One Billion Customers - James McGregor [45]
With Goldman Sachs as CICC’s partner, China Telecom became the nation’s first megadeal, one that for the first time gave foreign investors a shot at a nationwide Chinese industry. The company raised more than $4 billion when it was simultaneously listed on the New York Stock Exchange and the Hong Kong Stock Exchange on October 22 and 23, 1997.
The China Telecom deal was a disaster for Morgan Stanley and for Jack Wadsworth. Partners in New York who had been strong-armed by John Mack into backing the $35 million partnership were apoplectic. All they had heard from Beijing since CICC opened its doors in 1995 were problems. These were powerful people who went to the office every day intent on crushing Goldman Sachs. Now the biggest deal to ever come out of China—by a factor of ten—was going to Goldman, which had rejected the CICC partnership before Morgan Stanley bought in. Wadsworth’s once invincible credibility at headquarters suddenly had a gaping wound.
The Openhearted CEO
Harrison Young took the fall. Austin Koenen, his deputy, became chief executive officer of CICC late in 1997. Koenen was a disciplined and ambitious New Jersey farm boy who had graduated from the U.S. Naval Academy at Annapolis with four majors and served on attack submarines. He was one of the most level-headed and respected executives at Morgan Stanley in New York. Morgan Stanley CEO John Mack believed that Koenen had the strength of character to win over CICC’s skeptical Chinese employees. Koenen didn’t speak Chinese and he knew little about the history and culture of China, but he went out of his way to show that he respected the Chinese and their country. He exuded leadership and confidence—on his desk was a sign that said NO WHINING—and he mentored the Chinese employees like he was their father. He told them that his loyalty was to them and CICC, not to Morgan Stanley, because his mission was to build a first-class Chinese investment bank. Koenen kept communications with Morgan Stanley Hong Kong to a minimum. Instead, he talked to New York. He encouraged Chinese employees to speak up at meetings and not be intimidated by the arrogant and tenacious foreign bankers. He told them to get on with their jobs and come to him when they needed advice. From the beginning of the CICC venture, the Chinese had stressed that Morgan Stanley was expected to bring investment banking “technology” to the venture. Once Koenen became CEO, the Chinese realized that Morgan’s biggest contribution would be as a mentor to Chinese employees.
Chinese who worked with Koenen often used the same word to describe him: “openhearted.” They meant they trusted his sincerity and believed that he genuinely cared about their careers and lives. Behavior imperatives in Chinese culture are extremely negative and fairness isn’t a hallmark of the society. Parents motivate their children by focusing on their faults and inadequacies. The government rules through control, shame, and a ubiquitous presence. Worries about retribution for making mistakes guide the actions of most employees. Thus CICC’s Chinese employees were extremely receptive to genuine kindness, sincerity, and coaching from their new boss, whose competence was without question. For many, it was the first time in their lives that somebody in authority had treated them kindly.
Koenen smoothed over much of the bickering between the two sides of the joint venture and it seemed as if CICC was finally gaining some traction. Then, in May 1998, six months after he replaced Harrison Young as CEO, Austin