Can Responsible Companies Do Business With China?

(MENAFN- The Holmes Report) Here's something I never thought I'd say: Donald trump has a point.
Midweek—in between deranged rants about Joe Biden and Somalian refugees—the president waded into the debate about the NBA, freedom of speech and Hong Kong, using the furor as an excuse to troll coaches Steve Kerr and Greg Popovich by  contrasting their willingness  to take a moral stand on domestic US Politics with their somewhat more circumspect response to the China controversy.
I suspect that Trump's eagerness to attack Kerr and Popovich—both of whom have been critical of his policies—had more to do with a personal vendetta (the one thing our current president is good at is holding a grudge) than with any broader or more important political principle, but the comments of Kerr in particular ('it's a really bizarre international story, and a lot of us don't know what to make of it) did sound more than a little equivocal.
And that turns an uncomfortable spotlight on the clash between the growing expectation (among American and other Western consumers, and  increasingly among consumers in Asia ) that companies will behave in a principled and purpose-driven fashion, and the fact that principles and purpose can cost businesses dearly in the Chinese market, which is already one of the world's most crucial, particularly for consumer brands.
The events on which Kerr and Popovich had been asked to comment began a week ago, when Houston Rockets general manager Daryl Morey tweeted his support of pro-democracy protestors in Hong Kong: 'Fight for freedom, stand with Hong Kong. Within hours, a spokesperson for the Chinese consulate general in Houston had attacked the tweet and  urged the Rockets  to 'correct the error.
Chinese companies got involved too. Tencent  suspended its broadcast partnership  with the NBA. Fast-food chain Dicos  said it planned to suspend  "all marketing and publicity activities" with the League, and skincare brand Wzun said it would "terminate all cooperation.
In response, Morey  removed the tweet  and apologized: 'I have always appreciated the significant support our Chinese fans and sponsors have provided and I would hope that those who are upset will know that offending or misunderstanding them was not my intention. I have had a lot of opportunity since that tweet to hear and consider other perspectives.
The NBA's initial reaction was equally timorous. The association's first statement acknowledged that Morey's comments "have deeply offended many of our friends and fans in China, which is regrettable." (The Chinese translation of the NBA's statement was apparently  even more obsequious .)
But  after a bipartisan backlash —Sen. Rick Scott (R-Fla.) called the statement "shameful," while Democratic presidential candidate Beto O'Rourke said it was an "embarrassment"—NBA commissioner Adam Silver adopted  a different tone  during a news conference in Japan: "The long-held values of the NBA are to support the freedom of expression and certainly freedom of expression by members of the NBA community. "And in this case, Daryl Morey… enjoys that right as one of our employees."
That position seemed positively principled compared to another company that found itself between the metaphorical rock and the proverbial hard place last week. Activision Blizzard, one of America's biggest gaming companies, found itself under fire for 'acting as China's censor after it  suspended a Hong Kong-based player  for a statement backing pro-democracy protests.
As Vox's Zack Beauchamp pointed out, Blizzard 'is counting on expansion in the very large Chinese market to reverse the downward momentum   of a declining player base. Feeling the need to pick a side in the Hong Kong-China controversy, it opted to follow the dollars (or yuan, in this case) rather than its conscience.
As Beauchamp says, 'Blizzard is throwing its lot in with an authoritarian state, acting as an international agent of its repressive apparatus in opposition to fundamental human rights.
Apple, a company that has taken a strong position on some of the Trump administrations immigration policy and related human rights abuses, elected to  remove a crowdsourcing app  from its store after unsubstantiated allegations that it was being used by protestors in Hong Kong to evade the police. By the end of the week, Buzzfeed was also  reporting  that the company had 'given guidance to the creators of its new Apple TV+ programming to avoid portraying China in a poor light,
And ESPN—a company that has recently sought to eliminate any political content from its coverage of American sports—made it clear that its coverage of the controversy surrounding the NBA  should not include  any discussion of Chinese politics.
The fact is that this week's incidents are just the latest in a long line of similar incidents in which international companies have kowtowed to the Chinese government:

• Apple, for example,  'disappeared a Taiwanese flag emoji  from its iPhone keyboard in China;


• US-based airlines American, Delta, and United  all agreed to drop  references to Taiwan from their booking sites, while hotel chain Marriott apologized after it listed Hong Kong, Taiwan and Tibet as separate companies in a survey; 


• Luxury goods maker Versace also apologized for listing Taiwan as a separate country, with Donatella Versace  apologizing via Instagram : 'Never have I wanted to disrespect China's National Sovereignty and this is why I wanted to personally apologize for such inaccuracy and for any distress that it might have caused.


• Mercedes-Benz  issued its own apology  after offending Chinese consumers with an ad quoting the Dalai Lama.


• Shoemaker Vans, meanwhile, confirmed that it had  removed 'a small number  of submissions to a sneaker design competition, including one that appeared to be expressing solidarity with Hong Kong protestors;


• Jewellery retailer Tiffany & Co  deleted a Twitter ad  showing a female model with her hand covering her right eye, which some had interpreted as supporting the protests;


• Starbucks, or at least its Hong Kong franchisee Maxim's Caterers, have been targeted by protestors because of their close ties with Beijing, after they joined other business leaders attending  a meeting in Shenzhen  that rallied support for the Chinese government and  later defended the government's treatment  of protestors.

