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CONFUCIAN TRUSTWORTHINESS AND THE PRACTICE OF BUSINESS IN CHINA

Daryl Koehn

Abstract: Confucius’s teachings fail under four headings: “culture, moral conduct, doing one’s best, and being trustworthy in what one says” (7/25).’ Trust or, more precisely, being trustworthy, plays a central role in the Confucian ethic. This paper begins by examining the Confucian concept of trustworthiness. The second part of the paper discusses how the ideal of trustworthiness makes itself felt in business practices within China. The paper concludes by raising and addressing several objections to the Confucian emphasis on trustworthiness.

It is not the failure of others to appreciate your abilities that should trouble you, but rather your own lack of them.

?Confucius

Part One: The Concept of Trustworthiness in the Confucian Ethic

Confucius contends that individuals are ethically obligated to refine themselves and to become exemplary human beings. Such refinement (jen*) requires education. Becoming an educated and influential individual depends, in turn, upon establishing trust: “Only after he has gained the trust ofthe common people does the gentleman work them hard, for otherwise they would feel themselves ill- used. Only after he has gained the trust of the lord does the gentleman advise him against unwise action, for otherwise the lord would feel himself slandered” (19/9).

At first glance, Confucius appears to think of trust in a manner not all that different from Western theorists. Trust is the trustor’s expectation of good will on the part of the trustee. Trust is something we can bestow on or refuse to other people. Trust must be gained and, if we are not careful when reposing trust, we will feel ourselves betrayed. On closer examination, though, we find that Confucius diverges from many Western theorists because he regards the virtue of trustworthiness as more important than trust per se.

To be worthy of our trust a person does not have to cater to our needs. While a good leader will try to ensure that those ruled have enough to eat and drink, people will still honor a leader in hard times: “Death has always been with us since the beginning of time, but when there is no trust, the common people will

?2001. Business Ethics Quarterly, Volume 11, Issue 3. ISSN 1052-150X. pp. 415-429

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416 BUSINESS ETHICS QUARTERLY

have nothing to stand on” (12/7). This saying suggests that we should trust as long as the good will of the trustee is evident, regardless of whether the trustee promotes our material well-being or conforms to our expectations. Virtuous per? sons, who look beyond their own narrow self-interest and who seek the spiritual as well as merely material welfare of all of their fellow citizens, merit our trust. Cultivated individuals display good will by never treating the multitude with contempt. Instead he always praises the good while taking pity on the backward (19/ 3). To excessively hate those who are not refined only provokes them to unruly behavior (8/10), and the trustworthy person seeks to avoid war and conflict (7/13).

Those who are devoted to the way of virtue take instruction from anyone who speaks well. Anyone who truly is trying to be virtuous is eager to learn, and she never dismisses what is said on account of who is speaking (15/23). The person of jen* will even speak with a madman (18/5). In general, the person of jen* is intent upon helping others realize what is good in them (12/16). He neither looks for the evil nor denounces others as evil (17/24). He hates evil, not evil people: “To attack evil as evil and not as evil of a particular man, is that not the way to reform the depraved?” (12/21). If we focus upon evil persons, we will not dis? cern opportunities for realizing the good in others. We will not merit the trust of

others because we will not be acting so as to refine people. Instead, our judg? ments will foster hatred and discord.

Many Western ethics of trust contend that we are justified in accusing those who fail short of our expectations of betrayal.2 Confucius asks us to consider instead whether we have demanded more of those we have trusted than we should

have. We ought to err on the side of making allowances for people (15/15), re- membering that individuals have different strengths. Virtue exists as a continuum. The person of jen* has good relations with others precisely because she does not expect complete virtue from everyone:

A man good enough as a partner in one’s studies need not be good enough as a partner in the pursuit of the way; a man good enough as a partner in the pursuit of the way need not be good enough as a partner in a common stand; a man good enough as a partner in a common stand need not be good enough as a partner in the exercise of moral discretion (9/30).

It is up to us to choose our partners and friends carefully. In some cases, our business associates, friends, and family members may fail to keep their promises to us or may not show us due respect. However, we should not waste our energy accusing them of being untrustworthy. It is not the failure of others to appreciate our abilities that should trouble us, but rather our own lack of abilities (14/29). The Confucian ethic sees the value of trust but always directs our attention back to our own performance and attitudes. When there is trouble, we should look inward (4/17) and bring charges against ourselves, instead of blaming or scapegoating others (5/26).

