Responsible Business Conduct in China

As a member of the American Bar Association's China Committee, I keep a close eye on trends and legal and political developments in that vital and expanding, but challenging, market.

One of the biggest challenges in China is that there are significant differences between Chinese political and ethical philosophy and western perspectives of democracy and of what constitutes fair and responsible business conduct.

The Organisation for Economic Co-operation and Development (OECD) is working to reconcile those differences and to bring China more fully within the community of nations governed by the rule of law and responsible business practices. Toward those ends, the OECD recently released for comment its draft report, entitled "China-OECD Project on Government Approaches to Encouraging Responsible Business Conduct."

Please read on for more about the report, including my review of intellectual property issues. This blog also contains link and, at the bottom of the posting, Resources Notes to direct you to other invaluable sources of information and assistance. For more about OECD's role in the creation and harmonization of international commercial law, check out another of my postings here.

More on the OECD Draft Report

Labor rights, food and health safety, and environmental protection predominate in this draft. The prominence of these issues should telegraph to American and other companies that there are opportunities for them to align their China ventures with these hot button and high profile issues and to thereby build greater leverage in that challenging market.

This report, in final form, should continue to motivate China to adopt business practices that more closely comport with western standards for transparency and free markets. As with increasing intellectual property protections in their country, the pragmatic Chinese should be increasingly motivated by the realization that such standards are good for business.

Read on for my comments on intellectual property protections and other highlights from my review of the report.

Intellectual Property Protection

Intellectual property protections are conspicuously inadequate in the text of the draft report. The report contains three minor references. That said, the two referenced IP protection requirements of the Shenzhen Stock Exchange have the potential to increase respect for intellectual property rights as Chinese companies increasingly move to access capital through the financial markets.

In Paragraphs 173-74, the report discusses a dispute resolution mechanism in China, called "conciliation," that is not present in many other jurisdictions. There is a specific conciliation procedure for intellectual property disputes, but the report does not elaborate. It does list a variety of dispute resolution and arbitration bodies in which China cooperates, including, via cooperation agreements, with conciliation centers in New York and Hamburg.

The only other mentions of intellectual property protection are in the report's Annex 1, which reproduces the Shenzhen Stock Exchange's Social Responsibility Instructions of Listed Companies, dated September 25, 2006.

In Article 4, those Instructions state that listed companies should not infringe upon the intellectual property rights of others, but this requirement is notably drafted so as NOT to mandatory.

Article 20 of those Instructions does include mandatory "shall not infringe" language, but limits that prohibition on infringement to the rights of the listed companies' customers and suppliers. Of course, one can see that such a mandate only reflects good business sense and not any inherent respect for intellectual property rights in general. Customers and suppliers naturally have degrees of leverage in their relationships with Chinese companies, and infringements of customers and suppliers' intellectual property rights can have the very practical effects of injuring the Chinese company that engages in such conduct. Regrettably, the pragmatism for which Chinese companies and business leaders are so renowned apparently does not yet encompass third-party intellectual property rights, and neither does the Instructions' mandate.

Other Comments on Review

Paragraph 3. The OECD report states that the Chinese government is "strongly encouraging" Chinese businesses to adhere to high standards of behavior. It states that the latest Company Law encompasses principles of responsible business conduct (RBC) by requiring companies to comply with applicable law and social and business morality. It gives, as an example, of a code of conduct established for the Chinese textile industry, long known for its sweat shop operations.

Paragraphs 71-80. The report gives an excellent backgrounder on key aspects of Chinese philosophy and business culture and the influence of these inherent characteristics upon the view and adoption of international, and largely westernized, standards of responsible business practices. In our China-focused competitive intelligence work, we have seen these forces at work, particularly within large family-owned enterprises in the high tech sector, or what we call "industrial dynasties," and within state-owned enterprises and those closely tied by indirect ownership to the Chinese government, such as Lenovo, which acquired IBM's personal computer business in 2005.

