We have moved….
As our readers in mainland China have been experiencing problems accessing Off The Record, AC Capital has completely redesigned the blog and moved it to www.accapital-blogs.com.
Sunday, March 16, 2008
Monday, May 14, 2007
Are Chinese Blogs too Hard to Track?
Earlier this year international PR firm Edelman gave up its plans to track Chinese blogs, despite much ado.
Edelman’s retreat from Chinese blog tracking was a little bit surprising given the hullabaloo it had made about it needing to be part of the conversation by tracking blogs in the world’s second biggest – and soon to be biggest – Internet market. China blogger and tech guru, David Wolf of Wolf Group Asia, rightly commented in his ChinaTechNews.com column that it was proof that China was not for dilettantes. A good point.
But more to the point it probably means Edelman should stick to its knitting, which is PR. There are plenty of professional firms out there monitoring the blogoshpere. They should do what they do best, and PR firms should do the PR.
Chinese blogs aren’t too hard to track. But tracking them takes a level of commitment that a PR firm cannot provide. It is certainly not something this firm would venture into. But just as PR firms work with media monitoring companies, they need to start working with blog monitoring and tracking companies to keep their finger on the pulse. That’s how a PR firm can ensure it is part of the conversation.
Friday, May 4, 2007
Toxic Additive Makes Good Food for Thought – Get CSR Right from The Start
A pet-food crisis that killed thousands of cats and dogs across the United States could be about to impact China’s US$2 billion exports to the US of food for human consumption. The reason is that it has been found that the pet-food ingredient from China that went into American pet-food contained a mildly toxic chemical, melamine. Worse still it has been discovered that the chemical is commonly used in animal feed in China, sparking concerns that this could introduce the chemical into the human food chain. This crisis coupled with China’s generally poor health and safety record on food places the whole animal feed and human food industries at risk.
The crisis in the US started when pets began dying of kidney failure in the past few months. An investigation by the US Food and Drug Administration concluded that the pet-foods involved in the crisis had been using wheat gluten imported from China. Further investigation found that the wheat gluten contained high levels of melamine and were traced back to two companies, Xuzhou Anying Biologic Technology Development Co. in Jiangsu Province, and an associated firm in Shandong, Binzhou Futian Bio-technology Co. The FDA has banned imports from the two companies.
The companies’ immediate reaction to the crisis confronting them was to deny knowledge of the melamine and claim that they did not use it in their products. However, their denial was demolished when an online advertisement placed in March by Xuzhou Anying seeking to purchase melamine was discovered by investigators.
The first mistake of crisis management is to try to escape by lying – it usually fails, especially in today’s highly advanced technological world which has made it almost impossible to erase all tracks. Bad move Xuzhou Anying.
Since then it has transpired that many Chinese animal feed companies add melamine to their products as it boosts nitrogen levels in the products. Nitrogen is usually a yard-stick measure of the amount of protein in animal feed. Melamine in animal feed has no nutritional value. In other words melamine is used to mislead purchasers that the animal feed contains a higher level of protein than is actually the case. Put another way, the Chinese animal feed industry is based on lies and half-truths.
For the time being, the feed suppliers are saying their customers prefer their product with the melamine in it. It will be interesting to see how the domestic industry reacts to the news that their feed suppliers have been misleading them all these years.
The lesson for companies in China is that corporate social responsibility is not just about donating money to worthy causes. It is first and foremost about a company’s practices being consistent with its stated principles and policies. Lying to your customers is obviously very bad CSR practice indeed.
In the US, where concerns are already riding high about the risks of poor health and safety standards of imported animal feed from China, the crisis could spillover into imports of foodstuffs for human consumption.
So far the Chinese government has reacted appropriately, promising to ban the use of melamine in animal feed. But questions remain – including why weren’t stricter laws introduced sooner; and what guarantees can be provided on enforcing the soon to be introduced ban. After all, China has some of the most stringent IP protection laws in the world, but some of the worst enforcement of its own laws.
Chinese companies need to learn that if they wish to be global players they are going to have to comply with international standards, especially on issues of health and safety. They will need to align their CSR policies with world best practice standards. Watch this space.
