Journal of Chinese Human Resource Management

Emerald Article: Business ethics and workplace guanxi in Chinese SOEs: a qualitative study Jessica Li, Jean Madsen

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To cite this document: Jessica Li, Jean Madsen, (2011),"Business ethics and workplace <IT>guanxi</IT> in Chinese SOEs: a qualitative study", Journal of Chinese Human Resource Management, Vol. 2 Iss: 2 pp. 83 - 99 Permanent link to this document: http://dx.doi.org/10.1108/20408001111179140 Downloaded on: 20-11-2012 References: This document contains references to 61 other documents To copy this document: permissions@emeraldinsight.com

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Business ethics and workplace guanxi in Chinese SOEs: a qualitative study

Jessica Li
Department of Education Policy, Organization and Leadership, University of Illinois at Urbana-Champaign, Champaign, Illinois, USA, and

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Jean Madsen
Department of Educational Administration and Human Resource Development, Texas A&M University, College Station, Texas, USA
Abstract
Purpose The purpose of this paper is to examine Chinese employees perceptions on their ethical decision making in relation to the workplace guanxi context in state-owned enterprises (SOE). Design/methodology/approach Using a qualitative method, two rounds of interviews were conducted with 18 participants in two SOEs to explore Chinese employees ethical perceptions and experiences in the workplace. A qualitative thematic strategy was adopted to analyze and interpret the data. Findings The authors identied three major themes on SOE employees ethical decision making in relation to workplace guanxi: the ethical self; malleable ethical standards; and submission to authority. The authors derived a conceptual framework to outline the relationship between the invisible hand of guanxi and the SOE employees ethical decision making. Originality/value The paper contributes to the business ethics literature by presenting a three-dimensional prole and a conceptual framework for Chinese business ethics research. It provides an in-depth understanding of a complex dynamics of guanxi and its impact on employees ethical decision-making behavior. Keywords China, State-owned enterprises, Employee behaviour, Employee attitudes, SOE organizations, Business ethics, SOE employees, Decision making, guanxi Paper type Research paper

In recent years, Chinas business ethical practices have received increasing attention in both public and scholarly arenas (Chan et al., 2008; Wu, 1999). Particularly, Chinas recent problems in defective products, such as toys, toothpastes, and pet food, have been blamed for inappropriate business practices and ethical conducts (Brand and Slater, 2003). Recent literature has examined Chinese business leaders perceptions and practices regarding business ethics in organizations (Chan et al., 2008). Studies have also reported differences in business ethics between China and Western nations (Armstrong, 1993; Ralston et al., 1993; Tsui and Windsor, 2001). While insightful, existing studies often adopted established Western instruments with limited cultural adaptations. Thus, they may lack of proper explanations on what Chinese people may consider as acceptable practices (Lovett et al., 1999). A number of studies have taken the Chinese context in the research. For example, Au and Wong (2000) have found that guanxi and ethical reasoning affect Chinese auditors professional judgment. Tan and Snell (2002) further discussed two contextual reasons affecting Chinese managers decision making: one is context sensitive guanxi-linked

Journal of Chinese Human Resource Management Vol. 2 No. 2, 2011 pp. 83-99 q Emerald Group Publishing Limited 2040-8005 DOI 10.1108/20408001111179140

