Profits and Principles: Global Capitalism and Human Rights in China by Santoro, Michael A. Santoro, Michael A.

The New York Times Book Review - Barry Gewen

...anyone looking for reasoned discussion instead of rhetorical posturing, Michael A. Santoro's Profits and Principles is a fine place to start. Santoro, who teaches at the Rutgers Graduate School of Management, has been visiting China every year for nearly a decade. He has spoken with hundreds of businessmen, workers, government officials and human rights advocates inside and outside China.

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Chapter One

From the Sweatshop to the Office Suite:
Changing Perceptions of Western Business in China

There are things which ten hundred brushstrokes cannot depict but which can be captured by a few simple strokes if they are right.
The Mustard Seed Garden Manual of Chinese Painting (1679-1701)

The predominant image of the multinational corporation doing business in China is not an attractive one. Ask most people in the United States, or for that matter most members of the U.S. Congress, to describe a typical Western business in China, and the word "sweatshop" immediately comes to mind. The imagined setting may be Asian, but the atmosphere is a Dickensian cliché. They typically picture a dark, dirty, and overcrowded factory—perhaps with bars on the windows. It is a dangerous place in which a limb can easily be severed or a fire might break out and kill everyone inside. The work is numbingly boring and arduous. The hours are long and the pay barely enough to subsist. At night, the workers are herded off to crowded and unpleasant dormitories, fed a meager meal, and sent to bed exhausted.

    The image of the typical American manager is also an ugly one. Who is this loathsome creature who has traveled to a distant land to take advantage of the unfortunate Chinese workers? He is a pure breed of the global capitalist pig. He is culturally insensitive—disdainful of and completely ignorant about the language, customs, and mores of his workers. He is domineering and happily takes advantage of his superioreconomic position. He enjoys being in a country where he can bark orders to docile workers. He doesn't care about his employees or their families. His principal management objective is to manufacture a cheap product for as little cost as possible, regardless of the negative impact on workers, the environment, or the broader Chinese society.

    The image of the typical Chinese worker is similarly bleak. He has migrated from a rural province and has little education. He is illiterate and in poor health. He is desperate and willing to work for a couple of dollars a day. In the worst-case scenarios, he is perhaps a child, a twelve-year-old who has dropped out of school to work in a dangerous environment making toys for rich American children. Some Americans might even think that the typical Chinese worker is a prisoner of conscience forced to assemble cheap housewares in between beatings and indoctrination sessions. Each image of the working experience conjured is one of exploitation and abuse.

    Images possess enormous power to shape public opinion and policy. Inaccurate images can lead to misinformed opinions and faulty policies. There can be no doubt that the unattractive images of the multinational corporation in China have a profound effect on American thinking. They color the moral judgments of press pundits, nongovernmental organizations, members of Congress, and the general public. Because of such images, some go so far as to say that it is immoral for multinational corporations to do business in China at all. At best, say critics, these corporations are helping to support a corrupt and repressive regime. At worst, they are participating in and profiting from repression. Others argue that the China operations of multinational corporations need to be legally controlled. As a result, Congress has considered various bills that attempt to mandate a minimum standard of behavior for American corporations operating in China. Underlying all such moral judgments and policy proposals are the dreadful stereotypical images of American business in China.

    These negative images also threaten to undermine America's foreign policy of "comprehensive engagement" with China. Combined with reports of the Chinese government's increased repression of dissidents, these images contribute to the perception that engagement sacrifices human rights principles at the altar of economic expediency. These negative images also fuel the opposition to China's entry into the World Trade Organization (WTO). Horrid images of sweatshop labor are sometimes invoked to discredit the very idea of free trade and a global economy. If free trade and foreign investment have such morally repugnant consequences for the human rights of workers, then perhaps we should rethink the expansion of economic openness and interdependence.

    In short, significant foreign policy decisions depend in large measure on the images we hold about multinational corporations in China. For the New York Times columnist A. M. Rosenthal, no less than "our national soul" is at stake when we ponder our policy toward China. Rosenthal himself is quite self-assured about the disgraceful moral consequences of engagement with China. He writes:

The sardonic promise ... that this engagement would improve Chinese human rights ... is a nasty joke by now to everybody but the U.S.-China business lobbies and their groupies in the U.S. Government and press.

The engagers besmirch the American nation. By using their money and influence to strengthen Chinese Communist power, they brand the U.S. unfaithful to the freedoms that sustain America itself.

