2014年7月10日星期四

WSJ: Hong Kong's Talkative Companies

The political left in America loves to complain that companies play an outsized role in politics, especially in the wake of Supreme Court rulings that confirm corporations have a right to engage in political speech. But if you want to visit a place that has a real problem with politically active corporations, you'll have to hop on a plane to Hong Kong.

Some local companies have grown increasingly vocal in recent weeks in opposing pro-democracy activists. The Occupy Central movement—a respectable group, unlike those who camped out in Lower Manhattan a few years ago—is promising to bring gridlock to Hong Kong's central business district if Beijing doesn't follow through on its pledge to allow genuine democracy in the territory by 2017.

Many businesses are concerned about the risks and costs of business disruption if parts of Hong Kong come to a standstill.The Hong Kong offices of the Big Four accounting firms late last month took out an ad in several local newspapers warning that the protests would"shake" international confidence in the territory and could send foreign investors fleeing.

HSBCHSBA.LN -1.80% earlier this week issued a research report downgrading its view of Hong Kong stocks, citing the political instability and potential for "souring" relations between Hong Kong and Beijing that would arise from Occupy Central protests. After a public uproar, the bank partly backtracked by revising its report to list several other factors supposedly justifying such a downgrade.

The companies err badly on the merits. If it's allowed to continue, the territory's slide into Beijing-lite authoritarianism, with the loss of rule-of-law and concomitant rising public discontent, will be far worse for business than the temporary disruptions of a public protest. But in most political systems, including Hong Kong's (for now anyway), being wrong is not a crime.

The real problem is that Hong Kong law affords these companies an outsized role in the electoral system itself if they want one. Thirty-five of the 70 members in the territory's legislature, which will ultimately vote on any democratic-reform proposal, are elected from so-called functional constituencies, or industry-and other special-interest groups. Companies themselves are electors in many of these constituencies.

For example, the finance and insurance industries each get their own representative in the Legislative Council,elected by companies. Only 124 companies are registered to vote in the finance constituency, which encompasses banks; only 129 companies vote in the insurance constituency. Because HSBC and its subsidiary Hang Seng 0011.HK -0.16% Bank engage in both banking and insurance activities, each gets one vote in each constituency.

At first the situation appears better with respect to the accounting firms. Only individual human beings who are certified public accountants are eligible to vote in the functional constituency for accountancy, and some 25,000 electors are registered to do so. That makes accountancy one of the most "democratic" functional constituencies,alongside education and health services. Even so, accountancy electors get two votes for Legislative Council since they are also eligible to vote in their geographical constituencies.

Yet the Big Four have a back door path into functional-constituency voting, if they ever want to take advantage of it. One functional constituency, for general business, represents members of the Hong Kong General Chamber of Commerce. KPMG, EY, and Deloitte Touche Tohmatsu already are members and PwC could join at any time. Spokesmen from EY and PwC tell me their firms are not currently registered to vote in any functional constituency and KPMG declined to comment; a spokesman for Deloitte didn't return a request for comment.

This gives corporate speech in Hong Kong far more weight than any of the false nightmare scenarios concocted by the left in America. In a one-person-one-vote democracy,corporate speech is merely a form of activism by a voluntary association (in this case, of the shareholders) to persuade voters on one issue or another. But in Hong Kong, companies themselves get to pick some of their lawmakers, and can be expected to do so for commercial reasons.
This might sound like a great boon for business, but it's not. Critics of HSBC and the Big Four suggest the companies are motivated by commercial concerns—the bank's extensive business interests in mainland China, or all the accounting contracts the Big Four have with large Chinese enterprises. This is the point. Functional constituencies are designed to be a pro-establishment bulwark. Businesses risk being discredited by virtue of having been co-opted into an electoral system that relies on them to oppose popular movements such as Occupy Central.Companies become tarnished by their association with it and their political speech grows less and less persuasive.

In response to the Big Four newspaper ad, an anonymous group of the firms' employees bought their own ad supporting Occupy Central. To the extent that the universal suffrage those employees support undermines the influence of functional constituencies, the accountants are arguing against their electoral self-interest. But they seem to realize that real democracy is in the political and economic best interests of all Hong Kongers, and Hong Kong's companies. It's a more enlightened view than that of their employers.

Mr. Sternberg edits the Business Asia column.