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... t is true that she broke the law. But if her business ethics had been good enough, she would have not got involved in such illegal and unethical behavior. She was assigned and trusted by the shareholder to have the authority to manage the company assets, but she betrayed her company by abusing her space of freedom, especially when the company was in such a difficult situation. At that time she should have used her professional knowledge and cooperated with her colleagues to improve the financial performance of the company. Another reason was that there was no healthy corporate culture in the company.
Employees were not encouraged and rewarded for making contributions to the company. So nobody really cared about the company. That kind of environment gave Guifang Jing opportunities to corrupt such a great amount of money. Upon knowing that the police would investigate the missing bank check, she decided to confess to the police to avoid more serious punishment. Actually, she was at the first stage of Konhlber-Inspired Typology of Ethical Dilemmas. If she had been in a higher stage, for instance, Stage 4 Conform to rules, laws, code, and conventions, or even higher, Stage 5 Follow principles based on respect for people and their rights, she would have not got involved to this crime.
But we must be clear that the case of Guifang Jing was only one of the similar cases that happened in the SOEs in the country. Obviously the companies and the whole country need to take action to improve the business ethics, to foster a good and ethical business environment. So far, we have understood why the incentives and regulations cannot and will not solve the agency problems. The agency problems do involve business ethics dimension. Then there is a base for business ethics to play an important role in dealing with the agency problems. As common sense, human acquires knowledge through education, formal or informal.
Without education (in a broad sense), people cannot understand the nature and the society. They wont have their values developed in the process of learning and practice. Of course, they wont act according to the social behavior orders and norms. Business ethics aims to discuss the business conduct / activities that raise moral issues and to improve the ethical quality of decision-making process at all levels: micro-, meso-, and macro-level (Enderle) through education. 6. How to solve the Agency problem from the view of business ethics in the three levels (Georges Enderle)? The country should try to enhance the efforts to improve business ethics education.
According to Prof. Lu Xiaohe, the business ethics in China has emerged and developed mainly as a response to the demonic reforms in three stages: (1) 1978 - 1984; (2) 1984 - 1994; (3) 1994 to the present. That means the business ethics has just been talked about and studied. This is the actual need when the SOEs are in the intermediate state of the reform of the corporation organization. During this particular period, our country should put even more efforts to enhance business ethics education in all the SOEs and business schools.
Just as our Premier Zhu Rongji says, The success of SOEs hinges on the quality of the managers. If SOEs want to survive and develop in the severe market competition, they must develop a team consisting of managers who have high ethical standards, are good at managing business, have business acumen, and are brave to pioneer. By having the business ethics programs for the managers in the SOEs, they will improve their ethical reasoning sense and ability, distinguish what they ought to do from what they ought not to do. When they make decisions about the company, they will integrate the business ethical dimension in the economic efficiency. Obviously, when they encounter the dilemma where their personal and the organizational interests conflict with each other, that is, some agency problems, they will also measure their decisions according to the ethical values developed by the education. The business major students, the future managers, should not only learn how to improve the profits and efficiency for the organizations but also how to make ethical business decisions.
Meanwhile, the public media should play an active role in fostering the social environment in which business people should try to act in an ethical way. By advocating the good models and condemning the bad one, the public will develop a strong sense of business ethics. But we dont mean we can ignore establishing the regulations and other kinds of systems for trying to solve the agency problems. They will help our country to select good managers to assign to the SOEs, and monitor and control the performance.
Instead, we emphasize that we should try to carry out the both hands and the both should be strong. The SOES should try to develop and foster a good and healthy corporate culture that the companys interests should be put in the first priority. Nobody can bypass the companies to seek personal gain for itself. All the employees should be encouraged to participate in the management of the company. Every manager in the company will be under the supervision of all the employees. Once any unethical behavior is discovered, the actor will be condemned by all the employees and public.
