Employees as stakeholders and the human resource parameter of corporate social responsibility : implementation of human resource related best practices in the Chinese textile industry

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UNIVERSTIY OF AMSTERDAM

FACULTY OF ECONOMICS AND BUSINESS

M.Sc. in BUSINESS STUDIES

“Employees as Stakeholders and the Human Resource

Parameter of Corporate Social Responsibility –

Implementation of Human Resource Related Best

Practices in the Chinese Textile Industry”

STUDENT: LAMPROS SOFOURIS

STUDENT NO:

5647819

SUPERVISOR: DR. FRANK JAN DE GRAAF

DATE: JANUARY 2015

WORD COUNT: 17,334

This dissertation is submitted to the University of

Amsterdam in partial fulfilment of the requirements of the

degree of M.Sc. in Business Studies.

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Lampros Sofouris 2 M.Sc. Business Studies EXECUTIVE SUMMARY

The current research aims to analyse how CSR practices can be planned and implemented in countries like China. The researcher aims to give emphasis to the employment conditions that the workers are exposed to and how the implementation of CSR, mostly developed in the West, can improve worker’s life and increase their productivity, which will in turn give enterprises competitive advantage, and improve profitability for the shareholders. The researcher analyses the main parameters of the CSR concept and how it applies to employees as internal stakeholders. Information is provided on the ethical parameters of CSR, the benefits for enterprises and employee from the implementation of such practices may confer, especially with respect to brand value and reputation, and the development of a competitive advantage.

The researcher employs the qualitative research paradigm and semi-structured interviews as the primary sources for the collection of information related to CSR practices implemented in the textile industry of China. Five interviews were undertaken with executives of five large Chinese textile companies. The researcher presents the interview write-ups and evaluates the reliability and validity of the information collected. Information was also gathered from secondary sources (e.g., reports). Subsequently the analysis concentrates on information gathered from secondary sources, like the working conditions in China and the extent to which CSR practices have been implemented in the Chinese textile industry.

From the information gathered it becomes evident that the textile companies of China limit their human resource practices to the prerequisites that are set by Chinese labour law. Despite the fact that the Chinese textile companies acknowledge the importance of HR related CSR practices and their importance in gaining competitive advantage, in essence, they do not address the voluntary parameter of CSR and do not implement practices that go beyond their legal obligations. Several CSR best practices developed in countries of the West that can be transferred to Chinese textile companies are identified and recommended for implementation, which can aid them in gaining a competitive advantage that will augment their sustainability and profitability in the future.

Chinese textile companies need to go beyond the prerequisites of the law and implement the voluntary parameter of CSR if they want to facilitate an environment that will help them establish a competitive advantage and improve their reputation. There are several organisations both within China and abroad that can aid them in this direction.

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Lampros Sofouris 3 M.Sc. Business Studies ACKNOWLEDGMENTS

I would sincerely like to thank everyone that helped me with this project. I would like to extend my gratitude to the individuals who devoted their time to answer my questions and acknowledge that without their help this research would not have been possible. I must sincerely thank my supervisor Dr. Frank Jan De Graaf for all his invaluable help and advice during the period of this project. Finally, I would also like to say a special thank you to my family for helping me in the best way possible.

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Lampros Sofouris 4 M.Sc. Business Studies DECLARATION OF ORIGINALITY

“I declare that my work entitled “Employees as Stakeholders and the Human Resource Parameter of Corporate Social Responsibility –Implementation of Human Resource Related Best Practices in the Chinese Textile Industry” for the degree of M.Sc. in Business Studies, embodies the results of an original research programme and/ or consists of an ordered and critical exposition of existing knowledge in a well-defined field. I have included explicit references to the citation of the work of others or to my own work which is not part of the submission degree.”

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Lampros Sofouris 5 M.Sc. Business Studies TABLE OF CONTENTS EXECUTIVE SUMMARY ... 2 ACKNOWLEDGMENTS ... 3 DECLARATION OF ORIGINALITY ... 4 TABLE OF CONTENTS ... 5 1. INTRODUCTION ... 7 1.1 Research Rationale ... 8 1.2 Structure ... 10 2. LITERATURE REVIEW ... 12

2.1 Definition of Corporate Social Responsibility... 12

2.2 CSR Concept ... 12

2.3 Internal and External Stakeholders and CSR ... 14

2.4 Implementation of Ethical and Socially Acceptable Practices ... 15

2.5 CSR Practices and Employees ... 16

2.6 De Jong’s Matrix ... 18

2.7 CSR Benefits ... 20

2.8 Employee-related CSR and Competitive Advantage... 20

3. METHODOLOGY ... 23

3.1 Research Approach ... 23

3.2 Research Design and Materials ... 25

3.2.1 Setting ... 25

3.2.2 Generation of Semi-Structured Interview Guide ... 25

3.2.3 Sampling and Sampling Strategy ... 26

3.2.4 Methods ... 26

3.2.5 Analysis ... 27

3.3 Ethical Issues ... 28

4. RESULTS ... 29

4.1 Analysis of the Findings from Primary Research ... 29

4.1.1 Company Details and HR ... 29

4.1.2 CSR Schemes ... 29

4.1.3 CSR Schemes Related to Employees ... 31

4.1.4 CSR and Reputation ... 32

4.1.5 External Auditing ... 33

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Lampros Sofouris 6 M.Sc. Business Studies

4.2.1 Working Conditions in Asian Countries ... 33

4.2.2 CSR Practices in China ... 35

4.2.3 CSR Practices in the Chinese Textile Industry ... 36

4.2.5 Migrant Workers ... 40

4.2.5 Transfer of CSR practices ... 41

4.3 De Jong’s Matrix and Chinese Textile Companies ... 42

5. DISCUSSION ... 43

5.1 Living Wage and Working Hours ... 44

5.2 Health and Safety ... 45

5.3 Child and Forced Labour ... 45

5.4 Policies ... 46

5.5 Traceability and Transparency ... 47

5.6 Monitoring and Training ... 48

5.7 Worker Rights ... 49

6. CONCLUSION ... 51

6.1 Limitations ... 52

6.2 Recommendations for Future Research ... 53

REFERENCES ... 54

APPENDICES ... 64

Appendix A – Semi-Structured Interview Guide ... 64

Appendix B – Interview Write-ups ... 65

Appendix C – China ... 83

Appendix D – Chinese Textile Industry ... 85

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Lampros Sofouris 7 M.Sc. Business Studies 1. INTRODUCTION

Nowadays societies around the world are faced with significant changes that come into conflict with the earlier achievements of democracy and civilisation, like: the social State, the Rule of Law, human, social and political rights, and international law as a means of peaceful settlement of disputes. The onset of globalisation is often identified with market liberalisation, the international expansion of companies, the growth of international trade and international investment, and the increased interconnectedness of the national economies (Crane et al., 2008). However, this is not a new phenomenon to justify new conceptual categories. Globalisation should be seen primarily as an expression of a set of changes, which shape overall a new reality that is dominated by a number of elements, such as radical technological change, extensive liberalisation of trading, movement of capital, major changes in the operation of the national State and finally the tendency to divide the society into its economic and social elements (Crane et al., 2008). Employees of different companies and sectors around the world, however, are increasingly sceptical about globalisation, as they believe it has diminished their power to shape their own future and has led to rising of employment insecurity.

