�Last year, China�s high-tech exports, including goods made by foreign-owned plants, accounted for 17.5% of total exports, compared with 5% in 1985. China is also outpacing other East Asian countries , according to Shahid Yusuf, head of research for development economics at the World Bank. Between 1985 and 1998, China�s high-tech exports grew 43% a year on average compared with 18% to 28% for other East Asian countries.

�As other countries feel pressure to match China�s low wages, there�s risk that wage stagnation will spread to Malaysia, Mexico and elsewhere. But there is a downside for China, too: low pay breeds disenchantment. For two decades exports have fueled China�s growth while a repressive leadership has quelled potential labor unrest. But with 18 million people coming into the work force each year, and economists predicting that unemployment and the wage gap will continue to grow for the next 10 years, tensions could increase. Few see the government lifting wages. The Communist Party is now the development party. Their whole legitimacy is built on economic development.�

A Source of Unrest at Home and�Abroad?

That guarantees continued political, social and political unrest with the destruction of subsistence agriculture and protected local industries that previously provided some elementary defences. These have been ripped to tatters by Globalization and Development. Washington�s most visible preparations for the emergencies that are bound to result is building up its the high-tech � land-borne military gear to quell local unrest throughout more and more of the world, and planning high-tech stuff in the skies to confront a major challenge that may emerge from China�s mighty industrialization on the cheap.

The entire Third World program of the Western powers from the IMF to Globalization and Deregulation was oriented towards preventing the Third World from accumulating the capital to industrialize. China seems to have devised a means of overcoming these barriers. Whether it will succeed in achieving a First World status before its internal problems close in on it, remains to be seen. But it appears to be winning the current round against Wash�ington�s strategists.

W.K.

How Corporate Law inhibits Social Responsibility

Robert Hinkley

This article (slightly abridged) was originally published in the January/February 2002 issue of Business Ethics: Corporate Social Responsibility Report under the title, `How Corporate Law Inhibits Social Responsibility -A Corporate Attorney Proposes a 'Code for Corporate Citizenship' in State Law'. The author (rchinkley@dmedia2.hypernet.com lives in Brooklin, Maine, USA.

After 23 years as a corporate securities attorney advising large corporations on securities offerings and mergers and acquisitions, it dawned on me that the law, in its current form, actually inhibits executives and corporations from being socially responsible.

RESIGNED TO CHANGE

So in June 2000 1 quit my job and decided to devote the next phase of my life to making people aware of this problem. My goal is to build consensus to change the law so it encourages good corporate citizenship, rather than inhibiting it.

The law says the purpose of the corporation is simply to make money for shareholders. Every jurisdiction where corporations operate has its own law of corporate governance. But remarkably, the corporate design contained in hundreds of corporate laws throughout the world is nearly identical. That design creates a governing body to manage the corporation - usually a board of directors - and dictates the duties of those directors. In short, the law creates corporate purpose. That purpose is to operate in the interests of shareholders.

In Maine, where I live, this duty of directors is in Section 716 of the business corporation act, which reads: `...the directors and officers of a corporation shall exercise their powers and discharge their duties with a view to the interests of the corporation and of the shareholders....'

Although the wording of this provision differs from jurisdiction to jurisdiction, its legal effect does not. This provision is the motive behind all corporate actions everywhere in the world. Distilled to its essence, it says that the people who run corporations have a legal duty to shareholders, and that duty is to make money. Failing this duty can leave directors and officers open to being sued by shareholders.

Section 716 dedicates the corporation to the pursuit of its own self-interest (and equates corporate self-interest with shareholder self-interest). No mention is made of responsibility to the public interest. Section 716 and its counterparts explain two things. First, they explain why corporations find social issues like human rights irrelevant - because they fall outside the corporation's legal mandate. Second, these provisions explain why executives behave differently than they might as individual citizens, because the law says their only obligation in business is to make money.

This design has the unfortunate side effect of largely eliminating personal responsibility. Because corporate law generally regulates corporations but not executives, it leads executives to become inattentive to justice. They demand their subordinates `make the numbers,' and pay little attention to how they do so. Directors and officers know their jobs, salaries, bonuses, and stock options depend on delivering profits for shareholders.

Companies believe their duty to the public interest consists of complying with the law. Obeying the law is simply a cost. Since it interferes with making money, it must be minimized - using devices like lobbying, legal hairsplitting, and jurisdiction shopping. Directors and officers give little thought to the fact that these activities may damage the public interest.

IRRELEVANT ETHICS

Corporate law thus casts ethical and social concerns as irrelevant, or as stumbling blocks to the corporation's fundamental mandate. That's the effect the law has inside the corporation. Outside the corporation the effect is more devastating. It is the law that leads corporations to actively disregard harm to all interests other than those of shareholders. When toxic chemicals