2019-08-26 Bloomberg Businessweek

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publiclysupportedpro-democracy protesters to

be banned from flying into and over China and

asked for the names of all Cathay workers whose

jobs take them through Chinese airspace. China

also demanded that Cathay draw up a new plan

to improve flight safety and security measures.

And, in case that pressure wasn’t intense enough,

some big state-owned businesses including China

Citic Bank International Ltd. and China Huarong

International Holdings Ltd. advised employees not

to book Cathay flights.

Merlin Swire flew to meetings with officials in

Beijing. The airline quickly acceded to China’s

demands and on Aug. 16—following massive

protests at Hong Kong International Airport—

announced the resignation of its British-born chief

executive officer, Rupert Hogg, as well as one of

his deputies. A spokeswoman for Swire declined

to comment.

“This is the most appalling kowtow to Peking,”

David Webb, a Hong Kong activist investor, wrote

on his blog just hours after Chinese state broad-

caster, CCTV, broke the news of Hogg’s departure

on Aug. 16. “Every substantial employer in Hong

Kong, in both the public and private sectors, has

employees who have participated in marches that

have frequently gone beyond their approved spatial

or time limits. Should all the CEOs resign?”

While Merlin Swire appears to be sticking to the

strategy employed by his father—working to keep

peace with Beijing while focusing the business on

Hong Kong—his predicament has become a cau-

tionary tale of modern-day China, with the coun-

try increasingly willing to call out companies that

want access to its lucrative consumer market but

fail to toe the party line.

Cathay isn’t the only global company that’s

become enmeshed with the anti-Beijing protests.

Within days of the airline being castigated by the

Civil Aviation Administration of China and boy-

cotted by state-backed companies, luxury brands

Versace, Coach, and Givenchy apologized for sell-

ing T-shirts that implied Hong Kong wasn’t part of

China. PricewaterhouseCoopers (PwC) was accused

on Chinese social media—where nationalistic post-

ers are increasingly pushing the country’s causes—

of not condemning the demonstrations enough

after a purported company-linked online post

appeared to support the protests. PwC said the

post was a fraud. Banking giant HSBC Holdings Plc

came under fire from some protest leaders after

its CEO’s public praise of China’s socialist govern-

ment; China and Hong Kong together account for

more than a third of the value of all HSBC’s cus-

tomer accounts globally.

Few companies have more at stake than Cathay,

which is 45%-owned by Swire Pacific, with Air

China holding almost 30%. Most of the airline’s

workers are based in Hong Kong and its hub is the

airport that had become a key site for the protest-

ers. China, along with Hong Kong, accounts for

about half of Cathay’s revenue.

Cathay was in many ways an icon of the freedoms

born of Hong Kong’s British past, with one pilot even

offering favorable words about the protests over his

plane’s intercom. In the days leading up to Beijing’s

crackdown, Cathay Chairman John Slosar told

reporters the company “wouldn’t dream” of telling

employees how to think. Now, with its abrupt about-

face, the airline risks becoming a symbol of acquies-

cence to the central government.

“At the moment, I think most Hong Kongers are

likely to side with” Cathay, says Lo Kin-hei, vice

chairman of Hong Kong’s Democratic Party and a

district councilor. Yet if Cathay “keeps on compro-

mising,” he says, local residents might become less

loyal and turn to Air China or other Chinese carri-

ers when planning their flying.

The Global Times, a newspaper published by

China’s Communist Party, said Hogg’s departure

may not be enough to atone for Cathay’s “luke-

warm attitude” in dealing with its “radical” employ-

ees. “Cathay Pacific’s latest gesture was viewed by

many as too little to restore its scarred reputation

and the loss of customers,” the newspaper said.

Repairing that relationship is important not

only for Cathay, but also for its parent’s other busi-

nesses. A third of Swire’s extensive real estate port-

folio, a third of its 93,000 employees, and half of

its global beverage sales (it bottles Coca-Cola prod-

ucts in 11 Chinese provinces and Shanghai) are on

the mainland.

Cathay workers know they’re under the micro-

scope as well. In a recent Facebook post, the flight

attendants’ union asked members not to talk about

political topics while flying and to be careful on

social media and outside of work hours discussing

issues that could “cause significant effect on every-

one of us now.”

Webb, the activist investor, worries that the cir-

cumstances that led to CEO Hogg’s resignation

could hurt Hong Kong by scaring away talent from

the territory. “The mere fact this has been hap-

pening is enough to start the pressure on a brain

drain,” he said in an interview. “So the longer-term

effects could be quite negative. People don’t want

to work in a place where they might get fired for

their own views.”

Another risk, says Ivan Choy, a political scientist

at the Chinese University of Hong Kong, is that

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PHOTO ILLUSTRATION BY 731; PHOTO: GETTY IMAGES. DATA: COMPANY REPORTS. CHINA INCLUDES HONG KONG AND MACAU; DATA COMPILED FOR THE SIX MONTHS ENDED JUNE 2019