Macau Gaming Operators and the Pandemic: Corporate Social Responsibility is Changing

INTRODUCTION

Since the outbreak of COVID-19 in late 2019, the global health crisis has had a significant negative economic impact on many sectors. ¹ The global pandemic has been especially difficult for the gaming industry, with most gaming operators showing a sharp decrease in operating results during the first months of the pandemic. ² Despite the spectacular success in containing the number of infections, the city's economy still suffers from stringent travel restrictions. ³ Restrictions on border crossings have meant a significant decrease in visitors from outside Macau. Visitors from Mainland China, the main market for Macanese casinos, while still able to enter the territory, have been heavily reduced, leading to significant losses for the Macanese gaming operators. ⁴

The current difficulties of gaming operators have been compounded by the looming retendering of gaming concessions and uncertainties associated with the proposed revisions to the Macanese Gaming Law (Law 16/2001, of September 24, 2001). While the six gaming concessionaires currently operating in Macau have expressed confidence that the retendering process and the new law will not impede their activities, it is clear that the relationship between the concessionaires and the Region's authorities is changing. Namely, there is an increasing expectation by the Region's government that concessionaires make a greater commitment to its economic and social development goals, including the perennial objective of diversifying the Macanese economy. ⁵

In this context, corporate social responsibility (CSR) has become a key topic of discussion, with calls for gaming concessionaires to take on a more proactive role in this regard. ⁶ The difficulties arising from COVID-19 provide fertile terrain for understanding the extent to which Macanese gaming concessionaires can act as conduits of public welfare. As shown in this article, the challenges posed by COVID-19 are multifaceted. In addition to addressing the public health challenges arising from the pandemic, gaming concessionaires have had to act as stabilizers in economic matters. As a result, concessionaires have been presented with a golden opportunity to prove their indispensability to the Region.

To analyze how gaming concessionaires have approached their CSR during the pandemic, this article is divided into three parts. Section A offers an overview of the relationship between the gaming industry and CSR to illustrate the changing public opinion regarding casinos in recent decades. Section B provides an analysis of the reaction of gaming concessionaires to the COVID-19 crisis. It argues that despite the steep economic downturn, gaming operators nevertheless assumed significant responsibilities in helping the government achieve its public health and economic goals. Section C completes this article by framing the actions of gaming operators during this period within the broader literature on the CSR of Macanese gaming operators. It is argued that while the current CSR approach in Macau can be described as “proactive” (as opposed to “reactive”), it may be at least partially explained as a rational reaction to uncertainties surrounding the future regulatory framework.

A. OVERVIEW OF CSR IN TODAY'S MACANESE GAMING INDUSTRY

CSR has notably evaded a universally accepted definition. ⁷ It generally refers to the idea that companies must behave responsibly and contribute to the gains of all stakeholders, including clients, workers, and the communities in which they are integrated. Over time, the number of “socially responsible” companies actively promoting actions to advance economic, social, and environmental concerns has increased. However, the line between truly socially responsible behavior and the instrumental use of tools of corporate image management is often blurry. To this effect, some have criticized CSR as being mostly empty rhetoric without the ability to improve society in any significant way.

Skepticism of the concept of CSR has been especially strong with respect to gaming operators. Indeed, the gaming industry has traditionally had a complex relationship with the core concepts of CSR, mainly because the gaming industry has historically been seen as a “sin industry” ⁸ and thus, as inherently handicapped in fulfilling notions of social responsibility. ⁹ In this context, some scholars have expressed suspicion about the usage of such mechanisms in the gaming industry, arguing that CSR contributions in this field are often simply a method to portray the industry as a normal one. ¹⁰ Others have noted that casinos' CSR approach is typically economic in nature and neglects social and environmental aspects. ¹¹

Nevertheless, in recent decades, operators have increasingly espoused a commitment to the notion of CSR, as they see the benefits of voluntarily promoting it as a tool to increase their social legitimacy. ¹² The context for this approach is clear: gaming operators have been recasting themselves and redefining what were once unwanted and often obscure activities as a legitimate recreation industry. In this context, CSR can be useful for gaming operators to demonstrate that they are a net positive for the communities in which they operate. More specifically, it allows for the cultivation of an image of gaming operators as “normal” enterprises, composed of ethical people and, therefore, fully legitimate business organizations, rather than shady outfits.

