The Housing Magnate Cheung Kong - Essay Example

?Executive ment This study formulates a research proposal for the housing magnate Cheung Kong that could place the firm on the leading edge of corporate social responsibility. The proposal is based on a belief that the government and political climate of Hong Kong is much influenced by its business environment and its industrial leaders and that Cheung Kong, a major building, project management and investment business, could undertake a project of subsidized housing in partnership with the government that would continue Hong Kong's economic growth while also pursuing a determined plan of distributive justice among its marginalized elderly population for housing. Research Problem Statement Hong Kong well illustrates patterns of a distinct Asian business model that has resulted in the growth and influence of large gargantuan business enterprises. The Hong Kong housing market is dominated by a hand full of these large companies that include Cheung Kong, Henderson Land, and SHK PPT among others. The growth of Cheung Kong, for example, underscores specific ways of pursuing business and industrial growth based on certain Asian principles and management styles. These styles project paternalistic family control and trust and the respectful acceptance of authority. Pyramid structures of benefit permeate the leadership hierarchy of these Asian firms along with family cross-shareholdings of subsidiary companies. Hong Kong’s rapid economic growth is described by Xiabin et al (2004) as a period of economic restructuring that has seen the country evolve from a manufacturing center to a business, commerce and finance center, with most of its working force moving into the service industries. Influenced by processes of economic liberalisation, globalization, and government downsizing, the restructuring has resulted in a net rise of the middle-income population of Hong Kong, but since 1971 there has been a profound drop in the sharing of income by the bottom households while the income of the top 30% has shown a continual increase in income share (pp. 447-451). The authors note "there has been a steady exacerbation of income inequality in Hong Kong over the past 35 years" (p. 452) and, "There is no evidence of wealth trickling down from the top to the bottom" (p. 457). Nor have adequate services been expanded for the bottom poor. Xiabin et al (2004) emphasize the unsympathetic government policy of minimum intervention as a major factor in the ongoing policy of inequality. Resources provided for social welfare are sparse in comparison to resources for the more favored private sector. The authors propose the government avoids policies ameliorating income inequality in order to maintain "business-friendly" policies toward private interests and avoid a "dependency culture" that would discourage unemployed people from working and affect economic growth in negative ways. Despite a sterling economic growth that has made it one of world's largest centers of concentrated among the world's wealthiest economies, Hong Kong demonstrates the highest degree of economic disparity among its seven million citizens. The United Nations report Hong Kong as having the highest Gini coefficient of 43.4, a measure of economic disparity between the rich in the poor, among all Asian cities (Oxfram). As of September, 2010, 10.2% of working families were living in poverty in Hong Kong (Oxfram). The Hong Kong Council of Social Service reported recently, October, 2010, that 1.26 million of the 7 million citizens were living in poverty, nearly one/fifth of the population (Wong, 2010). The contrast stands stark and grim where three million of seven million citizens live in public housing. Under current public policy, the gap between rich and poor in Hong Kong is steadily increasing. In 1997, The Canadian Magazine Maclean's highlighted the nearly 100,000 Hong Kong displaced workers living in the small spaces or "cages" where larger spaces are divided into small cubicles with wire (Wood, 1997). Web blogs and YouTube videos today provide stark evidence of the over 100,000 who continue to live in such confines, lately described as cramped metal cages similar to chicken coops (Steward and Chung, 2009). In August, 2010 Cheung Kong Holdings reflected a successful rebound over the world's economic regression. Hutchison Whampoa Limited, the company’s largest conglomerate, showed the highest jump in two years of its stock price on the Hang Seng stock exchange market rising to HK$58.20 and giving Cheung Kong an overall gain of 3.9 percent, allowing net income of HK$11.9 billion (Wong, 2010). The Cheung Kong Group, under the stewardship of its founder and director Li Ka-shing, is "the leading Hong Kong based multi-national conglomerate" with operations in 53 countries and a world staff of 240,000 employees (CKH). Its investments extend into five areas: an international operation of ports, telecommunications over 3G technology, property