Paragraphs 148-58. Transparency is an essential component to compliance with and enforcement of responsible business practices. The OECD report provides a concise history of the development of China's Company Law, Accounting Law, and other laws, regulations, and initiatives geared toward the promotion of transparency within Chinese companies. The report also discusses the importance of competitive intelligence in making good business decisions for the China market. See Resource Note below.

Paragraphs 159-77. Here, the report documents the key ways in which the Chinese government can promote and ensure the adoption of responsible business conduct by countries operating in that country. Among the ways discussed are further development of the Chinese legal system, increased education of its business professionals, independence of the Chinese judiciary, and better collaboration with the international community. The ABA China Committee has been active in such collaborations and in facilitating the development of Chinese legal system and the independence of its courts.

Box 10 & Paragraphs 186-87. The report lists relevant United Nations Conventions to which China is a party and, tellingly, not yet a party. It has, for example, agreed to the United Nations Convention Against Corruption, but not to certain conventions protecting the rights of women.

Table 2 & Paragraph 198-203. Chinese corporations are beginning to publish annual RBC reports. Table 2 lists sixteen (16) domestic Chinese companies and eight (8) foreign-invested Chinese enterprises (FICEs) that the Chinese Enterprise Confederation says filed 2007 RBC reports. The domestic companies include huge cell phone makers, white goods giant, Haier, whose magnificent central building in Quingdao is pictured above, chemical companies, water suppliers, and financial institutions. The FICEs include big name American, European, and Japanese companies, such as Ford, Peugot, Sony, and Toshiba.

Unfortunately, CFC does not make any of these RBC reports available online. Haier, for instance, likewise does not publish its report online.

The draft report is unpublished. If you would like a copy, please contact us at +1.208.939.4472 or info@technologylawgroup.com.

RESOURCE NOTES:

On the subject of competitive intelligence, the U.S. Department of Commerce operates the U.S. Commercial Service for the purpose of assisting American companies find, evaluate, and obtain businesses partners around the world. This source of competitive intelligence is both invaluable and affordable. To learn more, check out the U.S. Commercial Service in Boise. For contact information for Director Amy Benson, click here.

For a current list of bilateral agreements that the United States has with China, check out the Treaties in Force, last published by the U.S. Department of State in November 2007. The listing for China is on Pages 16-19. Listings for China's Special Administrative Regions of Hong Kong and Macao are on Pages 19-20.

The Odyssey: One Woman Attorney's Journey in Entrepreneurship

Homer’s Odyssey, circa 700 B.C., is an epic story of heroic struggle and adventure, of creative intelligence, and of commitment in the darkest of times. It weaves a tangled, tragic, and ultimately triumphant tale of the hero’s journey home after the long Trojan War.

So influential on Western culture, the writing’s title, Odyssey, has become a word in English meaning an ambitious, classic, larger-than-life journey. A short synopsis demonstrates why.

Our hero is the shrewd and intelligent Odysseus. He leaves his wife, Penelope, and his infant son to fight for ten years in the Trojan War. The journey home takes our hero another ten years during which Athena, goddess of heroic endeavor and wisdom, protects him and the sea god Poseidon punishes him. Storms drive Odysseus’ fleet off course, and the monster Cyclops captures Odysseus and his sailors.

Odysseus escapes and Aeolus bestows upon him a precious gift, a bag containing all the winds to carry our hero and his fellows safely home. The foolish fellows, however, open the bag while Odysseus sleeps, the gift forever lost and Aeolus disinclined to bestow another.

Later, the cannibal Laestrygones destroys the entire company except Odysseus and his crew. Potions then turn most of the crew into swine. Our hero resists the potion, thanks to intercession by the god Hermes and bringing Odysseus into the favor of Circe, the witch-goddess, who gives him rest and frees his men. A year passes thus.

Odyssey then travels to the world’s westernmost reaches where he makes sacrifices and invokes help from the spirits. After receiving spiritual guidance, he travels back to Circe’s island and, with her aid, avoids and overcomes many perils: the Sirens; the hydra-headed monster, and the whirlpool.

