How did the MTR lose its way?

Not that long ago, the MTR Corporation was hailed as one of Asia's best managed companies. In 2009, it won three awards given by the magazine , including "Best Managed Company". In 2010, it won five awards by the same magazine, including "Best Investor Relations", "Best CEO" and "Best CFO".

In the summer of 2010, the MTR Corp's reputation took a big hit when it was disclosed that Octopus Cards Limited, a wholly owned subsidiary of Octopus Holdings, which is a subsidiary of MTR Corp, had been illegally selling the personal data of its customers and had made more than HK$44 million over 4½ years. The public outcry over the company's infringement of personal data privacy led to the resignation of its chief executive and enactment of legislative amendments to make it a criminal offence for data collectors to sell their clients' personal data for direct marketing without their permission.

The furore over Octopus Cards' illegal sale of personal data was a wake-up call for the MTR Corp management and the government, its majority shareholder, to beware the risks of abuse arising from complacency, greed, the relentless pursuit of profits and overexpansion. Unfortunately, as subsequent events attest, the warnings went unheeded after the controversies died down.

Launched in 1997 as a re-usable, contactless, smart card for electronic ticketing, the Octopus card was one of the earliest stored-value cards introduced and inspired many others. The MTR Corp's ability to innovate, making use of radio-frequency identification technology, was fully recognised with an award for global information technology excellence which it won in 2006, and its pride of place at the Hong Kong pavilion at the Shanghai World Expo in 2010.

Yet the fact that the Octopus card, already 13 years old by the time it was showcased in Shanghai, was the only innovation Hong Kong could boast of is, in itself, a sad reflection of the lack of innovative products coming out of the city in the past decade.

In recent years, legislators and the media alike have stepped up criticism of the MTR Corp owing to its frequent system malfunctions leading to train delays, its fare adjustment mechanism which all but guaranteed annual fare increases despite hefty profits, and its meagre fare discounts. It was not until April last year that mounting public pressure caused the secretary for transport and housing, Anthony Cheung Bing-leung, to push through a revised mechanism incorporating a higher productivity factor that effectively reduced future fare increases by 0.5 per cent.

At long last, financial penalties were introduced for train delays exceeding 31 minutes.