For Companies, Winning in China Now Means Losing Somewhere Else

Should be an awaking, both given Chinese government repression and the IOC various wilful blindnesses:

Companies usually shell out for Olympic sponsorship because it helps their business and reflects well on their brands. But this year, with the Olympics in Beijing, Procter & Gamble paid even more to try to prevent any negative fallout from being associated with China’s repressive and authoritarian government.

The company, one of 13 “worldwide Olympic partners” that make the global sports competition possible, hired Washington lobbyists last year to successfully defeat legislation that would have barred sponsors of the Beijing Games from selling their products to the U.S. government. The provision would have blocked Pampers, Tide, Pringles and other Procter & Gamble products from military commissaries, to protest companies’ involvement in an event seen as legitimizing the Chinese government.

“This amendment would punish P.&G. and the Olympic movement, including U.S. athletes,” Sean Mulvaney, the senior director for global government relations at Procter & Gamble, wrote in an email to congressional offices in August.

Some of the world’s biggest companies are caught in an uncomfortable situation as they attempt to straddle a widening political gulf between the United States and China: What is good for business in one country is increasingly a liability in the other.

China is the world’s biggest consumer market, and for decades, Chinese and American business interests have described their economic cooperation as a “win-win relationship.” But gradually, as China’s economic and military might have grown, Washington has taken the view that a win for China is a loss for the United States.

The decision to locate the 2022 Olympic Games in Beijing has turned sponsorship, typically one of the marketing industry’s most prestigious opportunities, into a minefield.

Companies that have sponsored the Olympics have attracted censure from politicians and human rights groups, who say such contracts imply tacit support of atrocities by the Chinese Communist Party, including human rights violations in Xinjiang, censorship of the media and mass surveillance of dissidents.

“One thing our businesses, universities and sports leagues don’t seem to fully understand is that, to eat at the C.C.P.’s trough, you will have to turn into a pig,” Yaxue Cao, editor of ChinaChange.org, a website that covers civil society and human rights, told Congressthis month.

The tension is playing out in other areas as well, including with regards to Xinjiang, where millions of ethnic minorities have been detained, persecuted or forced into working in fields and factories. In June, the United States will enact a sweeping law that will expand restrictions on Xinjiang, giving the United States power to block imports made with any materials sourced from that region.

Multinational firms that are trying to comply with these new import restrictions have found themselves facing costly backlashes in China, which denies any accusations of genocide. H&M, Nikeand Intel have all blundered into public relations disasters for trying to remove Xinjiang from their supply chains.

Harsher penalties could be in store. Companies that try to sever ties with Xinjiang may run afoul of China’s anti-sanctions law, which allows the authorities to crack down on firms that comply with foreign regulations they see as discriminating against China.

Beijing has also threatened to put companies that cut off supplies to China on an “unreliable entity list” that could result in penalties, though to date the list doesn’t appear to have any members.

“Companies are between a rock and a hard place when it comes to complying with U.S. and Chinese law,” said Jake Colvin, the president of the National Foreign Trade Council, which represents companies that do business internationally.

President Biden, while less antagonistic than his predecessor, has maintained many of the tough policies put in place by President Donald J. Trump, including hefty tariffs on Chinese goods and restrictions on exports of sensitive technology to Chinese firms.

The Biden administration has shown little interest in forging trade deals to help companies do more business abroad. Instead, it is recruiting allies to ramp up pressure on China, including by boycotting the Olympics, and promoting huge investments in manufacturing and scientific research to compete with Beijing. 

The pressures are not only coming from the United States. Companies are increasingly facing a complicated global patchwork of export restrictions and data storage laws, including in the European Union. Chinese leaders have begun pursuing “wolf warrior” diplomacy, in which they are trying to teach other countries to think twice before crossing China, said Jim McGregor, chairman of APCO Worldwide’s greater China region.

He said his company was telling clients to “try to comply with everybody, but don’t make a lot of noise about it — because if you’re noisy about complying in one country, the other country will come after you.”

Some companies are responding by moving sensitive activities — like research that could trigger China’s anti-sanctions law, or audits of Xinjiang operations — out of China, said Isaac Stone Fish, the chief executive of Strategy Risks, a consultancy.

