Saudi Arabia

Khashoggi fallout: CEOs in quiet exodus from Saudi Arabia’s ‘Davos in the Desert’, but the message is loud and clear

The fiasco around the conference shows how the kingdom is coming under mounting pressure to explain what happened to journalist Jamal Khashoggi, a government critic who disappeared two weeks ago

PUBLISHED : Wednesday, 17 October, 2018, 1:04pm
UPDATED : Wednesday, 17 October, 2018, 2:36pm

The list of top business leaders withdrawing from an investment conference in Saudi Arabia this month grew longer by the hour in recent days, as an international uproar grew over the disappearance and alleged killing of dissident journalist Jamal Khashoggi.

From JPMorgan Chase CEO Jamie Dimon to Blackstone Group head Stephen Schwarzman and Mastercard CEO Ajay Banga, the ranks are growing of top executives who will not attend the Future Investment Initiative, an event in Riyadh in late October that is known as “Davos in the Desert”.

The conference is organised by Saudi Arabia’s mammoth sovereign wealth fund, the Public Investment Fund, and has been billed as a showcase for the economic reforms of Crown Prince Mohammed bin Salman.

But it has been thrown into confusion since Khashoggi, a Saudi national and US resident who was critical of the crown prince, failed to emerge from a visit to the Saudi consulate in Istanbul on October 2.

The conference’s website previously featured a list of speakers. But that has now been removed, amid the wave of defections.

“Now that Jamie Dimon has spoken up, it might be a tipping point like we had with Ken Frazier,” said Leslie Gaines-Ross, the chief reputation strategist at Weber Shandwick, the global public relations firm.

The comparison to Frazier, the African American chief executive of Merck who withdrew from Donald Trump’s manufacturing council last year after the US president’s response to a rally in Charlottesville, Virginia, led by white supremacist groups, reflects Dimon’s status as a leader in the financial industry, which does significant business with the country of Saudi Arabia.

The International Monetary Fund said managing director Christine Lagarde was also deferring her trip to the Middle East with a stop in Saudi Arabia for the investment conference.

A brief statement by an unnamed IMF spokesman Wednesday did not elaborate.

HSBC CEO John Flint will not be attending, spokeswoman Heidi Ashley said, and nor will Credit Suisse’s Tidjane Thiam, according to a person familiar with the matter.

The exodus from the Saudi conference began last week. Virgin Group founder Richard Branson said he was suspending two directorships related to Saudi tourism projects.

AOL co-founder and tech investor Steve Case tweeted that he was putting his plans to attend on hold. Sam Altman, the CEO of startup incubator Y Combinator, said he was suspending his involvement advising a megacities project in Saudi Arabia “until the facts regarding Jamal Khashoggi’s disappearance are known”.

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And Dara Khosrowshahi, the CEO of Uber, in which Saudi Arabia’s sovereign wealth fund placed a US$3.5 billion stake, said he was “very troubled” about the reports regarding Khashoggi and would not attend the conference “unless a substantially different set of facts emerges”.

For businesses that withdraw, there are certainly risks of denting their relationship with the wealthy sovereign investor – the finance minister of Bahrain, an ally of Saudi Arabia, called for a boycott of Uber, for instance, and many have business ties to the kingdom.

But the risk of being seen as standing by the Saudi government is also very high, according to reputation experts.

“This conference is a pure reputation conference – it’s a conference put on by Saudi Arabia for the sake of the reputation of Saudi Arabia,” said Anthony Johndrow, who leads a reputation advisory firm in New York.

The CEOs “lent their names to this event. When they have this massive reputation question hanging over their head, that becomes an unacceptable bargain until that’s resolved”.

With much unknown, Johndrow said CEO involvement was really more about distancing themselves until the situation is resolved than taking a principled or moral stand.

Trump spoke with Saudi King Salman on Monday, who he said firmly denied knowledge of Khashoggi’s disappearance, while Turkish officials believe he was killed and dismembered inside the Saudi consulate in Istanbul.

On Monday, Trump also floated that it “could have been rogue killers”.

If pictures were to emerge, Johndrow said, of a CEO “standing next to the crown prince, and it turns out he is guilty of this and it’s as bad as everyone fears it is, that picture of the conference becomes a rallying cry,” he said.

Indeed, many of those who have withdrawn from the conference have said only that they will not be attending, rather than making statements or posting on Twitter about values like freedom of speech or human rights.

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For instance, according to reports, a spokesman for Dimon declined to say why JPMorgan Chase’s CEO would not be attending. A spokeswoman for Mastercard also declined to provide any further statement other than that Banga will not be attending.

“Until this is clear cut, they’re not going to publicly say anything about what’s going on,” Johndrow said.

“They’re certainly not going to put themselves out there.”

Additional reporting by Associated Press, Bloomberg and Agence France-Presse