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morality, and the other is the managerial grasp of guanxi. Clearly, understanding Chinas business ethical practices requires considering the contextual Chinese characteristics including culture and the transitioning contexts (Tsui and Windsor, 2001). While the relationship between guanxi and business ethics has been discussed by many (Chen and Chen, 2004; Fan, 2002; Ho and Redfern, 2010; Hwang et al., 2009; Koehn, 2001; Zhang et al., 2009), few studies have explored business ethics and workplace guanxi in the state-owned enterprises (SOE) setting. This study extend the literature by investigating SOE employees perceptions on, and experiences in, their approaches to making ethical decisions in their daily work settings. Through this study, we explore the following two research questions: RQ1. What are currently held ethics and moral perceptions by SOE employees? RQ2. How workplace guanxi affects SOE employees ethical decision making? Context of the study Chinese business ethics Business ethics in China has gained much attention due to the controversy over a few of the Chinese products (Chan et al., 2008). Lu (2009) has noted that two issues are connected to defective Chinese products. One is related to the management of industrial standards. If the standard is not up-to-date, it is an organizational issue. The other deals with business owners or managers moral characters. If the owner or manager intentionally uses deceptive measures to lower standards, employees are asked to perform accordingly. Lately, business ethics in China has been linked to other sensitive social phenomena including corruption, labor rights, and distributive justice (Fan, 2002; Lu, 2009). Chinese Government has taken measures to tackle these issues through institutional means, such as introducing corporate social responsibility (CSR). This has raised the prole of business ethics concerns in China to promote human-based and virtue-based business practices using CSR norms and visions (Ip, 2009; Lu, 2009). However, it is believed that the true line in defense of ethical business practices is the ethical and moral bottom line of the business owners and managers (Ip, 2009) As such, some Chinese corporations have wisely focused on establishing a corporate culture that value personal ethics and build a good person culture (Lu, 2009). Chinas business environment The complex nature of Chinese business environment is shaped by the transitioning context with multiple ideologies and organizational forms. At least three ideologies coexisting in China today inuence business ethics. They are communist, confucianism, and capitalist. Such dynamics is rooted in the contemporary Chinese social, history, and culture evolution (Zhang and Zhang, 2006; Ding et al., 2000). The SOE system is a product of Chinas socialist central-planned economy. Prior to the transition, SOEs had dual roles as economic entities and social institutions. As economic institutions, SOEs must produce prots and present a large proportion to the state. As social institutions, SOEs provide life-time employment for most urban population to fulll their role for social and political stability (Gu, 2001; Yang, 2005; Zhang and Keh, 2010). With major transformation such as restructuring, ownership realignment and human resources (HR) practices redesign, the social role of SOEs has been weakened, yet it is still dominating the mentality of managers in SOEs (Desvaux et al., 2004).

Theoretical framework We combine the perspectives of guanxi and Chinese cultural values as a theoretical framework for this study. These perspectives collectively demonstrate how group decisions affect Chinese organizations and employees. These symbolic terms insure there will be respect and harmony within group behaviors. It also describes how values affect ones approach to work and its implications for work ethics. A fundamental assumption of Western business ethics is that the individuals has complete autonomy in making independent ethical decisions (Rachels, 2010), the same may not be applicable to Chinese employees. Employees in SOE are part of a relational society where the individual is only considered a dot on a network of relationships. In this society, while the individual remains morally responsible, there are contextual relational considerations that may substantially moderate moral judgments (Tan and Snell, 2002). In predominantly Chinese societies, morality is both role and behavior dependent. Morality deriving from Confucian teachings emphasizes virtuous personal qualities (e.g. loyalty, honesty, obedience, sincerity, etc.) required in performing roles and with regard to roles (Au and Wong, 2000). As a result, moral behavior varies according to a persons role, position and relationship with other role-players within a hierarchical society. Thus, guanxi, or connectedness in a network of relationships, has a direct bearing on the Confucian moral tradition (Au and Wong, 2000). Guanxi network Recently, guanxi has undergone scrutiny regarding how it is connected to other moral areas. Guanxi is often seen as an outgrowth of Confucian emphasis on personal relations (Koehn, 2001). It can be dened as interpersonal relationships based on a common background and an existence of direct particularistic ties between two or more individuals (Tsui and Farh, 1997; Yang, 1993). While guanxi may be benecial to business transactions (Lovett et al., 1999), it was also found to be the root of all evils in China (Fan, 2002). Guanxi governs the informal networks that inuence business activities and are often more powerful than the formal chain of command. Trust built on guanxi is signicantly stronger than contractual agreements based on impersonal laws and institutions (Chen et al., 2004; Koehn, 2001; Tsui et al., 2004). People who are more cognizant of both positive and negative attributes of guanxi are likely to be more effective in todays Chinese business environment (Chen et al., 2004). Guanxi urges members to do right for other people within the in-groups. Members of the in-groups orient themselves toward group harmony by following a set of unwritten rules governed by guanxi. Favoritism and personal gain are often the benets of being the members of the in-group while discrimination against members of out-group occurs. Sometimes, it is hard to not link it to corruption, especially for Westerners (Fan, 2002; Su and Littleeld, 2001). One can certainly engage in unethical conducts on the basis of guanxi and that have led some researchers to conclude that guanxi is unethical (Chan et al., 2002; Fan, 2002; Provis, 2008; Warren et al., 2004). For the purpose of this study, it is necessary to make the following two clarications. First, guanxi is not an ethical framework; it is a set of powerful yet implicit rules that govern informal personal and business relationships. Guanxi by itself cannot be judged as ethical or unethical; it is the action that people take in the name of guanxi has ethical implications. Governed by guanxi relationship, people are obligated to reciprocate favors, but the reciprocation is neither immediate nor specied (Hwang et al., 2009).