One of the major parameters that drove globalisation was the mobility of western companies that gradually moved their production lines to countries of the East, mainly those in the Asian continent. Indeed, western companies that have expanded globally and have branches all over the world, constantly try to decrease their costs by taking advantage of low workers’ salaries in Asian countries, such as China, Bangladesh, Cambodia etc. In the majority of these developing countries, the standards of living are so low that people exist on the borders of poverty, and individuals, mostly women and children, are forced to work under difficult conditions that often violate even their most fundamental human rights. Physical punishment, verbal threats, coercive regulations, psychological harassment, dismissal and loss of pay are common (Chan and Senser 1997). These vile working conditions that prevail in these countries, especially in sectors like textile, apparel and fashion, are considered by international bodies as the most egregious ongoing abuse of workers.

The issue has raised significant ethical and moral concerns in the West, and lately in the East itself, where individuals have started to give more emphasis to Corporate Social Responsibility (CSR) practices that are related to employees. The provision of decent wages and appropriate working conditions would significantly improve the quality of life of workers in these countries (World Bank Report, 2013). Moreover, although poverty reduction has not been an explicitly stated goal of CSR, this does not exclude it as a beneficial result that can accompany the adoption

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of socially responsible business practices for employees, as well as wider community members in poverty-stricken, developing countries (Frost and Ho, 2006).

The design and implementation of employee relations arrangements is based on the value systems of the employers, which involve a mixture of self-regarding and other-regarding values (Kroon and Paauwe, 2013). Self-regarding values relate to employee power and the greater the latter is the employer has more incentives to take into consideration employee needs and interests. Contrary to this, other-regarding values, which include right to freedom, well-being and equality, recognise employees as legitimate stakeholders. The intrinsic motivation to take into account employee needs and interests is that this may be in the best interest of the organisation. Employees’ right to freedom sets limits to managerial control and demands that workers be paid sufficiently to provide for their livelihood. The right to well-being relates to safe working conditions and the right to individually or collectively pursue their own needs and interests. Finally, the right to equality requires procedural justice on the part of the firm (Kroon and Paauwe, 2013). Researchers have pointed out that value systems dominated by other-regarding values elicit employee reciprocation through higher innovativeness and commitment, and increased productivity (e.g., lower absenteeism, turnover) and performance (Allen et al., 2013; Verdorfer et al., 2013), which may subsequently lead to the development of a competitive advantage..

The firm must be respected in the local community and be trusted by customers and employees in order to survive in the long run (Grayson, 2003). The treatment of employees can significantly affect the reputation and brand value of a company and can lead to the development of a competitive advantage. CSR is very important for building good reputations with and among stakeholders and shareholders and as Mills (2002) posits: “what others say about your brand is much more powerful than what you can say about it yourself”. In this respect, the researcher tries to provide evidence based on which entrepreneurs, companies, managers and governments can be advised with respect to the implementation of the best CSR practices that focus on employees in order to improve company reputation and the value of the brand, in the hope that this will create a competitive advantage for the companies.

1.1 Research Rationale

The extent to which ethically-based approaches shape the value systems of firms has been increasingly pointed out as an area of research by a significant number of authors (Paauwe, 2004; Legge, 1998; Guest, 2002; Greenwood, 2013). The increased public awareness on ethically

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questionable activities by multinational corporations have attracted public interest and have led to research initiatives related to CSR (Lockett et al., 2006). Moreover, in view of the significant attention drawn in the last years to the issue of employees as stakeholders in Asian companies and the scarcity of information available on CSR practices and employee relations arrangements, the current research aims to analyse the principles on which CSR practices can be planned and implemented in countries like China. The researcher aims to give emphasis to the employment conditions that the workers are exposed to and how the implementation of CSR, mostly developed in the West, can improve worker’s life and increase their productivity, which will in turn give enterprises competitive advantage, and improve profitability for the shareholders. In the debate for the transferability of human resource management (HRM) practices, convergence theorists take the stance that the convergence of HRM policies as part of the globalisation process can aid in the global diffusion of ‘best practices’ (Ferner and Quintanilla, 1998).

I selected China as the case study country because of the central role it plays as world leader in the manufacturing sector. I chose to focus on the textile industry of China because it has been growing significantly in the last decade, employs millions of workers and has increasingly been accused of working conditions that raise significant concerns for Western governments, international human rights organisations and the public. Thus, the case study presents information for the working conditions that prevail in the textile industry of China and subsequently I explore how these might be improved through CSR practices.

The main objective of the current research is to address the following question: Is China, given economic progress, transferring to a more employee-oriented CSR? In this respect, the researcher focuses on the following research questions:

Research Question 1: Do large Chinese textile companies implement CSR practices related to employees that go beyond their obligations set by Chinese Labour Law and do they address the voluntary parameter of CSR? This question will be addressed through information collected from primary sources (e.g., semi-structured interviews with managers of large Chinese textile companies).

Research Question 2: What working conditions prevail in the Chinese textile industry? This question will be addressed through information gathered from secondary sources as it is very difficult to approach the employees working for the textile industry with or without the consent of their employers.

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Research Question 3: What CSR related ‘best practices’ developed in the West could be implemented in large textile companies of China, which will aid them to gain a competitive advantage? Transferability of CSR practices will also be addressed through secondary sources (e.g., report published by the Sino-German Corporate Social Responsibility Project, etc.).

The current research is useful because it provides information regarding the CSR practices related to employees in the Chinese textile industry. The research recommends CSR practices that could be transferred to the companies of the sector based on ‘best practices’ implemented in Western developed countries, which can aid these companies to address issues related to their employees and improve their life and prospects. These could subsequently lead to better productivity and commitment on their part and allow the companies to develop a competitive advantage. The research is useful for the academic and research community because it sheds light on how Chinese textile companies of China view CSR related practices and how they perceive their role as active members of the Chinese as well as the international communities. Awareness about CSR practices in China can also aid Western companies that collaborate with them in putting pressure that is aimed to improve the working conditions and life of the employees in Asian countries.

