34Vol. 17 No. 2ISSN 0872-84969 7 7 0 8 7 2 8 4 9 0 0 7ISSN 0872-8496EURO ASIA JOURNAL OF MANAGEMENT 34 Vol. 17 No. 2DECEMBER 2007Stakeholders’ Theory and Corporate SocialResponsibility in ChinaThe Ethics of Tax Evasion: A Survey of Macau OpinionAn Exploratory Study on Public Service Values in MacauCHINA BUSINESS PRACTITIONERS’ CORNERA Comparison of Casino Credit Issues in the US,Australia, Singapore and MacauINTERVIEWS WITH THE GURUSBY JORGE NASCIMENTO RODRIGUESThe Two Oldest Matrices of World Discoveries:Portuguese and Chinese Historical Linkage

AIM AND SCOPE Euro Asia Journal of Management (EAJM) is devoted to provide a forum for discussion over a wide range of management issues defined in the broad sense. However, particular emphases are placed on the advancement of management theory and practice in Asia, especially China, and the European continent. Published twice yearly by the Macau Foundation, EAJM welcomes submissions in the following areas: Accounting and finance, information technology management, strategic management, cross-cultural and international management, organizational behavior and learning, human resources management, public sector management, corporate governance, quality management, and tourism management. EAJM will include scholarly peer-reviewed papers in the form of empirical studies, qualitative inquiries, case studies, as well as critical literature reviews. From time to time, special sections are opened for debates, interviews, and commentaries. EDITORIAL BOARD Nelson António, Instituto Superior de Ciências do Trabalho e da Empresa, Portugal Virgínia Trigo, Instituto Superior de Ciências do Trabalho e da Empresa, Portugal Carlos Noronha, University of Macau, Macau Tiffany Lam, University of Macau, Macau EDITORIAL ADVISORY BOARD Tetsuo Abo, Teikyo University, Japan Douglas Allen, University of Denver, USA Robert Boyer, Centre D’etudes Prospectives D’economie Mathematique, France Eduardo Gomes Cardoso, Instituto para o Desenvolvimento da Gestão Empresarial, Portugal Su Mi Park Dahlgaard, Linköpings University, Sweden Harukiyo Hasegawa, University of Sheffield, UK Hideo Inohara, Sophia University, Japan Jorge Correia Jesuino, Instituto Superior de Ciências do Trabalho e da Empresa, Portugal Ekkehard Kappler, University of Innsbruck, Austria Martin Kenney, University of California at Davis, USA Mário Murteira, Instituto Superior de Ciências do Trabalho e da Empresa, Portugal Terutomo Ozawa, Colorado State University, USA Sung Jo Park, Free University of Berlin, Germany Tanya Phonanan, ASEAN Human Resource Management Federation & Thompson Television Thailand Wan Ahmad Shaffie, Malaysian Association of Human Resources Management & Menara Maybank Malaysia Hannes Streim, Bochum University, Germany Kay-Chuan Tan, National University of Singapore, Singapore Robert Terpstra, University of Macau, Macau Ingemar Torbiörn, University of Stockholm, Sweden Tadashi Umezawa, Toyko Keizai University, Japan Gerald Vinten, European Business School, UK Youmin Xi, Xian Jiaotong University, China Oliver Yau, City University of Hong Kong, Hong Kong Shuming Zhao, Nanjing University, China Note: The views of articles may not be those of the Journal.

34 Vol. 17 No. 2, December 2007http://www.geocities.com/eajm2002CONTENTSIndexed in Ulrich’s Periodicals Directory andCabell’s Directory of Publishing Opportunities in Management1. Stakeholders’ Theory and Corporate Social Responsibility in China ................................... 109-121Nelson Santos António, ISCTE Business School, Instituto Superior de Ciências doTrabalho e da Empresa, Portugal2. The Ethics of Tax Evasion: A Survey of Macau Opinion .......................................................... 123-150Robert W. McGee, Andreas School of Management, Barry University, Miami Shores, USACarlos Noronha, Faculty of Business Administration, University of Macau, MacauMichael Tyler, Andreas School of Management, Barry University, Miami Shores, USA3. An Exploratory Study on Public Service Values in Macau ...................................................... 151-166Zenon Arthur S. Udani, Faculty of Business Administration, University of Macau, MacauJavier Calero Cuervo, Faculty of Business Administration, University of Macau, MacauCHINA BUSINESS PRACTITIONERS’ CORNER4. A Comparison of Casino Credit Issues in the US, Australia, Singapore and Macau ............ 167-176Yang Ling, Beijing Normal University, Zhuhai Campus, ChinaINTERVIEWS WITH THE GURUSBY JORGE NASCIMENTO RODRIGUES5. The Two Oldest Matrices of World Discoveries: Portuguese and Chinese Historical Linkage ........................................................................................................................................ 177-185Jorge Nascimento RodriguesTessaleno Devezas, University of Beira Interior, Covilhã, Portugal

www.ift.edu.mo The Institute For Tourism Studies (IFT), the first WTO-Themis TedQual certified institution in tourism education, is a public institution of higher education, offering tourism, heritage, hospitality and tourism event management degree programmes, as well as professional training. The mission of IFT is to become a higher education institution of choice for tourism and hospitality studies with European characteristics. Not only for the benefits of Macao, but also for the Asia Pacific region, IFT equips students with professional knowledge and technical competence in preparation for their future leadership responsibilities in the industry. Colina de Mong-Há, Macao, China Tel : (853) 2856 1252 Fax : (853) 2851 9058 registry@ift.edu.mo The Tourism College offers Bachelor Degree and Higher Diploma Programmes in: Tourism Business Management Heritage Management Hotel Management Tourism Event Management TOURISM COLLEGE

Euro Asia Journal of Management Issue 34, Vol. 17, No.2, December 2007, pp.109-121 STAKEHOLDERS’ THEORY AND CORPORATE SOCIAL RESPONSIBILITY IN CHINA ∗ NELSON SANTOS ANTÓNIO1 ABSTRACT This article summarizes the major features and different schools of thought surrounding concepts such as corporate governance, corporate social responsibility (CSR) and private-public partnership (PPP). Then, an account of the current situation of CSR development in mainland China is provided. The salient features of CSR in China such as the central government’s initiative of developing the harmonious society and eventually the harmonious world are also discussed. THE PROBLEM ‘The company belongs to people who invest in it – not to its employees, suppliers, nor the locality in which it is situated.’ Dunlap, Albert J. in ‘How I Saved Bad Companies and Made Good Companies Great’, New York, Time Books, 1996. What Dunlap had in mind was that the employees, the suppliers, the clients, the government and the spokesperson of the community have no say in the decisions that ‘the people who invest’ ∗ This article is a part of the research project PTDCA/AFR/72258/2006 ‘Entrepreneurial Configurations in Africa and China: A Study in Four Countries’ sponsored by the Science and Technology Foundation (FCT) of Portugal. 1 ISCTE Business School, Instituto Superior de Ciências do Trabalho e da Empresa, Av.das Forças Armadas, 1649-026 Lisboa, Portugal. Email: nelson.antonio@iscte.pt

Nelson Santos António may take. And that the true decision-makers, the investors, have the right to dismiss out of hand, and to declare irrelevant and invalid any postulates which such people may make concerning the way they run the company. Dunlap’s message is not a declaration of intent, but a statement of fact. He takes for granted that the principle it conveys has passed all the tests which economic, political, social, and any others realities of our time have set to examine its viability. It has by now entered the family of self-evident truths, which serves to explain the world while themselves needing no explanation. Should we accept this ‘truth’ without any explanation? Or are there other ways to govern the corporation? For example, the advocates of corporate social responsibility (CSR) contest the viability of short term economic assessment of business in isolation. Instead, they call for a broader, long term perspective encompassing the range of economic operations. CSR implies the ideal of a win-win situation for all stakeholders and the insistence that the market forces, under proper guidance, may bring about a sustainable future for individual companies as well as the entire globalized world. Who will provide the proper guidance? STAKEHOLDER THEORY AND CORPORATE GOVERNANCE In the 19th century, huge modern corporations emerged in the United States and the public corporation became the dominant business structure. Adolf Berle and Gardiner Means voiced concern over the power of management in these big corporations with widely dispersed ownership; ‘to Adam Smith, private equity meant individual or few partners actively engaged in and relying in large part on their own labor and their immediate direction. Today we have tens and hundreds of thousands of owners and consumers combined in single enterprises’ (Berle & Means, 1932). With the separation of ownership and control in a modern dispersed ownership corporation, shareholders may incur agency costs as managers find it easy to pursue their own interests rather than those of the shareholders. In contrast, Alfred Chandler Jr. saw the growing concentration of power among the professional managers in a positive light; ‘in many modern business enterprises neither banks nor families were in control. Ownership became scattered. The stockholders did not have the influence, knowledge, experience, or commitment to take part in the high command. Salaried managers determined long-term as well short term they dominated top as well as lower and middle-management’ (Chandler et al., 1997). Modern corporations seem to have performed well with internal governance. The term ‘corporate governance’, although now commonplace, was rarely encountered before the 1990s. A few years ago the subject of corporate governance was little discussed certainly not under that name. Before Harold Wilson’s book ‘The Governance of Britain’ (Wilson, 1976), the word ‘governance’ was not in popular usage. Unfortunately, its subsequent rapid adoption has not been accompanied by consistent usage. Different writers vary widely in where they draw the boundaries of the subject. There is some doubt what ‘corporate governance’ 110

Stakeholders’ Theory and Corporate Social Responsibility in China means. Tricker (1984) defines it as ‘the process by which companies are run’. The Committee on Financial Aspects of Corporate Governance (Cadbury, 1984) said that, ‘corporate governance is the system by which companies are directed and controlled’. For Morck et al. (2005), corporate governance is an ongoing challenge in all countries – developed and developing. In European, Latin American and Asian countries, whose corporate sectors are mainly controlled by a few wealthy families, the key challenge is often finding competent sons. In state-owned enterprises, a similar problem of finding a politically loyal top manager who is also talented arises. Russia and much of Eastern Europe seem to be rapidly evolving towards oligarchies of the Latin American sort, where ‘idiot sons’ are a key corporate governance problem. The ‘idiot son’ problem, more generally, occurs whenever corporate power is assigned on blood or loyalty, rather than merit. And according to them it is too soon to tell whether China too will follow this path. In sum, corporate governance worries about the way the enterprise is managed in a long term perspective. In the narrowest sense, the term may describe the formal system of accountability of senior management to the shareholders. At its most expansive sense, the term is stretched to include the entire network of formal and informal relations involving the corporate sector and their consequences for the society in general. The economic debate concerning corporate governance is often posed in terms of a potential dilemma between strong direction and accountability, there being a tension in the paradox that assets are most efficiently valued when information to shareholders is maximized, whilst operational efficiency suggests that shareholders delegate surveillance and decision-making to managers. The absence of any real consensus on the definition of ‘corporate governance’ in the rapidly growing literature on the subject is symptomatic of the whole debate on governance reform. It is a debate in which the participants have entirely different analyses of the problem and therefore offer markedly different solutions. Fundamental disagreements cover key questions such as, ‘does the effectiveness of a firm’s governance arrangements have implications which go beyond those for its shareholders and, if so, does this justify public policy intervention?’ ‘Should any such intervention be concerned with distributional issues as well as those of efficiency?’ ‘What is the nature of the shareholder’s contractual freedom, as a resource owner, to maximize his financial reward from such resources?’ Corporations must be able to develop and implement their respective competitive advantages, to raise capital, to assemble and redeploy resources to that end, and at the same time, to meet the expectations of their shareholders, employees, suppliers, creditors, customers, communities and society at large. Corporate governance comprehends that structure of relationships and corresponding responsibilities among a core group consisting of shareholders, board members and managers designed to best foster the competitive performance required to achieve the corporation’s primary objective: the survival. In sum, corporate governance is an ongoing challenge in all countries – developed and developing, and the challenge is to make sure that the people who decide how to use a market economy’s resources are competent, honest, and not too lucky that their decisions serve the people as whole. 111

Nelson Santos António In the last two decades the stakeholder approach to understanding the firm in its environment has been a powerful tool, intended to broaden management’s vision of its role and responsibilities beyond the profit maximization function to include interests and claims of non-stockholding groups. Stakeholder theory attempts to articulate a fundamental question in a systematic way: which groups are stakeholders deserving or requiring management attention, and which are not? The stakeholder theory of the firm is used as a basis to analyze those groups to whom the firm should be responsible. As described by Freeman (1984), the firm can be described as a series of connections of stakeholders that the managers of the firm attempt to manage. Freeman’s classic definition of a stakeholder is ‘any group or individual who can affect or is affected by the achievement of the organization’s objectives’. Thompson et al. (1991) define stakeholders as groups ‘in relationship with an organization’. Windsor (1992) points out that stakeholder theorists differ considerably on whether they take a broad or a narrow view of firm’s stakeholder universe. Freeman and Reed (1983) recognized early on that there would be serious differences of opinion about broad versus narrow definitions of ‘who or what really counts’. Their broad definition of stakeholder as an individual or group who ‘can affect the achievement of an organization’s objectives or who is affected by the achievement of an organization’s objectives’ is virtually identical to Freeman’s (1984) definition ‘any group or individual who can affect or is affected by the achievement of the organization’s objectives’. This is one of the broadest definitions in the literature, for it leaves the notion of stake and the field of possible stakeholders unambiguously open to include virtually everyone. In this definition the basis of the stake can be unidirectional and bi-directional – ‘can affect or is affected’ – and there is no implication or necessity of reciprocal impact, as definitions involving relationships, transactions, or contracts require. Excluded from having a stake are only those who cannot affect the firm (have no power) and are not affected by it (have no claim or relationship). Stakeholders are typically analyzed into primary and secondary stakeholders. Clarkson (1995) defines a primary stakeholder group as ‘one without whose continuing participation the corporation cannot survive as a going concern’ – with the primary group including ‘shareholders and investors, employees, customers and suppliers, together with what is defined as the public stakeholder group: the governments and communities that provide infrastructures and markets, whose laws and regulations may be obeyed, and to whom taxes and obligations may be due’. The secondary groups are defined as ‘those who influence or affect, or are influenced or affected by the corporation, but they are not engaged in transactions with the corporation and are not essential for its survival’. An important question that has been addressed is to which groups do managers pay attention? Mitchell et al. (1997) develop a model of stakeholder identification and salience based on stakeholders possessing one or more of the attributes of power, legitimacy and urgency. Agle et al. (1999) confirm that the three attributes do lead to salience. Thus, we might anticipate that firms would pay most attention to those legitimate stakeholder groups who have power and urgency. In practice, this might mean that firms with problems over employee retention would attend to employees issues and those in consumer markets would have regard to matters that 112

Stakeholders’ Theory and Corporate Social Responsibility in China affect reputation. Stakeholder groups may also become more or less urgent; so environmental groups and issues became more urgent to oil firms following the Exxon Valdez oil split (Patten, 1992). CORPORATE SOCIAL RESPONSIBILITY IN THEORY The concept of Corporate Social Responsibility (CSR) is part of the field of business ethics, and it has frequently been expanded, discharged, supplanted and reintroduced by a great number of scholars, activists and companies. But what is meant by CSR? Responsibility for what and to whom? And who is calling for firms to be socially responsible? The need for companies to undertake activity that might be regarded as socially responsible has been discussed in the literature and has been a topic of academic study for decades. Cannon (1992) discusses the development of corporate social responsibility via the historical development of business involvement leading to a post-war re-examination of the nature of the relationship between business, society and government. He identifies that the primary role of business is to produce goods and services that society wants and needs; however there is inter-dependence between business and society in the need for a stable environment with an educated workforce. Cannon quotes Lord Sieff, the former chairman of Marks & Spencer, ‘Business only contributes fully to a society if it is efficient, profitable and socially responsible’. Similarly, Wood (1991) states that ‘the basic idea of corporate social responsibility is that business and society are interwoven rather than distinct entities’. It has become a standard observation that the waning of nation states and intergovernmental organizations has virtually left unattended huge tasks of social and environmental protection. In response, it is the basic drive of CSR to find ways how the private sector may take on part of these tasks. So, basically the term ‘corporate’ indicates that the agency of CSR initiatives lies in the private sector. Governments do take part in a great number of CSR projects, but they serve the role of facilitators rather than regulators. It is our opinion that, the stakeholder model offers the most viable identification of the object of CSR. In 1984, Edward Freeman published Strategic Management: A Stakeholder Approach, which has become the backbone of subsequent and very extensive elaborations of the stakeholder model. As we saw before, Freeman defines stakeholder as ‘any group or individual who can affect, or is affected by, the achievement of a corporation’s purpose’, and offer the following list of possible stakeholders ‘employees, customers, suppliers, stockholders, banks, environmentalists and government’. However, this list is by no means conclusive, as it is the organization and its context in each particular case that determines who is a stakeholder and what their stakes are. Freeman (1984) maintains that in principle there is no contradiction between strategy and ethics; taking all stakeholders into consideration is at the same time the wise thing to do and the right thing to do. Seen from the level of the individual company, CSR can be understood as 113

Nelson Santos António part of risk management; that is, taking different strategic measures to secure survival of the company in the foreseeable future. This is part of the responsibility of the management towards the shareholders to begin with, remarks Freeman, and the best way to do this is to strife for a model of operation that creates value for all stakeholders, who might otherwise in the long term jeopardize the survival of the company. The area defined by advocates of CSR increasingly covers a wide range of issues such as plant closures, employee relations, human rights, corporate ethics, community relations and the environment. For example, CSR Europe, a membership organization of large companies across Europe, in its reporting guidelines looks at the following areas: Workplace (employees); marketplace (customers, suppliers); environment; community; ethics and human rights. Whether or not business should undertake CSR, and the forms that responsibility should take, depends upon the economic perspective of the firm that is adopted. Those who adopt the neo-classical view of the firm would believe that the only social responsibilities to be adopted by business are the provision of employment and payment of taxes. This view is most famously taken to the extremes of maximizing shareholder value and reflected in the views of Milton Friedman (1962); ‘few trends would so thoroughly undermine the very foundations of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their shareholder as they possibly can’. The expression ‘from Friedman to Freeman’ is often used to illustrate the shift in the debate on the role of business in society. This expression refers to the challenge of the widely acknowledged and applied ‘shareholder model’ or ‘profit-centered model’ of corporate governance. This model operates on the premise that businesses are ultimately if not uniquely accountable to their owners. The proponents of a ‘stakeholder model’ or ‘social responsibility model’, however, explain that businesses are accountable to everyone (whether individuals or groups of individuals or society as a whole) who has a stake in their activity. Brummer (1991) in a wide-ranging review attempts to provide clear definitions of responsibility as well as looking at the different philosophical approaches. In a deep review of the meaning of responsibility, he proposes that responsibility means that executives are held to be accountable for their actions. He summarizes three types of corporate conduct normally thought of as requiring a rendering from executives: (1) Actions performed that go beyond the corporation’s domain of authority or permissibility. (2) Non-performance of acts within the corporation’s domain of responsibility. (3) Inferior performance of acts within the latter domain. But how does business actually define CSR? The World Business Council for Sustainable Development proposes the following definition for CSR as ‘the ethical behavior of a company towards society … management acting responsibility in its relationships with other stakeholders who have a legitimate interest in the business’ and ‘CSR is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large’. 114

Stakeholders’ Theory and Corporate Social Responsibility in China CORPORATE SOCIAL RESPONSIBILITY AND PUBLIC-PRIVATE PARTNERSHIPS What is a public-private partnership (PPP)? According to Reich (2002), a good working definition would include three points. First, these partnerships involve at least one private for-profit organization and at least one non-profit or public organization. Second, the partners have some shared objectives for the creation of social value, often for disadvantaged populations. Finally, the core partners agree to share both efforts and benefits. We see PPP as tools to implement projects related to CSR and integrated on the organizations strategy. Perhaps this definition needs some clarification. We need to clarify the nature of public and private. What is public? What is private? The public sector category certainly includes national governments and international agencies (such as World Health Organization and the World Bank). The private sector category certainly includes for-profit corporations. But where do international non-governmental organizations (NGOs) fit? There are non-profit and for-profit NGOs, and they are private in the sense that they do not belong to a governmental structure, yet they seek to promote public interests. These NGOs belong to a third sector, the civil society and are sometimes called civil society organizations. Baron (1997) defines civil society as ‘an area of association and action independent of the state and the market in which citizens can organize to pursue social values and public purposes which are important to them, both individually and collectively’. We can consider such organizations as belonging to the public side of the equation of PPP, while recognizing that NGOs are often considered as third sector on their own, reflecting different values, purposes, interests, and resource mobilization strategies. Private foundations are similar to NGOs, as civil society organizations seeking to promote public interests. As the case studied in this paper shows, many different kinds of organizations are joining PPP, and they bring with them different cultures, governance structures, and financial resources. These differences create challenges in the partners’ efforts to collaborate effectively and achieve their objectives. A second set of questions addresses the nature of partners. Who is a partner, and who should decide? For example, should the recipients of a public-private drug donation program be considered partners? Should these recipients participate in the design, implementation and oversight of a public-private partnership? What kind of governance structure could allow the participation of recipients and promote accountability while assuring effectiveness? Partnerships can involve a range of partners with different rights and responsibilities, including core partners, who assume key responsibilities for the joint enterprise, and in-country partners, whose participation is necessary for successful implementation. Some partnerships give prominent roles in governing structures to recipients, while others do not. Specific cases demonstrate the diversity of organisations within a single partnership. 115