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It is the individuals responsibility to determine when and how to return the favor, thus, the individual can return the favor ethically and in time. Second, guanxi and ethical framework works in conjunction when people making decisions of what actions to take. Guanxi plays an important role in the overall Chinese value system (Robertson et al., 2008). Hence, it is important to investigate the impact of guanxi when studying ethical decisions of Chinese employees and use it as an analytical lens to understand and interpret the data. Chinese culture values Understanding Chinese cultural values, similar to guanxi, is central to delineating what might be regarded as acceptable ethical behavior in organizations. Chinese employees perceive the ethical dimensions of their work based on cultural values, and how guanxi affects their decisions. Values are enduring believes that are personally or socially preferable (Rokeach, 1973). Chinese values are largely inuenced by Confucian values, which can be traced back to more than 2,000 years. The philosophies of Confucius stress interpersonal harmony, hierarchy, family integrity, kinship afliation, and individual responsibility (Hui, 1992, as cited in William and Sandler, 1995; Lim and Lay, 2003). Collective values and group interests are always above individual values and interests (Ip, 2009). Culture values are not static; China has changed signicantly since the economic reform, so as values. This study focus on a generation of SOE employees who have experienced the transition from a planned economy to a market-driven economy, thus, the 40 fundamental and basic values of Chinese people presented by The Chinese Culture Connection (CCC, 1987) remain applicable. For example, the sense of shame, kindness, reciprocation, etc. still offer ethical and moral guidance to the selection of conduct and behavior of groups or an individual (Song and Gale, 2007). Method The data used in this study were drawn from a larger study on Chinese SOE employees work ethics. We collected data during 2007-2008. The outcome of the work ethics study has been partially reported in Li and Madsen (2009, 2010) from different aspects. In this paper, we partially used earlier data and added six additional interviews that were not reported previously. Procedure We took a qualitative approach combining interviews, observations, and eld notes (Merriam, 1988). Two rounds of interviews were conducted with a month interval to ensure a reliability of responses and to allow supplementary reections on work ethics-related issues (Seidman, 1998). The rst author collected both sets of interview data while the second researcher was involved in the theoretical framework, methods and data analysis (Merriam, 1988). The interviews were conducted in a rented apartment adjacent to the interviewees. The Chinese researcher met with interviewees individually and made sure the participant felt comfortable in a familiar environment. Chinese employees were given the Institutional Review Board consent notice to ensure condentiality. All participants were notied that they could terminate their participation in the study at any time. To insure their continued participation in the second round, a small stipend was provided to them. No participants dropped out in the follow-up interviews.

The interview protocols, initially in English, were developed based on a combination of multidimensional work ethic prole (Miller et al., 2002) and confucius work ethic (Hofstede and Bond, 1988; Lim, 2003) frameworks. The translation process was managed by the rst author in a team consisting of three other bilingual Chinese scholars. If a term was found to have different expression from the forward and backward translation, the team would discuss and negotiate until reaching an agreement. To insure the quality of the interviews, protocols of the questions were piloted with other Chinese employees who were once employed in SOEs. This was to establish a meaningful functional equivalence between the English and Chinese, not an identical word-by-word translation of the questions (Bates and Khasawneh, 2005). A sample interview question includes please use your own words to describe a good moral person/employee. All interviews were recorded and transcribed verbatim in Chinese by a professional transcriptionist. The interviews were conducted in Chinese. A total of 480 pages of transcripts were resulted from the two rounds of interviews for ethical-related narratives. They were then translated into English by an independent translator for data analysis. In conjunction with the interview, we also conducted on-site observations at the factories where the interviewees were employed. As part of triangulation, this was to conrm and obtain rst-hand experience of participants descriptions of their work environment. Data from observations were used to validate interviewees responses to their working conditions. For the purpose of protecting the identity of the respondents, no attempt was made to connect participants with the factories where they worked. The rst author kept eld notes for both interviews and observations and later shared with the second author. Sample We adopted purposive sampling for this study (Patton, 2005). Purposive sampling is necessary not only because it is recommended in the literature for qualitative research (Merriam, 1998), but also because people in China are generally suspicious of being interviewed or questioned without personal connections or guanxi (Wright et al., 2002). We identied sample organizations based on the following criteria: . They must have existed before the economic reform. . They must be controlled by state government. We relied on our professional networks and identied two SOEs that met the above criteria. The rst is a cotton factory located in South China. It manufactures a variety of yarns. The second is a glass factory located in North China. It produces glass products used for commercial buildings and for sophisticated military purposes. Both factories were established in the 1950s and were located in mid-sized cities with urban populations of about one million. They both have about 10,000 employees prior to the reform and have been struggling for protability since the economic reform. Both organizations currently have about 5,000 employees. We used the following criteria to select interview participants in the two SOEs: (1) front-line employees or managers/ supervisors; and (2) aged in the range of 35-55 years.

