Jimin Zhu: China Shougang – Reducing Pollution, Promoting Ethics

Jimin Zhu is the chairman of the board of Shougang Corporation (formerly known as Capital Iron and Steel), the third largest steel producer in China. As late as 2001, Shougang was referred to as “the major source of industrial pollution in the Chinese capital.” Today, Shougang remains the third largest steel producer in China, where building projects are everywhere. But they are cleaning up their steel production, diversifying their portfolio, and establishing management practices that value people and ideas.

Zhu received a Bachelor’s Degree from Dougbei College of Industry in 1970. He has held numerous executive positions in the steel industry in China including Assistant President of Angang Steel Company, President of Shuicheng Steel Group Company, and Vice President and Vice Board Director of Beijing Steel Company.

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Ethix: Could you give us your perspective on business ethics?

Jimin Zhu: It was a new subject for us to think about ethics toward everyone. In China it is common to focus ethics on close personal relationships. But we have come to realize that if there is no business ethics, a company will not have a good future. To manage an enterprise well, we need to apply the right beliefs and tools to the process of management. These ideas are necessary to establish the vitality of the whole enterprise. Business ethics is centered on creating the right corporate culture. The vision of the leader helps shape the breadth and scope of the way this culture is developed.

We acknowledge that our vision is very modest. But we are eager to share our practices and want to learn from others.

Openness is a very important concept. We used to be very arrogant, inwardly focused. But management came to the conclusion that we could learn a great deal from others. So we have sent our management team out to learn. And we have learned the importance of being humble, treating other companies, including suppliers and people in other industries, as family.

What does this mean to collaborations with others?

We have developed collaborative projects with other companies and other industries, in other parts of the world. For example, two years ago we entered a partnership with a construction materials company. This would never have happened fifteen years ago. In the beginning of the ’90s, we started this collaboration with others.

Work with others must be based on very frank and open discussions. This is very different from the way we used to approach these relationships. We have learned to be bold in establishing these relationships, focusing more on character than on developing lots of paperwork. Yesterday we were in intense negotiation in the development of a relationship. Our approach was to look together at our value statements to see if we could trust each other. That is the center of any business relationship.

This extends to mergers, where having a common set of values is essential. As we consider merger opportunities, this is at the core.

I have had a strong internal motivation for carrying out business in this way for many years – even as a student. But it is only in recent times that I have been in a position to make this happen on a broad scale.

How does this translate to working with your own people in the company?

We had lost some very key people in the late 1990s, and recognized this was due in part to outmoded HR practices. We learned that in order to improve in the market we had to treat employees well. Further, I found that when I have the right relationship with my employees, I can learn a great deal from them and enrich my mind. By listening well, I have found that my employees actually like to talk with me!

In the 1980s, China had a big reform in the personnel system. For example, in 1984 I worked as a vice president of a subordinate firm of a steel company where the employees elected their own leadership. This is how I was in the position that I was in. It is better to execute business this way rather than through dictating. This was not the norm in most Chinese businesses, however. But for me this is the only way to manage. To make a good decision you must get the right information, and much of this information is in the heads of the employees. Once a decision is made, however, it takes strength and focus to carry it out.

So in the past several years we have been able to attract top talent through the new reputation we have established in the way we value people. Professors have recommended that their best students come here because it is a great place to work. We have come to realize that when it comes to recruiting, the brochure is not the key thing. In fact, we have found that the shinier the advertisement, the more secrets it is likely to hide!

What has happened to your company over this change of thinking?

Another step in the transformation of the corporation was to diversify. From what was Capital Iron and Steel, we have expanded our product line to include mining, machinery, electronics, construction, real estate, service businesses, and overseas trade. Today, about 50 percent of the revenue for Shougang comes from steel.

What about the environment? Capital Steel was once known for its pollution.

In the past ten years we have started to pay attention to environmental issues. We have been cooperating with a Japanese company to apply technology to the problem of reducing emissions. This is one way we can give back to society. Today, thousands of wild ducks make the grounds surrounding our factory their home, as we created a healthy, attractive, and green work environment. We’ve gone beyond simply cleaning up a problem to creating a place of beauty that will enhance the communities where we are.

This was not easy. In 2002 we cut our steel production by one quarter to get rid of pollution. In part this was driven by the civic goal of drastically reducing pollution in Beijing in preparation for the 2008 Olympics. The capacity that was cut in Beijing was finally replaced in Qian’an with the new facilities opening this year. These were not the copy of what had been closed down in Beijing, but rather equipped with the best environmental technology and facilities. This is a step in the broader goal of becoming a high-tech leader in the industrial segment in China by 2010.

How does Shougang see its role in the communities where it is located?

Of course we provide jobs, economic benefits, and now environmental benefits. But we wanted to do more than this. I will give two examples.

When SARS hit in 2003, both as a corporation and through the generosity of our employees, we contributed time and dollars to the hospitals in our communities.

We are also working with the city to jointly carry out economic development for the betterment of all. We don’t do these things only out of a charitable position. We have found that when we give to the community in this way, it produces a payback for the business. When you act responsibly toward society, society will pay you back.

This interview was pieced together from publications, from a public forum response Jimin Zhu made to my presentation on business ethics in Beijing, and from a lunchtime discussion with him at Shougang Steel. The last two were heard with the help of translators. Al Erisman