The Story of Donations Gate

(Southern Weekend)  May 29, 2008.


Corparations showing off how much they contributed towards earthquake relief

Summary: Two weeks after the great Sichuan earthquake, the sorrow and pity of the common Chinese citizens for their compatriot victims have become one of the strongest pressure forces in the world.  Many corporations which were slow to donate, or donated too little were pilloried heavily by the Chinese netizens.  The modernization of China has been taking place for over a century, but the majority of Chinese citizens still hold very vague notions about property right.  They do not understand western business ethics or the behavior of the multinational and Chinese eilites.  They do not respect the business rules of the games in this era of gloobalization.  This is not a manifestation of narrow nationalism.  Rather, this is a clash of Chinese and western values.  Meanwhile, the multinational corporations have been in the New China for thirty years.  Although they are deeply embedded into the Chinese economy and they have rich experiences and knowledge about the Chinese market and the consumption patterns of the Chinese people, they are much less knowledgeable about traditional Chinese culture.

At 2pm on May 27, it was full house at the second-floor conference room (with a capacity for 100 persons) of the Ministry of Commerce.

Nokia, P&G, NestlÚ, Siemens, IBM, Hyundai, Yum, AstraZeneca ... the directors of government affairs, public affairs and public relations and even vice-presidents of these well-known multinational corporations were in attendance.

The government official in charge made a brief opening remark, and then some corporate representatives got on stage to make emotional speeches.  They angrily complained to the Ministry of Commerce leaders about the misgivings and hardships of their corporations.  All of these speeches complained heavily against the popularly circulated list of "international corporate iron roosters."  (Note: In Chinese, the term iron rooster refers to a misanthrope/miser.  A real-life rooster may give away a feather or two, but an iron rooster will never do so because it is incapable.)

After the great Sichuan earthquake, the images of many foreign capital brands also experienced "great earthquakes."  Certain foreign corporations that did not donate quickly enough were strongly criticized by Internet opinion, and their products were subject to boycotts.  One week after the earthquake, an SMS of "international iron roosters" was broadly circulated and elevated the assault on the multinational corporations onto new heights.

One of the "misanthropes" was KFC, and its many stores in the Sichuan area were besieged and prevented from conducting business.  NestlÚ was not even on the list but on the second day after the earthquake, the 10,000 boxes of food sent to Sichuan was cursed out as "bird shit that we don't want!"

At the conference, the foreign company representatives repeatedly asked the Ministry of Commerce to clear their names.  On May 22 five days ago, Minster of Commerce Chen Deming had already cleared the foreign corporations.  He pointed out that most of the multinational corporations on the list of "international misanthropes" had donated more than 10 million RMB and therefore they cannot be said to be "iron roosters."

Yet, public opinion could not be stopped.  The Internet Robin Hoods (who rob the rich to benefit the poor) were not satisfied with the early performances of these multinational iron roosters.  On May 14 when the list of iron roosters first appeared, many of the companies gave less than 5 million RMB in their initial donations.  In the eyes of netizens, these iron roosters should donate at least 10 million RMB to the disaster victims.

After the Wenchuan disaster took place, the Confucian concept of emphasizing righteousness over profit was highlighted.  The Chinese corporations donated huge sums of money in line with the traditional concepts.  By comparison, the multinational companies abided by western business ethics and could not understand what and why their Chinese counterparts were doing. Thus, they did not recognize the strength of those moral forces.

They were not alone because Wang Shi and the Wanke company did not recognized this point either.  Meanwhile, many other Chinese brands were able to gain unprecedented support during this affair.  The beverage manufacturer Wanglaoji became nationally famous overnight by donating 100 million RMB.

At this time, the multinational companies can only keep issuing notices to the public and complaining to government officials.