Nelson Santos António PROCESSES FOR CREATING PARTNERSHIPS Constructing an effective partnership among diverse organizations is not a simple task. According to Austin (2000), partnerships confront seven organizational challenges, what he calls ‘the seven C’s of strategic collaboration’ (see Table 1). TABLE 1 The Seven C’s of Strategic Collaboration 1. Clarity of purpose 2. Congruency of mission, strategy, and values 3. Creation of value 4. Connection with purpose and people 5. Communication between partners 6. Continual learning 7. Commitment to the partnership Navigating these ‘seven C’s’ is not an easy task. Of particular importance is the challenge of creating value, for all the partners involved. To assure a sustainable collaboration, the value created must be useful to society, and value must flow to all core partners. In addition, creating a partnership is a continual learning process, with the potential for unexpected lessons. ETHICS OF PARTNERSHIPS Underlying the discussion of partnerships (and debates over definitions, motives, and processes) are basic questions of ethics, as we said before the concept of CSR is part of the field of business ethics. Which partnerships are good ones, and how do you know? Who has what kind of social responsibility and why? How do you assure accountability of partnerships and to whom? How should, for example, partnerships relate to international health agencies, such as the World Heath Organization? There is a growing agreement that partnerships can play a pivotal role in fulfilling our moral obligations to improve the health status of people in poor countries. Authors like Roberts et al. (2000) think that people in rich countries have the moral obligation to help people in poor countries. They further contend that private corporations have social responsibilities and that managers within firms have moral obligations. For these authors, global health companies have a special obligation to help because of their competence, resources, and expertise – their capacity to make a significant contribution to the health of poor people. They think also that partnerships can play an important role precisely because they can bring the creative potential of 116

Stakeholders’ Theory and Corporate Social Responsibility in China multiple perspectives to bear on critical problems, this is, because business has resources and skills there is a quasi-moral obligation to be involved. An ethical assessment of public-private partnerships depends partly on their consequences. The capacity of some societies to solve collective problems by the greater accumulation of trust and connection among their members can help to build public-private partnerships who may represent a form of international social capital and that we can consider as new problem-solving institutions that can work creatively and flexibly outside the existing bureaucratic framework. CHINA AND CSR ‘The mind of the Superior man is conversant with righteousness, the mind of the mean man is conversant with profit’ Confucius The Confucian virtue of ‘righteousness’ does not refer to knowing and acting according to what is right only. It actually refers to behaving in a way that is appropriate for one’s role status in a given social hierarchy. The vision of the ‘harmonious society’ points in the same directions. This vision was introduced at the Fourth Plenum of the 16th Central Committee held during 16th to 19th September 2004, and a whole section was devoted to explications of it in the CPC Central Committee Decision on the Enhancement of the Party’s Governance Capability, which was adopted during this plenum. President Hu Jintao offered further explications of this vision of the political leadership in a speech on 19th February 2005 at a seminar, which was sponsored by the CPC Central Committee Party School and attended by major provincial - and ministerial level leaders. ‘A harmonious society should feature democracy, the rule of law, equity, justice, sincerity, amity and vitality’, said Hu and ‘honesty, unity, fraternity, professional ethics should be advocated to the whole society’. However, he also stressed that ‘without a common ideological aspiration or high moral standard, a harmonious society will be a mansion built on sand’. At an event marking the 60th anniversary of the United Nations on 15th September, 2006, Hu Jintao defined a harmonious society ‘as one that develops in a comprehensive way, which gives full play to modern ideas like democracy, rule of the law, fairness, justice, vitality, stability, orderliness and harmonious co-existence between the humankind and nature’ (The 17th CPC National Congress, Interpretation of Congress terms). There is a need for more research on the implications of this new vision of the harmonious society. Meanwhile, it seems fair to assume that the political leaders envision the harmonious society as a spiritual driving force uniting China under the control of the Party. The fact that Hu Jintao mentions ‘vitality’ as one of the features of the vision, indicates that the harmonization is not intended to hamper the entrepreneurial spirit that has energized China’s rapid economic development over the past decades. The vision rather signals the wish that part of the entrepreneurial energy should 117

Nelson Santos António contribute to the common good. Here the political leaders seem to draw on the insights of Western European social democratic parties that the government should provide the organization and norms for the social responsibility of companies, individuals and other social groups. There are three schools of CSR practices namely the neo-liberal school, the state-centered school and the third-sector school. The neo-liberal advocates of CSR operate on the assumption that the adoption of CSR policies by business is rational and profitable in the long-term because these policies attract demand and factors of production such as labor and capital. In a simplified version of this view, in all markets, the firm is inspired by both incentives and insurance. Corporate managers walk a thin line between seeking returns from positive consumer, employee and investor perceptions of the company while avoiding the risks of negative government intervention, adverse media exposure, stock market declines and customer boycotts. Advocates of the state-centered (or state-led) CSR believe that national and international policy makers should actively promote the creation and enforcement of CSR obligations on companies. National policymakers should intervene for a number of reasons mostly related to the potential public goods nature of CSR work. First, CSR creates positive externalities in terms of higher consumer welfare, environmental protection and employee satisfaction that individual companies may not be able to appropriate or internalize in their investments decisions. Second, government is often required to facilitate rather than regulate. Third, the government should initiate the process of corporate responsibility in an industrial setting of its regulatory and tax framework given the first mover type of problems (in the form of higher operating costs for individual companies). Rather than certification as a branding strategy as mentioned above, CSR compliance serves as a method of solving ‘collective action problems’. In effect some take the view that because business has resources and skills there is a quasi-moral obligation to be involved. However this may be the view of executives rather than the owners of the business. The advocates of the third sector, rather than company led or government led initiatives, see the third sector (NGOs and civil society broadly defined) as the motor of CSR. Given the overall rise in the importance of the third sector, in general, their representation in the CSR discourses is reflexive of this overall trend. There are communalities between these organizations. First, in some sense, they represent ‘civil society’. Namely, they seek to influence policymaking without being part of the government or strongly attached to the industrial business sector. Second, they fulfill an educational role – informing consumers, business and policymakers. Third, they often work in collaboration with government and/or business. In sum, the Chinese leadership seems to promote the image of righteous leaders, serving the people with the intention of constructing a role model to be emulated by companies, individuals and other social groups. However, the efforts do not seem to yield the intended result of engaging part of the entrepreneurial energy in shouldering the burden of social welfare. Statistics compiled by the Ministry of Civil Affairs of the PRC in 2005 show that charity donations by companies are less than 1% of gross national product, and another survey, which was conducted by China Charities Federation in late 2005, indicates that fewer than 100,000 of China’s 10 million companies, or 1%, have records of donation (Mackey, 2005). 118

Stakeholders’ Theory and Corporate Social Responsibility in China After these figures were published, China Daily columnist Liu Shinan (2005) wrote a comment entitled ‘Rich people must carry more social responsibility’. Listing examples of millionaires spending huge sums on private extravagance, Liu points out that ‘it seems we have realized the goal set in the early 1980s to let a part of the population get rich first’, and he continues ‘now an affluent class has begun to take shape and they seem to be breaking away from the vast majority of the population rather than leading them onto a path towards common prosperity’. He notes that inadequate tax policies regarding private donations is part of the problem, but his key concern is ‘the poor quality of some private entrepreneurs’. ‘China’s private entrepreneurs do need to improve their quality through learning’ remarks Liu and he sees some reasons for optimism in that regard: ‘Fortunately, some of them have realized such a need. China Daily reported yesterday that 40 businesspersons from across the country are studying traditional Chinese culture at Peking University’. It seems that the situation is not improving since a recent project, undertaken by the University of Hong Kong between November 2006 and April 2007, showed a lack of CSR awareness in the corporate sector. According to this study ‘only 23% of the 10,094 companies surveyed indicated any awareness of CSR, and just 9% of those companies said they have dedicated resources specifically to CSR’ (Hong, 2007). Findings of the survey show that companies in Hong Kong practice CSR only when it helps to advance their commercial interests. Business leaders interviewed by the local media seemed to agree with the results of the survey, which according to Lo Foo-Cheung, vice-president of the Chinese Manufactures’ Association, reflected the real situation: ‘in their single–minded pursuit of profits, Hon Kong’s entrepreneurs have apparently failed to acknowledge the social cost of creating and maintaining a business-friendly environment in which they thrive. Under a long-standing economic policy, the Hong-Kong government has always adjusted public sector expenditure to accommodate the private sector’. According to Mads (2006), alleged poor quality of some private entrepreneurs is not the only reason why private sector actors are reluctant to engage in the social welfare project. For Mads, ‘socialism with Chinese characteristics’ represents an odd combination of control and laissez faire. On the one hand, the leadership maintains the principle of absolute Party-State control and China is still characterized by heavy bureaucracy and remnants of the centrally planned economy. On the other hand, decentralization and the current mode of economic development imply at times unlimited permissiveness to representatives of the entrepreneurial spirit. Private sector charity must be submerged into the Party-State system, and charity organizations are required by law to obtain the sponsorship of a state agency, just like all NGOs in China. The Ministry of Civil Affairs is in charge of regular management and organization of nationwide social donation activities, and local departments of the Ministry of Civil Affairs are in charge of management of local regular charity activities. Charities associations are organized under China Charities Federation, a national umbrella organization which was established in 1994 under the Ministry. Meanwhile the Chinese government has expanded the concept of the harmonious society to the harmonious world. According to Zhao Qizheng (2007), ‘the common nature of 119

Nelson Santos António different civilizations is the base for a world of harmony, acknowledging the diversity of civilization’, and ‘every civilization values love, tolerance, pursuit of happiness, and ultimate concern for the welfare of human beings. The Christian civilization praises universal fraternity, including love for one’s enemy. The Islamic doctrine requires its followers to realize their pains are also painful to others. The Confucius term widely believed in China is ‘do not to others as you would not be done by’. These are solid proof that different civilizations have something identical in essence and a dialogue is possible and feasible’. According to this author, ‘in recent years, Chinese political civilization has developed rapidly and it is set to construct a harmonious society and build a harmonious world. These efforts are based on the concept of he, which is at the core of Chinese traditional culture. In Chinese, he has a rich meaning, including harmony, peace, kindness and tolerance. .. it is our firm belief that he could be echoed by the ideas in other civilizations and it is also the common wish of mankind’. From some interviews that we have done with public officials, it is clear that the government wants to provide guidance to the private sector in cases related to CSR. One of the interviewees compared the projects with trees. According to her, ‘the government’s budget is not elastic. The government must prioritize the projects, some are more important that others, but it does not mean that all the projects have some interests. So when we think that one project has interest, we approach one company (or more) and ask for financing. We start in small scale. After some years when the project becomes bigger and bigger and shows results, the government lists the project on its budget. It is like the process of growing a tree. When the tree is small we take care of her and when she is bigger enough we gave her to the government’. During the interview and when asked about the relationship between the government and the enterprises, she said, ‘the dialogue is sometimes difficult. We know that the enterprises are profit-oriented, but sometimes they are in a rush and they want to take advantage of their participation, before they participate, that is. before they contribute. And we should stop them. We do not allow them to publicise their participation’. From the various sources of information that we have collected and summarized in this article, it is clear that CSR is at its initial stage of development in the mainland. President Hu’s position has already clearly indicated the Chinese government’s determination to enhance corporate governance and to disseminate CSR among the private, as well as the public, sectors. The development of the harmonious society and eventually the harmonious world will take high priority in the agenda of the Chinese government. 120

Stakeholders’ Theory and Corporate Social Responsibility in China 121 REFERENCES Agle, B.R., Mitchell, R.K. & Sonnenfeld, J.A. (1999). What matters to CEOs? An investigation of stakeholder attributes and salience, corporate performance, and CEO values. Academy of Management Journal, 42, 507-25. Austin, J.E. (2000) (ed.). The Collaboration Challenge: How Nonprofits and Business Succeed Through Strategic Alliances. San Francisco, CA: Jossey Bass. Baron, B. (1997). Funding civil societies in Asia: Philanthropy and Public Private Partnerships. The Asian Foundation Working Paper Series No. 3. Berle, A.A. & Means, G.C. (1932). The Modern Corporation and Private Property. New York: Harcourt, Brace and World. Brummer, J.J. (1991). Corporate Responsibility and Legitimacy: An Interdisciplinary Analysis. Westport, CT: Greenwood Press. Cadbury, A. (1992). The Financial Aspects of Corporate Governance: A Report of the Committee on Corporate Governance. London: Gee and Co. Cannon, T. (1992). Corporate Responsibility. London: Pitman Publishing. Chandler, A.D., Amatori, F. & Hikino, T. (1997). Big Business and the Wealth of Nations. Cambridge, NY: Cambridge University Press. Clarkson, M.B.E. (1995). A stakeholder framework for analyzing and evaluating corporate social performance. Academy of Management Review, 20, 92-117. Freeman, R.E. & Reed, D.L. (1983). Stockholders and stakeholders: A new perspective on corporate governance. California Management Review, 25, (3), 93-94. Freeman, R.E. (1984). Strategic Management: A Stakeholder Approach. Boston, MA: Pitman Publishing. Friedman, M. (1962). Capitalism and Freedom. Chicago, IL: University of Chicago Press. Hong. L. (2007). Blot on Hong Kong companies. China Daily, 16th November. Liu S. (2005). Rich people must carry more social responsibility. China Daily. 23rd November. Mackey, M. (2005). The new Chinese philanthropy. Asia Times Online, May 14. Available at http://www.atimes.com/atimes/China/GE14Ad06.html Mads, H.J. (2006). Serve the people! Corporate social responsibility (CSR) in China. Asia Research Center, Copenhagen Business School Discussion Papers 2006-6. Mitchell, R.K., Agle, B.R. & Wood, D.J. (1997). Toward a theory of stakeholder identification and salience: Defining the principle of who and what really counts, Academy of Management Review, 22, 853-86. Morck, R., Wolfenzon, D., Yeung, B. (2005). Corporate governance, economic entrenchment and growth. Journal of Economic Literature, 63, 655-720. Patten, D.M. (1992). Intra-industry environmental disclosures in response to the Alaskan oil spill: A note on legitimacy theory. Accounting, Organizations and Society. 17, 471-475. Reich, M.R. (ed.) (2002). Public Private Partnerships for Public Health. Cambridge, MA: Harvard University Press. Roberts, M.J., Breitenstein, A.G. & Roberts, C.S. (2000) Chapter four. In Austin, J. (ed.) The Collaboration Challenge: How Nonprofits and Business Succeed Through Strategic Alliances. San Francisco, CA: Jossey Bass. Thompson, J.K., Wartick, S.L. & Smith, H.L. (1991). Integrating corporate Social Performance and Stakeholder management: Implications for a research agenda in small business. Research in Corporate Social Performance and Policy, 12, 207-230. Tricker, R. I. (1984). Corporate Governance. Aldershot: Gower Publishing. Wilson, H. (1976). The Governance of Britain. New York: Harper and Row. Windsor, D. (1992). Stakeholder management in multinational enterprises. In Brenner, S.N. & Waddock, S.A. (eds.) Proceedings of the Third Annual Meeting of the International Association for Business and Society. Leuven, Belgium. Wood, D.J. (1991). Corporate social performance revisited. Academy of Management Review, 16, 691-718. Zhao, Qizheng (2007). China committed to world harmony goal. China Daily, 15th November.

Euro Asia Journal of Management Issue 34, Vol. 17, No.2, December 2007, pp.123-150 THE ETHICS OF TAX EVASION: A SURVEY OF MACAU OPINION ROBERT W. MCGEE1 CARLOS NORONHA2 and MICHAEL TYLER3 ABSTRACT The ethics of tax evasion has been discussed sporadically in the theological and philosophical literature for at least 500 years. Martin Crowe wrote a doctoral thesis that reviewed much of that literature in 1944. The debate revolved around about 15 issues. Over the centuries, three main views evolved on the topic. 1 Andreas School of Management, Barry University, 11300 NE 2nd Avenue, Miami Shores, FL 33161-6695. Email: rmcgee@mail.barry.edu 2 Faculty of Business Administration, University of Macau, Taipa, Macau, P.R. China. Email: fbacn@umac.mo 3 Andreas School of Management, Barry University, 11300 NE 2nd Avenue, Miami Shores, FL 33161-6695. Email: mtyler@mail.barry.edu

Robert W. McGee, Carlos Noronha and Michael Tyler This paper begins with a review of the literature and identifies the main issues and summarizes the three main viewpoints that have emerged over the centuries. It then reports on the results of a survey of business and economics students in Macau who were asked their opinions on the ethics of tax evasion. The survey consisted of 15 statements, representing the three viewpoints that have emerged over the centuries. Participants were asked to signify the extent of their agreement with each statement by placing a number from 1 to 7 in the space provided. One hundred eighty-seven (187) usable responses were received. The data were then analyzed to determine which of the three viewpoints was dominant among the sample population. Male scores were also compared to female scores to determine if the responses differed by gender. Males were significantly more opposed to tax evasion than females for 3 of the 15 cases. Gender differences were insignificant for the other 12 cases. INTRODUCTION The vast majority of articles that have been written about tax evasion have been written from the perspective of public finance. They discuss technical aspects of tax evasion and the primary and secondary effects that tax evasion has on an economy. In many cases there is also a discussion about how to prevent or minimize tax evasion. Very few articles discuss ethical aspects of tax evasion. Thus, there is a need for further research, which the present study is intended to partially address. As part of this study a survey instrument was developed based on the issues that have been discussed and the arguments that have been made in the tax evasion ethics literature over the last 500 years. Similar survey instruments were used to test sample populations in Romania and Guatemala. The survey was also distributed to professors of international business. The present study reports on the findings of a survey that was distributed to business and economics students at the University of Macau. 124

The Ethics of Tax Evasion: A Survey of Macau Opinion REVIEW OF THE LITERATURE Although many studies have been done on tax compliance, very few have examined compliance, or rather noncompliance, primarily from the perspective of ethics. Most studies on tax evasion look at the issue from a public finance or economics perspective, although ethical issues may be mentioned briefly, in passing. The most comprehensive twentieth century work on the ethics of tax evasion was a doctoral thesis written by Martin Crowe (1944), titled The Moral Obligation of Paying Just Taxes. This thesis reviewed the theological and philosophical debate that had been going on, mostly within the Catholic Church, over the previous 500 years. Some of the debate took place in the Latin language. Crowe introduced this debate to an English language readership. A more recent doctoral dissertation on the topic was written by Torgler (2003), who discussed tax evasion from the perspective of public finance but also touched on some psychological and philosophical aspects of the issue. Walter Block (1989; 1993) sought in vain to find a justification for taxation in the public finance literature. He examined a number of textbooks but found all justifications for taxation to be inadequate. Leiker (1998) speculates on how Rousseau would have viewed the ethics of tax evasion. Alfonso Morales (1998) examined the views of Mexican immigrant street vendors and found that their loyalty to their families exceeded their loyalty to the government. McGraw and Scholz (1991) examined tax compliance from the perspective of self-interest. Armstrong and Robison (1998) discuss tax evasion and tax avoidance from the perspective of an accounting practitioner and used Rawls’ concept of two kinds of rules to analyze how accountants view the issue. Oliva (1998) looked at the issue from the perspective of a tax practitioner and commented on the schism that exists between a tax practitioner’s ethical and legal obligations. There have been a few studies that focus on tax evasion in a particular country. Ethics are sometimes discussed but, more often than not, the focus of the discussion is on government corruption and the reasons why the citizenry does not feel any moral duty to pay taxes to such a government. Ballas and Tsoukas (1998) discuss the situation in Greece. Smatrakalev (1998) discusses the Bulgarian case. Vaguine (1998) discusses Russia, as do Preobragenskaya and McGee (2004) to a lesser extent. A study of tax evasion in Armenia (McGee, 1999e) found the two main reasons for evasion to be the lack of a mechanism in place to collect taxes and the widespread opinion that the government does not deserve a portion of a worker’s income. 125