Wednesday, April 25, 2007
Fasten Your Seat Belts, You Are Encountering Real Turbulence - Think Beyond The Danone And Wahaha Dispute
By Diego Hu*
I bet most PR people no matter whether they are working in-house or in an agency are doing everything to help companies get their names out in the media - and of course, the more the better. But in reality, no one wants that to happen - because if it happens, it means you are in a crisis.
If you are a newspaper addict like I am, you will be surprised to find that in the past 30 days two company’s names have been appearing on the front page of most publications with an incredible frequency. The debate between Danone and Wahaha has got considerable attention; and it’s changed from a simple acquisition case to a huge public debate involving media, government, dealers, employees, analysts, and academics.
For those who do not know, as a global leader in the F&B sector, Danone established a joint venture with Wahaha - a local leading brand - in 1997. According to the contract, Danone owns 51% of the joint venture with an option for a full acquisition in the future. However, when Danone started planning the acquisition, the CEO of Wahaha spoke in public and claimed that Danone is in breach of the contract. In addition, if Danone completes the acquisition, there will be a great danger that the domestic economy and industry will be affected long term. With more and more other parties getting involved in this dispute it has become a public debate on whether foreign investment is good for China or not.
If you are really interested in this story, a simple Google search will give you much more detail and in-depth analysis.
But to think beyond this case, the author of this article really wants to speak out about something that has been stuck in his throat for a long time: MNCs, it is time for you to fasten your seat belt in China. In the recent National People’s Congress, we heard a strong voice calling for a restriction of foreign investment and for the government to give more support to domestic companies. If you try and think of crises over the last four years, whose names jump out? I bet they are Nestle, KFC, and P&G - just to name a few. Doesn’t that tell us something? Twenty years ago, when those big names entered the China market, everyone applauded - they were perceived as the provider of investment, leading technologies and management system. Unfortunately, 20 years later, this perception has changed – the heroes are now seen as acting irresponsible and posing a threat to long-term economic development to China . If the Danone case happened 20 years ago, the media and government would have definitely been on Danone’s side. But now, when many successful Chinese companies are emerging - and going global - Chinese academics and the public have really started to think about the potential negative impact of the dominance of foreign investment in China . Will foreign investment restrict the development of local industries in the long term? Are foreign companies really bringing benefits to China or is it simply a capital game? Is China just a place for them to make profits with very low costs? These kinds of doubts are appearing more and more often in the Chinese media. To make matters worse, countless foreign companies have been involved in crises making the Chinese public doubt whether they are really acting responsibly in China . The media environment and public perception is changing a lot. But are MNCs aware of that, or are they actually doing anything about it? Just make a quick search for interviews conducted by many CEOs from MNCs and those common sound-bites immediately jump out, “we are the global industrial leaders”, “we come here to educate the Chinese consumers”, “we will contribute a lot to the local economy and taxation”. It becomes worse in many crisis situations, “this is the standard we follow in other countries globally” or “we strictly abide the Chinese regulations”. So the answer is “NO”. Foreign companies have not realized the changing media environment and public opinion in China - or they do not think it is really important for them. As a result, they still follow the “old” way of thinking in this “new” environment. To make matters worse, many decisions are still made in the overseas headquarters who don’t understand or are even not aware of the changes taking place. However, because of the development of new media and the transformation of traditional media in China, the media really have become a medium to reflect the public’s opinion and therefore have a real influence on government policy. If MNCs are not doing anything to change these negative perceptions, the actual business environment will eventually change as well. So the question is, what can the MNCs do to adapt to this shifting environment? From a PR perspective, the author believes the Chinese public and academic world are beginning to focus on the non-economic and long-term contributions from foreign companies. The messages MNCs need to communicate and the perception they need to build must reflect this shift in focus. The author is not another old advocate for CSR programs, and actually the author thinks most CSR programs in China are not very successful. When you do on-line research and read some in-depth media analysis on these topics, a good proportion of the Chinese public think most MNCs have CSR programs in China which are just part of their branding campaigns. Some even think it is just like a millionaire spending some pocket money. A successful CSR program is a long-term, systematic partnership with the right organization – which is reflected in your overall business strategy and actions. Again, a strategic communication plan is also needed to support it. It is not about making some pleasant statements in your donation ceremony. In any public speaking opportunity, you need to deliver the message that your company really takes actions and is committed to the long term social development of China. It is also about changing your communication tones. Instead of positioning yourself as the global leader to help China, you need to be perceived as a good company that respects and really listens and talks to the Chinese public, government, and your business partners. Instead of positioning yourself as an educator of Chinese people, you need to be perceived as a company that really wants to understand Chinese culture and meet their needs. Finally, remember that communication with the public is not the same as a legal debate. Many companies win lawsuits - but lose their reputations and thus the trust of the public in the process. This is more important for a foreign company in China because you are already perceived as a giant that does not respect Chinese people. In Hollywood movies there is a famous saying, “nothing personal, just business”. Here the author wants to say “nothing business, but perception”. So to put it simply, it is not about business and it is not about whether you are following regulations and standards. It is all about perceptions. And these perceptions will finally impact your business and even the entire economic environment. Coincidently, today a local IT person protested during a speech given by Bill Gate’s during his visit to China. There is some interesting “nationalism” coverage supporting this “hero” already. So at least, the head of the most successful MNC in China has personally realized some changes.
