The ethical challenges facing business in China today
Dr. Stephan Rothlin, Center for International Business Ethics (CIBE)

IBE Summer Event
Tuesday 5th
17.30 – 19.30 July 2011

“The golden rule in China – nothing is clear.”

Stephan explored the topic through his ‘rules for international business ethics’ framework:

1. The importance of context. China’s Confucian history has created a different attitude and ways of behaviour in Chinese business. To do business in China, it is essential to respect and understand these differences. Confucian teaching contributes positively to business ethics, for example through the emphasis on trust and trustworthiness.

There are some similarities between Western and Chinese cultures which need to be considered; for example, rule of law is very important in China yet this overrides the Confucian teaching of relationships and roles shaping behaviour. This is because in some cases, respecting a hierarchical relationship e.g. not reporting your father to the police if he steals, because he commands your respect, can lead to corruption.

A key message therefore is to be aware of and endeavour to understand differences in values between Chinese and Western culture, but also consider the existence of some universal values.

2. There is a need to emphasise the business case for business ethics in China, and make the point that there are benefits.

3. The consumer movement is a powerful stimulus for business ethics in China; consumers are willing to take action against business and are a genuine source of pressure.

4. Developing a brand requires building a reputation based on trust and reliability.

5. Safe working conditions; new generations are more aware of the standard of living of their contemporaries in the Western world and as a result, are increasingly less willing than their forefathers to accept poor working conditions. This is reflected in the high rate of suicides at Foxconn’s factories.

6. To inspire trust there is a need for transparency in business; particularly since the economic crisis. There needs to more effective teaching of business ethics, with business ethics integrated into courses, and business life. This is a challenge post-crisis.

7. Whistleblowing is seen unfavourably in China, as an act of disloyalty. This perception needs to be changed, by demonstrating the positive outcomes of speaking up in a business.

8. Balance the need for efficiency, profitability and downsizing with ethical responsibility for stakeholders.

9. Business should contribute positively to the social system. The rich-poor gap is a key concern for the Chinese government. Two thirds of China’s population live in rural China where there is great demand for learning and development. This provides business with a key opportunity.

Tackling discrimination; gender discrimination is lower in China than Japan. In Hong Kong and Taiwan for example, women have a better chance of holding responsible leadership positions. There are still issues though; harassment tends to be dismissed as a Western concept and discrimination against migrant workers and the rural population is subtle but still prevalent.

10. Technological changes e.g. in smart phones, are making the private-public spheres harder to differentiate between in China.

11. The media has a powerful influence in China and is largely responsible for awakening civil society and consumer awareness around business ethics. Businesses need to be aware of this and the risk that it can pose in terms of their reputation.

12. There is growing concern in China around the money lost through corruption. Whereas India had higher corruption levels, it has improved over the last 5 years, whilst corruption levels in China have risen. The Chinese government refers to the Transparency International Corruption Perceptions Index.

13. Since the Bhopal incident which polluted the Songhua River in 2005, there is a large concern for the environment in China.

14. The importance of branding for an organisation to develop its reputation. Branding should be in line with the organisation’s values.

15. As yet, China does not have an established philanthropic culture. It is difficult to cultivate because there is widespread suspicion within China around what happens with economic contributions to charities. In the past, charities themselves have failed to distribute money to needy parties.Stephan’s presentation was followed by a brief Q & A session. Some main points:

• Practical advice for doing business in China – it is essential for businesses to really familiarise themselves with China and Confucian values and develop a positive opinion of Chinese culture.

• Business in China is founded on relationships. The characters which spell out ‘ethics’ in Chinese translate into ‘all principles of all kinds of relationships’. Business ethics in China is about knowing the business and stakeholders’ place in relationships. The cultural clash in relationships is often overlooked, but it must be embedded into business behaviour and decision making when operating in China.

• It is important to honour Chinese values as well as understand the differences to Western culture. There is a need to balance values and not presume that different cultures have common values or that the West knows what these are.

• In practice, it is more difficult to balance Western and Chinese values, demonstrated in the number of corporations which have accepted the rules of Chinese government but then been criticised heavily for doing so. It is important to respect Chinese law if a business wishes to operate in China; businesses often underestimate the consequences for not doing so. Google, who refused to censor their search results in China, were forced to shut down (the company subsequently re-directed traffic to servers in Hong Kong which were uncensored).

• Who is driving and leading business ethics in China – foreign multinationals (MNCs) or Chinese business? Some MNCs are deeply committed to business ethics, but there is a greater drive from Chinese businesses, particularly women entrepreneurs, who have expressed frustration at corruption in China and are pushing business ethics.

• Is there a difference between local and central governmental attitudes to business ethics? If so, how do businesses resolve this? Central government loses credibility if it is involved in corruption but is simultaneously promoting business ethics. Local governments have greater influence over the public and do act against central government decisions. This discord is a key stumbling block to progress in business ethics in China today.