Doing Good Business in China

The following sections are included:

• About Rothlin LTD.
• About the Editors
• Contents

The term “Confucian Entrepreneur” can easily be abused by both entrepreneurs and self-styled scholars in order, masked, to continue doing business or conduct business in a ruthless way that completely lacks any ethical and legal norms. But, not all who claim to be “Confucian Entrepreneurs” are fraudulent. The challenge is learning to know the difference between what is real and what is fake. This article limits itself to pointing out the prime importance of case studies as a reality check in an ongoing search for the necessary benchmarks to distinguish fake from genuine Confucian entrepreneurs who can and do contribute to sustainable economic development…

Ethics may be a new and unfamiliar word for you. It may seem foreign, as it does come from the traditions of Ancient Greece and Rome. You may find it taught as an academic subject in philosophy departments. And, you may find it in various qualified forms as “applied ethics”, “professional ethics”, “medical ethics”, “business ethics”, and other specialties. Our concern with it here is whether there is anything important to learn from it, as we examine case studies in business…

The following sections are included:

• The Use of Case Studies in College Classrooms
• Challenges When Teaching Business Ethics
• Teaching Business Ethics with Case Studies
• Using this Book
• Bibliography

In 2016, Baidu Inc., China’s most successful online search engine faced consumer protest when internet users accused the company of selling administration rights of online health forums to unqualified doctors, private hospitals, and pharmaceutical companies. Users expressed that Baidu Inc. was commercializing these forums and ignoring the social impact that health forums have on consumers. The company was accused of putting profit over its social responsibility.

In 2011, Tencent, one of the most influential Chinese Internet companies introduced a new service called “WeChat”, which has become the most relevant chat service in China. Another year later, official accounts were also introduced, which allowed users to monetize their account and also receive donations. The service was confronted with severe criticism when a user published information on his young daughter’s illness and received donations from other users. Publicizing details about the illness and receiving these donations was seen as “bloody marketing”, which led to a discussion about charity fraud and Internet services supporting it.

In 2017, Tencent Holdings Limited, China’s Online giant faced the rage of its users after publishing an emoji featuring World War II sex slaves called “comfort women” on the International Memorial Day for Comfort Women. The company officially apologized, and the third-party provider that had designed the emoji was forced to stop its operations for two months by the government. The case discusses the freedom of speech, corporate communication, and moral issues of the events.

On April 12, 2016, a 22-year-old student named Wei Zexi died of synovial sarcoma, a rare soft tissue cancer. He was diagnosed with the disease two years earlier and documented his experiences seeking treatment on Zhihu, a popular question-and-answer website in China. The title of his testimony was called “What do you think is the greatest evil of human nature?” His answer? Baidu, China’s largest and most prominent search engine. This case will detail the controversy that has surrounded his death and the moral dilemmas it presents.

Alipay is one of the leading third-party online payment platforms in China. One of the company’s services is “I Owe You” (IOU), a lending service in which users can lend money to each other. In 2016, Alipay terminated this service after the suicide of a user who was unable to repay his debt. But, there are other corporations still very active in Chinese P2P (peer-to-peer) lending. The case discusses this phenomenon and its effects on Chinese society.

In 2017, Luo Mingxiong, CEO of Jingbei Investment and one of the most popular angel investors in China stated publicly that his company is not investing in companies or start-ups that have a female CEO. Luo’s comment provoked outrage from women, human rights groups, and especially female entrepreneurs. This case discusses gender equality, female entrepreneurship, and venture capital investments in China.

China is well known for its “One-Child Policy” introduced in 1979, which intended to curtail the growing population rate. In 2015, it was replaced by a “Two-Child Policy” and numerous new regulations to support families to have two children. The new policy is not as successful as planned, since many Chinese women decide against a second child. The main reason is their fear of facing discrimination at their workplaces and negative effects on their careers. This case discussed the effect of the new policy and whether the two-child policy has contributed to gender discrimination in China.