Robert W. McGee, Carlos Noronha and Michael Tyler A number of articles have been written from various religious perspectives. Cohn (1998) and Tamari (1998) discuss the Jewish literature on tax evasion, and on ethics in general. Much of this literature is in Hebrew or a language other than English. McGee (1998d; 1999a) comments on these two articles from a secular perspective. A few articles have been written on the ethics of tax evasion from various Christian viewpoints. Gronbacher (1998) addresses the issue from the perspectives of Catholic social thought and classical liberalism. Schansberg (1998) looks at the Biblical literature for guidance. Pennock (1998) discusses just war theory in connection with the moral obligation to pay just taxes, and not to pay unjust or immoral taxes. Smith and Kimball (1998) provide a Mormon perspective. McGee (1998c; 1999a) comments on the various Christian views from a secular perspective. The Christian Bible discusses tax evasion and the duty of the citizenry to support the government in several places. Schansberg (1998) and McGee (1994; 1998a) discuss the biblical literature on this point. When Jesus is asked whether people should pay taxes to Caesar, Jesus replied that we should give to Caesar the things that are Caesar’s and give God the things that are God’s [Matthew 22:17, 21]. But Jesus did not elaborate on the point. He did not say that we are only obligated to give government 10% or 5% or any particular percent of our income. There are passages in the Bible that seemingly take an absolutist position. Romans 13, 1-2 supports the Divine Right of Kings, which basically holds that whoever is in charge of government is there with God’s approval and anyone who disputes that fact or who fails to obey is subject to damnation. It is a sin against God to break any law. Thus, Stalin and Hitler must all be obeyed according to this view, even though they were among the biggest monsters of the twentieth century, because they are there with God’s approval. A few other religious views are also addressed in the literature. Murtuza and Ghazanfar (1998) discuss the ethics of tax evasion from the Muslim perspective. McGee (1998b, 1999a) comments on their article and also discusses the ethics of tax evasion under Islam citing Islamic business ethics literature (1997). DeMoville (1998) discusses the Baha’i perspective and cites the relevant literature to buttress his arguments. McGee (1999a) commented on the DeMoville article. A few studies have applied utilitarian ethics and rights theory to particular taxes or particular arguments found to justify certain tax policies in the public finance literature. Tax policies examined in the literature include an examination of whether the ability to pay principle is ethically bankrupt (McGee 1998f) and the related argument of whether discriminatory tax rates are ethically justifiable (McGee 1998g). Both of these arguments seemingly violate the 126

The Ethics of Tax Evasion: A Survey of Macau Opinion Kantian prescription that individuals should always be treated as ends in themselves, not as a means to an end (Kant 1952abc; 1983). The ‘paying your fair share’ argument is also examined (McGee, 1999c). McGee (2004) also addresses these issues in a book that discusses the various philosophies of taxation. If one begins with the premise that people should get something in return for their taxes, the argument could be made that there is nothing unethical about evading the estate tax (McGee 1999b), since the government cannot possibly provide any services to the dead. It is interesting to speculate what Kant would say on this issue, since Kant favors a strong rule of law, yet views the use of individuals as means rather than ends to be unethical. Yet the estate tax does precisely that, since it sees dead people as a source of tax revenue and cannot promise them anything in return for their ‘contributions.’ The Social Security tax in the United States might be attacked on utilitarian grounds, since it is a very poor investment compared to the alternatives (McGee, 1999g). The capital gains tax might be criticized on efficiency grounds, since some studies have found that the distortion to the economy that results – what economists call negative externalities – sometimes more than offsets the amount of taxes that are actually collected (McGee, 1999f). If a particular tax actually reduces welfare in society, the argument could be made that evading the tax, and thus reducing the amount of welfare reduction that would otherwise occur, might actually be an ethical act, from a utilitarian perspective. Evading a tariff would be one example (McGee, 1999d), since tariffs are generally viewed by economists as a negative sum game, a tax measure that is not so much intended to raise revenue as to prevent foreign competition, which feathers the nest of domestic producers at the expense of the general public (McGee, 1994b; 2003). The present study has been replicated and will be replicated several more times using different groups of respondents. A survey of international business professors found that some arguments justifying tax evasion are stronger than others but none of the arguments were very strong, since most of the professors who responded to the survey were strongly against tax evasion on ethical grounds. This survey also found that women were significantly more opposed to tax evasion than were the men (McGee, 2005a). A survey of business and law students in Guatemala reached a similar result. However, the law students felt less strongly about condemning tax evasion on ethical grounds than did the business students and female students were more opposed to tax evasion than were male students (McGee & Lingle, 2005). A survey of Romanian business students (McGee, 2005b) found that respondents often felt tax evasion was ethically justified. Males were slightly more opposed to tax evasion than were women. A survey of German business students also found that respondents were strongly against tax 127

Robert W. McGee, Carlos Noronha and Michael Tyler evasion, although some arguments were stronger than others. A comparison of male to female responses was inconclusive, in the sense that it could not be clearly determined which group of respondents was more ethically opposed to tax evasion (McGee, Nickerson & Fees, 2005). THREE VIEWS ON THE ETHICS OF TAX EVASION Over the centuries, three basic views have emerged on the ethics of tax evasion. View One View One takes the position that tax evasion is always, or almost always unethical. There are basically three underlying rationales for this belief. One reason is the belief that individuals have a duty to the state to pay whatever taxes the state demands (Cohn, 1998; DeMoville, 1998; Smith & Kimball, 1998; Tamari, 1998). This view is especially prevalent in democracies, where there is a strong belief that individuals should conform to majority rule. The second rationale for an ethical duty to pay taxes is because the individual has a duty to other members of the community (Crowe, 1944; Cohn, 1998; Tamari, 1998). This view holds that individuals should not be freeloaders by taking advantage of the services the state provides while not contributing to the payment of those services. A corollary of this belief is the view that if tax dodgers do not pay their fair share, then law-abiding taxpayers must pay more than their fair share. The third rationale is that we owe a duty to God to pay taxes, or, stated differently, God has commanded us to pay our taxes (Cohn, 1998; DeMoville, 1998; Smith & Kimball, 1998; Tamari, 1998). This view holds no water among atheists, of course, but the view is strongly held in some religious circles. View Two View Two might be labeled the anarchist view. This view holds that there is never any duty to pay taxes because the state is illegitimate, a mere thief that has no moral authority to take anything from anyone (Block, 1989; 1993). The state is no more than a mafia that, under democracy, has its leaders chosen by the people. 128

The Ethics of Tax Evasion: A Survey of Macau Opinion The anarchist literature does not address the ethics of tax evasion directly but rather discusses the relationship of the individual to the state. The issue of tax evasion is merely one aspect of that relationship (Spooner, 1870). There is no such thing as a social contract according to this position. Where there is no explicit agreement to pay taxes there also is no duty. All taxation necessarily involves the taking of property by force or the threat of force, without the owner’s permission. Thus, it meets the definition of theft. Stated as an equation, TAXATION = THEFT. A corollary equation is that FAIR SHARE = 0. View Three View Three holds that tax evasion may be ethical under some circumstances and unethical under other circumstances. This view is the prevalent view, both in the literature (Ballas & Tsoukas, 1998; Crowe, 1944; Gronbacher, 1998; McGee, 1998a, 1999e) and according to the results of some of the surveys (McGee, 2005a&b; McGee & Lingle, 2005). METHODOLOGY After reviewing the scant literature that exists on the ethics of tax evasion, a survey was constructed and distributed it to a group of graduate and advanced undergraduate business and economics students at the University of Macau in order to learn the prevailing views on this issue. This group was selected because they will be the future business and political leaders of Macau and China. The survey consisted of fifteen (15) statements. Using a seven-point Likert scale, respondents were asked to place the appropriate number in the space provided to indicate the extent of their agreement or disagreement with each statement. The survey was translated into Chinese, although some participants preferred to use the English version. One hundred eighty-seven (187) usable responses were received. In the following sections, some descriptive analyses will be presented. 129

Robert W. McGee, Carlos Noronha and Michael Tyler SURVEY FINDINGS Table 1 depicts the distribution of male and female respondents while table 2 shows the average score for each of the 15 statements which are also summarized in figure 1. TABLE 1 Responses by Gender Male 70 Female 117 Total 187 TABLE 2 Summary of Responses (1 = strongly agree; 7 = strongly disagree) S# Statement Score 1 Tax evasion is ethical if tax rates are too high. (S1) 5.05 2 Tax evasion is ethical even if tax rates are not too high because the government is not entitled to take as much as it is taking from me. (S2) 5.74 3 Tax evasion is ethical if the tax system is unfair. (S3) 3.95 4 Tax evasion is ethical if a large portion of the money collected is wasted. (S4) 4.04 5 Tax evasion is ethical even if most of the money collected is spent wisely. (S5) 5.76 6 Tax evasion is ethical if a large portion of the money collected is spent on projects that I morally disapprove of. (S6) 4.68 7 Tax evasion is ethical even if a large portion of the money collected is spent on worthy projects. (S7) 5.80 8 Tax evasion is ethical if a large portion of the money collected is spent on projects that do not benefit me. (S8) 5.58 9 Tax evasion is ethical even if a large portion of the money collected is spent on projects that do benefit me. (S9) 5.74 10 Tax evasion is ethical if everyone is doing it. (S10) 5.25 11 Tax evasion is ethical if a significant portion of the money collected winds up in the pockets of corrupt politicians or their families and friends. (S11) 3.58 130

The Ethics of Tax Evasion: A Survey of Macau Opinion TABLE 2 (continued) Summary of Responses S# Statement Score 12 Tax evasion is ethical if the probability of getting caught is low. (S12) 5.41 13 Tax evasion is ethical if some of the proceeds go to support a war that I consider to be unjust. (S13) 3.63 14 Tax evasion is ethical if I can’t afford to pay. (S14) 4.32 15 Tax evasion is ethical even if it means that if I pay less, others will have to pay more. (S15) 5.54 FIGURE 1 Average Score of 15 Statements 012345671 2 3 4 5 6 7 8 9 10 11 12 13 14 15StatementScore 131

Robert W. McGee, Carlos Noronha and Michael Tyler From the summarized chart, we can say that the average respondent will believe that tax evasion is ethical sometimes since the score for at least 10 of the 15 statements is greater than 2 but less than 6. Table 3 ranks the scores from lowest (most acceptable) to highest (least acceptable). The most acceptable reason for tax evasion is when a significant portion of the money collected winds up in the pockets of corrupt politicians or their families and friends. This reason also ranked high for the other surveys that were conducted using a similar survey instrument. But even though this reason had the strongest score, the score of 3.58 indicates that there is still a feeling that taxes must be paid even under these circumstances. TABLE 3 Ranking (1 = strongly agree; 7 = strongly disagree) Rank Statement Score 1 Tax evasion is ethical if a significant portion of the money collected winds up in the pockets of corrupt politicians or their families and friends. (S11) 3.58 2 Tax evasion is ethical if some of the proceeds go to support a war that I consider to be unjust. (S13) 3.63 3 Tax evasion is ethical if the tax system is unfair. (S3) 3.95 4 Tax evasion is ethical if a large portion of the money collected is wasted. (S4) 4.04 5 Tax evasion is ethical if I can’t afford to pay. (S14) 4.32 6 Tax evasion is ethical if a large portion of the money collected is spent on projects that I morally disapprove of. (S6) 4.68 7 Tax evasion is ethical if tax rates are too high. (S1) 5.05 8 Tax evasion is ethical if everyone is doing it. (S10) 5.25 9 Tax evasion is ethical if the probability of getting caught is low. (S12) 5.41 10 Tax evasion is ethical even if it means that if I pay less, others will have to pay more. (S15) 5.54 11 Tax evasion is ethical if a large portion of the money collected is spent on projects that do not benefit me. (S8) 5.58 12 Tax evasion is ethical even if tax rates are not too high because the government is not entitled to take as much as it is taking from me. (S2) 5.74 132

The Ethics of Tax Evasion: A Survey of Macau Opinion TABLE 3 (continued) Ranking Rank Statement Score 12 Tax evasion is ethical even if a large portion of the money collected is spent on projects that do benefit me. (S9) 5.74 14 Tax evasion is ethical even if most of the money collected is spent wisely. (S5) 5.76 15 Tax evasion is ethical even if a large portion of the money collected is spent on worthy projects. (S7) 5.80 A surprising second place went to the argument that tax evasion might be ethical if taxes went to pay for an unjust war. The unjust war theory is pervasive in the Catholic theological and philosophical literature and it is also widely present in the Protestant literature. It is a bit surprising that this reason would rank so highly in an Asian society. Perhaps the Portuguese Catholic influence is partly responsible for the strength of this reason. We can say that there is a suspected relationship between the score and the usage of the corrupted money since scores appear lower (tax evasion will be more acceptable) when the statement refers to government corruption. The statement which refers to government corruption most directly actually ranked number one. Furthermore, unfairness of the system and inability to pay also ranked high on the list, which is consistent with the other surveys. The weakest arguments had to do with the general belief that there is no duty to the state even if benefits are received Gender Differences Table 4 compares the male and female scores. Figure 2 offers a summary of the situation also. 133

Robert W. McGee, Carlos Noronha and Michael Tyler TABLE 4 Comparison of Male and Female Scores (1 = strongly agree; 7 = strongly disagree) S# Statement Score Larger By Male [70] Female[117] Male Female 1 Tax evasion is ethical if tax rates are too high. 5.00 5.08 0.08 2 Tax evasion is ethical even if tax rates are not too high because the government is not entitled to take as much as it is taking from me. 5.59 5.84 0.25 3 Tax evasion is ethical if the tax system is unfair. 3.91 3.97 0.06 4 Tax evasion is ethical if a large portion of the money collected is wasted. 4.14 3.97 0.17 5 Tax evasion is ethical even if most of the money collected is spent wisely. 5.57 5.87 0.30 6 Tax evasion is ethical if a large portion of the money collected is spent on projects that I morally disapprove of. 4.76 4.63 0.13 7 Tax evasion is ethical even if a large portion of the money collected is spent on worthy projects. 5.70 5.85 0.15 8 Tax evasion is ethical if a large portion of the money collected is spent on projects that do not benefit me. 5.76 5.47 0.29 9 Tax evasion is ethical even if a large portion of the money collected is spent on projects that do benefit me. 5.74 5.74 10 Tax evasion is ethical if everyone is doing it. 5.14 5.31 0.17 11 Tax evasion is ethical if a significant portion of the money collected winds up in the pockets of corrupt politicians or their families and friends. [Significant at the .005 level] 4.09 3.28 0.81 12 Tax evasion is ethical if the probability of getting caught is low. 5.44 5.38 0.06 13 Tax evasion is ethical if some of the proceeds go to support a war that I consider to be unjust. [Significant at the .064 level] 3.97 3.43 0.54 14 Tax evasion is ethical if I can’t afford to pay. [Significant at the .095 level] 4.60 4.15 0.45 15 Tax evasion is ethical even if it means that if I pay less, others will have to pay more. 5.55 5.54 0.01 134

The Ethics of Tax Evasion: A Survey of Macau Opinion FIGURE 2 Comparison of Male and Female Scores 012345671 2 3 4 5 6 7 8 9 10 11 12 13 14 15StatementScoreMale Female Table 5 shows the independent sample t-tests for each of the 15 items for male and female samples. S11 is significant at the 5% level. S13 and 14 are significant at the 10% level. In these three cases male scores were higher than female scores. 135

Robert W. McGee, Carlos Noronha and Michael Tyler TABLE 5 Test for Differences in Mean Scores between Male and Female Respondents Gender N Mean t-value p-value S1: Tax evasion is ethical if tax rates are too high. male 70 5.0000 -.335 .738 female 117 5.0769 S2: Tax evasion is ethical even if tax rates are not too high because the government is not entitled to take as much as it is taking from me. male 70 5.5857 -1.212 .228 female 117 5.8376 S3: Tax evasion is ethical if the tax system is unfair. male 70 3.9143 -.231 .818 female 117 3.9744 S4: Tax evasion is ethical if a large portion of the money collected is wasted. male 70 4.1429 .642 .522 female 116 3.9741 S5: Tax evasion is ethical even if most of the money collected is spent wisely. male 70 5.5714 -1.354 .177 female 115 5.8696 S6: Tax evasion is ethical if a large portion of the money collected is spent on projects that I morally disapprove of. male 70 4.7571 .525 .600 female 116 4.6293 S7: Tax evasion is ethical even if a large portion of the money collected is spent on worthy projects. male 70 5.7000 -.751 .454 female 116 5.8534 S8: Tax evasion is ethical if a large portion of the money collected is spent on projects that do not benefit me. male 70 5.7571 1.567 .119 female 117 5.4701 S9: Tax evasion is ethic even if a large portion of the money collected is spent on projects that do not benefit me. male 70 5.7429 -.004 .997 female 117 5.7436 S10: Tax evasion is ethical if everyone is doing it. male 70 5.1429 -.677 .499 female 116 5.3103 136

The Ethics of Tax Evasion: A Survey of Macau Opinion TABLE 5 (continued) Test for Differences in Mean Scores between Male and Female Respondents Gender N Mean t-value p-value S11: Tax evasion is ethical if a significant portion of the money collected winds up in the pockets of corrupt politicians or their families and friends male 69 4.0870 2.810 .005 female 117 3.2821 S12: Tax evasion is ethical if the probability of getting caught is low. male 70 5.4429 .271 .786 female 117 5.3846 S13: Tax evasion is ethical if some of the proceeds go to support a war that I consider to be unjust. male 70 3.9714 1.865 .064 female 117 3.4274 S14: Tax evasion is ethical if I can't afford to pay. male 70 4.6000 1.679 .095 female 117 4.1538 S15: Tax evasion is ethical even if it means that if I pay less, others will have to pay more. male 69 5.5507 .061 .951 female 117 5.5385 The MANOVA result indicated that gender did not make a difference on the responses. The Wilk’s Lambda value was reported at 0.882 (F = 1.468, p = 0.123). Several studies have compared male and female views on ethics and the results are mixed. Akaah & Riordan (1989), Dawson (1997) and Lampe & Finn (1992) determined that women were more ethical than men, but Babakus, Cornwell, Mitchell & Schlegelmilch (2004), Browning & Zabriskie (1983) and Kidwell, Stevens & Bethke (1987) found that there was no statistical difference between men and women when it came to ethical issues. Barnett & Karson (1987) found men to be more ethical and Harris (1990) found women to be more ethical in some situations and just as ethical (or unethical) as men in other cases. In the present study it is not possible to conclude that men are more ethical than women just because some of the male scores were significantly higher than the female scores. In order to do that one must begin with the premise that tax evasion is unethical, which may not always 137

Robert W. McGee, Carlos Noronha and Michael Tyler be the case. Indeed, the main purpose of the present study was to determine the state of opinion regarding when, and under what circumstances, tax evasion might be ethical. Thus, one could conclude that men are more ethical than women only if the male scores were higher than the female scores for a case where tax evasion was clearly unethical. A Comparison of Undergraduate and Graduate Scores Undergraduate and graduate scores were compared to see if the scores were significantly different. Graduate students tend to be older than undergraduate students, so if student status is used as a surrogate for age it will be possible to determine whether age makes a difference in opinions toward tax evasion. Ruegger and King (1992) found that people become more ethical as they get older. Babakus et al. (2004) also found that age made a difference, but what difference age makes sometimes depends on culture. Barnett & Karson (1987, 1989), Longenecker, McKinney & Moore (1989), Harris (1990), Kelley, Ferrell & Skinner (1990), Serwinek (1992) and Wood et al. (1988) also concluded that people get more ethical as they get older. But other studies found no correlation between age and ethical viewpoint (Kidwell, Stevens & Bethke, 1987; Izraeli, 1988; Callan, 1992; Kohut & Corriher, 1994). Table 6 shows the individual scores, means, t-values and p-values. Graduate scores were higher than undergraduate scores for 14 of 15 statements, indicating that graduate students were more opposed to tax evasion than were the undergraduate students. 138

The Ethics of Tax Evasion: A Survey of Macau Opinion TABLE 6 Test for Differences in Mean Scores between Undergraduate and Graduate Respondents Type N Mean t-value p-value S1: Tax evasion is ethical if tax rates are too high. undergraduate student 125 5.0000 -.574 0.567 graduate student 62 5.1452 S2: Tax evasion is ethical even if tax rates are not too high because the government is not entitled to take as much as it is taking from me. undergraduate student 125 5.6000 -2.238 .026 graduate student 62 6.0323 S3: Tax evasion is ethical if the tax system is unfair. undergraduate student 125 3.7760 -2.005 .046 graduate student 62 4.3065 S4: Tax evasion is ethical if a large portion of the money collected is wasted undergraduate student 124 3.9113 -1.347 .181 graduate student 62 4.2903 S5: Tax evasion is ethical even if most of the money collected is spent wisely. undergraduate student 125 5.5760 -2.471 .014 graduate student 60 6.1333 S6: Tax evasion is ethical if a large portion of the money collected is spent on projects that I morally disapprove of. undergraduate student 124 4.6855 .091 .928 graduate student 62 4.6613 S7: Tax evasion is ethical even if a large portion of the money collected is spent on worthy projects. undergraduate student 124 5.6613 -1.937 .054 graduate student 62 6.0645 S8: Tax evasion is ethical if a large portion of the money collected is spent on projects that do not benefit me. undergraduate student 125 5.4800 -1.562 .120 graduate student 62 5.7742 139