and hotel development and management, major retail holdings, and a Canadian energy company. Under Li Ka-shing and his two sons Victor and Richard Ka-shing, Cheung Kong, as a major property development and investment company, has over the years displayed a win-win acquisitions and merger and selling campaign. The majority of the company's revenue derives from its vast holdings of real estate ventures in Hong Kong and China. The stark contrast between the accomplishments of Cheung Kong Holdings and the elderly and poor of Hong Kong define the problem which this proposal seeks to address. Research Objective The research objective is to propose a model of corporate social responsibility that involves a Public Private Partnership (PPP) enterprise in the subsidized housing industry of Hong Kong as undertaken by the country’s leading retail housing business in consort with the government. Major concerns include building a mindset of civic responsibility for impoverished citizens amid a culture laissez faire of determined economic progress and to develop management strategies that avoid criticisms of collusion between government and private industry and that will instead promote values of civic responsibility. Literature Review A research proposal to Cheung Kong involving CSR must incorporate an appreciation and understanding of the company itself, and express an understanding of its business and leadership practices. Today Cheung Kong stands as a company of phenomenal growth and importantly as a gateway for other industries, from the West and elsewhere, to enter the business climate of Mainland China. The business practices and structure of Cheung Kong emerged from both Eastern and Western experiences. This literature review will draw out important facts the history of Cheung Kong and its founder, Li ka-Shing. It will discuss Corporate Social Responsibility (CSR), the theories of leadership and management, a concept of the Confucian Firm, and the how the marginalized elderly of Hong Kong can become valuable stakeholders in the proposal of building a housing project for their benefit and the benefit of Hong Kong. There are many theories of Corporate Social Responsibility (CSR). It is generally accepted today as a function of good business practice. Policies are adopted in favor of obtaining long term profitability. Milton Friedman's classical arguments of free market economies had discounted CSR as conflicting with the main goal of the corporation, which was to maximize corporate profit for the stockholders. Today, strategies of CSR must be economically efficient and not go against the profit making ability of the corporation, while maintaining environmental and ethical concerns as necessary corporate pursuits. Social theorists such as Betty Yung, base CSR on distinct concepts of social justice. Yung's concept of social justice rests upon a proper distribution of resources among the different groups of stakeholders (p. 1). She explains that the concept of social justice in Hong Kong may be unique because it is the meeting place where East meets West (p.3). Jung provides a history of government housing policy over the recent decades and explains how it was dictated by both rational concern and market forces. She also discusses concepts of Confucian social justice as an important consideration for pursuing business and social policy in Hong Kong (p. 79). An understanding of Confucianism would perhaps provide the best background upon which to view the leadership style and practices of Li-Ka Shing, the founder and chief executive of Cheung Long. Ip discusses the values and limits of Confucianism (2009). Perhaps the most important consideration is that "Confucian ethics entails _familial collectivism", meaning that obligations within and for the family outweigh ethical concerns of individuals (Ip, p. 464). Upon this background Ip draws out the three core values of Confucian ethics. These are compassion (ren), sense of moral rightness (yi) - what is appropriate, and protocol (li), norms, etiquettes. The sense of zhong shu obligates people to develop their moral self in the course of helping others develop their moral selves, entailing "a positive act of moral engagement in others' moral welfare and development” (p. 465). This could be seen as an Eastern version of the Golden Rule. Importantly, Junzi has all recognize high moral virtues in the ruling elites and the intelligentsia. Together these concepts are said to oppose the egoistic sense of the individual as portrayed in the west. Filial piety and harmony become important virtues underlined in a history where emperors were called "Father Kings" (p. 466). There is a hierarchical structure of human relationships, status based, that dominates over the equality of persons. Allegiance and obligation to the paternal head are deemed of upmost and automatic importance. Ip analyzes what a perfect Confucian Firm would be and then underlines its faults. The perfect Confucian Firm, outside of