Western money ... helps the Politburo dispose of dissidents, condemn millions to forced labor and give Christians the choice between worshipping in Government-controlled churches and going to jail for praying underground.

    Many other intelligent, well-meaning people in the West who also are genuinely concerned about human rights conditions in China share Mr. Rosenthal's outraged assessment of the moral bankruptcy of economic engagement with China. However well-meaning those who share Mr. Rosenthal's view might be, however, such negative moral judgments are based on an unbalanced, indeed distorted, view of actual conditions in China. The challenge for these well-meaning people is, therefore, to readjust their moral judgments in light of the facts. It is difficult for someone who has come to adopt a definitive and serious moral position to revise that position, but a good way to begin that process is to probe the factual predicates of that moral position. What if the negative images are misleading? What if the actual activities of Western corporations in China are as not morally repugnant as some may imagine? What if Western businesses are making a positive contribution to Chinese society? What if they are part of the solution rather than part of the problem? What consequences should this have for our moral judgments and our policies?

    For those inclined to believe the worst about the greed and venality of multinational corporations, many real examples of labor abuses can be found that correspond to the predominant negative images. However, for anyone who actually has traveled to China, visited the operations of Western companies, and spoken with Western managers and Chinese workers, it is abundantly obvious that these images do not justly represent the complete story of Western business in China. In fact, one who visits China and takes the time to observe conditions there will come to realize that Western firms are dramatically improving the lives of a great many Chinese citizens. The changes are not, moreover, solely material. Western companies also are imparting radically new ideas and values to their workers that are helping to foster democracy and human rights in China. Before this complex phenomenon can be understood and appreciated, however, the distorted snapshots of Western business in China that dominate public perception must be replaced with images that conform more closely to reality. These more benign images confound simplistic thinking about the effects of multinational corporations on human rights and challenge us to form a more balanced moral view of economic engagement with China.

Motorola: High-Tech Values

Motorola's operations in China rest on the same two key beliefs that guide our operations worldwide—respect for the integrity of the individual and uncompromising integrity in everything we do. These beliefs help create an environment of empowerment for all in a culture of participation.... Motorola's commitment to teamwork and continuous learning is also key in developing the company's operations in China and its partnership with the Chinese people,
Motorola in China (company document, 1998)

Anyone who thinks that all Western corporations exploit and degrade the Chinese people should visit the Motorola complex in the northern industrial city of Tianjin. It is a new and gleaming world-class facility that would be considered state-of-the-art if it were located in Cambridge, Massachusetts, or Austin, Texas. The Tianjin facility employs about ten thousand workers. In one building, pagers and cellular phones are assembled. Another building contains one of the largest semiconductor factories in the world, producing 10 million high-quality integrated circuits each week.

    Walking through the Tianjin facility, one cannot help but be impressed. It is spacious, clean, and well lit. The hallways are wide. Like most high-tech facilities concerned about competitive intelligence, there are very few windows, but the air conditioning and bright lighting make the atmosphere pleasant. Sophisticated machinery and computers abound and whir. Many areas utilize robotics. Indeed, the technology is so advanced that President Clinton, during his 1998 trip to China, was rumored to have cancelled a scheduled visit to the facility, for fear of highlighting the overwhelming display of valuable technology being transferred to China by American companies doing business there.

    Although the physical layout of Tianjin is impressive, even more remarkable are the people working there and the ambience of the place. Walking around the facility for a few hours, one can view hundreds if not thousands of workers. None of them appear to be in the least bit haggard or oppressed. Nearly all are in their twenties or early thirties. They are casually but cleanly and often smartly dressed. Most are university graduates happy to have challenging engineering jobs. Others have had good secondary school educations and are working as technicians. Motorola is known among young workers as one of the best foreign employers, and its employees are among the best and the brightest technical graduates China has to offer. Many of them are being promoted rapidly through the managerial ranks.

