Reforming China’s human rights regime: Can business play a role?

1. Reforming China’s human rights regime: Can business play a role? (Working Paper) Hong Kong Political Science Association Conference 2009Hong Kong University of Science and Technology Robert J. Hanlon hanlon@cityu.edu.hk City University of Hong Kong 21 August 2009

2. Key Research Questions What impact does corruption and human rights have on business? What is the political risk for businesses operating in China with regards to human rights and corruption? To what extent can foreign MNCs influence the human rights regime in the Mainland?

3. Methodology Qualitative vs. quantitative design Research conducted between 2006-2009 Interviews in Hong Kong, Singapore, Guangzhou, Kunming, Oxford and Paris. 25 in-depth interviews 6 Conferences and workshops (anecdotal) TNCs, MNCs, SMEs, academics and NGOs

4. Why corruption and human rights? Interrelated Police and courts Environment Education Health Land grabbing Tofu projects Intellectual property

5. Corruption “[T]he behaviour which deviates from the formal duties of a public role because of private-regarding (personal, close family, private clique) pecuniary or status gains; or violates rules against the exercise of certain types of private-regarding influence. This includes such behaviour as bribery (use of a reward to prevent the judgement of a person in a position of trust); nepotism (bestowal of patronage by reason of ascriptive relationship rather than merit); and misappropriation (illegal appropriation of public resources for private-regarding use” (Nye 1967, 284).

6. Human Rights “Rights inherent to all human beings, whatever our nationality, place of residence, sex, national or ethnic origin, colour, religion, language, or any other status. We are all equally entitled to our human rights without discrimination. These rights are all interrelated, interdependent and indivisible” (OHCHR 2008).

7. Corruption and Human Rights in China Corruption Corruption is endemic and encroaching on virtually all professions “You must assume all officials are always corrupt” (HR Lawyer) Daily reports and increased punishments Culture of clientelism, patronage, nepotism Human Rights Courts, Police, Media Tibet, Xinjiang, capital punishment, arbitrary detention and torture Major international campaigns with consistent media coverage Progress – rule of law, economic and social fronts

8. Business, Corruption and Human Rights Ethics and morals Culture Non-traditional risk management Significant challenge but no one talking Endemic for business: bribe to investigate Diverging definitions from business

9. What impact does corruption and human rights have on business? Generally speaking, corruption and human rights have minimal impact Bribery is a cost of doing business, while human rights are outside the sphere of influence Promoting anticorruption and compliance is highly linked to liability, while interest in human rights is largely self-motivated Personal risk to bribery Corruption and human rights investigations are time consuming and expensive Lack of expertise on the issues from within companies Courts and police generally have a negative impact on foreign business Genuine personal concern for human rights by most respondents Accountability and transparency

10. What is the political risk for businesses operating in China with regards to human rights and corruption? Risk is high, but minimized through joint venture partnerships High risk of dealing with state officials Employees not understanding corruption Reputational risk is not the primary concern Risk of engaging in human rights programs Some interviewees related risk to their personal life Extreme risks included kidnapping, revolt and war Being blacklisted by the government Fair hearing in court Intermediary: Same speech since 1992

11. To what extent can foreign MNCs influence the human rights regime in the Mainland? MNC have significant influence International regulation and Best Practice SMEs have little influence, size matters Gap between local and central government influence Some connections go to the highest level of government Sensitive policy issues are untouchable Company is at risk when too close to government: Coke and Huiyuan Juice Group Ltd MNCs can engage policy on corruption issues MNCs have limited influence over the human rights regime

12. Private Sector Corruption Business to business bribe paying Undermines fair competition and impacts rights Highly illegal in Hong Kong and Mainland China According to one whistleblower, common practice Entrenched system of price-fixing and profiteering

14. Findings The incentive for business to think short-term limits the capacity to think critically of corruption and human rights issues Corruption has a significant impact on foreign industry in China; however, most companies avoid finding a sustainable solution and would rather pay the bribe Foreign business relies heavily on joint venture partners especially to navigate the Mainland’s legal system Most SMEs would benefit from a strong legal system and enforcement, while larger firms would not. Interestingly, the larger firms are the drivers of policy debate in the Mainland Human rights in China is a non-issue for most companies interviewed, since there is no support being driven down from the top of the company Human rights is perceived to be highly political while corruption is criminal Accountability and transparency are seen as major concerns, while both impact corruption and human rights Many see Hong Kong as a source of inspiration for the Mainland, while strongly encouraging engagement with China’s government at all policy levels Many industries lack tools to deal with corruption and anticipate non-traditional (non-financial) business risk Gap between business policy and personal views

15. Reforming China’s human rights regime: Can business play a role? Business and corruption Independent judiciary Law enforcement Good governance and best practices Free flow of information Accountability and transparency Corporate Social Responsibility Leadership