China Resources Land Limited (CRL), a state-owned enterprise, is a property developer of the China Resources Group. The company focuses on developing, managing and investing in lands and properties in the major cities of China, such as Beijing, Shanghai and Shenzhen.
In recent years, Chinese property market ride booms, as the prices have soared to a level unaffordable to the public. One of the reasons for this phenomenon is the excessive land reserve by the property developers. As one of the land developers in China, CRL has also acquired large amount of land without developing them. From a research conducted in September 2009, CRL has accumulated more than 25 million square meters of land, which is sufficient for the company to develop for 10 years. In 2007, CRL purchased a land in Beijing, but the land were still left undeveloped in 2009. At the same time, homebuyers could not purchase flats because of the lack of supply and skyrocketed prices.
Excessive land reserve can boost the company’s share price and revenue. On the other hand, this made the citizens in China suffer from the soaring prices. A domestic apartment in Beijing was sold 30-50 thousands yuan per square meter, while the average monthly salary for a worker was just around 3 thousands yuan.
Worse still, if the process continues, this phenomenon will evntually lead to market failure due to an inefficient allocation of resources, or when public sector services would be more efficient(Making the case for Corporate Social Responsibility).
Worse still, if the process continues, this phenomenon will evntually lead to market failure due to an inefficient allocation of resources, or when public sector services would be more efficient(Making the case for Corporate Social Responsibility).
So, why the land developers would make the decision to adopt excessive land reserve even if they are clear that this would disrupt the function of the free market, leading to the soaring of land prices, followed by a series of social problems due to the General Public’s inability to afford the high land prices?
This is attributable to the land developers’ use of the “teleological approach” in deciding what actions they would take. Their adoption of the “egoism” approach" indicated that they would try to act in a way that would maximize their own self-interests, without regards to whether their behaviors were morally correct or not. In this case, the consequences (whether they could earn a large sum of money or not) overweighed their consideration for the society’s welfare. The high stakes (the attraction of huge profits) may tempt them to compromise their ideals (act in a socially responsible way and have concerns for the public) (Business Ethics: Approaches to decision making)
Sadly, the concept of “Corporate Social Responsibility” is not yet wide spread in China to influence the decision makings of the entrepreneurs there. As suggested by conventional wisdom, CSR has been considered as a zero-sum tradeoff with profitability, more money spent on CSR means leass spent on incresing market share( Rethinking Corporate Social Responsibility).With self-interests being the main driving force, they tend to think that engaging in corporate social responsibility will increase the costs of operations and affect their own ability to earn more profits.Thinking that “contributing to sustainable economic development of society to improve the lives in ways that are good for business and for development” (Rethinking Corporate Social Responsibility) doesn’t benefit them as much as "capitalizing every opportunity to gain as much money as possible", engaging in socially-responsible behaviors are out of the concerns of the land developers, their reservation of lands without regards to the function of the larger economy illustrates this.
Sadly, the concept of “Corporate Social Responsibility” is not yet wide spread in China to influence the decision makings of the entrepreneurs there. As suggested by conventional wisdom, CSR has been considered as a zero-sum tradeoff with profitability, more money spent on CSR means leass spent on incresing market share( Rethinking Corporate Social Responsibility).With self-interests being the main driving force, they tend to think that engaging in corporate social responsibility will increase the costs of operations and affect their own ability to earn more profits.Thinking that “contributing to sustainable economic development of society to improve the lives in ways that are good for business and for development” (Rethinking Corporate Social Responsibility) doesn’t benefit them as much as "capitalizing every opportunity to gain as much money as possible", engaging in socially-responsible behaviors are out of the concerns of the land developers, their reservation of lands without regards to the function of the larger economy illustrates this.
By adopting the “Cost-benefit” approach, the land developers balance the costs and benefits of whether or not to reserve the lands.(When is different just different,and when is different wrong?). To them, with self-interests being the priority, reserving the land and earning huge income clearly outweigh the costs of being discovered and having to pay compensations to the victims. Their gains derived from the land reservation exercise are so large that they are willing to take the risk of being discovered later on.
The Relativists perspective suggests that ethical behavior is defined by the experiences of the individual and group. “Culture is behind our behavior on the job and influences us without our realization” (Cross-cultural awareness). Using “self-interests" as a principle for guiding behaviors is in the mind-sets of the majority of Chinese people, to the extent that it has become a norm to think and act in this way. When the land developers think that most of their counterparts have been doing immoral behaviors in order to earn profits and they have experienced unfair treatments over the years as a result of that , it gives them a message that this is the rule of the game, and not doing so accordingly will put them in a disadvantaged position. They then lower their ethical standards in order to obey the rules of the game. In the face of ethical dilemmas, having a choice between self interests and virtue ethics, they will tend to choose the former one. No culture’s ethics are better than any others, there are no international rights and wrongs. (Values in Tension: Ethics away from home).Cultural Relativism is morally right(When is different just different, and when is different wrong?). When the land developers find that everyone else is doing the same, they will justify their own immoral behavior to be a morally right one.“Everyone in the country is doing the same, why don’t we?”
