Developing responsible leaders in China- 2011
Transcript of Developing responsible leaders in China- 2011
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Developing Responsible Leaders in China:
a challenge but a survival imperative
Henri-Claude de BETTIGNIESDistinguished Emeritus Professor of Globally Responsible Leadership, CEIBS, Shanghai
The Aviva Chair Emeritus Professor of Leadership & Responsibility, [email protected]
The Doughty Centre for Corporate ResponsibilityCranfield School of Management
May 11, 2011
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Plan
• Introduction
– China: its originality and achievements– China: its challenge for leaders
– China: its approaches and proposed solutions– Implications for business
– Implications for business schools
• Conclusions
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Great achievement of China
• Its achievements amaze the world: lifting 400 millions of people from poverty in a short time.
• Its process puzzles: blending socialism and capitalism.
• Its performance had a cost: making leaders aware and acting
• Its renaissance creates concerns: bringing uncertainty and fear of the new global power.
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Amazing achievements
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China
• Very different (in spite of the appearance, e.g in Shanghai)
• Very big (e.g. size of the' land, population)
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China
• Very big (e.g. size of the' land, population)
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A Comparison CountryCountryCountryCountry Area (kmArea (kmArea (kmArea (km²²²²)))) Population (in thousands)
2010 2010 2010 2010 2050 2050 2050 2050
China 9,596,960 1,330,141 1,303,723
India 3,287,590 1,173,108 1,656,554
Canada 9,984,670 33,760 41,136
EU 4,324,782 501,260 505,719 (2060)
USA 9,826,630 310,233 439,010
Source: Eurostat 2010; US Census; www.countrysize.com
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China
• Very diverse (e.g. provinces, cultures, minorities)
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China
• Very consistent and rapid growth
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China annual GDP growth (10.2% average)
Source: World Bank
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China
• Very rapidly moving into N°1 position
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China as N°°°°1 ( "globally")• Energy-saving bulbs
• Computer materials• Cell phones
• Color TVs• Batteries for electrical
cars
• Domestic electrical appliances
• Solar panels• Windmills
• Textile
• Toys• Steel and iron
• Leather• Aspirin
• Tobacco• Piano
• Shoes• ……
Source: Le Point, Dec 24-31, 2009
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China: a giant in bankingThe first 5 in market value (billion US$ 27/11/09)
Source: Bloomberg
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Source: OICA; JAMA; Wikipedia; China Daily, Feb 3,2010
Automobile production (million units)
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Internet users (million)
Source: CNNIC; ITU; Nielson
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China 2011: toward N°1
• With such a large population (1.33 billion)– a great economic performance (>9% over a long
period)
– in a short time (30 years)
• No precedent in history
Hence, it nurtures admiration, anxietyand fear (internationally)
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Developing "responsible leaders" in China:
a challenge.But a "necessity".
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As China is faced with somany challenges…
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Xi Jianghuo, Director of The China EnterpriseReform & Development Society, says
• "In fact, while Chinese enterprises and entrepreneurs are amassing huge amount of wealth, they are simultaneously contributing to serious negative impacts the include: the widening of the gap between the rich and the poor; practices of deceit and bribery; production and distribution of fraudulent goods; widespread pollution; unrecoverable environmental damage; and "sweatshops" labor practices that trample on human rights of workers"
• From Opening up the era of Chinese CSR, Leading Perspectives,Summer 2006, p.16
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Examples of challenges
Work Safety, workers protection
Work Safety, workers protection
Economic Inefficiency,
Bribery/corruption
Economic Inefficiency,
Bribery/corruption
Legal framework and its implementation
Legal framework and its implementation
Intellectual Property
Intellectual Property
Public Healthcare,Social protection, Old age
Public Healthcare,Social protection, Old age
Pollution, Environmental
DegradationResourcesShortage (Water)
Pollution, Environmental
DegradationResourcesShortage (Water)
Gaps:Urban-rural, coastal-inland, genderHuman rights
Gaps:Urban-rural, coastal-inland, genderHuman rights
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The environment challenge
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The water challenge (1)
• The per capita water volume in China is one fourth of the world average.