The Confucian ethic takes the energy out of our anger at others for slighting us and redirects that energy back into self-examination. This redirection is ap? propriate for several reasons. First, there is little point in getting angry with

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CONFUCIAN TRUSTWORTHINESS 417

others. If they have harmed us out of ignorance, then the correct response is to try to educate them, not to harm them in return. If they intend us harm, we should still try to dissuade them, rather than retaliate in kind. Second, even if others persist in trying to wrong us, we should not let their actions distract us from the arduous work of becoming an authoritative person. Since refinement or jen* is within our control, we always should look to our own behavior and not worry overly much about what others are or are not doing to us. Warned that Huan T’ui would try to assassinate him, Confucius retorted: “Heaven is the author of the virtue that is in me. What can Huan T’ui do to me?” (7/23). The person of jen* is free from anxieties (7/37) because he keeps his eye on what is most important: “If, on examining himself, a man finds nothing to reproach himself for, what worries and fears can he have?” (12/4). Confucius was famous for maintaining his composure in the face of insults: “To be transgressed against yet not to mind. It was towards this end that my friend [Confucius] used to direct his efforts” (8/ 5). It is our trustworthiness, not others’ machinations or venom, that should be our primary concern.

Third, it is easy to misjudge another. We may think, for example, that some? one is not a good leader because the community or corporation he leads is in disarray. Yet “even with a true king, it is bound to take a generation for benevo? lence to become a reality” (13/12). Or we may conclude we have been betrayed when a trusted party deviates from a stated plan of action. Sometimes, though, to change one’s mind is the right course. A “man who insists on keeping his word and seeing his actions through to the end . . . shows a stubborn petty- mindedness” (13/20). We cannot hope to assess accurately the “betrayals” of other people if we are not striving simultaneously to be as mindful as possible (15/8). Followers have a responsibility, therefore, to be thoughtful as their lead? ers. If those who are led are not mindful, they will not be able to grasp the wisdom in what the leader is saying and simply may dismiss her out of hand.

Finally, we humans are only too prone to self-deceit. Scrupulous self-exami- nation is necessary if we are not to err. For example, we may be inclined to dismiss younger workers as undisciplined and undeserving of our trust and re? gard. Yet, we are far from infallible. How “do we know that the generations to come will not be equal ofthe present?” (9/23). In other cases, our judgment may be motivated by bad faith. One should never oppose a lord or ruler without first making certain of one’s own honesty (14/22). If all of us would engage in rou- tine self-scrutiny, we would be more worthy of trust. We then would trust one another more fully. With more trust, we would be able to educate each other even better, thereby increasing the level of trustworthiness and engendering still more trust. If people are failing to live up to their potential and living in discord, then perhaps it is because we are failing to lead by example (13/ 4). When Confucius wanted to settle in the midst ofthe “barbarians,” one of his disciples asked, “But could you put up with their uncouth ways?” Confucius bitingly retorted, “Once a gentleman settles amongst them, what uncouthness will there be?” (9/14).

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418 BUSINESS ETHICS QUARTERLY

For all of these reasons, Confucius warns that to love trust without loving learning can lead an individual to do harm (17/8). Judging other people’s good will without simultaneously turning a critical eye on our own standard and trust? worthiness is a recipe for disaster. It does not follow that we should tolerate any and all abuse. The person of jen* is not angered by abuse, but neither does she stick around to be mistreated. She tries to choose her friends carefully, refusing to accept anyone as a friend who is not as good as herself (9/25; see also 16/4). That does not mean she chooses only completely virtuous individuals as her friends. It does mean she looks for others who are as critically mindful as she is. Her friends should be eager to learn. She advises them as best she can but stops if her advice is not being heeded. She does not ask to be snubbed (12/23) and does not waste her words on those who are incapable of improving themselves (15/8). The superior person does not look for evil but she quickly discerns it because she is thoughtful. So, “without anticipating attempts at deception or presuming acts of bad faith, [she] is, nevertheless, the first to be aware of such behavior” (14/31). Her responses to others’ acts are similarly nuanced. An in? jury should not be taken personally but neither should it be rewarded. Confucius rejects a student’s suggestion that one should repay an injury with a good turn. For if you did so, then “what do you repay a good turn with? You repay an injury with straightness, but you repay a good turn with a good turn” (14/34).