Disaster rains again, however, when Odysseus’ men ignore warnings about hunting sacred cows belonging to Helios, the sun god. Outraged, Helios wrecks their ship. All but Odysseus drown. Finding him washed ashore on her island, the goddess Calypso helps Odyssey, but compels him to stay for seven years.

Finally escaping, our hero is befriended by the Phaeacians who, enthralled by his story, help him home to Ithaca. After unraveling intrigues at home, Odysseus eventually makes himself known to Penelope, and they reunite, our hero’s journey completed.

To the American author Joseph Campbell, Odyssey and other legendary stories of struggle and triumph have larger and timeless meaning. In his 1949 seminal book, The Hero with a Thousand Faces, Campbell examines the patterns in these mythical stories of heroism and considers the universal truths that they convey about an individual’s journey of self-discovery and self-transcendence, his or her role within society, and the interplay between that personal journal and one’s societal role. As Campbell and others observed, these stories exhibit the same sequence of events and can be viewed as telling the same story, the so-called monomyth.

The monomyth has a recognizable pattern. It begins with a call to adventure, which our hero must accept or decline. The adventure then takes our hero on a road of trials as to which he or she succeeds or fails. Our hero achieves his or her goal, viewed as a boon in the monomyth, and thereby often gains vital knowledge of him- or herself. Success or failure then awaits our hero as he or she returns to the ordinary world. The hero’s return heralds one of the real triumphs of the hero’s journey when the hero improves the world by using or applying the boon.

Campbell encapsulates the monomyth thusly: “A hero ventures forth from the world of common day into a region of supernatural wonder. Fabulous forces are there encountered, and a decisive victory is won. The hero comes back from this mysterious adventure with the power to bestow boons on his fellow man.”[i]

Gender references aside, lawyers in entrepreneurial practices and other endeavors can relate to the monomyth, the hero’s journey, the odyssey. For women in male-dominated professions, like law, technology, and the sciences, the entrepreneurial journey often seems more gargantuan and overwhelming. There seem to be fewer gods to intercede on our behalves and help us along the way, although there are some truly golden ones out there. There certainly are more evil monsters to outwit and battle as bitter experience reveals.

One of the more difficult parts of the entrepreneurial journey, the hero’s journey, for women, is perhaps however that because we are women, there are fewer mapmakers, fewer course-charters, fewer pathfinders and pioneers who have traveled the ways before us and have bequeathed us the maps, business experiences, social and business networks, the tricks of the trade that we need to succeed. In many ways, being an entrepreneurial woman attorney is uncharted territory, a journey to the westernmost reaches of the world.

It is not a journey for everyone. Real and perceived risk is part of the landscape, and to journey through the entrepreneurial odyssey, one must face this risk, manage it, and work to minimize it. Eleanor Roosevelt, one of our first women political leaders, said: “You gain strength, courage and confidence in every experience in which you really stop to look fear in the face. . . . You must do the thing you think you cannot do.”[ii] Succinctly put, you’ve got to gut it out.

Catalyst, the nation’s leading women’s research organization, and the National Association of Women Business Owners (NAWBO) have conducted comparative research to analyses of risk-taking by female entrepreneurs and their male counterparts. A recent NAWBO study revealed that women entrepreneurs are substantially more likely than men to take risk investing in their respective companies. In addition, more than seventy percent (70%) of those female risk-takers reported success in their investments.[iii]

Not only is the hero’s journey fraught with risk, it is not one characterized by the lack of failures, betrayals, reversals of fortune, and other monstrous events. Being an entrepreneurial female attorney is a singular endeavor and, like the experiences of our sisters in science and technology, one that the singularity of which seems to render more visible to those we aspire to serve, collaborate with, and influence.

For this reason and because we have so few role models among the ranks of female attorneys, scientists, and engineers, it is perhaps a natural response to question one’s own judgment, common sense, and intuition when these trials occur. What is more helpful, productive, and imminently more liberating than such self-flagellation is a correction to one’s thinking and the realization that these events are learnings. Painful, destructive, and infuriating, yes, they are. When we gleam these learnings, however, we take away knowledge and the wisdom of experience so that we can avoid or overcome murderous monsters and painful events in the years to come. As a good friend and sister small business founder says, she has a master’s degree from the school of hard knocks. I know precisely what she means.

