The conception of Corporate Social Responsibility (CSR) in China is moving rapidly beyond its roots of philanthropy and compliance towards a global concept with strategic implications. However, CSR engagement still constitutes a rather limited category of firms in China as mostly the largest firms, including both state-owned and private enterprises, have engaged themselves in CSR reporting and investment. Zhao’s book aims to critically analyze contemporary approaches to CSR using a legal perspective so that more will be known about whether and how CSR can be an effective approach for addressing issues such as product quality, employee management, governance and human rights in China today.
To those who tend to associate CSR with liberal democratic political, legal, economic and civil society underpinnings, a challenge will be whether and how Chinese institutional systems can facilitate CSR development, in particular, how corporate governance and legal framework play their part in China. Elaborating on the regulatory aspect of CSR throughout his book, Zhao focuses on the nature of the Chinese legal system which has underpinned the development and internalization of CSR in China, and describes the key features of the Chinese legal system and their formative or destructive influences on CSR in China.
Zhao’s book is comprised of nine chapters. In the first chapter the author lays the foundations for the whole book by introducing the basic terms and theoretical approaches adopted, including stakeholder approach, shareholder primacy norm, corporate social responsibility, and categorization of corporations by Chinese Company Law 2006. The second and third chapters provide detailed analyses of historical and present-day CSR in China. The unique corporate governance model of China is introduced in Chapter 4, setting the backdrop to further analysis of the solutions to promote socially responsible behavior among Chinese companies. Based on the investigation of stakeholder interests and legitimacy as related to CSR in China in Chapter 5, the author proposes improving corporate governance and a regulatory framework (Chapter 6), mandatory information disclosure for listed companies (Chapter 7), and enforcing CSR in a harmonious society (Chapter 8). In the concluding chapter, the author reiterates strengthening the link between the government’s policy of ‘Harmonious Society’ and follow-up measures to ensure the effectiveness of the legal environment.
Although it is generally argued that CSR is an ‘alien’ concept, diffusing from the West to developing countries, abundant research suggests that it is important to take the contextual dynamics into account when understanding CSR across different countries. Zhao has done a comprehensive investigation into the historical and cultural roots of CSR in China in Chapter 2, depicting the influences of Confucian culture and philosophy, state–business relations in the Qing Dynasty, modernization initiatives in the Republic of China, and the traditional role of state-owned-enterprises (SOEs) in the New China. He further attributes the recent rise of CSR to the external push of economic globalization, international CSR standards, CSR reports, and the internal drivers of worrying CSR practices, domestic regulations and guidelines, legal reform and CSR management standard, in Chapter 3.
Zhao’s caution against wholesale reference to theories and research findings originating from Western contexts is laudable. Starting from Chapter 4, Zhao pays closer attention to the unique regulatory environment in China in order to understand its relevance to CSR. For instance, the heavy involvement of the Chinese government in business adds the difficulty of shareholder protection and monitoring. As he illustrates, the ‘guanxi’ between corporate directors and government authorities has significantly reduced the effectiveness of dual board structure with independent directors, adding to the likelihood of improper behavior inside the company.
Despite the debate on the voluntary and mandatory nature of CSR, it is not difficult to find increasing legal intervention in enforcing voluntary CSR policies, together with market and social forces. A central argument in Chapter 5 is that legal awareness of the need for CSR helps define CSR in a manner that integrates both its voluntary and mandatory aspects, and that CSR itself functions as soft or informal law that is based on a set of fundamental business laws. Instead of treating CSR as being beyond legal compliance, Zhao particularly emphasizes its supplementary or facilitating role to legal enforcement in China. Correspondingly, the design of a regulatory framework appropriate to the Chinese context and relevant stakeholders becomes the keystone of tackling CSR-related problems.
The regulatory system is never one-dimensional but composed of multiple dimensions. On the level of corporate governance, Zhao suggests, in Chapter 6, that the hybrid corporate governance model will be essential to improve the effectiveness of corporate governance in China. Together with governance reform and restructuring, other aspects of the legal system such as the social security system, labor and employment system, as well as public regulation also need to reflect stakeholder interests and legitimacy in the Chinese context. Another effective measure to promote socially responsible business behavior will be mandatory information disclosure, especially for publicly listed companies, as explained in Chapter 7. At the corporate level, Zhao suggests that instead of transferring one-way, CSR-related information from companies to stakeholders, more efforts are needed to establish a pathway so that information can be transmitted between the company and its stakeholders in a bi-directional manner. At the national level, Zhao proposes considering the unique Chinese context when designing the regulatory system for corporate information disclosure, as illustrated in Figure 7.1.
To embed CSR into business management strategy and practice, it is essential to investigate the link between national government policy and CSR. The Chinese government’s initiative of ‘Harmonious Society’, which is derived from Confucian philosophy, has been widely considered as a harbinger of a new era of CSR. In Chapter 8, Zhao elaborates on the possible links between ‘Harmonious Society’ and CSR through Figure 8.1 and emphasizes the importance of building a stakeholder-friendly legal environment that is germane to a harmonious society.
The embedding of CSR within individual companies cannot be separated from the institutionalization of CSR within a regulatory framework and environment. Throughout the book Zhao has mapped a blueprint for a CSR regulatory framework with Chinese characteristics that is dependent on combining a globalized and indigenous understanding of the increasingly interdependent political, regulatory and commercial exchanges between sectors, and an appreciation of the interests and legitimacy needs of different stakeholders. While scholars are still debating the voluntary and mandatory nature of CSR, Zhao has provided his insight of the mutual complementarity between the two aspects of CSR. As he tackles controversial issues such as how to regulate CSR and when the law is necessary or effective, he is inviting future research to discuss more nuanced topics under the CSR umbrella, such as the domain of human rights that has been widely discussed yet remains highly sensitive in China. Moreover, though he discusses in detail the relevance of the government and regulatory framework to CSR, he calls for concerted efforts from the business and civil society sectors to promote CSR in local, domestic, and international arenas. Last but not least, the book will be helpful to guide the Chinese regulators and businesses who aim for a more balanced, people-centered and sustainable model of growth and development.