1.2 Structure

The current chapter introduces the reader to the wider framework and the rationale of the research, and presents the main research question. The second chapter presents the literature review, which concentrates on the main parameters of the CSR concept and how it applies to internal stakeholders, like employees and workers. Emphasis is given to the parameters that are related to the development of a competitive advantage, like: the way ethical and socially acceptable practices can be developed within the premises of an enterprise; the CSR practices that involve employees and workers as internal stakeholders and the benefits that the implementation of these practices may confer; and, the effect CSR practices may have on brand value and reputation. Chapter 3 presents the methodological approach that was employed in the research. The researcher employs the qualitative research paradigm and interviews in order to collect information regarding the CSR practices that are implemented in the textile industry of China. Five interviews were undertaken with executives of five large Chinese textile companies in order to gather information related to the CSR practices related to employees. Chapter 4 presents the primary research results, as well as information gathered from secondary sources and relate to the working conditions in China and the extent to which CSR practices have been implemented in the Chinese textile industry. Chapter 5 links the information gathered from the

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primary analysis and the secondary sources to the literature review, and identifies and recommends CSR best practices, the implementation of which can aid companies in Asian countries, especially in the textile industry, to gain a competitive advantage that will augment their sustainability and profitability in the future. From the information gathered it becomes evident

that the textile companies of China limit their Human Resource (HR) practices to the prerequisites that are set by Chinese labour law. Despite the fact that the Chinese textile companies acknowledge the importance of HR related CSR practices and their importance in gaining competitive advantage, in essence, they do not address the voluntary parameter of CSR and do not implement practices that go beyond their legal obligations. Chapter 6 presents the concluding statements, the reflections and the recommendations for future research. Chinese

textile companies need to go beyond the prerequisites of the law and implement the voluntary parameter of CSR if they want to facilitate an environment that will help them establish a competitive advantage and improve their reputation. There are several organisations both internal and external that can aid them in this direction. Further information on China and the Chinese textile industry with respect to its size, structure and trends, and Porter’s Five Forces Model is presented in the Appendices.

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Lampros Sofouris 12 M.Sc. Business Studies 2. LITERATURE REVIEW

2.1 Definition of Corporate Social Responsibility

The literature review begins with the premise that corporate social responsibility (CSR) is the philosophy, way of thinking, the set of principles and values that govern (or should govern) the functioning of an enterprise and therefore its decision making process. As with any philosophical point of view, so in the case of CSR, there are not only many attempts to clarify various aspects of its definition, but also many different terms used to express the same or similar meaning (i.e., the company as a citizen), there are conflicting views, proponents and sceptics, and individual or unilateral resolutions of is range (Baker, 2003).

The current dissertation employs definitions that give emphasis to employees as stakeholders, their rights and obligations, and stress the fact that companies are responsible for their well-being as an and end in itself. In this respect, Jones (1980:59) gives emphasis to the obligation of shareholders to other stakeholders and that they need to go beyond the rule of law and union contract in terms of provisions for them. He states that: “Corporate social responsibility is the notion that corporations have an obligation to constituent groups in society other than stockholders and beyond that prescribed by law and union contract”. Amnesty International (2002) gives emphasis to social acceptability of enterprises and posits that: “Companies [have] to recognise that their ability to continue to provide goods and services and to create financial wealth will depend on their acceptability to an international society, which increasingly regards protection of human rights as a condition of the corporate licence to operate”. Finally, the Corporate Responsibility Coalition (2003:2) gives emphasis to human rights by stating that: “As an ‘organ of society’, companies have a responsibility to safeguard human rights within their direct sphere of operations as well as within their wider spheres of influence.”

2.2 CSR Concept

A large number of academics (Bowen, 1953; Frederick, 1960; Friedman, 1962; Sethi, 1975; Carroll, 1979; Jones, 1980; Wood, 1991; Baker, 2003), international bodies (WBCSD, 2003; CSR Europe, 2003; OECD, 2003; Amnesty International, 2002; CORE, 2003; Novethic, 2003), and enterprises (Unilever 2003; Novo Nordisk 2003) have published conceptual definitions and characteristics that define CSR during the last 30 years. Despite the variety of definitions, perhaps, the most widely accepted conceptual approach is the one proposed by Archie Carroll,

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who considers CSR as a composition of four different parameters of society relations that resemble a pyramid (Carroll, 1979; 1991):

(1) Economic responsibility: The companies have shareholders, who seek a reasonable return on their investments, have employees who want safe and fairly paid work, clients, who seek good quality products at a fair price, etc. Thus, the primary responsibility of management is the proper functioning of the enterprise as an economic unit so that sustainability of the entity is ensured. All other minor responsibilities fall within the scope of CSR. According to Carroll, satisfying financial responsibility is, therefore, a basic condition of the whole business;

(2) Legal responsibility: CSR in relation to the law requires that an enterprise abides by the terms and ‘plays by the rules of the game’. Carroll suggests that the satisfaction of legal responsibilities is required from all companies that seek to be socially responsible;

(3) Ethical responsibility: This responsibility obliges companies to take actions that are honest, fair and reasonable, even when this is not bound by law. Carroll argues that moral responsibilities, therefore, consist of what societies expect generally that goes beyond an enterprise’s financial and legal obligations;

(4) Philanthropic responsibility: The fourth level of CSR examines the philanthropic side of enterprises and addresses a wide variety of issues, including donations to charitable organisations, recreational infrastructure investments for employees and their families, support for local educational institutions, or sponsorship of Arts and sports events. According to Carroll, charitable expectations are simply desirable and not mandatory like the previous three responsibilities. The following figure presents a schematic representation of the pyramidal shape of CSR proposed by Carroll (Figure 1).

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Lampros Sofouris 14 M.Sc. Business Studies 2.3 Internal and External Stakeholders and CSR

Stakeholders of a company are all those individuals who are influenced by or can influence a business’s decisions and actions. According to Freeman (1984:46) stakeholders are: “any group or individual who can affect or is affected by the achievement of the organisation’s objective”. These may include (but are not limited to): employees, customers, suppliers, community organisations, subsidiaries and affiliates, joint venture partners, local neighbourhood residents, investors, and shareholders. Employees are considered stakeholders because they both affect and are affected by a firm performance. Companies have a self-regarding motive to take employee interests into consideration, but also a responsibility to take their interests into account.