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The rst criterion is to ensure we obtain data from all perspectives, and the second is to ensure the interviewees have sufcient experiences with the SOEs transitions. We also considered balancing gender and educational background. Six from the cotton factory agreed to be interviewed and 12 from the glass factory participated. Table I listed the demographic information of the 18 participants. Data analysis A qualitative thematic strategy was used to analyze and make sense of the data (Boyatzis, 1998). We rst coded the data with respect to different formats (interviews, documents, or observations). We then used constant comparative method to identify major themes (Glaser and Strauss, 1967). Through constant comparison, we identied subthemes under each major theme as properties or descriptors to reveal the underlying nature of the themes. The data were presented thematically and the relationship between the ndings and current literature was integrated into the discussion of themes (Glaser and Strauss, 1967). As researchers themselves are part of instrument in qualitative research (Merriam, 1988), we have the following advantage for the data analysis. The rst author was Chinese origin and bilingual, she has been educated and is currently teaching in the USA. She returns to China frequently, thus has what is termed a negotiating insider/outsider status (Merriam et al., 2001). As such, the bilingual rst author was able to understand the cultural contexts and values of the participants and their interpretations. We adopted a number of measures to ensure trustworthiness of the data analysis: . We developed an explicit coding system and established a consistency of judgment. . We adopted diverse perspectives to examine the interview data. For example, one interview statement might be coded under different thematic categories.

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No. Age Sex Years at SOE Education M1 M2 M3 M4 M5 M6 M7 M8 E9 E10 E11 E12 E13 E14 E15 E16 E17 E18 52 55 45 46 46 39 45 45 52 55 47 43 42 44 48 39 37 52 M M M M F F M M F F F F M F M F F M 29 35 21 22 22 14 26 24 32 24 28 21 25 26 21 20 21 35 University University University College College Tech school Tech school

Area of responsibilities

Number of subordinates 2-3 200-210 20-30 20-30 20-30 20-30 80-90 100-110 0 0 0 0 0 0 0 0 0 0

Table I. Demographic information of interview participants

Training supervisor Supply division manager Training manager Product research manager Product quality manager Product quality manager Electrical maintenance manager Tech school Engineer maintenance manager College Trainer Some college Secretary (recently retired) High school Lab technician High school Machine operator High school Repair technician High school Maintenance worker High school Maintenance worker High school Electrician Mid school Electrician Mid school Driver

We constantly reminded ourselves of being sensitive and reexive to themes when interpreting the data (Alvesson and Skoldberg, 2000; Boyatzis, 1998).

Findings Overall, Chinese SOE employees perceptions on ethics vary according to their roles and positions within the SOE. The interviewees were affected by the hierarchy within these contexts. In many ways their decisions were affected by who they interacted with at the factory level. Many believed that working hard and being ethical framed the way they operated in the workplace. For the most part, Chinese employees tried to avoid shame. They did not want to embarrass themselves in front of their coworkers. We identied three themes from the data analysis. They are: the ethical self, malleable ethical standards, and submission to authority. Table II reported the three themes and a short description of each of the themes. Theme 1: the ethical self This theme described a shared perception that all the interviewees expressed. One should rst be responsible for him/herself. It was important that guanxi was demonstrated in everyone performing good behaviors. Employee worked collectively to establish a form of self-cultivation. It was similar to the good person culture that some Chinese companies are advocating (Lu, 2009). In this culture environment, an employee should be a righteous person and avoid doing things that will bring a sense of shame to ) implies oneself and others. The perceived use of the term sense of shame (Zhi Chi one should internalize what it meant to deal with other people in a fair and responsible manner. The emphasis was to avoid shame by doing the right thing in the rst place, hence, the importance of self-cultivation (Chinese values listed by CCC, 1987). Workplace guanxi implies that forming personal connection and strong group orientation can replace formal structure, employees pressed each other to maintain an informal sense of ethics. This informality governs ones judgment on if something is fair or not. M7 explained what it means by not to harm others:
For example, we have bonus, my boss give me more because I am the manager, others may get some bonuses too, but they may not receive as much as I do. In this case, I will accept the bonus happily. If I receive bonus while others get nothing, I would feel guilty, it is equal to harming others.