Foreign Domestic Helpers (FDHs) in Hong Kong are playing an important role in domestic households. Many of them are women, mothers with children of their own at home, who are working overseas in order to pay for school fees, and all the other needs of their families in Indonesia and the Philippines. A newly established NGO, Hong Kong’s “Fair Employment Agency” (FEA), states that the crucial problem is “debt bondage”, namely, that incoming FDHs typically pay very high fees to the agencies through which they obtain their contracts in Hong Kong and support FDHs to enter Hong Kong under fair conditions. The case discusses social businesses and asks whether introducing cheap labor is actually a social business idea.

This case discusses the problems coal miners in Heilongjiang Province faced when not being paid. They staged massive protests after not getting their wages for six months. The case discusses the issue from various perspectives, the company claiming to have great debt, the workers asking for their rights, and the Chinese media reporting on labor and health issues.

PepsiCo GCR, an MNC producing popular brands of soft drink beverages, integrated philanthropic activities into their business activities in China. It donated over RMB 53 million yuan for various projects supporting water safety all over China. Their activities affected more than 600,000 people. One of the most memorable projects is called “Water Cellars for Mothers.” The case discusses PepsiCo GCR’s involvement in the “Water Cellars for Mothers” project and asks whether these community-oriented activities of the firm are merely a public relations coup, dictated by strategic business considerations, or a genuine act of corporate philanthropy.

China’s population is aging. The ratio of retirees to workers is increasing at the same time as the size of the average family is decreasing. This is putting a strain on China’s working population, who are responsible for taking care of their retired family members. This tradition of parent/child reciprocity in China is called filial piety. However, with changing dynamics and demographics, how it is or ought to be practiced in the 21st century is in need of fresh reflection. This case study thus presents the challenges and opportunities facing the practice of filial piety and explores mutually beneficial options for both children and parents.

The cockroach farming industry in China has grown without much publicity. However, after a building housing a cockroach farm was leveled in the city of Dafeng, Jiangsu province, under the assumption it was vacant, millions of cockroaches escaped out into the open. Authorities had to work quickly to prevent the swarm of roaches from reaching farming and residential areas. This case breaks open the ethical issues involved in cockroach farming and discusses questions of industry transparency.

Corporate social responsibility (CSR) is a concept with varying interpretations. However, almost always, it involves socially oriented partnerships between corporations and non-profit organizations. This case details a partnership between China’s Proya Cosmetics and UN Women. It aims to address the multifaceted issues facing women in China today through fundraising, advocacy, and events. It also discusses what CSR is and whether Proya Cosmetics is embodying its aims.

The new Charity Law of the People’s Republic of China prohibits using charitable donations to publicize tobacco products but does not define the penalties for violating this provision. There are other products carrying health and safety risks for Chinese people, such as alcohol, but the law does not forbid these. The case discusses this law and the question of whether this ban should be extended to the manufacturers of other ostensibly harmful products.

“Green Collecting” is a movement in favor of art pieces that use sustainably sourced materials. In China, the movement has put a lot of attention on the use of ivory — derived from the tusks of elephants — in the creation of various kinds of collectibles. As awareness has grown about the unsustainability of using ivory in art, TRAFFIC, a wildlife trade monitoring network, and WWTX, a Chinese-based trading platform for collectibles, have collaborated to hedge against the further exploitation of elephants for their ivory. This case outlines their partnership and how corporate social responsibility animates their mission.

Product quality scandals are a major issue in China. Not only do they erode public trust and consumer confidence but they can also destroy the image of a company, even an entire industry. Enter the role of public relations as it relates to crisis management. This case will detail a dispute involving Nongfu Spring Company (Nongfu) and the Beijing Times.

In 2014, Shanghai Husi Food Company Ltd. (Husi) was found guilty of supplying reprocessed and expired meat to their western fast food clients operating all over China. The company lied about production and expiration dates and provided false guarantees about the storage life of their products. Many Western fast food clients such as McDonalds and Starbucks were affected by the scandal. The case discusses the scandal, whistleblowing, and food safety issues in the People’s Republic of China.

In 2016, IKEA, the world-renowned Swedish furniture manufacturer, recalled some of its adult and children’s chests and dressers in US and Canada. But, despite the fact that IKEA also sold the same more than a million times in China, the products were not recalled there. Even if the company has more than 20 stores in the country, Chinese law did not force a recall. This case discusses the difference between legal and ethical decision-making at IKEA and asks whether ethical decisions are of importance in the People’s Republic in China.