CSR can be characterised as ‘internal’ and ‘external’ depending on the stakeholders that are affected by it. The management is called upon to identify these stakeholder groups and assess the impact they have on company’s viability, sustainability and development, and how the implementation of CSR schemes may affect them. The assessment and implementation of CSR practices varies for different countries, regions, sectors and organisation types, and responsible business practice requires different items of discussion and significantly different priorities. However, the basic approach to CSR includes organisations that adopt a formal and structured approach to the assessment of the social and environmental impact, making steps to monitor, improve and publish the whole process and its results (Freeman, 1994; Freeman and Philips, 2002).

The internal parameter of CSR involves practices that primarily involve: (1) the employees and relate to issues such as investment in human capital, health and safety, and the management of change; and, (2) environmentally responsible practices, which relate mainly to the management of natural resources used in production. The implementation of such practices paves the way for change management and the reconciliation of social development with improved competitiveness. The external parameter of CSR on the other hand extends beyond the company to the local community and to a broad set of stakeholders, like business partners, suppliers, customers, public authorities and non-governmental organisations (NGOs), all of which together represent the local communities or the social environment (European Union Commission, 2001).

As (Hillman and Keim (2001) point out employees are one of the primary stakeholders of a company, as the latter cannot exist without them. They are considered one of the company’s most essential resources and represent it externally. Moreover, the employees need training, which requires a significant investment both in time and money. The position an employee holds

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in company acts as the foundation of his/her economic livelihood and at the same time provides opportunities for social development and the establishment of social relationships (Crane and Matten, 2004; Greenwood and De Cieri, 2007; Van Buren, 2005). As employees both affect and are affected by the company to which they provide their services, they are entitled to a very substantial extent to be recognised as primary stakeholders, from both an instrumental as well as a moral perspective. This justifies employees to pursue their individual interests and to be included in the decision-making process that affects their interests (Greenwood and De Cieri, 2007).

2.4 Implementation of Ethical and Socially Acceptable Practices

Hurst (2004:6) posits that business ethics “aim at inculcating a sense within a company’s employee population of how to conduct business responsibly”. Indeed, creating a moral and socially responsible working space is not just a matter of luck and common sense. Senior managers, who are aided by other managers and professionals, can create strategies and programmes aimed to encourage ethical and socially accepted behaviour. There are several initiatives that can be undertaken, which include (Carroll and Buchholtz, 2003; Garriga and Mele, 2004):

(1) Establishment of formal mechanisms and committees for the control of ethics. The committees should have representatives from the upper management of the entire organisation, an expert on ethics and CSR from the HR department and employee representatives. The committee helps to create policies that relate to ethical and social responsibility, while it can conduct ethical screening on all activities of the company. In addition the committee members can consider complaints relating to infringements of ethical behaviour from employees vis-à-vis customers. An important factor is the hiring of a senior officer who will be responsible for the observance of ethical standards.

(2) Drafting of organisational codes of conduct can also act as a guideline for ethical and socially responsible behaviour. These guidelines have become very important because officials in the administration are not controlled as much as in the past. Some areas of these codes are general, like requiring individuals to behave with honesty and impartiality, while others may be industry or company oriented suggestions.

(3) Companies should make explicit and strong references to issues of ethics and social responsibility. Constant reference to CSR can encourage ethical and socially responsible behaviour. The senior management can spread the benefit, in terms of competition, ethics and socially responsible behaviour.

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(4) Leadership plays a major role and special emphasis should be given to upper management support for CSR practices and the setting of example.

2.5 CSR Practices and Employees

The undertaking of CSR initiatives that involve employees has drawn significant emphasis from several parties, like governments, academics, human rights organisations, unions, etc. Several international bodies, like the European Union, in their directions for the implementation of CSR practices give special emphasis to the health, prosperity, safety, differentiation, equality and professional development of the employees that work for a company. (Kwan and Tuuk, 2012) The implementation of employee-oriented CSR requires an organisational environment where trust prevails. It involves policies and practices that provision material as well as immaterial benefits for the employees that go beyond the obligations dictated by legal regulations and/or collective bargaining agreements. The implementation of such practices instils a climate where employees feel respected and appreciated. They reciprocate by showing a greater degree of commitment to the company, which subsequently improves the company’s performance through less frequent absenteeism and turnover, higher productivity and greater innovativeness (Guest and Peccei, 2001; Paauwe, 2004; Pfeffer, 2010; Tsui et al., 1997; Van Buren, 2005).

According to studies, CSR is a lever for attracting, motivating and retaining employees. Taking into account that the manpower is perhaps the most important resource of an enterprise, the ability of a company to attract and retain employees, who can contribute significantly to the increase of the added value of the products or services, plays a significant role for its short and long-term sustainability and profitability. In practical as well as economic terms, it is important to realise that employee-related CSR is not yet another expenditure for a company, but a strategic investment, which can yield not only significant short-term and long-term benefits for the company in general, but also with respect to the most important resource of the company that are the employees (Kwan and Tuuk, 2012).

The role of the HR department is particularly important, as it acts as a medium that has the opportunity and the tools to engage and involve the employees in the company’s CSR strategy (Inyang, Awa and Enuoh 2011). HRM is at the heart of each organisation and has the ability to make the CSR practices part of the way in which it operates and in which decisions are made. HR is considered the necessary ingredient for the true implementation of CSR practices that are disseminated throughout the entire company. The success of HR, however, is totally linked to the

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support it gets from higher management and the shareholders, as well as the participating employees. The training of employees and the design of their professional development, the implementation of evaluation systems and the recruitment of staff with the right knowledge and skills are important factors in shaping the CSR strategy of a company. The relationship of course is bidirectional and as HR contributes decisively and effectively for the implementation of CSR, CSR has a positive impact on HR (Kwan and Tuuk, 2012).

Employee engagement in CSR practices involves four steps, which are: designing, implementing, communicating and assessing CSR strategy. When CSR schemes are designed, it is vital for an organisation to avoid passing the message that the initiatives are window dressing and are there for the sake of enhancing public relations. Employees may perceive focused and high-profile CSR schemes as marketing efforts. In order to gain the most benefits and maximise employee engagement, enterprises should implement CSR schemes that employ a co-creation approach, where employees are consulted and have an opportunity to provide feedback. The enterprise should facilitate the development of employee-driven CSR goals, as these will facilitate their engagement in CSR practices. When CSR programmes are implemented, enterprises struggle to a balance between standardisation and customisation, and indeed both are needed to address the needs of all stakeholders. Some degree of localisation aids in alleviating the concerns of the employees and their perceptions that CSR might only be a publicity management tool. (Kwan and Tuuk, 2012:7-8)

