Corruption and poor Corporate Social Responsibility (CSR) in China, you’d think, went hand in hand, right?
Brace! Brace!!
Researchers Juncheng Hu and Janice Hollindale from the Bond University (Gold Coast) and Lijuan Zhang from the Australian National University (Canberra) found, in fact, “…evidence that CSR in China is a window-dressing tool to mask corruption.”
Moreover “..[Good] CSR is not necessarily driven by a firm’s intent to be socially responsible, but rather, its need to hide corruption.” It should be stressed at this point these conclusions are based on a China study and the findings therefore specific to that space.
However, the research dovetails into studies from other parts of the world that highlight the ‘agency’ problem of promoting CSR i.e., managers are often motivated to do what seems right not necessarily what is right.
The work reached its conclusions by triangulating the ‘shock’ that social scientists are always looking for of the beginning of Xi JinPing’s anti-corruption campaign (December 2012) with data from Chinese company reports on Business Entertainment Expenses (BEEs) and financial information provider Hexun’s widely used CSR scores.
In short, the researchers discovered that after the anti-corruption campaign began CSR scorings dropped. This was especially notable in companies with higher paid and more politically connected managers. The keen can review the full analysis by following this link Corruption and CSR.
For practitioners there are three important points for when embarking on future analysis of Chinese companies:
- Be especially suspicious of companies that tout CSR credentials
- Be especially suspicious of managers boasting political connections
- Be especially suspicious of companies with highly paid senior staff
For many of us the above have been red-flags in the China space for a long time.
Newbies though would benefit from a perusal of this work whose findings are so diametrically opposed to CSR received-wisdom in the rest of the world.
Happy Sunday.