On the eve of an antigovernment protest by accountants in Hong Kong, a PricewaterhouseCoopers executive warned his staff not to do anything that could put the firm in a bad light.
“It is important we do not misrepresent or compromise the firm through individual actions,” Raymund Chao, PwC’s chairman for Asia Pacific and Greater China, said in a Thursday memo to employees.
A wave of protests, now in its third month, is pitting Hong Kong’s freedoms against Beijing’s authority. Companies can’t afford a misstep.
A top Chinese official overseeing Hong Kong exhorted the city’s property tycoons and other elites to publicly support the local government and condemn violent protesters.
Pressure from China cost the CEO of Hong Kong flagship Cathay Pacific Airways Ltd. his job after some employees took part in marches and Beijing threatened to cut off access to its airspace. E-commerce giant Alibaba Group Holding Inc. pulled a planned listing of shares in Hong Kong, reasoning that market and political conditions weren’t right for a deal that would be a boon for the city’s stock market.
Such is the pressure corporations operating in Hong Kong face as they try to balance demands from one of their most important markets—mainland China—with the sentiments of many employees and a wide swath of the Hong Kong population that supports the protests.
“Every company in Hong Kong is in a delicate situation,” said Michael Tien, a Hong Kong lawmaker, and has to decide how to respond when employees want time off to protest. “When the central government puts pressure on companies, it’s going to start a series of ripple effects among employees that will cause even more divisiveness internally,” he said.
In the latest confrontations, protesters barricaded streets and threw some firebombs as they clashed with police Saturday and Sunday, leading police to bring out a water cannon for the first time. The street fights followed an enormous, peaceful rally a week earlier that organizers estimate drew 1.7 million people, nearly a quarter of the city’s population. Smaller protests have been held by teachers, lawyers, civil servants and airport staff.
As a result of the turmoil, the city’s economic pillars are wobbling. Tourism and yacht sales are in decline, conferences have been canceled, deals have been pushed back. Companies including InterContinental Hotels Group PLC have told employees to take leave as business dried up.
Hong Kong’s stock market has lost nearly $300 billion in market value since the end of June. The cumulative damage to spending and investment is threatening to tip the city’s $363 billion economy—roughly the size of Israel’s—into recession. Analysts at Morgan Stanley expect Hong Kong’s economic growth for the quarter ending in September will be the worst in a decade.
Hong Kong has been through several bouts of protests since the handover to China from the U.K. 22 years ago, and the city has continued to grow. Travel industry executives say tourism and business travel could rebound quickly if the unrest ends.
Today, however, pressure on Hong Kong’s economy is compounded by the spiraling trade war between the U.S. and China as well as weak global growth. In the most extreme scenario, if China were to use force to quell the protests, many diplomats and business people say Hong Kong’s days as a financial capital could be numbered.
“The brain drain from Hong Kong, which is already under way, would accelerate, and talented foreigners would be further deterred from moving here,” said David Webb, an investor in Hong Kong.
The protests kicked off in earnest on June 9 when an estimated one million people marched in opposition to a bill that would have allowed suspects to be extradited for trial in China.
Early on, many companies publicly supported their employees’ right to protest against the extradition bill. Some allowed time off with no questions asked.
Employers became cautious as marches grew into a broader pro-democracy movement, with demands including universal suffrage, and as attacks on China’s national emblem and main office in Hong Kong raised Beijing’s ire. The protests descended into a series of clashes with police across the city.
On Aug. 7, a senior Chinese official in charge of Hong Kong affairs warned a gathering of the city’s elite, whom he had summoned to a meeting in Shenzhen, that the Chinese central government wouldn’t hesitate to intervene if the situation worsened.
Since that meeting, Hong Kong tycoons, conglomerates and global financial firms have taken out newspaper ads declaring their support for Hong Kong’s government. Ads from U.K.-headquartered banks HSBC and Standard Chartered PLC called for an end to the unrest.
On Aug. 9, executives from Citigroup Inc., HSBC Holdings PLC and other banks and business groups were called to a meeting with Hong Kong Chief Executive Carrie Lam to discuss ways to address the city’s economic issues.
As the discussion drew to a close, attendees unexpectedly were asked to stand with Ms. Lam at a news conference. Most declined, uncomfortable with being pressed to stand publicly behind the government, according to people familiar with the closed-door meeting.
Peter Wong, CEO of the Asia-Pacific unit of HSBC, which was founded in Hong Kong and is heavily exposed to business with China, was among the few who agreed to join Ms. Lam on stage. (HSBC confirmed Mr. Wong was on stage but didn’t comment.) Goldman Sachs Group Inc. was among banks invited to the meeting that didn’t attend, those familiar with the gathering said.
