BLOGPOST: Choosing sides

This blogpost is from our regular newsletter, Political Risk for the C-Suite, which explores political risk as it plays out in the week's news. You can sign up here.

Last month was Pride month, so corporates around the world showed their commitment to LGBT+ communities with the rainbow flag on their social media.

As one parody account pointed out on Twitter, the commitment wasn’t always as universal as may appear to Western audiences:

This newsletter is about the challenges of having and expressing corporate values across borders.

HSBC once ran an ad campaign celebrating (and warning of) the cultural differences across borders. Since Sino-Western relations soured last year, the bank has found itself on the rack, stretched between its Western and Chinese interests. That is understandable for a bank with HSBC’s heritage, but no less challenging for its board.

These cases remind me of the approach taken by the American big data firm Palantir, not least because there’s a lot of noise about a vaguely similar organisation, the Israeli NSO Group, which sells weapons-grade software. NSO has been accused of selling its Pegasus spyware to some interesting governments, who may have used it to target political opponents. The company strongly denies the allegations, and points to rigorous vetting procedures, export licence scrutiny and ethical standards. Yet campaigners still argue that NSO is not living up to its own stated values.

Palantir operates in a somewhat related field (though I don’t think it develops spyware). It specialises in processing and mobilising massive datasets for behemoths like the USA’s defence complex, and the UK’s welfare state, both of which can create questions over sensitive data handling, inter alia.

Whereas some firms want to operate in all markets and claim to be universally neutral, Palantir has an interesting strategy in rebuffing arguments about the ethical implications of selling to the edgier parts of government. In the words of its IPO filing last year, “we have chosen sides, and we know that our partners value our commitment. We stand by them when it is convenient, and when it is not.” That side is the side of “Western liberal democracy and its strategic allies”.


Side note: I’m interested in the use of ‘strategic allies’ there, as I wonder how someone like Saudi Arabia might fit in. Strategic ally, certainly, but Palantir says it “cannot predict how the activities and values of our government and private sector customers will evolve over time, and they may evolve in a manner inconsistent with our mission.” Presumably, the USA is Palantir’s lodestar for what counts as Western Liberal Democracy. But that means it’s in some way outsourcing company policy to the US State Department. For example, what happens if the long-term deal with the House of Saud falls apart? I’m not saying that has any implications for Palantir as I don’t know their customer base, and of course most internationals face some version of this, but they don’t tend to state it as company policy.


Of course, selling data services to the military is just a 21st century version of offering intelligence services, or even manufacturing guns and ammunition. Arms trading has long been highly regulated in most countries. But there are certainly more grey areas in software and data, which serve both military and civil purposes in ways that Surface-to-Air Missiles do not. That’s why countries like the UK are adding new layers of defence scrutiny to their merger control regimes.

Palantir has made a bet: that it will be in its own strategic interests to back Western Liberal Democracies. Like a lot of people, Palantir probably sees the growing geopolitical divides of this century and realises that a company like itself will seriously struggle to ride two horses at once. To be a little more generous to the people at the company, they may also believe that it’s not only good business, but also just good.

That’s not what everyone does. Some companies try to operate everywhere, even agreeing to help an authoritarian regime to censor the internet.

What’s become a little clearer is that multinationals effectively pursue one of three strategies when operating across borders and across what we might call ‘value zones’:

  1. Splendid neutrality. Simply sell your product or service and insist that it’s not your fault if someone decides to use it to oppress an ethnic minority or spy on political rivals. You don’t ‘do politics’.

  2. All things to all men. Similar to splendid neutrality, but this strategy means engaging with local issues in very different ways and then defending yourself by saying ‘we’re just being sensitive to local customs, which are just as valuable as the West’s’. I don’t know, but presumably some of those firms in the Pride photo were thinking along these lines. And Google seems to have been doing exactly this with its forays into China. This approach seems like an optimistic ‘post-history’ approach in which the world is pretty much one big playing ground with roughly similar rules.

  3. Choosing sides. Palantir’s option. You say ‘we have Western values, so don’t expect to see us selling to Beijing or Baku’. There are still grey areas - see side note above.

I’m not saying any one of these approaches is right or wrong; it depends on your company’s goods and services and where you’re selling them. It is very possible and very common to misapply them. If you sell oranges, then ‘Splendid Neutrality’ seems legitimate, assuming you’re not breaking sanctions and you’re conducting business ethically and legally – e.g. no bribes for big orange shipments. Selling bombs is a different matter.

‘All Things To All Men’ seems like a reasonable thing sometimes because we live in a gloriously multicultural world, as HSBC’s adverts used to point out. But those adverts were about whether people find bare feet rude or not. Things change when it comes to financial services for dictators. The strategy can easily look hypocritical, as the social media image shows. A great deal of time must be spent hoping that customers in different value zones don’t notice what you’re up to elsewhere, which is increasingly hard to do.

And ‘Choosing Sides’ also seems reasonable (and I admit to a certain admiration for it). It may become an increasingly common strategy on both sides of the new iron curtain, wherever that may fall. But there are many questions. How do you define “western liberal democracy and its strategic allies”? What if your major, liberal, democratic government client does something that betrays those values, like illegally harvesting masses of citizens’ data? Et cetera. Palantir has a fascinating and detailed list of other risks in its own IPO filing documents.

Flip-flopping between these strategies seems like a bad idea: “we have universal ideals, which we apply selectively”. Better to stick to one or another.

So, while I’m not advising one strategy over another, there is one clear piece of advice: pick a strategy and know what the implications are. That way, you can prepare for the inevitable criticisms and consequential reputational risks.

The world is somehow globalising and polarising right now, as part of a massive post-COVID realignment. Multinationals need to be clear-eyed about the risks and exposures which come from operating across 'value zones'. Pick your strategy, know what it means.

This blogpost is from our regular newsletter, Political Risk for the C-Suite, which explores political risk as it plays out in the week's news. You can sign up here.

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