2. What is “Guanxi”?
• Loosely translated to “networking” or
“relationship”
• Tacit differences
– Reciprocity
• Don’t accept if you can’t reciprocate
• Out of obligation than gratitude
– Long-term orientation
• Deep relationship for trust
• Life-long responsibility
– Shift of family-based to social-based “Guanxi”
• “Pin Die” means competition of family background
• One-child policy
3. Foundation of “Guanxi”
• Based Confucius’ “he” (harmony) of
kinship and friendship
• And “ren” of mutully supportive
relationship
• And “li” of courtesy
4. Case Analysis – Theory vs Reality
“… hire Lin Chen as a government affairs
coordinator … familiar with the Chinese way of
doing business”
• Has “renqing” and “mianzi ”with
Mr Zhu
– Close personal “guanxi” with
Central Department
• Case study implied that “gift
giving” equals “achieving
approval ”.
• Cultivating of “Guanxi” is a longterm process. “Gifting” may be
the beginning of relationship
building. They may give gifts but
does not mean they will get the
approval.
• Due to the country’s long history
of wars and foreign invasions, the
Chinese are wary of foreigners.
4
5. Case Analysis – Theory vs Reality
“According to Chinese law, to give gifts to government
officials and expect them to take advantage of their
position and power to conduct illegal actions is bribery.
Our intent is to motivate officials to handle our
application legally but without delay. I see no serious
ethical problem”.
• NES was not the only company
whose application was deemed
“complete and perfect”. If the
official speeded up the process of
approval because of gift, is it fair
to other similar companies?
5
6. Case Analysis – Theory vs Reality
“The officials say that they will consider … only when
the application is deemed ‘complete and perfect’. They
can always find some minor issues. But the officials
insisted on their original opinion without giving a
detailed explanation of the relevant legal basis”
• It is a common phenomenon in
Chinese public service, although
it is not definitely a rent-seeking
behavior. The policy and
procedure are always very
complicated, obscure, fickle and
flexible.
6
7. What is Bribery?
• Bribery and tipping, are they different?
– Why do you tip?
• Reward good service rendered
• Encourage good service in the future
– Why did you bribe?
• Gratuity for a favour
• Induce favourable future cooperation
vs
8. What is Bribery?
• Only a fine line separates socially
acceptable act of tipping and
immoral act of bribing
• Places where people tip heavily,
chances of bribes are higher
• In many less developed countries, they are understood as
unsaid entitlements. It becomes corruption, only when the
person takes more than his entitlement or never shares.
9. Are Gifting, Wining & Dining Briberies?
• Cultural norms aimed at establishing good
“guanxi”, hence functioning society based on “he”
– Meaningful experience together to connect
– Opportunities to discuss on neutral territory
– Not necessarily intended to ask one party to break laws in
order to facilitate
• Who does not like gifts?
– Gifts create happiness hence create the necessary
conditions to communicate frankly and good partnership
10. Don’t Confuse Ethics and Morals
Ethics
What are they?
Morals
Rules of conduct recognised in
a group of people, culture, etc
Beliefs- and values-based
conduct of an individual
Where they come External – Society
from?
Internal – Individual
Why we do it?
Because one believes in doing it
Because society expects it
What if we don’t? Face ostracisation
Face remorse, discomfort, etc
Variation
Varies from contexts and
cultures
Consistent with one’s beliefs
and values, transcends cultural
norms
Grey Area
One who follows ethical
principles may not have morals.
Likewise, one could violate
ethical principles to maintain
morality.
A morally-bounded person may
choose to follow a code of
ethics (WIRDATRD)
A person who has no moral
could be amoral, not necessary
immoral
11. Ethical Reasoning
Reflect on Company’s Values and Purpose
Ethical
Sensitivity
• Is there really an ethical dilemma or just dilemma?
Ethical
Judgement
• Who are the stakeholders involved?
• What are the relevant laws, outcomes and values?
- Why and why not? How does the situation make you feel?
- What are the values in conflict causing in physical or psychological harm?
Ethical Intention
• What are the internal factors affecting your choice?
- Motivation, commitment, fatigue, convenience, etc
• What are the external factors affecting your choice?
- Professional, social, organisational, political, family, etc
Ethical Behaviour • Is moral courage needed to act on intention and/or decision?
12. Ethical Reasoning
Ethical
Sensitivity
- There is no ethical dilemma in Chen’s proposed approach as it is how the society
works in China.
- Nonetheless, there were gaps between the trio’s personal morals and business ethics
in China, and business ethics between China and Germany.
Ethical
Judgement
- Nobody’s interest is sacrifised nor harm was done to anybody.
- No law was broken. Law is vague of the acceptance of gifts in private capacity.
- The outcomes would have benefitted the stakeholder, which included the trio tasked
to set up the holding company, shareholders of the company and employees in China.
- The veto factor would have been the espoused values of the company.
Ethical
Intention
- No intention for the official to break the laws nor approve something illegal, but to
nudge the officials to give some priority and advise accordingly.
- There are possible internal motivations like careers advancement for the trio and
fatigue in long-drawn approval process, and need to free up the registered captial
quickly
Ethical
Behaviour
- There is no moral courage involved in either the options of scrapping plan or playing
along with the cultural norms.
13. Ethical Decision Flow
• Society
•
Society
As the holding company’s focus is in
China, the ethics in China should prevail
when there is a conflict.
• Company’s Purpose & Values
•
Competitors’
Behaviours
Desired
Outcomes
Company’s
Purpose &
Values
•
Competitors’ Behaviors
•
Company’s
Approach
•
As much as possible companies should
adapt to local practices, but being very
clear not to run contrary to the
company’s espouse values and the local
laws.
Benchmarking against competitors’
behaviour might not “right” own
actions but it set the tacit boundary
when ethics are in conflict.
Company’s Approach
•
Between the basic ethical principles
and the upper boundary for grey area,
the company has to decide.
14. Localising Ethics for Business
• When ethical values conflict, people should follow the
local one as the their own values might be meaningless
in the local context
• Every organisation has core values which shape the
identity of the organisation. Although companies
should WIRDATRD, it should not be done at the
expense of their core values
– WIRDATRD to survive, use local ethics
– When issue transcends legality, use international norms
– When no reference, use morals of higher regard
15. Localising Ethics for Business
• Future holding companies should develop special
ethical codes to recognise local business cultures, not
just China, if the cultures differs significantly.
– Avoid putting staff in dilemma frequently
– Setting upper and lower boundaries of business conduct
16. Conclusions
• It is important to understand human and cultural
behaviours to succeed in China, or in any
business
• We should not equate moral and ethics, and
imposing our standards onto others without
understanding the cultural context
• Understanding the boundaries of the playing field
allows one to “thread near the line” instead of
disadvantaging ourselves by the self-imposed
boundaries
17. Disclaimers
• Our views are solely based on the academic
nature of the case study and in not way
represent our personal morals and ethical
conduct
