Night of the long envelopes

When the former 'Observer' editor Jonathan Fenby arrived at his new job in Hong Kong, a drama unfolded. Stephen Vines reports

It was all handled with sledgehammer sensitivity. The editor- in-chief made a very brief speech about the need for economies in the face of rising costs and quickly withdrew, leaving a secretary to hand out long white envelopes to every member of staff. As the envelopes were eased open, itbecame evident that the recipients of the thicker envelopes were being sacked, while those with thinner ones were saved.

Within five minutes of receiving the envelopes, the holders of the thicker ones were denied access to their computers.

By the end of the exercise, 10 per cent of the staff and a number of freelancers were out of a job; the Sunday and daily papers were merged. The cuts had been made by Hong Kong's South China Morning Post, one of, if not the, world's most profitable newspapers.

"I just walked into it," says Jonathan Fenby, the Observer's former editor. He had arrived from London a few days earlier, expecting to edit a daily newspaper. Now he found himself running a seven-day-week operation.

If Mr Fenby was surprised, so were the staff. They had no warning of cuts. On the contrary, they had high expectations for the arrival of the new editor, arguably the largest catch ever landed by the Post, Hong Kong's biggest-selling English-language newspaper and one of the most influential papers in this part of the world.

The axe fell at around six on the evening of 23 May. It didn't take long for the newly jobless to gather for an impromptu wake around the horseshoe bar of the Foreign Correspondents' Club.

It just didn't add up. The staff thought their paper was still making money hand over fist, a view seemingly confirmed within days as the Post published its customary 120 pages or so of Saturday classified advertising and a bulging book of display ads. The most recent company results of SCMP Holdings, the public company that owns the Post, showed a gross profit margin of 48 per cent, the kind of return which would make newspaper proprietors in Britain weep with joy.

Jonathan Fenby has certainly never worked on a paper making this kind of money. Nor, as he freely admits, has he ever been employed by a public company with its eye so firmly on the bottom line. As he dryly notes: "As a journalist one often feels all profits should be channelled back to the editorial side. It doesn't happen like that here."

It certainly does not. SCMP's management is not worried about making a loss: no such event is even contemplated. The worry is a slowdown in the rate of profit increase.

In his brief address to the staff, David Armstrong, the editor-in-chief, told them that the paper had to make cuts because of massive increases in newsprint prices, a slowing down of the economy, an inflated editorial budget brought about by competition from a new English-language newspaper, Eastern Express, and the move, from the Post's relatively central offices, to a new base in the New Territories.

No one was given a chance to ask questions. One of the sacked journalists dismisses the reasons given as implausible. He says: "We're being made to pay the price for cock-ups at Tai Po," a reference to the cost of moving the paper's headquarters.

A former Post executive confirms this assessment, saying that the move to Tai Po is "a disaster".

However, attention in Hong Kong was focused elsewhere as the usual conspiracy theoriesmade the rounds.

Local Chinese-language newspapers buzzed with theories about cutting back on high-paid "gwei lohs" - literally "ghost people", but more usually translated as "foreign devils". All the 25 sacked journalists are indeed foreigners, even though Ann Quon, the former editor of the Sunday paper, a Canadian, is of Chinese origin.

Mr Armstrong flatly deniesany racial element in the choice of those selected for the axe but points out that many of the higher-paid staff were foreigners, and in cost-cutting exercises, the higher-paid tend to go first.

Then there was much talk about the politics of the move. When Robert Kuok took control of the Post it was widely expected that it would be much more sympathetic to the Chinese government as Mr Kuok serves as one of Peking's official Hong Kong advisers and is very close to the Chinese leadership. Indeed, the Eastern Express was launched on this premise.

Almost two years into new management, the Post has yet to shift editorial policy. If anything, it has become rather more aggressive in its coverage by way of responding to the challenge from the Express.

How will Jonathan Fenby deal with political pressures? He says he has been given "no line in the sand" defining what he can do. Secondly, he believes that "if your coverage or comment is right, that's the best defence".

Still, as Mr Fenby admits, it remains unclear who will have the last say in editorial matters. Mr Armstrong, an Australian with wide experience in newspapers run by Rupert Murdoch, has overall control. "How relations will evolve, I don't know," says Fenby.

If he feels he is in uncharted waters with the Post, the Post is equally in uncharted waters with Fenby. He comes with a liberal reputation which may be out of kilter with the conservative mood sweeping through the Hong Kong media.

For decades the Post was the house magazine of the colonial government. Nowadays it is not a mouthpiece but it retains more than a hint of arrogance which comes with its near monopoly of the English-language market and its claim to reach more Chinese professional and executive readers than any other paper.

"They think they've beaten off the opposition," says Ken McKenzie, publisher of Hong Kong's Media magazine, "and so don't have to put out a product which is way up there."

Jonathan Fenby sees it differently. He says that during discussions before he took on the job, "I kept hearing the word 'quality' a lot."

It will be interesting to see whose idea of quality prevails.