JPMorgan Chase is hardly the first major company to open its employment doors to sons and daughters of China’s elite
Investment bank forks out US$264m fine for dubious practices in hiring some 200 mainland “Princelings”
News that JP Morgan Chase has been forced to pay a US$264m fine for dubious practices in hiring some 200 mainland so-called “Princelings”, delivers yet another body blow to the world of satire.
Honestly, who knew that a big blue chip American bank would soil its hands with guanxi-type activity in order to win business?
Who knew that the sons and daughters of big shots in the world Chinese business were not invariably among the brightest and best, only fit for what one of the bank’s internal memos described as “photocopying”?
Moreover who could have guessed that this is how business works, even at the elevated levels of an institution where the words ‘integrity’ and ‘responsibility’ are bandied around as though they had some meaning?
In days gone by satirists often had to make this stuff up to earn a crust but now they are reduced to being pre-empted by the US Justice Department, which has a dismal reputation for its sense of humour.
Of course, this saga could be viewed through an entirely different prism employing the old British term: ‘everyone is at it’.
Or to put it another way: do you know of a major company seeking to do business in China that will not open its employment doors to sons and daughters of the mainland elite?
And, as Jake Van der Kamp has pointed out on these pages earlier in the week, have you never heard of other Wall Street firms who employ tycoon offspring?
Do you believe business is exclusively conducted in stark boardrooms or is it just possible that the lavish dining facilities of swish hotels are also used for this purpose?
Then there is the matter of gifts, nothing as crude as large stacks of bank notes, but let’s say maybe a rather fine piece of artwork, a ‘business’ trip on a private jet to the sort of coastal resort that provides an amenable setting for ‘blue sky thinking’, and, sure, why not take your lady friend along, she might just be able to survive the spa treatments.
It is fair to assume that while this furore is focusing eyes on China, the fine folks doing business in other nations, which have their own names for guanxi, are mightily relieved that the spotlight is being directed elsewhere.
Why, even here in Hong Kong, it is possible that companies have the benefit of providing employment to princelings and indeed the offspring of local tycoons, in the latter case it tends to be for shorter periods because they soon return to the family business.
And, yes, there may well be all manner of other activity underway that is almost certainly best kept out of the public eye.
The problem is where to draw the dividing line. In some quarters the word guanxi or connections, has acquired a somewhat sinister tinge, suggesting untoward activity.
However almost all business relationships are conducted on the basis of an intricate network of connections. This is especially the case in Asia where so many businesses, even at international levels, remains as family business, even when the companies have gone public.
There is no law against having friendly relations with business associates and such relations tend to be fueled by entertaining, exchange of gifts and so on.
There are other problems here. For example what to do about genuinely talented and useful princeling offspring (such people do exist); are they to be tarred with the photocopying brush? Then we get to extreme stupidities where companies bar even mundane ‘gifts’, such as the provision of lunch, on grounds that they must be seen as completely free of any taint of corruption.
It may be argued that it is hard to draw the line between low level schmoozing and the bad stuff: corruption or illicit collusion. But is it? Surely what we are talking about here is the classic question of how to describe an elephant. The answer is that it’s not always easy to proffer a description but you sure know what an elephant looks like when it starts charging at you.
The US Attorney General Leslie Caldwell described JP Morgan’s hiring programmes as “nothing more than bribery by another name”. I am not as sanguine as Jake is in these matters because the real issue is not so much whether any of these princelings are good at their jobs or even if they are harmless but there are problems over the transparency of business relations. More substantially this whole guanxi business raises very real issues over the existence of anti-competitive business practices, some of which are illegal and some are pretty trivial. It really cannot be that difficult to distinguish between the extremes of this spectrum, once that’s been done the consequences can be sorted out.