MTR management’s buck-passing over railway scandals a lesson in how not to handle a crisis

Stephen Vines says the lack of accountability displayed by the MTR Corporation’s leadership is rooted in it being a listed company whose major shareholder is also its regulator

PUBLISHED : Wednesday, 20 June, 2018, 2:01pm
UPDATED : Wednesday, 20 June, 2018, 10:54pm

The initials MTR are supposed to stand for Mass Transit Railway but nowadays the words Management Traumatised by Responsibility seem more appropriate.

The people who run this company appear to be largely focused on how to avoid responsibility for the growing scandal involving delays in construction, faults in construction, cover-ups and safety threats.

In so doing, they are inadvertently providing a classic case study of what happens when corporate responsibility and crisis management go badly wrong.

In its defence, the corporation has (correctly) pointed out that all major projects encounter difficulties. However, the MTR Corporation does not seem to appreciate that what matters is how problems are handled.

What works is transparency, accountability and swift remedial action. The MTR management turns this on its head and operates on the basis of covering things up, dragging their feet on remedial action and passing the buck.

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They do not seem to understand that those at the top are expected to shoulder responsibility. Instead of sorting out problems at the project management stage, they spend their time pointing fingers at others, be it the main contractor, the subcontractor or even the sub-sub contractor. If anyone at the MTR ultimately shoulders the blame, it will probably be some relatively junior-level managers.

If anyone at the MTR ultimately shoulders the blame, it will probably be some relatively junior-level managers

And just when the bad odour emanating from all this buck-passing seemed impossible to surpass, the MTR chairman, Frederick Ma Si-hang, launched an extraordinary tirade implying that the public had no right to know what was going on because on the one hand, they were too stupid to understand and, on the other, if the MTR was satisfied with how things were going, that was good enough.

The furore these remarks caused led Ma to resort to schoolboy tactics by saying that he had only spoken in this way because of bad weather and forgetting to pray in the morning. He did not, however, even attempt to withdraw the substance of the remarks.

Ma and his well-heeled colleagues are not alone in the buck-passing game because the MTR’s major shareholder, the government, is also the railway’s regulator and seems to think that, when things go wrong, everyone else is to blame. So far, the MTR has got off very lightly.

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This is surprising because the MTR’s responsibilities are obvious. Its problems arise from a profound structural malaise entirely created by the government itself, which rushed to privatise the corporation in 2000, but left it in the hinterland between the public and private sectors, offering the worst of both worlds.

Maybe there were zealots in the administration who liked the idea of privatising a large publicly owned utility

There was never any reason for taking the MTR partially out of the public sector. Indeed, its IPO document made it clear that the share sale had nothing whatsoever to do with fundraising for the corporation because all the money would go to the already overflowing government coffers and not one cent would be allocated for investment in the rail system.

Maybe there were zealots in the administration who liked the idea of privatising a large publicly owned utility and maybe some of them actually believed this would transform the MTR into a more competitive entity.

The outcome, however, is to have created a corporate structure which seems to be designed for evading responsibility as it is no longer a purely public entity but, on the other hand, hardly a fully fledged private entity. The government’s stake hovers around 75 per cent, which is right on the border of the upper limit for a company to retain a listing in Hong Kong.

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The partial privatisation created a mutant monopoly with conflicting public and private interests. It not only has exclusive rights to operate a mass transit system but also a unique niche in the property market, with government ensuring that the MTR alone has property development rights in highly desirable locations adjacent to railway stations. Thus, the MTR’s shareholders enjoy a double transport and property monopoly.

The MTR’s shareholders enjoy a double transport and property monopoly

And if that were not enough, the company’s regulator is also its owner. This kind of arrangement is commonplace among utilities around the world but only works where the entire operation is in the public sector and subject to full accountability. Once a utility is able to cite responsibilities to its private shareholders alongside its public responsibilities, the whole situation becomes hopelessly muddled.

There will now be a judicial inquiry into just one of these scandals (at Hung Hom station). A wide-ranging review of how the MTR works and is managed has been firmly ruled out.

Given the strange hybrid nature of this entity – including the nominal need to serve two entirely different masters – it is little wonder that the MTR’s management has such a shaky concept of accountability and seems to regard management responsibility as some kind of exotic beast that needs to be avoided.

Stephen Vines runs companies in the food sector and moonlights as a journalist and a broadcaster