Q: “When would you trust your Chinese Employee not to think corrupt anymore, after three years?” A: “More like ten years” said the Manager. I was interviewing a Western Manager of a Multinational in China this week, about the Sustainability and CSR issues that were of importance for that company nowadays. We were talking about their Global Culture, and the rules in that Culture that had to be executed in any Country that they operated: the rules and standards that were non-negotiable. Three top rules were implemented despite any culture surrounding the company: their own strict Health & Safety Rules were non-negotiable, just as respect for people in HR issues. And no corruption, absolutely no corruption.
How long does it take for Global Standards to settle in?
These issues, respect for people and no corruption were the hardest to implement: even if the standard of the company was very clear, people kept trying or expecting to try to get business deals the ‘Chinese’ way. the manager had experienced that a younger colleague would come up with a solution to gain a permit that was not compliant with the Company standard (i.e. handing over a few red envelops to officials), just as a proposal: he as manager dismissed the proposal and made it clear that the Company would rather wait two years than get the permit illegally. This the employee understood. But still the fact that the employee would even consider proposing the wrong action, could tell the manager the company global culture was not settled in completely in the mind of his Chinese Colleague. So that’s how I asked him about how many years he thought it would take for the idea of absolutely no corruption in the company to settle in. He thought it could take ten years…
SMEs, Multinationals, and the cost of Corruption detection
If it would take ten years to get the wrong mind-set out of someone’s head, how could you trust anyone for the first nine years in your company? Well, Ernst and Young China, the consultancy Company, gave a presentation in the European Chamber of Commerce (on Corruption and Compliance) of a piece of software they had developed that could track every. single. piece. of. company. receipt. all across over China for a company, and could give you a daily, weekly or monthly overview of employees that could be in risk of corrupt situations or that could be corrupt themselves. If you cannot trust your employees (think of any fast growing Multinational in China), it will cost you an enormous amount of money to track and monitor them. This lack of trust is what makes doing business in China so expensive, so is China really still a ‘cheap’ labor force?…
Trust, Third Party services and the latest trends
These higher costs related to corruption and lack of trust make it less profitable to do business here, but what is also expensive is the use of third parties, mostly shady service bureaus that help companies to get a permit to operate. Consider a third party that will give a 100% guarantee you will get the bid, but asks a 50% commission- what kind of ‘work’ will they do for you for that? And does this leave you any profit margin? At the same European Chamber Event this was contemplated as well, and by several people it was said there that you should really consider as a company not to work with third parties at all, if possible, in such cases: not only were the margins too low for real business, the service bureau would certainly be operating in a corrupt way for you. And the United State’s FCPA and the UK Foreign Bribery Act would condemn the use of third parties in this way. Outsourcing your corruption issues to third parties was unwise for business, and still illegal. Many companies are fighting back corruption by imposing their global standards more clearly in China. They are saying: no, we are not giving any gifts anymore (AstraZeneca 2014), even if this does not fit the local business culture. We will operate ‘insensitive’ of the culture if the (corrupt) culture hurts our non-negotiable rules. And this was something that I haven’t heard much about yet in China, but hope to hear more about in the future!
- Look at the exact service third parties have to offer: Is it realistic? Is it work? Could you do it yourself?
- Have a strong back- up from Head Office overseas if you want to stay non-corrupt. If it takes you two years to get a permit the right way, you want their back-up completely. Tell them they do not have the ‘right not to know’ if they want their company to stay clean from corruption.
- Keep explaining and living the example at all the times, if you want to teach your employers to be non- corrupt. There is no ‘a little corrupt’