Others, like Cisco, have scaled back their operations. Some have left China entirely, though usually not on terms they would choose. For example, Micron Technology, a chip-maker that has been a victim of intellectual property theft in China, is closing down a chip design team in Shanghai after competitors poached its employees.

“Some companies are taking a step back and realizing that this is perhaps more trouble than it’s worth,” Mr. Stone Fish said.

But many companies insist that they can’t be forced to choose between two of the world’s largest markets. Tesla, which counts China as one of its largest markets, opened a showroom in Xinjianglast month.

“We can’t leave China, because China represents in some industries up to 50 percent of global demand and we have intense, deep supply and sales relationships,” said Craig Allen, the president of the U.S.-China Business Council.

Companies see China as a foothold to serve Asia, Mr. Allen said, and China’s $17 trillion economy still presents “some of the best growth prospects anywhere.”

“Very few companies are leaving China, but all are feeling that it’s risk up and that they need to be very careful so as to meet their legal obligations in both markets,” he said.

American politicians of both parties are increasingly bent on forcing companies to pick a side.

“To me, it’s completely appropriate to make these companies choose,” said Representative Michael Waltz, a Florida Republican who proposed the bill that would have prevented Olympic sponsors from doing business with the U.S. government.

Mr. Waltz said participation in the Beijing Olympics sent a signal that the West was willing to turn a blind eye to Chinese atrocities for short-term profits.

The amendment was ultimately cut out of a defense-spending bill last year after active and aggressive lobbying by Procter & Gamble, Coca-Cola, Intel, NBC, the U.S. Chamber of Commerce and others, Mr. Waltz said.

Procter & Gamble’s lobbying disclosures show that, between April and December, it spent more than $2.4 million on in-house and outside lobbyists to try to sway Congress on a range of tax and trade issues, including the Beijing Winter Olympics Sponsor Accountability Act.

Lobbying disclosures for Coca-Cola, Airbnb and Comcast, the parent company of NBC, also indicate the companies lobbied on issues related to the Olympics or “sports programming” last year.

Procter & Gamble and Intel declined to comment. Coca-Cola said it had explained to lawmakers that the legislation would hurt American military families and businesses. NBC and the Chamber of Commerce did not respond to requests for comment.

Many companies have argued they are sponsoring this year’s Games to show support for the athletes, not China’s system of government.

In a July congressional hearing, where executives from Coca-Cola, Intel, Visa and Airbnb were also grilled about their sponsorship, Mr. Mulvaney said Procter & Gamble was using its partnership to encourage the International Olympic Committee to incorporate human rights principles into its oversight of the Games.

“Corporate sponsors are being a bit unfairly maligned here,” Anna Ashton, a senior fellow at the Asia Society Policy Institute, said in an event hosted by the Center for Strategic and International Studies, a Washington think tank.

Companies had signed contracts to support multiple iterations of the Games, and had no say over the host location, she said. And the funding they provide goes to support the Olympics and the athletes, not the Chinese government.

“Sponsorship has hardly been an opportunity for companies this time around,” she said. 

Source: For Companies, Winning in China Now Means Losing Somewhere Else

How America’s talent wars are reshaping business

In Canada, by contrast, immigration is relied upon to meet labour force requirements. One of the consequences, unforeseen or not, was reduced pressure to improve productivity and innovation:

Dcl logistics, like so many American firms, had a problem last year. Its business, fulfilling orders of goods sold online, faced surging demand. But competition for warehouse workers was fierce, wages were rising and staff turnover was high. So dcl made two changes. It bought robots to pick items off shelves and place them in boxes. And it reduced its reliance on part-time workers by hiring more full-time staff. “What we save in having temp employees, we lose in productivity,” explains Dave Tu, dcl’s president. Full-time payroll has doubled in the past year, to 280.Listen to this story

As American companies enter another year of uncertainty, the workforce has become bosses’ principal concern. Chief executives cite worker shortages as the greatest threat to their businesses in 2022, according to a survey by the Conference Board, a research organisation. On January 28th the Labour Department reported that firms had spent 4% more on wages and benefits in the fourth quarter, year on year, a rise not seen in 20 years. Paycheques of everyone from McDonald’s burger-flippers to Citi group bankers are growing fatter. This goes some way to explaining why profit margins in the s&p 500 index of large companies, which have defied gravity in the pandemic, are starting to decline. On February 2nd Meta spooked investors by reporting a dip in profits, due in part to a rise in employee-related costs as it moves from Facebook and its sister social networks into the virtual-reality metaverse.