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For the employees being ethical was grounded on how they had lived their own lives. This implied that employees must work hard, and be worthy of their pay check. Almost all interviewed believed that they have worked hard but the reward was not adequate, as articulated by E10:
No. Theme 1 2 3 Ethical self Malleable ethical standards Submission to authority Description One should rst be responsible for him or her own behaviors and become a good person through self-cultivation The understanding of what consist of a right (ethical) decision is complex. When making decisions, there were many factors that were considered beyond the formal ethical standards Value their loyalty to superiors. Obeying the order of their superiors without question even when in doubt

Table II. Chinese employee ethics themes and descriptions

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I have been working hard here for such a long time, but the salary I received didnt make me satised. Our salaries are so low and I dont have enough money to buy an apartment or a car.

When asked about what represents an ethical employee, all the descriptions by the interviewees were consistent with the following statement by E12:

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Using my own imagination, that is, respect for the old and love the youth, be responsible for ones work, never take advantage of others, like to help others and be positive towards life. That is a good moral worker.

It was these qualities that led to an ethical self that permeated how employees interacted with one other. Subtheme 1.1: responsible for self. This subtheme represents the nature of the invert looking of an employees ethical self and avoiding interference with others unethical behavior whenever possible. Employees believed they were responsible for their own behaviors. The underlying guanxi aspect of trust and group orientation meant if they had made a mistake, they would feel a sense of shame and would attempt to rectify it (Au and Wong, 2000). To them, a mistake meant something they did that had negative impact on their team or the organization. They expressed that because of their relationships with others they had to accept the consequences. With group orientation, responsible employees would work hard and focus on the job at hand. Managers considered that they were not only responsible for creating informal networks of guanxi, but also set examples for their subordinates, as noted by manager, M4:
I often tell them [my subordinates] if you want to perform your job well, rst, you need to be responsible for yourself, [and] second be responsible for your job. In the long run, you [always] need to be responsible for your family.

Yet for employees, E14 offered a typical behavior:

[. . .] If it has nothing to do with me [I wont do anything about it], because everyone has their own thoughts, I dont want to argue too much with others and use up my energy.

Both guanxi which emphasizes group orientation and Chinese values of self-cultivation (xiu yang ) which emphasizes self-discipline had direct linkage to individuals ethical behaviors. Many perceived that while they were responsible for themselves, they still would be accountable for their peers as obliged by workplace guanxi. E12 articulated her experience:
Like us, we work on cotton spin catcher machines, we have to keep working, not a lot of free time. Lunch is only half an hour. I have a bad stomach, sometime I cannot nish my lunch in 30 minutes so when I get back from lunch, others have already been working, they may have nished some of my work, when that happens, I feel shameful.

In many ways this form of peer pressure also affected how they themselves would be responsible to others in the workplace. This phenomenon was observed when employees formed informal work teams as a subset of in-groups in relation to the overall organization. This group orientation focused employees attention toward their in-group affairs than that of the factory. The notion that one is only responsible for oneself but also towards their group resulted in limited reasoning abilities. As noted by manager M5:
From ones own standpoint, one should be purely oneself. Actually one cannot change the reality. I think in China this is a tradition, it has been like this for over 2000 years.

Subtheme 1.2: avoiding interference. Owing to concerns of possible negative impact on guanxi, most people avoid confrontations by not interfering even when there were problems in defective products or company resource uses. Employees, some of the times, went through a sense of dissonance because guanxi relationship conict with their ethical values. The need for trust among their group, yet dealing with their individual ethics caused them much stress. Employees cited several examples when they turned around and looked in the other direction when they observed others not following workplace regulations, problems of taking company things for personal use. Even though the factory was not an ideal job with tough working environment, it did provide a way to support their family. Fears of losing their jobs often permeated their thoughts. Thus, it is important for them to maintain employment. As noted for the following comment by worker E16:
I dont like to talk to others if it doesnt relate to me. I believe others have their way of doing things. As long as I perform my job well, that is enough. [. . .] They dont need me to correct them about what they should or should not do [. . .] This type of things needs to be addressed by team leaders and directors. If I confront, it may course a conict, I dont want to do that.

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Worker E18 presented the same issue from a different perspective:

If it is my boss, I wont even want to touch on it. Because I dont have authority over it, I am not the boss. It is the boss who is in charge of everything here. Besides, it is not my work responsibility, if I do something about it, I might get revenged [. . .] I dont want to hurt anybodys feelings.