In Macau specifically, the social legitimacy of casinos is particularly relevant, given their symbiotic relationship ¹³ with the government and Macau's highly regulated market structure. ¹⁴ Indeed, there are only six concessionaires in Macau's gaming industry: SJM, Venetian, Galaxy, Melco, Wynn, and MGM. ¹⁵ The government ultimately determines the selection of operators, and its decision-making power can significantly define the profitability of their operations. In other words, although the Region highly depends on the gaming industry for its taxable income, gaming concessionaires are subject to the risk of possible regulatory interventions (including the continuing risk of nonrenewal of concession contracts). Therefore, cultivating a good image with the local government and the local population is key to preserving their place in the market.

Despite the importance for the Macanese gaming concessionaires of projecting an image of being good corporate citizens, it is important to note that CSR practice in Macau is rather informal and somewhat underdeveloped. At the time of writing, Macau does not have a legally binding framework mandating the disclosure of social responsibility actions. Consequently, gaming concessionaires have significantly different approaches to reporting their CSR activities, with a high variance in the level of detail and methods used to communicate them. ¹⁶ Furthermore, gaming concessionaires in Macau typically do not have a separate department dedicated to CSR; therefore, in practice, it is scattered among various departments. ¹⁷ A survey carried out by Leung and Snell ¹⁸ found that some employees do not even recognize or understand the term “CSR”, which exemplifies the lack of centrality of CSR activities in the day-to-day life of gaming concessionaires.

B. CONCESSIONAIRES' CSR MEASURES DURING COVID-19

The COVID-19 outbreak brought gaming concessionaires' CSR to the spotlight. Indeed, the pandemic has had a tremendous impact on Macau's economy. Due to the partial lockdown that the Region entered in early 2020, a sudden decrease of over 80% in the number of visitors led to a decline of over 90% in the gaming concessionaires' income. ¹⁹ In early February 2020, following the government's decision to suspend gaming activities in the Region, all six gaming concessionaires closed their branches in Macau for 15 days. While casinos reopened after this short period, the number of leisure visitors to Macau plummeted to almost zero by April 2020. ²⁰ Even though there has since been a partial recovery in terms of the number of visitors, income is still far from pre-pandemic levels, given the central government's policy of limiting the issuance of visas for mainland travelers.

Against this backdrop, and despite the significant downturn in their operating results, the gaming concessionaires responded in a timely manner. At first, they focused on the health crisis generated by the pandemic and contributed to preventing infection by donating medical masks to the government and other groups in need. ²¹ Furthermore, they made their properties available for 14 days of medical observation—a key component of the zero-case policy put in place in Macau. ²² In addition, the gaming concessionaires drafted additional safety protocols and employee health benefits. ²³ Beyond their assistance in Macau, they also provided significant external financial assistance to Mainland China to help deal with the health crisis. For example, SJM donated up to MOP 20 million to Hubei for COVID-19 support. ²⁴ Similarly, Galaxy donated up to MOP 100 million to Mainland China for COVID-19 relief. ²⁵

Apart from their support of pandemic prevention and combat efforts, the gaming operators made contributions to stabilize the economy and minimize the economic consequences of the crisis. In particular, they affirmed, as part of their CSR communications, a commitment to guaranteeing local employment, allowing employees to take paid leave, providing further employee training courses, and so on. ²⁶ Further, they committed to supporting the wider economy by aiding local small and medium-sized enterprises in overcoming the difficulties created by the pandemic. ²⁷ They also took action to assist the parts of the population most affected by the pandemic, namely, by providing food and shelter for those in need locally ²⁸ and volunteering hours to help people in need. ²⁹

C. IMPLICATIONS OF THE CSR INTERVENTIONS

The significant efforts undertaken by the gaming concessionaires during the pandemic opened a window onto the relationship between them and the Macanese government. In particular, it demonstrated the potential of a collaborative approach between the government and gaming concessionaires in achieving common social goals. It also highlighted that these goals could be achieved through voluntary contributions and joint efforts rather than through top-down demands, which would risk making the relationship with gaming concessionaires increasingly adversarial. Indeed, the Macanese government expressed a strong preference for this collaborative approach, with the Macanese Chief Executive maintaining that his approach would be to encourage voluntary support from concessionaires rather than impose compulsory rules unless “absolutely necessary.” ³⁰

