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Expanded Corporate Role
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The guideline for listed companies on corporate social responsibility (CSR) issued on Monday by the Shenzhen Stock Exchange is more than welcome, as it clearly indicates that China will get more and more serious on the issue.

By urging listed companies to better assume their duties to all their stakeholders, the document rebuffed the misconception that CSR is only a luxury for businesses in developed economies.

As a developing country, China still has to rely heavily on its comparative advantage of low labour cost. As a result, many Chinese enterprises can only reap a very thin profit margin through labour-intensive production.

However, the dire situation does not mean that domestic businesses can ignore their social responsibilities. To deal with the challenges that globalization and domestic reforms bring about, Chinese enterprises must work to serve the interests of shareholders as well as those of other stakeholders like employees, creditors, suppliers and customers.

The new guideline recommends that listed companies implement good CSR practices via good corporate governance and responsible practices.

And it also asks them to provide public reports on social and environmental performance.

Being a group of prestigious companies that have been granted the rare opportunity to raise funds from the domestic stock market, listed companies are obliged to make greater contributions to society than others. As public companies, they should not be fixated only on the profits they make, but pay more attention to the well-being of the communities in which they operate.

It is reasonable to argue that by pursuing greater profits, a company can both better reward its stockholders and create more job opportunities for other stakeholders.

But that is not sufficient.

On the one hand, as China is pressing ahead with the establishment of an all-round well-off society, domestic enterprises must invest more to improve work conditions and raise labour standards.

On the other hand, as the country is increasingly aware of and sets to fix its environmental problems, all businesses should step up their efforts to combat pollution.

Such efforts will add to their short-term costs, but are crucial to their long-term sustainable development.

By requiring listed companies to set a good example in implementing CSR, the authorities have committed themselves to a meaningful cause that will benefit both the businesses and society.

(China Daily September 28, 2006)

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