Don't tick off the government is the first rule of doing business in China. The bureaucrats have the power of life and death. Why risk losing its market? Avoid anything that is politically sensitive.
Steve Simon didn't get the memo. The chairman and chief executive officer of the Women's Tennis Association has waged a relentless campaign to protect one of its stars that has highlighted the iniquities of the communist regime and left Chinese authorities scrambling to find a way out.
Steve Simon is the Chairman and CEO of the WTA.
The tough stance of the WTA has been characterized as an exception. It could signal a different future for the relationship between China and international business. Increased U.S.-China tensions, intensifying oppression within China, and more pressure on companies outside China to support social equity will make it harder and harder for big business to turn a blind eye to Beijing's abuses. The outcome could be a lot more confrontations between businesses and the Chinese state, with the potential to change China's economic relationship with the rest of the world.
There is no new information about China's human-rights horrors or the awkward position in which they have placed international companies. Well-known brands have had to defend themselves against accusations of poor treatment of workers in Chinese factories. The profits in the China market were too good to be sacrificed. Every CEO had to have a China strategy or suffer in the stock market. Nike Inc., for one, raised eyebrows earlier this year when its chief executive, John Donahoe, echoed Abraham Lincoln to pronounce that "we are a brand of China and for China."
The priorities are shifting. The scandal broke when a Chinese tennis pro accused a former vice premier of sexual assault. The post vanished and Peng disappeared from public view. Simon demanded access to Peng to confirm her well-being and freedom of action, as well as an investigation into her accusation. The Chinese government cherishes the country's participation in international sports, but the incident has further fueled calls to boycott the upcoming Winter Olympics in Beijing, now only two months away.
Beijing dodged the requests of the WTA and instead tried to distract from the criticism with a series of propaganda stunts, including videos, photos, and a purported email. He is taking a big gamble with the finances of the WTA, as they inked a lucrative 10-year deal to hold the finals in Shenzhen. He said the issues raised by the plight of Peng are bigger than the business.
The circumstances driving Simon's stubbornness might be specific to the WTA. It is impossible for an organization for female athletes to not take a stand when a well-known player disappears after accusing a powerful person of sexual abuse. It shows the pressures corporations are facing to play a greater role in ending discrimination and injustice. Under a microscope for their efforts to promote diversity, close the gender gap, protect the environment, and support workers, CEOs will find it increasingly uncomfortable to justify their operations in a China where the government suppresses minorities and denies its citizens basic civil liberties.
Beijing is making it less comfortable. Yahoo! and Microsoft have left the China market due to state control over information. Washington has imposed sanctions on human-rights issues in China. The Uyghurs, a Muslim minority in the far west region of Xinjiang, have become a flashpoint in the government's treatment of them. The U.S. banned the import of cotton from Xinjiang because of concerns that Uyghurs were being forced to work. There are more hurdles that are likely. The cotton ban would be expanded to all products from the region.
This doesn't mean that Starbucks is closing its Chinese coffee shops or that GM is closing its car plants. American companies invested almost $300 billion in China from 1990 to 2020. Executives will still try to keep a low profile. On Nov. 23, Jamie Dimon joked that he expected his bank to survive the Chinese Communist Party and that he was committed to doing business in China.
The International Olympic Committee was desperate to save the Winter Games and called the tennis star to say he was safe and well. The IOC was criticized by Human Rights Watch for being involved with Chinese authorities on the call.
The Chinese regime will be more willing to fight for social justice against the international companies that are willing to stand up for it.
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