So what is it that drives a person, much less a woman scientist-technologist-attorney, to undertake the odyssey? Even a golden god has advised at least one former entrepreneur not to start a business, in that instance, a technology business. He said that the personal costs were just too high. Floored upon hearing that advice, I asked him why then did he co-found his huge technology company? The answer: “We had to.” Apparently, he and his fellow co-founders were attempting a product for which they could not locate an integrated circuit component that would perform the required functions, and they were dead set on making that product.

In looking forward to the beginning of our sixth year in business at Technology Law Group, I realize that my answer to the why is just that: I had to.

The “had to” came in when I began looking for employment toward the end of my deeply appreciated clerkship for the Honorable Sergío Gutierrez at Idaho’s Court of Appeals. Opportunities presented themselves, but at an unacceptably low rate of pay. Other firms, even ones that professed to know better, responded with a resounding lack of resonance to my stated goal to have a technology-focused legal practice. Partners at other firms understood my vision, but had no positions then open for a beginning lawyer, if experienced technology professional.

Although highly desirous of remaining in Idaho, the odds of doing so looked increasingly slim. In attempting to gently break the news of our possible relocation to my family, it was indeed the then-seven-year-old love of my life who laid down the law and emphatically informed me, “I’m an Idaho spud, mama, and I’m not moving!”

Oddly enough, that funny little episode seemed to set things straight. It had to. Shortly thereafter, the kindest of mentors, a skilled gentlemanly in-house intellectual property attorney and another of the golden gods, and his principle clients, more golden gods, made the most remarkable opportunity available to me. With that, Technology Law Group was born, humbly in the spare bedroom, but born nonetheless.

As I have learned and now believe, chance favors a prepared mind, and serendipitous events have a special way of unfolding when one follows a course of integrity and hard work. I was perfectly prepared and willing to work hard, very hard and very creatively. Great good fortune came my way. I reached out and grabbed it, and I have never, well, almost never, looked back.[iv]

I have a second answer to the why question: I wanted to.

All of my life from the time I was a little, snaggle-toothed girl on the farm, collecting eggs and tadpoles, until today, I have had an unquenchable curiosity, a keen intellect, and an all-embracing passion to know. This love of learning drove me from a successful, but in the end, predictable profession in technology marketing and health care administration. It drove to multiple jobs because, well, I just grew bored.

Today, I work with virtual and real multimillionaires, young and young-at-heart software programmers who have figured out have to crack a nut and make a tidy sum, large companies and institutions in the thrilling process of transforming themselves into beacons of industrial and academic leadership, and mid-sized businesses in legacy industries becoming paragons in the new knowledge-based economy. I work with engineers of all types, geneticists, researchers, lawyers around the world and in organizations here at home, economic development professionals, linguists, librarians, technology advocates in and out of government, students, and geeks extraordinaire.

These people and their work thrill me. I am deeply passionate about what they do and about what I and my treasured team do to support them in their own passions for excellence. Perhaps I am Odysseus, called upon now to feast and then to suffer, but always to toil, create, discover, build, and grow, always to journey toward that place I call home.

Here in beautiful, becoming Idaho, in my own private Idaho, I am grateful for the days now and in the future when I can give back all that I have learned, all my boons, to those who will benefit the most: the learners, my colleagues, the entrepreneurs, the creative, the women who will follow me, the brave undaunted. Then I can say that I have truly arrived home.

[i] Joseph Campbell, The Hero with a Thousand Faces 30 (1949).
[ii] Eleanor Roosevelt, You Learn by Living 29-30 (1960).
[iii] Lois P. Frankel, See Jane Lead: 99 Ways for Women to Take Charge at Work 56 (2007).
[iv] The almost, I credit to the monsters.