Developing responsible leaders in China presents many challenges but is a necessity for the country's survival and continued growth. Some of the key challenges China faces include corruption, environmental degradation, water shortages, workplace safety issues, human rights concerns, and intellectual property violations. Leaders are taking steps to address these issues, such as punishing over 100,000 officials for corruption in 2009 and setting ambitious targets for reducing pollution and energy use. However, solving deep-rooted problems like corruption may require fundamental changes to China's political and economic systems. Developing leaders who can navigate these complex challenges responsibly is critical for China's future.

1. Developing Responsible Leaders
in China:
a challenge but a survival imperative
Henri-Claude de BETTIGNIES
Distinguished Emeritus Professor of Globally Responsible Leadership, CEIBS, Shanghai
The Aviva Chair Emeritus Professor of Leadership & Responsibility, INSEAD
hc.debettignies@insead.edu
The Doughty Centre for Corporate Responsibility
Cranfield School of Management
May 11, 2011

2. Plan
• Introduction
– China: its originality and achievements
– China: its challenge for leaders
– China: its approaches and proposed solutions
– Implications for business
– Implications for business schools
• Conclusions

3. Great achievement of China
• Its achievements amaze the world: lifting 400
millions of people from poverty in a short time.
• Its process puzzles: blending socialism and
capitalism.
• Its performance had a cost: making leaders
aware and acting
• Its renaissance creates concerns: bringing
uncertainty and fear of the new global power.

4. Amazing achievements

5. China
• Very different (in spite of the
appearance, e.g in Shanghai)
• Very big (e.g. size of the' land,
population)

6. China
• Very big (e.g. size of the' land,
population)

8. A Comparison
Population (in thousands)
Country Area (km²)
(km²
2010 2050
China 9,596,960 1,330,141 1,303,723
India 3,287,590 1,173,108 1,656,554
Canada 9,984,670 33,760 41,136
EU 4,324,782 501,260 505,719 (2060)
USA 9,826,630 310,233 439,010
Source: Eurostat 2010; US Census; www.countrysize.com

10. China
• Very diverse (e.g. provinces, cultures,
minorities)

12. China
• Very consistent and rapid growth

13. China annual GDP growth (10.2% average)
Source: World Bank

14. China
• Very rapidly moving into N°1 position

15. °
China as N°1 ( "globally")
• Energy-saving bulbs • Textile
• Computer materials • Toys
• Cell phones • Steel and iron
• Color TVs • Leather
• Batteries for electrical • Aspirin
cars
• Tobacco
• Domestic electrical
• Piano
appliances
• Shoes
• Solar panels
• ……
• Windmills
Source: Le Point, Dec 24-31, 2009

16. China: a giant in banking
The first 5 in market value (billion US$ 27/11/09)
Source: Bloomberg

17. Automobile production (million units)
Source: OICA; JAMA; Wikipedia; China Daily, Feb 3,2010

18. Internet users (million)
Source: CNNIC; ITU; Nielson

19. China 2011: toward N°
1
• With such a large population (1.33 billion)
– a great economic performance (>9% over a long
period)
– in a short time (30 years)
• No precedent in history
Hence, it nurtures admiration, anxiety
and fear (internationally)

20. Developing "responsible
leaders" in China:
a challenge.
But a "necessity".

21. As China is faced with so
many challenges…

22. Xi Jianghuo, Director of The China Enterprise
Reform & Development Society, says
• "In fact, while Chinese enterprises and
entrepreneurs are amassing huge amount of
wealth, they are simultaneously contributing to
serious negative impacts the include: the widening
of the gap between the rich and the poor;
practices of deceit and bribery; production and
distribution of fraudulent goods; widespread
pollution; unrecoverable environmental damage;
and "sweatshops" labor practices that trample on
human rights of workers"
• From Opening up the era of Chinese CSR, Leading
Perspectives,Summer 2006, p.16

