Globalization has significantly expanded opportunities for multinational corporations to operate across borders. Two major economic mechanisms underpin this expansion. First, corporations engage in foreign direct investment (FDI), whereby they invest in ventures abroad with the expectation of long-term returns once initial costs are recovered. One of the primary risks to FDI is nationalization—the expropriation of corporate assets by host states. Historical examples include the nationalization of oil assets in Iran following the 1979 revolution and in Venezuela under President Hugo Chávez.
Second, multinational corporations consolidate profits generated across countries into their financial statements. These aggregated results influence corporate valuation, innovation strategies, and growth trajectories, while also contributing to the perceived economic strength of their home countries. In other words, what happens abroad brings wealth at home.
However, globalization is not without substantial risks. Beyond conventional business challenges—such as cultural misalignment—companies operating internationally must navigate complex political environments. When countries are destabilized by war (e.g., Syria) or become subject to international sanctions (e.g., Russia following its 2022 invasion of Ukraine), multinational firms operating in those regions face acute dilemmas. Some firms withdraw, absorbing financial losses, while others choose to remain.
Two French corporate cases illustrate the risks of continuing operations in such contexts: the Mulliez Group in Russia and Lafarge in Syria.
Case 1: Mulliez Group in Russia
At the onset of the war in Ukraine in February 2022, Auchan (a supermarket chain) and Leroy Merlin (a home improvement retailer), both owned by the Mulliez family, were among the largest foreign companies operating in Russia. Auchan alone ran approximately 300 stores and employed around 41,000 people.
The companies chose to remain in Russia, citing responsibility toward local employees. However, subsequent investigations revealed that local managers organized donation drives that directly supported Russian military personnel. This led to significant reputational damage for Mulliez. In 2023, Ukraine’s National Agency on Corruption Prevention designated Auchan as an “international sponsor of war” (Le Monde, 2023; NV.ua, 2023).
While this designation has not yet resulted in formal sanctions, it exposes Auchan to potential future penalties and more reputational harm. More broadly, this case highlights a key governance challenge: multinational corporations may not fully control the actions of their local subsidiaries, yet they remain accountable for them.
Case 2: Lafarge in Syria
The Lafarge case is even more consequential, particularly due to its legal outcomes. In 2008, Lafarge, a French cement company, acquired a cement plant in Jalabiya, Syria through a subsidiary in which it held a 98% stake.
As the Syrian civil war intensified, Lafarge evacuated its expatriate staff in 2012 but continued operations using local employees until 2014, even after ISIS gained control of the surrounding region. To maintain operations and ensure safe passage for goods and personnel, the company made payments totaling €5 million to various armed groups, including some affiliated with ISIS (U.S. Department of Justice, 2022)
The legal consequences were severe. In the United States, Lafarge pleaded guilty to providing material support to terrorist organizations and agreed to pay $778 million in fines. In France, the company and several of its executives were individually prosecuted. In 2026, French courts found Lafarge guilty of financing terrorism, marking a landmark decision in holding a parent company accountable for the actions of its subsidiary. Some executives received prison sentences.
Discussion
These cases demonstrate how increasingly volatile geopolitical conditions amplify the risks associated with FDI. Companies operating in unstable or authoritarian contexts face not only financial losses but also legal liability, reputational damage, and ethical scrutiny.
Key questions emerge:
To what extent should corporations be held accountable for actions taken by local subsidiaries?
What role should governments and international institutions play in regulating corporate behavior in conflict zones?
Risk mitigation strategies are essential. Scenario planning, enhanced due diligence, and clear exit strategies can help firms anticipate and respond to geopolitical instability. However, these tools are not foolproof, particularly in rapidly evolving conflict situations.
Conclusion
Operating in politically unstable or conflict-affected regions presents multinational corporations with profound ethical, legal, and strategic challenges. The cases of Mulliez Group and Lafarge illustrate that decisions to remain in such environments can lead to unintended consequences, including complicity in conflict dynamics and exposure to severe legal penalties.
As globalization continues, companies must adopt robust governance frameworks and risk assessment tools. At the same time, stronger national and international regulatory mechanisms may be necessary to ensure accountability. Ultimately, firms must balance economic objectives with ethical responsibilities, recognizing that the cost of inaction—or poor judgment—can be extraordinarily high.
—Adrian Borbély, Associate Professor, Department of Marketing, emLyon Business School
—Cynthia Alkon, Professor of Law & Director of the Criminal Law, Justice, & Policy Program, Texas A&M University School of Law
—Sanda Kaufman, Professor Emerita, College of Urban Affairs & Education, Cleveland State University