By judging and responding with a high degree of discretion, we show our? selves to be worthy of trust. In turn, we should trust those who are consistently thoughtful. There probably is no such thing as a perfect friend or colleague. However, if we use good judgment and do not expect too much of our colleagues and associates; and if our friends use good judgment as well and do not take on too much responsibility, then we can have strong, secure, and trusting relations with our fellow employees and friends.

Notice that for Confucius trust cannot be based on conformity to rules such as “Always keep promises,” “Avoid conflicts of interest,” etc. A friend might become even more trustworthy in our eyes if she were to break a promise. Sup? pose she had promised to help her best friend paint his house. On the way over, she comes across a child badly hurt in a bicycle accident. She takes the child to the hospital and as a result never gets over to his house. Although she did not keep her word, her friend might conclude she is even more deserving of his trust because she used good judgment. To take an example from business: Oskar Schindler lied about the health and productivity of the Jews he employed in order to save them. This willingness to lie to the Nazis was exactly what en- deared him to his employees.

From the Confucian perspective, there can be no algorithm for assessing other people’s trustworthiness. We must always judge the particular action, looking at the context in which the actor operated and at the relevant factors. There are some general guidelines for assessing the agent’s judgment?is the person thoughtful? Does he rush to judgment or does he stop to examine his own mo? tives and assumptions? But these guidelines are not exhaustive and never will be

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so because the person of jen* will often act in such a way as to make us com? pletely rethink our presuppositions. Although the ethical order has certain changeless injunctions?e.g., “Do not let your word outstrip your deed” (14/27) or “Be resolute” (13/27)?it is always up to the individual to decide what these injunctions actually mean in a particular context. As Aristotle would put it, the decision lies with perception or aisthesis. The person of jen* acquires authority because she is able by her actions and speech to disclose new, relevant possibili? ties to her peers. Confucius’s own discourse, for example, makes us consider what it means for our deeds to conform to our words. He berates those who keep to their word in a literal way as petty and stubborn-minded. So he clearly does not favor honoring any and all of one’s past promises or claims. What does he mean then when he urges us not to let our words outstrip our deeds?

The example given above is helpful: Although the woman failed to keep her promise to help her friend paint his house, her words did not outstrip her deeds. In volunteering to assist her friend, she spoke as a true friend would because friends seek to benefit each other. In helping the child, she acted as a humane person would. In both cases, her words and deeds reflect her commitment to jen*. Only a small person would accuse her of betraying her friend. Those who are critically mindful would see her behavior as exemplary (jen*) because her choices and actions serve to disclose what it means for words and deeds to be congruent.

Part Two: Examples ofthe Confucian Ethic at Work in Business

Suspicion of Contracts

Like the Japanese, the Chinese historically have been loathe to rely upon contracts. They often will not even read long contracts and may insist the docu- ment be shortened. A contract is merely a commercial agreement not to be taken as the gospel: “You might say they [the Chinese] sign long complicated con? tracts only as a formal confirmation that they intend to do business with you, not how they are going to conduct the business.”3 The Confucian emphasis on trust? worthiness makes reliance on contracts less attractive for several reasons. First, use of detailed contracts encourages parties to think of the contract as the basis for trust. The parties then feel entitled to accuse each other of betrayal whenever one appears to the other to have deviated from the terms of the contract. The contract thus contributes to an atmosphere of distrust. By contrast, if people enter into relationships and transactions with the understanding that they will need to work hard to accommodate their partner’s interests and to keep their own biases and self-righteousness in check, then they will have put their rela? tionship on a sounder footing. They may still decide to use some simple written document to lay out key terms or to serve as a talking document, but they will not make adherence to a contract the entire basis of the relation.