Robert W. McGee, Carlos Noronha and Michael Tyler TABLE 6 (continued) Test for Differences in Mean Scores between Undergraduate and Graduate Respondents S9: Tax evasion is ethic even if a large portion of the money collected is spent on projects that do not benefit me. undergraduate student 125 5.6480 -1.452 .148 graduate student 62 5.9355 S10: Tax evasion is ethical if everyone is doing it. undergraduate student 124 5.0887 -1.888 .061 graduate student 62 5.5645 S11: Tax evasion is ethical if a significant portion of the money collected winds up in the pockets of corrupt politicians or their families and friends. undergraduate student 125 3.4720 -1.104 .271 graduate student 61 3.8033 S12: Tax evasion is ethical if the probability of getting caught is low undergraduate student 125 5.2960 -1.519 .130 graduate student 62 5.6290 S13: Tax evasion is ethical if some of the proceeds go to support a war that I consider to be unjust undergraduate student 125 3.6240 -.072 .942 graduate student 62 3.6452 S14: Tax evasion is ethical if I can't afford to pay undergraduate student 125 4.2560 -.712 .478 graduate student 62 4.4516 S15: Tax evasion is ethical even if it means that if I pay less, others will have to pay more undergraduate student 125 5.3680 -2.639 .009 graduate student 61 5.9016 All the 15 items, except four, showed no significant difference between undergraduate and graduate mean scores at the 5% level. The four items that showed significant differences are S2, S3, S5 and S15. At the 10% level, S7 and S10 were also significant. The MANOVA result indicated that the type of student appeared to affect the responses. Thus, it can be said that graduate students were more firmly against tax evasion than were undergraduate students. The Wilk’s Lambda value was reported at 0.863 (F = 1.740, p = 0.048). Nevertheless, the p-value can be considered only marginally below the 5% level. 140

The Ethics of Tax Evasion: A Survey of Macau Opinion Furthermore, when ‘gender’ and ‘type of student’ were considered together, no significant difference was revealed. The Wilk’s Lambda value was reported at 0.913 (F = 1.041, p = 0.416). Determining Dominance One way to determine public opinion is to look at average scores. But average scores can obscure data and patterns. So we decided to also divide the responses into three groups, those who considered tax evasion to always or almost always be unethical, those who thought tax evasion was ethical under certain circumstances and those who thought tax evasion was always or almost always ethical. We then compared the percentages for each group for each of the 15 statements. Table 7 shows the results of these comparisons. Those who chose a score of 1 or 2 were classified as being in the always or almost always ethical category. Those with scores of more than 2 but less than 6 fell into the sometimes ethical category. Those with scores of 6 or higher fell into the never or almost never category. Figure 2 shows the relative size of the three groups. TABLE 7 Comparison of Groups (Determination of Dominant Group) Always Ethical % SometimesEthical % Never Ethical % Dominant Group 1-2 2

Robert W. McGee, Carlos Noronha and Michael Tyler TABLE 7 (continued) Comparison of Groups (Determination of Dominant Group) Always Ethical % SometimesEthical % Never Ethical % Dominant Group 1-2 2

The Ethics of Tax Evasion: A Survey of Macau Opinion FIGURE 2 Relative Size of each Group 01020304050607080901001 2 3 4 5 6 7 8 9 10 11 12 13 14 15Statement%Always Ethical Sometimes Ethical Never Ethical Table 8 summarizes the frequencies of the dominant groups for each statement. As can be seen, the dominant group is the group that believes tax evasion is never or almost never ethical. However, the sometimes ethical group had the largest plurality for 7 of the 15 statements, making it nearly as dominant as the never ethical category. TABLE 8 Summary of Dominant Group Frequency Tax evasion is …. Frequency Always ethical 0 Sometimes ethical 7 Never ethical 8 Total 15 143

Robert W. McGee, Carlos Noronha and Michael Tyler Qualitative Comments The survey instrument included space for participants to make additional comments to explain their views on the ethics of tax evasion. Many respondents left this space blank. However, 66 participants did make comments. Below is a summary of their comments: Neutral, mixed or negative views toward tax evasion • Whether tax evasion is ethical depends on whether the people benefit as a result of the taxes they pay or whether the distribution of tax funds is unfair. • Tax evasion in any situation is illegal. Paying tax is the responsibility of every good citizen. • Ethical standards should be related to the whole society, not only to individuals. • Tax evasion is unethical if tax collection is fair and just. • Tax evasion is illegal. Citizens should obey the law and pay tax as a kind of responsibility to society. But this is under the condition that the tax system is responsible and fair to everyone. If tax collections are too high, so that the average citizen is unable to afford to pay, or so that the citizens’ wealth gap is widened, then tax evasion is understandable. If most of the tax receipts are being wasted or corrupted or used inappropriately, then tax evasion is understandable. • As long as we are living in society we have an obligation to pay for the benefits we receive. No matter how high or how low taxes are, citizens should obey and pay. If the people feel that they are not getting their moneys worth from their government, stakeholders would probably get together to oppose the government, which harms society due to instability. For example, in Canada taxes are high but the people have good welfare. • Whether tax evasion is ethical depends on the situation. If it is proved that the taxpayer cannot afford the amount of the tax, tax evasion is involuntary. But if the taxpayer has the ability to pay and does not, then evasion is unethical. To judge whether evasion is unethical, the most important thing is whether the person can really afford the tax. If there are special reasons, evasion is ethical. • Tax evasion is unethical regardless of the system of government and regardless of the reasonableness or unreasonableness of the tax. 144

The Ethics of Tax Evasion: A Survey of Macau Opinion • Paying taxes is the responsibility of the citizen. Someone who escapes from responsibilities does not have the right to enjoy social welfare. So rights and responsibilities are not separable. • Tax evasion is tax evasion. I don’t care how the money is used because someone should pay tax. Where the money is spent has nothing to do with ethical standards. Favorable views toward tax evasion • When the government sets unreasonable tax rates and too many unnecessary taxes, then tax evasion can be regarded as ethical. • The level of fairness of tax collection is the standard for the ethics of tax evasion. • Whether tax evasion is ethical or not depends on the fairness of the tax law and the eventual use of the tax receipts. • The ethical standard of tax evasion is that tax collection should be in direct proportion to personal income. • Taxation is necessary to protect basic rights of taxpayers, to guarantee food and shelter, to provide medical, education and other expenses. If there is no welfare I think one should evade taxes. The reasoning of the respondents is quite enlightening. Their responses, in the aggregate, more or less mirror the theological and philosophical literature of the last 500 years that Crowe reported in his 1944 doctoral thesis. The Crowe thesis reported mostly on the European and American Catholic literary debate. Yet the population of Macau is well over 90% Chinese, 50% Buddhist and only 15% Catholic, according to The World Factbook (CIA), which indicates that the issues raised in the tax evasion ethics debate might be universal, not ethnocentric and limited to just one or two geographic areas or one religion. A number of respondents indicated that they believed tax evasion is unethical because it is illegal. This line of reasoning is rather widespread. However, it is also logically flawed. Just because something is illegal does not automatically make it unethical. The philosophical and political science literature have made this point repeatedly. The basic argument in this literature is that there is nothing inherently wrong in breaking an unjust law. If there is a traffic light in the middle of the desert and it is red there is nothing inherently unethical about going through it if no one is within 100 km. Indeed, one would be wasting gas by sitting and waiting for the light to change. Utilitarian ethics would dictate that one should go through the red light in such circumstances in order to avoid wasting gasoline. Prior to the American Civil War (1861-65) it was illegal to help slaves escape from their slave masters. Yet no one would argue that the practice was unethical. The point is that one 145

Robert W. McGee, Carlos Noronha and Michael Tyler cannot logically argue that something is unethical just because it is illegal. In a good society, one would hope that there is a good deal of overlap between what is illegal and what is unethical. But the overlap is probably not 100%. What may be illegal can be ethical and what is legal can at times be unethical. The two are not identical. CONCLUDING COMMENTS This study surveyed the opinions of business and economics students in Macau. The results indicate that the belief that tax evasion is ethical is widespread, although there is a significant segment of the educated population who think that tax evasion is always, or almost always unethical. Although some arguments justifying tax evasion are stronger than others, the average scores, which ranged between 3.58 and 5.8 on a 7.0 point scale, indicated that the average view falls into the middle category, that is, that tax evasion might be somewhat ethical for any of the reasons given. But the dominant group, measured in terms of plurality, believed that tax evasion is always or almost always unethical. This seeming inconsistency can be explained by the fact that the distribution of scores was skewed. The strongest arguments justifying tax evasion occur when the government is deemed to be corrupt or when the tax system is perceived to be unfair. This finding has important policy implications. From these findings one might reasonably conclude that the extent of tax evasion might be reduced if government is perceived as being less corrupt or if the tax system is deemed to be fair. This study could be replicated in a number of ways. Different groups of Chinese students could be surveyed, either in different cities or regions of China or in different disciplines, such as law, philosophy or political science. Judging from the results of the study of Guatemalan business and law students (McGee & Lingle, 2005), the responses obtained could be different for different disciplines. Surveying Chinese business people might also be worthwhile, since their perception of taxation might be different than that of university business and economics students. It would be interesting to see whether the results might be different for sample populations in Hong Kong, mainland China and Taiwan as well, since the populations of these places share a more or less 146

The Ethics of Tax Evasion: A Survey of Macau Opinion common heritage and culture, although their recent economic and political history has been different. Comparative studies might also be made of China and Japan, China and Korea or China and some other Asian country to see whether the view of tax evasion may differ by country. The Torgler study (2003) indicated that the view of tax evasion might indeed be different, depending on which Asian country is chosen for study. Replicating this study in other Asian countries would shed light on whether the Torgler findings could be confirmed. REFERENCES Akaah, I.P. & Riordan, E.A. (1989). Judgments of marketing professionals about ethical issues in marketing research: A replication and extension. Journal of Marketing Research, 26, (1), 112-120. Armstrong, M.B. & Robison, J. (1998). Ethics in taxation. Journal of Accounting, Ethics & Public Policy, 1, (4), 535-557, reprinted in McGee, R.W. (ed.) The Ethics of Tax Evasion. Dumont, NJ: The Dumont Institute for Public Policy Research. Babakus, E.T., Cornwell, B., Mitchell, V. & Schlegelmilch, B. (2004). Reactions to unethical consumer behavior across six countries. The Journal of Consumer Marketing, 21, (4/5), 254-263. Ballas, A.A. & Tsoukas, H. (1998). Consequences of distrust: The vicious circle of tax evasion in Greece. Journal of Accounting, Ethics & Public Policy, 1,(4), 572-596, reprinted in Robert W. McGee (ed.), The Ethics of Tax Evasion. Dumont, NJ: The Dumont Institute for Public Policy Research. Barnett, J.H. & Karson, M.J. (1987). Personal values and business decisions: An exploratory investigation. Journal of Business Ethics, 6, (5), 371-382. Barnett, J.H. & Karson, M.J. (1989). Managers, values, and executive decisions: An exploration of the role of gender, career stage, organizational level, function, and the importance of ethics, relationships and results in managerial decision-making. Journal of Business Ethics, 8, (10), 747-771. Block, W. (1989). The justification of taxation in the public finance literature: A critique. Journal of Public Finance and Public Choice, 3, 141-158. Block, W. (1993). Public finance texts cannot justify government taxation: A critique. Canadian Public Administration/Administration Publique du Canada, 36, (2), 225-262, reprinted in revised form under the title ‘The justification for taxation in the economics literature’ in McGee, R.W. (ed.) (1998), The Ethics of Tax Evasion. Dumont, NJ: The Dumont Institute for Public Policy Research. Browning, J. & Zabriskie, N.B. (1983). How ethical are industrial buyers? Industrial Marketing Management, 12, (4), 219-224. Callan, V.J. (1992). Predicting ethical values and training needs in ethics. Journal of Business Ethics, 11, (10), 761-769. CIA, The World Factbook www.cia.gov/cia/publications/factbook/ Cohn, G. (1998). The Jewish view on paying taxes. Journal of Accounting, Ethics & Public Policy, 1, (2), 109-120, reprinted in McGee, R.W. (ed.), The Ethics of Tax Evasion. Dumont, NJ: The Dumont Institute for Public Policy Research. 147

Robert W. McGee, Carlos Noronha and Michael Tyler Crowe, M.T. (1944). The Moral Obligation of Paying Just Taxes. The Catholic University of America Studies in Sacred Theology No. 84. Dawson, L.M. (1997). Ethical differences between men and women in the sales profession. Journal of Business Ethics, 16, (11), 1143-1152. DeMoville, W. (1998). The ethics of tax evasion: A Baha’i perspective. Journal of Accounting, Ethics & Public Policy, 1, (3), 356-368, reprinted in McGee, R.W. (ed.), The Ethics of Tax Evasion. Dumont, NJ: The Dumont Institute for Public Policy Research. Gronbacher, G.M.A. (1998). Taxation: Catholic social thought and classical liberalism. Journal of Accounting, Ethics & Public Policy, 1, (1), 91-100, reprinted in McGee, R.M. (ed.), The Ethics of Tax Evasion. Dumont, NJ: The Dumont Institute for Public Policy Research. Harris, J.R. (1990). Ethical values of individuals at different levels in the organizational hierarchy of a single firm. Journal of Business Ethics, 9, (9), 741-750. Izraeli, D. (1988). Ethical beliefs and behavior among managers: A cross-cultural perspective. Journal of Business Ethics, 7, (4), 263-271. Kant, I. (1952a). Fundamental Principles of the Metaphysics of Morals. Great Books of the Western World, Volume 42, Chicago: Encyclopedia Britannica. Kant, I. (1952b). General Introduction to the Metaphysics of Morals. Great Books of the Western World, Volume 42, Chicago: Encyclopedia Britannica. Kant, I. (1952c). Preface and Introduction to the Metaphysical Elements of Ethics. Great Books of the Western World, Volume 42, Chicago: Encyclopedia Britannica. Kant, I. (1983). Ethical Philosophy (translated by Ellington, J.W.). Indianapolis and Cambridge: Hackett Publishing Company. Kelley, S.W., Ferrell, O.C. & Skinner, S.J.. (1990). Ethical behavior among marketing researchers: An assessment of selected demographic characteristics. Journal of Business Ethics, 9, (8), 681-688. Kidwell, J.M., Stevens, R.E. & Bethke, A.L.. (1987). Differences in ethical perceptions between male and female managers: Myth or reality? Journal of Business Ethics, 6, (6), 489-493. Kohut, G.F. & Corriher, S.E. (1994). The relationship of age, gender, experience and awareness of written ethics policies to business decision making. S.A.M. Advanced Management Journal, 59, (1), 32-39. Lampe, J.C., Finn, D.W., Gaa, J. & O’Malley, P.L. (1992). A model of auditors’ ethical decision processes; Discussions; reply. Auditing: A Journal of Practice and Theory, 11 (Supplement), 33-78. Leiker, B.H. (1998). Rousseau and the legitimacy of tax evasion. Journal of Accounting, Ethics & Public Policy, 1, (1), 45-57, reprinted in McGee, R.W. (ed.), The Ethics of Tax Evasion. Dumont, NJ: The Dumont Institute for Public Policy Research. Longenecker, J.G., McKinney, J.A. & Moore, C.W. (1989). Do smaller firms have higher ethics? Business and Society Review, 71, 19-21. McGee, R.W. (1994a). Is tax evasion unethical? University of Kansas Law Review, 42, (2), 411-435, reprinted at http://ssrn.com/abstract=74420. McGee, R.W. (1994b). A Trade Policy for Free Societies: The Case Against Protectionism. New York and Westport, CT: Quorum Books. McGee, R.W. (1997). The ethics of tax evasion and trade protectionism from an Islamic perspective. Commentaries on Law & Public Policy, 1, 250-262, reprinted at http://ssrn.com/abstract=461397. McGee, R.W. (ed.). (1998a). The Ethics of Tax Evasion. Dumont. NJ: The Dumont Institute for Public Policy Research. 148

The Ethics of Tax Evasion: A Survey of Macau Opinion McGee, R.W. (1998b). The ethics of tax evasion in Islam: A comment. Journal of Accounting, Ethics & Public Policy, 1, (2), 162-168, reprinted in McGee, R.W. (ed.), The Ethics of Tax Evasion. Dumont, NJ: The Dumont Institute for Public Policy Research. McGee, R.W. (1998c). Christian views on the ethics of tax evasion. Journal of Accounting, Ethics & Public Policy, 1, (2), 210-225, reprinted at http://ssrn.com/abstract=461398. McGee, R.W. (1999a). Is It unethical to evade taxes in an evil or corrupt state? A look at Jewish, Christian, Muslim, Mormon and Baha’i perspectives. Journal of Accounting, Ethics & Public Policy, 2, (1), 149-181, reprinted at http://ssrn.com/abstract=251469. McGee, R.W. (1999b). Is it unethical to evade the estate tax? Journal of Accounting, Ethics & Public Policy, 2, (2), 266-285, reprinted at http://ssrn.com/abstract=242536. McGee, R.W. (1999c). An ethical look at paying your ‘fair share’ of taxes. Journal of Accounting, Ethics & Public Policy, 2, (2), 318-328, reprinted at http://ssrn.com/abstract=242549. McGee, R.W. (1999d). Tariffs as a form of taxation: Is evasion unethical? Journal of Accounting, Ethics & Public Policy, 2, (2), 376-385, reprinted at http://ssrn.com/abstract=242565. McGee, Robert W. (1999e). Why people evade taxes in Armenia: A look at an ethical issue based on a summary of interviews. Journal of Accounting, Ethics & Public Policy, 2, (2), 408-416, reprinted at http://ssrn.com/abstract=242568. McGee, R.W. (1999f). Is it unethical to evade the capital gains tax? Journal of Accounting, Ethics & Public Policy, 2, (3), 567-581, reprinted at http://ssrn.com/abstract=251491. McGee, R.W. (1999g). Is it unethical to evade the social security tax? Journal of Accounting, Ethics & Public Policy, 2, (3), 585-596, reprinted at http://ssrn.com/abstract=242507. McGee, R.W. (2003). Trade policy as corporate welfare: The case of the US steel industry. In Biberman, J. & Alkhafaji, A.F. (eds.), Business Research Yearbook: Global Business Perspectives, Volume X, Saline, MI: McNaughton & Gunn, reprinted at http://ssrn.com/abstract=410817. McGee, R.W. (2004). The Philosophy of Taxation and Public Finance. Boston, Dordrecht and London: Kluwer Academic Publishers. McGee, R.W. (2005a). The ethics of tax evasion: A survey of international business academics. Presented at the 60th International Atlantic Economic Conference, New York, October 6-9, 2005. Also available at www.ssrn.com. McGee, R.W. (2005b). The ethics of tax evasion: A survey of Romanian business students and faculty, Andreas School of Business Working Paper Series, Barry University, September, available at www.ssrn.com, reprinted in McGee, R.W. & Preobragenskaya, G.G. (eds.) (2006) Accounting and Financial System Reform in Eastern Europe and Asia. New York: Springer. McGee, R.W. & Lingle, C. (2005). The ethics of tax evasion: A survey of Guatemalan opinion. Presented at the 60th International Atlantic Economic Conference, New York, October 6-9, 2005, available at www.ssrn.com. McGee, R.W., Nickerson, I. & Fees, W. (2005). The ethics of tax evasion: A survey of German business students. Paper presented at the 2005 International Conference of the Academy of Legal, Ethical and Regulatory Issues, Las Vegas, October 12-15. McGraw, K.M. & Scholz, J.T. (1991). Appeals to civic virtue versus attention to self-interest: Effects on tax compliance. Law and Society Review, 25, (3), 471-498. Morales, A. (1998). Income tax compliance and alternative views of ethics and human nature. Journal of Accounting, Ethics & Public Policy, 1, (3), 380-399, reprinted in McGee, R.W. (ed.), The Ethics of Tax Evasion. Dumont, NJ: The Dumont Institute for Public Policy Research. 149

Robert W. McGee, Carlos Noronha and Michael Tyler 150Murtuza, A & Ghazanfar, S.M. (1998). Taxation as a form of worship: Exploring the nature of Zakat. Journal of Accounting, Ethics & Public Policy, 1, (2), 134-161, reprinted in McGee, R.W. (ed.), The Ethics of Tax Evasion. Dumont, NJ: The Dumont Institute for Public Policy Research. Oliva, R.R. (1998). The schism between tax practitioners’ ethical and legal obligations: Recommendations for the fusion of law and ethics. Journal of Accounting, Ethics & Public Policy, 1, (4), 603-628, reprinted in McGee, R.W. (ed.), The Ethics of Tax Evasion. Dumont, NJ: The Dumont Institute for Public Policy Research. Pennock, R.T. (1998). Death and taxes: On the justice of conscientious war tax resistance. Journal of Accounting, Ethics & Public Policy, 1, (1), 58-76, reprinted in McGee, R.W. (ed.), The Ethics of Tax Evasion. Dumont, NJ: The Dumont Institute for Public Policy Research. Preobragenskaya, G.G. & McGee, R.W. (2004). Taxation and public finance in a transition economy: A case study of Russia. In Gardner, C., Biberman, J. & Alkhafaji, A. (eds.), Business Research Yearbook: Global Business Perspectives Volume XI, Saline, MI: McNaughton & Gunn, Inc. Ruegger, D. & King, E.W. (1992). A study of the effect of age and gender upon student business ethics. Journal of Business Ethics, 11, (3), 179-186. Schansberg, D.E. (1998). The ethics of tax evasion within biblical Christianity: Are there limits to ‘rendering unto Caesar’? Journal of Accounting, Ethics & Public Policy, 1, (1), 77-90, reprinted in McGee R.W. (ed.), The Ethics of Tax Evasion. Dumont, NJ: The Dumont Institute for Public Policy Research. Serwinek, P.J. (1992). Demographic and related differences in ethical views among small businesses. Journal of Business Ethics, 11, (7), 555-566. Smatrakalev, G. (1998). Walking on the edge: Bulgaria and the transition to a market economy. In McGee, R.W. (ed.), The Ethics of Tax Evasion. Dumont, NJ: The Dumont Institute for Public Policy Research. Smith, S.R. & Kimball, K.C. (1998). Tax evasion and ethics: A perspective from members of the Church of Jesus Christ of Latter-Day Saints. Journal of Accounting, Ethics & Public Policy, 1, (3), 337-348, reprinted in McGee, R.W, (ed.), The Ethics of Tax Evasion. Dumont, NJ: The Dumont Institute for Public Policy Research. Spooner, L. (1870). No Treason: The Constitution of No Authority, originally self-published by Spooner in Boston in 1870, reprinted by Rampart College in 1965, 1966 and 1971, and by Ralph Myles Publisher, Inc., Colorado Springs, Colorado in 1973. Tamari, M. (1998). Ethical issues in tax evasion: A Jewish Perspective. Journal of Accounting, Ethics & Public Policy, 1, (2), 121-132, reprinted in McGee, R.W, (ed.), The Ethics of Tax Evasion. Dumont, NJ: The Dumont Institute for Public Policy Research. Torgler, B. (2003). Tax morale: Theory and empirical analysis of tax compliance. Dissertation der Universität Basel zur Erlangung der Würde eines Doktors der Staatswissenschaften. Vaguine, V.V. (1998). The ‘shadow economy’ and tax evasion in Russia. In McGee, R.W, (ed.), The Ethics of Tax Evasion. Dumont, NJ: The Dumont Institute for Public Policy Research. Wood, J.A., Longenecker, J.G., McKinney, J.A. & Moore, C.W. (1988). Ethical attitudes of students and business professionals: A study of moral reasoning. Journal of Business Ethics, 7, (4), 249-257.