    The Tianjin facility is radically different from the sweatshop images that occupy public consciousness in the United States. It is also a far cry from what these young people would experience outside the plant. On my tour, I could not help thinking what a haven it was from some of the normal, not-so-pleasant aspects of everyday life in China. The morning I set out to visit Tianjin, I rose early in my modest hotel in a traditional Beijing hutong, or walled community. I passed the local public bathroom, noting its stench, passed the food stalls, already crowded, and fought my way into a crowded bus, which then honked its way through the chaotic and pollution-infested streets of Beijing. It was a scene that could be replayed in any other Chinese city, from Shanghai and Guangzhou to Chengdu and Wuhan. Within the walls of the Motorola factory, however, was another world—a clean and orderly world. In the 1950s, Chairman Mao's ill-fated Great Leap Forward promised the Chinese people that by sheer dint of will China could be transformed from a feudal rural economy to an industrial nation. The result was disastrous; an estimated 30 million people died of famine when agricultural production fell short of politically correct forecasts. Here in Tianjin, however, thanks to Motorola, a few thousand Chinese workers were truly experiencing a Great Leap Forward into a postindustrial age that would have been unimaginable in China even as late as the 1980s.

    In the company cafeteria, workers queue up politely for a variety of free and nutritious meals. One area is set aside for a pregnancy well-care program. A booth is open at which appointments can be made with the company medical staff. There is a bank branch dedicated to employee needs. It is a scene that one might expect in a Fortune 500 corporate campus in the United States. The overwhelming sense is of a pleasant, orderly place in which people are fulfilled in their work. It is a place that a young graduate of Purdue, North Carolina State, or Cal Tech would find congenial.

    There is, however, more of interest to the Motorola plant than its pleasantness and cleanliness. These workers are learning many ideas and values on the job. Each year, Motorola provides its employees in China with an average of seventy hours of training. Even more impressive is the informal learning that takes place. In the hallways are posters in Chinese script encouraging workers to speak out if there is a dangerous condition or some process at the plant that can be improved. Other posters announce an award for interfunctional team projects that improve productivity. Workers at the plant are presented with a booklet describing the company's "I Recommend" program. The booklet, which is translated into Chinese, describes the purpose of the program as follows:

The employees often find that something can be improved in the daily work, some of them affect our work, and some bring us inconvenience, so they think and get the solutions via the [I recommend] channel. The management can get the good suggestions and ideas; the employees have the chance to take part in the management, help the manager to improve the factory system, and improve the business performance.

    Motorola is investing a lot of money and time in developing its corporate culture in China and elsewhere in the world. As Glenn Gienko, Motorola's executive vice-president and director of human resources, trumpets, "Motorola's facilities in China are world-class in all aspects and demonstrate what is possible when you apply Motorola's global values of `Constant Respect for People and Uncompromising Integrity' with the talents of our Chinese associates." The human resources objectives and corporate values that underpin this corporate culture are as state-of-the-art as the high-tech machinery in Tianjin. The company is trying to create a first-class corporate workforce of Chinese workers. It wants its line personnel and managers to take initiative, exert leadership, assume responsibility, manage rapid change, and work in teams. These kinds of behaviors (and the values that underpin them) are typical of successful organizations in the United States and Europe. In many respects, however, they are antithetical to the values and behaviors a Chinese worker would typically learn by working in a state-owned enterprise and living in Chinese society. The motivations of Motorola and other Western companies that train their technical and white-collar Chinese employees in such state-of-the-art management skills are far from political. Mostly, these companies are interested in building market share, profitability, and sustainable businesses. They know that to do so they must nurture local managerial talent. Nonetheless, one cannot help but think that profound long-term social and political change will ensue from this learning. At the very least, it is clear that the simplistic image of the inhumane sweatshop does not tell the whole story about the multinational corporation in China.

The Best and the Brightest Western Managers

It's important for people to understand that China is a work in progress. There is a saying here among foreign workers, TIC—This Is China, referring to the fact that so many things are different here. Well, I like to say AIP, Anything Is Possible.
—Diane Long, U.S. business executive

    Diane Long is the general manager of the Shanghai office of an American branded apparel company. A California native and Stanford University graduate, Diane has a low-key, easygoing manner. Growing up in a working-class family in a small, provincial Northern California town, Diane recalls that her favorite subject was geography. From a young age, she was "very aware of the fact that I was Swedish and from a different place."

    After graduating from Stanford, Diane worked for five years at an international trading company in San Francisco. Shrewdly recognizing the growing commercial importance of China, she set about learning Mandarin. One of her first important lessons in understanding China came from her language course. "Ni chi le ma—have you eaten yet?—is a common Chinese greeting," says Diane. "I'm a product of the 1960s America, where life is prosperous, and at first I couldn't understand what this emphasis on eating was about. In fact, the greeting typified a preoccupation with the many famines that had ravaged China. After studying the language, I began to intuit many things like this."