On the surface, it seems that CRL's immoral behaviors would be doing it good rather than bad had these behaviors not been discovered. However, when we think deeply, land reservation will only bring about short term results and have detrimental effects on the comapny in the long term. In customers' minds, Corporations are expected to have “commitment to communities”, engaging in their communities in ways that go beyond just making financial contributions (Rethinking Corporate Social Responsibility). And a commitment to and a high-level of engagement with people by contributing time and effort to local community events are becoming the new standard by which consumers judge excellence in corporate social responsibility. However, when we look at what CRL has been doing, not only did it do nothing to contribute to society and the community, it has even gone the opposite direction by committing acts that cause harm to the economy.
The Relativists perspective suggests that ethical behavior is defined by the experiences of the individual and group. “Culture is behind our behavior on the job and influences us without our realization” (Cross-cultural awareness). Using “self-interests" as a principle for guiding behaviors is in the mind-sets of the majority of Chinese people, to the extent that it has become a norm to think and act in this way. When the land developers think that most of their counterparts have been doing immoral behaviors in order to earn profits and they have experienced unfair treatments over the years as a result of that , it gives them a message that this is the rule of the game, and not doing so accordingly will put them in a disadvantaged position. They then lower their ethical standards in order to obey the rules of the game. In the face of ethical dilemmas, having a choice between self interests and virtue ethics, they will tend to choose the former one. No culture’s ethics are better than any others, there are no international rights and wrongs. (Values in Tension: Ethics away from home).Cultural Relativism is morally right(When is different just different, and when is different wrong?). When the land developers find that everyone else is doing the same, they will justify their own immoral behavior to be a morally right one.“Everyone in the country is doing the same, why don’t we?”
On the surface, it seems that CRL's immoral behaviors would be doing it good rather than bad had these behaviors not been discovered. However, when we think deeply, land reservation will only bring about short term results and have detrimental effects on the comapny in the long term. In customers' minds, Corporations are expected to have “commitment to communities”, engaging in their communities in ways that go beyond just making financial contributions (Rethinking Corporate Social Responsibility). And a commitment to and a high-level of engagement with people by contributing time and effort to local community events are becoming the new standard by which consumers judge excellence in corporate social responsibility. However, when we look at what CRL has been doing, not only did it do nothing to contribute to society and the community, it has even gone the opposite direction by committing acts that cause harm to the economy.
Academic thought has suggested that companies who appear to be more responsible in the areas of environment and societal behavior would be more attractive to investors, and therefore perform better financially(Making the case for Corporate Social Responsibility). Though CRL is earning money currently, it wouldn’t last too long. Even if it can escape the liability of the law, its immoral behavior will lead to the damage in its corporate image in the eyes of the General Public, especially the consumers to whom it provides its services. Located in the services industry where profits mainly derive from customers’ pockets, having a bad reputation will guarantee that the corporation would have a hard time struggling for survival in the years to come.
Anecdotal evidence suggests that investment in corporate ethics and social responsibility, as well as avoiding negative consequences, can often lead to positive payoffs(Rethinking Corporate Social Responsibility) whereas continue committing unethical behaviors will promise otherwise. Conflict of relative development (ethical standards conflict because of the country’s different levels of economic development) will decreases when the economic conditions in a developing country improve(When is different just different, and when is different wrong?).When China’s economic development is progressing towards a positive trend, people’s ethical standards are also expected to move up, resulting in a higher expectations on what corporations should do and act.
The new business climate does not allow firms to escape socially irresponsible behaviors (Rethinking Corporate Social Responsibility) and they will soar what they reap as times passes. To act or to cheat, as a rational business corporation, it’s time for CRL to make a wise decision.
References
References
Cavett-Goodwin. D., (2007) Making the Case for Corporate Social Responsibility, Web.<http:// culturalshifts.com>.
Donaldson, T. , (1996). When is different just different, and when is different wrong. Harvard Business Review, pp48-62
Fleishamn-Hillard&National CosnumersLeague (2007). Rethinking Corporate Social Responsibility.Rethinking Corporate social responsibility, pp1-13
Gardenswartz. L, & Rowe, A., (2011) Cross-Cultural Awareness. HR Magazine, pp139-142
Poznak Law Firm Ltd, Business Ethics: Approaches to Ethical Decision Making, Web.<www. poznaklaw.com/articles/bizethics.html >.
Zhang, M., (2007) Real Estate Giants Amass Large Areas of Land, Webhttp://www.china.org.cn/english/business/224771.htm.
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