Phoney logic

PUBLISHED : Saturday, 19 September, 1998, 12:00am
UPDATED : Saturday, 19 September, 1998, 12:00am

Even in such times of economic austerity and salary restraint, Hongkong Telecom's decision to demand that its employees take a 10 per cent pay cut has sent shockwaves across the community.

Staff are rightly angry that such a wealthy company should resort to these extreme measures. It is not as if Hongkong Telecom is short of money. Its $15 billion cashpile is almost embarrassingly large and it has just received $6.7 billion in compensation from the Government for surrendering a monopoly on international calls.

Nor are its prospects particularly bleak. While profits will be affected by the advent of greater competition, experience overseas suggests an incumbent operator should have little difficulty maintaining a dominant market share. As a utility its earnings are also relatively more resilient to the effects of the recession.

All this makes Hongkong Telecom's behaviour inexplicable unless, as unionists allege, the company has been ordered to maximise profits for its owners, Britain's Cable & Wireless. Whatever the reason, this action threatens to set a worrying precedent.

Pay cuts have become increasingly common as Hong Kong struggles to adjust to the dismal economic climate. In certain cases, these are inevitable. Those who take the risk of working in highly speculative industries, such as the property market, and profit immensely during times of high growth, can hardly be surprised to see the situation reversed during such a severe slowdown. In a few cases, such as some highly-paid airline pilots, salary adjustments are long overdue.

But the spread of this trend to profitable companies, which can scarcely argue pay cuts are an alternative to bankruptcy, is unjustified and alarming. Worse still, is the way they are imposed: without consultation or warning. In some cases, although not Hongkong Telecom's, employers may be breaking the law.

Difficult times clearly call for companies to become more cost-conscious. But that is no excuse for actions which damage staff morale and may even be counter-productive because of the effect upon productivity. Hongkong Telecom's behaviour should be an example to avoid rather than a precedent for other companies to follow.