With respect to communication, enterprises should promote awareness of CSR values and practices among employees, in order to develop trust and understanding. The HR officials need to go beyond the basic level of informing employees, but provide them with initiatives and opportunities to participate. Moreover, CSR should align parameters like job design, staffing, performance management and compensation with the organisation’s CSR strategy and values. Responsible leadership should proactively develop a culture that fosters integration of CSR values into HR functions, which will in turn help build and promote a workforce that is strongly aligned with the organisation’s CSR strategy. An assessment of the effectiveness of CSR schemes on the other hand requires development and strengthening of reporting and auditing systems, which will reinforce transparency and consistency. These will allow HR to design more effective metrics that will facilitate an assessment of the impact of CSR strategy on employee outcomes. Evaluation criteria involve but are not limited to: (1) internally focused measurements of employee engagement; (2) attitude; (3) satisfaction; (4) embeddedness; (5) commitment; (6) retention; (7) productivity; and, (8) absenteeism. (Kwan and Tuuk, 2012:8)

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As Inyang, Awa and Enuoh (2011:124) point out “employees can strengthen or damage brand reputation” and their involvement in CSR practices as front-line ambassador is a sine qua non for

brand value development. Management should always be aware that employees play a critical role in CSR initiatives and their engagement makes the schemes more legitimate in the eyes of the other stakeholders. It allows CSR to go beyond public relations. (Inyang, Awa and Enuoh, 2011:124) Indeed, as Strautmanis (2008:348) asserts “successful implementation of CSR helps the stakeholders develop a good impression of the enterprise. This creates a positive long-term image of the enterprise, increases its value and forecasts bigger profits in the future”.

Researchers that studied the impact of CSR schemes on the motivation, development and retention of staff, report a positive correlation between them. Skinner (2002:1) undertook a study that involved the Danish pharmaceutical company Novo Nordisk, which implemented a high value CSR scheme that aimed to align business objectives with sustainable development principles. He reports that the company had a reduction of 5% in staff turnover. Another landmark study that was undertaken in 2006 by the Society for Human Resource Management (SHRM 2007:27) revealed that “CSR practices are seen as important to employee morale (50%), loyalty (41%), retention (29%), recruitment of top employees (25%) and productivity (12%)” (SHRM, 2007:27).

2.6 De Jong’s Matrix

In the introduction emphasis was given to the value systems of the employers in the design and implementation of employee relations arrangements (Kroon and Paauwe, 2013). Other regarding values determine the extent to which owners-managers take into account the well being of the employees and act in this direction. Indeed, employers need to take into account the employee relations arrangements as ends in themselves. As De Jong (2014:60) posits “other-regarding values and employee power, however, are not mutually exclusive” and combining them “allows for distinguishing between four types of employee relations arrangements”. Each of the four arrangements presented in the next figure, allows the establishment of a particular organisational climate and the implementation of HR practices that are associated with it. The former represent the nature of social exchange that takes place within an organisation, while the latter reflects the effort-reward bargain for employees.

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Lampros Sofouris 19 M.Sc. Business Studies Figure 2 - Employee relations arrangements based on combinations of owner- managers’ other-regarding values and employee power (Source: De Jong, 2014:61)

The four systems of De Jong’s matrix are: (1) low-wage system, whereby employees have low power and employers consider them a cost factor that needs to be minimised in order to maximise profit (lower-left corner) (Greenwood & De Cieri, 2007; Jones et al., 2007; Truss et al., 1997); (2) paternalistic system, whereby employees have low power, but employers take into consideration other-regarding values to a certain extent based on their individual values and norms (lower-right corner) (Greenwood & De Cieri, 2007; Purcell, 1987); (3) HRM system, whereby employees have relatively high power and employees consider them as being assets that should be supported for optimising productive capacity (upper-left corner) (Becker & Gerhart, 1996; Gooderham et al., 2004); and, (4) employee-related CSR system that gives high level emphasis to other-regarding values and strives to facilitate employment relations that take into account the interests and needs that employees consider to be most important (upper-right corner)( (Greenwood & De Cieri, 2007; Hammann et al., 2009; Hoevenagel & Bertens, 2007; Russo & Perrini, 2010).

As De Jong (2014) points out under the low-wage systems and paternalism, employees are more likely to be dissatisfied with their working conditions, due to lack of participation in the decision making process and communication. The other two systems, especially employee-oriented CSR, take employees’ interests and needs into consideration and have a greater potential to increase productivity by inspiring employees to contribute more. Employee-oriented CSR allows the employees to attain self-actualisation and turns them into valuable assets that can constitute a competitive advantage.

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Lampros Sofouris 20 M.Sc. Business Studies 2.7 CSR Benefits

Researchers have identified several benefits that CSR can confer on companies that choose to implement them. Theoretical and practical arguments in favour of CSR include: (1) the implementation can lead to increases in profits, as showing interest in the improvement of the social conditions of communities can lead to an increase of their purchasing power; (2) competitiveness increases and access to markets is facilitated more easily; (3) CSR improves a brands quality and reputation; (4) employee attraction and retention is improved; (5) implementation of CSR practices may reduce state or other authorities intervention; (6) CSR acts as a risk prevention strategy solving various problems before they arise or become too large; (7) through CSR a company fulfils its ethical obligations to the society; (8) the undertaking of social activities in terms of business, increases the sustainability of the system of free economy as it provides social benefits and thus emphasises that companies are socially responsible; (9) actions that are done within the premises of CSR may have benefits for the company shareholders (i.e., creates value and gives access to capital) as well as the other stakeholders, like the employees and the environment; and, (10) the public image of the company in an era of intense competition might improve, which will benefit the shareholders, because they will have the approval of the public or reduced social critique, and might eventually lead to higher profits and returns for them. Fernández-Feijóo Souto, 2009:40-41)

2.8 Employee-related CSR and Competitive Advantage

During the last decades companies have adopted flexible production methods and supply chains, to be able to respond quickly and efficiently to fast changing consumer demands and in this way gain a competitive advantage. This has led to supply chains that involve a large number of suppliers and service producers and increased the pressure that was being placed on companies to develop effective management systems across their operations. (Levy 1997) However, this also led to increased scepticism by the consumers and the wider public in the purchasing countries with respect to quality of the products, and the environmental impact and the working conditions that prevail in the supplying countries. As a consequence, a lot of scandals were revealed, and many companies had to face criticism and sometimes legal proceedings that led to the damaging of their reputation, which was a significant parameter of their competitive advantage. Thus, the implementation of CSR practices with respect to these parameters could aid companies in avoiding such issues in the future. (Melo, 2009:9-10)