The varying reactions show how companies are caught between standing up for their own values, and their employees, while also protecting their business with China.
Cathay Pacific had allowed employees to join marches but reversed its support after Chinese aviation authorities said they would review the staffing of all Cathay Pacific flights that traverse China’s airspace and bar any carrying crew members who participated in the demonstrations.
The airline warned staff in an email Aug. 12 of “disciplinary consequences for employees who support or participate in illegal protests.” That effectively means most, since police have refused permits for the majority of recently proposed demonstrations and marches. The airline has fired at least two pilots, two ground staff members and a cabin-crew union leader at a subsidiary.
Cathay said last week its business wasn’t affected in July, but that it expects “a much more significant impact to our revenue in August and onwards” as business and leisure travel into Hong Kong drops.
Flight bookings to Hong Kong from Asia excluding China and Taiwan, where the timing of a holiday affected the data, fell 20% from June 16 through Aug. 9 compared with a year earlier, according to Olivier Ponti, a vice president at Forward Keys, a company that analyzes bookings. In the first 5½ months of the year, by comparison, such bookings rose 6.6%.
Australian airline Qantas said last week it will start using smaller planes for flights into and out of Hong Kong, cutting capacity by 7% until tensions abate.
Cathay’s newly appointed chief customer and commercial officer, Ronald Lam, reiterated the company’s resolute support for Hong Kong’s government and its police in an Aug. 22 memo to the airline’s business partners.
In the city’s International Finance Center, which houses many financial firms and luxury retail stores, some shops closed early on several days in August during violent protests. Stores including Dior, Tiffany & Co. and Samsonite have shortened their operating hours in some stores to allow staff to get home safely. Foot traffic has also fallen.
An employee at LVMH Moët Hennessy Louis Vuitton SE’s Swiss watch unit Tag Heuer said, “With less tourists, our sales KPI have dropped,” referring to the store’s performance metrics. All sales are dropping “unless you’re selling masks now—and this,” he said, putting his hand on his head in reference to helmets worn by the protesters.
Tiffany, Samsonite and LVMH didn’t respond to requests for comment. Dior couldn’t be reached for comment.
Bobbi Brown, a makeup brand owned by New York-based Estée Lauder Cos. , has told its Hong Kong retail sales staff not to wear their customary all-black work attire during their commutes out of concern they will be mistaken for protesters, said a staffer at one store. She said the company sent the instructions after a violent attack on black-clad subway passengers in an outlying area a month ago.
A spokeswoman for Estée Lauder said Bobbi Brown makeup artists always wear black and that the dress code is part of the company’s brand identity.
On Friday, an estimated 5,000 people took part in an accounting-industry protest in Hong Kong’s business district. Many wore face masks along with their regular office attire. A team of auditors from BDO donned sunglasses and held signs that read: “Restore Hong Kong, Revolution of Our Times.”
One man wore a dress shirt along with a yellow helmet, black mask and an eyepatch with fake blood—recent symbols of the violent protests. The 29-year-old, who said his surname was Li, said accountants were on the streets to show that “everyone who loves Hong Kong will go out.”
China’s state-owned media criticized the Big Four accounting firms, KPMG, Deloitte, PwC and Ernst & Young, which employ thousands of people in Hong Kong, after some of their workers took out a newspaper ad criticizing their leadership for putting priority on business over their staff’s “yearning for democracy and freedom.”
The accounting firms have all said they don’t condone violence or illegal acts. “We are concerned that unauthorized statements made by individuals might be mistakenly taken as representing the firm’s view on the current situation,” said a spokeswoman for PwC.
EY’s leaders warned employees in a staff memo Aug. 13 not to take part in illegal activity or use company equipment for nonbusiness purposes, and chastised people for using its brand on social-media messages supporting the protests. EY declined to comment.
In this environment, controls on communications can extend even to personal messages. In a farewell note on Aug. 15, a customer-service employee at American Express Co. told colleagues she was leaving after nine years to take care of her young daughter and help with a family business.
She also mentioned she had donated to an organization that provides legal support to arrested protesters, and she included an image of yellow letters on a black background saying, “Stand with Hong Kong!” The email was recalled less than two hours after it was sent. The author of it couldn’t be reached for comment.
“We acknowledge that employees have personal views on a wide range of issues,” an American Express spokesman said. “However, our policies state that employees should use corporate assets and systems for business-related purposes only.”