The Past Speaks

The Chinese government blames the pro-democracy movement in China on sinister Western interests. The ongoing disturbances in Hong Kong have created significant political risks for Western firms in the SAR and in mainland China. The disturbances, which threaten to exacerbate the growing rift between China and the West (think of the Trump Trade War, President Xi’s more assertive foreign policy, the Chinese naval build-up), have created additional challenges for the executives of Western firms in Greater China. The decision of HSBC to fire CEO John Flint has to be understood in this context, since once of reasons that have been given for his dismissal were connected to the new geopolitical environment, at least according to a report in The Guardian.

Historical research can shed some light on these developments. I recently published a business-historical paper in Enterprise and Society that examines the Western firms that operated in China during the treaty-port period, the era after the Opium Wars when China was forcibly opened to Western commerce. The Chinese Communist Party’s ongoing “patriotic education” program has sought to keep memories of this period alive. The Party does so by creating historical narratives that emphasize the sheer extent to which racist and colonialist Westerners mistreated China during the so-called “century of humiliation.” This historical narrative is particularly problematic for the firms that can trace their origins back to this period (HSBC, Jardine Matheson, the Swire Group), since it creates an association in the minds of Chinese people between these companies and the Western powers’ terrible treatment of China in the 19^th century. Cathay Pacific has been bashed in the pro-Beijing media for its alleged lack of enthusiasm for punishing employees in China who support the pro-democracy movement. As reporter Tom Mitchell informs us in the Financial Times,  it is not surprising that Cathay and its parent, the Swire Group, have been attacked during this crisis, since “Swire, alongside Jardine Matheson, is one of two British trading groups established in Hong Kong during the 19th century.”

To my mind, Mitchell’s report is a reminder that firm’s reputations in the present can be affected by events long ago in their history, a phenomenon  that has been discussed by Judith Schrempf-Stirling and her colleagues in an important Academy of Management Review paper (see here).