• 90% of cities’ groundwater and 75% of rivers and lakes are polluted.
• As a result of widespread water pollution, 700 million people drink contaminated water every day.
• Waterborne diseases have created a rising number of premature deaths.
• Between November 2005 and January 2006, three large-scale incidents occurred, halting water supply for millions of people and raising awareness of the challenges ahead.
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The water challenge (2)
• If present trends are not reversed, the World Bank forecasts that by 2020 there will be 30 million environmental refugees in China due to water stress.
• With 20% of the world’s population but only 7% of global water resources, China meets with a severe challenge.
• More than half of China’s 660 cities suffer from water shortages, affecting 160 million people.
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Challenge: the environment
• China will spend 15 billion yuan (2.2 billion U.S. dollars) in the first half of this year to beef up sewage treatment facilities as the nation works to clean up its environment. (Ministry of Environmental Protection of the PRC, April 2010)
• China issued its first national census of pollution sources, with data showing that the country's wastewater discharge totaled more than 209 billion tons while waste gas emissions topped 63.7 trillion cubic meters in 2007. (Ministry of Environmental Protection of the PRC, April 2010)
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Total global installed wind power capacity (GW)
Source: Global Wind Energy Council; South China Morning Post , April 14, 2010
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The view of Premier Wen Jiabao(NPC speech, March 5th 2005, on the 11th 5-year plan, 2006-2011)
• "In the outline (draft), the target for reducing energy consumption per unit of GDP is set at about 20% and the target for cutting the total discharge of major pollutants is set at 10%. These targets are designed to address the acute problem of mounting pressure on resources and the environment…. We must work ceaselessly if we are to create clean and pleasant living and working conditions for the people and leave our future generations with blue skies, green land, clear water and verdant mountains …"
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Leadership & Responsibility: the dysfunctions
• Poor safety and labor treatment:Migrant workers treatment, low wages (but increasing), workers unpaid, child labor, many coal mine accidents and casualties, miners suffer from pneumoconiosis…
• Human rights abuses:- Arrests of journalists, academics, writers, artists, researchers, human rights activists, spiritual leaders and simply whistle-blowers…- Human organs (e.g. from executed prisoners) trade, often without prior consent- Censorship of the media, monitor the Internet to curb dissent.
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The Migrant workers
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Average salary of migrant workers (RMB per month)
2007 Green Paper of Population and Labor (published by Chinese Academy of Social Sciences); NBS
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As of 2009
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The "safety" challenge
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Chine: accidents mortels dans les mines
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Coal mines (deaths): government intervention
Source: The State Administration of Coal Mine Safety; State Work Safety Supervision Administration
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But government intervenes
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The "corruption" challenge
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CPI (Corruption Perceptions Index) ranking2000 2005 2009
Finland 1 2 6New Zealand 3 2 1
Canada 5 14 8Singapore 6 5 3
UK 10 11 17US 14 17 19
Germany 17 16 14France 21 18 24Japan 23 21 17
South Korea 48 40 39China 63 78 79India 69 88 84
Philipines 69 117 139Russia 82 126 146
Indonesia 85 137 111
Source: Transparency International, 2010
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Corruption
• About 150,000 officials being punished every year for bribery, corruption and other offenses. (The New York Times, Sept 24, 2009)
• In February, 2010, the party issued a new code in the hope of ending a problem that exploded in 2009 with the conviction of 106,000 officials for corruption. (Central Commission for Discipline Inspection)
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Corruption
• “We will give high priority to fighting corruption and encouraging integrity. This has a direct bearing on the firmness of our gripon political power.” (Premier Wen Jiabao, March 2010, the National People’s Congress)
• In 2009, according to the Ministry of Supervision and the CCP’sCommission for Discipline, more than 100,000 officials were punished for corruption and 4.44 billion yuan (US $650 million) were recovered. The number of officials arrested and punished for corruption involving more than 1 million yuan (US $146,500) increased by 19 percent in the first 11 months of 2009compared to the same period in 2008. At least 15 corrupt high ranking officials were punished, the highest in 30 years.