Second, reliance on contracts can prevent people from focussing on the larger picture and from being as mindful as they should be. A number of disputes

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between the Chinese and their joint venture partners have involved transfer of technology issues. The foreign partner typically accuses the Chinese side of failing to meet contractual requirements to supply land or capital, while the Chinese claim that the foreign partner has not provided the technical training the two had agreed upon. The foreign partner has generally viewed this counter-claim as a fabrication. It did provide training and the Chinese are simply trying to justify their own breach of contract. While that might be true in some cases, the person of jen* would look beyond the contractual dispute to the larger cultural and economic issues.4

The Chinese have good reason to be sensitive about technical training. The government has made a conscious decision to modernize the country by import- ing technology and then adapting it to suit their needs and their level of development. Mao Tse Tung imported “turnkey” facilities?i.e., entire facto? ries. The current policy is to build their own facilities using imported technology. In an effort to acquire technology as cheaply as possible, the Chinese have been willing to acquire slightly older hardware and software in the secondhand mar? ket. This modernization strategy obviously will not succeed if they do not also learn to use the technology. Therefore, the Chinese place great emphasis on jishu jiaoliu or technical presentations conveying technical information. They will bring in successive groups. Each group asks most of the same questions their predecessors posed. The Chinese use these sessions not only to brief all mem? bers of their team on the status of the project but also to train their people in the technology.5 They do not see themselves as “using” these presenters for their own purposes. They simply see themselves as obtaining an education that any person of genuine good will would wish to help them obtain.

Given their history of being colonized, the Chinese are understandably afraid of being exploited. Many have noted that, as late as the beginning of World War II, Shanghai’s British quarters still had signs proclaiming “Chinamen and dogs are not permitted to enter.”6 They do not want to give up hard currency and to provide land and other resources to their former masters in exchange for tech? nology they are unable to use. Nor do they want to become a dumping ground for obsolete or non-functioning software. If they cannot get the software to run, they naturally suspect that they have been duped. What Westerners view as a rather cut-and-dried contractual dispute?did the Chinese live up to their end of the bargain or not??is a major cultural issue for the Chinese. The future of China and Chinese pride and self-respect is at stake in each of these deals. Con? tracting to do business with the Chinese will never build trust unless each side consistently looks beyond the contract to discern the economic, psychological, and cultural factors at work.7 Parties will be more inclined to take this broad and

more generous point of view if they remind themselves that they may not know as much about the situation as they think they do. Contractual disputes will prove more resolvable if each side shifts its attention away from the other’s alleged betrayal and to the question of whether it has been behaving trustworthily.

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CONFUCIAN TRUSTWORTHINESS 421

The Prominence of Guanxi

The Chinese reliance on connections or guanxi is another important feature of the Chinese business scene. Does the Confucian ethic endorse such a reli?

ance? Guanxi is typically seen as an outgrowth of the Confucian emphasis on personal relations. And it is true that, for Confucius, good order requires that each person fulfill his particular role-based duties. Children should be filial. The ruler should be a ruler and a father should be a father (12/11). Persons should acknowledge their role in the hierarchy. Historically these roles were relatively fixed by custom. There was little public law to which people could appeal if the authorities abused their power. In such a system, it became vitally important to cultivate relations with powerful people in the event one needed some sort of help from an authority. Family and local ties were especially important. To this day Chinese businesspeople will often treat classmates, friends, and family mem? bers preferentially when making hiring or other business decisions.8

Public authorities, especially local authorities, continue to exercise a phe- nomenal degree of power in China. Kristoff and Wudunn argue that China still has an imperial system. The party leader is the new emperor, but local chieftains share in this absolute power:

Each lower official acts like a prince on his own turf, from the ministry to the department to the section to the team, from the factory manager to the production manager to the workshop director. The petty autocrats are often the worst, as well as the most difficult to escape. In many villages, the local chief rules even more absolutely than [the national leader], for he decides who can marry, who can get good land, who can get water for irrigation, who can be buried where. He is almost as powerful as God, but not so remote.9

Businesspeople, therefore, are well advised to cultivate guanxi. However, it would be a mistake to conclude, as Francis Fukuyama does, that China is a low-trust, family-oriented society whose members have little practice or interest in interacting with outsiders or in dealing with others on an equal basis.10 If this were true, the Chinese would never have been able to achieve their economic miracle: China now ranks first in the world in the production of coal, cement, grain, fish, meat, and cotton; third in steel production; and fifth in crude oil output; its annual growth rate has averaged more than 9 percent since 1978.11 The Chinese would never have succeeded if they had not imported their technology and had not formed numerous joint ventures with foreign companies. Nearly 10 percent of China’s industrial output comes from foreign-owned and private businesses.12