23. Examples of challenges
Public
Public
Economic
Economic Healthcare,
Healthcare,
Inefficiency,
Inefficiency,
Work Safety, Social protection,
Social protection,
Work Safety, Bribery/corruption
Bribery/corruption
workers Old age
Old age
workers
protection
protection
Gaps:Urban-rural,
Gaps:Urban-rural,
coastal-inland,
coastal-inland,
gender
gender
Intellectual
Intellectual Human rights
Property Human rights
Property
Pollution,
Pollution,
Environmental
Environmental
Degradation
Degradation
Legal framework Resources
Resources
Legal framework
and its Shortage (Water)
Shortage (Water)
and its
implementation
implementation

24. The environment challenge

25. The water challenge (1)
• The per capita water volume in China is one fourth of the
world average.
• 90% of cities’ groundwater and 75% of rivers and lakes are
polluted.
• As a result of widespread water pollution, 700 million
people drink contaminated water every day.
• Waterborne diseases have created a rising number of
premature deaths.
• Between November 2005 and January 2006, three large-
scale incidents occurred, halting water supply for millions
of people and raising awareness of the challenges ahead.

26. The water challenge (2)
• If present trends are not reversed, the World
Bank forecasts that by 2020 there will be 30
million environmental refugees in China due to
water stress.
• With 20% of the world’s population but only 7%
of global water resources, China meets with a
severe challenge.
• More than half of China’s 660 cities suffer from
water shortages, affecting 160 million people.

27. Challenge: the environment
• China will spend 15 billion yuan (2.2 billion U.S.
dollars) in the first half of this year to beef up sewage
treatment facilities as the nation works to clean up its
environment. (Ministry of Environmental Protection of the
PRC, April 2010)
• China issued its first national census of pollution
sources, with data showing that the country's
wastewater discharge totaled more than 209 billion
tons while waste gas emissions topped 63.7 trillion
cubic meters in 2007. (Ministry of Environmental Protection
of the PRC, April 2010)

28. Total global installed wind power capacity (GW)
Source: Global Wind Energy Council; South China Morning Post , April 14, 2010

29. The view of Premier Wen Jiabao
(NPC speech, March 5th 2005, on the 11th 5-year plan, 2006-2011)
• "In the outline (draft), the target for reducing
energy consumption per unit of GDP is set at
about 20% and the target for cutting the total
discharge of major pollutants is set at 10%.
These targets are designed to address the
acute problem of mounting pressure on
resources and the environment…. We must
work ceaselessly if we are to create clean and
pleasant living and working conditions for
the people and leave our future generations
with blue skies, green land, clear water and
verdant mountains…"

30. Leadership & Responsibility: the dysfunctions
• Poor safety and labor treatment:
Migrant workers treatment, low wages (but
increasing), workers unpaid, child labor, many
coal mine accidents and casualties, miners
suffer from pneumoconiosis…
• Human rights abuses:
- Arrests of journalists, academics, writers,
artists, researchers, human rights activists,
spiritual leaders and simply whistle-blowers…
- Human organs (e.g. from executed prisoners)
trade, often without prior consent
- Censorship of the media, monitor the Internet
to curb dissent.

31. The Migrant workers

32. Average salary of migrant workers (RMB per month)
2007 Green Paper of Population and Labor (published by Chinese Academy of Social Sciences); NBS

33. As of 2009

34. The "safety" challenge

35. Chine: accidents mortels dans les mines

36. Coal mines (deaths): government intervention
Source: The State Administration of Coal Mine Safety; State Work Safety Supervision Administration

37. But government intervenes

38. The "corruption" challenge

39. CPI (Corruption Perceptions Index) ranking
2000 2005 2009
Finland 1 2 6
New Zealand 3 2 1
Canada 5 14 8
Singapore 6 5 3
UK 10 11 17
US 14 17 19
Germany 17 16 14
France 21 18 24
Japan 23 21 17
South Korea 48 40 39
China 63 78 79
India 69 88 84
Philipines 69 117 139
Russia 82 126 146
Indonesia 85 137 111
Source: Transparency International, 2010

40. Corruption
• About 150,000 officials being punished every
year for bribery, corruption and other offenses.
(The New York Times, Sept 24, 2009)
• In February, 2010, the party issued a new code
in the hope of ending a problem that exploded in
2009 with the conviction of 106,000 officials for
corruption. (Central Commission for Discipline Inspection)