"The ranking of the very profitable but also very stingy in donations multinational misanthropes are: Coca Cola, KFC, McDonald's, Nokia, LV, Daikin, P&G, Motorola.  If you have a conscience, please boycott these companies and spread this message around!"  This was one of the versions of the list of international iron roosters that was being sent around.  On May 19, many Chinese persons received this SMS.  This list has been revised many times, so that it is impossible to track down the originator.  Our reporter determined that the apparently first appearance was on May 14 at a technology forum PHPWindBoard, wherein KFC, McDonald's, Samsung, Semir, Motorola and Nokia were listed.  The post asked everybody to update the list as events unfolded.

The information on this post was inaccurate.  This was two days after the Wenchuan earthquake.  On the evening of the earthquake, the MDGB group (which is the parent company of KFC) had already decided to donate 3 million RMB.  On May 14, McDonald's announced that it would donate 1 million RMB.  On May 15, Samsung gave 30 million to the Red Cross.  According to their public relations manager Mr. Zhou, the Samsung management made the decision on May 13, and the news was posted on the home pages of Sina.com and Sohu.com the next day and stayed there fore for whole day.

Yet, on that day, the most popular list of iron roosters had Samsung listed on top, followed by Nokia, Daikin, LV, Coca Cola, McDonald's, KFC.  The poster even wrote, "I am reporting these companies not to waste your time , but to remember: The Chinese people will not let those company without conscience earn any money!"

But that post did not spread immediately.  On May 19, the list of misanthropes suddenly took off like a nuclear detonation at all the major forums, chatrooms, MSN and QQ.  Supposedly, people even got rewarded for re-posting: "Those netizens who forward it over 30 times will be treated as a loving and caring user off QQ and their names will be displayed in red color."  There were some voices that defend these so-called international iron roosters, but they immediately drew 'bricks' from all directions.  The list of "iron roosters" was also disseminated via SMS in massive volumes.  Everybody from the Ministry of Commerce Chen Deming to middle-school students eating at McDonald's all received the same message on their mobile telephones.  The Southern Weekend writer He Sanwei inquired a sender (who is a judge in the Chengdu Middle Court) about the veracity of the message on behalf of his confounded daughter and got the reply: "I don't know.  I am just forwarding it."

Before even the facts are know, the public was already angry.  Behind those first seven "iron roosters," P&G, Dell, IBM and other multinational companies would soon join the ranks.

In order to express their anger, the netizens directed their love towards Chinese brands.  They created this doggerel:  In the future, drink Wanglaoji (100 million RMB), save your money at the Industrial and Commerce Bank (87.26 million RMB), use China Mobile phone service (58.20 million RMB), use Suning consumer electronics (50 million RMB), buy Ping'an insurance (35 million RMB), drink Luzhou Laojiao white wine (30 million RMB), buy Xiuzheng medicine (25 million RMB), use QQ IMS on the Internet (20 million RMB), wear Li Ning sportswear (12.49 million RMB), buy Lenovo computers (10 million RMB), use Hai'er washing machines (10 million RMB), use Midea air conditioners (10 million RMB), drive Geely cars (10 million RMB) ... if everybody buys Lenovo, they will go past Dell in five years; if everybody buys Geely, they will go past Volkswagen and Honda in 5 years.

The multinational companies became the objects of criticisms of the netizens.  But the anger of the netizens was not just verbal.

The netizens do not appreciate the difficulty of being a multinational company in China.  "I cannot fly immediately over to Finland to explain to headquarters why we need to spend so much money," said Nokia vice-president Xiao Jiyun.

Southern Weekend interviewed several dozen multinational companies.  Without exception, they said that they needed to communicate with headquarters about making donations.  The initial sum has to be based upon the seriousness of the disaster at the time, and they may apply for more depending on the conditions.  AstraZeneca's China region senior vice-preseitn Wu Yuanling told us that she used 1 million RMB in emergency funds on May 13 and then began to apply to headquarters for another 6 million RMB.

