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Executing in China (So to Speak)
Posted by Tim Reason | CFO.com | US
January 4, 2006 8:36 AM ET
Over the holiday week, I received this press release, complete with disturbing photos, alleging the beatings and rape of two Falun Gong adherents by Chinese police last month.

Grassroots organizers are getting smarter and more aggressive about sending this sort of thing to the business press. (The first such release I remember blogging about came from the Rainforest Action Network.)

I expect I'll see more. We reported in November on "China's Growing Appetite," and I'm writing an article right now about the protectionist sentiment stirred up in the United States (particularly in Congress) by China's failed bid for Unocal. As departments editor Joe McCafferty noted last August in "The Price of a Cheap Suit," allegations of poor working conditions in China are already a headache for U.S. companies. Add an increasingly savvy grassroots campaign to draw attention to human-rights issues, and U.S. companies doing business in China are likely to see those headaches continue.

Or will they?

Last year, when China executed four bankers for fraud, the reaction in the general business community tended toward jokes about Andy Fastow's good fortune, or comments like, "You think Sarbanes-Oxley is bad?" Stephen Cutler, then SEC enforcement director, even quipped in a speech that "My friend Eliot Spitzer was heard to criticize the approach as too soft."

Good for a laugh, I guess, until one considers that conviction for a capital crime in China often means being shot in the back of the head upon leaving the courtroom, according to Amnesty International. As we reported in our banking issue, foreign investors are increasingly buying up pieces of Chinese banks. How enthusiastic would you be about an overseas stint as CFO at one of these firms?
Comments (3)


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It is an interesting piece of information. Only thing that would be worth noting, is it universally true for most of the establishments in China? I mean can we conclude from such incidents that the environment is not-so-easy for professionals? Can someone please throw some light?
Posted by Tan Chakrabarti | January 04, 2006 06:12am

In response to the comment above, one of my colleagues provided me with this link to a New York Times article from October about an American businessman caught up in the Chinese legal system.


I'd also note that the execution of the Chinese bankers I alluded to earlier was reportedly part of an effort to "clean up" the country's banking system in an effort to attract foreign investors. But who is to say bank fraud would no longer be considered a capital crime once Western CFOs came in? Given the many, many loose ends that still surely exist in the banking system, would it be worth the risk to an American finance executive? And, for that matter, would a Westerner truly feel better if things went awry and the Chinese government deported or jailed Westerners and shot their Chinese counterparts? Talk about tension in the executive suite over accounting disagreements.


Posted by Tim Reason | January 04, 2006 11:52am

Really points to ponder!

I think Chinese corruption is very deep-rooted in the system. I am based in India. The Transparency International Figures for corruption does not differentiate much when it comes to India & China as far as Corruption figures goes. Interestingly, once I had an opportunity to discuss this with a Chinese official based in US. He said the difference between India and China when it comes to corruption is in India at least one can find out whom to bribe to get a certain job done, but in China the corruption is so much deep-rooted in the system that one never knows even whom to bribe- and thus one might land up in trouble trying to bribe the wrong person. And of course the Judiciaries in the two countries are absolutely different due to Governmental set-ups.

Therefore one can imagine with such legal provisions trying to clean up a Chinese system that is to do things like preventing frauds- the measures undertaken would also be giving such scares!

Thanks for the information, it is really an Important piece of information on one of the fastest growing economies.

CFO's need to be worried I guess.



Posted by Tan Chakrabarti | January 05, 2006 03:56am

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