Euro Asia Journal of Management Issue 34, Vol. 17, No.2, December 2007, pp.151-166 AN EXPLORATORY STUDY ON PUBLIC SERVICE VALUES IN MACAU ZENON ARTHUR S. UDANI1 and JAVIER CALERO CUERVO2 ABSTRACT This exploratory study looked into the values manifested by employees of the Macau Government Tourist Office, the Public Security Police and the Health Bureau. Employing the multiple case study method, data were collected through face-to-face interviews. Interviewees generally perceived an improvement in the quality of public service and an overall enhancement in the values of public servants. Good work attitudes, professionalism, effective spirit of service, genuine care and concern for clients, more open communication, and attentiveness to the needs of the general public were among the values cited as crucial in government service. The deliberate formation and development of values among public servants should be explored in the region. For this matter, HRD practitioners should look into the developmental needs of government agencies with the view of humanizing and enhancing the quality of public service. 1 Faculty of Business Administration, University of Macau, Avenida Padre Tomas Pereira, S.J., Taipa, Macau SAR, China. Email: zudani@umac.mo 2 Faculty of Business Administration, University of Macau, Avenida Padre Tomas Pereira, S.J., Taipa, Macau SAR, China. Email: jcuervo@umac.mo

Zenon Arthur S. Udani and Javier Calero Cuervo INTRODUCTION Values refer to what people consider important in life, work and leisure, as reflected in their behaviors and moods (George & Jones, 2002). Values determine what people do and how they do things (Mitchell, 1997). For Chinese societies like Macau, the five constant virtues of loyalty, filial piety, faithfulness, brotherhood and sincerity take on center stage (Correia, 1999). Good values lived by people in the workplace have helped organizations face the hard times (Collins & Porras, 1994). Some business enterprises have been more judicious in adopting a proactive stance toward molding positive values. Recognizing the need to espouse a set of ethical values, these organizations have invested resources to disseminate and inculcate values among their employees (Mele, 1997; Aguilar, 1994; Clutterbuck, et. al., 1992; McCoy, 1985). Values that are internalized by people characterize organizational behavior (Posner et al., 1985). They are either reinforced or challenged by the organization’s predominant culture (Hall, 1994). The top management of any enterprise usually aspires to develop a culture that would benefit the public that they serve. They want a reputation that would win the trust and goodwill of their various publics (Novak, 1994; Hoffman, 1986). When ethical values prevail in a corporate culture, the organization and its employees benefit from the situation. This paves the way to ‘a culture of greater ethical quality’ (Mele, 1997: 21). Noronha (1998) observed how Chinese cultural values are related to certain Total Quality Management (TQM) philosophies and practices in organizations. For example Noronha (1998: 61), noted how ‘Harmony with Others’ is linked with the ‘internal and external customer satisfaction; and job satisfaction and enrichment’. Greater trust and harmony in the workplace enable people to perform more and work better. On the other hand, if the countervalues pervade the culture, the result would be dismal for the organization. Selfishness and greed, for instance, render impossible a cohesive corporate culture and cripple excellent service toward the public. REVIEW OF LITERATURE Literature on values as relevant to organizations highlights their instrumental role in the pursuit of corporate goals and objectives (Collins & Porras, 1994). Espoused corporate values indicate what the organization and its people should do (McCoy, 1985). They are indispensable toward the fulfillment of an organization’s vision and mission (Phillips, 1995; Waterman, 1994). Likewise, values dispose people to reflect on what is ethical (Aguilar, 1994; Waterman, 1994). This challenge is extended to the whole enterprise such as developing a ‘virtuous organization’ (Collier, 1995; Ortiz, 1995) or an ‘ethical organization’ (Di Toro, 1995; Driscoll et al., 1995). 152

An Exploratory Study on Public Service Values in Macau The relevance of values in organizations is intrinsically linked to the need for ethical formation of people (Carballo, 1993). This need is highlighted by a keen interest on virtues which are the good habits of people (Montague, 1992; May, 1988). While the workplace highly regards professional competence among employees, equal attention should be given to integrity and character excellence (Estanislao, 1995; Sonnenberg, 1994; Kouzes & Posner, 1996). Professional development should go in tandem with the development of human virtues. Thus, ethical values have to be nurtured in organizations (Ortiz, 1995; Carballo, 1993). Public service organizations need people who are equipped with the necessary knowledge, skills, attitudes and values in order to render their service effectively and efficiently. Adequate knowledge and proper skills enable employees to discharge their duties faithful to the nature of their jobs and the mission of the organization. Positive attitudes empower them to serve clients according to the manner they want to be served. And ethical values orient and guide employees to pursue what is truly good and important in the fulfillment of their jobs. These values are continually strengthened and reinforced by consistent behavior, as in the case of prompt and efficient service propping up the value of customer care. The relationship of knowledge, skills, attitudes and values considers ‘knowledge’ as an important element of ‘Culture’ and ‘skills’ as reflected in ‘Behavior’ of the Culture- Values- Attitudes-Behavior- Culture continuum (Correia, 1999). While all organizations give due importance to the knowledge and skills of their employees, they have to harness their values as well. In the case of public service organizations, a peculiar set of values characterize them (Mitchell, 1997). A recent report by the United Nations found a renewal of traditional civil service values (United Nations, 2005: 16): ‘This resilience of traditional civil service values is reflected in the renewal of concern in many countries for the recruitment and retention of a core of more or less permanent, committed, talented individuals, a theme that is addressed throughout the present report. One argument is that they are needed to foster a distinctive culture of public service professionalism, including a strong commitment to citizen-centered values.’ Before Macau’s handover to China in 1999, civil service was characterized by ‘inefficiency, insufficient training, politicization, corruption, frequent reorganization and intense bureaucratic politics’ (Lo, 1995:140-141). While Macau’s public service has seen changes over the past few years, developing a culture of excellent service needs more attention. In the absence of a positive public service culture, structural and technical changes may not be sustained in the long run (Lou, 2005). Mr Edmund Ho, Macau’s Chief Executive, has indicated that civil servants should possess five core attributes, namely: (a) the virtue of affection toward the Chinese nation, Macau and its people, (b) capability and adaptability necessary to perform their work, (c) motivation and hard work to perform, (d) efficiency and effectiveness in responding to public needs, and (e) fairness and justice. These five core values characterize what a good civil servant should be and broadly express the requisite public administration culture needed by a good government (Kwok, 2005). Effective and outstanding government agencies, on the other hand, are supported by a mission-guided culture, steered by effective leaders and backed by their stakeholders (Rainey & Steinbauer, 1999). 153

Zenon Arthur S. Udani and Javier Calero Cuervo Macau’s civil service, which had been described as inflexible and overly bureaucratic, had also been criticized as composed of employees who set their self-interest before public interest (Lo, 1995). To guarantee effectiveness and efficiency in public service, besides possessing the relevant knowledge and technical skills, public servants must also have the drive to excel in their work performance and be committed to give the best service at all times (Kwok, 2005). Transforming an organization means transforming its people and aligning their values to the core values of the institution. Ho’s proclamation outlined a template for the ideal demeanor of a civil servant. However, congruence between the ideal and actual performance is verified by an objective evaluation of the work of employees and the public’s satisfaction about their service (Kwok, 2005). If employees feel that they are already doing what they are supposed do and are unwilling to bear more responsibility in revitalizing Macau’s public administration, any change effort will most likely fail. Moreover, cultural reform in the public service may be radical or incremental. While the Macau government has chosen the route of implementing incremental changes focusing on performance standards and work procedures, it will eventually have to deal with transforming its culture in order to build an effective service organization. The government will also have to ensure that any change effort is suited to the needs of the Macau people and the concerned agency. Access to feedback channels, public participation and consensus are crucial to identifying strategic needs and yielding change plans beneficial to the society (Wong, 2004). CONCEPTUAL FRAMEWORK The framework of the research underscores the importance of values in delivering genuine public service among government agencies. While technical skills and knowledge are needed in becoming an excellent professional, good values also have to be acquired by individuals and fostered within the organization in order to ensure high quality public service. Values are important in guiding and directing a person’s thoughts, attitudes, decisions, moods and actions. They also serve as the foundation of a strong organizational culture. The chart below shows the framework of this research, conveying the idea that while technical skills are necessary in fulfilling effectively any task, good values are likewise indispensable in guaranteeing excellent public service. 154

An Exploratory Study on Public Service Values in Macau FIGURE 1 Conceptual framework Improving the technical skills of public servants and enhancing their values facilitate excellent public service. Technical skills pertain to the know-how and expertise of employees. Guided by the right values, these skills are put into proper use in achieving organizational goals and objectives. RESEARCH METHODOLOGY The research employed the multiple case study method focusing on the service of three government agencies which were chosen deliberately for their visibility and relevance to the Macau public. The organizations are the Macau Government Tourist Office (MGTO), the Public Security Police (PSP), and the Health Bureau (HB). The significant contribution of the tourism sector in Macau makes it an important government agency to study. While the PSP provides the crucial service of maintaining peace and order in Macau, essential for the quality of life of residents and good business prospects for investors. The HB looks after the health of Macau residents which is of concern especially after the experience of SARS in 2003. For case studies, it is not necessary for the samples to be chosen randomly as pointed out by Eisenhardt (1989). Convenience sampling was therefore used in order to select the samples. Data were collected through face-to-face interviews. Being a qualitative study that is exploratory in nature, it was decided that 30 interviewees from the employees and 30 interviewees from the clients of the three government agencies would be sufficient for the study. Thus, 30 public servants from each TechnicalCompetence Excellent public service Human Work Values 155

Zenon Arthur S. Udani and Javier Calero Cuervo of the three agencies were targeted for interview; as well as 30 randomly selected clients of each of these agencies were likewise interviewed. The actual number of employee interviews was 80, and clients, 90. Six interviewers carried out the interviews using carefully selected questions focusing on the performance of the government agencies, their merits and shortcomings, the values of the employees and the interviewees’ expected image for each agency. Questions in Cantonese were used for those who preferred or spoke only Chinese. Questions in English were used for the rest of the interviewees. Each interview ranged from 30 to 60 minutes. Most of the interviews were tape-recorded with the consent of the interviewees. And taped interviews were transcribed for data analysis. Summary reports where consolidated for the profile of the employees and clients of each of the departments (see Appendix). Overall reports for each of the departments were drafted. And finally a general report was prepared for the three government agencies. The interview results reflected perceptions of those interviewed which may or may not reflect fairly the status of public service among the agencies considered. Nonetheless, these provide us with an exploratory view of values and services in these government agencies. The other limitations of this study are that the employee-interviewees from the PSP and the MGTO were chosen by the organizations; and for the HB, the available employee-interviewees were mainly their frontline employees. RESULTS AND FINDINGS The Macau Government Tourist Office The client interviewees of the Macau Government Tourist Office (MGTO) were generally satisfied with the overall performance of the agency. All interviewees rated the MGTO’s performance from average to good. They considered the MGTO to be doing relatively well in promoting Macau as a tourist destination. The agency is regarded as one of the most professionally-managed departments of the Macau government. All employee interviewees, on the other hand, thought that their clients were generally satisfied with their performance and services. They also thought that these past years after the handover of Macau to China, the MGTO has improved its service quality and work performance significantly. This finding is based on the perception of the interviewees rather than on a benchmark study utilized by the researchers. The client interviewees lauded the MGTO for its promotional activities, the adequacy of tourism-related information, as well as the increase in the number of tourists coming to Macau over the past years. Clients also characterized employees in the Tourist Information Center as helpful with tourist queries, supportive and kind. 156

An Exploratory Study on Public Service Values in Macau The major shortcomings identified by both the client and employee interviewees included language deficiency, work attitude problems, and the lack of continuous self-development among some employees. Both parties agreed that the MGTO employees, especially those in the frontline, needed more language training in order to be fluent in English, Portuguese and Mandarin. With enhanced language fluency, employees can do their jobs more effectively and efficiently. Moreover, frontline employees need a broader and deeper knowledge of Macau’s history and heritage in order properly respond to the queries of tourists. Some clients also noted the need for more information and promotion about Macau’s heritage sites. They hear a lot more about the casinos in Macau than its heritage. Besides, they also had the impression that tourist-related activities were insufficient, and that the MGTO focused more on tourists from China and Hong Kong, leaving out tourists from other countries. Noting the shortcomings of the MGTO, the client interviewees suggested specific areas of improvement for the MGTO staff members. These included professional training, language training and self-development. Moreover, the client interviewees thought that the work attitudes of the frontline staff should also be improved toward being more responsive, friendly, polite and cheerful toward clients. Employee interviewees, on the other hand, mentioned that the older staff members should be more willing to accept challenges in their work. They also thought that the number of staff members in the MGTO should be increased in order to equitably distribute the workload. Nineteen of the 30 employees who have been with the MTGO for at least 10 years were generally satisfied with their work. Although five of the 30 considered salary and job stability as the most important aspects of their job, the majority of the longer-serving employees (i.e. 10 out of 19), valued work efficiency, seriousness in doing their jobs, accomplishment of work, self-improvement, harmonious work atmosphere, as well as communication and smooth interpersonal relationships. Based on a scale of one (1) to ten (10), with ten (10) being the highest rating given by clients interviewed on their rating of the service of the MGTO employees, an average score of 6.6 was computed. Therefore, the service was viewed by clients as slightly above average. Fifty percent of the interviewed clients are resident of Hong Kong and they rated the service of the MGTO slightly higher at 6.8. Sixteen of the 30 employee interviewees said that they considered their family, as the most important value in their daily life. The other important values noted by the respondents include health, work, happiness and work-life balance. Both employee and client interviewees thought that the MGTO should project the image of being ‘friendly’, ‘helpful’, ‘polite’, ‘professional’, ‘knowledgeable’. The MGTO is promoting such an image to the public through its five Tourist Ambassadors (mascots) – Friendly, Helpful, Knowledge, Polite and Smiling. Client and employee interviewees agreed that the MGTO is doing relatively well in projecting a positive image to tourists and the public. Moreover, both parties think that the MGTO has the responsibility to transform each Macau resident into a tourist ambassador. 157

Zenon Arthur S. Udani and Javier Calero Cuervo The Public Security Police Seventy percent of the client interviewees were satisfied with the performance of the Public Security Police Force (PSP). On the scale of one (1) to ten (10), with ten (10) being the highest score, the perception of the quality of public service of the PSP was rated as slightly above average with a score of six (6.0). They have observed a steady improvement in public order and safety since the handover of Macau to China in 1999. One of the improvements they cited was the quicker response of the police to road traffic situations. In addition, some respondents also thought that today’s policemen were more polite and responsible than before. On the other hand, 33% of the PSP employees interviewed said that, in general, the public is satisfied with their performance. These employees thought that the PSP has improved the quality of its service, communication and transparency toward the public over the past few years. Forty percent of client interviewees indicated that public image of the PSP can be improved further in its communication and relationship with the public. Besides, these client interviewees identified the need for faster responsiveness in to attending cases, soliciting feedback from the public, the building of more police stations, and the need to communicate more often with the public. Clients also wanted to see better work attitudes, such as discipline and professionalism, among the members of the police force. They added that better management and stricter supervision could help the PSP to upgrade its ranks and enhance its public image. In addition, client interviewees noted that the policemen could improve further in their professional competence and language skills in order to adeptly deal with various situations while on duty. The client interviewees suggested higher standards in the entry requirements to the police force. With stricter and better qualification requirements, the PSP can improve the quality of its employees. This change will lead to better work attitudes and greater enthusiasm among the PSP staff. Also, the provision of training is deemed necessary in order to enhance employees’ skills. Moreover, stricter supervision from management can improve the overall image and decorum of the entire police force. Eighty-seven percent of the PSP employee interviewees have been with the service for at least ten years. They think that the PSP has already attained certain improvements over the years, such as better service quality, better communication, more contact with the public, politeness, and improved public safety. Nonetheless, they also admit that their ranks need updating and upgrading in professional knowledge, qualification level, and appearance before the public. Forty percent of the employees interviewed valued their relationship with their co-workers, which they considered as the most important aspect of their job. They cherished harmonious work relationships above other critical factors including salary, performance, and efficiency. Another one third of the respondents said that their emotions and the support of their 158

An Exploratory Study on Public Service Values in Macau bosses could affect the quality of what they do. The interviewees also revealed that as members of a disciplinary force, obedience is also an important requirement of their job. Eight-seven percent of the employee interviewees also said that they worked primarily to support their families. They put the family first in their daily life. However, one third of the client interviewees thought that most of the staff in the department worked only for the money. In summary, client and employee interviewees hope to see a more caring and reliable image for the PSP. The client interviewees prefer more interaction and communication with the police so that the police force can know and understand their needs better. In addition to fostering a caring image, the staff members of the PSP also want a just and responsible image nurtured in their department. Health Bureau Seventy-three percent, or 22 of the 30 client interviewees, rated the Health Bureau’s (HB) performance from average to good. On a scale of one (1) to ten (10), with ten (10) being the highest score, clients rated the quality of the service of the HB as slightly above average with a score of 6.3. Clients noticed more willingness to serve and improved work attitudes among HB employees. On the other hand, about 75% of the employee interviewees rated their department’s overall performance from average to good. Both clients and employees interviewed were satisfied with the HB’s services and they also think that the Bureau has improved continually since the handover of Macau to China. The employees’ desire to put the welfare of the patients first and the fear of being the object of customer complaint have driven the quality of service of the staff members. The complaint system is also playing an important role in making HB staff members more customer-oriented. The employee interviewees who are directly involved in offering medical services mentioned that giving the best quality of service to their patients is the most important goal that they should achieve. Patients, on the other hand, are more vocal than before, allowing the HB to know better their needs and expectations. The client interviewees noted that here is still much room for improvement for the HB. Some clients hoped to see better work attitudes among HB staff members, such as being more caring and friendly, and genuinely service-oriented. Seventy percent of the clients also suggested the need for a more efficient booking and queuing system. Shorter waiting time is considered crucial in health service delivery. Employee interviewees, on the other hand, feel overwhelmed by the increasing demands of their clients. More than half of the employees interviewed thought that the public is satisfied with the service. However, a significant 42% think otherwise. Client respondents gave the following suggestions in improving the overall performance of the Health Bureau: shortening the waiting time of each patient; quicker medical services; better customer service attitude of the staff members; more training for the staff members; having a dispensary inside the hospital; improving the traffic leading to the government hospital; enhancing the quality of diagnosis; increasing the efficiency of the emergency unit; improving the service quality of the enquiry counter; and punctuality among 159

