Edelman China Chief Back Home; Questions Abound About His Absence

Steven Cao Was Gone More Than Two Months, Apparently Cooperating With Chinese Authorities' Investigation

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Steven Cao.
Steven Cao.

The China chief of PR giant Edelman has returned home to his family, the company said Tuesday, marking the end of a two-and-a-half month absence during which he was apparently cooperating with Chinese authorities on an investigation.

Steven Cao, CEO of the PR giant's China holding company, stopped reporting to the office in July. Soon afterward, Chinese authorities visited one of the company's subsidiaries in Beijing to seek help with an inquiry, the firm said at the time. There are many unanswered questions about the case, including what the investigation is about and whether Mr. Cao is still an Edelman employee.

The public relations industry has been one area of interest in a sweeping anti-corruption campaign by China's leadership, leading to speculation that Mr. Cao had been swept up in it. (His former business partner, a famous TV news anchor named Rui Chenggang, was detained before Mr. Cao disappeared. The anchor had owned a stake in an Edelman subsidiary in China from 2007 to 2010, and local media asked whether his dual role – anchor and Edelman stakeholder, albeit an inactive one – was a conflict of interest.)

Edelman has confirmed that Mr. Cao stopped reporting for work and said the company was cooperating with an unspecified investigation, but declined to answer most questions. Chinese authorities have never mentioned Mr. Cao or explained his whereabouts. (In China, people can be held at length without ever being formally arrested.)

Edelman sent Ad Age a brief email Tuesday. "We learned that Steven Cao has returned to his family," the statement from an Edelman spokesperson said. "He is spending private time with his family, which we respect and hope you will too. We have nothing further to share at this time."

Asked if Mr. Cao was still CEO of the Daniel J. Edelman China Group, the firm's China holding company, an Edelman spokesperson said the company could "not discuss employment status of employees, present or past." (Mr. Cao's photo, however, still appears prominently on Edelman's China site.)

The company, which employs more than 300 people in China, also declined to say where Mr. Cao had been, who had been holding him, and whether there were formal accusations against him.

"We are not in a position to comment on the investigation the government is conducting," the spokesperson said.

Mr. Cao himself did not immediately respond to an email seeking comment.

Soul-searching

The first hints of possible trouble in the PR industry in China sparked soul-searching about practices, big and small, that would be off-limits in other markets. (For example, some PR companies give out cash-stuffed envelopes of up to $130 to Chinese reporters at press events. The handout is referred to as "transportation money.")

Longtime China PR executive David Wolf wrote on his blog, Silicon Hutong, that PR firms doing clean business are the future in China. But "they are still the exception that proves the rule, and no agency executive or corporate PR manager should guffaw too loudly at Edelman's expense," he wrote in July. "For far too long as an industry and a craft we have turned a blind eye to practices considered unethical, immoral, or even illegal in more developed markets, failing to see that China was developing and that a reckoning was coming."

China's leaders are waging a massive crackdown on corruption – even Zhou Yongkang, China's former security czar, is being investigated.

The PR and news industry have been caught up too. In one case, police in Shanghai detained the editor of a financial news website, several journalists and two PR executives on suspicion they had been extorting money from companies to slant their stories, according to the official Xinhua news agency.

There is speculation Mr. Cao's troubles may be linked to a probe at state television giant CCTV. Several of its employees were detained, among them the anchor, Mr. Rui, famous for his nationalistic stances. He once campaigned to oust Starbucks from Beijing's historic Forbidden City.

Mr. Rui helped found a PR company called Pegasus Communications with Mr. Cao over a decade ago, and in 2007, Edelman bought a majority stake in it.

The news anchor kept a 7.92% share in the subsidiary, though Edelman expected him to sell his stake to Mr. Cao immediately. For reasons that are not clear, he did not do that until 2010.

At the same time, Pegasus worked on corporate sponsorships for companies helping underwrite CCTV's presence at the World Economic Forum in Davos. Edelman said in July that it was launching a fact-finding mission into Pegasus.

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