Lessons on Ethics and Compliance in China

How can American companies do business more ethically – and without running afoul of American, European, or even Chinese law – while doing business in China? Participants at a recent meeting of the Business and Organizational Ethics Partnership at Santa Clara University's Markkula Center for Applied Ethics came up with the some possible answers to these questions:

1. What are the key principles and practices that help manage a global Code of Conduct and business standards within China?
• • Have a local Chinese employee be the face of your company's code of conduct, so it's not just a document that someone from U.S. headquarters "throws over the transom" of the Chinese office.
• • Make sure the code of conduct is translated into the local language – and check the translation to be sure it's accurate.
• • Look for common ground: Many of the values, such as the importance of family, are common to many cultures. The differences are in how those values are put into practice.
• • In training sessions, discuss scenarios that could happen locally – don't just translate American or European situations into the local language.>/li>
• • Consider reframing some of a large, international company's core values to align with local cultural values. For example, in a culture that values community, focus on the community aspects of the company's values.
• • Focus on the sustainability of the company, so employees understand the benefit of following the code of conduct.
2. What works and doesn't?
• • What works: Translate the company's code of conduct into the local language and make sure it doesn't sound U.S.-centric. The CEO and other leaders should mention the code of conduct in everyday discussions about business, not just in one annual training presentation. And local management should understand that the corporate code of conduct is part of their everyday job.
• • What doesn't work: A code of conduct that is written in English and not translated, or that has a lot of references to U.S. laws and regulations, will not be effective overseas.
• • What partially works: It's important for a high-level official from headquarters to visit the company's Chinese offices and introduce the code of conduct. But this is only a first step. Without follow-up from local managers, employees may receive the code politely, then revert to old ways of doing business.
3. What role do "core values" play in creating an ethical culture?
• • Core values are indeed important, but it's also important to remember that people in different cultures may interpret them differently.
• • Try to separate core values, such as fairness or integrity, from the specifics of how those values are implemented. The values themselves are probably shared among cultures, but how they are put into practice may vary.
• • Conversation is critical to making sure your shared core values create an ethical culture. Regularly engage both managers and workers in overseas offices in discussions about how to best implement the core values.
4. What are the most effective processes and procedures to detect ethical and compliance problems?
• • Remember that despite what companies intend in their policies, being a whistleblower is often very difficult.
• • Consider separating the reporting process for whistleblowers from the HR and legal departments. Allow employees to report concerns to someone with direct access to the board of directors.
• • Some companies create an ombudsman position that is filled by a senior manager for a year. This person helps resolve concerns about company practices.
5. What are the best practices for correcting problems swiftly when they arise?
• • For a code of conduct to work, it requires a quick yet thoughtful response to complaints. A "ready, fire, aim" approach will be just as harmful as not taking complaints seriously.
• • Have investigations conducted by people with experience and training in conducting complex investigations.
• • Understanding the business model – and being willing to ask questions – is one way to catch problems early. An executive who knows the business well will know to ask, for example, how the business just landed a big contract it had never before been able to get, or why business in a particular region increased so much more than in others. If it looks too good to be true, start asking questions. It may not be true.

Margaret Steen is a freelance writer, editor, and writing instructor.