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Corruption: leaders take action
• About 150,000 officials being punished every year for bribery, corruption and other offenses. (The New York Times, Sept 24, 2009)
• Action is taken: in February, 2010, the party issued a new code in the hope of ending a problem that exploded in 2009 with the conviction of 106,000 officials for corruption. (Central Commission for Discipline Inspection)
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Corruption: leaders take action• “We will give high priority to fighting corruption and
encouraging integrity. This has a direct bearing on the firmness of our grip on political power.” (Premier Wen Jiabao, March 2010, the National People’s Congress)
• In 2009, according to the Ministry of Supervision and the CCP’s Commission for Discipline, more than 100,000 officials were punished for corruption and 4.44 billion yuan(US $650 million) were recovered. The number of officials arrested and punished for corruption involving more than 1 million yuan (US $146,500) increased by 19 percent in the first 11 months of 2009 compared to the same period in 2008. At least 15 corrupt high ranking officials were punished, the highest in 30 years.
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Corruption cases
Name Position Crime Sanction Date
LI Peiyang
Former head of Beijing airport's management
company
Taking bribery and embezzling of US$16 million
Death penalty Aug, 2009
WANG Yi
Former vice president of the
China Development Bank
Taking bribes totaling RMB 11.96
million (US$1.76 million)
Death with a two-year reprieve
April, 2010
CHEN LiangyuFormer Shanghai Communist Party
Chief
Taking bribery of US$340,000
18 years in jail April, 2008
ZHENG Xiaoyu
Former director of China’s top food and drug safety
agency
Taking bribes of 6.49 million RMB (US$ 850,000)
Death penalty Jun, 2007
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Corruption: some recent cases (2)
Name Position Crime Sanction Date
LIU ZhihuaFormer vice
mayor of BeijingTaking bribes
of 1 million US$Death with a two-
year reprieveJan, 2009
CHEN Tonghai
Former chairman of Sinopec Corp.
Taking bribes of 28 million
US$Death with a two-
year reprieveJuly, 2009
WEN QiangFormer
Chongqing justice chief
Taking bribes of 2.4 million
US$Death penalty April, 2010
HUANG Guangyu
Founder & CEO of GOME Electrical
Appliances Holdings Ltd,
Bribery, insider trading and
illegal business dealings
14 years of prison, fine: RMB 600M,
& property confiscated: RMB
200 M
May 18, 2010
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Corruption
• “Corruption has not derailed China’s economic rise, but it’s rotting the establishment of a rule of law. The Chinese government has more than 1,200 laws, rules and directions against corruption, but implication is ineffective. (Prof. GAO Quanxin, the Chinese Academy of Social Science)
• “Corruption is the glue that keeps the party stuck together. Getting rid of it is not possible as long as they keep this system.” (Prof. PEI Minxin, Claremont McKenna College )
Source: The New York Times, Sept 4, 2009
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Some Business Leaders give theirposition, explicitely
(Wang Licheng, Chairman of the Board, Huali Group)
• "Commercial bribery has become a malicious tumor hindering the healthydevelopment of Chinese enterprises. If wecompete through bribery, it will set a corrupt standard for our whole commercial society and ultimately none of us willwin…" (China Today, September 2006, p16)
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The view of Premier Wen Jiabao(NPC speech, March 5th 2005, on the 11th 5-year plan, 2006-2011)
• "We will work hard to build a clean government and combat corruption. We will conscientiously carry out all tasks and measures for punishing and preventing corruption. We will launch a campaign this year to combat bribery in business, focusing on unhealthy practices in construction, land transfers,property transactions, purchase and sale of drugs, and government procurement, in order to resolutely put a stop to irregular transactions and we will investigate and prosecute cases of bribery in business in accordance with the law. We will continue to remedy improper practices that harm public interests and strive to resolve such outstanding problems as arbitrary educational charges and excessively high medical costs…"
• "Government employees at all levels, especially leadingofficials, must be devoted, diligent and responsible and serve the people wholeheartedly… They also need to be realistic and pragmatic in their approach to work, refrain from making empty promises, triumph over bureaucracy, formalism, deception and exaggeration, and fully carry out all tasks and assignments…"
