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UPDATED: September 26, 2011 NO. 39 SEPTEMBER 29, 2011
Getting Strict With Rule Breakers
More supervision is needed over multinationals operating in China as controversy begins to surround these foreign companies

NO PRICE FRAUD: A Carrefour supermarket in Guangzhou, capital of Guangdong Province, establishes a "price center" to resolve problems involving incorrect price labels (LU HANXIN)

CLEAR DIRECTIONS: A consumer looks at a bulletin about the manufacturing process of KFC's soybean milk at one of the food chain's restaurants in Hefei, capital of Anhui Province (CFP)

Another social responsibility problem is infringement on labor rights. Wang said the problem of infringing on labor rights by some multinationals has become more and more serious, mainly in processing trade companies and exporting companies in the industries of electronics, textiles, garments, shoes, toys and handicrafts. Some enterprises in these industries ignore work safety and sanitation, environmental protection and labor protection, take excessive holidays, depress salaries and benefits, and provide inadequate remedies for industrial injury and medical treatment.

Compared with these problems, the public condemns product quality and in some instance safety. Wang said to provide safe and reliable products is the basic requirement for a company and the basic responsibility a company should fulfill. However, some multinationals that produce high-quality, safe and reliable products in their mother countries lower their safety standards after they enter the Chinese market. Some of their products do not stand up to safety standards.

Some people may say multinationals in China often make charity donations. But Su Yong, Director of the Department of Corporate Management of Fudan University, said donations do not equal corporate social responsibility. The most essential social responsibility lies in human-oriented management of the employees, strict control of product quality and the protection of the environment, and strict abidance to state laws and regulations.

Chen Mingsheng, Deputy Director of the Center for Law and Economics affiliated to the Central University of Political Science and Law, said entrepreneurs should lead their companies to carry out social responsibilities with their faith, practice ideas of sustainable development, pursue harmonious development among employees, the society and the nature, repay the society, care for the nature and protect the environment. This is what companies should do to fulfill social responsibilities.

Powerless supervision

Multinationals are ignoring their social responsibility in China for three reasons, Wang said.

First, related Chinese laws and regulations are not sound and law enforcement is powerless. Major Chinese laws related to social responsibilities lag behind economic development. The Law on Protection of Consumer Rights and Interests, Contract Law, Civil Procedural Law and Product Quality Law only offer general provisions, so it is hard for consumers to win lawsuits to protect their rights, and the costs for companies that break the law is quite low.

During the 2010 recall by Toyota, Akio Toyoda, President of Toyota Motor, visited China and apologized to Chinese consumers. He said the company would fulfill its obligations and responsibilities in accordance with local laws. His words indicate the attitude of Toyota: For the part which Chinese laws do not stipulate, Toyota may not fulfill the same obligations and responsibilities as it did in the United States, and Toyota is making this adjustment in accordance with the characteristics of the Chinese market.

In the product quality incident of Pajero cars in 2010, Mitsubishi Motors refused to recall the defective cars sold in China using the reasoning that China has no legal system to issue such a recall. It actually means that Mitsubishi Motors adopts "discriminative treatment" to Chinese consumers not because the company is immoral, but because Chinese laws are inadequate in protecting the consumers.

"It is thus clear that loopholes in the legal system will be exploited by some multinationals, while related government supervisors have no law to go by and legitimate rights and interests cannot be appropriately protected," Wang said.

Second, policies of some local governments boost the egos of multinationals. To attract investment, local governments at various levels offer preferential policies to foreign-invested enterprises.

Third, industrial associations have not played their due role. Throughout the world most standards on corporate social responsibilities are formulated and implemented by non-governmental organizations. But in China, there is no similar social organization specially promoting the construction of corporate social responsibilities. Industrial associations and united organizations voluntarily established by enterprises should have played an important role in social responsibility construction, but they did not fulfill their due functions of self supervision.

"Unsound development of industrial associations also boosts some companies, including multinationals, in unfair competition and infringement on consumers' rights and interests," Wang said.

How to supervise?

Gu from Fudan University said the government should at least adopt some measures, like improving related legal systems, establishing effective supervision mechanisms, setting up indicators and assessment mechanisms on the social responsibilities of these companies, fully playing the role of non-governmental organizations and strengthening supervision through the media and the public.

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