EXHIBIT C16-1 Filtration Inc.

Organization Chart

Filtration Inc.

Controls Inc.

Freezer & Cooler Unit

Controls Asia-Pacific (Singapore)

Joint Venture In China

EXHIBIT C16-2 Survey of Key Characteristics of Chinese Culture and Management

Culture One of the strong cultural beliefs among the Chinese is that their culture is the oldest and, the best. It is the center of the universe, the Zhong guo-center country. They believe themselves to be totally self-sufficient. In Chinese, the character of the word China means "middle kingdom, thus implying that everyone other than themselves is beneath them. Concept of Face and Time The concept of face is of paramount importance in China. It is a person's most precious possession. Without it, one cannot function in China. It is earned by fulfilling one's duties and other obligations. Face often requires little effort, but merely an attention to courtesy in relationships with others. Face involves a high degree of self-control, social consciousness, and concern for others. In Chinese society, display of temper, sulking, loss of self-control, or frustration create further loss of face rather than drawing respect. Despite having invented the clock, the Chinese never define or segment time in the way that it is approached in the West. Even today, for Chinese, time simply flows from-one day to another. If a job is not completed today, they will carry it forward to the next day or the day after next. This is a manifestation of the concept of Polychronic (non-linear) time. In Western cultures, people see time as Monochronic (linear). An important cultural difference between the West and China is the Chinese custom of giving precedence to form and process in completing a task, over the task itself, an approach which is typically more time-consuming. Behavior Chinese behavior is influenced by their brutal history. This has created a careful people.They give consideration to the repercussions of every move or decision that they make. An important aspect of behavior involves the way the Chinese think. They think about thinking and relationships, whereas the Westerner would think in linear patterns of cause and effect. Another aspect, which confuses the Westerner, is the willingness to discuss endless possibilities even when things look hopeless. A Chinese philosophy that relates to interacting with Westerners, can be stated: Whereas a Westerner will try to tell you everything he knows in a conversation, a Chinese will listen to learn everything the Westerner knows, so that, at the end of the day, he would know both what he knew and what the Westerner knew. Gift Giving Chinese are conditioned to express appreciation in tangible ways, such as by giving gifts and other favors. They regard the Westerner's frequent use of "thank you" as a glib and insincere way of passing off obligations to return favors. When they do someone a favor, they expect appreciation to be expressed in some very concrete way. If all you choose to do is say "thanks, it should be very specific and sincere, and then stop. The Chi nese do not like gushy thanks. Gift giving in China is a highly developed art. Although it has greatly diminished today (there is a law forbidding government officials from accepting gifts of any kind or value), the practice remains a vital aspect of creating and nurturing relationships with people. Living as a Foreign Guest in the People's Republic of China Foreigners, who have gone to the People's Republic of China in the last decade to help the Chinese, have been given preferential treatment. Their quarters are often far more modern than those of a typical Chinese. The expatriate is given perquisites in excess of those available to all but the top officials, fed with highest quality food, and paid salaries many times higher than paid to their Chinese counterpart of the same status. They are sheltered from the harsh realities of Chinese life and are recipients of enormous courtesy and care. There are three main reasons for this preferential treatment. First, as a poverty-stricken nation, the Chinese need to attract and retain foreigners to help them achieve a higher standard of living, by increasing their economic and technical level. Second, the Chinese believe that people from the developed nations are so used to modern comforts that they would not be able to function competently without them. Finally, there is simple pride. They want their country to be thought of favorably. Social Generally, the sociocultural behavior of the Chinese differs greatly from that of Western societies. Family is very important to them, and obligation to them takes precedence when it conflicts with work responsibilities. Those outside the family are treated with indifference and sometimes with contempt. Decision making evolves from the opinion and support of the family. The highest respect is given to elders and ancestors. The reverence for authority and order explains why the Chinese are so careful about getting consensus from everyone. An important ideal that is fostered by the family is harmony. The Chinese do not believe in the concept of privacy. This absence of individuality and freedom is a way of life in China. Laws Made to Be Broken Due to their history of being encumbered by rules and taboos, the Chinese have developed a perverse and seemingly contradictory attitude toward laws and regulations. They tend to ignore them and break them to suit their purpose, as long as they think they can get away with it. A significant proportion of public Chinese behavior is based on political expediency, and not on their true feelings. Since their public, official behavior is more of a survival technique than anything else, they do not feel guilty about ignoring or subverting the system. It is something they do naturally as a way of getting by.