Another "iron rooster" Nokia upped its donation on May 17 from 3 million RMB to 10 million RMB; P&G added 10 million RMB; Coca Cola went from 5 million RMB to 17 million RMB; the MDGB Group to which Kentucky Fried Chicken belonged went from 3 million RMB to 15.8 million RMB on May 19 and then added another 5.2 million RMB from its employees.

Among those not on the list, BP China went from 1.4 million RMB to 10.5 million RMB on May 20, Dell went from 2.1 million RMB to 8 million RMB on May 22, and so on.

Yet, the positive effects of the actions of the multinational companies were outweighed by far by the original negative information.

The netizens were "delighted" about the additional donations.  On May 16, the netizen Lao Zui had criticized P&G in a blog post titled "Advertising giant, donation dwarf."  On May 20, he wrote "An iron rooster gets its feather plucked, P&G contributes another 10 million."  Lao Zui is one of the leaders of these netizens.  Many netizens even regarded the 17 million RMB contributed by Google as being the result of Lao Zui's efforts.

Then some other netizens pointed out that the "iron roosters" had not been totally stingy and as more multinational corporations added further donations, public opinion on the Internet was no longer totally one-sided after May 19.

But then something happened that the multinational companies really did not expect.  This campaign against the "roosters" spread from verbal condemnations on the Internet to the consumers.

At around 10am on May 20, a hundred people gathered at a McDonald's restaurant on the Five Star Pedestrian Street in Nanchong city, Sichuan province to protest the lack of donations by McDonald's.  A big printed banner saying "Super international iron rooster" was pasted onto the front door.

Subsequently, in Panzhihua (Sichuan), Xian (Shaanxi), Yucheng (Shanxi) and other cities, KFC also encountered various kinds of blockades.  "Many restaurants had to stop business temporarily," said Wang Jun, the MDBG Gropu China Business Section vice-president.  From the photos posted on the Internet, someone had printed the list of "iron roosters" and posted in on the front window of McDonald's with the annotation: "We will boycott each other in accordance with our conscience!  We pay silent tribute to the compatriot victims in the disaster zone."

According to an eyewitness at the time, the patrons inside the McDonald's were too scared to come out.  The two groups were separated by the glass door.  Along with the police who rushed to the scene, the scene felt like a powder keg/gas drum about to explode.  The eyewitness noted that all those present at the scene were Chinese nationals.

P&G's business was also affected.  Certain supermarkets and emporiums did not dare to order from P&G because they did not know if the consumers who used to buy Colgate toothpaste would switch to the Zhonghua brand instead.

There was a difference in opinion as to how much responsibility the multinational companies should bear.  On May 20, within IBM, an email titled "Too awesome!!!!  Must read!!!!!" was circulated among the workers.  According to one Chinese employee, "I am extremely disappointed with the response of the company towards the disaster ..."

A software engineer at IBM told the Southern Weekend reporter that the company employees quickly split into two camps of views with respect to the corporate donation towards earthquake relief.  This protest letter was the strongest illustration of that division so far.

On May 25, Coca Cola Southern China Regional Headquarters received a notice from a Fujian distributor to request the termination of their contract.

Actually, if the multinational headquarters decline to donate money in consideration of the interests of their shareholders around the world, it would be still consistent with western business concepts.  American economist Friedman said that the principal social responsibilities of a corporation are to be responsible to its shareholders, to obey the laws and to gain profits.

But when a disaster arrives, the ordinary Chinese person cannot understand or accept these values.

On May 22, Minister of Commerce Chen Deming told reporters at the State Council Information Office press conference: "The companies listed on the Internet have all made large donations, usually more than 10 million RMB."  "Donations are based upon voluntary efforts.  We must respect the rights of all persons and companies."

This unprecedented corporate image crisis also fell upon a Chinese company that held western corporate management ideas.

The character is Wang Shi.  He spent twenty years to build the top Chinese real estate brand, the Wangke Comapny.  He has received multiple corporate citizen awards.  The management style of his company became the model of emulation for innumerable corporations.  His words and deeds were a matter of public attention, so that he can be considered as one of the small number of entrepreneurs who are respected in China.

