Business ethicists are split on whether Canadian companies should pull out of strife-torn Tibet or stay and help spur change.

Several Canadian companies are expected to maintain their operations in Tibet, despite the recent escalation of violence there between protesters and Chinese soldiers.

Projects built or under development range from a luxury train service - connecting Beijing and Lhasa with train cars supplied by a Canadian company - to proposed metal mines worth hundreds of millions of dollars.

The potential for improved human rights and better living and working conditions would make it more favourable to being there, says James Gaa, a University of Alberta business ethics professor.



"But ultimately, you still can't stay neutral," says Gaa.

With the Beijing 2008 Summer Olympics approaching, the Tibet conflict is drawing growing attention to China's often-criticized alleged human-rights abuses. But Canadian companies operating in Tibet contend it's better to stay and foster positive change.

Gaa points to the example of Calgary-based Talisman, which was heavily criticized for operating in war-ravaged Darfur before it sold its stake there, as proof that Canadian companies can't succeed in their goal of being non-partisan players.

"If you have any impact on the country, you'll have an impact, at least indirectly, on the political conflict," he says.

But Bob Walker, vice-president of sustainability for the Ethical Funds Co., a Vancouver-based firm that promotes sustainability and aims to allow investors to express their values through investment activity, says it's best for a firm to stay in Tibet and try to help resolve problems.

His group prefers "smart sanctions," rather than divestment or boycotts, which enable Chinese authorities to blame protesters.

"Our preference is in engagement and finding some of the softer forms of what might be called sanctions or 'smart' sanctions, as opposed to pure economic-based sanctions that tend to hurt only workers on scene in Tibet and elsewhere in China," says Walker.

He says such designer sanctions would target elite groups rather than the poor. It's hard to say what effect a boycott of the Summer Games opening ceremonies would have on a country as large and economically significant as China, he adds, "but we feel it's a strategy that's better than doing nothing" if progress is not being made.

Howard Balloch, a former Canadian ambassador to China who is an investor in the luxury train project being developed by Shanghai-based Tangula Group Ltd., has stated it's better for Canadian companies to continue to operate in Tibet because foreign investment benefits Tibetans.

Executives with Vancouver-based Continental Minerals Corp., which is developing a $500-million copper and gold mine in central Tibet, have made a similar argument.

Walker says Canadian companies have the potential to improve human rights and working conditions in Tibet, but firms have to make sure they're not just paying lip service to critics.

"There has been a lack of disclosure of any human-rights systems or stakeholder-indigenous systems on the part of companies that have been in China for decades now," says Walker.

The Ethical Fund Co.'s $2.7-billion investment portfolio includes shares in both Power Corp. and Nortel, which have both drawn criticism for their activities in Tibet. The investment firm is developing shareholder-rights programs and human-rights improvement and community-engagement systems with both companies.

"We've got these two companies moving on these issues," says Walker. "Now, it's a question of seeing more disclosure and implementation."

Walker says Canadian firms operating, or looking to operate, in Tibet need to put in place human-rights management systems and disclose them to investors and other stakeholders, develop programs for engaging and benefiting affected local communities and negotiate with the Chinese government on improvements.

Kernaghan Webb, a Ryerson University business ethics professor, says there are many schools of thought on how companies should deal with operations in troubled regions.

Some scholars believe the best strategy is for companies to stay and engage communities and potentially improve situations. Others believe that by being there, the business is somehow endorsing the practices of a regime that is in power, and payments of licensing fees and other charges could endorse financial abuses.

"Philosophically, this school is just split down the middle on whether it's best to stay or it's best to leave," says Webb. "There's no absolutely clear corroborating evidence for either camp. You can point to situations where companies have all left en masse and it hasn't improved the situation - and, arguably, worsened the situation," says Webb.

"There are also situations like South Africa, where there was a complete shutdown by a tremendous number of western companies and countries. Arguably, that did play in a role in galvanizing, or hastening, the movement away from apartheid."

The decision on whether to withdraw from a region is entirely dependent upon the incident, the relationship between a company and a regime, and the degree of outside pressure, he adds, noting he does not know much about the Tibet situation.

Ray Yee, a vice-president of the Canada Tibet Committee (CTC), says Canadian companies are exploiting - not helping - Tibetans. The potential for progress is a secondary issue over Tibetans not having a say on such projects.

"It doesn't matter how much good you think you're shoving down their throats," says Yee. "If they don't have a say, truly participate or even have a right to say no to it, then it just doesn't have a priority."

The CTC opposes all major development in Tibet, particularly mining, because it's directly related to Tibet's occupied land. In theory, he says, mining practice should enable local people to have some impact into what's going on and provide free, prior and informed consent, but "that has not come anywhere close to happening."

Yee says the railway has actually increased the influx of Han Chinese, the main ethnic group in China, into Tibet and enabled Tibetan mineral riches to be hauled back to China for processing. Montreal-based Bombardier Inc. provided 330 passenger-train cars and 30 luxury train cars for the project.

"We don't just see Bombardier's activities as an economic issue," says Yee. "It's also being used by the Chinese politically for further subjugating the Tibetans. I don't think the average Tibetan has the income to even use that train."

However, Bombardier spokesman John Paul Macdonald, who has visited Tibet, says the company worked with Tibetans in advance of the project. He says the company also provided $1 million so that 20 poor Tibetans could take a three-year tourism-managment course.

(Monte Stewart can be reached at monte@businessedge.ca)