Importance of Human Resources Management in Organizations in China The labor environment in China is influenced by six major factors.They are National Economic Plans, the Four Modernization Programs, Political Leadership, Chinese Cultural Values, Labor Unions, and the Special Economic Zonesthat is, SEZs. The SEZs were created specially for the conduct of the joint ventures with overseas countries.The main characteristics of the SEZs that are found in a joint venture are their dominating influence on matters pertaining to the employment wage system, organizational structure, management roles, and decision making. One of the most interesting aspects of Chinese HRM is the unmistakable influence of some of the traditional cultural values such as guanxi (relationship), renqing (favor), mianzi (face), and bao (reciprocation) in recruitment and selection, training and development, and placement and promotion. There is a definite political element involved in the behavior of Chinese Personnel managers; those who are more partyoriented base their decisions on party policies rather than for the good of the company. Maintaining Personnel Files and Their Implications Chinese-style personnel management generally does not forgive or forget any real or imagined past transgressions by employees under their jurisdiction. Any past mistakes or offenses committed by the employee are duly recorded in the employee's file and are often used against that person. To hire someone from another company, the other company must release the prospective employee's file. This contains the employee's work record and entitles him or her to benefits accorded to workers in the state sector. If the employer is not willing to release the file and the employee leaves, he or she loses the benefits, a risk few Chinese are willing to take. Many foreign companies have been able to complete transfers only after compensating the other company. The average payoff has been about 1,000 yuan (in 1992), a very modest amount in $US but one-half of one month's salary for a translator. The Chinese can be said to be ethnocentric, that is, the belief that one's own national or regional management practices are superior. This can carry over into the review and acceptance of an employee's file from other provinces. The employee's previous place of employment can impact his future job prospects. In this case, the Shanghainese would look with disfavor on an employee file (and therefore the individual) from the poorer, less sophisticated Chongming Dao area. A related culture difference is that a foreign manager would examine an employee's file from the perspective of performance, whereas a Chinese manager would review the file to learn of an individual's seniority and to see if there is a history of causing dissention. Rank There are no official class distinctions in China, but rank among businesspeople and government bureaucrats is very important. It is very important that you know the rank of the individual you are likely to deal with and your response should be consistent with the rank. Connections and rank gain one access to the tequari or special privileges. If the top official is accompanied by the second in rank, all the discussion should be directed toward the top official and the second in rank might as well not be present. Manufacturing and Quality Control in China In general, the Chinese have only a rudimentary understanding of quality concepts. They almost always carry out 100% inspections to "control" quality. Because the Chinese have become accustomed to inferior quality goods, producing goods of high quality is often not perceived by workers to be important. Those items that do not pass quality control are offered to the employees free of charge. There is great variety in the quality of technology used in China. For the most part the technological level resembles that of the United States in the 1950s. There is scant computerization. Materials handling is done manually. Machinery is bulky and frequently needs repair. Scheduling of work is almost nonexistent, though work itself is assigned to groups. A typical manufacturing operation is very laborintensive, and in most cases there is an excessively large workforce. Production planning is usually based on the number of hours to be worked rather than on the number of units to be manufactured. Infrastructure China's economy suffers from weak infrastructure. Electricity is unavailable at times (especially if the firm has exceeded its quota). Roads need repairs, train shipments are more often than not late, factory allocations of raw materials are (occasionally) routed to other units, and the communication systems can be considered a nightmare.

Additional Note
Neither Geert Hofstede's original study (Hofstede, 1980) nor his later work (Hofstede and Bond, 1988) included China as a country of analysis. However, Hong Kong and Taiwan were included in both instances. The results were similar for Power Distance (Large), Individualism (Low), Uncertainty Avoidance (Low), and Confucianism (High), differing only in Masculinity (Hong Kong, high, and Taiwan, low).We would therefore expect top-down decision making, centralized authority, little participative management, tolerance of uncertainty, and authority vested only in the most senior employees.This confirms the events described in the case.

EXHIBIT C16-3 Controls' Joint Venture in China: Organization Chart