Corporate leaders have expressed support for America’s black community amid widespread revulsion at the way George Floyd died. But some companies have struck a very different tone when commenting on Beijing’s widely criticised imposition of a potentially repressive legislation in Hong Kong © AP

When Bill Winters blogged last week about the “scourge of racism and discrimination” laid bare by the police killing of George Floyd, the Standard Chartered boss joined a line of corporate leaders expressing admirable support for America’s black community amid widespread revulsion at the way Floyd died.

But it was striking that, in the same week, StanChart struck a very different tone when commenting on Beijing’s widely criticised imposition of a potentially repressive legislation in Hong Kong. “We believe the national security law can help maintain the long-term economic and social stability of Hong Kong,” the bank said in a generally supportive statement.

It was not alone. HSBC, another British bank with an Asia focus, made a similar declaration. So did a number of other big companies with operations in the territory.

Is this double standards? Clearly, yes. It is also perfectly logical from a business perspective.

Criticising the killing of a black man and the repressive response to anti-racism protests is not something that business leaders would traditionally have done. To have begun to do so now looks progressive. It is bang in line with companies’ new-found claims that they will care for all “stakeholders”, rather than a narrow set of shareholders who might focus myopically on quarterly profit. Companies’ “ESG” agenda, previously directed largely at environmental and governance issues, has been refocused on to social concerns. Following through on the fine rhetoric, for example with better staff diversity initiatives, is the next challenge.

But make no mistake: the reason companies are embracing ESG, or at least claiming to do so, is not that they have turned cuddly or lily-livered. This is both right-thinking and good business. It is simply that to make capitalism work in a more divided society, where climate change threatens the world for future generations, and racism inflames large sections of the population, company bosses have twigged that they must look like they care. Hiring the best staff and attracting decent investors will depend on it.

Backing Chinese repression is less uplifting but similarly expedient.

A business like HSBC’s or StanChart’s, like it or not, depends existentially on the Chinese government for its licence to operate. Yes, there will be some staff, customers and investors who abhor the banks’ backing of the new national security law. But the corporate calculus is that the greater imperative is to keep the Chinese authorities on side.

Reconciling fragmented stakeholder interests makes life more complicated for companies, given that those stakeholders may range from woke staff and ethical investors to authoritarian governments. At least in the short to medium-term, the best interests of a company and its shareholders are probably served by setting moral judgments aside and responding to dominant stakeholder concerns, whatever they might be. Witness the 4 per cent jump in StanChart’s Hong Kong listed shares on the day it issued its statement supporting the national security law; HSBC’s rose nearly 2 per cent. (Interestingly in both cases, the London-listed shares were far more muted.)

Not long after Mr Winters published his LinkedIn blog last week, one follower wrote the obvious riposte. “Couldn’t agree more Bill, but rather than shallow words why don’t you put your money where your mouth is?” He went on to suggest that StanChart should reconsider its operations in parts of the Middle East where gay and women’s rights are oppressed and in China because of its treatment of Uighur muslims.

And therein lies the rub. To take the moral high ground, as many corporate interventions in support of George Floyd have, invites criticism of corporate behaviour that is less ethically admirable.

The purist conclusion would lead western businesses to exit markets that do not espouse liberal western values and moral standards — regardless of the financial impact.

A more pragmatic approach, which could both protect profits and effect change, would be for companies and business leaders to use their considerable influence more effectively. This is the whole premise behind ESG: if an asset manager wants, for example, to discourage irresponsible oil exploration, it won’t necessarily simply sell its shareholding, but will engage robustly with the oil group’s management to push for a more rapid shift into renewable energy.

That principle could be extended into other areas. Just don’t hold your breath waiting for financial sector bosses to strong-arm Xi Jinping into backtracking on Hong Kong or treating the Uighur any better. Those corporate licences to operate are simply worth too much.

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