Product safety is a concern in China. From the quality of the material inputs used in production to the degree of compliance by manufacturers to existing safety standards, companies have responsibilities to consumers in the way their products are created. When such responsibilities are skirted or ignored, consumer confidence goes down and the search for alternatives begins. To understand which brands are trustworthy and which are not, Wei Wenfang started a company named DaddyLab, which tests the toxicity of stationery and other products used by children in primary school. This case discusses the concept of responsible entrepreneurship and whether Wei embodies its characteristics.

China is a country of over one billion people. All of those people need to eat every day. And, not only eat but eat well. Unfortunately, over the past decade, a series of high-profile food safety scandals have deteriorated the country’s confidence in the quality of its food. People are skeptical about everything from meat to lettuce to cooking oil. What can be done? Many, who feel the food industry is too far corrupted, say “mei ban fa” (没办法), or “nothing can be done.”

However, all hope is not lost. There are entrepreneurs and innovative business leaders who are taking strong action to counter this poor public perception of China’s food industry. They see this social problem as a responsible business opportunity and are setting a new precedent in farming practice in China.

Organic farming is a development in agricultural practice that emerged in response to concerns about large-scale industrial farming or so-called agribusiness. As we shall see in this case study, the widespread use of synthetic chemicals, growth hormones, and Genetically Modified Organisms (GMOs) in industrial farming has come under heavy criticism in recent years. The industry has been scrutinized from many angles, including consumer health, sustainability, entrepreneurship, and business ethics. However, industrial farmers engaged in these practices have defended themselves and their behavior, presenting their own research aimed at assuaging anxiety about the risks associated with eating food produced under these conditions.

Nonetheless, the organic farming movement is international and gaining momentum, with much of the progress being pioneered through agricultural entrepreneurs. This case study will compare the organic farming movement in China and the United States (US) and provide examples of industry entrepreneurs.

Taobao is an online platform on which users can sell their products within China and all over the world. Many Chinese villagers use this opportunity and produce products to be sold on the platform. The problem is that they ignore international Intellectual Property Rights and produce and sell products that resemble brand products from all over the world. The case discusses the developments of the so-called Taobao Villages, the protection of property rights in China and foreign manufacturers’ responses to these challenges.

In 2016, Jack Ma, China’s richest man, mentioned publicly that he thinks that fake good are better than the original ones. This comment started a discussion on production processes in China, the protection of property rights, and how foreign manufacturers of brand products are affected by them. The case discusses these issues from various perspectives.

International supply chain management is an involved enterprise. There are a lot of moving parts, all of which need to work harmoniously together for the production of goods to happen effectively and on time. This case discusses a situation where Rip Curl, an Australian designer of surfing sportswear, was outsourcing production to a factory in China that was in turn subcontracting to a factory in North Korea, an unauthorized country for the production of Rip Curl apparel.

In August 2007, waters from an adjacent river flooded some of the tunnels of the Zhangzhuang mine near the city of Xintai. 172 miners were trapped in the mine and died. The flooding was caused by heavy rain and not by problems within the mine and was labeled as a natural disaster. Since China had just introduced a new set of regulations mandating payment of 200,000 yuan to the families of workers killed in industrial accidents, the question of whether the incident was a natural disaster or an industrial accident became significant for the families of the workers killed. The case discusses this incident and presents questions on labor safety, corporate responsibility and the current situation of mine workers in China.

Bike-sharing, the ability for a person to rent a conveniently located bicycle for a short-term purpose, has grown quickly in popularity since the industry began in 2014. Bicycle units have become ubiquitous throughout cities in China, with both positive and negative effects. This case details the emergence of the industry, the major players, the effects of industry competition, and the environmental impacts. It also challenges readers to reflect on and discuss strategic questions concerning the future of the industry.

