Under the Table: An Introductory Course
“Last week, a finely dressed Chinese man walked into Louis Vuitton’s flagship store here, seeking that perfect gift for that special someone: a senior government official.” So begins a recent article in the New York Times, Chinese Grease the Wheels of Power With Luxury Gifts.
In 2002, a finely dressed Chinese man walked into my classroom seeking private English lessons with that special someone: his teacher. So began my education on socialism with capitalist characteristics- and the most difficult test I ever took. As the global economy plummets and the rate of corruption continues to rise worldwide, I cringe. When academics pontificate on the “social ills” of China and government officials deny the practice of bribery and American businessmen in China are tried as “rogues” for under the table deals, I am compelled to put my 2 jiao on the table (what does 2 jiao buy these days, anyway?) So, here it is, an introductory course from a former teacher who became, and will always be, a student:
Statement #1: When asked whether or not gift-giving as business bribes takes place in China, media relations official Jiang Hongbo answered, “Where have you heard this crazy news?”
Opinion #1: Gift giving (whether cash or luxury goods) to secure business deals is a rampant GLOBAL practice. I would surmise that biased reporting and a crooked spotlight led Jiang Hongbo to answer as he did, but China is no more guilty than a host of other nations in the world, including the US (although, with stringent restrictions on expense accounts, those 2 oz. jars of La Mer have been replaced with travel kits from Kiehls). Now that China has become a top contender on the global playing field, the country is expected to abide by some very murky rules of the game. Let’s challenge these rules for a minute, as the Tuck School of Business did in a forum on Confronting Corruption in Global Business: “are different definitions of corruption in other cultures necessarily wrong? Might there be cases when yielding to local custom is the lesser evil? If a morally pure company refuses to work in a country where “gifts” cement trust, might its absence from the scene make it easier for reactionary and damaging enterprises to thrive?”
Statement #2: In commenting on the practices of Morgan Stanley’s China-based real estate man, Garth Peterson, the head office has taken the view that this was the “rogue act of a rogue individual.”
Opinion #2: Garth Peterson is the fall guy representing thousands of other expatriate professionals who have not yet been caught. Foreign-led businesses in China frequently run into the dilemma of conforming with societal norms, and more often than not, the baijiu is swallowed and gifts are sent the very next day, barring hangover. If you’ve never had to deal with the issue of kickbacks, bribes or gifts while doing business in China, I’ll have to assume that you’re not doing much business at all. As China throws open the doors to foreign business again and laid-off Western workers set up shop in the new land of opportunity, more fall guys like Garth Peterson will surface in the news- I can guarantee this. To quote Forbes reporter Raymond Fisman, “labeling individuals like Peterson or companies like Siemens as unprincipled exceptions shoves under the rug the deeper problem: informal rules that dictate global commerce. As long as the conversation focuses on catching deviants, we’ll never have an open dialog on changing the norms that bear much of the responsibility.”
Statement #3: According to Sun Liping, the combination of power and money and the resulting corruption has fundamentally distorted China’s development.
Opinion #3: Corruption, the great enemy of progress, is a symptom of chronic institutional illness. Deng Xiaoping’s 1978 decision to adopt free-market reforms was not the point of contagion- corruption began long before the famous words- “it doesn’t matter if the cat is black or white as long as it catches the mouse”- were spoken. Increases in the public display of power and money has merely encouraged the spread of illicit practice to make a quick buck, not just in China, but everywhere. Corruption is not a result of China’s economic miracle; perceptions of power and money ingrained in this miracle have merely exacerbated the practice. “Distortions of development” are up for interpretation. Has foreign investment or economic growth suffered because of this chronic institutional illness? A quick look at GDP statistics over the past ten years proves otherwise. Has China’s political system and socioeconomic development shown signs of decay because of increased corruption? Without a doubt- but we are also seeing this in the rest of the world.
Statement #4: It’s time for China to start defending those victimized by corruption.
Opinion #4: “Victim” is often a slippery term. In the case of any corrupt official, “victim” can apply to the citizens of his prefecture, the businesses economically impacted, the families that have suffered because of his mistakes (including his own) and… the corrupt official, who was “victimized” by a social structure that encouraged “under the table deals” over an honest yet impoverished life. As cliche as it may sound, in the business of corruption, everyone is victimized to some extent. Before China can effectively defend those “victims”, it will have to uncover the source of the problem. The situation, metaphorically, is not dissimilar from that of the Bernie Madoff scandal when we consider the “victimized investors,” his family, the SEC, and all the complicit partners who have not been tried in a court of law. Killing a chicken to scare the monkeys fails to address the real problem; any redress for the victims under this prevailing model will be short-lived, at best.
Statement #5: A tough economy breeds corruption.
Opinion #5: As a hunger for the “comfortable life” continues to grow despite a depleting global job market, increases in crime- generally- are inevitable, whether through petty theft or white-collar embezzlement. A tough economy encourages corrupt behavior by the nature of its hardships; it also magnifies illicit activity in the press while bringing to light some long-standing corrupt behaviors in the corporate sector- both Bernie Madoff and Garth Peterson are evidence of this. The combination of an exciting new business venture and the desperation for cash in the petri dish of a foreign company does, in fact, breed corruption… and jail time, personal ruin, financial loss. As reported by China’s government in 2007, more than half of commercial corruption cases investigated over the past decade involved multinational and foreign companies. Given current economic and political pressures, it is my prediction that these figures will climb.
Running into some form of corruption in business, particularly in the developing world, is altogether unavoidable. How the situation is addressed can irreversibly alter one’s personal and professional existence. Is it possible to play by the rules and stay in the game? When does a token of goodwill cross into the realm of bribery? How can you safeguard your new venture from becoming the target of an anti-corruption campaign? In a follow up to this post, Under the Table: An Intermediate Course, I will attempt to answer these questions. In the meantime, any input on the following automatically gets an ‘A’ grade:
Can a foreign-owned company thrive in China without engaging itself in gift-giving?
Garth Peterson: Scapegoat or rogue?
Is corruption in China being magnified by Western media?
Regarding the issue of corruption, have any major factors been ignored?
Is it possible to eradicate “under the table, over the table” practices in China?
How has your business been affected by this issue?
Note: the opinions and statements expressed in this post are solely those of the author.