    Deciding that she wanted to travel to China, Diane applied for and was accepted to Stanford's "Volunteers in Asia" program. The Stanford program has counterparts at other schools, such as Oberlin's Shansi Program, the Yale-China Association, and Princeton-in-Asia. Michigan, Johns Hopkins, and Harvard, among others, have similar educational exchange programs, in which a significant number of the American managers in China have learned the Chinese language and developed an appreciation for the distinctive history and culture of China. As does the Stanford program, the Oberlin and Yale programs require a two-year commitment to live and teach in smaller Chinese cities. David Youtz, former Hong Kong director of the Yale-China Association, explained that this requirement is intended to help participants to "unlearn" many American preconceptions about China:

By the end of two years you have learned enough language and experienced enough of China to be humbled by the concepts of "understanding" and "changing" this society. Without question, however, you have also made profound impressions in these two years on hundreds of Chinese students, friends, and colleagues and inadvertently opened a window onto Americans and the outside world, which I have to think is positive and subversive?

    As part of the Stanford program, Diane lived in a remote village in Anhui Province. Explaining her decision to teach English in the countryside rather than a big city like Beijing, Diane comments, "I didn't just want to be with a foreign clique. I really wanted an opportunity to be responsible in the system that I was participating in." Years later, Diane's sense of social responsibility in China is evident as she reflects on her current job as a Western manager: "Business is not a charity, but we don't have to mistreat anyone to be successful. We take our community responsibility quite seriously."

    Diane admits that her initial efforts at getting on in China weren't all that successful. "At first I was like a bull in a China shop. (No pun intended.) I was completely gung ho on America. I look back on it, not with embarrassment mind you, but just laughing uproariously at myself." One lesson Diane learned early was the seemingly ineluctable penchant of foreigners to criticize Chinese practices. Sitting in her sleek, modern office in Shanghai, surrounded by her Chinese coworkers, Diane is careful to distance herself from such attitudes. Diane recounts that even when "Chinese people say `please tell us how to improve,' they don't really mean `criticize me.' They really mean `Will you please tell us how wonderful we are?' When I first visited China I didn't understand that comment. I'm sure I caused all kinds of consternation. Of course, from an American point of view, we are not just criticizing for the sake of criticizing but with the hopes of improving. That missionary zeal is so inbred in us."

    Diane is married to a Chinese man, and they have a son. She obviously relishes her life in Shanghai. "As mundane as it sounds, I'm just living a life. We have a home, a life, and friends. On a personal level, however, it's very, very exciting. I feel I'm developing levels of sensitivity, maturity, and awareness of the universality of people on a greater level by living here than staying in the United States."

    On a professional level, Diane believes she is contributing to the development of her employees: "I'm trying to open the doors to a wider experience for them. They are very smart, naturally gifted, hard-working people. But they lack exposure and experience. Their expectations in life are much faster, much higher than their experience. They don't even know what they don't know. Part of it is being young," she says laughing, "we all were the same."

    Despite her aversion to cultural imperialism, Diane freely admits that part of her job as a manager is to overcome some deep-rooted cultural patterns of behavior among her Chinese staff. She explains:

I think we challenge people here. We challenge them to question their beliefs—their ways of doing things. We expect accountability. The goal of our training is self-sufficiency. Taking responsibility. Taking the initiative. We want them to think "I want to take the initiative and I will take responsibility if I fail or am successful." The education system and the culture don't teach this. You can't expect 21-year-olds who have had a lifetime of education where they have been told "don't put your head above the crowd or it gets shot off," to suddenly accept this. We are asking them to do that. That's one hundred percent different than what they are taught. Another change is that we are giving them the right to express opinions. It takes a long, long time before they build that trust and speak out.... In the long run, you have to ask if it is a good thing to teach people to speak out. I think it's a good thing,

    Diane does not think that Western corporations should attempt to apply pressure on the Chinese government to directly influence social and political conditions. Nonetheless, she sees business as playing a subtle, indirect role in transforming Chinese social and political culture: "I believe that in our everyday actions we will teach more about what democracy means than if we stand on a soapbox. If I have a meeting with ten people and I ask `What is your opinion about this?', or if I put out an idea to vote, I will be making a point. It works better in a country like this when you just show it by action."

    When it comes to human rights, Diane shares with other American businesspeople in China the desire to avoid speaking about an unfamiliar and uncomfortable subject. "As soon as I hear that now my first reaction is, What do you mean? What is a human right? It is a relative concept—based on how you define it and the value you put on it." Even when it comes to workers' rights, she prefers to refer to them as "labor abuses" rather than "human rights" violations.

