The NBA guanxi deficit: on defense rather than defending human rights

If Apple’s handling of the Foxconn suicides stands as an example of how guanxi can be used to protect human rights, the National Basketball Association’s (NBA) handling of a pro-Hong Kong democracy tweet by a team official illustrates how badly things can go for companies that fail to cultivate guanxi. The NBA first went to China in 1985. At first, it practically gave away broadcast rights, but Chinese interest in the sport was strong and eventually in 2015 Tencent signed a five-year, $700 million deal to stream NBA games and related content (Ozanian, 2018, Beam, 2020). From 2004 to 2019, estimated revenues from Chinese viewership and sponsorship rose from $9.5 million to $500 million per year. Around 2008, the NBA set up a subsidiary, NBA China, that a decade later was reportedly worth over $4 billion (Ozanian, 2018). Mark Fischer, former managing director of NBA China, said that part of the reason for establishing a subsidiary there was not just to help manage a complex business, but “to increase the NBA’s influence and connections in the corridors of Chinese government power” (Beam, 2020).

The attempt to build a relationship on which it could draw failed, however. Acute need for such a relationship came on Friday, 4 October 2019, when Daryl Morey, the general manager of the Houston Rockets, tweeted, “Fight for Freedom, Stand with Hong Kong.” He soon deleted it, but the damage had already been done. Within approximately 48 hours, Chinese companies, such as the Li Ning shoe company and the Shanghai Pudong Development Bank, pulled out of sponsorship deals with the Rockets, the Chinese Basketball Association (CBA) stated that it had stopped “communication and cooperation” with the team, and Tencent dropped broadcasts of Rockets games (Beam, 2020). The CBA suspended ties with the team even though the president of the CBA is the former Rockets superstar Yao Ming (The New York Times Editorial Board, 2019).

While reactions from China were swift and strong, responses from the NBA were in utter disarray. Rockets owner Tilman Fertitta told ESPN “we’re here to play basketball and not to offend anybody,” but league Commissioner Adam Silver vaguely defended Daryl Morey’s right to free speech (The New York Times Editorial Board, 2019). Players James Harden and LeBron James—whose financial interests depend significantly on business with China—apologized for the tweet, indicating great appreciation for their Chinese fans. This, however, resulted in their jerseys being burned by Hong Kong protestors (The New York Times Editorial Board, 2019, Beam, 2020).

Senators and members of the US Congress, conservative and liberal alike, denounced the NBA for caving in to China and its hypocrisy on human rights. The NBA, its leaders, coaches, and stars have been vocal for many years about racial justice, increasingly so following the mounting deaths of unarmed black men and women at the hands of American police, as wrell as the election of President Trump in 2016 (Beam, 2020). And yet, in the case of China, the NBA found itself in the posture of muting an executive expressing support for human rights quite plainly because of the financial consequences. In early 2020, NBA games were suspended because of COVID-19, and after nearly six months it appeared that the controversy had died down. However, in May 2020, when the league was set to play basketball again, China Central TV (CCTV) issued a statement indicating that it would not resume airing NBA games, saying: “On questions of China’s sovereignty, CCTV’s attitude is strict, clear, and consistent” (Beam, 2020).

The fallout over Daryl Morey’s tweet raises many difficult ethical questions. As a US citizen, Morey has the right to express his opinion, and from a human rights perspective, the people of Hong Kong have a right to free expression and self-determination. However, from the Chinese perspective, he was touching a raw nerve. When the Qing Dynasty lost the Opium Wars in the 19th century, it was forced to cede Hong Kong to the British as a trading post until 1997, when it reverted back to China in an agreement with the British that was intended to preserve legal and political freedoms for the next SO years. Joe Tsai (Chinese national, cofounder of Alibaba, and controlling owner of the Brooklyn Nets team) expressed his view of the offensive nature of Morey’s tweet in an open letter (Tsai, 2019).

The NBA found itself navigating through the Charybdis of human rights and the Scylla of Chinese nationalism. This is not an enviable position but it is an inevitable one for any major global brand operating in China. Most such companies deliberately manage to steer away from any public comments about political freedoms (or lack thereof) in China. The Morey tweet, however, thrust the NBA right into the middle of a complex issue of global ethics. What placed them on the horns of the dilemma was their commitment to racial justice and human rights. The NBA could not sidestep the issue the way the English Soccer League (cravenly but effectively) did when, on Instagram, Arsenal midfielder Mesut Ozil criticized human rights transgressions against Uighur in western China (Ames, 2019). His team followed a standard China crisis playbook of issuing a face-saving apology, then waiting for the controversy to blow over (Dreyer, 2019). Arsenal immediately distanced itself, claiming that the post expressed a personal opinion and reiterated the team’s policy of not “involving itself in politics” (Ames, 2019). China and many Chinese fans took this as a satisfactorily face- and relationship-saving apology (Beam, 2020). Perhaps, if instead of a team official it had been a player who spoke out on human rights, the NBA might have had available to it a version of the Arsenal playbook, though it would strain credulity to claim it had a policy of not “involving itself in politics.”