Zenon Arthur S. Udani and Javier Calero Cuervo some doctors. What appeared paramount among the suggestions of the clients are the need for quality and timeliness of medical services. Client interviewees also expected an improvement in the public image of the HB. Seven out of 19 employees interviewed identified the need to be a more caring and service-oriented department. They want HB staff members to be kind, warm, caring, friendly, polite, reliable, fair and enthusiastic. They also expected them to have a clearer sense of mission, to be very professional and efficient in their service. Two-thirds of the respondents identified that staff members of the HB could further improve their work attitude. Other areas for improvement for the employees of the HB include the need for better qualified employees, better management information systems, enhanced work quality and more productive staff. The employee interviewees, basically, shared the same expected image of their department as suggested by the client interviewees. Ten of the 19 employees interviewed want their department to exhibit a more professional image before the public. This can be manifested as well in terms of reliability, better work attitude and better quality of service. Among all these desired images of the HB, one-third of the client interviewees indicated that their most desirable image is the ‘caring’, ‘friendly’ and ‘kind’. Thirty percent of the interviewees desired that the HB should be more ‘responsive’, ‘service oriented’ and ‘reliable’. A quarter of the interviewees indicated ‘professionalism’ and ‘trustworthy’ as the image that the HB should project to the public. CONCLUSION AND RECOMMENDATIONS In general, most of the interviewees spoke positively of the performance of the three government agencies in Macau. There is a general consensus about the perceived improvement in the quality of public service among these agencies and an expressed satisfaction from their respective clients. This reflects an overall enhancement in the values of public servants and effectiveness in rendering service through their respective agencies. Nonetheless, the interviewees agree that the quality public service must be continually improved in order to keep these government agencies more responsive to the needs of the people. Client interviewees of the three agencies expect professionalism, good values, and positive work attitudes from those in public service. Clearly there is the need for those who work in public service to stay closer to their customers, to know better their needs and meet their clients’ expectations. Delivering the right services, at the right time and place, is crucial in this regard. The quality of public service, and the corresponding values that propel them, should continually improve. Good work attitudes, professionalism, effective spirit of service, genuine care and concern for clients, more open communication, and attentiveness to the needs of the general public are among the values expected from those in public service. This suggests the need for enhancing the competencies of people who render the service and funding fundamental 160

An Exploratory Study on Public Service Values in Macau improvements in public service. In this regard, a deliberate effort and a long-term program addressing the developmental needs of employees must be pursued in government agencies in order to improve further the quality of public service. CONTRIBUTION TO HRD This research highlighted the values dimension of public service -- an area which is equally important as having the right skills in public service. The deliberate formation and development of values beneficial to Macau’s public service is an important key result area in workplace learning and performance. Values formation in public institutions should be pursued in the region. For this matter, HRD practitioners should look into the developmental needs of government agencies with the view of enhancing the quality of public service. This research has identified some core public service values which are potential areas of improvement for people in government. Selecting and designing the right interventions attuned to the culture of Macau can significantly improve the quality of public service. REFERENCES Aguilar, F.J. (1994). Managing Corporate Ethics: Learning from America’s Ethical Companies How to Supercharge Business Performance. New York: Oxford University Press. Carballo, R.L. (1993). Moral reasoning and professional behavior. In Center for Research and Communication (ed.) Economics and Society. Metro Manila: Center for Research and Communication. Clutterback, D., Dearlove, D. & Snow, D. (1992). Actions Speak Louder: A Management Guide to Corporate Social Responsibility. London: Clutterbuck Associates in association with King Fisher. Collier, J. (1995). The virtuous organization. Business Ethics: A European Review, 4, (3), 143-149. Collins, J.C. & Porras, J.I. (1994). Built to Last: Successful Habits of Visionary Companies. New York: HarperCollins Publishers. Correia, P. (1999). Cultural Diversity and Management: The Case of Work Motivation. Macau: Macau Foundation. Di Toro, P. (1995). Building an ethical organization. Business Ethics: A European Review, 4, (1), 43-51. Driscoll, D.M., Hoffman, W.M. & Petry, E. (1995). The Ethical Edge: Tales of Organizations that Have Faced Moral Crises. New York: MasterMedia Limited. Eisenhardt, K.M. (1989). Building theories from case study research. The Academy of Management Review, 14, (4), 532-550. Estanislao, J.P. (1995). Foundations for People Development. Metro Manila: Southeast Asian Science Foundation, Inc. George, J. & Jones, G. (2002). Understanding and Managing Organizational Behavior. Englewood Cliffs, NJ: Prentice Hall. Hall, B.P. (1994). Values Shift: A Guide to Personal and Organizational Transformation. Rockport, MA: Twin Lights Publishers. Hoffman, W.M. (1986). What is necessary for corporate moral excellence? Journal of Business Ethics, 5, (3), 233-242. 161

Zenon Arthur S. Udani and Javier Calero Cuervo Kouzes, J.M. & Posner, B. (1996). Seven lessons for leading the voyage to the future. In Hesselbein, F., Goldsmith, M. & Beckhard, R. (eds.) The Leader of the Future: New Visions, Strategies, and Practices for the Next Era. San Francisco, CA: Jossey-Bass Publishers. Kwok, S.W. (2005). Attributes to be equipped by Macau SAR’s civil servants (in Chinese). Public Administration, 68, 435-441. Lo, S.H. (1995). Political Development in Macau. Hong Kong: Chinese University Press. Lou, S. (2005). A rational view in Macau SAR’s administrative culture construction (in Chinese). Public Administration, 67, 71-79. May, W.F. (1988). Professional virtue and self-regulation. In Callangan, J.C. (ed.) Ethical Issues in Professional Life. New York: Oxford University Press. McCoy, C.S. (1985). Management of Values: The Ethical Difference in Corporate Policy and Performance. New York: Harper & Row Publishers. Melé, D. (1997). Etica en la Dirrección de Empresas. Barcelona: Ediciones Folio, S.A. Mitchell, J.R. (1997). Ethics and values in the public service. Available at http://www.sussexcircle.com/pdf/011-Ethics.pdf Montague, P. (1992). Virtue ethics: A qualified success story. American Philosophical Quarterly, 29, (1), 53-61. Noronha, C. (1998). Traditional Chinese cultural values and Total Quality Management. In Inohara, H. & Noronha, C. (eds.) Culture and Management: Observations in Asia, Europe and Africa. Macau: Macau Foundation. Novak, M. (1994). Seven plus seven: The responsibilities of business corporations. Crisis, July-August, 5-9. Ortiz, J.M. (1995). La Hora de la Ética Empresarial. Madrid: McGraw-Hill. Phillips, N. (1995). From Vision to Beyond Teamwork: 10 Ways to Wake Up and Shake Up Your Company. Chicago, IL: Irwin Professional Publishing. Posner, B.Z., Kouzes, J.M. & Schmidt, W.H. (1985). Shared values make a difference: An empirical test of corporate culture. Human Resource Management, 24, (3), 293-309. Rainey, H. & Steinbauer, P. (1999). Galloping elephants: Developing elements of a theory of effective government organizations. Journal of Public Administration Research and Theory, 9, (1), 1-32. Sonnenberg, F.K. (1994). Managing With a Conscience: How to Improve Performance through Integrity, Trust, and Commitment. New York: McGraw-Hill. United Nations (2005). Unlocking the Human Potential for Public Sector Performance - World Public Sector Report 2005. New York: Department of Economics and Social Affairs, United Nations. Waterman, R.H. Jr. (1994). What America Does Right: Lessons from Today’s Most Admired Corporate Role Models. New York: Plume. Wong, C.F. (2004). Public administration employees and civil law system (in Chinese). In Wong, C.F., Lei, S.Y., Wong, K.K., Lei, S.H., Chu, I.M., Ng, M.T. & Cheung, H.H. (eds.) Macau Public Administration Studies. Macau: ALAP. 162

An Exploratory Study on Public Service Values in Macau APPENDIX Profile of employee and client interviewees of the Public Security Police (PSP), the Health Bureau (HB) and the Macau Government Tourist Office (MGTO) PSP – employee interviewees’ profile A. Years of Service Frequency Percentage (%) 5 or under 2 6.45 6 – 10 1 3.23 More than 10 26 83.87 Unknown 2 6.45 B. Position Frequency Percentage (%) Senior Officer 4 12.9 Junior Officer 6 19.35 Front-line 21 67.74 C. Sex Frequency Percentage (%) Male 17 54.84 Female 14 45.16 D. Education Frequency Percentage (%) Elementary 12 38.71 Secondary 12 38.71 University Undergraduate University graduate 2 5 6.4516.13 163

Zenon Arthur S. Udani and Javier Calero Cuervo Profile of employee and client interviewees of the Public Security Police (PSP), the Health Bureau (HB) and the Macau Government Tourist Office (MGTO) PSP – client interviewees’ profile A. Sex Frequency Percentage (%) Male 15 50 Female 15 50 B. Age Frequency Percentage (%) 25 and under 28 93.33 26-30 1 3.33 31-35 0 0.00 36-40 0 0.00 41-45 1 3.33 C. Education Frequency Percentage (%) Elementary 0 0.00 Secondary 3 10.00 University Undergraduate University graduate 23 4 76.6713.33 HB – employee interviewees’ profile A. Sex Frequency Percentage (%) Male 7 24.14 Female 12 63.16 B. Years of Service Frequency Percentage (%) 5 and under 4 21.05 6 to 10 3 15.79 More than 10 12 63.16 C. Position Frequency Percentage (%) Doctor 3 15.79 Technicians 7 36.84 Nurse 9 47.37 164

An Exploratory Study on Public Service Values in Macau Profile of employee and client interviewees of the Public Security Police (PSP), the Health Bureau (HB) and the Macau Government Tourist Office (MGTO) HB – client interviewees’ profile A. Sex Frequency Percentage (%) Male 15 50Female 15 50 B. Age Frequency Percentage (%) 25 and under 14 46.6726-30 4 13.3331-35 1 3.3336-40 1 3.3341-45 2 6.6746-50 2 6.6751-55 4 13.3356-60 2 6.67 C. Nationality Frequency Percentage (%) Chinese 22 73.33Portuguese 7 23.33Others 1 3.33 MGTO – employee interviewees’ profile A. Sex Frequency Percentage (%) Male 10 33.33Female 20 66.67 B. Position Frequency Percentage (%) Manager 3 10Supervisor 16 53.33Rank and file 11 36.67 C. Years of Service Frequency Percentage (%) 5 and under 7 23.336 to 10 10 33.33Above 10 13 43.33 165

Zenon Arthur S. Udani and Javier Calero Cuervo 166Profile of employee and client interviewees of the Public Security Police (PSP), the Health Bureau (HB) and the Macau Government Tourist Office (MGTO) HB – client interviewees’ profile A. Sex Frequency Percentage (%) Male 15 50Female 15 50 B. Residency Frequency Percentage (%) China 5 16.67Hong Kong 15 50.00Local 10 33.33 C. Age Frequency Percentage (%) 25 and under 12 40.0026-30 6 20.0031-35 4 13.3336-40 4 13.3341-45 3 10.0046-50 1 3.33

CHINA BUSINESS PRACTITIONERS’ CORNER The China Business Practitioners’ corner has been established with an objective of providing useful information on doing business in China. The corner will feature real life cases, interviews, and other practical-oriented articles. A COMPARISON OF CASINO CREDIT ISSUES IN THE US, AUSTRALIA, SINGAPORE AND MACAU YANG LING1 ABSTRACT This paper aims at depicting the similarities and differences of casino credit systems in four countries and regions which have legalized gambling namely, the US (Nevada), Australia, Singapore and Macau. It will evaluate and analyze these casino credit systems and the unique regulations integrating with different historical backgrounds and the current situations in the four places. The suitability of the credit system depends on the current situation of a particular place, each of which has its own weaknesses. Therefore, different countries and regions should develop their own suitable credit systems and constantly improve them by learning from one other. INTRODUCTION Some countries which have legalized gambling or which are going to do so have been making great efforts in dealing with the negative side of running casinos, since the gaming industry is often related to social vices such as gambling addiction, loan-sharking and prostitution. However, casino credit is allowed in these places because it can generate more gaming and tax revenue. 1 Beijing Normal University, Zhuhai Campus, China. Email: ylkathryn@gmail.com

China Business Practitioners’ Corner Therefore, social safeguards have become extremely important to prevent these problems, including those stemming from casino credit practices, from happening. Suitable regulations on casino credit can address problem gambling and mitigate the potential impact on individual families and the whole society. Macau legalized gambling in 1847 while Nevada legalized gambling in 1931 (Las Vegas Online, 2008). Australia established the first casino in Tasmania in 1976, followed by Perth, (Western Australia) and Melbourne (Victoria) in the years 1985 and 1994, respectively (Breen & Hing, 2006: 13). After the legalization of gambling, extension of credit has become an accepted practice in the gaming industry. It is supposed to provide convenience to players who may risk carrying large amounts of money to and from the casinos. However, in reality, this convenience can easily cause a player to overextend oneself, leading to eventual tragic consequences. It is astonishing to see how many hits one gets when keying into search engines such as Google words like gambling and suicide. The practice by casinos to extend credit to their ‘big’ clients was rampant in the 1990s all over the world, including Macau, Nevada and Australia. Fortunately, such activities have since been strictly controlled due to worldwide massive credit defaults at that time. Casino credit regulations continued to develop every year according to situational changes in different countries and regions. Macau, Nevada, Australia and Singapore, which has only legalized gambling recently, have established their own credit systems suitable for themselves. CASINO CREDIT AND ENFORCEABILITY Enforceability refers to the ability of a casino to take a punter to court if he or she does not repay the debt after receiving a credit extension for the purpose of gambling. In terms of enforceability, the four places are the same. According to Section 40 of the Singapore Casino Control Law promulgated in 2006, gambling contracts are allowed to be made in casinos which are to be enforceable in courts. In the State of Victoria, Australia, debts relating to money won from or wagered with a casino operator are also enforceable (Cabot et al., 1999: 588). It is the same for Macau now even though before 2004 all credit for gaming was illegal and prohibited by law. Nowadays in Macau, if punters wish to apply for credits, they should better try to obtain a guarantee from junkets, which must be well known and have high prestige in the casinos. The case of Nevada is somewhat complicated. Nevada had adopted the English ‘Statute of Anne’ since 1710, which stipulated that gambling debts were uncollectible. But this had changed in the year 1983 when the Nevada Legislature amended the law to allow casinos the right to collect debts through the court system. Therefore, nowadays a gaming credit instrument2 is enforceable 2 NRS 463.01467 ‘Credit Instrument’ defined ‘credit instrument’ as a writing which evidences a gaming debt owed to a person who holds a non-restricted license at the time the debt is created, and includes any writing taken in consolidation redemption or payment of a previous credit instrument. 168

Yang Ling A Comparison of Casino Credit Issues in the US, Australia, Singapore and Macau in Nevada courts (Cabot et al., 1999: 116). This shows that the governments of the four places have being active in using law enforcement to regulate the casino industry. Nevertheless, there is still a long way to bring casino credit to perfection in these places. A BRIEF INTRODUCTION TO CASINO CREDIT EXTENSION SYSTEMS IN MACAU, NEVADA, AUSTRALIA AND SINGAPORE AND THE REASON FOR THEIR EXISTENCE In Nevada, it is possible for casinos to extend credit to gamblers, and it is mainly done directly by the casinos. Las Vegas is almost exclusively a place for gambling rather than tourism. Casino operators must therefore allow extension of credit to attract gamblers. However, the extension of credit by a casino in Nevada for the purpose of gaming is strictly regulated. Clients must go through certain authorization and financial affordability checks before they receive the credit. Nevada emphasizes the casino operators’ right to reduce bad debts by collecting debts through the court. As is the case with Les Vegas, Macau is well-known as a gambling heaven in Asia and gaming is Macau’s leading industry. Therefore, lending credit is also a very important issue. Before 2004, when the credit law was yet to be established, granting gambling credit was illegal in Macau. The main reason for this is that the government wanted to discourage gambling (Macau Daily, 2004a). Therefore, when a customer left the casino after having lost all his money, he was not able to borrow money for further gambling activities. Furthermore, allowing casino credit may raise vicious competition. In order to attract more customers, casinos had to reduce the requirements on the customers’ payback ability and this finally led to punters gambling blindly. In terms of casino credit granting method, the main difference from Las Vegas is that junkets who act as a media between casinos and clients play a very important role in credit granting in Macau. Macau junkets contribute a large portion of gaming revenue every year. They try to bring customers from outside to Macau and provide transportation, accommodation and entertainment to them. Therefore, Macau is good in attracting people from outside, enlarging the market to reach for higher gaming revenues. So far, casinos in Macau such as Crown, Wynn, Venetian, and Grand Lisboa extend special kinds of credits to customers. For example, Crown issues different cards for its customers, such as Crown card, Signature Card, VIP card and so on. Along with the different types of cards, different services are provided. When junkets and promoters extend credit to customers, the casinos always bear the risk of extending credit. Therefore, they scan and make copies of the customers’ passports or I.D. cards and casino staffs will check the customers’ cards each time when they use it. However, Macau was loosely regulated in terms of the credit extension system. There was no formal law to exactly clarify different issues related to extending credit. But it was believed that the government could, to a certain extent, buffer the problem by setting up a casino credit law. Finally, the new law became effective on 1st July, 2004. Furthermore, it is important to mention loan sharking, which is 169

China Business Practitioners’ Corner taking an active role in the credit system of Macau. Nowadays, loan sharking is still illegal in Macau. However, players can easily get loans not only inside but also outside the casinos. In Australia, the main customers for casinos are the local people. No credit for gaming is permitted in any state to local residents. The government simply aims to use gaming activities to boost up the tourism industry. Casino operators in the State of Victoria may provide chips on credit to a person who is not ordinarily residing in Australia for use while participating in a premium player arrangement with the casino operator according to regulatory requirements prescribed by the Victorian Casino and Gaming Authority. This is because in Australia gaming machines and lottery are more popular than table games. In Victoria, only Melbourne has one casino. Since no credit extension is permitted, in order to prevent players from overusing their credit cards, the government only allows players to withdraw 200 AUD each time with their credit card. The regulator will check this issue every three years (Va Kio Daily, 2004). Singapore is going to have two integrated resorts in 2009, which will contain leisure, entertainment and business zones. Casinos will only be a part of the overall complex. Like Australia, the Singaporean government also treats the establishment of integrated resorts as a strategy to boost tourism appeal so as to raise its status as a leisure destination in Asia and at the same time generate economic growth. Therefore, it is natural and obvious that a total ban on credit for Singaporean punters will be enforced. However, credit may still be granted to players who are non-local residents. CASINO CREDIT EXTENSION TO RESIDENTS AND NON-RESIDENTS As mentioned above, the Singaporean government prohibits casinos and junket operators from extending credit to Singapore citizens and permanent residents3. Casino operators will not be allowed to accept credit cards and post-dated checks. The exception is for punters who maintain a credit balance of at least S$100,000 with the casino operator at the start of their gaming who would be qualified as ‘premium players’. However, since Singapore pays more attention to tourism, the opposite may be practiced with regard to overseas punters. The gaming act will be amended to allow loans or credit extended to non-Singaporeans for the purpose of gambling. The junkets and casino operators will be able to extend credit to foreign punters on an informed basis, with full recourse to debts outstanding. Chia (2007) has suggested the following credit extension offers for Singapore (see table 1). 3 According to the Singapore Casino Control Bill 2006, Section 108 and the 2nd Reading Speech by DPM and Minister for Home Affairs, Wong Kan Seng, Parliament Sitting, 13th February 2006. 170

Yang Ling A Comparison of Casino Credit Issues in the US, Australia, Singapore and Macau TABLE 1 Type of player and the period of credit Type of player Maximum line of credit Period of credit Regular player USD $5,000 - 50,000 3 days Premium player USD$ 50,000 - 500,000 7 days Whale* USD$1,000,000-10,000,000 Negotiable * Typically defined as a player who checks in a minimum of US$1,000,000. So far, the Singaporean government has not yet set up detailed regulations on credit extension reporting and documentation. However, it requires recording transactions of S$5,000 and above. Transactions of S$10,000 and all other suspicious transactions will be reported to the regulator. Casinos need to keep all relevant records for a minimum period of seven years4. In Nevada, since the gaming industry is relatively more mature with a good regulation of casino credit, there are more detailed and specific requirements and procedures for casinos to follow. The licensee is required to document, prior to extending credit, the patron's established credit history to provide evidence of credit-worthiness. According to the State of Nevada Gaming Control Board (2000) 5 , acceptable sources to obtain this information include credit-reporting agencies, financial institutions (usually banks) at which the patron maintains an account, another licensee or other businesses that have extended gaming credit to the patron. If credit information is unavailable for a patron who is not a resident of the US, the licensee must obtain information from an agent or employee of the licensee who has personal knowledge of the patron’s credit background so as to establish a reasonable basis for the credit extension. Besides credit background sources, there are standards for the authorization and extension of credit (State of Nevada Gaming Control Board, 1997). When patrons who have credit limits or are issued credit of over US$1,000 (excluding payroll checks, cashier’s checks, and travelers checks), the following information must be recorded: a) patron’s name, current address, and signature; b) identification verification; c) authorized credit limit; d) documentation of authorization by an individual designated by management to approve credit limits; e) credit issuances and payments. Because a series of procedures must be carried out and the amount of credit applied is strictly controlled, this practice seems to lack flexibility and may not be favorable in terms of promoting gaming promotion in other regions like Macau. Compared to Nevada, the regulation in terms of casino credit in Macau is relatively loose and simple. It largely depends on traditions and customs that are not systematic enough since in Macau credit extension activities are carried out mainly by junkets. It is an important promotion method for attracting clients from other countries. These junkets are usually native to the cities in which the punters come from and are therefore in a better position to assess their credit-worthiness and to recover the eventual debt due. 4 According to the statement by Minister for Home Affairs, 18th April 2005. 5 Regulation 6.120(2)(a) in Gaming Audit Procedures Manual. Available at: http://gaming.nv.gov/ngc_main.htm 171