reality, provides "fair salaries and wages, and a safe and healthy work environment for its employees...be a law abiding corporate citizen, help promote social good and be protective of the environment" (Ip, p. 468). More functional are the features of Confucian Firm practiced in the real world that Ip gels from other writers. These features are collectivism, particularism, paternalism, and authoritarianism. Particularism bases merit not on ability but on personal relationship. Affectionism is an expression of particularism, where guanxi measures the importance of social connection, expressed in cronyism, bribery, and nepotism. This practice leads, of course to corruption, the violation of fairness and inefficiency. Authoritarian paternalism leads to suppression of subordinates and arrogance, and anti-female policies, creating malfeasance and above all, inefficiency. The Western model of Confucian leadership would perhaps be the transformational leader or manager. This type of leader is seen to have 'charisma' and perhaps represent a father figure, a savior, or a king. They influence others with self-confidence that goal achievement is possible. The leader differs from the manager in that the leader inspires and motivates with a vision and encourage change. Managers organize, control, and solve problems and encourage order and predictability (xxx 308-309). The transformational leader was substantiated in the 1980s and was made to move aside in the face of globalization and improved communication during the 1990s (309). Going into the new century a new 'post-heroic leadership' model was suggested that defied the overall one leader at the top. This proposal can be based on certain facets of the transformational leader tied while accepting the Confucian view that Asian firms are "connected by cross-shareholdings and pyramid structures" (Tipton, 2007). Hofstede's classical structure of national cultures enables an appreciative view of the Confucian Firm (Torrington et al, 2006, pp. 697-699). Collectivist persuasion, as opposed to individualism, places a wider social responsibility that supports the collective group (the family). Power distance recognizes the hierarchical status based structure and also places belief in the transformational vision of the leader into the unknown. The hierarchical structure is at once patriarchal and autocratic. Li Ka-shing has become a powerful and influential figure with a membership seat among the world's accomplished billionaires. He is one of the most respected and revered men in Hong Kong and Asia. Born in China of academic parents in 1928, Ka-shing has had a mythical background after arriving to Hong Kong in 1940. He rose through factory and sales work and demonstrating intellect, diligence and a capacity for hard work, he became owner of his own firm manufacturing plastic flowers. Li Ka-shing’s rise demonstrated well the Confucian model. His early work was for a wealthy uncle and he then married the boss's daughter. With additional funds from his mother-in-law he was able to build up his own company (Studwell, 2007, p. 54). His ascendency may represent a Confucian model, but it is just as well a Western and worldwide model, too. By the 1950s, developing international import and export contracts, Li Ka-shing became the "King of Plastic Flowers" and soon moved into real estate (Chan, 2008). When fleeing Western businesses begin to leave large properties in Hong Kong during the 1967 China Cultural Revolution, Li Ka-shing moved in, buying property at basement prices. His company Cheung Kong went public in 1972 and he became the island's largest landlord by 1979. Li Ka-shing proved that he was a singular individual of vision and strong fortitude – transformation leader operating under the Confucian window. That same year in 1979, Li Ka-shing finally broke into the British commercial hold on Hong Kong, buying the large British export import company, Hutchison Whampoa Limited. He led the company from its debt ridden state to the major multi-conglomerate operation it is today (Chan). Li Ka-shing’s rise has not been a fairytale. Many writers have criticized the ascendency of Cheung Kong, accusing Li of cronyism, nepotism, and even undemocratic principles (Thompson, 2004). It is as if these writers have forgotten that these practices also have firm expression in the West. Others have noticed the uniqueness of the Chinese business style and have approached it in ways for increasing understanding. Mitchell identifies the importance of reputation and trust among the Chinese business elites (1995). She underscores that although professional management is duly practiced, it is the extended family network that obtains important credit and information. “[A] degree of family control is always maintained that will allow the kind of quick decisions that first made Li rich” (p. 378). Li has built a great reputation and his investments are meticulously followed and supported throughout the worldwide community of