Who Teaches the Chinese Business Ethics?

Chances are you have never heard of Zeng Chengjie. He was a big time real estate developer who, according to Business Insider Australia (July 15, 2013): “Allegedly defrauded more than 57,000 investors out of approximately RMB2.8 billion (US $460 million)…He used the money to fund his company that bid business ethicsfor urban development projects, including key local landmarks and public facilities, in Jishou, a small city in Hunan, China.”

The Chinese government imposed a penalty on Mr. Zeng; death. He was executed even before his family had the chance to wish him farewell.  He violated Chinese Business Ethics.  Yet, day after day the news reports that unethical practices are common in order to do business in China.

Though China keeps executions for white collar crime a secret, Chinese human rights groups place the number of white collar executions at approximately 4,000 per year. These are not murderers or kidnappers mind you, but violators of ethical business practices. The range of violators awaiting executions range from corrupt CEO’s of major companies to illegal fund raisers to politicians who have accepted bribes to small business owners.

Naturally, there are protests by those who claim local party officials played a role in “assisting” businesses commit fraud and others protest that preferential treatment is given to those with more political muscle than others. However, some of the sentences are over the top in their severity. Even in a case of a plea bargain, the sentence is usually amended to life in prison.

When Mr. Zeng was imprisoned, he was compared to Bernard “Bernie” Madoff. Not that I’m counting but Madoff’s Ponzi scheme was in the billions of dollars; multiples of Zeng’s crime. Madoff ruined many lives and he did so without compunction. Ultimately, he was sentenced to 150 years at the Federal Correctional Complex, Butner, North Carolina. It is a country club compared to a Chinese prison.

Zeng had no appeal process. A lethal injection was jammed in his arm and his name will forever be shamed.

Consequences?

Somewhere, somehow, Madoff probably realized he was violating an ethical code of conduct. In October 2011, Barbara Walters interviewed Madoff:

“He has terrible remorse, he says he knows that he ruined his family,” Walters said, adding that Madoff told her that with the help of therapy he does not think about what he has done, but “at night he says he has horrible nightmares.”

In other words, he knows. I am not as certain that Zeng understood the full impact of his crime at the time he was committing the crime. I would hazard a guess and say that of the 4,000 per year in China awaiting execution for ethical violations, most do not appreciate the full implication of their crimes.

Stories that come out of China are legendary in regard to product adulteration (milk, honey, pet products dumplings – you name it), fraud, manufacturing defects and practices, widespread bribery, cost overruns and on and on.

When caught, they express guilt and sorrow, but I wonder if they are expressing guilt as a function of shame, or that they understand the far-reaching business implications of their actions. My strong guess is the former; they are often clueless as to consequences in their pursuit of profit.

China was propelled like a rocket in a span of three or four decades. The country went from agrarian under a strict communist regime, to explosive growth. Millionaires sprang up all over China within decades – or less. It is difficult to argue with China’s success.

Despite China’s growth, I believe that their ethical business failures will do more to hamper growth their future than any other single factor. There are hundreds of manufacturing experts who can assist a Chinese factory to set up a production line to reach the American market.  However, there are only a handful of people who can explain to the executives of that factory why it is better to approach the American market with ethical business practices.

If China can compete ethically as well as in a production capacity, it will benefit not just China but the entire world. I would love the opportunity to teach them.

 

Posted by Chuck Gallagher in business ethics, Ethical Behavior, ethics, Ethics - Political and tagged , , , , , , .

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