At the same time, firms of all sizes and sectors are testing new ways to recruit, train and deploy staff. Some of these strategies will be temporary. Others may reshape American business.

The current jobs market looks extra ordinary by historical standards. December saw 10.9m job openings, up by more than 60% from December 2019. Just six workers were available for every ten open jobs (see chart 1). Predictably, many seem comfortable abandoning old positions to seek better ones. This is evident among those who clean bedsheets and stock shelves, as well as those building spreadsheets and selling stocks. In November 4.5m workers quit their jobs, a record. Even if rising wages and an ebbing pandemic lure some of them back to work, the fight for staff may endure.

For decades American firms slurped from a deepening pool of labour, as more women entered the workforce and globalisation greatly expanded the ranks of potential hires. That expansion has now mostly run its course, says Andrew Schwedel of Bain, a consultancy. Simultaneously, other trends have conspired to make the labour pool shallower than it might have been. Men continue to slump out of the job market: the share of men aged 25 to 54 either working or looking for work was 88% at the end of last year, down from 97% in the 1950s. Immigration, which plunged during Donald Trump’s nativist presidency, has sunk further, to less than a quarter of the level in 2016. And covid-19 may have prompted more than 2.4m baby boomers into early retirement, according to the Federal Reserve Bank of St Louis.

These trends will not reverse quickly. Boomers won’t sprint back to work en masse. With Republicans hostile to outsiders and Democrats squabbling over visas for skilled ones, a surge in immigration looks unlikely. Some men have returned to the workforce since the depths of the covid recession in 2020, but the male participation rate has plateaued below pre-pandemic levels. A tight labour market may persist.

But base pay is rising, too. Bank of America says it will raise its minimum wage to $25 by 2025. In September Walmart, America’s largest private employer, set its minimum wage at $12 an hour, below many states’ requirement of $13-14 but well above the federal minimum wage of $7.25. Amazon has lifted average wages in its warehouses to $18. The average hourly wage for production and nonsupervisory employees in December was 5.8% above the level a year earlier; compared with a 4.7% jump for all private-sector workers. Firms face pressure to lift them higher still. High inflation ensured that only workers in leisure and hospitality saw a real increase in hourly pay last year (see chart 2).

Raising compensation may not, on its own, be sufficient for companies to overcome the labour squeeze, however. This is where the other strategies come in, starting with changes to recruitment. To deal with the fact that, for some types of job, there simply are not enough qualified candidates to fill vacancies, many businesses are loosening hiring criteria previously deemed a prerequisite.

The share of job postings that list “no experience required” more than doubled from January 2020 to September 2021, reckons Burning Glass, an analytics firm. Easing rigid preconditions may be sensible, even without a labour shortage. A four-year degree, argues Joseph Fuller of Harvard Business School, is an unreliable guarantor of a worker’s worth. The Business Roundtable and the us Chamber of Commerce, two business groups, have urged companies to ease requirements that job applicants have a four-year university degree, advising them to value workers’ skills instead.

Another way to deal with a shortage of qualified staff is for firms to impart the qualifications themselves. In September, the most recent month for which Burning Glass has data, the share of job postings that offer training was more than 30% higher than in January 2020. New providers of training are proliferating, from university-run “bootcamps” to short-term programmes by specialists such as General Assembly and big employers themselves. Employers in Buffalo have hired General Assembly to run data-training schemes for local workers who are broadly able but who lack specific tech skills. Google, a technology giant, says it will consider workers who earn its online certificate in data analytics, for example, to be equivalent to a worker with a four-year degree.

Besides revamping recruitment and training, companies are modifying how their workers work. Some positions are objectively bad, with low pay, unpredictable scheduling and little opportunity for growth. Zeynep Ton of the mit Sloan School of Management contends that making low-wage jobs more appealing improves retention and productivity, which supports profits in the long term. As interesting as Walmart’s pay increases, she argues, are the retail behemoth’s management changes. Last year it said that two-thirds of the more than 565,000 hourly workers in its stores would work full time, up from about half in 2016. They would have predictable schedules week to week and more structured mentorship. Other companies may take note. Many of the complaints raised by labour organisers at Starbucks and Amazon have as much to do with safety and stress on the job as they do wages or benefits.

