Tuesday, July 10, 2007

What Won't Improve Quality of Chinese Products

The Chinese government executed the former director of their Food and Drug Administration.  Zheng Xiaoyu accepted $850,000 in bribes from eight firms. Zheng optimized his personal income at the expense of the public and drug company customers.

The U.S. variation on this theme saw one third of publicly traded companies cheating on stock option grants at the expense of shareholders. Many corporate executives stole much more than $850,000. Yet only a handful face prosecution, much less jail time. Most issue a statement not admitting guilt, while returning ill begotten gains.

In China and America, leaders chose to optimize their pay at the expense of others. Noted management guru W. Edwards Deming said "Sub-optimization is when everyone is for himself. Optimization is when everyone is working to help the company."

Zheng's returning the bribes and confession were not enough to justify mercy. China executed him as a warning.  It came amidst a series of health scandals rocking the China brand. Canadian news called it "the strongest signal yet" that officials are serious about tackling product safety issues.

"Zheng Xiaoyu's grave irresponsibility in pharmaceutical safety inspection and failure to conscientiously carry out his duties seriously damaged the interests of the state and people. The social impact has been utterly malign."

Yan Jiangying, spokeswoman for the State Food and Drug Administration, said the case had brought only shame to the watchdog. "This kind of serious case of law breaking by a small minority of corrupt elements, as far as the entire system is concerned, really made us feel ashamed."
Small minority or systemic practice? China has a long history of huilu (payola), as do American branded multinationals.  Corporate giant Halliburton's Facilitating Payments Policy states:

It may be difficult to distinguish a legal facilitating payment from an illegal bribe, kickback or payoff.

China's action shows how ignorant they are about tackling their dangerous quality problems.  Given the execution, how many will step forward to report corruption? Dr. Deming spoke of the need to drive out fear as it distorts communication, processes and figures.

While people need to be held responsible for their illegal deeds, actions that impose fear could make China's quality problems worse. Dr. Deming asked "Are you in favor of quality?" If so, American and Chinese leaders have much to learn. That includes business and government leaders.  The Bush team has a long track record of "glitches", bumbling and instilling fear.

News reports indicated up to half of water in coolers in Beijing might be below standards. The official reponsible called it an "isolated incident". Might he be in fear for his life?

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