As the world becomes a smaller place, more companies are finding themselves part of the once-narrow and elite category of "multinational" companies that have operations, subsidiaries, or investments in more than one country. As a result, information that once moved from desk to desk within one building now finds it way around the world to manufacturing plants in China, help desks in India, and assembly plants in Mexico.
The number of multinational companies has grown from 30,000 in 1990 to 63,000 in 2000, according to Global Inc., an Atlas of Multinational Corporation, by Medard Gabel (New Press, 2003). The ascent to multinational status can happen through conscious decisions to expand into overseas markets, acquisition of a U.S. company with overseas facilities, offshore outsourcing of various business functions, or through a partnership with a company that has overseas operations.
Regardless of how a company achieves multinational status, the consequences are the same: An understanding of local and national laws concerning the use, retention, and reporting of company records is essential for the overall accession and protection of these vital assets. Once a company becomes a multinational, it must respect the rules of every country - and often the provinces, city-states, and local governments - where it operates.
The Big Three: Litigation, Taxes, and Security
Three major factors influence record retention worldwide: litigation, taxes, and security. Litigation first became a driving force in the early 1980s when a chemical leak at the Union Carbide plant in Bhopal, India, resulted in a hotbed of legal actions. The incident opened the doors for U.S.-based claims against U.S. companies operating in other countries and corporate counsel at multinational companies became intently interested in complying with laws in local jurisdictions where claims could be filed.
During the 1990s, with the advent of high-speed Internet, intranets, and e-mail, many large companies introduced Enterprise Reporting Program (ERP) systems that use a central repository to house financial transactions. Some companies found that the revenue and taxation rules of countries where they operated prohibited financial data from residing outside the country. In some cases, costly system reconfigurations were required. In other cases, exemptions from the various ministries of revenue were requested, which gave rise to unwelcome government inquires, audits, and additional expenses.
Today, safety and security concerns drive many record retention requirements. Terrorism and corporate corruption have contributed to new regulations and international standards. For example, the U.S. Patriot Act has implications for U.S.-based securities firms doing business in other countries, especially with regard to client account information. Similarly, Privacy Legislation being implemented in countries, such as the United Kingdom and Canada, impact industries based in those nations doing business in the United States.
Law of the Land
Establishing operations in another country is both difficult and challenging. Foremost under consideration by senior management are the local language and culture, the business environment, and the potential financial and tax incentives and risks. Traditionally, the reporting, preserving, and retaining of information was of little concern but today multinationals are wise to consider information retention and reporting requirements as part of their decision-making given the costs that compliance can impose.
For example, the current U.S. regulatory environment demands that U.S.-based multinational and foreign companies with operations in the United States demonstrate good information management practices that have a base in ISO standards. Similarly, information practices, and retention and reporting guidelines also are specified in China, India, and Mexico, among many others countries.
Further, many countries have overlapping regulations at the national and local levels. The inter-relationship between governing bodies within a country must be understood to ensure full compliance. Within the European Union, for example, a company operating in Milan, Italy, falls under the city-state's jurisdiction as well as the local Italian province, the Italian government, and ultimately the adopted provisions of the Maastricht Treaty of the European Union. Unlike the United States, where the states default to the federal government requirements for many retention regulations, Italy's city-states are autonomous and do not default to the regulations of other government entities. Other countries have similarly overlapping jurisdictions.
Some countries have specific government requirements relating to original records. For example, original records created within France must be retained in France. If an operation relocates to another country, the records must be maintained in France until applicable retention requirements are met. Although copies of documents can be transferred over the borders, the original document must be retained in France.
Finally, special consideration must be given to records created in countries with unstable governments. A strategy must be developed to preserve a copy of the information outside the country, not only to protect the information in case of civil unrest, but also to validate the operations of the company to any new government that evolves.
Conclusion
Applying U.S. information retention regulations as a multinational company's global policy is no longer an adequate strategy. Super-national treaties along with country, province, and local regulations must be considered in order to defend against litigation and tax audits and to meet privacy and security requirements around the world. The law of the land must be followed, regardless of the land in question.
To learn more about the steps a multinational company can take to develop sound information retention policies, read the white paper, "Corporate Governance: An International Information Retention Perspective," by Fred V. Diers, Principal, Information and Records Management Practice, Entium Technology Partners, LLC.
This article was written by Fred V. Diers, CRM, FAI. For more information, contact Entium Technology Partners at (888) 757-2045.
Entium Technology Partners develops and implements life-cycle information programs that ensure compliant business rules and standards for all company records regardless of media type. These information programs control the creation, processing, maintenance, distribution, storing, and disposing of all corporate documents and records by combining information policies, processes, and procedures with the appropriate technology tools. Our solutions will allow enterprise-wide access to corporate documents and records while meeting internal security and business continuity needs.
