Business ethics focus of mainland conference

PUBLISHED : Sunday, 13 April, 1997, 12:00am
UPDATED : Sunday, 13 April, 1997, 12:00am

THERE are no business ethics in China, according to one Western executive in Beijing. 'Isn't that an oxymoron?' asks another.

Foreign executives love to complain about the business environment of the country they work in. The frustration of working in a place where most things do not run as smoothly as at home often surfaces as black humour and sometimes worse.

Scott Seligman is updating his book, Dealing with the Chinese , to include, among other things, a section on business ethics.

'There is a lot more business being done now than there was seven or eight years ago and the ethical standards vary greatly,' Mr Seligman, chief representative in Beijing for the public relations giant Burson-Marsteller, said.

The Beijing International Conference on Business Ethics will later this month attract academics from Hong Kong, Japan, the United States, and seven other countries, including China, to create a benchmark for business ethics in China.

The conference aims to explore the ethical issues thrown up by the rapid pace of change in modern China which will 'contribute in a fundamental way to China's future as a prosperous and stable society', according to the organisers.

The principal organisers are the All China Federation of Industry and Commerce and the Chinese Academy of Social Sciences.

The conference follows a bilateral symposium between US and Chinese academics held in Beijing in autumn last year that discussed a similar theme.

Topics at the forthcoming conference include 'Developing ethical understanding in a cross-cultural business context' and 'Economic systems and economic ethics'.

With hard business and political support, the conference was part of a move to 'build up a new socialist economy that combines honesty and profit', said Wang Guangying, vice-chairman of the Standing Committee of the National People's Congress and an honorary president of the conference.

Sponsor Cable & Wireless opened a representative office in Beijing in November last year and hope, with China's Ministry of Posts and Telecommunications, to lay the first fibre optic cable between China and the US.

China is home to almost every stage of economic growth; from the crudest forms of capitalism to central planning as well as sophisticated capitalism.

A code of business ethics as well as a legal structure is necessary to mould all of this into a coherent economic organism.

China has different methods of conducting business, particularly when compared with the West.

For example, 'negotiating a big deal in China involves dealing with your client and the provincial or national authorities', one multinational executive said. 'In the West you just deal with your client.' For this reason, all big foreign companies in China retain employees - often well connected Chinese citizens - whose sole brief is to make good relations with the government.

Different methods do not mean unethical methods and foreigners often adapt quickly to practices that at first seem strange. The overriding importance of guanxi, or personal connections, in Chinese society can baffle newcomers but many take to it like a fish to water.

There is an immediate divergence of emphasis between foreigners and Chinese on the subject of ethics.

Few foreign companies were prepared to say anything on the record for this article.

One multinational which recently signed a deal worth more than US$1 billion in China refused to discuss the issue point blank.

Outsiders tend to label corruption as the major ethical problem in their dealings in China. Companies are routinely asked for cash payments in return for business favours and bribery is a frequent feature in the awarding of contracts.

While these practices are unethical, they are now also illegal and should be seen primarily as a legal problem.

In November last year, Interim Regulations Forbidding Commercial Bribery law came into effect and banned the payment of 'cash or materials in the name of promotional costs, publicity fees, donations, research and development costs, labour service fees, consulting fees or commissions, or by means of reimbursement of various costs'.

US companies are covered by an anti-corruption law whether they are operating at home or abroad.

The Foreign Corrupt Practices Act, which arose out of the Lockheed bribery scandals in Japan in the early 1970s, makes it punishable in the US for a US citizen to bribe a foreign official.

It applies to US companies worldwide and is often inserted into joint-venture contracts signed in China and, according to legal sources, is taken very seriously.

As a Chinese participant in the conference points out, the social cost of market reform is also an ethical question.

When foreign and Chinese companies merge, the foreign partner usually takes on, for a specified period, the social responsibilities of the Chinese side.

However, workers can be laid off with little or no danwei (work unit) or state welfare system support.

'We need to create a morality for a market economy,' a Chinese academic said.

'In the West, competition is subject to regulation. Business, just like a sporting contest, needs to be regulated in order to create a healthy environment.' Ironically, the high cost of investing in China for foreign companies has limited the extreme exploitation of workers.

Horror stories about workers being burned to death in textile factories in Guangdong are not uncommon, but many of the wealthy high-technology multinationals in China, fearful of consumer reaction in their home markets, are sensitive to accusations of exploitation and have their own internal codes of conduct.

In the past, China was strictly authoritarian, holding to a Confucian model of obedience to family and emperor.

In the wake of the revolution, the Communist Party expected complete compliance no matter how erratic the doctrine.

Now, as the free market spreads through China, there is perceived need for codes of conduct.

The revival of model workers such as Beijing bus conductor Li Suli and the government-sponsored campaign of 'spiritual civilisation' serve as examples of this.

The promotion of business law, spurred by economic growth, has been notably more successful than that of civil law and the development of business ethics - ultimately a voluntary code of practice - reflects the relative sophistication of the laws on which it rests and the market it serves.