China Business Practitioners’ Corner In Nevada and Australia, casinos will also employ junkets; however those junkets are only responsible for bringing outside players into casinos and are not involved in any credit transaction or extension which is very different from Macau. In Macau, junkets give non-redeemable chips to players and receive commissions from the casinos according to the amount of chips given out. When the junkets extend credit to punters, they will try to obtain knowledge about the person’s financial situation, but this still largely depends on trust between them. They use their experience to judge whether to give credit to a customer or not. Therefore junkets in Macau may have to bear high risks when granting credit, especially in the past when there was no protection of credit by law. This practice may be unbelievable from the Westerners’ point of view. But this is a reflection of the Chinese collective culture, which emphasizes on good ‘relationship’ among people when doing business. It is in a way a good method to maintain customers. The operation of private VIP rooms and the role of junkets are especially unique to Macau. Casinos provide non-redeemable chips to contractors of the VIP rooms. After reaching the contracted amount of sales of these chips, contractors receive commissions and share the total win with the casino. Contractors of the VIP rooms give non-redeemable chips to junkets and junkets can get commissions if they reach the expected sales to VIP players. Since VIP rooms contribute to a large portion of the gaming revenue, it is very important to know Macau’s special practice of VIP rooms and junkets. In the year 2004, a casino credit law was established in Macau. The new law (Law no. 5/2004) defines that legal credit extension should only refer to the transfer of ownership of chips, and any credit in the form of cash, check or electronic transfer will be illegal. The entities that may grant credit are the gaming concessionaires, sub concessionaires, and gaming promoters (Article 3 of Law no. 5/2004). These granters must exercise the activity directly and they cannot delegate their powers to other entities (Article 5 of Law no. 5/2004). The granting of credit by any other entities will be treated as a criminal offence and will be punished by the law. Gaming promoters can employ collaborators through contract to help gaming promoters to enlarge their businesses, but the collaborators themselves do not have the right to grant credit. Junkets must make a contract with the concessionaires to be a credit lending entity to provide credit directly, or to be a middleman to provide credit indirectly to clients (Article 8 of Law no. 5/2004). It is also being included in the contract that junkets are responsible for a certain part of the casino revenue so as to ensure the casino profit and the gaming tax (Macau Daily, 2004b). However, the new law is relatively simple. It mainly focuses on granting the right for casinos and junkets to issue credit, but there is no detailed systematic credit application and extension procedures like those in Nevada. Therefore, Macau casinos and junkets do not have conscientious and detailed credit granting criteria and procedures to follow. This shows that Macau is relatively weak in terms of the legal and regulatory framework. In the Australian state of Victoria, it is regulated that ‘A licensee may not lend or offer to lend money to a person who is in, or appears to be about to enter, a gaming area within the licensed premises or extend or offer to extend credit to a person to play a gaming machine on the licensed premises’ (Gambling Research Panel, Victoria, 2003), which simply means that gambling providers are not allowed to provide credit or lend money to anyone for the purpose of 172

Yang Ling A Comparison of Casino Credit Issues in the US, Australia, Singapore and Macau gambling. The law also states that if a general operator or an employee makes a loan or extends credit in any form to a person to take part in approved wagering, he will receive a maximum penalty of 200 penalty units6. CREDIT COLLECTION In Nevada, the only persons or entities that may collect gaming credit are: a) bonded and duly licensed collection agencies; b) employees, junket representatives (independent agents) and attorneys of a casino; c) affiliated or wholly-owned corporations and their employees (Cabot et al., 1999: 117). For a casino, the most important limitation is that the gaming debt must be represented by a written credit instrument. The effective time is 90 days at one time, the credit instrument is considered collectible (State of Nevada Gaming Control Board, 2000)7. Casinos will require clients to sign a credit instrument, and if the player has enough chips at the end of his game he can redeem the instrument. If the player loses, or does not wish to cancel the loan, the instrument will be deposited in the casino’s bank for collection from the player’s bank, just like any other check. The very unique policy in Nevada compared to other countries and regions is that if the casino cannot collect the debt back after certain efforts, the bad debt will not be considered when paying gaming tax. It is a policy for the government to protect gaming concessionaires to reduce losses. Compared to Nevada’s practice, Macau does not have credit instruments. The junkets simply sign a simple contract with the clients. Since most players in Macau come from mainland China, it may happen that some mainland players may not repay the debt and just return to their hometown to escape from it. This is because there is a conflict between Macau and the mainland laws in terms of gaming issues. In the mainland, gambling and the related credit debt collection activities are illegal or even punishable by criminal law. However, it is the opposite case in Macau especially since the new credit law regulates that debts arising from credit for gaming can be judicially enforced (Article 4 of Law no. 5/2004). As a result, court judgment and decisions in Macau concerning debt collection of mainland customers may not be supported by the related Chinese laws and therefore collections cannot be carried out in mainland China. Thus, in this case, if Macau collectors go to the mainland to collect debts, this is actually illegal. In recent years, more and more mainland customers are coming to Macau individually which makes this problem worse and worse. Some mainland VIP customers may even bring public money to gamble in Macau. In an interview conducted in Macau, a junket told the author that she knew that some of the punters she brought to casinos have used public money, but she claimed that it is not her business. The issue of people gambling using public money is indeed a serious social problem. 6 According to Article 209 (1) of the Gambling Legislation Amendment No. 51 (2000). 7 Regulation 6.120(2)(a) in Gaming Audit Procedures Manual. Available at: http://gaming.nv.gov/ngc_main.htm 173

China Business Practitioners’ Corner 174 OTHER PROBLEMS AND QUESTIONS DRAWN FROM CASINO CREDIT ISSUES Australia prohibits any form of credit extension. However, it is customary for casino operators to accept checks from patrons8. This practice of accepting personal checks or traveler’s checks actually allows some casino operators to establish a deposit account for a player that can be credited as cash. Some of the advantages of a credit restriction are lost if checks are allowed to be cashed, because if there is no money to cover the checks, in practical terms it means that credits will already have been given. Nevada has very mature internal control and social safeguard regulations. Whether those regulations can be carried out properly and completely is still a problem. The manner in which the surveillance is carried out seems not proper, especially for foreigners. For example, Chia (2007) pointed out that the routine checks on bank relationships are frequently ineffective because of secrecy acts, and the bureaus normally rely on network assessments which can be vague and outdated. There is a big question that raises a wide debate. Facing foreign investment, especially American investment, does their policy of deducting bad debts from gaming tax fit Macau? Since Macau legally allows casino credit, so it should have some concern about how to deal with the bad debts generated. In Las Vegas, the gaming tax is only 8.25% for casino properties that earn revenues of more than US$1 million a month (Morrison, 1999), and it is possible to deduct bad debts from tax. If Macau adopts this practice, it can attract more American investments. However, in Macau the gaming tax rate is 35%, which is much higher than that in Las Vegas. Therefore, if Macau introduces this policy, the calculation of the gaming tax will be a problem and more importantly, this practice will have a large negative impact on government tax revenue. Therefore, the Macau government should be cautious in determining whether to carry out this American policy or not. Recently, more and more casinos have been established in Macau since the opening up of the casino industry in 2002. There is definitely fierce competition among casinos. Some casinos offer zero or even negative credit interest to attract customers. Competition among VIP rooms is even more dramatic. Big customers or whales can usually receive zero interest credit. The junkets sometimes share the commissions with them or may even not get any commissions in order to reach a certain amount of revenue. In Las Vegas, casinos also often do not charge any interest or even give 10% to 15% credit discount (Macau Daily, 2003a). Research conducted in the gaming industry shows that casino credit will sooner or later become very important in the competition among concessionaires and gaming promoters (Macau Daily, 2004c). 8 As pointed out in the NSW Legislative Council Hansard: Casino Control Amendment (Cheques) Bill, Second Reading by the Hon. R. D. Dyer.

Yang Ling A Comparison of Casino Credit Issues in the US, Australia, Singapore and Macau CONCLUSION AND RECOMMENDATION Different countries and regions execute different systems that may or may not fit their current situations. Therefore it is possible for them to revise their own practices and absorb others’ experience so as to strengthen themselves. A good legal framework is extremely important during the development of a country or a region’s casino credit system. The government will take part of the responsibility, but the concessionaires themselves should provide practical suggestions. In this way, new laws and regulations can be established at the right moment, with proper contents satisfying both public interests and legal regulatory needs. Take Macau as an example, the new law has provided legal protection and a safe environment for Macau’s credit granting system, and it has reduced the potential problem of the fight for gaming marginal profit. Also, the Department for the Investigation of Gambling-related and Economic Crimes of the Judiciary Police is primarily accountable to prevent and investigate casino-related crimes such us, the counterfeiting of currencies, bills of exchange, stamped values, or their alike, and/or the passing of such counterfeits; crimes committed inside casinos, rooms and gaming venues, or at their surroundings, providing that such crimes are related to gambling; and the ones related to computer technology; money laundering, its alike or related. In addition, the Department is accountable to take preventative and investigative actions related to crimes, which probing shall, by law, fall under the jurisdiction of the Judiciary Police, or those that it had been assigned by the Attorney General. Macau’s own way of granting credit has its advantages and disadvantages, and the optimal situation is that the new regulations should enhance the advantages and weaken the disadvantages. It is also possible to refer to good practices in foreign countries, especially those in the US. However, Macau definitely should not just copy the American practices. Macau should try to develop a suitable credit granting system gradually. However, it is hard for us to expect the new laws and regulations will solve all the problems related to credit granting. Besides government supervision, gaming entities should receive enough free space to test or to develop the most proper business operation system by themselves. Therefore, the Macau government suggests the setting up of a gaming law that can strike a reasonable balance between public interest and legal regulation (Macau Daily, 2003b). In order to solve the negative social problems created by credit granting, responsible gambling should be emphasized in all countries and regions which legalize gambling. For example, Nevada casinos offer a hotline that helps players cancel or reduce credit lines upon their request. Australia has psychologists in casinos ready to systematically redress the players’ misunderstandings and to reform a rational judgment of gambling activities (Macau Daily, 2005). Macau and Singapore should adopt these kinds of good practices. It is also recommended that a central information checking website should be established (Macau Daily, 2004d). All casinos in a country or region could then be connected 175

China Business Practitioners’ Corner 176together. Different casinos can thus exchange customers’ gaming information. It is helpful to know their past payback ability and recent debt situations quickly. It also avoids customers from borrowing credit from several casinos at the same time and not having the ability to pay back. However, due to customers’ privacy, only the management level of the casinos should be authorized to enter the website and check the information. In order to strengthen casino credit regulation, different places have set up their own administrative gaming bureaus. The Ministry of Home Affairs in Singapore is also going to set up a new regulatory agency to monitor casinos with its vendors, suppliers and agents. However countries and regions should not be limited to this, a national framework is urgently needed. Gaming is a kind of internationally popular entertainment activity. Although different places may have their own cultures or practices, international interaction and cooperation is urgently necessary. REFERENCES Breen, H. & Hing, N. (2006). Casino history, development, and legislation in Australia. In Hsu, C.H.C. (ed.) Casino Industry in Asia Pacific: Development, Operation, and Impact. Binghamton, NY: Haworth Press. Cabot, A.N., Thompson, W.N., Tottenham, A. & Braunlich, C.G.. (1999). International Casino Law. 2nd edition. Reno, NV : Institute for the Study of Gambling and Commercial Gaming, College of Business Administration, University of Nevada. Chia, T.L. (2007). Taming the casino dragon: The only certain thing in life is its uncertainty. Available at: http://www.globalgamingnews.com/news_asia/taming-the-dragon.html Gambling Research Panel, Victoria (2003). Summary of Australian States and Territories Self-exclusion Programs and Harm Minimization Policies/Strategies Report B: Prohibition of Lending or Extension of Credit. Department of Justice, Victoria, Australia. Available: http://www.justice.vic.gov.au/CA256902000FE154/Lookup/GRP_Reports_Files5 Las Vegas Online (2008). Historical information. Available at http://www.lvol.com/lvoleg/hist/historal.html Macau Daily (2003a). Section B3. October 24. Macau Daily (2003b). Section B10. September 15. Macau Daily (2004a). Section 3. February 21. Macau Daily (2004b), Section B1. June 14. Macau Daily (2004c). Section A3. July 1. Macau Daily (2004d). Section B1. April 11. Macau Daily (2005). Section B7. October11. Morrison, J.A. (1999). Neal seeks vote on gaming tax hike. Las Vegas Review-Journal. Available at: http://www.reviewjournal.com/lvrj_home/1999/Apr-25-Sun-1999/news/10968670.html State of Nevada Gaming Control Board (1997). Minimum Internal Control Standards. Author. State of Nevada Gaming Control Board (2000). Gaming Audit Procedures Manual. Author. Va Kio Daily (2004). Section 4. November 5.

INTERVIEWS WITH THE GURUS BY JORGE NASCIMENTO RODRIGUES Jorge Nascimento Rodrigues, editor of the renowned on-line management resource web page gurusonline.tv, brings to EAJM the latest from the management gurus. THE TWO OLDEST MATRICES OF WORLD DISCOVERIES: PORTUGUESE AND CHINESE HISTORICAL LINKAGE1 JORGE NASCIMENTO RODRIGUES2 and TESSALENO DEVEZAS3 Portuguese and Chinese histories have a profound historical linkage - the globalization path in its birth period. During the 14th and 15th centuries the Portuguese and Chinese navigators and explorers shared a common portfolio of world vision: strategic intent, out-of-the box thinking, scientific commitment and power projection. Both revealed strategic intelligence, the most important ingredient of great power politics. The Chinese stopped their oceanic projection just at the moment the Portuguese became the new maritime challenger. It was an opportunity window for the Portuguese to complete what the Chinese left unfinished. They filled the vacuum left by the Chinese. And accomplishing that mission, the Portuguese gave birth to globalization, as a new long historical step of the evolution of the world system. Ironically, the Chinese came from the South China Sea to the Indian Ocean. The Portuguese did the reverse route - from the Atlantic to the ‘locked’ Indian Ocean and afterwards to some regions of the Pacific. Here we intend to formulate the hypothesis of the two Discoveries' Matrices, their similarities and differences. Research on these Matrices is very recent. More investigations are necessary. The Portuguese Discoveries Matrix was presented in our book, Portugal, Pioneer of 1 A sequel to Portugal, Pioneer of Globalization (2007), Centro Atlântico Publishing House, Portugal. Available at: http://www.centroatlantico.pt/globalization 2 www.gurusonline.tv 3 University of Beira Interior, Covilhã, Portugal

Jorge Nascimento Rodrigues Interviews with the Gurus Globalization, and the Chinese Matrix has been described in different papers and books of Chinese and foreign origins. Now we put the pieces together in a comprehensive manner. THE LEGACY OF THE CHINESE NAVIGATIONS At the dawn of the 15th century, when the Portuguese Prince Henrique had not yet justified his nickname, ‘the Navigator,’ the Chinese in the Ming Dynasty launched seven expeditions toward the Indian Ocean, going well beyond their traditional oceanic sphere of influence. Their objective was to assert a hegemonic role in that part of the world, but, in 1433, they ceased this expansion as a consequence of the reactionary movement of the Chinese Confucian bureaucracy amidst a crisis of hyperinflation. As the economic historian Angus Maddison states, the Chinese undertaking had never been, since the beginning, to create a network of positions with strategic, commercial or military objectives, despite their notions of a naval projection previously unparalleled in history. After some of the expeditions, the objectives clearly evolved - the Chinese navigations were an evolutionary process, precisely as the Portuguese saga later on. Their retreat would in turn constitute an open door for the navigators who followed directly upon their heels, reaching the Indian Ocean from the West. This Chinese endeavor, however, according to some, left a technological legacy around the world, of which the Italian - and indirectly the Portuguese - took bountiful advantage. A controversy is now ongoing with respect to the significance of the Chinese navigations prior to the entrance of the Portuguese onto the scene. At the beginning of 2006, the intellectual and historical world was shaken by a sensational news report. The Economist published an 18th century Chinese map that demonstrated ‘an integrated world’ (based on six Chinese characters printed on the map). This is thought to be copy of a cartographic representation dating back to 1418, which would make it a creation fully independent of contemporary Italian Renaissance cartographers and of Prince Henrique. The map was in the possession of a Chinese collector who understood its importance through reading a disputed book by all the scientific community, 1421, authored by Gavin Menzies, an English submarine commander. It apparently came into the Chinese collector's possession by mere chance. He purchased it in 2001 for $500 at an antique shop in Shanghai. Soon after this revelation, in January 2006, a rather efficient media campaign started to emanate. The world-map’s overwhelming impact was due to its completeness in representing the five continents and showing, presumably in 1418, that the oceans were clearly united. Indeed it demonstrates the feasibility of the Cape route and world circumnavigation well before Bartolomeu Dias defied the phantom of the Cape, the mythical ‘Adamastor’ (in 1488), and before Fernão de Magalhães (Magellan) perished in the Philippines (in 1521) nearly concluding the first journey around the world. Therefore, assuming the 1418 date of the original map, it must be thought that the correctness of this drawing could only be the result of empirical 178

The Two Oldest Matrices of World Discoveries: Portuguese and Chinese Historical Linkage knowledge that had been transmitted to Chinese cartographers, by Chinese navigators, at the beginning of the 15th century. The connection was immediate in the minds of certain historians. The map challenged the received version of history: its knowledge could only have resulted from the ‘Dragon Explorers’ of the 15th century under Admiral Zheng He’s leadership. Zheng He, also transcribed Cheng Ho, earning the nickname San Bao (three treasures), born as Ma He, one of the boys castrated at Kunming, was a Muslim eunuch by birth, devoted to Buddhism, in service to Yong Le, emperor of the Ming Dynasty, who had taken over by force the ‘Dragon Throne’ in 1402. Yong Le projected a vast, global 20-year program for the Ming Empire, which led to a series of journeys to ‘Xiyang’ (the ‘Western Ocean’), continuing from 1405 to 1433. Yong Lee, at the age of 64, died in 1424 after putting into effect some of the most important expeditions of the ‘Eunuch Admirals’ under the command of Zheng He. But emperor Yong Le's successors - son and grandson - initiated a retrograde process of deactivating the global strategy and dismantling all Chinese overseas infrastructures created by him. The global knowledge acquired from these Chinese discoveries may well have reached Europe, despite the apparent cleansing efforts of the records concerning these navigations, after Yong Le's death. The Portuguese would most likely have been the first to take advantage, under great secrecy, of this asymmetric information about what the European tales and myths had baptized the Mar Ignoto (the Unknown Sea). With such precious clues, the political leaders (starting with the brothers Prince Henrique and Prince Pedro) and the Portuguese navigators would certainly have had their missions in the High Seas made much easier than what was depicted by the chroniclers and the great Portuguese poet Camões. The thesis of Chinese pioneering was mainly divulged with the publication of Menzies’ book, in 2002, but has been strongly criticized as being frankly poor in its scientific argumentation. The Royal Navy commander intended to reveal a secret in his book: the Europeans may have had access to that almost perfect Chinese knowledge of the ‘integrated world’ through the Venetian Niccolò da Conti, who, over the course of 25 years (1419-1444), traveled through Asia and became acquainted with Zheng He’s deeds. The chronicles or stories about these journeys would have circulated first as manuscripts and have influenced the Italian cartography of the time, namely the Genovese School (1447-1457) and Friar Mauro, from whom the Portuguese King Afonso V ordered a circular planisphere, completed in 1459. Menzies’ next step was to claim that the Portuguese Prince Pedro secretly brought back from Venice, in 1428, a world map in which the Cape of Good Hope and the Strait of Magellan were already represented, thanks to the expeditions of the eunuch Admiral. Menzies quoted António Galvão, the Portuguese author of the Tratado dos Descobrimentos (Discoveries Treaty) published after is death in 1563, but the supposed precious secret that Pedro had brought from Italy still has not been proven today. As many questions related to the map brought forth in 2006 are still unanswered, the controversy in relation to Chinese pioneering will no doubt endure for some time - Menzies will sort out with a new book in June 2008, referring the supposed 1428 ‘link’. What is accepted until now by the Chinese and foreign scientific community is that the Chinese would have traveled over much of the Pacific and Indian Ocean, covering more than 179