It should also be noted that the fastest-growing countries during the last de? cade?China, Japan, Hong Kong, Singapore, Taiwan, and South Korea?either have a large Chinese population or have been heavily influenced by Chinese culture. The ethnic Chinese may be the most economically successful ethnic group in the world. Although they constitute only 1.5 percent ofthe Philippine

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422 BUSINESS ETHICS QUARTERLY

population, they are responsible for 35 percent of the sales of locally owned firms. In Indonesia, they are 2 percent ofthe population but may own as much as 70 percent of private domestic capital.13 Again, these minority Chinese popula- tions would never have done as well as they did if they had refused to deal with non-family members.

While Confucianism certainly stresses the need for respect for family, Confucius never says “Trust only your intimates.” On the contrary, a trustwor? thy person willingly associates with anyone else who is eager to learn. Confucius chides his students who presume to condemn a fellow student with an undesir- able background (7/29). Moreover, filial piety is not desirable if it functions in an exclusive manner. Filial piety should lead to respect for others and for true rulers and to a general climate of trust and good will. A Confucian ethic encour? ages open rather than exclusive relations rooted in suspicion of other people. It supports guanxi with everyone.

The Chinese openness to new relations, their reliance on guanxi and their emphasis on being trustworthy are evident in their response to Western market? ing. On the one hand, the Chinese are certainly willing to buy goods from foreigners. There is not any xenophobia when it comes to purchasing from strang- ers. On the other hand, the most effective Western marketing focuses more on the company and its character and less on the product.14 The consumers want to know with whom they are dealing. This desire is a natural outgrowth of a Confu? cian ethic emphasizing relations of mutual development and refinement instead of desire satisfaction. Any company can sell a product, so pushing the product does not make the company trustworthy. Advertising of the company’s charac? ter, by contrast, may foster trustworthiness. The consumer sees that the company is self-conscious and aware ofthe effect its behavior has on consumers and other

stakeholders. Since the advertising may turn out to be deceitful, we cannot say that all such advertising is intrinsically ethical. Nevertheless, from the perspec? tive of the Confucian ethic, corporate image advertising would be more ethical than mere promotion of products because ultimately the consumer and other stakeholders are in relation with the company, not its output.

An Emphasis on Trustworthy Leaders in Polities and in Business

The Confucian value of trustworthiness both illuminates certain Chinese busi?

ness practices and enables us to critique them. Consider the question of who is a good business leader. In one respect, Confucian leadership resembles so-called “servant leadership.” There are no leaders when there are no followers. One leads best when one rules in the interest of the ruled. A ruler will be able to

accurately perceive the interests of the ruled only if he is able to live in such a way as to remain sympathetic to other people’s concerns and problems. Since so many people have been poor throughout China’s history, the Confucian ethic would recommend that a business leader live frugally and unostentatiously. The ethic does not necessarily favor absolute egalitarianism. Neither does it promote

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asceticism. As the standard of living of those one is ruling or managing im- proves, a leader can opt to live more comfortably, although virtue rather than material comfort should always be her primary concern.

The Chinese students protesting government corruption at Tiananmen Square were on sound Confucian ground. After Deng Xiaoping made his famous 1992 trip to the south and urged people to embrace capitalism even more quickly, the whole country seemed to be gripped with baijinzhuyi or money worship.15 Min- ister-level officials plus many of the leader’s children went into business for themselves. The army ran factories making clocks and refrigerators, and the Army General Staff Department became the part owner of a luxury Chinese hotel. Government officials were sometimes able to enrich themselves because they could take advantage of their contacts and their control over land to secure con? tracts or to gain a share in joint ventures. Relatives of senior Communist officials have become some of the richest people in China. The Confucian ethic would condemn those who have sold state assets to enrich themselves and would ques? tion whether such ruler-managers are true or legitimate rulers.

In addition, the Confucian ethic of trustworthiness would have us look be? yond the material successes of leadership. Modern Chinese leaders are sometimes praised for destroying the feudal system, reducing infant mortality, and extend? ing adult life span. If Hitler was right and if “success is the sole …

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