Businesses Caught in the Middle in Hong Kong Protests

The uproar over China’s influence on companies like Apple and the NBA reflects a hunger for corporate leadership on public issues, Fletcher professor says
Pedestrians walk by a vandalizes Starbucks storefront in Hong Kong. The uproar over China’s influence on companies like Apple and the NBA reflects a hunger for corporate leadership on public issues, a Fletcher professor says
Hong Kong protesters target companies they say sympathize with China. Firms “are keeping their heads down, hoping they don’t get caught in the cross-fire of multiple disputes between China and the West,” said Bhaskar Chakravorti. Photo: Mohd Rasfan/Getty
October 18, 2019

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When the general manager of the Houston Rockets tweeted support for the pro-democracy protests in Hong Kong recently, he unleashed a global firestorm. Officials at the National Basketball Association reportedly discussed firing him before eventually defending his right to free speech. They also offered an apology, which drew criticism in the West, but wasn’t enough to prevent a costly reaction in China, where sponsorships and broadcasts of preseason games were canceled.

Other U.S. companies also found themselves in hot water over episodes related to the Hong Kong protests. The tech giant Apple was criticized after it withdrew a mapping app that allowed users in Hong Kong to track the movement of police, saying that the authorities in Hong Kong claimed that protesters were using it to attack the police.

And Activision Blizzard, a gaming company, suspended a professional e-sports player for voicing his support for the protesters in Hong Kong. That decision prompted a backlash from fans and lawmakers and a walkout by company employees, and Activision changed course, reducing the player’s suspension and restoring his prize money.

All three businesses were accused of bending to China’s threats for fear of losing money. China represents enormous economic opportunity, with 1.4 billion consumers, and is a manufacturing powerhouse.

While companies that rely on the Chinese market understandably want to preserve their access and profits, business leaders have a responsibility—and quite often the resources and the leverage—to address the political and environmental consequences of their decisions, said Bhaskar Chakravorti, the dean of global business at The Fletcher School and founding executive director of Fletcher’s Institute for Business in the Global Context.

“In many ways, businesses can get more done in the political, social, and environmental arenas than the traditional actors who shape global affairs,” he said. “It is time that businesses realized that they have that power, it could be in their long-term interests to use it, and they should step up to demonstrate broader vision and leadership.”

Tufts Now spoke with Chakravorti to understand how businesses are responding to the current controversies with China and what they—and their fans and customers—might do differently.

Tufts Now: What do you think of how the NBA handled the balance between the rights of its staff and its economic interest in China?

Bhaskar Chakravorti: I think the NBA handled it terribly across its leadership. First, I will not question why Houston Rockets General Manager Daryl Morey chose the Hong Kong protests as an opportunity to “fight for freedom” (quote from his tweet, which he deleted an hour later after he realized what it had unleashed). It seems that China’s longstanding repression of its Uighur minority community, among others, hadn’t registered and Morey was perfectly happy doing business with a country whose government had a shoddy track record on freedom long before the Hong Kong protests.

“Businesses have a disproportionate role in shaping all these arenas that are outside the narrow definitions of business—and it is time that leaders had the vision and courage to take them on,” said Bhaskar Chakravorti. Photo: Alonso NicholsThe NBA’s official follow-on effort at damage control was silly—not taking a stance and speaking out of both sides of its mouth. To make matters worse, you now have the much-admired NBA superstar LeBron James suggesting that Morey needed to be “educated on the situation at hand.”

Of course, just like Morey, James has the right to freedom of speech. But he should just come out and say it—revenue considerations trump others. The NBA relies on China for 10 to 15 percent of its revenue. China cutting off the Houston Rockets alone has cost the team $25 million in sponsorship money this season. I have a simple recommendation for managers or stars of sports franchises. If you take a political—and principled—position, take a stance that is clear, consistent, and courageous. If it violates a fourth “C” – i.e. it contradicts commercial motivations—so be it. If fans love you enough, they will find a way to come back.

Many Western observers expressed outrage that Apple was apparently bowing to pressure from Chinese authorities when it withdrew a mapping app used to track police in Hong Kong, but there haven’t been large-scale calls for a boycott over the issue. Does that mean Apple made the right business decision?

Of course, Apple made the right business decision, commercially speaking. It was consistent in its position. It bet on the fact that few Apple users would boycott their beloved product and it could continue to play nice in China, which is its third-largest market, making up about 20 percent of its business.

Should Apple be taking a more principled stance on this? I think that is a difficult question to address, since it has a business to operate and jeopardizing a fifth of its revenues is no joke. Other tech companies have been driven out of China and there are viable Chinese competitors to Apple, so its market position isn’t that secure. Apple’s management has a fiduciary responsibility to not risk its market opportunities.

Apple CEO Tim Cook gave an explanation for why the app was removed, which seemed to suggest a more high-minded reason. I don’t have the data on this, so I will not second-guess him. I will simply say, if you as a free-thinking citizen don’t like what Apple did, boycott their products or take some action that would signal your displeasure and hurt the company commercially. We cannot just hang on to our iPhones and shake our heads about Apple’s cowardice, given that we would be exposing our own by not taking some costly action ourselves.

Does the response of Apple embolden the Chinese leadership to demand more concessions from firms that want to do business in China?

Sure it does. But it is not just Apple alone. The Chinese administration knows that so many global businesses have a disproportionate dependence on their country, as a market and as a critical part of its supply chain. This leverage matters—and the leadership will use it whenever it needs to press its case or demand concessions.

How are those other companies that do business with China avoiding the negative public image of appearing to capitulate to an authoritarian government?

They are keeping their heads down and hoping they don’t get caught in the cross-fire of multiple disputes between China and the West. Besides the Hong Kong protests, there is a trade war with the U.S. and other tensions, such as the concerns about Chinese technology companies like Huawei getting access to user data from around the world and the Chinese One Belt One Road projects, which are building geopolitical alliances that might eventually create disadvantages for Western companies and governments.

This isn’t a new problem for global businesses. They often choose to manufacture or sell products in countries with questionable records on everything from labor safety to human rights. What is the responsibility of businesses to consider the larger political environment in which they operate, whether in China or elsewhere?

I think companies should get “educated” on these matters. Business decisions have geopolitical, human, developmental, and environmental consequences. We call this “contextual intelligence” at The Fletcher School and have created novel business programs such as the Master of International Business and the Master of Global Business Administration to train business leaders in this holistic manner.

Businesses have a disproportionate role in shaping all these arenas that are outside the narrow definitions of business—and it is time that leaders had the vision and courage to take them on. I am completely unequivocal about this: being aware of how the world of business intersects with the world is essential for a truly transformational business leader. Businesses have leverage; they make products that people love to or need to consume. They have reach, scale, and creative and financial resources. They should use that leverage to help make it a better, more equitable, safer, and more sustainable world.

While many businesses have complied with China’s requests, the U.S. television show South Park issued a satirical apology earlier this month, after it was banned from the country for an episode about censorship there. The statement said, “Like the NBA, we welcome the Chinese censors into our homes and into our hearts. We too love money more than freedom and democracy.” Why do you think the creators of that Comedy Central show made that choice?

While I applaud the writers of South Park for doing this, I have a simple question: how much of the show’s revenue was at stake? Did they get added viewership because of the publicity from this episode? When a business such as the NBA or Apple that has a fifth of its revenues riding on China decides to thumb its nose at Chinese leadership and the organized army of internet trolls, then I will pay attention. Otherwise, I will simply say, this was a fine opportunity to do some snappy writing that is topical and doesn’t really come at a cost.

Heather Stephenson can be reached at heather.stephenson@tufts.edu.

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