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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

The top priority task is to improve related laws and regulations as soon as possible to stop loopholes. The government should incorporate corporate social responsibility into the legal system. The supervising authority should set up a claiming mechanism and update monitoring facilities to make sure all claims reach authorities' attention. The government should also regularly publicize the blacklist of multinational companies breaking social responsibilities and strengthen law enforcement, strictly punishing all enterprises breaking the law.

According to Gu, China can also learn from the experience of developed countries, utilizing international organizations and non-governmental organizations to curb behaviors of breaking corporate ethics by multinational companies. In China there are few similar organizations, but the government can utilize existing trade unions, consumers' associations, investors' associations, industrial associations, quality supervision associations and other social organizations to jointly supervise multinational companies to assume their social responsibilities.

However, an anonymous official of the State Administration for Industry and Commerce expressed his concerns. He said supervision over multinationals is not as easy as that over domestic companies. It is likely to cause international condemnation and be smeared as striking foreign investment. This is why they are overcautious when it comes to supervision.

He said multinationals' behaviors influence social and economic benefits of more than one country. Since every country where any branch of a multinational company is located has the jurisdiction of the branch, jurisdiction conflicts of different countries over the same multinational company will be unavoidable.

"Hence pressure from the consumers and mass media will be more powerful than government supervision against bad behavior by multinational companies," said this official.

Recent Scandals Involving Multinationals

ConocoPhillips: Bohai Bay oil spill

The oil spill started at the Penglai 19-3 Oilfield on June 4, but the oilfield operator ConocoPhillips did not publicize the information. The accident was disclosed by the media in early July. ConocoPhillips held its first media conference on August 24. Under the pressure of public opinions and investigation by the State Oceanic Administration, ConocoPhillips started to adopt measures to plug the leaks.

Kumho Tires: Shoddy products

The scandal was disclosed by China Central Television (CCTV) on March 15. The company denied any defects in its products, but after three follow-up reports by CCTV, Kumho admitted it had used excess recycled rubber during production and decided to recall more than 300,000 tires produced in 2008-11.

Apple Inc.'s Chinese suppliers: Pollution

In August, five Chinese environmental protection organizations jointly issued a report titled The Other Side of Apple: Pollution Spreads Through Apple's Supply Chain, disclosing that environmental problems exist in 27 suppliers and suspected suppliers of Apple.

This is the second time Chinese environmental protection organizations have disclosed pollution problems of Apple's supplies. A similar report issued in January this year indicated there were serious problems concerning environmental protection, occupation health and labor rights.

Knorr: Condensed soups

In August, condensed bouillon by Knorr was criticized for confusing words on the packages of some of its products, which stated that "This product may contain" certain ingredients. Later supermarkets in many cities removed Knorr products.

Unilever, Knorr's parent company, responded that the word "may" was used in accordance with international practices to warn the consumers who are allergic to certain substances. The company decided not to recall the condensed soup products.

KFC: Cooking oil

A KFC employee said in early September that the restaurant was using cooking oil used the previous day and only changed cooking oil every four days. The restaurant also adds new oil to used oil. This information was later confirmed by a related government supervisor.

KFC avoids increasing the frequency of its cooking oil changes by saying its cooking oil fully complies with related national standards on the usage of edible vegetable oil.

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