Consistent with its COP21 (Conference of Parties, 21st annual meeting) agreements, creating a United Nations Framework on Climate Change, China recently announced a three-year suspension of new permits for coal mine operations. At the same time, China has made major investments in developing renewable energy sources, and now leads the world in wind and solar power generation. It has also begun to ramp up its efforts to develop nuclear power. The search for alternatives, of course, means a shift away from carbon-based fossil fuels like coal and oil whose use generates the emission of the so-called “greenhouse gases”, thought to be responsible for global warming. This case discusses China’s motives in the global climate debate.

Each day, China’s food delivery platforms process 57 million orders. Every order is delivered in a food container leading to an enormous amount of plastic bags, containers, and disposable chopsticks consumed and disposed every day. Food delivery has led to serious waste problems. The case looks at different perspectives on this problem and asks what can producers, platforms, and consumers do to decrease garbage in food deliveries.

China is the world’s third-largest beef producer after the United States and Brazil. Despite this, China is not complying with the environmental measures that have been adopted elsewhere by the beef industry. Current Chinese regulations and standards covering the negative impact of the meat industry are scarce; research studies measuring the impact of current policies on air pollution have a focus other than the beef industry, such as thermal power, metallurgy, and iron and steel production. The case discusses the current situation of meat production in China and its effect on the environment.

After almost 500 children studying at a junior middle school in the city of Changzhou in Jiangsu province became sick with a range of illnesses. Investigations revealed the school had been built on polluted ground. The premises had been formerly occupied by three chemical pesticide factories, which left the ground toxic. After investigations, questions arose as to why the school was built there. This case presents the moral issues involved, including corruption, stakeholder rights, and corporate social responsibility.

In November, 2016, JPMorgan Chase was found to have an internal program called “Sons and Daughters.” It prioritized hiring the children of high-ranking political officials and business executives in China and Hong Kong SAR as a means of doing business. They were fined for bribery by the Securities and Exchange Commission for violating the Foreign Corrupt Practices Act. This case discusses what is and is not proper hiring protocol, the Confucian notion of guanxi, and provides an imagined scenario for discussion and debate.

China’s movie industry has developed over the past decades without a number of setbacks. Despite this, China is the second largest movie market in the world. Its competitiveness often leads to unethical behavior in the industry. One major scandal shook the industry when a film distributor, Beijing Max Screen, inflated ticket sales to boost the performance statistics of the movie. The case discusses the scandal, looks at different players in the movie business in China, and asks how to increase business ethics in this particular industry.

After China’s stock market experienced serious turbulence in 2015, the number of Peer-to-Peer (P2P) start-ups and schemes where lenders and borrowers, in theory, could deal with each other directly increased. The benefits of these new businesses seemed obvious, financial intermediaries with their rules and regulations are eliminated, no time-consuming credit worthiness checks, and it got easier for small businesses and individuals to get loans.

However, one of the largest players in the field, Ezubao, was accused of running a Ponzi scheme. The case discusses the scandal, explains the concept of a Ponzi scheme, and asks how the Chinese government can protect investors in the future.

This case describes how a Chinese entrepreneur started a business by buying up discarded vaccines and reselling them to hospitals and clinics. The entrepreneur, Pang Hongwei, was convicted once, but could still continue her activities very quickly turning it into a multi-million dollar business. Only in 2016 did the Chinese authorities put an end to this and arrest more than 300 business people and government officials involved. The case discusses the scandal and asks what responsible entrepreneurship is.

China Huishan Dairy Holdings Co Ltd. was accused in December, 2017 of accounting fraud and embezzlement by a US-based short selling investment firm named Muddy Waters. The accusations were based on on-the-ground investigations into the integrity of Huishan’s financials. Not a few months after Muddy Waters published their findings, Huishan’s stock price dropped 85% in 90 minutes. This case analyzes Muddy Waters’ research findings, Huishan’s operational inconsistencies and suspicious executive behavior, Huishan’s response to Muddy Waters’ research, and the morality of fraud and embezzlement.

Short selling, in short, is legal betting against the continued growth of a publicly traded firm. It predicts that, for one reason or another, the stock price of a given firm will decrease, thus benefitting the investor holding the short position. The company Muddy Waters was founded by a short selling expert named Carson Block, who made a name for himself and his firm by allegedly discovering fraud at a number of publicly listed Chinese companies through investigative research. Once discovered, Muddy Waters would publish a research report summarizing their findings. The case describes two cases in which the company applied this business model to Chinese companies and asks whether it is ethical to profit from another’s losses and whether investors should be allowed to invest in the failure of a firm.

