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JPMorgan: Hiring Chinese Princelings Becomes a Royal Pain  
 
Product Ref: 14/549C Company: JP Morgan Private Bank

Product Type: Case Industry: Banks & Diversified Financials

Related Product(s): Teaching Note
Authors: Zhigang Tao   W. H. Lo   Yihong Yao
In August 2013, the United States Securities and Exchanges Commission (¡§SEC¡¨) opened a bribery investigation into JPMorgan¡¦s ¡§princeling hiring¡¨ practices in Hong Kong, China¡¦s Special Administrative Region. The investment bank¡¦s Hong Kong operation hired the daughter of a senior official of the state-owned China Railway Group (¡§CRG¡¨) in 2007, and the son of the chairman of state-owned China Everbright Group (¡§Everbright¡¨) in 2010. Months after the 2007 hiring, JPMorgan successfully secured the job of underwriting CRG¡¦s initial public offering (¡§IPO¡¨). Similarly, although few business deals between JPMorgan and Everbright and its subsidiaries were made before 2010, JPMorgan then successfully secured several financial advisory jobs for the company. The US Security Exchange Commission¡¦s subsequent investigation put investment bank efforts to build ¡§guanxi¡¨ in China by hiring princelings in the spotlight.
Functional Area : Strategy & General Management

Learning Objective: This case helps illustrate the motivations behind the hiring of Chinese princelings. When conducting business in the context of the ¡§market economy with Chinese characteristics¡¨, the question of whether guanxi should be used for opening doors or deal-making is a demanding one with no prescriptive answers. Though the approach of acquiring opportunities through networks seems to be a long and sustainable way of doing business, intense competition and the recognition that competitors are closing guanxi-based deals very often drives companies to follow a short-term approach. This case provides a context for students who are or will be business decision-makers, to understand and consider the implications of hiring princelings and other candidates with influential social networks.

This case has the following teaching objectives:
- To understand motivations and other considerations for deploying guanxi while doing business in China;
- To understand the impact of princeling hiring.
Length: 26 pages Country: China (People's Rep. of)
United States of America

Pub. Year: 2014 Level of Difficulty: 2
         
This product type is available in the following language(s):      English
         
Related Information: N/A
 
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