom regarding the transfer of employment practices across national borders?

The conventional wisdom suggests that practices inconsistent with host country laws cannot be effectively transferred to a multinational corporation's (MNC's) foreign subsidiary. However, this article challenges this notion by exploring the roles of power and politics within these organizations. Research often concludes that inconsistent host country laws either prevent the transfer of employment practices or allow only partial implementation. This article counters this by showcasing examples, such as with General Motors (GM) and its Australian subsidiary, GM Holden Limited, where adaptation and negotiation allowed for the transfer of employment practices despite legal constraints. This underscores the idea that actors often have more options than initially perceived, highlighting the negotiated nature of organizational processes during a global economic crisis.