The catastrophic earthquake that erupted in Sichuan Province in May 2008 left nearly 70,000 dead, over 370,000 injured, and 18,000 missing. Zhang Ziyi, one of China’s most acclaimed actresses, was in Cannes, France, for the International Film Festival when the earthquake struck; she responded hastily by making a personal pledge of RMB 1 million yuan, as well as raising USD 500,000 (RMB 3.3 million yuan) in donations for earthquake relief. Despite these efforts, a discussion started on whether celebrity philanthropy was nothing more than a scam and Ms. Zhang came under attack. The case discusses the questions on whether philanthropy always has to be altruistic or can also have other objectives.

Singles’ Day, a Chinese tradition which was started in 1993 in Nanjing University, has developed from a party of single students into one of the biggest mass consumption events on the planet. The case discusses the moral, social, and environmental implications of this event in which a billion boxes are sold in China every year.

In October 2016, a photo went viral in which Chinese executives of the Korean corporation Samsung were kowtowing at a sales meeting in Heibei Province. The picture created a scandal; online bloggers claimed South Korean executives “forced” their Chinese counterparts to kowtow to apologize for product failure with one of their products, the Samsung Galaxy Note 7. Kowtowing has different meanings in China and in Korea and debate on the meaning of bowing arose. The case discusses the scandal and encourages students to reflect on cultural differences and their effects on business practices.

Journalism is a noble profession. The professionals working to bring news and event coverage to the general public in a truthful and transparent manner are doing society a great service. However, when such a great responsibility is abused, and erodes the integrity of the profession, justice is called for. This case details the behavior of Chen Yongzhou, a reporter for a newspaper called New Express, who was accused of and eventually pled guilty to publishing fabricated articles about a company named Zoomlion for bribes.

In 2014, Xiamen University faced a scandal about one of their history professors sexually harassing female students. The professor was suspended, but the case became very prominent in the Chinese blogosphere. The case looks at the scandal from the students’ and university’s perspective and asks how harassment can be avoided at universities.

Sun Village is the name of the organization caring for the children of inmates. It was founded in 1995 by Zhang Shuqin, who became aware of the children’s plight when she worked as an officer and newspaper editor for the Shaanxi Province Prison Administrative Bureau. She acquired some land, built dormitories and a school, and recruited children either from the prison or from relatives forced to take custody of them, or even from the streets. Sponsored by The China Charities Aid Foundation for Children, media coverage was very positive at the beginning. Sun Village however was turned into a business and children who lived there also had to work. This led to a lot of criticism and questions regarding what a charitable or social organization does and which rules are applied there. The case investigates these questions in the Chinese context.

This case provides an overview on the topic of childhood obesity in China. It explains the issue and looks at different perspectives of this social problem.

In 2013, Liu Xinyu, a prominent Chinese journalist, founded On the Road to School (ORS), a non-profit dedicated to supporting China’s growing number of so-called “left-behind children”, a term coined in 1999. The inspiration for the founding of ORS was the hardships of rural Chinese families driven apart by the need for financial sustenance. Parents would leave their children in the countryside to find work in urban factories, becoming migrant workers. Children would be left to their grandparents, neighbors, or in some cases on their own, becoming literally “left-behind”.

The 2008 Sichuan Earthquake, also called the Great Sichuan Earthquake or Great Wenchuan Earthquake, was the strongest quake in terms of magnitude to hit China since the 1950s. It killed 90,000 people, injured 375,000 more, and left over 4.8 million people homeless. But, it also created a strong bond within the Chinese nation and led to a wave of solidarity. The case discusses what solidarity is and what solidarity means in different types of communities (families, schools, local businesses, or nations).

This case discusses tax avoidance in China, which has a long history. The Chinese generally believe taxes are too high, and people do not believe that they are getting much by way of benefits in exchange for their payments. Even famous entrepreneurs share this opinion. The case discusses the relevance of tax paying in China, Confucian values, and the overall business atmosphere in China.

The following section is included:

• Index