Zero out of 100. To its utter embarrassment, that was the State Grid Corp of China's (SGCC) score when Fortune magazine released its list of the "Most Accountable Companies" in 2006. Ranking last in the list, the score of the largest Chinese power transmission firm was a sharp contrast with 72 that Vodafone notched up, topping the list of 64 large companies in the world.
But within just two years of this poor showing, SGCC has come out on top of another list. Its corporate image is set for a mega boost because of its huge donation to help victims of the devastating earthquake that rocked Sichuan on May 12. SGCC also responded to the disaster swiftly by restoring power supply in the quake-hit areas.
SGCC is among the legion of Chinese companies that have opened their wallets and hearts to help the earthquake victims, and large State-owned enterprises (SOEs) seem to be taking the lead in the relief efforts.
Within a week of the quake, 128 SOEs under direct administration of the central government donated 1.16 billion yuan ($166 million), with SGCC topping the list with 86 million yuan. The number does not include the SOEs' subsidiaries. For example, China Mobile donated 15 million yuan while its provincial subsidiaries donating 43.2 million yuan. China National Petroleum Corporation (CNPC), which ranked 63 in the Forbes' accountability list with a measly score of 3, beating only SGCC, donated 23 million yuan.
The generosity and the show of support could go a long way in easing the contempt with which a section of the Chinese public views the large SOEs and their monopoly status. The concept of corporate social responsibility (CSR) is new to most Chinese businesses, especially the State-owned ones, but they have proved to be quick learners. And it's already doing wonders for their image.
The increasing popularity of CSR activities is evident from the frequency with which State companies these days take part in related forums, publish CSR reports and promote their philanthropy in the media.
The primary reason for SOEs' rising interest in CSR is that they want to "ease the tension with the public", says Zhang Shenwei, with non-profit Samsung Economic Research Institute (SERI). "With the gap between the rich and the poor widening, the public is increasingly uncomfortable with the hefty profits turned by State monopolies."
Also, a number of large SOEs have stepped up their global expansion in recent years, which has pushed them toward CSR in order to win the trust of overseas customers, Zhang says.
Taking the lead
In fact, in this hour of grave national disaster, SOEs seem way ahead of the curve in implementing CSR strategies compared with private companies and multinationals, says Xiao Mingchao, vice-general manager and research director with domestic market research firm Sinomonitor International. "SOEs are setting examples for others," he says.
Apart from the huge cash donation, SGCC has given out materials and equipment worth 130 million yuan. State-owned China Life Insurance (Group) Co donated 16 million yuan and has promised to take care of the children left homeless by the earthquake till they turn 18. The insurer will also prepay the 10 million yuan payout to those in Sichuan who had bought its healthcare policies. The company is even giving accident insurance policies of 200,000 yuan to all journalists working in the disaster zone.
Major State-owned banks, apart from chipping in generously themselves, are charging nothing for transfers of donations to earthquake victims. Many SOEs have sent their employees to restore the roads, power supply and communications to facilitate rescue efforts.
Shortly after the earthquake, all the heads of Chinese telephone operators rushed to the worst hit areas to coordinate efforts to restore communications. Two technicians from China Satcom reached Yinxiu town, close to the epicenter, with 10 satellite phones the very next day after the quake and made the first call out of there to a command center in Sichuan's capital Chengdu. Before that, no information was coming in about the town as the roads had either been wiped out or blocked by landslides and all communication links had snapped.
On May 15, China Netcom General Manager Zhang Chunjiang, also the former deputy chief of the Ministry of Information Industry, headed a small team that walked into Yinxiu with satellite phones. Like other rescue workers, Zhang slept in the tents pitched in the rubble.
Liu Jianqiu, an employee of China Mobile's Chengdu branch, was killed when restoring the fiber cables linking the epicenter. He was hit by landslides caused by aftershocks on May 16.
Although SOEs are being applauded for their generosity, observers say there might still be a long way to go before these giants can introduce the best CSR practices.
"Most SOEs have vague definitions of their social responsibilities and are not as actively implementing CSR practices as multinationals," says SERI's Zhang. "Besides, CSR activities of most SOEs focus on charities while basic social responsibilities such as integrity, quality control and compliance with laws, are ignored."
CNPC, for example, donated more than 720 million yuan between 2001 and 2005, making it the most generous company in China as ranked by the Hurun Report. But its public image still needs a lot of work.
Besides, with their large headcount, the giant donations of SOEs can hardly be considered a feat. "Given their sheer size and the huge number of employees, SOEs usually have some advantage of scale in making donations," Zhang says. For instance, SGCC employs more than 1.5 million people, and 76 million yuan of its 86-million-yuan donation came from the employees.
At the end of the day, unless they reduce their monopoly and reliance on the government, SOEs can hardly become the most accountable corporations in China, Zhang says. "When describing its stakeholders, China Mobile always puts the government first, followed by customers and employees, while investors come the last."
That's hardly copybook CSR. "It fails to respond to the criticism from the public about the exorbitant mobile charges and has never come up with any measure for improvement," adds Zhang.
Clearly, the numbers are fine when it comes to disaster donations, but SOEs need to do more to connect.
(China Daily?May 26, 2008)
