Fatal accidents are five times more frequent at Chinese companies with political connections, new research claims. The finding adds weight to accusations that executives’ political ties allow them to get away with placing profits ahead of worker safety. Provincial rules linking promotions to safety records, though, appear to have borne some fruit. From Raymond Fisman and Yongxiang Wang at Harvard Business Review (via Ray Kwong):
We studied all publicly traded Chinese companies in safety-regulated industries, including petroleum and natural gas extraction, mining, chemicals manufacture, and construction—a total of 276 firms. We added up the annual fatalities in each firm from 2008 to 2011, using company-reported statistics, government data, and press reports. After examining the employment histories of the firms’ top (C-suite-equivalent) leaders, we defined a company as “connected” if at least one executive previously held a high-level government post.
Our results showed that on average, the rate of worker deaths is five times greater at connected companies than at similar companies that lack political connections. The finding that connected companies have much worse records was remarkably consistent from year to year. Moreover, deaths per 10,000 workers rose by almost 10, on average, during the year following the arrival of a connected executive at a previously unconnected firm, and fell by 6.4 during the year following a connected executive’s departure. To investigate whether our results were skewed by underreporting, we narrowed our focus to include only major accidents, or ones that caused three or more deaths—events that would be very hard, if not impossible, to shield from discovery. The same pattern prevailed.