Over the past two weeks, the image of Wang Shi and the image of Wangke have collapsed like houses during the Wehnchuan earthquake.  This was related to numbers -- "2,000,000" and "10."

These two keywords came from Wang Shi's blog post on May 15.  Because netizens thought that the 2,000,000 RMB contributed by Wangke towards earthquake relief was incommensurate with the company's financial position, Wang Shi replied in his blog: "It was appropriate for Wangke to contribute 2 million RMB.  This was not only the largest single contribution authorized by the board of directors, but even they had authorized more than this amount, I still think that 2 million was the right amount."

At the 2006 annual shareholders' meeting, the annual corporate citizen construction fund was limited to not more than 10 million RMB.

Before the earthquake, almost 8 million RMB had been spent with only 2 million RMB remaining.

The following words then became the focus of netizen attacks:  "China is a country which encounters frequent disasters.  It is normal to hold charity fund-raising benefit events for disaster relief.  Corporate donations should be sustainable without becoming a burden.  Among the Wangke Group donation activities, there is a requirement: At each donation campaign, the ordinary worker is limited to a maximum of 10 RMB.  The point is not to turn charity into a burden."

As a result, Wang Shi earned the name of "Wang Ten" and "Wang Ten RMB."  Some netizens even wrote, "A person cannot be too Wang Shi."

This proposal not to let disaster relief donations become a burden made netizens feel that this was rather cold-hearted at a time of national crisis.  A netizen left a comment at Wang Shi's blog;  "If you feel that helping the disaster victims is a burden to you, please take back your 2 million RMB."

Someone found out about Wang Shi's annual salary -- 4 million RMB.  Someone calculated that Wang Shi spent 2 million RMB on mountain climbing.  "I don't care about how many peaks you have scaled, because your soul will never rise higher than a grave!"

On May 21, Wang Shi apologized to the netizens through the media: "During this period, I am uneasy about the propriety of what I said!  There are three reasons.  First, it caused a diversion among the people and it hurt the netizens.  Secondly, it created pressure for Wangke employees.  Thirdly, it had a certain impact on the image of the Wangke company.  I apologize here to the broad masses of netizens!"

But the netizens did not forgive Wang Shi and the Wangke Company, because on May 21, the Wangke Company Board of Directors approved the plan to spend 100 million RMB to participate in the temporary relocation, recovery and reconstruction work after the Sichuan earthquake, with Zundao town, Mianzhu city as the focus.  This project was purely for public interest without involving any commercial development.

This ambiguously worded statement roused the rage of the netizens, who believe that Wang Shi chose Zundao town because of its unique potential as a tourist spot.  Thus, reconstruction was a guise for commercial reasons.

"This was just a public relations ruse to shut the people up.  It was a sales tactic to divert people's attention.  This is vastly different from those people who genuinely donated 100 million RMB in money or material resources."

...

On May 24, Wanke had to issue a statement about its earthquake donation: The company's role in arranging for temporary accommodation in the earthquake zone, the recovery and the reconstruction is uncompensated.

Even in its statement, Wangke reiterated its management philosophy: All the assets of Wangke belong to its shareholders, and therefore corporate donations must be authorized at the shareholders' meeting.

But in the view of the majority of netizens, "It is a matter of life and death in which tens of thousands of lives perished in an instant.  Who is going to do the accounting?  Who cares about your profits?  Who cares about the board of directors, or the rights to decide?  Who doesn't know about what is happening at the company?"

A number of small shareholders have dissented from the majority opinion and they expressed their opinions at the official Wangke website.  A netizen with ID Donglai wrote that Wangke's donation of 100 million RMB has seriously violated the rights of the shareholders, and he is contacting lawyers to file suit.  On June 5, Wangke is calling for an emergency shareholder meeting over the 100 million RMB donation.  "Wangke is facing an unprecedented crisis."  Wangke Group Vice-President Xiao Li wrote that in an SMS to the Southern Weekend reporter on her way back from Sichuan to Guangzhou.