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According to McWilliams and Siegel (2001) CSR enhances a company’s reputation because consumers associate it with reliability and honesty and tend to take for granted that products that come from such sources are of a higher quality. Roberts and Dowling (2002) go further and state that good reputation augments an enterprises sustainability and profitability over time. Thus, brand value gains significant importance and becomes a core component of corporate reputation (Fan 2005) while brand strategy presents a unique opportunity through which enterprises can trigger positive consumer perception (Martinez et al. 2007). Good reputation is usually rewarded

by all stakeholders and in the long run can lead to superior financial performance. (Melo, 2009:9-10; Moneva and Ortas, 2008; Porter and Kramer, 2006; Roberts and Dowling, 2002; Zairi and Peters, 2000; Melo 2009) From the macroeconomic point of view, the creation of intangible assets like image and reputation is the major benefit that is gained from CSR, because it is difficult to replicate by others. (Branco and Rodrigues, 2006; Hillman and Keim, 2001; Lantos, 2001; Melo, 2009:9-10; Roberts and Dowling, 2002; Schnietz and Epstein, 2005) Indeed, researchers report that there is positive correlation between brand value and CSR. (Gelb and Strawser, 2001; McGuire et al., 2008; McWilliams and Siegel, 200; Melo, 2009:9-10; Roberts and

Dowling, 2002; Schnietz and Epstein, 2005; Stanwick and Stanwick, 1998; Waddock and Graves, 2007)

Employee-related CSR practices are based on an influential theory of strategic HRM, which links a resource-based view of the firm (RBV) to the development of a sustainable competitive advantage (Barney, 1991). The inclusion of the employees in the decision making process, motivation and innovativeness in their part, and trust between them and the management can develop an organisational culture that would lead to the development of a sustainable competitive advantage. Employees reciprocate a firm in which they feel secure, respected and important. The literature on strategic management places significant importance on the human element as one of the few potential sources of sustainable competitive advantage. As innovations in technology are being imitated rapidly, they nowadays constitute only a transient source of competitive advantage (Barney and Wright, 1998; Boxall, 1998; Coff and Kryscynski, 2011; Huselid, 1995; Pfeffer, 1994; Wright et al., 1994). On the other hand, employee commitment is gaining importance as a source of competitive advantage. Thus, companies need to establish employee relations in such ways as to increase their employees’ commitment to the company. It becomes obvious that employee-related CSR is an important tool that confers benefits to the companies. Reputation is a great advantage, and it is very difficult for a company to stay uninterested. The matter of reputation has increased over the last decade, since globalisation has

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become a prioritised research topic. The trend of organisations to sell and distribute their products in many countries around the world is pushing them to the edge of implementing new characteristics, which are going to help them compete at the international level. The development of the information and communication infrastructure is more efficient than ever before, and the cost of accessing information has significantly dropped. The new technology has greatly increased the information transparency and search efficiency (Friedman, 2006).

From the literature review it becomes evident that employees play a significant role in the development of a competitive advantage and may improve the company’s reputation. The wellbeing and satisfaction of the employees within the premises of CSR schemes could aid in this direction. Thus, the primary research will try to analyse the approach the Chinese textile companies take with their employees and whether they go beyond the self-regarding values and adopt other-regarding values and the voluntary parameters of CSR. The primary research will also try to analyse the perceptions of the management with regard to the link between CSR and company reputation. The secondary research will try to analyse the working conditions that prevail in these companies and the employees’ perceptions about them. It will also try to explore how CSR best practices developed in West can be transferred to Chinese companies and how these attempts have been facilitated in the past.

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Lampros Sofouris 23 M.Sc. Business Studies 3. METHODOLOGY

3.1 Research Approach

The current research employs a qualitative approach in order to study the CSR approaches with respect to employees in the Chinese textile industry. The qualitative research paradigm was employed because the study involves the human factor and because a lot of information that could not be quantified had to be extracted from a small number of sources. Semi-structured interviews were employed as primary sources for the collection of information. Information was also gathered from secondary sources, such as policy reports, non-governmental organisations and other researchers that provide data for the CSR practices in the Chinese Textile Industry.

The aim was to present information from a variety of sources in order to assure the validity and reliability of the study through the triangulation of the data. The researcher believed that the large amount of information needed with respect to the CSR could not be extracted from the companies, unless semi-structured interviews were undertaken. Interviews in China are very difficult to facilitate. Language barriers and cultural differences on one hand, and reluctance to give information and lack of trust on the other, play major roles on whether these interviews will be productive. Nevertheless, the researcher believes that they were the only way source of primary information for the implementation of CSR in Chinese textile companies beyond the general policy documents. However, primary sources could only be employed in the collection of information through semi-structured interviews only with the managers of the Chinese textile companies. None of companies that participated in the study agreed to allow the interviewing of their employees, while the latter were totally negative to provide information without the consent of their employers. So information on the conditions that prevail in the Chinese textile industry and on the employees’ point of view could only be gathered through secondary sources, which forms a limitation of the study.

According to the definition of Creswell (1998), qualitative research employs clear methodological strategies in the investigation and understanding of social phenomena. Qualitative researchers study objects in their natural environment, trying to understand or interpret things in terms of the meanings that people attach to them (Denzin and Lincoln, 1994:2).

The first feature of qualitative research is that researchers try to understand the meaning that people attribute to phenomena in relation to their world and their experiences (Merriam, 2002). The second feature of all forms of qualitative research is that the researcher is responsible for the

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collection and analysis of data. As understanding is the purpose of such investigations, the human perception becomes responsible for the collection and analysis of data. The third feature of qualitative research is that the process is inductive in nature. Researchers, for example collect data to build concepts, hypotheses or theories instead of looking for axioms or proving hypotheses (i.e., such as the one in positivist research) (Robson 2002).

As Patton (1985) posits, qualitative research is an attempt to understand situations in their uniqueness as part of a specific context and describes their interactions within it. Qualitative research does not constitute an attempt to predict what might happen in the future, but to develop an understanding of the present situation, for example what is the meaning of a situation for the participants who experience it, what their lives are like, what is happening with them, what are the meanings they attribute to what is happening, with what life looks like in their current situation, etc. The analysis aims at in-depth understanding.

Qualitative studies, however, have some weaknesses, particularly with regard to the problem of the generalisation of findings derived from analysis of case studies or a small sample of interviews. In addition, they suffer from: (1) lack of control in their reliability and validity; (2) ambiguous phrasing of research aims and objectives; (3) the drawing of a variety of interpretative conclusions depending on the theoretical direction of the researcher; and, (4) an inability to verify the findings through the repetition of the research (Robson 2002).

