Monopoly leads to not shouldering responsibilities
Nov. 16, 2006.11.16
Fu Xin
"Fortune" Magazine of the US recently published its 2006 corporate social responsibility list, which comprehensively examines the performance of 64 international leading corporations in terms of management and shouldering social responsibility. PetroChina and China's State Grid Company ranked 63 and 64 on the list, a great drop from their ranking of 39 and 32 on Fortune Global 500 list.
The corporate social responsibility review by Fortune magazine does not include the index for corporate charity donations. It is based on six areas, "shareholder responsibility, management system, corporate strategy, management execution, transparent reporting, and whether an outside independent audit is used." This appraisal standard is totally contrary to our conventional understanding, and provides good insight for us into how should we view corporate social responsibility.
Although charity donations are an important demonstration of whether a corporation bears its social responsibilities or not, a corporation's social responsibilities are by no means limited to donations. One should say that an enterprise's most fundamental social responsibility is whether the enterprise is built on the basis of a modern enterprise management system, whether it operates in a legal fashion; whether the enterprise is responsible toward shareholders and consumers; whether the enterprise can be open and accept social supervision with an honest attitude; and thus win public trust.
How an enterprise is managed seems like an internal affair, but actually is linked to its shareholders' interests and also the interests of the public. Is the corporation's management of personnel in line with related laws? Does the corporation seek maximum profit via fair competition? Is the corporation providing products and services that are of good quality and worth their prices? Is the corporation including losses caused by poor management and overly high salaries into the cost of its products? Therefore, "transparent reporting" and "outside auditing" are important and necessary areas in the concept of shouldering social responsibility.
It is exactly in terms of these social responsibilities that some large state-owned enterprises, including Sinopec and the State Grid, are not doing well. Let's examine "shareholder responsibility," all Chinese people are state-owned enterprise "shareholders", but they do not have the right to ask about corporate management and development strategies; nor do large state-owned enterprises pay dividends to "shareholders." And if we talk about "transparent reporting," whether the management cost of senior managers' pay is too high, how much products and services cost, how high profit is, what profit is spent on, these are all perfectly unclear in the eyes of the public, and there are no transparent and open books.
Therefore it is not difficult to understand why Sinopec and the State Grid rank last in the review of social responsibility. Actually, why the two state-owned enterprises are at the bottom of the list is because of monopoly. Monopoly gives these two enterprises the confidence to disregard shareholders' interests, to close their books and to refuse outside auditors; monopoly allows them to lose the urgency to improve management and make cautious moves... Therefore, when some large state-owned enterprises try to show off their social responsibilities by making charity donations, by using the people's money to buy a good reputation and glory, this kind of topsy-turvy show can only arouse a negative response from the public.

by reporter Fu Xin