But there are plenty of people who are willing to defend Wang Shi and the Wangke group.  On May 27, the Southern Metropolis Daily published a commentary.  In that essay, it was stated that it was a good thing for the senior management of a company to make charitable donations.  But it is also a good thing for the senior management to stay within the rules of the game.  In fact, that would be an even greater good.  For the sake of some good, one damages another good and that can be even worse!  Even more significantly, Wangke Company was not elated with this line of defense.  A Wangke said confidentially: We hope that there would be fewer and fewer negative reports, but we are also concerned that overly exertive essays in defense may create more controversies.  The best choice for Wangke is to wait for the event to blow over.

Amidst this clash of eastern and western values, many Chinese brands gained unprecedented popularity.  The herb tea beverage vendor Wanglaoji became famous overnight after donating 100 million RMB.

At the May 18 CCTV disaster relief gala festival, Wanglaoji's parent company Jiaduobao Group donated 100 million RMB.  Immediately, a post appeared at the Tianya Forum to '"clean out Wanglaoj':  "Wanglaoji, you are so tough  You donated 100 million RMB, which is 500 times the amount that Wang Shi donated!  In order to punish this boastful company, we will buy up all the Wanglaoji products at the supermarkets!  We will buy every can that they put on the shelf!"

The influence of Internet opinion also extended to real life.  Wanglaoji began to show up in all sorts of sales channels that it was previously absent from, so that people can buy their products anytime that they want to ""clean out the company.

The netizens began to write advertising slogans for Wanglaoji.  The most broadly circulated phrase was: "If you want to donate, you donate 100 million RMB; if you want to drink, you drink Wanglaoji."  There was even a revised version of the rescued boy who wanted cold Coca Cola into: "I want to drink Wanglaoji ... ice cold."

At the same time, there began discussions of the deleterious effects of carbonated drinks such as colas while highlighting the fact that Wanglaoji herb tea drinks are beneficial to health.  If someone dared to state that the donation was a marketing ploy by Wanglaoji, they are immediately accused of being "paid hacks" and then netizens would issue more posts like crazy in order to guarantee that those posts would sink into oblivion.

"Even if this was a successful marketing ploy, I will continue to support them.  At the very least, they donated 100 million RMB to the victims in the disaster zone.  The more these kinds of corporations, the better," said a white-collar worker who switched from Coca Cola to Wanglaoji.

Even if they were hijacked or exploited, the people were willing to go along.  Some companies were hurt as a result.

On May 19, a post titled <How much did Wang Shi, Ma Yun donted?> appeared at a certain website.  In the post, Ma Yun was charged with having donated only 1 RMB.

On the same day, that post was widely cross-posted at the major websites.  The netizens made sarcastic remarks about Wang Shi and Ma Yun and they attempted to destroy the public standing of these two entrepreneurs who used to have excellent public images.

According to Zhang Po of the Social Responsibility Department of Alibaba, the Alibaba Group had already donated 2 million RMB by that time.  On the evening of the earthquake, Ma Yun had donated 1 million RMB, and the Alibaba disaster relief group was hurriedly planning on the second phase of its disaster relief effort.  Back in 2006, Ma Yun had said at a press interview that "At a charity event held under the limelight, one RMB is enough.

Ín May 20, after seeing the clarification statement from Alibaba late night on May 19 and the additional donation of 25 million RMB, the netizen nicknamed "Housing prices are so expensive" posted at Tianya forum to ask the public to apologize to Ma Yun and Alibaba.  Almost all of the posts were in agreement.  Thereafter, all discussions about the 1 RMB donation of Ma Yun stopped.

In the discussion about the earthquake-related matters, Tianya had the most heated debates.  It was the source of many of the topics.  But nobody knows where the post about Ma Yun's one RMB donation came from.

The hijacked public opinion came roaring in and then it went out roaring too.