Deutsche Bank’s Brunei hotel ban raises moral bar

French chef Alain Ducasse poses in the dining room at the Le Meurice Restaurant in Paris

Deutsche Bank’s latest strategy for boosting its appeal may be its most effective yet: the German lender headed by Christian Sewing has banned staff from Dorchester Collection hotels after its owner, the government of Brunei, implemented homophobic laws. Shareholders will welcome the fact that employees of a bank whose costs ate up 93 percent of revenue last year will no longer frequent a chain which charges nearly 400 pounds a night for a standard room in London. However, the decision raises the moral bar.

Brunei’s state-owned investment agency owns the Dorchester Collection hotel group, which includes luxury venues such as The Beverly Hills Hotel and Hotel Bel-Air in Los Angeles. Oscar-winning actor George Clooney called for a boycott after the government implemented Islamic laws which would impose the death penalty for homosexuality or adultery. Celebrities including singer Elton John have joined in.

Shunning the sultanate is relatively painless for Deutsche, which has limited business in Brunei. Yet like many of its global peers the bank continues to operate in Saudi Arabia, which also has stringent anti-homosexuality laws. Goldman Sachs CEO David Solomon recently met government-linked clients in the desert kingdom.

Banks and other big multinationals long argued that they had to accept the laws of countries where they do business. But pressure from customers and shareholders is forcing them to set out moral positions. Employers’ efforts to attract and retain a diverse workforce in the West is also increasingly hard to square with maintaining links with repressive regimes.

Big companies generally muster two defences. The first is that if the government is moving in the right direction, a boycott would be counter-productive. This is how companies justified their presence in Saudi Arabia – which recently allowed women to drive – at least until the brutal murder of journalist Jamal Khashoggi by Saudi agents last year. The second defence is that companies have an obligation to their shareholders to weigh the costs of boycotting certain countries against the reputational damage of working with them.

Increased investor demand for companies to meet a range of social and environmental criteria means banks especially will face more awkward questions about business in illiberal countries. So while Deutsche’s Brunei boycott may be relatively cost-free, it will face bigger financial tests in the future.