Personal interviews are probably the most popular qualitative research method because of the flexibility they offer when they are undertaken, the immediacy and familiarity that the public feels towards them and their low cost. Semi-structured interviews give importance to the validity of the process, but at the same time allow for more flexibility than other methods (e.g., questionnaires) in the collection of information, due to the greater freedom of speech and the variety of responses that can be given (Robson 2002).

From the moment an individual consents to give an interview, there is stronger participation in the research effort of the interviewee. Moreover, interviews ensure direct contact between the interviewers and the interviewees, unlike other form of research (e.g., questionnaire). In addition, in the event that the respondents do not understand some questions, they have the opportunity ask for clarifications directly and allow for a smoother interview process. According to the answers given by the interviewee, the researcher has the ability to alter the order of questions, thus making more flexible the flow of the interview and allowing him/her to make additional questions on possible similar areas of interest. A competent interviewer can detect ideas, possible

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reactions, can investigate incentives and feelings that one could never do with questionnaires (Bell, 1994:143). In addition, the use of audiovisual aids facilitates the recording complex information. Moreover, the interview allows the researcher to draw on in-depth information particularly when it comes to exploring complex social processes, behaviours, attitudes, values and perceptions.

Interviews, however, have some drawbacks. In interviews there is always the danger of preconceived ideas and as Selltiz et al. (1962) note “the interviewers are human beings and not

machines, and their behaviour can have an effect on the interviewees”. It is easier to recognise the likelihood of developing prejudice than to eradicate it entirely, since it is difficult to completely avoid bias, but one needs to be aware of the problem, and constant self-monitoring can help (Gavron, 1966:159). There is always the danger that the interviewer might intervene during the interview with words or movements of the face or body. The intervention indeed does not ensure the objectivity of the interview. The researcher, during the interview, must remain neutral in reactions, without judging the views of the interviewees or guide them to a certain way of thinking and approaching the subject under consideration. Because the interview entails personal contact, the personality of the interviewer can affect directly and decisively the interview itself. For this reason, the interviewers should be experienced and prepare appropriately, in order to have the desired results. Also, the cost of interviews can be large due to the requirements in travel or recording of the materials) and they are time consuming (Bell, 1994: 50).

3.2 Research Design and Materials 3.2.1 Setting

The current research is set within the premises of the Chinese textile industry and employs five large and prominent companies that belong to the sector in order to extract the information needed with respect to CSR practices.

3.2.2 Generation of Semi-Structured Interview Guide

A semi-structured interview guide was developed for the interviews that involved six questions. The first question asks the interviewees to provide a short description of their company, with respect to its industry sector, location, products manufactured and number of employees it has. Subsequently the interviewer asks whether the company has a HR Department to see whether the company takes a more formal approach to the handling of employee issues. The third question focuses on whether the company has formal CSR schemes and what these involve. The

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fourth question concentrates on CSR initiatives that relate to the employees, and aims to investigate the processes that the company employs in the hiring, remuneration, evaluation and training of its employees. It also investigates the number of hours employees work per week, whether they are paid overtime and additional benefits they might enjoy. The fifth question tries to investigate whether the company considers CSR schemes important for its reputation. Finally, the sixth question asks the interviewees whether their company has been audited by domestic and international buyers in order to see whether the latter have taken interest in the working conditions that prevail in their suppliers and if companies have experienced any pressure from the other parts of the supply chain to become more responsible. The semi-structured interview guide employed in the research is presented in Appendix A.

3.2.3 Sampling and Sampling Strategy

Chinese companies are generally very reluctant to give information about their intra-company practices and trust plays a major role. For this reason the companies of the current research were chosen by purposive non-probability sampling. This was done because the researcher cooperated with these companies in the past, as part of his employment in the Greek textile sector from the position of buyer. So he had the opportunity to approach the individual interviewees from the five companies through personal connections. The interviewees chosen were either HR Managers or executives from the HR of the factories and could answer questions with respect to CSR practices that involve employees.

3.2.4 Methods

The five companies and the individual interviewees were approached by the researcher through personal connections that made the introduction. Subsequently the researcher communicated with the interviewees and described to them the aims and objectives of the study and gained their informed consent for their participation in it. The researcher assured the interviewees for the confidentiality of the information that would be presented, and that the details of the company and their personal information would not be made public. The interviews were conducted through Skype at prearranged times with the interviewees and lasted 30 minutes. The interview guide that was developed for the research was employed in the interviews. The interviews were conducted in English, but the researcher employed an interpreter that spoke both Chinese and English in order to clarify issues in the interviewees’ own language. Notes were kept by the researcher, who subsequently generated the write-ups that are presented in Appendix B.

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The research also presents information gathered from secondary sources: (1) the International Labour Organisation; (2) other non-governmental organisations (e.g., Sino-German Corporate Social Responsibility Project); and, (3) other researchers that have studied the Chinese Textile Industry (e.g., report published by Wang and Xiao in 2009).

3.2.5 Analysis

The analysis of qualitative data is an activity that involves all the processes of categorisation and theorisation of qualitative material in order to answer the research questions, the testing of research hypotheses or the interpretation and understanding of phenomena, processes and behaviours. The analysis of qualitative data gathered from the research field is the crucial and decisive stage from which will emerge the theorisation, the control of any issues, and the general and specific conclusions of the research project (Robson 2002).

The current analysis takes the thematic approach (Thomas and Harden, 2007) in the interpretation of the findings, which is a method for “identifying, analysing and reporting patterns (themes) within data. It minimally organises and describes your data set in (rich) detail. However, frequently it goes further than this, and interprets various aspects of the research topic” (Braun and Clarke, 2006:79).

The semi-structured interviews were employed to collect information on how the companies perceive CSR and how they implement it in relation to their employees. The interviews were very difficult to arrange and the researcher had to mobilise all his connections in the sector to gain the informed consent of the companies. The information that was gathered from the interviews was useful, but does not exhaust all the issues that are related to the CSR practices with respect to the employees. This is attributed to the language and cultural barriers between the interviewees and the researcher, as well as the reservation the interviewees felt towards a foreigner they did not know very well. The intention of the researcher was to also interview employees of these companies so that CSR practices could be assessed from both sides of the CSR equation. However, this was met with fierce opposition from the companies. So the researcher had to rely on information gathered from secondary sources in order to assess the employees’ opinion about their working conditions and CSR practices implemented by their employees. Thus, general reports from other researchers or international bodies were employed to provide at least some relevant information related to the employees’ point of view.