'I think if you charted it out, there's been a dramatic increase in these incidents in the last five years, Aaron Friedberg, a China expert at Princeton University who served as an adviser to former vice president Cheney,  told the Washington Post . 'That's all about the Chinese Communist Party regime throwing its weight around and feeling it now has the leverage and confidence about using the power of its market to apply pressure.
Isaac Stone Fish, a journalist and senior fellow at the Asia Society's Center on US-China Relations,  explains in a Washington Post column  how China pressures American companies who want access to its vast and fast-growing market to suppress any negative information, and to amplify positive information. 'This is an effective public relations strategy, honed over decades, that co-opts some foreigners into facilitating the spread of Chinese propaganda, he writes. 'It has succeeded in creating a coterie of Western chief executives petrified of offending Beijing.
There was a time—perhaps relatively recently—when that kind of craven pandering would have merited little more than shrug. Companies that care only about profits have nothing to gain by standing up to a market that promises to deliver profit aplenty. But many companies—including several on the list above—have invested time, money and energy trying to convince concerned consumers thatthey care about more than just money , that they wish to be seen as responsible citizens, that they have a—and in some cases are driven by—purpose.
Says  Axios reporter Erica Pandey ,  ' For all that CEOs increasingly talk of their ‘moral duty to speak up,' those moral duties seem to be left on the tarmac whenever they hop on their corporate jet.
New York Times  columnist Farhad Manjoo went even further , writing:  " A parade of American presidents on the left and the right argued that by cultivating China as a market—hastening its economic growth and technological sophistication while bringing our own companies a billion new workers and customers—we would inevitably loosen the regime's hold on its people….
'It turns out the West's entire political theory about China has been spectacularly wrong…. China's growth did not come at any cost to the regime's political chokehold. A darker truth is now dawning on the world: China's economic miracle hasn't just failed to liberate Chinese people. It is also now routinely corrupting the rest of us outside of China.
Tom Brathwaite, writing for the Financial Times,  makes the same point : 'The hope was that exposure to Western business would accelerate China's move to a consumerist democracy. Instead, the reverse is happening: the country's vast business opportunity and totalitarian edge is wearing off on western companies.
However, some observers believe that the NBA controversy has the potential to test the power of the Chinese government, particularly if Chinese consumers are prevented from viewing what has become an incredibly popular sport in China.
'Caring enough to punish a brand isn't free,  writes Josh Barro  of New York magazine. 'In the long run, China's capricious punishment of businesses that break with its party line make it a riskier and less desirable place to do business, which hurts growth…. But with the NBA, the costs are a lot more immediate and concrete than a worry about the loss of long-run economic dynamism.
'Even if the mainland Chinese public tends to agree with their government about the Hong Kong protests… how much does the Chinese public care about basketball? Are they fixated enough on politics to happily give up the Houston Rockets for an extended period? Or will Chinese officials decide punishing the NBA isn't worth antagonizing the public in a country with hundreds of millions of NBA fans?
But others remain sceptical. Jo Barro, head of the sports practice at MWWPR, told our Diana Marszalek, 'Being consistent and standing behind its progressive philosophy of providing a platform for its players to speak on issues is being applauded by many. But it has also resulted in swift and far-reaching consequences to the league's business in a high growth market in China. All 11 Chinese NBA brand partners ended their relationships with the league, and it would not be a shock to see Chinese pressure on US-based NBA sponsors who currently do business or would like to grow their business in China to choose a side.
Meanwhile, Paul Argenti, professor of corporate communications at Dartmouth's Tuck School of Business,  tells the Los Angeles Times  that while many companies talk about values and responsibility, 'Are you willing to go to the mat for that, or is it just lip service? For most companies, it's just lip service.
I am intrigued by the argument that Chinese consumers might not continue to march in lockstep with their government. And I understand the cynicism of anyone who has observed corporate America's mostly cosmetic approach to corporate responsibility over the years. But I also wonder whether we have reached a point at which trying to have it both ways is no longer a viable strategy.
Consumers have higher expectations than ever before when it comes to corporate purpose, and many leading companies have invested millions of dollars in presenting themselves to those consumers as companies with a conscience. And those consumers are going to make it increasingly difficult, going forward, for companies to listen to that conscience only when it's convenient—and comes without a cost.
Braithwaite's FT article quotes Ben Hunt, CEO and founder of Epsilon Theory, who lays out the choice in stark terms: 'Do you want to preserve your authenticity and your brand or do you want to preserve your earnings guidance and share price? Choose one. You can't have both.
That's something today's consumers are smart enough to understand, which means that any company claiming to believe in purpose and corporate responsibility had better be brave enough to stick to its principles even when they come with a cost, as they likely will in China. If they're not prepared to pay that cost, they should stop pretending—because increasingly there will be a price to pay for making promises you have no intention of keeping.

MENAFN1410201902190000ID1099121995