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And, a few other challenges
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Intellectual Property Rights
• FY 2009 seizures of IPR infringing products from China totaled $204.7M and accounted for 79% of the total domestic value for all IPR seizures. (U.S. Customs and Border Protection, U.S. Immigration and Customs Enforcement, Oct 2009)
• China deals with 200,000 counterfeit cases valued 3.37 billion RMB (490 million US$) in 2009. (Xinhua, Jan 2010 )
• Branded goods, food ,building materials, home appliances, mobile phones ,auto parts, even medicines…
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Cooking the books ++• Shanghai Worldbest, a medicine unit of China's State-owned
textile and pharmaceutical conglomerate, said in a statement that it used inaccurate date to inflate profit by 65.11 million yuan (US$ 8.1million) from 2001 to 2004. (China International Business, O6.06 p.46)
• In China, a number of top bankers have been charged with fraud in recent years. Example: Zhou Lin, Shenzhen Development Bank) (WSJ 32.04.06), Liu Xiaoguang (GM of SOE Beijing Capital Group) (FT, 21.06.06)
• Corruption cases in China are becoming more sophisticated as the economy continues its rapid development and pose unique challenges to enforcement authorities… "Almost every type of financial institution has seen the emergence of criminal cases involving the solicitation of bribes in return for loans" Mr Ye Feng, (Director General at the Supreme People Procurate). Last year Chinese prosecutors launched more than 41.000 graft investigations, ¾ of which led to charges… The Chinese government is concerned that corruption will continue to fuel popular discontent and unrest, especially in rural Areas where local officials often exercise absolute authority…'" (FT, 10.05.06)
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Leaders are fully aware of the challenges
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Developing "responsible leaders":a survival imperative
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Where will change come from?
1. Government regulations and guidance
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• The government has an answer and wants to implement it:
The "harmonious society"and…
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"The concept of a harmonious society
is really China's rephrasing of the concept of CSR,
sustainable developmentand human rights in China"
(W. Valentino, China Daily, 27.10.2006, p. 11)
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CSR in China? a change in process
1. A "fashion"? A buzzword?2. An often misunderstood concept3. A concept that induces scepticism4. Some successful examples5. From concept to implementation: what
can be done?6. Responsible competitiveness: a
"categorical imperative"
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CSR in China
An often misunderstood concept
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Some misconceptions (?)• CSR equals charity• CSR is philanthropy, giving money away• CSR is for big corporations• CSR adds to costs, too expensive• CSR is just "cosmetics", a PR effort• CSR is "not too pollute"• CSR is just a fashion, it will pass. A fad, or A new "religion"• CSR does not really pay, it just "costs"• Small companies have not time, no resource for CSR• CSR is "a trick to make us less competitive, under the
cover of doing good"• My competitors do not pay attention, why should I
• CSR Yes! in 10 years (when I will be rich… when I willhave time)
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The view of Premier Wen Jiabao(NPC speech, March 5th 2005, on the 11th 5-year plan, 2006-2011)
• We must sustain steady, rapid economic development, speed up change of the pattern of economic growth, improve China's capacity for independent innovation, balance development between urban and rural areas and among regions, intensify efforts to build a harmonious society, deepen reforms and open wider to the outside world, we need to change our way of thinking about development, create a new pattern of growth, improve the quality of development, and make economic and social development more people-oriented, comprehensive, balanced and sustainable…"
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Where will change come from (beyond the promotion of Confucius and the "harmonious society")?
