power, managers and staff in theirguanxi network may oppose
the establishment or the execution of certain regulations when it is
in contradiction to their interests. There are also instances where
employees object to rules of control that are applied arbitrarily and
unilaterally to employees but not to managers, or to distant employees
but not to intimates.
Both cultural traditions, of Confucianism and Legalism, emphasize
the value of respecting and being obedient to authority. In such a
cultural tradition, most employees are used to accepting a paternal-
istic style of management. In order to make more money to support
their families, most are concerned about distributive justice in the
organization. They may compare their own income with that of
others who are doing similar tasks in the same or a different organiza-
tion. Once individuals believe that they are overpaid or that their
income is fair, they may have higher work morale. People are con-
cerned about distributive justice not merely for utilitarian reasons.
As a family business grows larger to include non-family members,
organizational distributive justice also experiences a shift from the
need rule to the equity rule. If workers believe that they are underpaid
or not fairly treated, work morale may decrease, or they may leave for
another better job. This is one plausible reason why the industry of
Taiwan showed a high turnover rate during the 1970s (Yu, 1977 ).
Political capitalism
The political situation of Taiwan faced drastic change when its econ-
omy was undergoing successive stages of rapid development during
the 1970s. Taiwan was expelled from the United Nations in 1971,
and Chiang Ching-kuo was appointed prime minister the next year.
In order to consolidate his control over the regime, he assigned
many centripetal Taiwanese elites to key positions in the government.
The accomplishment of his ‘‘Ten Big Construction Projects’’ enabled
Taiwan to maintain its economic progress, but it could not prevent its
diplomatic failures. In the 1970s, Taiwan severed diplomatic relations
with most major countries and lost its seat in many international
organizations. Chiang was elected to the post of president by the
National Assembly at the beginning of 1978. But, the USA declared
its recognition of the People’s Republic of China, and severed
diplomatic relations with Taiwan, at the end of that year, destroying
Taiwan’s people’s confidence in their government’s claim that it
Leadership theory of Legalism 135