* Diego Hu is a Consultant in the Shanghai office of AC Capital Strategic Public Relations.
Virginia Tech Shooting Highlights Truth As First Casualty In A Crisis
The massacre of 33 students at Virginia Tech this week was a tragedy that robbed us of the promise of the young people killed. Each one of them no doubt had much to offer the world – whether in great ways or small ones just to their own families. Any way you look at it, it was a tragedy. I don’t want to belittle that tragedy by writing about it when so much has been said in the media – some of it profound such as the comments I heard from a father of one of the victims on television who spoke not just of his own loss, but the loss of all the families. But I do want to comment on two aspects of crisis management that were highlighted by the media coverage.
The first is that truth is the first casualty in a crisis just as it is the first casualty in a war. Within the first hours of the shooting rumours about what was happening were flying thick and fast and reported as gospel across the air waves. Reports ranged from “there might be two shooters” to “the shooter was Chinese”, right down to one reporter claiming the shooter had obtained his visa to the US from the American consulate in Shanghai . Given that we now know the shooter was an American of Korean descent, it has to be asked, from what source had the reporter obtained that information. We may never know. The simple reality is that, in a crisis situation, reporters, in the rush to get a scoop, to be the first to report something, do not have the time to carefully check and verify every piece of information they hear – they only have time to report it and move on with finding further information.
Unfortunately now, more than ever, in the words of Mark Twain, “a lie gets half-way around the world before the Truth can get its pants on”. Chinese who are complaining about the American media for reporting that the shooter was a Chinese student in the States should be asking why their Internet media were so quick to pick up the stories and run them rather than doing their own due diligence on the reports. The simple fact is the news moves fast in a crisis situation.
What can companies learn from this for their own crisis management preparedness? First of all accept that you will never have full control of the news reporting, especially in the very early hours of a crisis when every rumour, every whisper, every half-truth and even out-and-out lie will be reported and will travel across the Internet faster than news carried on telegraphic wires in Mark Twains day. Then be prepared to spend much of your time issuing statements that set the record straight, that put your side of the story out there. From the perspective of tools to do this the best is to have a “dark site” – a section of your website that is normally inaccessible to the outside world – ready to replace your website within hours of a crisis so that accurate information can be communicated to the public and to the media. In other words, use today’s technology to bypass the purveyors of misinformation.
The second point that needs to be made is that the media will always sensationalise crises like this to the point that they drive the news for the next couple of weeks. It has to be asked – again without belittling the deaths of those young people who were slain at Virginia Tech - how the deaths of 33 people compare with the deaths of more than 300 through the violence in Iraq on the same day. Yet Iraq has been pushed from lead story all week in deference to the Virginia Tech massacre.
Perhaps it is because the media and all of us are trying to make some sense of a senseless killing. Why would a student walk around his own campus on mindless killing spree? But then, why would a suicide bomber kill himself and many who share his own faith? Murder in whatever guise is mindless to this writer.
Maybe the media – and consumers of the media – paid more attention to the Virginia Tech slayings because they occurred somewhere that was supposed to be peaceful and safe. After all, the killings in Iraq are to be expected as they occur in a war zone. Or is it because the killings in Iraq have become mundane? This author hopes not.
Leo Tolstoy captured the senselessness of violent death best: “Even in the valley of the shadow of death, two and two do not make six”. Perhaps we’ll never have all the answers; but let’s hope we can keep our perspective on life.