Jorge Nascimento Rodrigues Interviews with the Gurus 50,000 kilometers (100,000 ‘li’ by traditional Chinese unit of distance) and visited more than 3,000 ‘barbaric’ locations in less than 30 years, as reported, in 1431 by the Admiral himself. One expedition combined 62 great junks carrying 17,800 soldiers on board! It all began with an incipient desire to re-establish the protectorate over the Sunda Islands (now including Borneo, Java, Sumatra, Bali, Flores, as far as Timor), which supplied China with gold and spices, as Fernand Braudel states in his Grammaire des Civilisations. Seven expeditions, between 1405 and 1433, would have reached Indonesia, Indochina, India (Calicut), Ceylon (now Sri Lanka, where a garrison was erected), Hormuz in the entrance to the Persian Gulf, Jeddah (now the second largest city in Saudi Arabia) in the Red Sea, and finally the Eastern coast of Africa (Mogadishu, in modern Somalia, and Zanzibar). Malacca and Calicut were regarded by the Chinese as military bases and strategic commercial ‘hubs’ on these voyages and routes. Much to the surprise of the Chinese at home, the explorers brought back giraffes from Africa (qilin in Chinese), an animal that the Ming Emperor almost immediately transformed into a magical creature. Chinese scholars continue to study the many reasons behind the abrupt termination of the Expansion. By imperial proclamation in 1433 - the Hai jin - proclaimed the end of maritime expeditions for a period not well defined today. New imperial edicts were issued in 1449 and 1452. Around 1479, the vice president to the Ministry of War submitted a proposal to the Ming Imperial Court in which the registers of these expensive expeditions were to be destroyed; at the same time Confucian bureaucracy won the campaign against the endeavors toward exterior regions. Building a seaworthy junk with more than two masts was punishable by death and in 1525 all such junks were ordered destroyed. Formally, the proclamation was only lifted in 1550 - by coincidence, at the same time in which the Portuguese established their first contacts with Macau. But, even in 1551, espionage was redefined to include anyone who went to sea in a multi-masted ship. By that time, António Galvão, whom we mentioned above, was told about the early Chinese navigations when he visited China in 1555. During the mid 15th century, China again witnessed itself foregoing geo-strategic opportunities to play the role of a leading world power, as occurred during the Sung Dynasty from the 10th to the 12th century. China missed this great opportunity as Chinese Prime-Minister Wen Jiabao recognized recently in Singapore. It was the first, from a group of three (including the closed policy of the 17th and 18th centuries, and the Cultural Maoist Revolution of the 1960s), historical opportunity missed. THE CHINESE MATRIX Here we summarize the 10 ingredients (main characteristics) of the Chinese navigations of the 15th century: Strategic intent: China must reemerge and regain the world leadership from the Golden Age of the Sung Dynasty; the outside world must be aware of the greatness of China. 180

The Two Oldest Matrices of World Discoveries: Portuguese and Chinese Historical Linkage Maritime DNA: A long tradition of maritime voyages of discovery dated from the Sung Dynasty (10th-12th century), the Golden Age of Chinese hegemony of the world, and later on with the fleets of Kublai Khan (grandson of Genghis Khan, founder of the Chinese Yuan Dynasty in 1271) in the 13th century. By 1430, China probably peaked the development of its naval power. The Ming navy outclassed that of any other Asian nations at any time in history, and would have been more than a match for that of any contemporary European state or even a combination of them. Felipe Fernández-Armesto, in his research about civilizations (Civilizations - Culture, Ambition and the Transformation of Nature, 2001) considered South China a ‘seaboard civilization of maritime Asia’. Early maritime technologies, weaponry and logistics: Such as skills in astro-navigation and some methods of determining longitude, not fully resolved; desalinating sea-water techniques; Chinese ships already armed with gunpowder weapons, brass and iron canons, mortars, flaming arrows and exploding shells; the Chinese manual of the arts of seamanship and naval warfare summarized in the Wu Pei Chi, whose originals are in Beijing, although the British Library holds copies; focalization in human details (the fleets carried concubines!); Scientific commitment: Such as a committee of distinguished astronomers set up by the Emperor to ‘compare and correct the drawings of the guiding stars’ (Shun Feng Hsiang Seng [Fair winds for escort], anonymous author, c. 1430); the idea of a network of astronomical observatories in other Asian countries, like Japan and Korea (two countries brought into the Chinese tribute system), linked with the Beijing great observatory, supposed to be the centre of the known universe; attraction of foreign navigators and cartographers; the setting up of one of the earliest world records (I Yu Thu Chih [The Illustrated Record of Strange Countries], c.1430), a compilation of people, animals and places known to the Chinese of the early 15th century. Soft power strategy: The objective of the navigations and the vast armadas were a new diplomatic tool to impress and intimidate foreign rulers of the Indian Ocean, bringing those regions into China’s tribute system. Rulers paid tribute to China in return for trading privileges and protection against their enemies; but the Chinese always gave its trading partners a greater value of goods (like silk and porcelain at discounted prices), creating a psychological debt. The Chinese preferred to pursue their geo-strategic aims mainly by trade, image, influence and bribery, rather than by open conflict, brutal force and direct territorial colonization - hard power comes after, if and when needed, as a last political resort. World knowledge city: The project was to transform the new capital city, Beijing, into the world intellectual capital, with encyclopedias and libraries covering every subject known to man. The great project Yong-le-Dadian began in December 1404 involving 2,180 scholars. A language school was established in Nanjing in 1407 to train interpreters for the voyages. Religious tolerance, non-ideological evangelization: The Chinese armadas habitually carried Muslim, Hindu and Buddhist savants to provide advice and guidance. Network of checkpoints and ports-of-call around the Indian Ocean: For example, Malacca (in the Straits of the same name) was used as a forward base and Calicut (in India, where Vasco da Gama would arrive later on) was recognized by the Chinese as the meeting port of all foreign merchants. The Chinese used extensively the ports of Hormuz in the Persian Gulf, Malindi, Kilwa, Zanzibar, Sofala and Mombasa in East Africa. 181

Jorge Nascimento Rodrigues Interviews with the Gurus Network of settlements abroad: Some authors pointed out that the Chinese of the 15th century navigations would also have set up longer-term settlements namely to exploit the mineral riches they discovered during their voyages. Bi-hegemony of the Indian Ocean: The Chinese managed a geopolitical situation based on a mutual interested relationship with the Muslims from Egypt, the Gulf States and the Gujarat. The problem with China was the political backlash and the reversal of geo-strategic policies after Yong Le’s death. A power decline succeeded and by the middle of the 16th century almost nothing was left of its former grandeur. In any case, this history of Yong Le’s Power Projection Project for 20 years reminds us that China is an old power with strategic intelligence. Usually China is referred in the West as the master of the Art of War - the famous military treatise written by Sun Tzu. But the art of strategic intelligence is even more important, despite less referred and quoted in the West. THE PORTUGUESE MATRIX The main impact of the Portuguese expansion is still alive today, and regards what we call the ‘Portuguese difference’, which induced this country to the status of globalization pioneer, which is the main argument of our book. It is the historical root of this small nation placed in the Western corner of Europe. We coined it the ‘Discoveries Matrix’, whose 10 differentiating aspects are developed later in this paper. Before presenting the Matrix let us present a summary of our book’s concluding remarks. The Portuguese expansion from the 14th to the 16th century was a typical evolutionary process that allows us to design a profile of ‘being Portuguese’. This set of distinctive differences we coined them as ‘the Discoveries Matrix’. The investigation on that inheritance has led us to the 10 characteristics which have indeed made a difference during that period of time: strategic intent; global vocation; scientific commitment; knowledge management; out-of-the-box thinking; control of asymmetric information; incrementalism; critical attitude; geo-strategic 'cleverness' and organizational improvisation. The hypothesis formulated and presented in our book is that the Portuguese of the 21st century can use these strengths of the Discoveries era as starting points to trace their professional and collective paths. This, however, does not admit moral connivance with brutal violence, barbarity, mercenary spoliation and plundering, slavery and imperialism that, at the time, branded the global projection of the small rectangle at the corner of Europe. This geo-strategic inheritance is considered, in our book, the fundamental asset for the country’s intellectual capital. 182

The Two Oldest Matrices of World Discoveries: Portuguese and Chinese Historical Linkage THE DISCOVERIES MATRIX, THE PORTUGUESE DIFFERENCE, 10 INGREDIENTS Strategic intent: As stated by Agostinho da Silva, the Portuguese people are only pro-active if they have ‘an enterprise to execute’. Globalist vocation: Fernando Pessoa once said, when referring to ‘being Portuguese’, that this figure could not live the ‘narrowness of only one personality’ and that it was ‘everything in all manners’. The extension of the Discoveries points, in fact, to a world strategy presenting a variable geometry. The Portuguese global spirit historically opposed the strict geo-strategic options (as the Iberianism wanted during periods of identity crisis, the ‘Lusitanian community’ from the time of the dictatorship or the modern version of the ‘priority of priorities’, erratically defined at the mercy of contexts). Scientific commitment: The oldest ‘Lisbon (European) Agenda’ in research and development. Knowledge management: The Discoveries were an example of the establishment of innovative structures and dynamics (Prince Henrique’s think tank; the Cosmographer’s Commission created by King João II; the academic mobility boom with the King’s scholars in Europe and the foreign scholars in Portugal in the last quarter of the 15th century and the first half of the 16th century; and the elaboration of a ‘knowledge workers’ pool - an interpretation offered by the late Peter Drucker, the ‘Father of Management’). Looking abroad: An ‘out-of-the-box’ thought, which went beyond the boundaries of geopolitical dispute (then the Mediterranean) occupied by the dominating powers and the challengers of the time. Control of asymmetric information: The Discoveries were the golden years of ‘the worship of the unpredictable’, that is, between the known and the unknown. The Portuguese chose the latter (as Agostinho da Silva said), which, at the time, guaranteed a strategic advantage. Incrementalism: During the strategy formulation, the place of honor was attributed to the role of ‘trial and error’ and pragmatic correction. The Discoveries process was not straightforward. The evolutionism of geo-strategic system building was evident. Critical attitude: It was evident the emergence of a thought against dogmatism and the scholastics - ‘examining the own things - this is the true pathway to find knowledge’ (Francisco Sanches, Que nada se sabe [That nothing is known], 1581). The scientists of the Discoveries explicitly formulated their results: ‘Construct a new science, as your first science is now false’ (using again the words of Francisco Sanches). Geo-strategic ‘cleverness’: The most distinct ‘Prince’ from the Renaissance in the art of secrecy and counterintelligence/disinformation, of geo-strategic espionage and of searching for intelligence, was João II, also known as ‘the Perfect Prince’. Organizational improvisation: The Portuguese generations engaged in the Discoveries managed a ‘mix’ between, on one hand, the true Portuguese lifestyle of improvisation (‘that Portuguese characteristic which is censured worldwide’ - quoting Agostinho da Silva), which 183

Jorge Nascimento Rodrigues Interviews with the Gurus would have been essential in the real expansion occurring on a day-to-day basis and, on the other hand, a clear strategic intent of the highest level of scientific accuracy possible at the time (all the nautical instruments which the navigators carried on their journeys were gradually improved), and a remarkable logistic scheme (of the journeys and later of the global projection network). CORE DIFFERENCES BETWEEN THE CHINESE AND THE PORTUGUESE MATRICES After presenting the main ingredients of the Chinese and the Portuguese Discoveries matrices separately, we finally point out four main differences between them. 1. Scientific commitment endurance; a Portuguese advantage Due to the political reversal in China after Yong Le’s death, the scientific commitment was put to an end. That is why we refer the Portuguese advantage as a systematic and long-term scientific commitment. For the first time in the history of civilization, the systematic and long-term use of science as an instrument of economic development was observed. Something that the Chinese long-range oceanic activity between 1405 and 1433, mainly in the Indian Ocean, truly did begin in the fields of astronomy, cartography, ocean logistics, naval warfare, soft diplomacy, checkpoint networks, language translation, etc., but without continuity, and failing to master the use of the sun to obtain latitude, something the Portuguese first achieved decades later. The impact of the Portuguese navigations in world science was radical. The Portuguese empiricist generations of the 15th and the 16th centuries changed almost completely the incumbent science. 2. International commerce and global trade; the Portuguese as the creators of world commerce Even from the Asian perspective, the Portuguese geopolitical and geo-economic impacts on the Indian ocean can be summarized into five main changes, according to Sanjay Subrahmanyam (The Portuguese Empire in Asia, 1500-1700: A Political and Economic History, London and New York: Longman, 1993): the development of a true global commercial link, embracing Europe, Asia and the Americas through two centuries; the interaction with local states, changing their profile, raising a new type of ‘mixed’ state, half-agrarian, half commercial, as happened with Iran, the Moghul empire, Golkonda, and even Burma; the spread of a lingua franca, based on Portuguese mixed with Malay, Tamil, Arab and other languages; the propagation of fire-arms; and the development of precious metals as means of payment linked with the commercial boom. In terms of the world economy, the geo-economic impact of the Portuguese discoveries was radical. The economic historian Leo Huberman attributes to the Portuguese of that period the role of ‘creators of a true international commerce’. Anyway, this fact of life does not mean that the Portuguese were the dominant traders in the world spice cycle. In the Far East, the 184

The Two Oldest Matrices of World Discoveries: Portuguese and Chinese Historical Linkage 185Portuguese had to be satisfied with the role of minor participants; the Far East was the biggest spice market - only China detained almost 75% of the world consumption of pepper. 3. Soft power v. hard power; the Chinese political knowledge Due to the Indian Ocean context, the Portuguese, even if they thought at the beginning of a soft power strategy finding in India Christian allies, turned rapidly to a hard power strategy that marked all the Portuguese expansion in Asia. Power based mainly in naval military advantage and systematic use of state terrorism. The Chinese also had impressive naval military power in the early 15th century, but they did not use cannons as a primary political tool. The Portuguese were intruders in the ‘Muslim and Chinese lake’ - they wanted to capture the Spice routes and they had nothing to offer of high market value. They came to disrupt the balance in the Indian Ocean. They came as brutal competitors, not as partners, even if the first ideological aim was searching Christian allies in Eastern Africa (Ethiopia of the mythical Prester John) and India, to circle the Muslims in Egypt and the Middle East. The Chinese were part of the Indian Ocean trade routes. They were big clients and important suppliers of high value commodities. They came to the Indian Ocean to partner in bi-hegemony with the Muslims. Their interests were convergent, not divergent. Even today the Chinese give predominance to soft power before using the language of hard power. The so-called Chinese ‘charm offensive’ (title of the recent Joshua Kurlantzick book) in Asia, Africa and Latin America is a clear example of its mastering of the soft power in a period of smooth (US) or open (Russia) decline of several great powers in the world. 4. Religious ideology v. cultural superiority Ideology; the Chinese advantage The Portuguese considered Christian evangelization as a sacred aim of the navigations. The Portuguese religious proselytizing with its intolerance and its mandatory commitment were part of the problem, not part of the solution. The Chinese based their expansion on a variable geometry of religions inside its armadas. They used multiple religions as political tools for partnering. Their efforts were made to support local religions as political signal of magnificence and superior cultural status. Anyway it was the political approach of the Portuguese that established a long pattern of great power politics in the Indian Ocean since the end of the 15th century. As the great Indian historian M.N. Pearson stated once (The Portuguese in India, Cambridge University Press, 1987), the world has an ironic debt – even if dubious – with the Portuguese: they bring geopolitics to the Indian Ocean. The Chinese soft power politics died with the Confucian backlash. The test of history for a soft power projection strategy was something to be proved. This ‘lesson’ from the late medieval times may be of interest nowadays when scholars and analysts follow with great curiosity today’s Chinese soft power around the world. May be this time, the test of history can give us an answer. © Portugal, Pioneer of Globalization project, 2007.

EDITORIAL CORRESPONDENCE All correspondence including submission should be sent to the following: In Europe, Prof. Nelson António, Escola de Gestão, Instituto Superior de Ciências do Trabalho e da Empresa (ISCTE), Av. das Forças Armadas, Lisboa, Portugal. Email: nelson.antonio@iscte.pt In Asia, Dr Carlos Noronha, Faculty of Business Administration, University of Macau, Taipa, Macau, China. Email: fbacn@umac.mo BUSINESS CORRESPONDENCE All correspondence including orders and subscriptions, advertisements, back numbers, and offprints should be addressed to Ms Tiffany Lam, University of Macau, Taipa, Macau, China. Email: fbakpl@umac.mo SUBSCRIPTION RATES United States, Europe, and South America, US$19.50 per year including postage Asia, US$13.50 per year including postage China and Hong Kong, HK$67 per year including postage Macau, MOP$61 per year including postage ORDERING INFORMATION Together with the Order Form, send a draft or international money order of the appropriate amount made payable to ‘Macau Foundation’. PUBLISHER’S INFORMATION Macau Foundation Av. da Amizade, 918, 16 Andar - Edificio World Trade Center, Macau Tel: (853) 966777 Fax: (853) 968658 Email: fmac@macau.ctm.net Homepage: http://www.fmac.org.mo HOMEPAGE http://www.geocities.com/eajm2002

ORDER FORM Name: ____________________________________________ Position: ____________________________________________ Company: ____________________________________________ Address: ____________________________________________ ____________________________________________ Telephone: ____________________________________________ Fax: ____________________________________________ E-mail: ____________________________________________ Signed: ____________________________________________ Date: ____________________________________________ Please enter my subscription to Euro Asia Journal of Management for: 1 year (2 issues) 2 years (4 issues) 3 years (6 issues) starting issue: _______________ Please send a draft or international money order of the appropriate amount made payable to MACAU FOUNDATION to the following person and address: Ms. Tiffany Lam Faculty of Business Administration University of Macau Av. Padre Tomás Pereira S. J. Taipa, Macau Tel: (853) 8397-4743 (Direct line) Fax: (853) 2883-8320 E-mail: fbakpl@umac.mo

1 0 5

SUBMISSION GUIDELINES Authors are requested to submit their work in accordance with the following guidelines so as to facilitate the review process. 1. Manuscripts submitted, written in English, should be original and not published or under consideration elsewhere unless authorized by the editorial board. 2. Each manuscript submitted will be reviewed by the editorial board for its general suitability. If judged to be suitable, a double blind review process by two reviewers will take place. The editorial board, based on the suggestions given by the reviewers, will decide whether the manuscript should be rejected, revised, or accepted. 3. The scholarly peer-reviewed article should normally be between 4,500 to 7,500 words including references, footnotes, tables, figures, and their captions. Include an abstract of approximately 100 words and information about the name of the author(s), affiliation, address, contact details, and email. The name of the author(s) should not appear within the article text. 4. An electronic version of the manuscript in a format compatible with the Windows environment should be submitted via email to Prof. Nelson Antonio ( in Europe: nelson.antonio@iscte.pt) or Dr Carlos Noronha (in Asia: fbacn@umac.mo). 5. Sections and sub-sections should be clearly differentiated in a logical way. Sections should be typed in bold capitals while sub-sections are typed in bold lower case letters. Avoid the use of more than two levels of sections. 6. Tables, charts, and figures should fit the journal’s page size and clearly labeled and captioned with headings and numbers (e.g. Table 1, Figure 1, etc.). Instructions should be given on putting them in the text (e.g. insert table 1 about here). 7. All mathematical notations, numbers, and symbols must be typewritten. 8. The manuscript should be typed double-spaced, font size 12. 9. Referencing is similar to the Harvard system. Include bibliographic information in the ‘References’ only materials cited in the text. Avoid the use of footnotes and endnotes whenever possible. 10. Citation and reference guidelines: Single author: Roth (1995) / (Roth, 1995) Two authors: Snow and Herbiniak (1980) / (Snow & Herbiniak, 1980) More than two authors: Taylor et al. (1996) / (Taylor et al., 1996) With page numbers: Roth (1995: 201-202) / (Roth, 1995: 201-202) Same year’s papers: Harvey (1997a, 1997b) / (Harvey, 1997a, 1997b) Multiple papers: (Pfeffer, 1994; Poole & Jenkins, 1996; Taylor et al., 1996) Book: Chandler, A.P. (1990). Scale and Scope. Cambridge, MA: Belknap. Multiple authors: Spencer, A.M. & Hazard, H.A. (1988). International Competitiveness. Cambridge, MA: Ballinger. Article in edited volume: Murphy, L.R. (1988). Workplace interventions for stress reduction and prevention. In Cooper, C.L. & Payne, R. (eds.) Causes, Coping and Consequences of Stress at Work. Chichester: John Wiley. Non-English language: Maekawa, K. (1993). Gendai Kigyo Kenkyu no Kiso (Basic Research on Modern Business Enterprises). Tokyo: Tokyo Keizai Shinposha. Journal article: Tushman, M & Anderson, M. (1986). Technological discontinuities and organizational environments. Administrative Science Quarterly, 31, (3), 83-92. Conference presentation: Gill, J. & Butler, R. (1997). Trust in the dynamics of joint venture partner selection and operation. Paper presented to the 12th LVMH Conference: Partnerships and Joint Ventures in Asia, February 7-8, Fontainebleau: INSEAD. Thesis: Conrad, L. (1999). Control issues in the regulation of privatized industries: A case study of the gas industry. Unpublished PhD thesis, University of Essex. Magazine article: Asiaweek (1999). Designs on the future. April 23, 56-58. Newspaper: Joong-Ang Ilbo (Central Daily News) (1997). July 14. 11. A pdf offprint file and a complete copy of the relevant journal will be sent to the author about four weeks after publication. 12. Once accepted and published by EAJM, it is assumed that the author(s) agree to transfer copyright of the work to the Macau Foundation including full and exclusive rights to publication in all media. However, the author(s) retain the right to reprint their article, after publication in EAJM, in any work without the need of further permission in writing from the Macau Foundation. 13. Photocopies of articles published in EAJM are allowed for personal academic and classroom use.