Lauren Hilgers

A little adjustment to the books, an under-the-table payment or two: corrupt business practices are not news to businesspeople around the world and here in China, executives can face unique challenges. With this in mind, a group of CEIBS professors and executives recently took the issue out from behind closed doors, bringing to light the tough decisions that many of today's business men and women face, around the world .

"Companies have to compete in a very tough context where there is no real level playing field beyond rules, codes of conduct and compliance," says Henri-Claude de Bettignies, Professor of Globally Responsible Leadership at CEIBS. "What makes a difference are the values of the leader and the way he or she walks the talk".It is such thinking that de Bettignies, professor of Globally Responsible Leadership at CEIBS, is trying to change.

To start the conversation, de Bettignies recently organized a roundtable discussion entitled Enhancing Business Through Transparency. The event, hosted at CEIBS on May 9, brought together professionals and academics to discuss the realities of corruption around the globe. The event was organized, de Bettignies says, to paint a more complete picture of the history and consequences of corrupt business practices, to learn from other countries and corporations' experience, and to share and discuss remedies.

Participant Cen Ling, general manager of Wuhan-based KCH Co. and a CEIBS EMBA student, says the roundtable was a step in the right direction. "It's good just to have this topic discussed," he says. "It may take time, but people are working to change the situation."

Conference speakers included Laurence Cockcroft, chairman of Transparency International (UK); Peter Brew, director of Responsible Business Solutions and co-chairman of the China Business Leaders Forum; William Valentino, general manager of corporate communications at Bayer (China) and Andrew Wu, group representative director of the LVMH Shanghai representative office.

No Checks and Balances

The discussion began with an acknowledgement that corruption - defined by Transparency International as "the misuse of entrusted power for personal or corporate gain" - is a global problem. TI's definition includes practices such as manipulating government, diverting profits from shareholders and illegally destroying the environment for corporate gain. Peter Brew stresses that such practices are being fought worldwide. "We want to emphasize that this is not an issue unique to developing countries," Brew says, pointing to scandals involving companies including Enron and Amaranth Advisors in the United States.

But while corruption is an issue for nations around the globe, conference speakers agreed that China faces some particularly serious challenges.

Putting the situation into historical context, CEIBS Associate Dean Wang Jianmao says lack of transparency in China can be traced back to the period when most companies were state-owned. As authorized monopolies, the companies had little reason to be transparent. For a state-owned company, there were no checks and balances.

Also important, Wang says, are "inequalities" in the way China's economy initially developed. "Early strategies caused imbalance," he says. "Preferential treatment was given to businesses that would invest in certain areas." China's initial economic development policies, launched in the 1980s, focused investment on certain geographical regions - in some instances through Special Economic Zones that offered tax incentives to investors. Today, Wang says, the government is working on correcting those imbalances. For example, a recent corporate income tax law brought foreign and domestic corporate taxes to the same level, negating some of the benefits of the Special Economic Zones and instead encouraging investment in specific industries.

Today, China-based companies, however, should not sit back and wait for regulations to change, speakers said. Opaque practices can harm competition, reduce trust between companies, and ruin an individual's reputation. "I always advise my students, 'you have to be at least a half-step ahead of [your competitors],'" Wang says. "You have to be able to protect your reputation."

As China emerges onto the global marketplace, understanding and following transparent business practices will become increasingly important, speakers stress. Transparency will be critical to building business relations with companies from countries with stricter reporting regulations.

This means that new graduates taking on management positions in China will face different challenges than their predecessors, Bill Valentino says. Going forward he warns that corrupt practices could cripple their ability to do business. "I look at corruption and transparency from the perspective of sustainability," Valentino says. "Businesses want to remain sustainable, governments want to remain sustainable, and fighting corruption and bribery to achieve transparency all play a huge role."

Simply providing transparent and honest information during business operations, however, is not enough to achieve transparent business practices, advised CEIBS Accounting Professor Yuan Ding. "The second question is, 'how will the information ? made available thanks to the transparency ? be used?'" Ding says. "We have to look at the quantity and quality of the information available." He added that many Chinese businesses and investors fail to fully use information that is available, such as doing background checks when selecting business partners or conducting due diligence research before drawing up contract terms.

Solving this problem, professor de Bettignies suggests "requires not only effective institutional mechanisms and an effective government hand to implement the law throughout the country, but also it demands strategic courage and clearly exemplified values." He says these two qualities are ingredients of "responsible leadership" in the corporation. "People like to pass the buck," he says. "They want to escape responsibility and justify their behavior because of the culture, the tradition, or as a necessary step of the development process, or just on survival and the necessity to produce a good bottom line."

Through discussing the topic, Peter Brew says the students at CEIBS are taking part in a global trend. He explains that more companies are pushing for socially responsible policies. "I believe we're going through a new phase of business relations to society," he says. "We need to prepare the next generation for a different environment ? business schools are the perfect place to do this."

In the future, Brew hopes China - and the students at CEIBS - will lead the world in responsible business practices. He says, "China has the ability to demonstrate what a new free market economy can deliver if it is based on sound principles."