Picking a Side
On July 2, 2020, the United States Congress and Senate unanimously passed the Hong Kong Autonomy Act (HKAA). Less than two weeks later, President Trump signed the bill into law. This rare feat of bipartisanship signals the commitment of the United States towards the autonomy and freedom of the people of Hong Kong.
The HKAA would impose economic sanctions, not just on individuals and entities undermining the autonomy and freedom granted within the Basic Law, but also on the financial institutions transacting with these individuals and entities. This law provides a foil to the Hong Kong National Security Law, which imposes extraterritorial penalties on “act of treason, secession, sedition, subversion” by residents and foreigners. Notably, the law was hurriedly passed without elected legislators ahead of the 23rd anniversary of the Hong Kong handover.
Corporations have been confronting mounting pressures from politicians, law enforcement, the media and the public in recent months. Since the escalation of the pro-democracy protests, businesses have suffered direct hits to their bottom lines, recall products, or repair premises vandalized during protests. Cathay Pacific, Hong Kong’s flagship airline, bowed to the pressure from the Civil Aviation Administration of China, resulting in the resignation of CEO Rupert Hogg. Businesses had been cautious in their responses to the protests and increasing violence playing out in Hong Kong. However, major banks HSBC and Standard Chartered, together with venerable trading houses Swire and Jardin Matheson, have since released statements supporting the National Security Law. This came after former Hong Kong Chief Executive, Leung Chun-Ying, criticized HSBC for not publicly taking a stand.
Since the mid-1800’s, financial institutions in Hong Kong have been pivotal in facilitating international trade with mainland China. Post-handover, these institutions have reaped significant profits in facilitating market access for corporations via cross-boundary investment strategies and infrastructure such as Renminbi Internationalization, the Shanghai-Hong Kong Stock Connect and Belt-and-Road Initiative. However, as mainland China’s economy grows, Hong Kong’s share has significantly reduced and its own GDP has seen only marginal growth. Financial institutions would be rightly concerned about the imminent impact of US economic sanctions to their stakeholders.
Hong Kong’s share of mainland Chinese economy (Source: Reuters/Sin)
It is not the first time that banks have been swept up in geopolitics. Deutsche Bank’s active role in the Third Reich is well-documented. As with many tragedies, things started with a string of small compromises like the dismissal of two Jewish board members, that snowballed to the expropriation of Jewish-owned assets, and eventually, to the financing of the construction of concentration camps. More than half a century after atrocities were committed, Deutsche Bank acknowledged its role in the suffering and deaths of millions of people. At this critical juncture, how should the financial industry in Hong Kong frame their responses as this geopolitical tug-of-war continues to play out?
First, it is important to understand that all decisions (and actions) are personal. And that we experience all consequences – good and bad – as individuals. This has been shown by Nobel laureates Kenneth Arrow and John Harsanyi. Arrow’s theorem states that there is no legitimate measure of welfare by a group of individuals that respects the values of each individual. Any alleged “collective” welfare would have to be imposed on individuals by force. In other words, there is no such functioning, decision-making organ as “society”, “institution” or “corporation”. At the end of the day, it is not “corporations” or “governments” that hurt or benefit “society”; it is individuals making decisions that hurt other individuals.
Once we have established that a response is a decision solely in the control of the individual, we would look to apply perspectives or lenses to each alternative within the decision. In “Ethics for the Real World”, Ronald Howard and Clinton Korver separates decisions into three dimensions: prudential, legal and ethical.
Three Dimensions of Ethical Action (Source: Ethics for the Real World)
An action is in the legal dimension if it is obligated by law. Legal obligations are inherently coercive. The law allows the use or threat of physical force to compel subjected individuals to action. Laws determined by different legislative forces could be contradictory, as clearly illustrated in both the Hong Kong Autonomy Act and the National Security Act that imposes penalties on conflicting actions.
An action is prudential if it is taken in our self-interests. Interestingly, self-interest can be altruistic if doing good deeds for others adds to our pleasure. Prudential arguments such as economic stability and maintaining profits have been put forward by pro-Beijing parties to enlist support from corporations against the pro-democracy protests. When we take action that is not prudential, we often feel regret.
An action has ethical content if it raises a question of “right” vs. “wrong”. Unethical actions generally lead to the feeling of remorse. Many have argued that ethical actions and morality are the same thing – however, morals generally pertain to society norms of what is right whereas ethics are personal. For example, many societies or religious groups deem homosexuality immoral, but it does not mean that every individual, even from within these societies, would necessarily agree that it is wrong.
How would we differentiate between a “right” vs. a “wrong” action? Most wrong-doing in the ethical dimension fall under the categories of lying - intentionally giving a false impression with or without telling a lie, stealing - appropriating the property of others without permission, harming - the use of violence against another person, which also includes threats, coercion - imposing external control on others, by use or threat of force and power.
As illustrated in the figure above, there may not be any overlaps between legal, prudential or ethical actions. For example, a legal action may not be ethical: Deutsche Bank’s actions under the Third Reich were permissible under German Law, but are unethical. Infamously known as the “Nuremberg defense”, Nazi officials defended their horrific acts of inflicting harm as legal and were therefore, not a crime.
As we review our choices against these simple lenses, we start to clarify the arguments and viewpoints that befuddle our own decision-making. As Howard pointed out, what we perceive as ethical dilemmas are often our own conflicts between prudential gain and ethical action: “In most situations, we do not routinely decide between two wrongs, but an ethical rock and a prudential hard place.” It is certainly the case for decision makers within financial institutions, who must now decide between business profits and compliance.
Our decisions and actions have real consequences on ourselves and others, even if they do not ultimately influence the course of history. Ethical decision analysis gives us a frame for making tough choices in uneasy situations, providing clarity of action. We, as decision makers, understand what we should do and why, even if we are uncertain of the outcomes. This gives us the full power of control over our actions and not be battered by the whims of change.
Acknowledgements
My thanks to Dr. Dale Nesbitt for his guidance in decision analysis and ethics, and to Professor Ron Howard for his generousity in allowing me to use and adapt his work. Professor Howard most recently co-authored "A Hippocratic Oath for Technologists".