Friday, February 2, 2007
China Media Ethics III – Some Good Analysis
Further to our recent posts on this issue, a superb analysis of the problem has been written by Associated Press and published by the International Herald Tribune. The article lists a number of institutional problems that have led to corruption and low ethics among Chinese journalists, including:
- Tight controls on what the media can report;
- The close link between media advertising departments and editorial departments, with many journalists required to bring in revenue and meet monthly revenue targets;
- Increasing business pressure in a saturated media market.
Interestingly the article highlights that journalists at the business magazine Cai Jing are required to sign a code of ethics that forbids them from accepting hong bao. Cai Jing is revered – and feared - in the market for its hard-hitting, no holds barred investigative reporting that has blown the lid on wrong-doings at many Chinese corporations.
Read the IHT article for more insight into this problem.
Thursday, February 1, 2007
Chinese Media Ethics Wanting (II): Towards A Solution
Although we only commented on the subject of Chinese media ethics as recently as one month ago (see To Hong Bao Or Not To Hong Bao – That Is The Question), it is time for a follow up post on the subject. Two reasons compel. The first is the number of e-mails we received (for some reason no one chose to post their comments on the blog) defending the practice of Hong Bao. Surprisingly many defenders of the practice are PRO’s at foreign companies including a number of laowais. The second reason is an article that appeared in The Washington Post of 25 January entitled Blackmailing By Journalists In China Seen As ‘Frequent’, and which has elicited comment on other China-blogs, such as Dan Harris’ excellent China Law Blog under the title The Steep Price of China Public Relations.
Both the number of defenders of hong bao and the rising practice of blackmail by the media are evidence that we in the public relations profession in China are up to our necks in a moral and ethical quagmire. It is time to extract ourselves from this bog.
Time to wake up and smell the coffee
The defenders of hong bao put forward the argument that hong bao was necessary for two reasons. The first is that Chinese journalists are paid woefully low salaries by their media organizations making it necessary to supplement their incomes by other means. Taking the transportation fee – nay, expecting its payment - is, according to the defenders of hong bao, a legitimate practice in these circumstances. The second reason for the practice is apparently because local PR companies do it and unless we follow suit we will not be able to compete for media coverage. These defenders of hong bao took solace in that they pay less hong bao than the local PR firms and local companies.
According to them, our argument against hong bao was naïve. Perhaps this writer is but a virgin in the brothel that is China public relations. Nonetheless, we should look at their arguments.
First, is it really the role of private companies to supplement incomes of Chinese journalists? That they don’t get paid well enough is a commentary on the sad state of affairs of the Chinese media market – a market with more media companies and outlets than is justified by the size of the market in terms of advertising and subscription revenue. With more than 2,000 newspapers, 8,000 magazine titles, 900 TV channels and 800 radio stations, China is well overdue for a media shake-up. Chinese journalists looking for hong bao and ever-ready to blackmail companies is a direct result of the companies not being able to pay them to be sure. But what law of business makes it the responsibility of PRO’s to pick up the tab? Which PRO has justified it in these terms to their finance or procurement departments? The usual argument goes “it is the custom and we cannot afford to offend the media.”
And if this is a reasonable cause to pay hong bao, it must also be a valid reason for paying lowly bureaucrats such as customs officials a little baksheesh to do their jobs. Hell, the private sector could take over supplementing the incomes of all underpaid public servants. A little gift to Betty’s teacher so she pays a little bit more attention to teaching your daughter. This already happens in Chinese schools while businesspeople and even individuals take sometimes drastic steps to avoid taxes because they feel the government doesn’t provide sufficient public services. You don’t need to be Aristotle to see how this is getting kind of circular.
Accept the argument of the defenders of hong bao and you’re climbing onto a pretty slippery slope that could get us even more into the quagmire.
The argument that we need to pay hong bao to compete with the local companies who pay even higher transportation fees to the media is almost a non-starter. Didn’t their mothers ever tell them that two wrongs do not make a right?
If their premise is true, their argument is confused. Shouldn’t their conclusion be that we need to pay even higher hong bao than the local companies to be able to compete for media coverage? Because getting the coverage with lower payments doesn’t make economic sense.