Theme 2: malleable ethical standards Many stated that in their factory area it was always about production. Managers and supervisors emphasized the importance of meeting production quotas when it was dictated by the higher tier of management, it appeared that they were neither consulted on the production quotas nor explained why they were given the demands in any detail. There was very little relationship with the higher tier of management. Thus, interviewees believed that most of the ethical issues related to defects rest with senior management until it impacted consumers. They perceive it is the responsibility of the factory boss or the government regulatory agencies, thus they are not responsible for it even if they were involved in producing the defects. This was evident in the following quotes:
This [fake products] is the problem of the country; we have no right to interfere [M5]. The employees dont know anything about it [the fake products], it is the boss problem [E12].

The notion of what consists of a right (ethical) decision for these employees was complex. In many ways it was a balance among guanxi, coworkers, personal values, and dealing with the superiors demands. The interviewees believed that they should not cheat, steal, hurt, or take advantage of others for personal gains. Many stated that an ethical person should be honest and trustworthy. However, when situations developed that forced one for an ethical decision, the tensions between wanting solidarity with their peers and their relationship with their bosses troubled them on multiple levels. Being harmonious with peers, subordinates, and the boss was to maintain good guanxi; thus bending the rules or looking in the other direction was accepted as long as no one was being held accountable. For them, ethical decision making appeared to be contextualized and often dependent on whether it affected the harmony of the workplace guanxi.

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Subtheme 2.1: interpretations of ethical standards. Many of the interviewees had limited nancial resources in terms of pay. As such, they felt that there were some ethical standards could be open for interpretations. It was widely accepted that because they often worked long hours and were paid low it would be appropriate to use resources in the workplace. Thus, they would x a cooking pot, use a few pieces of defective glass to repair a broken window at home, or wash their clothes in the workplace to reduce water bills at home. As part of the guanxi network, employees exchanged favors by doing things for one another with company resources. It was part of this interplays showing how guanxi played out in the workplace. Therefore, employees straddled about how ethical standards were interpreted in the workplace. It was expected and appropriate at times to x their cooking pots or take product from the factory if no one noticed. E13s following statement was representative of this nding:
If he doesnt take it home, [I] should provide him with the help. If he takes it home, [I] shouldnt help. For example, the tools we use at work, there are just here, so it is ok to use it for personal needs, as long as you return it back after use.

This particular point is supported by the interpretation of Confucian ethic to act base on the circumstances of the situation, refusing to act because one wants to keep ones character unsullied does little to improve a bad situation (Koehn, 2001). We also found that managers kept a blind eye to show benevolence in exchange for employees loyalty. It was part of the workplace guanxi to maintain their informal interpersonal relationships. Benevolence authority and loyalty to superiors are two important Chinese values (Wang, 2011; CCC, 1987). Additionally, it was important for their social connections because refusing to help might cause employees to lose face among friends and their community. Owing to the aura of guanxi, their work and personal lives were closely intertwined (Li and Madsen, 2009, 2010). M7 articulated this in the following way:
Of course in principle, it is not right to do so. But in the reality, it is ok if one needs it badly at home. Theoretically it is not allowed. However, in China, this is our basic condition, and it is common in state-owned company.

Subtheme 2.2: situational ethical standards. The interviewees expressed sentiments that they were to avoid interfering with others ethical responsibilities, especially when it involved their superiors. Some noted they could lose their jobs if they questioned their bosses ethics. This may explain why Chinese employees were not bold enough to blow whistles when encountering unethical conduct. For example, all interviewees believed it was illegitimate to produce defects for prot. However, they indicated that it was often the case that management might use low-quality materials to cut cost. None of the employees from the two SOEs spoke about being involved in producing substandard products. However, they did believe that if they were instructed to do so, as front-line employees, they should not possibly be responsible for that. The reasons were that: . the employees would not know; and . the employees were only accountable for the tasks assigned to them by the management.

Hence fears of termination would promote silence, thus most would choose not to question or challenge the management for wrong doings (Li and Madsen, 2009), as E15 stated:
You cannot blame us; we just follow the directions from the above, and it wont be our fault. If you want to blame, blame the people above us.