What happened in the YYY SOES in Shanxi Province was a good example. When the warehouse keeper of this SOES found that the over RMB 200 thousand was missing during the evaluation of the company assets before transforming to corporation limited, she reported to the local government. Although the investigation indicated that there were no problems, she believed that the results were wrong and some people cheated in the investigation. She chose to suicide to fight against the corruption. Fortunately, she was saved. The second time investigation proved that she was right.
If everyone or most people have such strong ethical levels, we would not have some many and serious problems. Meanwhile, the SOES can also resort to other means to improve the business ethics levels of their managers, such as inviting famous business ethics professors to have training programs, or sending their managers to some famous business school in China to attend business ethics courses. The managers of the SOES should continuously improve their ethical standards by self-teaching. This is the call and need from the current society. If they want to be successful in their career with the SOES, actually, the same as with other types of organizations. Our Premier Zhu Rongji emphasizes, The managers should be happy to learn, diligent to learn, and good at learning.
As Chinese, we should feel lucky that we have a very long history and a lot of famous philosophers who left us so great valuable culture legacy that we can always find something inspiring even for the modern business management. In Lun Yu, Confucius said, If people have no faith, I dont know what they are good for. Can a vehicle travel without a link to a source of power? How vivid is this metaphor? Upon agreeing to take the management positions in the SOES, managers should keep the faith to the country, to the company and to all the employees.
They should not betray any of them, or they will not go further. The famous ancient military scientist Sun said in his famous work, The Art of War, The generals should have five basic qualities: wisdom, sincerity, benevolence, courage, and strictness. As the business managers, they also should have similar qualities to win the business war in the market competition. There are numerous examples in Tao Te Ching, too. In a broader sense, Chinese traditional ethics about Yi and Li also gives us a kind of guidance. Li means benefits and profits and Yi refers to the principle or norms of obtaining and distributing benefits or profits (Lu Xiaohe).
Speaking about the specific agency problems, managers should observe the ancient doctrine that is still acceptable and applicable in the modern business world. Along with the opening policy, we have a lot of opportunities to exchange ideas with foreigners in many different aspects including business ethics. Now we can find some translated books on business ethics. Also it is easy for us to access the Internet to read the relevant articles and research results from abroad. The managers as individuals can and should try to improve themselves.
The essential question should not be What should the other individuals, companies and the national economies do? ; but rather what should I personally do, and what should the company and the national economies to which I belong do in order to perceive and carry out the ethical responsibility at the different levels of acting. In summary, business ethics can play an important role in solving the agency problem through the efforts taken in the three different levels. Nowadays, firms have to recruit management talents from outside, who are not owners, to compete in this more and more globalized economy. As long as the firms were to be managed by the agent, agency problem will exist. If they are not dealt with carefully, they will cause huge loss for the owners. In the SOEs in China, the managers, the agents are working for the country, which is the owner and principal.
So the agency problems are unavoidable. Although regulations and supervision systems are critical to solve the agency problems, they can not and will not eliminate the problems thoroughly. The ethical reasoning ability and ethical level of the managers of the SOES are also very important to reduce the possibilities of the agency problems. Especially, we need to put a lot of emphasis on improving the ethical quality of the managers at the same time to reform the corporation organization of SOES in China.
Because the current system is out of date, cannot meet the requirement of the market economy in China, and not strong and effective enough to control and supervise the behaviors of the managers of SOEs. Through the efforts of strengthening education and the wide publication of the business ethics in three different levels, the macro-, meso-, and micro-level, the ethical awareness and reasoning ability of the managers will certainly be improved. That will contribute to solving the agency problem in the SOEs in China. Sun T. and Yuan S.
B. (translator) 1997. The Art of War. Foreign Language Teaching and Study Press. Enderle, G. 2000. Business Ethics. Blackwell Companion to Philosophy.
Lu, X. H. 1997. Business Ethics in China. Journal of Business Ethics (Netherlands) 16: 1509 - 1518 Snell, R. Psychic Prisoners?
Managers Facing Ethical Dilemmas: Cases from Hong Kong web Bibliography: Students of The China Europe international business school
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