41. Corruption
• “We will give high priority to fighting corruption and encouraging
integrity. This has a direct bearing on the firmness of our grip
on political power.” (Premier Wen Jiabao, March 2010, the National
People’s Congress)
• In 2009, according to the Ministry of Supervision and the CCP’s
Commission for Discipline, more than 100,000 officials were
punished for corruption and 4.44 billion yuan (US $650 million)
were recovered. The number of officials arrested and punished
for corruption involving more than 1 million yuan (US $146,500)
increased by 19 percent in the first 11 months of 2009
compared to the same period in 2008. At least 15 corrupt high
ranking officials were punished, the highest in 30 years.

42. Corruption: leaders take action
• About 150,000 officials being punished every year
for bribery, corruption and other offenses. (The New
York Times, Sept 24, 2009)
• Action is taken: in February, 2010, the party issued
a new code in the hope of ending a problem that
exploded in 2009 with the conviction of 106,000
officials for corruption. (Central Commission for Discipline
Inspection)

43. Corruption: leaders take action
• “We will give high priority to fighting corruption and
encouraging integrity. This has a direct bearing on the
firmness of our grip on political power.” (Premier Wen Jiabao,
March 2010, the National People’s Congress)
• In 2009, according to the Ministry of Supervision and the
CCP’s Commission for Discipline, more than 100,000
officials were punished for corruption and 4.44 billion yuan
(US $650 million) were recovered. The number of officials
arrested and punished for corruption involving more than 1
million yuan (US $146,500) increased by 19 percent in the
first 11 months of 2009 compared to the same period in
2008. At least 15 corrupt high ranking officials were
punished, the highest in 30 years.

44. Corruption cases
Name Position Crime Sanction Date
Former head of
Taking bribery and
Beijing airport's
LI Peiyang embezzling of Death penalty Aug, 2009
management
US$16 million
company
Former vice Taking bribes
president of the totaling RMB 11.96 Death with a two-
WANG Yi April, 2010
China Development million (US$1.76 year reprieve
Bank million)
Former Shanghai
Taking bribery of
CHEN Liangyu Communist Party 18 years in jail April, 2008
US$340,000
Chief
Former director of
Taking bribes of
China’s top food
ZHENG Xiaoyu 6.49 million RMB Death penalty Jun, 2007
and drug safety
(US$ 850,000)
agency

45. Corruption: some recent cases (2)
Name Position Crime Sanction Date
Former vice Taking bribes Death with a two-
LIU Zhihua Jan, 2009
mayor of Beijing of 1 million US$ year reprieve
Taking bribes
CHEN Former chairman
of 28 million Death with a two- July, 2009
Tonghai of Sinopec Corp.
US$ year reprieve
Former Taking bribes
WEN Qiang Chongqing of 2.4 million Death penalty April, 2010
justice chief US$
Founder & CEO 14 years of prison,
Bribery, insider
of GOME fine: RMB 600M,
HUANG trading and
Electrical & property May 18, 2010
Guangyu illegal business
Appliances confiscated: RMB
dealings
Holdings Ltd, 200 M

46. Corruption
• “Corruption has not derailed China’s economic rise,
but it’s rotting the establishment of a rule of law.
The Chinese government has more than 1,200
laws, rules and directions against corruption, but
implication is ineffective. (Prof. GAO Quanxin, the Chinese
Academy of Social Science)
• “Corruption is the glue that keeps the party stuck
together. Getting rid of it is not possible as long as
they keep this system.” (Prof. PEI Minxin, Claremont McKenna
College )
Source: The New York Times, Sept 4, 2009

47. Some Business Leaders give their
position, explicitely
(Wang Licheng, Chairman of the Board, Huali Group)
• "Commercial bribery has become a
malicious tumor hindering the healthy
development of Chinese enterprises. If we
compete through bribery, it will set a
corrupt standard for our whole commercial
society and ultimately none of us will
win…" (China Today, September 2006,
p16)

