Celebrities And Businesses Are Boycotting A Brunei-Owned Hotel Chain, But Do These Protests Actually Work?
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This week the five-star Dorchester hotel in London was thrown into the international spotlight. Its owner, the royal family of Brunei, has introduced new Sharia laws in their home country which include the death penalty by stoning for gay citizens.
George Clooney called for wealthy travellers to boycott the nine luxury hotels owned by the Sultan of Brunei and his family, which also include 45 Park Lane in London and the Beverly Hills Hotel and Hotel Bel-Air in Los Angeles. Businesses quickly joined the protest, including London real estate events company Movers & Shakers, which said it would not host events at the Dorchester as it had done previously. Several other business groups said they would cancel awards ceremonies and conferences held at the hotel.
The purity of intention of those backing the boycott is undeniable. But do such protests have the intended impact of hurting the finances of property owners and businesses perceived to have done wrong? And do those who have done wrong always face a financial backlash from the boycotts?
No, not really.
Take the issue of the new laws passed in Brunei. The issue has flared up in the public consciousness because of the intervention of Clooney. But it is not new. The laws that were introduced this week were first mooted four years ago, and at that point there was also an outcry, led by celebrities, and followed up by businesses cancelling events at the Dorchester. But the furor passed, and five years later, the hotel and the others in the collection are fixtures on the conference and hospitality circuit.
Or to take another example, last October the killing of Saudi Arabian Washington Post journalist Jamal Khashoggi caused a huge international outcry. The killing was widely regarded to have been ordered by the ruling Saudi Arabian royal family, and as a result, business leaders like JP Morgan’s Jamie Dimon and Blackstone’s Stephen Schwarzman pulled out of a high-profile investment conference hosted by the Saudi government in Riyadh.
But six months later, Saudi Arabia has faced no real pushback in the world of business for actions that were seen as a state-sponsored killing.
As the Financial Times pointed out this week, a $10B bond issue by the state-owned oil company Aramco is likely to be hugely oversubscribed as investors clamour to lend to what is the world’s most profitable company. Who is leading the bond issue for Aramco? JP Morgan of course.
The Saudi government through its sovereign wealth fund continues to work with real estate investors like Blackstone, in whose infrastructure fund it has invested billions; WeWork, via its investment in the coworking firm's biggest backer, SoftBank; and Accor, with whom it has a huge hotel real estate joint venture.
“I’ve spoken to some investors, and anecdotally, there hasn’t been much of a backlash against Saudi from the investor community, which is surprising,” Mikael Homanen, Cass Business School Finance faculty Ph.D. candidate and University of Chicago Booth School of Business Bradley Fellow, told Bisnow about a month after the Khashoggi killing. “There hasn’t been a big outcry.”
Homanen said it was very rare to find the perfect storm of public pressure that causes investors to pull money out of a company or country and spurs politicians to take action. One of the few examples is South Africa in the 1980s, where outcry against the apartheid regime instituted by the country’s government led investors to divest from the country and governments across the world to impose economic sanctions.
Even in seemingly clear-cut and egregious cases, it can be hard to get investors and large corporations to boycott or pull business from companies, governments or projects linked to human rights abuses.
“A lot of these things are going on and it is very difficult to say when they become a perfect storm,” Homanen said. “They are often very complex situations, and it is very difficult to say companies are directly involved in them or to draw a direct line between an abuse and a financial institution. It is very rare that there is a single, easily identifiable culprit, either in the abuse that is happening, or among companies that might be supporting it.”
There are different and sometimes conflicting perspectives when it comes to where investors should draw the ethical boundaries or from whom they should accept investment from or work with, according to Joakim Sandberg, professor of Economics and Finance from a Humanist Perspective at the University of Gothenberg Department of Philosophy, Linguistics & Theory of Science.
Sandberg said one way some companies and people have been justifying their lack of action has begun to fall apart.
“You might have people who argue that a country like Saudi Arabia is not morally perfect and you are getting your hands dirty by working with them, but you can affect matters, and it is better to work with a regime and try to liberalise it from within and change things rather than take the moral high ground,” he said. “This kind of argument is crumbling. People are realising the country hasn’t changed. They have made superficial changes like letting women drive, but down the line they have proved they are a totalitarian regime. So the argument that you can get your hands dirty but change things crumbles.”
More broadly, there are two philosophical ideas that companies need to weigh. By choosing to not work with an investor, will it actually change anything? And even if the answer is no, should they pull away from an investor anyway?
“One looks at the effect of what you do,” Sandberg said. “Do my actions support bad behaviour and therefore cause it to happen? And can you therefore change what is being done by acting differently and withdrawing your support?
“The other perspective is more about the symbolism of what you do: even if I know it won’t change anything, which is most cases, should I express a positive or negative attitude towards something and change what I have been doing previously? Both of these ideas are quite intuitive and are part of our moral make-up as individuals also, but they often come into conflict.”
For Sandberg any one company, almost no matter how large, taking a particular course of action like refusing to work with a particular government or investor is not going to change the actions of that organisation.
“We are always going to fall short of high ideals,” he said.
But change can be brought about if enough investors decide to take a stand against a particular issue, and the business and investment community is then backed up by the political and regulatory world.
“You need both an ethical and political solution,” he said. “Funds and companies need to take an ethical stand but they need backing from collective structures like tax laws and legal institutions so that the organisation doing wrong is punished or loses money. That makes it easier for ethical investors to make that choice. And without political solutions unscrupulous companies will always look to make money from a situation.”
The problem is, it is very rare for a political, moral or human rights situation to gain enough momentum in the public collective consciousness to prompt companies or governments to act, let alone both. Without significant public outcry backed by business and government, nothing much changes.