investors and the elite Chinese. He is the patriarchal transformation leader of vision and control. As a major developer, he is aware of all the facets of building and has at his call, advisors and experts dealing with all aspects of development. The proposal asks him importantly to become a civic leader to influence an otherwise slowly moving political climate. A Public Private Partnership is basically a financial arrangement by which public or government bodies seek to shift the burden of risk on large public works projects to private firms (Cheug, 2009a). The concept initially evolved during the Thatcher administration in which the mantra was to make government smaller and to invigorate and trust the initiative of private industry. Guidelines were developed by private agencies under which the government, in effect, pays a private firm to take over a public works or costly infrastructure project. The government provides a contract to the firm to operate the project over a course of time enabling the firm to recover its expenses plus profit. After a number of years, the project is then transferred to government control. PPPs have served in the UK to build hospitals and schools and also have been used in Australia for large infrastructure projects. The concept offers several advantages, notably the transfer of risks and also the use of the "private sector’s expertise, innovation, motivation and experience" (Cheung et al, 2009b, p. 93). Disadvantages may arise from problems caused by indirect management, public perception of collusion which may see more benefits accruing to the private sector, government indecisiveness, and proper coordination of government jurisdictions (Cheung 2009). Hong Kong has experienced PPP projects and has charged an Efficiency Unit responsibility to research develop guidelines (Cheung). Studying several Hong Kong cooperative private public projects, Cheung identified the Cross Harbour Tunnel, opened in 1972, as one of the most successful projects. The 1993 Western Harbour Tunnel was criticized for increasing tolls and the Asia World Expo opened as a PPP project in 2003. Cheung's study cautions a "thorough investigation into the feasibility of using the model". The success of PPPs depends on undertaking important foundation work and incorporating best practice lessons learned from other international jurisdictions (Cheung, p. 19). The Research Design The housing project for the marginalized elderly should begin with a consortium or project committee that consists of building, design, and budget specialists from Cheung Kong and the HKSAR, including representatives of the Hong Kong Housing Authority. The first task is involves using Cheung Kong media holdings and those of Tom.com to affirm Li Ka-shing as the leader symbol representing the high moral virtues instilled in the Confucian principle of junzi. Tom.com is the mega-media enterprise operated by Li's son Richard that reaches Mainland China through television services and the internet. This public relations campaign will ready the public in Hong Kong for accepting the moral rightness (yi) of social welfare for the marginalized elderly and the compassion (ren) it demonstrates under Confucian ethics. In a leadership role, the research design poises Li Ka-shing leading Cheung Kong to form a partnership with HKSAR to develop a housing project for Hong Kong's marginalized elderly. As the project is developed, a functional brief is formed addressing the need. The brief will incorporate feasibility studies on land granted from HKSAR and the results of foundation work on the land. Questions will be addressed as to budget and costs and on how to identifying the elderly in need as stakeholders. The best subsidized housing scheme as developed by the Hong Kong Housing Authority will be appraised and adapted to the project. From a concept budget, a firm budget is designed over the scheme design. These processes are followed by execution of construction and then management. The PPP agreement will cover management for a number of years by Cheung Hong as it recovers expenses and some profit. The goal is to ensure a good transfer to government operation invigorating the concept Confucian yi, that which is appropriate. Corporate social responsibility entails what is economically feasible. The project proposal here emphasizes the concept of social justice expressed as a Confucian value by a Cheung Hong, a leading firm in Hong Kong. References Chan, A.B., 2008. Creating wealth in twenty-first century China: Li Ka-shing and his progenies. Asian Affairs, 32(4), pp. 193-210. Cheung, E., 2009a. Common problems holding back the development of PPP in Hong Kong. Department of Building and Real Estate. The Hong Kong Polytechnic University, 14 February. Cheung, E., Chan, A.P.C. & Kajewski, S. 2009b. Reasons for implementing public private partnership projects: Perspectives from Hong Kong, Australian and British practitioners. 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