Saturday, 6 June 2020

'Lion Bank' - Led By Donkeys

Philip Collins writing in The Times argues that the HSBC 'Lion Bank' is led by donkeys given its craven behaviour over Hong Kong whose citizens are in a desperate fight to defend their human rights and hard won freedoms.

Pro-China banks don’t deserve our custom

Putting profit before the people of Hong Kong will harm craven businesses in the long term

By Philip Collins - The Times

In Hong Kong, the locals sometime refer to HSBC as “the Lion Bank” after the pair of sculptures that adorn the corporate headquarters. After the craven capitulation of Peter Wong, HSBC’s chief executive officer in the region, to China’s curtailing of the freedoms that have allowed banking to flourish in Hong Kong, the lion bank now seems to be led by donkeys.

In 1997, when I started working as an equity strategist for HSBC in London, the principal obligation of the company was to provide a high return on capital to shareholders. In those days, before the 2008 crash demonstrated that banks are part of wider society, it was hard to get a hearing for the argument that companies burnish their reputations best when they consider a group wider than those who provide their capital.

The Hongkong and Shanghai Banking Corporation was, in fact, created in 1865 to uphold exactly that view. Its founder, the Aberdonian Sir Thomas Sutherland of the Peninsular and Oriental Steam Navigation Company, wanted to create a bank that would follow “good basic Scottish banking principles”. His new corporation financed the colonial trade that came through Hong Kong and Shanghai between China on one side of the transaction, and India and the rest of the British Empire on the other.

Those good Scottish principles have gone missing. Under the terms of the joint declaration issued by China and Britain at the handover in 1997, Hong Kong should continue to enjoy the freedoms to which islanders have been accustomed. A new law, drafted by the Chinese under a fake guise of security, now threatens those liberties.

The British government has responded well. In an article for The Times, the prime minister said that if the law is imposed, visa regulations for Hongkongers who hold British National (Overseas) passports would be relaxed, opening a path to full citizenship. Rebel Conservative MPs have also forced Mr Johnson to reconsider the decision to award the contract for the 5G network to the Chinese company Huawei.

The corporate response, by contrast, has been feeble. Mr Wong signed a petition backing the Chinese. The management of Standard Chartered, Swire Group and the parent group of the Mandarin Oriental Hotel Group have all endorsed the law and the Prudential life insurance company has so far refused to comment. On behalf of HSBC, Mr Wong went even further than the petition. On the Chinese social media platform Wechat, he said that HSBC “respects and supports all laws that stabilise Hong Kong’s social order”.

Though listed in London, more than half of HSBC’s profits are made in Hong Kong. This declaration is a triumph of money over ethics. It is an instant capitulation to threat. Cathay Pacific has been punished by Beijing for its alleged support of protesters in Hong Kong. Last Friday Leung Chun-ying, the pro-Beijing former leader of Hong Kong, went on Facebook to say that HSBC would be unwise to take its privileged position in Hong Kong for granted. To which there is an answer which is ethical and commercial at the same time. It would have been to say that we, HSBC, are the best provider of banking services in Hong Kong and, so long as customers can make free market choices, we are confident they will bank with us.

Global businesses face an ethical problem in countries that disdain democratic accountability. If the local rule is a mix of corruption and force majeure, is the best course of action simply to leave the country? In most cases the local supplier that replaces the absent global conglomerate has even less regard for basic terms and conditions. Global companies are often the most sought-after employers. The usual policy, on local politics, is to say as little as possible. Yet a company has no ethic at all if it does not draw a line and this is a case of going well over the line.

It is not, sadly, the first time HSBC has shown too little regard for ethical standards. In late 2012 it had to pay $1.9 billion in penalties for laundering South American drug money. As well as working for HSBC I have been an accidental customer since they bought the Midland Bank in 1992. Inertia usually prevents me from switching but it is time to get active.

The power of the customer is rarely exercised on ethical matters but it should be. We don’t have to give them our money to look after. The World Rugby Sevens Series does not have to take sponsorship from HSBC and Liverpool FC do not have to have Standard Chartered emblazoned on their shirts.

HSBC, of all companies, ought to know what they are dealing with. When the Communist Party took over Shanghai in 1949 it closed HSBC’s operations in mainland China. Now President Xi, in his betrayal of promises to President Obama about the South China Sea, his bullying of Taiwan and his threat to impose trade sanctions on Australia for daring to suggest an inquiry into Covid-19, has signalled that Chinese economic power is going to be exerted in the world. This is not the sort of regime a reputable company ought to be offering a signature of support.

There is a principle at stake here which might cost money in the short term but will be worth more than is lost in the long term. No trading nation can wholly close off an economic giant such as China but there is no need to prostrate themselves before it. That accusation could be levelled at the Cameron government and it can now be levelled at the corporate supplicants, with HSBC, once the lion bank, in the front row. They have spent a lot of money advertising their values to the world but we all know what they value most now.