1. Government
2. International standard certification, e.g. Social Accountability 8000 (SA8000, 26000)?
3. Voluntary participation in international efforts e.g. Global Compact, OECD code of conduct, Caux Roundtable?
4. Corporate codes of conduct?5. Unions?6. Pressures from the civil society: media, NGO,
consumers?7. Education: in business schools (teaching CSR)?8. Business leaders: "responsible" business leaders?9. Transfer of management practices for competitive
advantage?10. Globalization pressure (foreign pressure on supply
chain)?
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CSR in China
But a concept progressivelyimplemented
with some success.
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Groups active in CSR Reporting in China
• PetroChina• CNOOC• China Mobile• Zhejiang Mobile• PingAn Insurance• Baosteel• Guizhou Telecom• JX Mobile• China Life• State Grid• Chalco• Cosco• Haier• Xizi UHC• SinoChem• Lenovo• Hysan AsiaPacific• Yili Group• …
• Degussa• John Crane• Volswagen• Atlas Copco• Total• Shell China• Novozymes• Toshiba China• Sony China• Pfizer• Omron• BASF• Coca Cola• Nike• Bayer• Standard Chartered• APCO• …
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Number of sustainability (CSR) reports
Source: CSR China
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Global Compact participants
Source: Global Compact, 2010
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What can be done to developresponsible leaders in China?
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Discuss with the skeptics (1)
• Make clear what CSR is not:– CSR is not philanthropy or a charitable deed– CSR is not a gimmick, a gadget, a fad– CSR is not cultural imperialism– CSR is not a luxury for rich companies– CSR is not a costly investment turning into a sunk
cost– CSR is not a constraint induced by NGOs' pressure– CSR is not an old product in a new package to create
a new market for consultants
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What can business leaders do, in China?(1)
• Understand the evidence that:– Successful corporations need a healthy
society and that a healthy society needs successful companies
– Such interdependence makes CSR a strategic necessity, win-win for both (given a good identification of the societal problems the firm is best equipped to help solve and from which it can gain the greatest competitive benefit).
• Realize that CSR offers an opportunity to be proactive.
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What can business leaders do, in China?(1)
• The pressure is growing from:– The employees will (increasingly) demand it– The government, pushing for the "harmonious
society"– The civil society; pushing through local
communities, medias, NGOs, …– The international community, pushing through
international organizations, foreign customers, supply chain partners and investors, …
– Some business leaders who want to build their brand
– Some shareholders
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What can business leaders do, in China?(1)
• Understand the evidence that:– Successful corporations need a healthy
society and that a healthy society needs successful companies
– Such interdependence makes CSR a strategic necessity, win-win for both (given a good identification of the societal problems the firm is best equipped to help solve and from which it can gain the greatest competitive benefit).
• Realize that CSR offers an opportunity to be proactive and that…
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What can business leaders do, in China?(2)
• The pressure is growing from:– The employees will (increasingly) demand it– The government, pushing for the "harmonious
society"– The civil society; pushing through local
communities, medias, NGOs, …– The international community, pushing through
international organizations, foreign customers, supply chain partners and investors, …
– Some business leaders who want to build their brand
– Some shareholders
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Some proposals to conclude
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A bright future?
• A government fully aware of the challenges.• A government driven by ambition but
pragmatism.• A government still in quasi "full" control (and
determined to hold to it).• A government "feeling the stones" as it makes
progress.• An urban population mostly satisfied with the
results achieved and by the opportunities it provides.