48. The view of Premier Wen Jiabao
(NPC speech, March 5th 2005, on the 11th 5-year plan, 2006-2011)
• "We will work hard to build a clean government and combat
corruption. We will conscientiously carry out all tasks and
measures for punishing and preventing corruption. We will
launch a campaign this year to combat bribery in business,
focusing on unhealthy practices in construction, land transfers,
property transactions, purchase and sale of drugs, and
government procurement, in order to resolutely put a stop to
irregular transactions and we will investigate and prosecute
cases of bribery in business in accordance with the law. We will
continue to remedy improper practices that harm public
interests and strive to resolve such outstanding problems as
arbitrary educational charges and excessively high medical
costs…"
• "Government employees at all levels, especially leading
officials, must be devoted, diligent and responsible and serve
the people wholeheartedly… They also need to be realistic and
pragmatic in their approach to work, refrain from making empty
promises, triumph over bureaucracy, formalism, deception and
exaggeration, and fully carry out all tasks and assignments…"

49. And, a few other challenges

50. Intellectual Property Rights
• FY 2009 seizures of IPR infringing products from China
totaled $204.7M and accounted for 79% of the total
domestic value for all IPR seizures. (U.S. Customs and Border
Protection, U.S. Immigration and Customs Enforcement, Oct 2009)
• China deals with 200,000 counterfeit cases valued 3.37
billion RMB (490 million US$) in 2009. (Xinhua, Jan 2010 )
• Branded goods, food ,building materials, home
appliances, mobile phones ,auto parts, even
medicines…

51. Cooking the books ++
• Shanghai Worldbest, a medicine unit of China's State-owned
textile and pharmaceutical conglomerate, said in a statement
that it used inaccurate date to inflate profit by 65.11 million yuan
(US$ 8.1million) from 2001 to 2004. (China International Business, O6.06 p.46)
• In China, a number of top bankers have been charged with
fraud in recent years. Example: Zhou Lin, Shenzhen Development
Bank) (WSJ 32.04.06), Liu Xiaoguang (GM of SOE Beijing Capital Group) (FT, 21.06.06)
• Corruption cases in China are becoming more sophisticated as
the economy continues its rapid development and pose unique
challenges to enforcement authorities… "Almost every type of
financial institution has seen the emergence of criminal cases
involving the solicitation of bribes in return for loans" Mr Ye
Feng, (Director General at the Supreme People Procurate). Last year
Chinese prosecutors launched more than 41.000 graft
investigations, ¾ of which led to charges… The Chinese
government is concerned that corruption will continue to fuel
popular discontent and unrest, especially in rural Areas where
local officials often exercise absolute authority…'" (FT, 10.05.06)

52. Leaders are fully aware of the
challenges

53. Developing
"responsible leaders":
a survival imperative

54. Where will change come from?
1. Government regulations and
guidance

55. • The government has an answer and wants
to implement it:
The "harmonious society"
and…

57. "The concept of a
harmonious society
is really China's rephrasing of
the concept of CSR,
sustainable development
and human rights in China"
(W. Valentino, China Daily, 27.10.2006, p. 11)

58. CSR in China? a change in
process
1. A "fashion"? A buzzword?
2. An often misunderstood concept
3. A concept that induces scepticism
4. Some successful examples
5. From concept to implementation: what
can be done?
6. Responsible competitiveness: a
"categorical imperative"

59. CSR in China
An often misunderstood concept

60. Some misconceptions (?)
• CSR equals charity
• CSR is philanthropy, giving money away
• CSR is for big corporations
• CSR adds to costs, too expensive
• CSR is just "cosmetics", a PR effort
• CSR is "not too pollute"
• CSR is just a fashion, it will pass. A fad, or A new "religion"
• CSR does not really pay, it just "costs"
• Small companies have not time, no resource for CSR
• CSR is "a trick to make us less competitive, under the
cover of doing good"
• My competitors do not pay attention, why should I
• CSR Yes! in 10 years (when I will be rich… when I will
have time)

61. The view of Premier Wen Jiabao
(NPC speech, March 5th 2005, on the 11th 5-year plan, 2006-2011)
• We must sustain steady, rapid economic
development, speed up change of the pattern of
economic growth, improve China's capacity for
independent innovation, balance development
between urban and rural areas and among regions,
intensify efforts to build a harmonious society, deepen
reforms and open wider to the outside world, we need
to change our way of thinking about development,
create a new pattern of growth, improve the quality of
development, and make economic and social
development more people-oriented, comprehensive,
balanced and sustainable…"

