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.