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«Internationalization", global standards, values & CSR
• The globalization process brings pressure on Chinesevalues and behavior for common « global » standards:– Labor: e.g. elimination of child labor, minimum wages, union
recognition, working hours– Safety: e.g. equipments (helmet, shoes, belt), safer methods
and reliable technologies– Environment: e.g. emission limits, effluents treatment, waste
management, forest logging limits and methods– Human rights: e.g. freedom of expression, prisoners’ work
and control– Property rights: e.g. rules of property ownership, patenting
systems, protection of intellectual property• China access to WTO, entry into OECD, ILO etc…
brings obligations, acceptance of standards embedded into values.
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Bringing CSR, through the growing pressure for global standards?
• It is supposed:– to bring "best practices", – to promote common pattern of behavior (easier to
understand and monitor)– To facilitate regional and global HR management– to level the playing field: every one using the same rules of
the game (a « global » game)• But:
– It is often ressented: ‘an imposition by the rich, or the West’– it is said to be inappropriate: ‘it does not fit into China’– It is too early: ‘In 10 years, yes, but not now’– Its implementation is improper: ‘the process totransfer the practices goes against our values’
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Some "Dilemmas"On one hand:• I want to transfer our « best practices », because we have more
knowledge and experience: Chinese will have to adapt to ourmethods, approaches, practices and standards.
• Let’s use a code of conduct, to have everyone in our operationsin China sharing the core values of our corporate culture.
• We need a global, common corporate culture• On the other:• I must do in Rome as the Romans do (e.g. as I should not have
the arrogance to impose my values on the Chinese): this is whyI pay bribes (or outsource bribery to my local partner or to myagent).
• I have global standards through the code of conduct of mycompany, but I do not apply them here (e.g. for environment, for safety) as I prefer local laws (less demanding) and regulations(less stringent).
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The double talk of best practices
• I shall rely upon and transfer « best practices » when they fit me: I have to be opportunistic
• When they do not, I will be a relativist (« It depends! », « There is nothing right or wrong per se… »), and « do in Rome as the Roman do »
• I will lobby against more labor regulation, and union development, but ask regulation for IP
• In any case, « the best practice is the one which contributes the best to the bottom line » (while I am here…): I am a utilitarian: the end justifies the means.
• In short: let’s implement my values, my best practices, but as long as it delivers the most value for my shareholders.
• It is Values for Value, rather than values for values• « Best practices » remain a tool exclusively used to achieve
bottom line expectations
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China’s leaders feel responsible to quickly develop their own modernity
• As China is engaged in its development process, its over-heated economy is:
• Associated to many issues, including:– Environmental deterioration– Infringement of intellectual property rights– Poor safety and labor treatment – Bribery and corruption– Human rights abuses
• The Consequence of a mindset.– China, humiliated by the imperialist West for more than a century, is
motivated by revenge, keen to catch up with the West and to (re)buildits global power. A new “late development effect”?
– China wants to develop a modern society, but in its own definition, its own terms, on the basis of its own (Confucian or eclectic) values. An attempt to reinvent modernity?
• And China may (re?) define CSR in its own way
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Developing "responsible leaders" in China:
Not a choice,But an "imperative"
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To conclude: who will be the "responsible leaders"?
• China's long term performance will rely upon its capacity to develop responsible leaders able to manage complexity and willing to build Sustainable Enterprises, i.e.– Will be men and women of character demonstrating strategic courage
to make the tough decisions needed to be made in the highly competitive Chinese and global environment.
– Will question the «command and control» approach and be willing to explore alternative management styles contributing to grow leaders.
– Will care, now, for the planet and the generations to come, integrating all stakeholders (present and future, in China and outside) in making their decisions
– Will be aware of and able to reconcile contradictions, to blend East & West, Public & Private, Personal & Professional, managing the interdependence as Yin and Yang.
– Will have a holistic vision, global that integrates the complexity and responsibility inherent to the China's power
– We willl need business schools and Faculty willing to take risk to innovate. Deans and some faculty members have to take the lead.
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It will be long road…With many challenges on
the road…
We should remain optimistic
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"If you think you are too small to make a difference, try sleeping in a room with a mosquito".
(African Proverb)