62. Where will change come from (beyond the promotion of
Confucius and the "harmonious society")?
1. Government
2. International standard certification, e.g. Social
Accountability 8000 (SA8000, 26000)?
3. Voluntary participation in international efforts e.g. Global
Compact, OECD code of conduct, Caux Roundtable?
4. Corporate codes of conduct?
5. Unions?
6. Pressures from the civil society: media, NGO,
consumers?
7. Education: in business schools (teaching CSR)?
8. Business leaders: "responsible" business leaders?
9. Transfer of management practices for competitive
advantage?
10. Globalization pressure (foreign pressure on supply
chain)?

63. CSR in China
But a concept progressively
implemented
with some success.

64. Groups active in CSR Reporting in China
• PetroChina
• CNOOC • Degussa
• China Mobile • John Crane
• Zhejiang Mobile • Volswagen
• PingAn Insurance • Atlas Copco
• Baosteel • Total
• Guizhou Telecom • Shell China
• JX Mobile • Novozymes
• China Life
• State Grid
• Toshiba China
• Chalco • Sony China
• Cosco • Pfizer
• Haier • Omron
• Xizi UHC • BASF
• SinoChem • Coca Cola
• Lenovo • Nike
• Hysan AsiaPacific • Bayer
• Yili Group
• Standard Chartered
• …
• APCO
• …

65. Number of sustainability (CSR) reports
Source: CSR China

66. Global Compact participants
Source: Global Compact, 2010

67. What can be done to develop
responsible leaders in China?

68. Discuss with the skeptics (1)
• Make clear what CSR is not:
– CSR is not philanthropy or a charitable deed
– CSR is not a gimmick, a gadget, a fad
– CSR is not cultural imperialism
– CSR is not a luxury for rich companies
– CSR is not a costly investment turning into a sunk
cost
– CSR is not a constraint induced by NGOs' pressure
– CSR is not an old product in a new package to create
a new market for consultants

69. What can business leaders do, in China?(1)
• Understand the evidence that:
– Successful corporations need a healthy
society and that a healthy society needs
successful companies
– Such interdependence makes CSR a
strategic necessity, win-win for both (given
a good identification of the societal problems the firm is
best equipped to help solve and from which it can gain
the greatest competitive benefit).
• Realize that CSR offers an opportunity
to be proactive.

70. What can business leaders do, in China?(1)
• The pressure is growing from:
– The employees will (increasingly) demand it
– The government, pushing for the "harmonious
society"
– The civil society; pushing through local
communities, medias, NGOs, …
– The international community, pushing through
international organizations, foreign customers,
supply chain partners and investors, …
– Some business leaders who want to build their
brand
– Some shareholders

71. What can business leaders do, in China?(1)
• Understand the evidence that:
– Successful corporations need a healthy
society and that a healthy society needs
successful companies
– Such interdependence makes CSR a
strategic necessity, win-win for both
(given a good identification of the societal problems
the firm is best equipped to help solve and from which
it can gain the greatest competitive benefit).
• Realize that CSR offers an opportunity
to be proactive and that…

72. What can business leaders do, in China?(2)
• The pressure is growing from:
– The employees will (increasingly) demand it
– The government, pushing for the "harmonious
society"
– The civil society; pushing through local
communities, medias, NGOs, …
– The international community, pushing through
international organizations, foreign customers,
supply chain partners and investors, …
– Some business leaders who want to build their
brand
– Some shareholders

73. Some proposals to conclude

74. A bright future?
• A government fully aware of the challenges.
• A government driven by ambition but
pragmatism.
• A government still in quasi "full" control (and
determined to hold to it).
• A government "feeling the stones" as it makes
progress.
• An urban population mostly satisfied with the
results achieved and by the opportunities it
provides.

