Abstract

The MTR Corporation Limited (MTR) is a publicly-traded Hong Kong company that operates the city's mass transit railway system. Thanks to its Rail + Property (R+P) business model, MTR is one of the few systems across the world that generates a healthy profit while charging relatively low fares. MTR achieves this through the Rail + Property Model (R+P), in which it only builds railway lines that connect to greenfield real estate development sites. By building and managing real estate, MTR generates substantial profits that subsidize its transit operations and generate substantial dividends to its main shareholder, the Hong Kong Special Administrative Region government. However, MTR has been subject to criticism that R+P fails to consider the needs of many of Hong Kong's residents, especially the ones living off the MTR network where it would not be profitable to build rail lines. The multiple stakeholders involved highlight the tradeoff between profitability and social obligations, especially when the natural monopolist of a necessity good is at stake.

Learning Objectives

This case can be used for three different purposes:

(1) Teaching Business Ethics. MTR achieves high profits at the cost of failing to achieve universal coverage. What are MTR's duties as a public corporation and a natural monopoly? How do these duties clash with its duties to its minority private shareholders? What are the consequences of the R+P model? The key concepts to consider are deontology, consequentialism, and Rawls' Veil of Ignorance in evaluating whether the R+P model is ethical.

(2) Teaching Corporate Social Responsibility. Similar concepts are involved with CSR. What are the duties of a public corporation? Additionally, the triple bottom line and strategic CSR could be taught.

(3) Teaching about Business in Hong Kong. While Hong Kong is typically seen as an extreme example of a free market economy, the MTR case shows how embedded its economy is within government-supported institutions.