Ever considered why Chinese journalists don’t expect or demand hong bao from government agencies or NGO’s? It’s because they know they cannot and will not pay these fees. Does the Chinese media still cover the news of these organisations? Yes. Why? Because news is news. For journalists not covering news, not getting the scoop, would result in a pretty harsh reprimand from editors.
Here again lies the nub of the issue. Could it be that we pay hong bao because we know we don’t have real news to peddle to the media? Or perhaps it is that many China PRO’s are not very good at packaging the news for the media. Maybe it is time to learn our craft better rather than cop out with a payment of baksheesh.
Bribes open the blackmail door
As long as we continue to pay bribes to the media (let’s call a spade a spade: hong bao is a bribe to get the media to at least attend a press conference or interview), it leaves us vulnerable to the possibility of blackmail by the media. Journalists receive a signal that gets them thinking – “such and such a company is prepared to pay for us to come to an event, so how much will they pay for positive coverage?” The next question is “How much would they pay to avoid negative coverage?” The answer is “Probably a whole lot more”.
Get the picture. In case you don’t get it yet, here’s an anecdote. Some years ago this writer was asked to help extricate a global fortune 500 company from a difficult situation. They had paid the editor of a magazine US$7,000 for a cover story on the company with a nice colour spread inside. But the editor of the magazine had come back the following year expecting the same again. They didn’t want to pay, but the editor had got upset. Should they have been so surprised to find the editor had come back for more the following year? The fact is they had established a precedent.
In another case a company was approached by a journalist for an interview. After the story was published the journalist called up sheepishly wondering where his money was. Finally the company paid US$1,500 to the journalist – a bit less than he was asking. The next time he called for an interview the company politely declined. But were they bound to pay the extortionist in the first place?
Not surprisingly Chinese journalists think many companies are easy marks. Hong bao opens the door to bigger bribes, then to extortion, and ultimately to blackmail.
The way forward
But there is a way forward. Refuse to get on the slippery slope. Or if you are on the slope already, opt off. It’ll be worth the short-term pain.
Or get together with some like minded PRO’s from other companies and start to place pressure on the China International Public Relations Association (CIPRA) and the All-China Journalists Association (ACJA) to help overhaul Chinese media ethics. To borrow from Marx (Karl not Groucho) we have nothing to lose but our chains.
Thursday, January 25, 2007
Sponsor Beware: Reality TV Is A Risky Business For Corporates
The latest outcry against inappropriate behaviour on a reality TV show sounds a long-overdue alarm bell for companies hoping to promote and profile brands through sponsorship of these programs. Key sponsors deserted
Britain’s Celebrity Big Brother program aired on its Channel 4 following a wave of global protests at the racist outburst of British contestant Jade Goody against Bollywood actress Shilpa Shetty.
Effigies of the shows producers were burned in Indian cities and Britain’s Chancellor of the Exchequer, Gordon Brown, on a visit to New Delhi, denounced Goody for her comments. Britain’s Culture Minister, Tessa Jowell, said the show was presenting racism “as entertainment” and called it “disgusting”.
The show’s main sponsor, Carphone Warehouse, immediately cancelled its four year relationship with Celebrity Big Brother. The company’s CEO, Charles Dunstone, noted that his firm was becoming increasingly alarmed by events on the show and that this was the last straw. Two other sponsors, United Biscuits and Cobra Beer, which provided products for use in the show have also withdrawn products.
This is not the first time a reality TV show has resulted in such a chorus of disapproval by the public. An Australian version of the Big Brother franchise reality TV show fell into disrepute last year when a crude incident resulted in claims of sexual harassment against one of the contestants. Although no charges were pressed, many were outraged by the vulgarity of the incident.
The problem with many of the reality TV shows shown around the world is that they play to the lowest common denominator in society. The people watching most of these programs are not looking for uplifting entertainment. And the shows producers are often trying to create conflict amongst the cast members to ensure controversy. Contestants for the show are usually selected on the basis of how they will interact with each other – that is to say how they will interact negatively to provide the conflict that will pull in viewers.
Fortunately reality TV in China has not plummeted to the depths of distaste seen in the West. Not yet anyway.
Companies choosing to sponsor reality TV shows need to consider the controversy factor that is used to drive ratings. They cannot wander around after an appalling incident has occurred, Groucho Marx-like, uttering that they are “shocked and dismayed to find gambling in this casino”.