Companies that cannot find enough workers are trying to do with fewer of them. Sometimes that means trimming services. Many hotel chains, including Hilton, have made daily housekeeping optional. “We’ve been very thoughtful and cautious about what positions we fill,” Darren Woods, boss of ExxonMobil, told the oil giant’s investors on February 1st.

Increasingly, this also involves investments in automation. Orders of robots last year surpassed the pre-pandemic high in both volume and value, according to the Association for Advancing Automation. ups, a shipping firm, is boosting productivity with more automated bagging and labelling; new electronic tags will eliminate millions of manual scans each day.

New business models are pushing things along. Consider McEntire Produce in Columbia, South Carolina. Each year more than 45,000 tonnes of sliced lettuce, tomatoes and onions move through its factory. Workers pack them in bags, place bags in boxes and stack boxes on pallets destined for fast-food restaurants. McEntire has raised wages, but staff turnover remains high. Even as worker costs have climbed, the upfront expense of automation has sunk. So the firm plans to install new robots to box and stack. It will lease these from a new company called Formic, which offers robots at an hourly rate that is less than half the cost of a McEntire worker doing the same job. By 2025 McEntire wants to automate 60% of its volume, with robots handling the back-breaking work and workers performing tasks that require more skill. One new position, introduced in the past year, looks permanent: a manager whose sole job is to listen to and support staff so they do not quit. 

Both workers and employers are adapting. For the most part, they are doing so outside the construct of collective bargaining. Despite a flurry of activity—Starbucks baristas in Buffalo and Amazon workers in Alabama will hold union votes in February—unions remain weak. Last year 10.3% of American workers were unionised, matching the record low of 2019. Within the private sector, the unionisation rate is just 6.1%. Strikes and pickets will be a headache for some bosses. But it is quits that could cause them sleepless nights.

Pay as they go

Companies’ most straightforward tactic to deal with worker shortages is to raise pay. If firms are to part with cash, they prefer the inducements to be one-off rather than recurring and sticky, as with higher wages. That explains a proliferation of fat bonuses. Before the Christmas rush Amazon began offering workers a $3,000 sign-on sweetener. Compensation for lawyers at America’s top 50 firms rose by 16.5% last year, in part thanks to bonuses, according to a survey by Citigroup and Hildebrandt, a consultancy. In January Bank of America said it would give staff $1bn in restricted stock, which vests over time.

Source: How America’s talent wars are reshaping business

‘Talk is cheap’: How companies can act on diversity targets amid an economic crisis

Some reasonable practical suggestions and approaches:

When Jaqui Parchment was climbing Canada’s corporate ladder, she noticed office cliques formed around members of the same hockey team and frequently overheard senior consultants chattering about their next round of golf with important clients.

“It just felt so foreign to me,” said Parchment, who emigrated from Jamaica at the age of 14 and has since become the chief executive at consulting company Mercer Canada.

“I’m sure to most people it would not have felt that way, but there were 100 little things … which combined to say to me, ‘Wow, you’re really different.’

“It didn’t feel great.”

For Parchment and other members of racialized communities, these kinds of incidents — small in themselves, but which add up over time — serve as a constant reminder that corporate Canada is failing to meet the bar on inclusivity.

But 2020 brought a push to improve workplace culture and attract and retain more diverse staff and customers after the death of George Floyd, a Black man who died in U.S. police custody in May.

Seven in 10 corporate leaders said their focus on diversity, equality and inclusion has increased since then, Mercer found in a November study that surveyed leaders from 54 Canadian companies. Some have published specific measures outlining how they plan to do better.

The pledges to change comes as COVID-19 is battering the economy and many companies are struggling to survive, but experts say it’s important to keep the momentum going.

“There is absolutely no shortage of things that companies can be doing,” said Tash Jefferies, the Nova Scotia-bred founder of Diversa, a startup helping people of colour and women pursue careers in the tech sector.