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Another example of situational ethical standards was intellectual property infringement. A majority of the interviewees were sympathetic toward companies who infringed on others intellectual property. Some stated that to make a prot everyone had the right to survive and to accumulate the start-up capital (Li and Madsen, 2009). A similar case was shared by Zhang et al. (2009), when a criminal used the illegally acquired capital to start a successful business venture that beneted the local economy. When the illegal activity was discovered, should this person be punished became a subject of national debate. Many interviewees agreed to the following statement by M2:
To survive, to reduce cost so the companies can survival, they may copy other brands and produce pirate products to rst maintain their nancial solvency survival. It is all about livelihood priority.

Theme 3: submission to authority Chinese people often value their loyalty to superiors (CCC, 1987). The meaning of this loyalty as expressed by the interviewees was obeying to the order of their supervisors without questioning even when in doubt. Particularly, when a decision was made above their ranks, the structure of guanxi would be no longer based on informal structures or relationships such as they had with their peers. Many felt they should remain silent and not address their concerns about production and quality issues with their bosses. It was believed if you spoke out, you would lose your job. These ndings stressed the importance of employees being loyal to their superiors. In many ways this has the greatest impact as most stated that loyalty to superiors takes precedent over the daily operations in the workplace. Managers considered that upper administration had uncontested power. They believe it was the duty of subordinates to follow and obey to management directives. If they followed the upper administration, their subordinates were expected to do the same (Li and Madsen, 2010). Because employees felt powerless and too far from upper management, they would remain silent even when they disagreed to the conduct of their supervisors. Manager M8 responded in the following way when asked what if his coworkers behaved unethically:
No. I wont do anything. If it is my subordinates, I will talk about it. My boss? Whatever he wants to do, I wont say anything.

Some interviewees suggested that the current organizational structure allowed upper management to wield their powers to their own advantages. Owing to the fact that all salaries for all ranks of positions in SOEs were public information, many believed their bosses possibly took bribes as their salaries would not be able to afford owning cars and living in spacious luxury apartments. They did not see how their superiors could afford the type of lifestyle that they led (Li and Madsen, 2009). For example, M8 made this comment during the interview:
Now the company is losing money and in nancial decit all the time. The bosses drive nice cars to work and smoke Zhonghua Cigarette [expensive cigarettes].

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On the other hand, they perceived it was necessary to follow the societal common practice to treat the bosses for nice meals or to present gifts to them from time to time. It was their way for trust building. Particularly when something went wrong with them, the bosses would be willing to take care of them. Front-line employees in SOEs have limited opportunities to nd jobs outside the system. Their personal life and nancial support depended on the income from their current job; the risk is too high for them to challenge their superiors (Li and Madsen, 2009). Thus, it was important for them to establish interpersonal associations with their bosses. E12 summarized the phenomenon:
The whole nation knows that one needs to know how to please the boss, atter the boss. This is for sure. This is what I think and what I feel.

Discussion The reasons behind the interviewed SOE employees invert looking on ethics, such as responsible for oneself and unwillingness to interfere were complex. In a study of whistle blowing behavior in China, Zhang et al. (2009) concluded that many in China are still under the pressure of maintaining harmony, especially, in the in-group guanxi network settings. To mind ones own business and to conform to the norm is the common practice. The consequences of interfering are considered undesirable and often unpredictable. Chinese culture is collective in nature, with high power distance and high uncertainty avoidance (Hofstede, 1991). Workplace denes employees social sphere which means they are embedded in their work environment and work provides their social support systems (Li and Madsen, 2009, 2010). It would cost a huge price if asked to leave their social network sphere because something they did unacceptable at the factories. Simply strengthening legal support for whistle blowers may not be applicable to these employees. The Chinese tradition of guanxi will prevail and continue to inuence ethical decision makings of Chinese employees, and they will continue to experience the moral dilemmas of obedience (Snell, 1999). The ndings revealed that addressing the (un)ethical dimensions in the workplace jeopardized employees guanxi ties, causing them to lose face, and be reprimanded. This was quite evident when they would have to go against the boss as their actions would be inconsistent with or violating Chinese values loyalty to superiors, ordering relationships by status, and harmony with others. That may explain the slow progress in ghting corruptions and so few whistle blowers in China. Few people are willing to interfere and ofcially voice the concerns for fear of retaliation, not by a single person but by a network of workplace guanxi (Zhang et al., 2009). The ndings further led to a three dimensional ethical prole of Chinese SOE employees. Guanxi and culture values does affect SOE employees ethical decision making. The concepts of an ethical self has implications for how employees apply ), Chinese values of self-cultivation, keeping oneself disinterested and pure (Qinggao and maintain harmony with others (CCC, 1987). It was this mindset that prevented unpleasant experiences and maintained solidarity among the employees. Therefore, it was this harmonized working environment and workplace guanxi that played a signicant role in employees ethical decision making. Consequently, employees were not always willing to speak out regarding unethical conduct in the workplace, and silence became the golden rule at these factories. If they were to address ethical issues on their bosses, they might lose as a result of retribution. They would be perceived as

