Hiring someone based on connections is not bad per se. I guess what the SEC is getting at is when the hiring is highly correlated to the awardment of business contracts. Its such a pervasive thing, how is the SEC going to regulate that? Where do you draw the line between connection-network-influence, as to when it is a bribe and when it is considered as "business experience and networking"???
I don't think the SEC has thought this through at all, as to how the endgame will be, how will they prosecute, how will you regulate and fine trespassers, ... I think even the courts are shaking their heads at these developments, how in hell will they write their judgments.
If the SEC is just targeting the princelings / children (less than 5 years job experience), well, maybe they have some legs to stand on. Even then, the SEC will have to prove that a) they are: not capable / under-qualified and that b) the hiring company actually benefited. Both are not easy to prove, especially the latter.
I am, of course, not for these privileged hirings ... but its not for the SEC to make the call especially when its on foreign territory. You should clean it up in the US first. Then maybe other regulators will take a leaf from it. I guess our SC should be looking at this as well. However, good intentions can always be thwarted by political goodwill and pressure. Still, its an important issue to address.
It is well known that many listed company owners send their children to "hard to get internships" or "critical job openings at investment banks" to give a headstart ... hey, your resume looks brilliant with so-and-so as your first job. It is easy to get that to work for very rich people as they may have big private banking accounts and/or other business transactions that flow through them.
Its not right, but its prevalent, but its also so hard to regulate. That is also why the rich gets richer. If you are not well connected or have the right parents ... then you better be very smart, industrious and better than them to succeed.
Dealbook/NYT:
HIRING THE WELL-CONNECTED ISN’T ALWAYS SCANDALOUS | An investigation by the Securities and Exchange Commission into whether JPMorgan Chase had hired the children of powerful Chinese officials to help the bank win business “is sending shudders through Wall Street,” Andrew Ross Sorkin writes in the DealBook column.
“If JPMorgan Chase is found to have violated the Foreign Corrupt Practices Act by hiring the children of the elite, then the entire financial services industry is probably in a heap of trouble. Virtually every firm has sought to hire the best-connected executives in China and, more often than not, they are the ‘princelings,’ the offspring of the ruling elite.”
Hiring the children of powerful executives “is hardly just the province of banks doing business in China: it has been a time-tested practice here in the United States.”
Bill Clinton; Stephen Schwarzman of the Blackstone Group; Martin Sorrell of WPP; and Robert Rubin, a Clinton administration official. All four have children who held jobs in companies with an arguable interest in their parents.
Businessweek: If American regulators are really intent on looking at companies that hire nieces and nephews of China’s high and mighty, the SEC and others will have their hands full for a long time. Hiring people with good connections has long been a standard way of doing business for multinationals in China—and often, those people with good connections turn out to be relatives of high officials. Since that’s such an accepted way of doing business in the country, proving a quid pro quo between a foreign company and a Chinese official is difficult.
Companies also long ago recognized the need to be especially careful when hiring offspring of Chinese officials. Usually, the jobs young Chinese from important families receive are genuine jobs, not just fake positions created to funnel money crudely back to the official’s family. Recognizing the potential risk of action under the Foreign Corrupt Practices Act, companies have put together policies to show that everything was kosher when they made their hiring decisions.
In other words, if suddenly confronted by regulators asking questions, foreign companies want to be able to demonstrate that the person was qualified and the company went through a routine and regular hiring process before hiring him or her. And companies want to be able to say with credibility that this person who just happens to come from a well-connected family was not hired with any corrupt intent of winning business from his or her high-profile relative in China.
