China Corruption Crackdown Continues Apace. Next Stop Edelman?

For years I have heard of how China’s press can be bought off with red envelopes. I have had companies brag to me about how they were able to buy good press on themselves and bad press on their rivals. And every time, my response is that is not a good idea both from a long term reputational standpoint and because people might eventually go to jail for that. And when that happens, reputational issues will be the least of it. About half the time, the reaction I get when I say these things is that I am a naive idiot. The other half of the time, the reaction is that the possible risks had just never even occurred to the person, as though there would never be a day of reckoning.

I am not saying that we are at the day of reckoning and I am also NOT saying that there is any connection between the above and what has been happening to Rui Chenggang and to Edelman, but I am saying that any American buying press in China is making a huge mistake. And I am saying that those who continue to brag about their buying press in China are making an even bigger mistake.

Matt Schiavenza just wrote an article, entitled, China’s Corruption Probe Widens As Government Detains Edelman PR Boss. I’ve known Matt for many years and Matt knows China.  Matt’s article also quotes Bill Bishop. I’ve known Bill Bishop for many years and Bill knows China. Bill says that Edelman “– and its clients — may face turbulent times ahead.” They just might.

Here’s what Matt and Bill have to say:

China’s investigation into Edelman has occurred amid a sweeping anti-corruption campaign in the country, one that hasn’t refrained from targeting high-profile figures. Beijing said Tuesday that Zhou Yongkang, once in charge of domestic security, was under investigation for disciplinary violations, making him the highest-ranking official to face such an investigation in China.

The campaign has increasingly placed state television CCTV, whose various networks attract an audience of well over 1 billion people, under close scrutiny. Government officials detained Guo Zhenxi, the head of CCTV’s financial channel and Rui Chenggang’s supervisor, in May, while Li Yang, the channel’s deputy, came under investigation on July 11.

Privately owned Edelman, which had $707 million in annual sales for its year ended June 2013, is the world’s largest public relations firm. More than 10 percent of its business comes from its Asia, Middle East, and Africa division, which employs 1,300 people. Despite Cao’s absence, a spokesman for Edelman said that “senior management is overseeing operations at the company, and business in [China] is running as usual.”

Nevertheless, according to Bill Bishop, editor of the China-focused newsletter Sinocism, China’s investigation of Edelman signals that the company — and its clients — may face turbulent times ahead.

“Edelman looks to be in big trouble in China,” Bishop wrote.

I think this is just the beginning of what is going to be a huge deal. Who is with me on this?

Anyway, it is time to stop giving red envelopes to the press. Doing so does not mean you are savvy; it means that you are willing to put your own freedom at risk. For more on China’s anti-corruption crackdown and on what you should be doing about it, check out the following:

• Beijing’s Shot Across the Bow on Corruption (Wall Street Journal article written by Chris Priddy, our firm’s anti-corruption compliance lawyer)
• China And The FCPA. Just When You Thought It Could Not Get Any Worse.
• Going To Jail For China Bribery. Now That We Have Your Ear….
• China Corruption. Let’s Talk Business.
• The FCPA And China. Be Afraid. Be Very Afraid.
• Doing Business In China Without An Anti-Corruption Compliance Program? Are You Crazy?