When it came time to act with purpose, the NBA was woefully unprepared. They allowed a single tweet to turn into an international debacle for the NBA. They were unable to maintain their commitment to human rights while preserving their financial interests. What they lacked at the critical moment, and in the years leading up to it, was an understanding of the principles of our Ethical Triad, and, in particular, the indispensability of acquiring Awareness and Ethical Agility in face and gudnxi.

Before we describe a few things that the NBA could have done better, we hasten to add that the Daryl Morey tweet was not the ideal way for the NBA to be staking out a position on human rights in China. In fact, it would be hard to imagine a worse posture for taking on the issue because of its highly public nature. In short, to use a sports metaphor, they were playing defense on human rights and were in no position to defend human rights. Though Daryl Morey is not top-brass NBA leadership, his position as general manager will, to many Chinese and East Asian perspectives, render him a leader and as a result someone who bears special responsibilities as a public representative of his team and league. To put out a publicly critical tweet meant that, to typical Chinese perspectives, Morey had taken it upon himself to step into the ring of international diplomacy. It is unsurprising that the Chinese government and business organizations moved to save face by reacting not just to a lone individual’s tweet but to the organizations Morey took it upon himself to represent: the Rockets and, to a lesser extent, even the NBA. Morey’s tweet eroded face by expressing disrespect for Chinese leaders, the CBA, NBA China, and Chinese fans: “if you disrespect our country, we can live without your games” (Beam, 2020).

So, what could the NBA have done better? First, before we discuss their lack of Ethical Agility, it was shocking to see that they lacked even basic institutional knowledge about China and human rights conditions there. Even considering that the Morey tweet was a thorny way to have to introduce the issue, it is still remarkable that after 35 years of doing business there, the NBA found itself tongue-tied about their position on human rights. With their vague and contradictory remarks, it seemed like NBA executives had never thought about the issue and were making it up as they went along. The NBA is a global brand, and like every other global brand these days, it needs to have a sophisticated and informed human rights capacity in the C-Suite. Indeed, if the NBA had this capacity, it might have averted the Daryl Morey tweet in the first place. Like the messaging on any other important political issue in a global business organization, the NBA could have controlled how and when it would say something about human rights in China. Put another way, controlling what league executives say publicly about human rights is a lot more palatable if the NBA organization had a clear and responsible corporate voice and policy about human rights. Instead of squandering all its potential influence playing defense, it could possibly have had a positive impact or at least registered its opinion respectfully.

In addition to being substantively unprepared, a second and even more debilitating factor was the absence of sufficiently close relationships between the NBA, its subsidiary NBA China, Chinese broadcasting companies including CCTV, and the Chinese government. After 35 years, and despite setting up a subsidiary with the express purpose of cultivating such relationships 12 years ago, the NBA simply did not have the Ethical Agility with relationships and guanxi needed to weather this type of storm. Back in the 1980s and 1990s, as the size of the business opportunity in China became clear, NBA top brass should have made it a larger priority to cultivate relationships with its Chinese broadcasting partners and the Chinese government. This was the playbook followed by Tim Cook at Apple, Bill Gates at Microsoft, and Hank Paulson at Goldman Sachs. The NBA instead treated China as an ATM machine, raking in the profits but not making any sincere efforts to develop meaningful relationships.

Third, while we agree that setting up NBA China was on point, it was ineffectually implemented. That organization needed to be led by Chinese nationals who had their own networks of relationships—and hence guanxi— which are required to both get things done and manage disasters. Bringing in Michael Ma in 2020 to try to assuage the Chinese government was the right idea, but far too little too late. This hollowed-out and mismanaged corporate presence in China is a sign that the NBA was running a bare-bones operation in China without making significant investments in building relationships and guanxi. After 35 years in China, the NBA remained strangers even though their games and players had loyal followings among what has been estimated to be up to 500 million fans. It was an extraordinarily incompetent disconnect between commercial importance and managerial attention.

Even under the best of circumstances, it requires substantial Ethical Agility to effectively negotiate the terrain of human rights in China. Only with strong and longstanding relationships of trust can a global company operating in China hope to have any chance of saying something substantive, much less making a positive impact by doing its fair share on general human rights conditions. Within such relationships and by drawing on guanxi, delicate conversations can be had about Muslim players sympathizing with Uighur and Western players sympathizing with pro-democracy movements in Hong Kong and elsewhere, while acknowledging the awkwardness of foreigners commenting on Chinese politics and society so as to preserve sufficient face that these relationships can continue and weather storms.

If the NBA could not remotely expect to magically turn China into a liberal democracy through quiet diplomacy, it could at least have set the stage to lobby for the freedom of jailed dissidents or persecuted minorities. If this seems like too modest an expectation, consider what the cumulative effect would be if dozens of similarly commercially significant foreign firms followed the same playbook. Moreover, modest expectations about businesses speaking out about general human rights conditions in China that have nothing to do with its operations should be understood in the context of the idea of doing its “fair share.” Governments and non-governmental organizations such as Human Rights Watch and Amnesty International are better positioned to speak not just up, but out, and press the case for human rights reforms. Business is not in a position to take the lead on such external international pressure for human rights reform in China, but it does have a responsibility to support such efforts.

 
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