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Lampros Sofouris 28 M.Sc. Business Studies 3.3 Ethical Issues

There are some ethical issues that need to be taken into account, as the research involves human specimens. The primary concern of the researcher was to seek the informed consent of all the interviewees. The researcher had to assure the interviewees about the confidentiality of the information they provided and their personal and company details. For this reason the current dissertation write-up does not disclose the names of the companies or the interviewees. Moreover, the researcher assures that he has taken all the steps for the protection of this information and ethics were a primary concern throughout the research. The researcher also assures that efforts were made to avoid preconceived ideas and bias throughout the process.

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Lampros Sofouris 29 M.Sc. Business Studies 4. RESULTS

4.1 Analysis of the Findings from Primary Research

The thematic analysis of the information gathered from the semi-structured interviews indentified five thematic units.

4.1.1 Company Details and HR

All of the companies employed in the study were very large textile manufacturing companies with facilities in various regions of the People’s Republic of China and large customer base throughout the world. Their products include cotton yarn, corn-span yarn, chemical fibres, denim, knitted fabrics and died fabrics. Company A employed 84,000 individuals, Company B 16,725, Company C 20,171, Company D 7,661 and Company E 5,948 individuals. Some companies indicated that the international financial crisis had affected their economic results. For example, Company B mentioned that: “In 2012, [the] company was affected by the international economic slowdown, growth of the textile sector of China as a whole also slowed down, with a weak international demand, a slower growth of the domestic demand, rising costs of production elements, a disparity between the domestic and overseas cotton prices, etc.” Despite this environment the “company managed to maintain a sustained, healthy and steady development momentum in technical innovation, cost control, market expansion, brand building, corporate culture development, etc. However, the severe situation in the international market caused a drop of the Company’s business results for 2012, the first since its listing” (I2, Q1)

All companies studied had HR departments in their headquarters and HR officials in all their factories. Company B also mentioned that the department is staffed with approximately 25 employees and that the HR manager reports directly to the CEO (I2, Q2).

4.1.2 CSR Schemes

The next thematic unit concentrates on how and in which way the companies implement their CSR schemes. Company A had a comprehensive CSR plan that “focuses on both high-end products and emerging markets, but also on proactively fulfilling [its] social responsibilities, including energy-saving, environmental protection and sustainable development” (I1,Q3). The company has an Audit Committee

that ensures that the legal and ethical obligations of the company are appropriately fulfilled and formal schemes for employee welfare, energy and water-saving, waste management and, recycling. They also provide funds for the cultural and sport activities.

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Company B stated that they have procedures that “relate to culture, employees, environment and ethics”

and “contribute around $2 million per year for CSR projects from company funds” and that the subsidies

they receive from the government in this respect are also directed to CSR activities like the protection of the environment (e.g., energy saving and sustainability) and training and development of employees. The company also had appropriate policies and procedures for the disclosure of financial information in accordance with Stock Listing Rules of Shenzhen Stock Exchange. The Company stated that they “fully respected and protected the legal rights of [their] customers, banks, suppliers, other creditors, staffs and consumers, etc., as well as paid special attention to the active cooperation with them, in order to mutually promote the sustainable and healthy development of [the] company”

(I2, Q3).

Company C stresses that: they are “committed to maintaining a high level of corporate governance within a sensible framework with an emphasis on the principles of transparency, accountability and independence” and that “good corporate governance is essential to the success of the company and the enhancement of shareholders’ value”.

They have an Audit Committee and they publish financial reports as well as CSR reports. Their CSR schemes focus on “corporate governance, employee well-being and protection of the environment”. The

company also stress that “several initiatives have also been undertaken by [their] CEO and members of the Board, who actively support cultural and athletic events” (I3, Q3).

Company D stresses that they comply “with the applicable securities laws and regulations in and outside mainland China and makes efforts to further improve its corporate governance”. They have implemented

schemes that fulfil their “social responsibilities and strived to protect the interests of all stakeholders, serving as a leading advocate for the transformation to a green, low-carbon economy and making a positive contribution to a more beautiful China”. The company has also sponsored athletic events and promoted educational

programmes for schools. Moreover, due to the high risk environmental profile of the company, they have established risk management policies both for the protection of the employees as well as the environment (I4, Q3).

Company E stated that their “management seeks the highest quality not just for the final products and service, but in the way products are manufactured. [Their] standards of quality, social ethics and respect for the environment are always at a high level and go beyond the country’s requirements. The company has also been accredited in 2009 with ISO9001 by the TUV Rhein CERT Certification Body”. They have undertaken

programmes for energy saving, reduction of waste in the raw materials, water consumption and sewage, recycling and sustainable development. They consider the health of their employees paramount and “plan to expand [their] range of health promotion measures, to further improve the working conditions in [their] factories and the well being and health status of [their] employees”. The company has also

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encourages “the development of the individual strengths and the targeted expansion of the development potential of our employees”. Their charitable contributions in 2012 reached $400,000 (I5, Q3).

4.1.3 CSR Schemes Related to Employees Wages, Working Hours and Overtime

All companies stated that they comply with the prerequisites of the Chinese Labour Law with respect to the employees. In this respect the companies have normal working hours of 40 hours and pay overtime for any work provided by the employees beyond those hours. All companies participate in the employees’ social security schemes (e.g., basic retirement insurance, medical insurance, social insurance, and housing accumulation fund). Only Company A states that the employees receive salaries that are higher than the industrial standards, which are determined by a formally established Remuneration Committee. “Employee remuneration is determined based on their performance, experience and the prevailing industry practice. Bonuses and rewards are granted to the staff based on their performance appraisal to encourage and drive them to strive for better performance” (I1, Q4). Company

B has “formulated a remuneration management system with its principle being payment according to one’s work and more pay for more work. A post is appraised based on labour intensity, technical requirements, responsibilities, the working environment, etc.” They state that “this system fully demonstrates the three principles of internal fairness, self fairness and external fairness. It has greatly motivated the employees and enhanced the corporate management” (I2, Q4). Company C states that it provides “discretionary bonuses and share options to all eligible staff, based on an individual’s performance and company performance” (I3, Q4). Hiring, Training and Evaluation

As all companies that were interviewed have HR department, hiring, training and evaluation processes are undertaken by HR officials. Company A states that they “hire skilled as well as unskilled employees for [their] factories and train them on the job”. They also provide appropriate training

for each position, on safety and upon new product introduction (I1, Q4). Training in Company B involves management, technical skills and general knowledge, is formally planned on an annual basis, and “carried out according to requirements of [the] company’s strategic development planning, improvement of employees’ capability, performance management, employees’ career planning, etc.” They believe that “excellent human resources in the long-term [can lead] to sustained and stable development of the Company” (I2, Q4).

Company C states that they “closely monitor employee productivity and reward it” (I3, Q4). They place “heavy emphasis on the training and development of individual staff and team building, as the company’s success is