Nes China Case Study

NES CHINA: BUSINESS ETHICS

Case Analysis

BACKGROUND

For almost a year the Germany-headquartered multinational company NES AG was trying to get its application to the Chinese government approved to set up a holding company in Beijing so as to coordinate its investments in China but it was faced with ethical issues over bribery and gift giving. NES is one of the largest industrial groups in Germany. NES had businesses in more than 100 countries with over 120,000 employees. In China NES had completed more than 40 technology transfer and infrastructure projects. It had also setup 20 representative offices, six equity joint ventures and three wholly owned enterprises. In doing business in China NES strictly adhered to its business principle. This business principle was highlighted in the company’s code of conduct. It required employees to pursue the highest standard of business and personal ethics in dealing with government officials and business customers and to avoid any activities that would lead to the involvement of the company in unlawful practices. It was against giving immediate favors or rewards to individual Chinese officials and customers and instead relied on its advanced technology, management know-how and top quality products and services to give it an edge against it competition. NES already had a representative office in Beijing but Chinese legal restrictions severely limited the activities of this office. It was only allowed to engage in pure administrative activities such as conducting marketing research for the main head offices in Germany, scheduling meetings and trade visits and conveying price and technical information to Chinese customers. It was not allowed to engage in employments contracts with Chinese employees but instead had to go through a local labor service agency that overlooked all personnel issues including recruitment, compensation and dismissal. Hence the representative office was not able to effectively manage their Chinese...