    Although Diane's story is in some ways unique, in most respects it is typical of many foreign managers working in China. These committed managers are not there by accident. They arrive with a sense of adventure and historic mission in helping to open the Chinese economy, and a genuine affection for the Chinese people. They are excited about living and working in China, eager to help their employees and coworkers navigate the ways of western capitalism. Anyone who meets Diane Long and the many other foreign managers like her would have a hard time reconciling that encounter with negative images of Western business executives in China.

China's New White Collar and Technological Elite

Multinational corporations provide a variety of job opportunities for Chinese workers. At one end of the spectrum are low-wage factory jobs. Western media attention has focused on the appalling conditions in some factories where labor-intensive goods are manufactured for export to Western countries. However, multinational corporations are also creating other, higher paying and more desirable opportunities. For young college graduates, white collar and technical jobs in Western corporations are among the most coveted positions in China. It should come as no surprise that the Chinese workers found in managerial and technical positions at these corporations are highly intelligent and self-confident. They represent an entirely different social stratum than do the poor and illiterate workers toiling in sweatshops. Moreover, these mostly young men and women are learning ideas and values at work that are quite radical in the context of Chinese society.

    One such young Chinese worker, referred to here as "Tom" to protect his identity, is an engineer by training, but he has risen rapidly through the managerial ranks of his American corporate employer. Dressed in his neatly pressed white shirt and tie, Tom is the very model of a rising corporate executive. On introducing himself, Tom is careful to note that his Ph.D. in theoretical physics from a prestigious university was earned with honors. At first, Tom comes across as a bit of a braggart as he recounts his various academic accomplishments and swift rise through the managerial ranks. It soon becomes apparent, however, that the reason he touts his credentials is that he is proud of achieving his position on the basis of his talents rather than through personal connections. Tom is very careful to contrast his own career with that of his father, who was, according to Tom, a "number one boss" at a factory in Hebei province. Tom's father rose to his position largely as a reward for being a People's Liberation Army soldier at the time of the founding of the People's Republic of China in 1949. Tom, however, is eager to be judged by his technical and business acumen?

    Tom is quick to point out differences between his managerial style and his father's: "Facts, data ... we use them at every stage of decision making here. My father's firm never used data." Tom also noted that his father's idea of a meeting was to call a bunch of people into a room and yell. Tom is very conscious of acting as a "mentor" to those who work under him, admitting that one of the most challenging aspects of his job was figuring out how to get the most out of those whom he supervised.

    "Ling," a woman in her mid-thirties, works as a business strategist for an American company. She is originally from Northwest China but went to college in Shanghai. Before joining her American employer, she spent several unhappy years working at a state-owned enterprise (SOE). When she moved to her current job, she increased her income fourfold over her previous job. Ling is immaculately dressed in a pastel blue suit. With her stylish glasses and poised demeanor, she exudes great confidence. Her English is flawless, and she is careful and thoughtful in responding to questions. She would not seem out of place at a top Western investment bank or consulting firm even though she has never traveled outside of China.

    Ling also stresses generational issues when she compares working for an SOE with her current job. Ling calls her current working environment "more suitable for young people." She reports that in the SOE there were "lots of idle people" and that her current job is more challenging. She contrasts her new employer with her old one: "As long as you perform, you will get promoted. SOEs are large and old. You are behind a lot of people for a promotion."

    Although it is true that millions of low-skilled and semi-skilled laborers are working in foreign-owned factories in China, a new white-collar and technical middle class, working in foreign-owned companies, is rapidly emerging. Tom and Ling are typical of this new "meritocracy" class of workers who are learning radically new ideas and cultural values in their corporate settings. Anyone who wants to fairly assess the impact of Western corporations in China must take into account the emergence of this new meritocratic class.

Toward a Balanced View of Western Business in China

The negative images of the sweatshop, the abusive manager, and the child laborer do not accurately represent the full story about Western business in China. To be sure, these exist in China, but so do good companies such as Motorola, caring managers such as Diane Long, and empowered workers such as Tom and Ling. These polar opposite images rise out of two very different business models for exploiting the vast and diverse economic potential existing in China. Each of these two business models represents not only a different approach to doing business in China, but also a distinctive strategic response to the powerful forces of economic globalization. These two faces of globalization raise distinctive moral and public policy considerations that are analyzed in the remaining chapters of this book.