aggressive employees who cause conict within the group, thus not eligible for promotion. Instead, given the prevailing guanxi and Confucian values, employees were willing to support the group orientation to insure their interpersonal associations. The malleability of the ethical standards was a direct result of the invisible hand of guanxi. Guanxi offered a way these employees could compromise their ethical standards to benet their social network. Decisions are often made by balancing moral reasoning and personal interests according to guanxi. It is almost impossible to separate work relationship from personal relationship because work and personal lives are so closely intertwined for the SOE employees (Li and Madsen, 2010). As suggested by the ndings, it is not uncommon that people trade a personal favor for a business favor, or vice versa. In reality, people may allow guanxi take precedent and return the favor by bending moral and ethical standards. Our ndings conrmed that favoritism toward in-group members conicts with the fundamental moral requirement of impartiality (Rachels, 2010). This explains why some has determined that guanxi is the source of unethical behaviors in China (Fan, 2002). Guanxi is based on partiality because it requires one to treat in-group members differently from out-group members (Chen et al., 2004). Given the current SOE environment and economic situations in China, if impartiality is reinforced, it means that one cannot help a friend in need by bending a few rules, a manager cannot show benevolence by taking care of employees personal needs, it may induce a hostile working environment. Work provides these SOE employees with safety net, denes their personal existence, and provides social support (Li and Madsen, 2009). Apparently, ethical decision making is a tricky balancing behavior between guanxi and ethical standards, and is often paradoxical. Loyalty to superiors and following orders are laudable Chinese values. Hence, submission to authority may not be perceived as a negative attribute. Instead, good relationship with the boss is an important guanxi aspect in the workplace. SOE employees often place their hope in the hand of the company and the bosses because they have the absolute power (Li and Madsen, 2010). Therefore, it is unlikely an employee would speak up when observing unethical workplace behaviors by the boss. Based on the ndings of this study, a link can be made through the thematic analysis. As such, we propose a conceptual framework for understanding Chinese SOE employees workplace ethical decision-making behavior (Figure 1). Formally, SOE employees are aware of what is considered an ethical person with a focus on the ethical self and are clearly able to differentiate ethical from unethical behaviors in the workplace. Meanwhile, the malleable ethical standards present a dilemma when guanxi is factored into the ethical decision making. These two constructs are clearly dominated by the third construct, submission to authority. The dynamics of these three constructs determines the (un)ethical business conducts in the SOE context. In the meantime, the interactions of the three are subject to the length and strength of individual or groups workplace informal guanxi network. Overall, an employees ability and capability to navigate this framework may determine an employees wellbeing, promotion, and other career-related aspects. Managerial implications By exploring the relational nature of SOE work environment, this study reveals the complexity of SOE workplace ethics through thematic analysis of qualitative data. This study offers important managerial implications for HRM practice in China. First, given

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Submission to Authority

96
The Ethical Self Ethical Standards

(Un)ethical Behavior or Conduct

Figure 1. A conceptual framework for SOE employees business ethics

The Invisible Hand of Guanxi

the workplace guanxi and collectivist culture, organizations need to address business ethics issue with a group orientation. For example, SOEs may develop ethical standards that are effective in regulating group behaviors for front-line employees and managers. Second, it is important to create a safe net for employees to speak out in the in-group environment. Third, managers, especially HRM managers need to grasp the intricacy of workplace guanxi to lead and manage successfully (Tan and Snell, 2002). Conclusion This study revealed the complex nature of Chinese SOE employees ethical decision-making behavior and how guanxi has made this process rather paradoxical according to the rule of impartiality. It has extended the literature on Chinese business ethics by offering a conceptual framework. Understanding the impact of the invisible hand of guanxi is curial to understand business ethical practices. This study demonstrates that navigating through the muddy terrain of guanxi and unambiguous land of moral and ethics is no small task in the Chinese context. As most studies, this study has its limitations. The samples of this study are limited to two SOE organizations in the manufacturing industry. Future studies need to explore the same phenomenon in different forms of organization such as private-owned enterprises, foreign-owned enterprises to identify similarity and differences in business ethics. Studies may also explore the same topic for knowledge workers. Future research on validation of the framework is also required to develop a Chinese theory of HRM on business ethics.
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