75. «Internationalization", global standards, values &
CSR
• The globalization process brings pressure on Chinese
values and behavior for common « global » standards:
– Labor: e.g. elimination of child labor, minimum wages, union
recognition, working hours
– Safety: e.g. equipments (helmet, shoes, belt), safer methods
and reliable technologies
– Environment: e.g. emission limits, effluents treatment, waste
management, forest logging limits and methods
– Human rights: e.g. freedom of expression, prisoners’ work
and control
– Property rights: e.g. rules of property ownership, patenting
systems, protection of intellectual property
• China access to WTO, entry into OECD, ILO etc…
brings obligations, acceptance of standards
embedded into values.

76. Bringing CSR, through the growing pressure for global
standards?
• It is supposed:
– to bring "best practices",
– to promote common pattern of behavior (easier to
understand and monitor)
– To facilitate regional and global HR management
– to level the playing field: every one using the same rules of
the game (a « global » game)
• But:
– It is often ressented: ‘an imposition by the rich, or the West’
– it is said to be inappropriate: ‘it does not fit into China’
– It is too early: ‘In 10 years, yes, but not now’
– Its implementation is improper: ‘the process to
transfer the practices goes against our values’

77. Some "Dilemmas"
On one hand:
• I want to transfer our « best practices », because we have more
knowledge and experience: Chinese will have to adapt to our
methods, approaches, practices and standards.
• Let’s use a code of conduct, to have everyone in our operations
in China sharing the core values of our corporate culture.
• We need a global, common corporate culture
• On the other:
• I must do in Rome as the Romans do (e.g. as I should not have
the arrogance to impose my values on the Chinese): this is why
I pay bribes (or outsource bribery to my local partner or to my
agent).
• I have global standards through the code of conduct of my
company, but I do not apply them here (e.g. for environment,
for safety) as I prefer local laws (less demanding) and regulations
(less stringent).

78. The double talk of best practices
• I shall rely upon and transfer « best practices » when they fit
me: I have to be opportunistic
• When they do not, I will be a relativist (« It depends! », « There
is nothing right or wrong per se… »), and « do in Rome as the
Roman do »
• I will lobby against more labor regulation, and union
development, but ask regulation for IP
• In any case, « the best practice is the one which contributes the
best to the bottom line » (while I am here…): I am a utilitarian:
the end justifies the means.
• In short: let’s implement my values, my best practices, but as
long as it delivers the most value for my shareholders.
• It is Values for Value, rather than values for values
• « Best practices » remain a tool exclusively used to achieve
bottom line expectations

79. China’s leaders feel responsible to quickly develop their
own modernity
• As China is engaged in its development process, its over-heated
economy is:
• Associated to many issues, including:
– Environmental deterioration
– Infringement of intellectual property rights
– Poor safety and labor treatment
– Bribery and corruption
– Human rights abuses
• The Consequence of a mindset.
– China, humiliated by the imperialist West for more than a century, is
motivated by revenge, keen to catch up with the West and to (re)build
its global power. A new “late development effect”?
– China wants to develop a modern society, but in its own definition, its
own terms, on the basis of its own (Confucian or eclectic) values. An
attempt to reinvent modernity?
• And China may (re?) define CSR in its own way

80. Developing "responsible leaders" in
China:
Not a choice,
But an "imperative"

81. To conclude: who will be the "responsible leaders"?
• China's long term performance will rely upon its capacity to develop
responsible leaders able to manage complexity and willing to build
Sustainable Enterprises, i.e.
– Will be men and women of character demonstrating strategic courage
to make the tough decisions needed to be made in the highly
competitive Chinese and global environment.
– Will question the «command and control» approach and be willing to
explore alternative management styles contributing to grow leaders.
– Will care, now, for the planet and the generations to come,
integrating all stakeholders (present and future, in China and outside)
in making their decisions
– Will be aware of and able to reconcile contradictions, to blend East &
West, Public & Private, Personal & Professional, managing the
interdependence as Yin and Yang.
– Will have a holistic vision, global that integrates the complexity and
responsibility inherent to the China's power
– We willl need business schools and Faculty willing to take risk to
innovate. Deans and some faculty members have to take the lead.

82. It will be long road…
With many challenges on
the road…
We should remain optimistic

83. "If you think you are too
small to make a difference,
try sleeping in a room with
a mosquito".
(African Proverb)