Casinos were built for gambling and reality TV is made for conflict that appeals to the lowest common denominator. The best thing corporations can do to protect their hard earned reputations is eschew these shows from the outset. Pull the sponsorship now and put those marketing dollars into responsible communications programs.
Wednesday, January 24, 2007
Tinseltown Bending It For Beckham*
The David Beckham public relations machine appears to be in overdrive since the announcement the other day that he will play for the L.A. Galaxy soccer team. The news wires and broadcast waves hummed with news that Becks and spice-spouse,
Victoria, will move to L.A. Fans waxed lyrical about the planned move on their blogs and vlogs. Becks’ friend and fan Tom Cruise was apparently consulted before Becks made his decision and Sylvester Stallone welcomed the move as the best thing for L.A. Galaxy. Others, including David Beckham himself, welcomed the move as the best thing for soccer in America. The price tag – US$50 million per year for five years. It’s the sporting world’s biggest contract – ever. This puts Becks in a league of his own. But does it really mean he is better than Michael Jordan, Muhammad Ali, Jessie Owens, Babe Ruth and other great athletes past and present? Those sports stars were legends and more – figures whose prowess and achievements endured and inspired generations.
Even within the world of soccer, Becks doesn’t seem to be in the same league as some others – he is certainly left in the dust by legends of the past like Brazil’s Pele, Northern Ireland’s George Best and Argentina’s Maradona; but he’s also not quite in the same league as some of his own contemporaries like France’s Zinedine Zidane or Brazil’s Ronaldo.
So what is the L.A. Galaxy getting for its US$250 million? No doubt the team coaches and managers know they are not getting a top-rated world player. It has been some time since Becks was able to claim such honours. Apart from one goal scored against the Greek team in the 2002 World Cup qualifying matches, Beckham’s performance was lacklustre. Even his new team of Real Madrid has had him sitting on the bench during recent matches. And, at 31, Becks is heading into his sunset playing years. This hardly makes Becks the man to save L.A. Galaxy or invigorate American soccer.
The truth of the matter is base and far away from noble aspirations one may have about sport. It is about money. It is about the pulling power of Beckham and the money that L.A. Galaxy hopes to make from the merchandising that will follow.
Probably the best commentary about Becks’ move to Tinseltown is the one by the entertainment writer John Doyle of Canada’s Globe and Mail newspaper. Doyle argues that the Beckham move is more about celebrity than what Beckham will do for L.A. Galaxy or American soccer. He says the news angle in the L.A. Times’ reporting of the Beckham move was not soccer but “fame and frivolity”. The same can be said about most of the other reporting on the Beckhams’ move to L.A. The media have simply gone ga-ga over the news, with female reporters acting like love-struck teenage girls (“he’s so handsome” commented one female TV anchor) while their male counterparts have focused on the size of Becks’ pay cheque – a case of pay packet envy perhaps.
Sadly, modern celebrity and even stardom is based on neither talent nor character. Blond hair, good looks and a willingness to do anything in front of the camera seem to be all that is required; just consider the notorious air-head Paris Hilton and others of her ilk who all but grace our TV screens. Now that the Beckhams are moving to La-la Land, expect to see them in unremarkable and even bizarre TV shows in the near future. Who knows: There might even be a movie in the offing.
Thank the PR and marketing gurus behind the Beckham phenomenon. They’ll be in for a cut of the $250 million. Spin has been replaced by bending it like Beckham.
In the meantime the owners of the L.A. Galaxy soccer team should contemplate the words of baseball great, Babe Ruth: “The way a team plays as a whole determines its success. You may have the greatest bunch of individual stars in the world, but if they don’t play together, the club won’t be worth a dime.” It’ll be interesting to see how Becks fits in with his new team.
And Becks should reflect on some other words of Babe Ruth: “All ballplayers should quit when it starts to feel as if all the baselines run uphill.” Becks and wife Posh would do the world a big favour by retiring gracefully rather than continuing to inflict their lack of talent and intellect on the rest of us.
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* A version of this article by Alistair J. Nicholas, Managing Director of AC Capital Strategic Public Relations, was published by the online magazine Mercatornet.
Thursday, December 28, 2006
To Hong Bao Or Not To Hong Bao – That Is The Question
One of the things that strikes your correspondent on the China PR conference and seminar circuit is the number of complaints he hears about the appalling media ethics that exist in the market. The complaints seem universal and come from PRO’s working in both international and local companies. And they cover everything from having to pay “hong bao”, through to issues that are outright graft, and even extortion by journalists.