For companies unable to hire right now, Jefferies recommends businesses look to supplier contracts and consider shifting to work with companies that are committed to diverse workforces instead.

If you don’t work with suppliers, you can look at changes to workplace culture, she said.

As Parchment worked her way toward the top job at Mercer in 2018, she remembered the cliques from years earlier and moved to “peel back the onion of belonging” so that no one else would feel the same way.

The team said goodbye to golf tournaments at prestigious Glen Abbey. Jerk chicken, Chinese food and samosas started making the menu at company events and clients were entertained with treats that matched their interests instead of the traditional tickets to the game or round of golf.

At a broader level, Parchment urged hiring managers to consider a wider range of candidates and monitor gaps in raises and bonuses between genders and races.

For companies under a hiring freeze, Jefferies suggested looking at the board as director’s terms end, creating an opportunity to bring on a new member from an under-represented community. It’s also important to think about recruitment long before job postings go public, she said.

“The root issue occurs somewhere earlier in the system and so if I was a company, I’d started looking at all my recruiting practices … and try and create some alliances and relationships with different groups long before I have to start hiring,” added Rajesh Uttamchandani, the chief people officer at the MaRS innovation community in Toronto and a member of the newly formed Coalition of Innovation Leaders Against Racism.

That strategy is already coming to life at Toronto-based digital rewards company Drop Technologies Inc. It crunched its own numbers in June and discovered 44 per cent were white and 56 per cent were “ethnically diverse” but not one employee was Black.

Companies can be hesitant to publicly release such data but Drop felt it was the right thing to do, said Susan Feng, the company’s engineering manager and a member of its diversity, equity and inclusion committee.

“Unless you’re making an enormous effort right from the start, you’re going to be falling behind in some aspect of diversity in your hiring and it’s hard to move past that initial feeling of ‘This doesn’t look very good,'” she said.

“But if we don’t even acknowledge that there’s an issue here, then we’re not going to do anything to make it different.”

Drop worked with staff to find ways to better represent Canada’s population. It settled on ideas that touch every department, including ensuring at least 30 per cent of models used in the company’s emails, social media and advertising are Black, Indigenous or people of colour, hosting internal events on allyship and anti-racism and donating one per cent of the money redeemed on its app each month to Black-centric charities.

Drop’s chief of staff Esther Park said engagement around the changes has been “incredible” and she’s already seen positive discussions come from lunch-and-learns and movie nights. She hopes the efforts will move the needle.

Mercer managed to do just that after it began tracking gender diversity and rolled out other changes.

Women now make up 45 per cent of Mercer’s leadership team and 40 per cent of its partners, with a 50:50 gender ratio at the level just below partner.

Parchment said Mercer is “further behind” on racial diversity, but is working on tracking it this year.

“I’m not going to pretend that we’re perfect. We still have our issues,” she said. “There’s still very few CEOs of the largest corporations in Canada that are women. There’s still not enough board seats held by women.”

More than 200 companies, signed a pledge vowing to create and share strategic inclusion and diversity plans, implement or expand unconscious bias and anti-racism education and work with members of the Black community to increase their representation as part of the newly-formed Black North Initiative.

Signatories include Mercer, Air Canada, Maple Leaf Sports and Entertainment, Facebook Canada and Rogers Communications, and make up 30 per cent of the TSX 60.

The pledge was prompted in part by Floyd’s death, which ignited conversations around systemic racism and ways to address it.

Companies across the country released statements at the time vowing to closer examine their own operations, but Jefferies says she’s seen similar promises go unfulfilled before and doesn’t know what to expect at a time when companies are tightening spending during a pandemic.

“Unless you’re willing to take action and make (diversity) a policy within what you’re doing in your company, it’s just lip service because everybody can do that, and talk is cheap,” she said.

This time she hopes things will be different because conversations around diversity haven’t disappeared, and the attention is acting as a layer of accountability.

“Any companies that are showing that they’re not playing ball and they’re not having diversity be one of their key tenets … they’re going to get hit because ultimately the consumers are helping to shape what companies stay around,” Jefferies said.

“The market will dictate who comes out the winners.”

Source: ‘Talk is cheap’: How companies can act on diversity targets amid an economic crisis