Harvard Business Publishing (HBP) has a new article out entitled, “Can You Be 80% Ethical?”

The report was based on a business survey conducted across 12 Indian cities, but questions centered around the stuff of white lies.

“Nearly half of respondents said it was quite appropriate to use the office telephone to make personal calls - even long-distance calls,” HBP reported.

Shocker!

“Almost half had no qualms about recording their entry times as being within permissible limits, even when they arrived late,” HBP noted.

Whoa!

“Another 60% found nothing wrong in carrying office stationery to their homes, while 63% said it was okay to do personal work during office hours,” HBP found.

Gulp. Make that double gulp.

By these standards, China can be a much less “ethical” place by the very “virtue” of the omnipresent guanxi.

“Corruption and relationship often can mean the same thing,” according to Ira L. Cohen, chief representative of China EMBA programs for Rutgers, who also is executive vice president of Universal Ideas Management Training Co. Ltd. (and nothing if not an old China hand, with more than 20 years of China business experience).

“You scratch my back and I scratch yours has negative consequence for the development of society,” said Mr. Cohen.

Gome’s Huang Guangyu, now under arrest on stock manipulation charges as the police investigate further, is a recent high-profile case in point.

Mr. Huang has been under investigation for a long time, but managed to keep the police/government happy for a while by being a good citizen.

According to Caijing, 1.3 billion yuan in loans from companies under he and his brother’s name were illegally obtained from the Bank of China, investigators said.

“They had siphoned cash through fake rents, mortgage loans and car loans,” according to Caijing’s report of police allegations.

The unpaid loan and alleged tax malfeasance triggered the 2006 investigation. But, surprisingly, the investigation was called off “mysteriously,” according to Caijing. He then set about some civic duties, acquiring in that same year “Zhongguancun Group, a struggling science and technology company created with much fanfare by the Beijing government in 1999.”

Coincidence or normal Chinese back scratching? There’s at least a bit of the latter.

You could say by doing his civic duty, Mr. Huang was at least 10 percent ethical. Had he been 20 percent ethical, he might have avoided his current scrape with police.

Mr. Huang’s case is no corrupt exception in China. Based on tales from Tim Clissold’s book, Mr. China, it appears to be more of a rule.

Investigating a case of fraud involving the owner of a brake-pad export factory in Zhuhai, Tim Clissold, whose group had invested sizably in the business, uncovered some truly odd details. First, shipping details were faked. Second, the investment appeared to have gone to build some hotels in Vietnam in secret.

According to Mr. China:

The picture soon got worse. In Wang’s safe, we had found two air-ticket vouchers for his flight to America in the previous month. One was for Wang’s journey to Las Vegas, but who was the other passenger?…. He was the assistant bank manager of the branch where we had deposited the US dollars. It was the same branch that had issued the letters of credit.

Mr. Clissold emphasized the obvious: the bank manager is not a car parts salesman, so why was he on a sales trip to America?

When the president of the bank was confronted, he wasn’t helpful. He was irritated.

“Just because he was on that flight doesn’t mean that he’s done anything wrong,” the bank president said.

“I didn’t say it did, but you have to admit that it’s a bit unusual,” Mr. Clissold replied.

“Why?” the bank president asked, staring blankly.

Meanwhile, the Anti-Corruption Bureau of the Zhuhai Government – charged with investigating the case – asked Mr. Clissold’s group for a car and money to do so. In other words, a bribe for doing its anti-corrupt duty. They didn’t make much progress.

Later, it was also found that a Zhuhai government official was a shareholder of a company implicated in the fraudulent scheme.

When the case finally went before a Zhuhai court, the judge found the case “confusing” and instead of demanding bank officials’ appearance in court, he went to the bank to ask questions. The written judgment – which found against Mr. Clissold’s group – included new evidence that was never heard in court.

In other countries, you follow the money trail in an investigation. Clearly in China, you can follow the two-way guanxi trail, which in this case is as follows: Wang<-->assistant bank manager<-->bank president<-->Zhuhai judge, and also Anti-Corruption Bureau<-->Zhuhai Government<-->Zhuhai judge.

Corruption corrupts. Absolute corruption corrupts absolutely.

But ultimately, my question isn’t “Can China Be 10% Ethical?” My question is, “Can You Be 10% Ethical in China?”

Global Outlaws: Crime, Money, and Power in the Contemporary World, by University of Notre Dame anthropology professor Carolyn Nordstrom, finds that much of the world’s crime is facilitated not by drug dealers and other hoodlums, but – with a wink and a nod - by corporations, regardless of where their dealings lie.

One CFO of an elite multinational told Dr. Nordstrom:

We have to juggle all of this. Our people doing these negotiations are on the frontlines, so to speak: they meet at government offices, in boardrooms, at private meetings, behind closed doors. They spend days, weeks, months working out acceptable deals. They come back to us, to the officers, to the board and tell us the final word on what they have managed, and we forge our response. We develop an approach that can meet public scrutiny. But what goes on behind those closed doors, that’s their business, their work.

Walk it down a level. So a project gets started in some country. Some guy is out on a production site and he has to get things done. He has to get parts, supplies, labor, contracts, transport, negotiations, you name it. He is beholden to us at corporate headquarters – he has to get things done, done on time, and done cost-effectively. And he is beholden to the conditions and the people out with him. He needs something, and the only way to get this is on the black market. He plays with customs; he crafts “creative” ways to get around policies; he greases the palms of people he depends on. That is how it works.

But he doesn’t send this to us in a report. He doesn’t come up to headquarters or meet with an officer of the corporation and talk about these things. He does it and turns in the kinds of reports the system expects. He gets things done, or he risks losing his job.

You can walk this all the way down the line. The people working for this manager know they have to get the job done. If they don’t, there are others willing to step in. And so they do it. And they don’t write this up in reports for the site manager any more than he writes it up for us.

I guess we know it. I guess we know how it works…. We know not to ask for the, ah, details…. It is a fact of all business.

And the line – described as a fine one here between legal and illegal – is nothing compared to the obvious porous one between illegal and immoral, but also porous one between legal and immoral.

War-torn Angola some years ago sets the stage for this argument, although it easily could be transplanted to mainland China in some form or another:

At the level of passengers, Angola doesn’t seem a prime commercial airline routing site. But the massive amounts of military supplies flown in and the extensive resources flown out make countries like Angola desirable to well-known international airlines. The profit margin on air cargo is a carrot dangling in front of airline executives; and that carrot can illuminate the business ethics of large corporations.

In order to receive the right to fly into Luanda, Angola, the airlines had to fly a special government man’s produce and goods to Europe for free.

Most major airlines involved in negotiations agreed to these kinds of deals.

“The one declining said it smacked of corruption and unfair business practice – not just for the country, but for the airlines,” Dr. Nordstrom wrote. But no one talked about “the fact that Europeans sitting down to a nice, reasonably priced salad with tomatoes from Africa were linked by their purchase to military battles and the forced relocation of poor villagers who were then transformed into a desperate, unpaid workforce…and to deals with airlines to provide free transportation for the fruits of this labor.”

Can you be 10% ethical in China?

You could be. But clearly, most of your multinational and Chinese competition isn’t.

Take heart, at least, that a few good businessmen and women aren’t taking the office stationary home.

    Channel: Vital News     |