The question then is, what, if anything can be done to address the matter.
A Dream of Red Envelopes
In this post we’re going to focus on the issue of paying journalists hong bao or red envelopes. Another euphemism used for this practice is “transportation fee”. The fee is paid to media to attend a function such as a press conference or even a one-on-one interview and can range in price from RMB200 per journalist to about RMB500. Some companies have been known to pay more to attract senior journalists and editors to events and use a sliding scale depending on which journalist attends. This writer has heard of amounts as high as RMB10,000 being paid for editors of top newspapers and magazines and producers of leading TV news programs.
The practice of hong bao started in the early days after
China’s opening when foreign companies needed to attract media attention but found they couldn’t get the media to attend as journalists were not compensated by their outlets for expenditure on transportation or their lunch when working outside the office. Hence, the euphemism “transportation fee” came into existence. Some years ago the foreign PR firms got together to cap the fee at RMB200 per journalist. But local firms are known to pay as much as RMB500 per journalist, which is creating pressure for the international firms to increase their amounts. Rumours abound that some foreign PR firms have started paying more.
The fee is justified by many in the industry on the grounds that it does not guarantee a story; indeed paying the hong bao does not even guarantee a positive story as, on occasion, journalists attending press activities and happily taking the fee have written negative articles about the host company afterwards. But for the most part it does get the host company at least two column inches of neutral to positive coverage. The problem is too many PRO’s are satisfied with showing their bosses a fist full of clips regardless of the quality.
But the fact is that the practice remains illegal under Chinese law and under the anti-corruption laws relating to the conduct of international business held by most OECD countries. That’s why considerable steps are taken by foreign companies in China to cover the payment of the fee. In most instances it is rolled into the fees of the PR agency so headquarters in home countries need not be aware of it being done.
A simple rule of thumb definition for a corrupt practice might be anything one feels a need to cover up, to hide from headquarters, the company auditors, and/or government authorities. At the very minimum many companies are breaking their own internal codes of ethics by paying hong bao to the media.
A Way Out of the Mess
The real problem with hong bao is that it is the thin edge of the wedge. It gives Chinese journalists the impression that foreign companies are prepared to pay for coverage. And that opens the door to other corrupt practices amongst the Chinese media (which we will take up in a future post). As pressure mounts for the hong bao fee to go up, it is clear a way needs to be found out of the whole sorry mess.
In Shanghai the cash filled hong bao has largely been replaced by transportation cards to the nominal value of the hong bao. Shanghai being a modern, sophisticated metropolis has magnetic cards that can be used on the city’s transportation system – on everything from taxis to buses and the light-rail system. Companies hosting media events have started to use these in place of the insidious hong bao.
While the transportation card is markedly better than handing over an envelope, red or brown, stuffed with cash, it is still problematic. The problem is that companies trying to attract media to events will be tempted to increase the value of the cards. They could go from RMB200 to RMB500 to who knows how much. And then the cards can be transferred to friends and family members – so it doesn’t matter too much how many one receives or for what value.
It would be far better to entirely stop the practice of hong bao. But how?
As I have often said, the payment of transportation fees will not end until everyone who is angered by it stops doing it. The problem is no one wants to be the first, to go it alone as it were. So the industry needs to join together and all players must agree to stop paying the fee.
Not paying the fee will lose media coverage only for the short-term, but eventually the media will need to come back as journalists need to find material on which to file stories every day. They cannot afford to avoid news events for a long period of time – their editors and owners of their media outlets will not put up with it.
Currently both Chinese and foreign government agencies operating in China do not pay the transportation fee and the media accept that they do not and continue to attend their events. Likewise, China’s large SOE’s do not pay transportation fees because they know the media cannot afford to ignore them when they have real news to announce.
This writer was impressed recently by a journalist from the magazine Cai Jing who handed back her red envelope to a PR flunkey at an event saying “we’re not allowed to take hong bao; we’re only interested in real news.”
That says it all. If foreign companies operating in China have real news for the media they don’t need to pay hong bao. But then, of course, many companies are locked in to paying hong bao precisely because their “news” is anything but newsworthy. You just can’t have your cake and eat it too.