At the same time, the strong social role of gaming concessionaires during the pandemic must be understood within the wider context of the looming renewal of concession contracts. The efforts undertaken by the gaming concessionaires can conceivably be construed as an attempt to curry favor with the government at a time when the sector was preparing for significant regulatory changes, new gaming legislation, and retendering of existing concession contracts. ³¹ Thus, the operators' attempt to show their commitment to the government's goals via a strong response to the COVID-19 outbreak was a reasonable business response in this context. Indeed, this strategy seems to have been positively received by the Macanese government, with the Chief Executive noting that the current challenges were an ongoing exam for the gaming concessionaires ³² and that the gaming industry's contributions during the outbreak had been acknowledged. ³³

To understand the approach of the Macanese concessionaires, the concepts of proactive and reactive, as used by scholars to explain the CSR activities of gaming concessionaires in Macau, are particularly useful. ³⁴ Proactive CSR refers to a situation in which corporations voluntarily recognize the long-term economic benefits and reputation of the industry and take up their CSR accordingly. Conversely, reactive CSR refers to actions of corporations that only carry out their CSR responsibilities under external pressure (e.g., political pressure or competition). Within a reactive CSR framework, companies tend to “team up” ³⁵ with the government to achieve social benefits to demonstrate their usefulness. Some have argued that this approach is dominant in Macau, given that a relationship between the operators and the government is important for earning their “legitimacy” in the market. ³⁶

The gaming concessionaires showed a markedly committed reaction during the COVID-19 pandemic. They all autonomously tailored their approaches to meet the government's expectations within a short period. ³⁷ This was accomplished through significant investment without the need for explicit demands by public authorities to entice contributions from the gaming concessionaires. Whether this approach was a cynical reaction to the risk derived from the terminus of the current concession contracts and the implied threat of nonrenewal or a worse regulatory environment in the future is an open question. Still, the reaction of the concessionaires certainly demonstrates the vast positive influence these operators can have in the Macanese future.

D. CONCLUSION

Since the start of COVID-19 in 2019, gaming corporations in Macau have made dramatic transformations to accommodate the new market conditions. ³⁸ In particular, gaming operators became more open to collaborative partnerships with regulators to achieve their common goals, namely ensuring public safety and public health, which would allow them to continue operating. ³⁹ Beyond this, it is undeniable that the gaming industry operated de facto as the “first line of defense” in Macau's economy and public health policy, ⁴⁰ allowing the Macanese society to show resilience, despite an extreme economic downturn. In short, this illustrates the extent to which the gaming operators and the government required assistance from each other to achieve their respective goals.

Such a co-dependent relationship between gaming operators and the public sector is particularly important in Macau because of its lack of economic diversity. Given Macau's dependency on the gaming industry, expanding its contribution to the development of the Region is paramount. At the same time, gaming operators are increasingly aware that their presence in Macau is not guaranteed and ultimately depends on them being seen by the Macanese government and, ultimately, by the Chinese government as a net positive. In this context, developing a well-coordinated plan to maximize CSR activities and align them with the local government's priorities has the potential to benefit both sides.

The upcoming renewal of concessions has been linked to the government's intention to regain more control over the industry. ⁴¹ In this context, a further definition of the gaming concessionaires' CSR obligations will likely be undertaken. ⁴² Currently, the draft bill under discussion has already outlined the expected CSR initiatives, namely, supporting local small and medium-sized enterprises and local industries, ensuring employee rights, supporting disabled individuals, and supporting educational/scientific activities. ⁴³ While the text of the draft bill does not in itself establish a full-fledged CSR framework, it likely signals an expectation that operators seriously consider their CSR policies to be part of their new concession proposals. ⁴⁴ Therefore, this will be a critical opportunity for Macau to leverage its regional autonomy and promote an approach to CSR that guarantees that the gaming industry fully contributes to the Region beyond financial support. ⁴⁵