A Cautionary Tale from China

The Financial Times tells the story of a raid orchestrated by the German chief executive of Frankfurt-listed Business China of the company’s Beijing headquarters:

The impromptu raid turned up a raft of evidence showing that a group of BMC’s senior Chinese managers had – unbeknown to BMC’s German managers – set up their own company within the advertising and exhibition business and, Mr Zuercher and the rest of the company’s management claim, siphoned off its most lucrative advertising contracts.

“We’d been tipped off anonymously by one of our staff that some executives had set up this secret company and were taking all of our clients,” explains Mr Zuercher, who is due to face shareholders on Wednesday at BMC’s annual meeting.

The case, which is under investigation by the Beijing police, involved at least seven senior executives and has brought to its knees a company that controls billboard advertising at dozens of China’s largest railway stations and airports.

Corporate is not nearly as common as intellectual property infringement or outright bribery in China’s robber-baron economy. But the brazen betrayal involved in this case provides a cautionary tale for any company hoping to do business in the country, where legal protections are rudimentary and local allegiances and networks take precedence over loyalty to foreign shareholders.


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