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Wednesday, March 31, 2010

Rio Tinto - Last Post I hope

An opinion piece in the WSJ -The Rio Tinto Case and China's Rule of Law.

The quick summary is the Rio Tinto executives were punished because they broke handshake deals with their suppliers, where trust is an issue.

To me this does not make sense. China is this place where you need to do deals with a handshake, but at the same time a deal can be broken by either party and a handshake has no worth, and business is business.

My guess is what happened was not so much about trust, but rather making the other person lose face. Especially people with a lot of power. And these people with power had also done the bribes to the Rio Tinto executives. When Rio Tinto embarrassed some state owned firms by causing losses by going by the letter of the contract, and not the spirit.

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