That Rio Tinto Taint
April 6th, 2010
The confession of Rio Tinto’s man in China, Stern Hu, accepting bribes did not surprise me. Hu was originally from Tianjin, and acquired an Australian passport. Rio fired Hu soon after the Beijing court’s verdict at the end of March 2010, claiming it did not know what its man in China was up to during his negotiations with Chinese steel producers over iron ore pricing.
The reason I’m not surprised is that it is all too common in China for overseas Chinese to return to China as prodigal sons who quickly take to Chinese ways of doing business. I thought over the years that I would hear fewer stories of Overseas Chinese (OCs) who are General Manager’s following the Chinese Way of doing business: opaque, backroom dealings; mis-information or no information relayed back to HQ; commanding subordinates to help them siphon funds from purchasing contracts. What does surprise me is the increasing frequency with which I am hearing these stories, mostly from expats who have to work under the OCs. Perhaps the reason for the increase in cases is that when the global economic downturn struck in late 2007, headquarters of companies from around the world began pulling their expat GMs out of China, because of the “hardship” of it all. In many instances, Chinese junior staff were not yet ready to take the tiller of managing large, complex, rationalized organizations that had to meet international standards – especially around transparency.
The other point that surprised me about the Hu story is that there are not more of them in the news. One American businessman that’s worked in China more than eight years expects to see Western companies putting expats back in place after they’d pulled them out in a financial panic come the Great World Recession. “The companies are just figuring out that they’d passed the reigns on to Chinese staff too quickly, and that Headquarters actually doesn’t know what’s happening in their Chinese operations,” my friend said. When I commented on the dearth of news of multinational mis-organizations in China he commented sagely, “What multinational wants the world to know their man in China screwed the pooch?’
Find an excellent in-depth analysis of the Rio Tinto case: FT
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