Having been in-house counsel and as an external lawyer at a firm for almost 16 years now in China, I wanted to share my own experience working on issues of compliance. When most people here at multinational companies or law firms serving multinational clients speak about “compliance”, we traditionally used to think about the Foreign Corrupts Practice Act (FCPA), the UK Bribery Act, and other globally enforced regulations that could be applied to these companies’ businesses in China. With China seen as a relatively high risk area to trigger these laws.
But what I have always found is that what really moves the needle as far as getting a company's employees' attention, especially in the last decade, has been the fear of violating local compliance regulations. And compliance training for local sales teams, local procurement teams, and local finance teams at large companies is most effective when you talk about real cases or realistic hypotheticals that barely ever even mention the term FCPA.
Instead, you talk about fairness, right and wrong. You open up the discussion to let people talk themselves about what they would do in situation X, Y, or Z. Yes, what they say in a company training may be difficult to do in practice when the time comes, but it starts with issue spotting and awareness. When compliance is less about lecturing on an abstract concept for a law made half way around the world, and more about doing the right thing, with relatable examples, the vast vast majority of people here (or anywhere) will do the right thing.
For sure, international companies have a reputation for being stricter on compliance, setting a higher bar, having a global standard. On some occasions, companies begrudgingly make limited exceptions (think mooncakes) on gift policies in line with local customs. Its not easy, even small changes like this take long internal debates and lobbying. And on the one hand, people on the front lines in the trenches, in the real world of trying to get new business complain how out of touch or rigid the company policy is on meals and entertainment with customers, for example. On the other hand, I’m convinced it is this strict, high bar mentality which sets a standard for the culture of the entire company - that in turn attracts and retains more talented people than it loses. What one might call the silent majority.
This is absolutely by no means to say international companies always have integrity, have a monopoly on integrity, or that in today’s modern Chinese business world are even objectively more integrity-minded than their Chinese competitors. Chinese companies have raised their own bar. It starts from lots of touch points - having their own IP to protect, their own lawsuits to pursue, and then building up a legal and compliance team that enables the executive team to build a culture of compliance where the tone has been set at the top.
One of the favorite examples I like to give here is when a client had a large transaction with a government invested customer. The government investment was substantial and the transaction was so large and came out of nowhere into the client’s sales pipeline. We were asked to do certain due diligence including meeting with the government investor of the client's customer. It was a bit awkward - the lawyer of a client whose customer was government invested. So about 3 steps removed from each other.
We beat around the bush with small talk and questions at first to warm up. But then the light bulb went off with the lead person at the government investor, he knew why we were there and looked me and the others in the eye and said: “Thank you, I can appreciate your concern. You can be assured, no one has more to lose if something was not in compliance here than me.” That wasn't the end of the diligence, but yeah, that was a pretty assuring way to start the process.
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