Business is key to SA’s economic prosperity, but it must be ethical
Those decrying business in general because of illegal practices are throwing the baby out with the bath water
In the decade since the onset of state capture in SA we have learned some painful lessons about corporate governance in both the public and private sectors. These are not unique to SA, or to state-owned enterprises (SOEs) in developing countries. For more than a generation, the trend in public administration and business in developed countries has been to subvert systems of good governance and accountability. The failure of Enron in 2001, apart from being the largest corporate bankruptcy in the US, threw up myriad questions about the effectiveness of contemporary auditing and corporate governance practices.
Specifically, for corporate SA we witnessed the country’s largest company, Naspers, drawn into controversy over the behaviour of its subsidiary MultiChoice amid allegations of state capture.
The spectacular collapse of Steinhoff, one of SA’s largest companies, did not show business ethics in good light. Stakeholders never imagined that top executives could be embroiled in such blatantly unethical practices because the company had a code of ethics. But in addition to executives who acted unethically, others saw wrongdoing and ignored it. The code of ethics was seen as protecting executives’ interests rather than inculcating ethical values, virtues and norms in the organisation for the benefit of all stakeholders.
Similarly, some executives in multinational auditing firm KPMG and consultancies McKinsey, SAP and Bain & Co fell into ignominy for flouting corporate governance and social responsibility practices. Sadly, some nonprofit and nongovernmental organisations formed with noble intentions premised on ethics and righteousness have not escaped the pervasive, malignant greed and corruption. The public is justified in demanding accountability and consequences.
The persistence of unethical business activities is a sign that having a code of ethics is not enough for an organisation to be ethical.
Internationally, governance has been eroded for a variety of reasons. Institutional compliance is weak, and the rise of transactional leadership has led to the emergence of public sector and corporate corruption. These failures have posed challenges to the post-Enron governance order because these organisations have become potential breeding grounds for abuse. Venality seems to be the order of doing business.
Whatever these instances show, they are not representative of broader business conduct, nor do they collapse the differences between the overwhelmingly honest behaviour of the business community and the industrial-level corruption occurring at all levels of the government. It is wrong to paint all business leaders as unethical.
Business is the critical enabler, the key to unlocking the country’s economic potential. Every social goal we wish to pursue requires the health and success of business. The country does not have an alternative route forward. Damage business and we all suffer. When business prospers, society prospers. SA is in dire need of a responsible state and an engaged society.
Business Leadership SA (BLSA) is proving that it not only wants a functioning state but also responsible business leaders. For the first time in its 60-year history, the first organisation it suspended when corporate corruption was uncovered as part of the state capture scandal was a private entity. Suspension of the private entity was a statement from business leaders that we reject the conduct of our peer. It is also a statement that we are ready to work with the government to help it cleanse itself. Business must be at the forefront of the battle against corruption and state capture. That a few have acted unethically is no reason to make a declaration that all business is toxic.
We declare that anyone who breaks the law should be prosecuted, and that includes any business people, whether in their own right or in the course of their dealings with the government. While the law must take its course, it is not enough for companies to say they have not broken the law. If they wish to keep their licence to operate, they also need to satisfy the standards of behaviour expected by society.
This is captured in BLSA’s integrity pledge, which all our members are signatories to. It sets out a standard we believe all businesses should adhere to. Breach of the pledge is not consistent with continued membership. BLSA will not cover for businesses that break the law or violate our ethical compact, the integrity pledge. They do not share our values and we reject them. They damage the valuable reputation of business, and we all pay the price. We need to remind people that business is a critical component of a successful society, not a constituency that stands apart. Business is society at work, and to denigrate business is to disparage a large part of the population. That is why a key pillar of our strategy is to promote the value of business as a national asset because it is business that will deliver the growth, jobs and transformation without which the country has no future worth thinking of.
BLSA has been absolutely clear that too many people in SA are unemployed, there is too much poverty and inequality. Business has a critical role in helping address this moral stain. That is why we signed the Contract with SA, in which our members showed that they understand the key role business could play in helping address the social challenges the country faces. We need a growing economy that creates jobs, fuels transformation and poverty reduction and hastens the transition to a more normalised society.
BLSA insists that all social partners adhere to the values of the constitution. We believe the goals of accelerated, inclusive socioeconomic growth, job creation and transformation can never be achieved if business leaders do not accept equal responsibility with their social partners to drive positive social change. We are obsessive in our insistence on a clean, responsible society led by business. Business wants functioning institutions, a responsible state and an engaged society. Social cohesion can only be achieved when business and the state fulfil their responsibilities to all social partners. Social cohesion is the ultimate objective because it reduces transaction cost.
Ethical leadership is not the responsibility of boards and executives alone; it should flow throughout the society and organisations. Business failures are painful and can cause widespread collateral damage, often to the innocent.
Businesses make mistakes and bad judgments. As appropriate, they must be held accountable. But we must not throw the baby out with the bath water. You cannot be pro-poor and anti-business. The schadenfreude that has been expressed at business’s discomfort over unethical behaviour by a few bad eggs raises questions about whether these critics seriously want to address the country’s pressing social challenges.
We need ethical leaders who are committed to building on the “Three I’s ”— individuals, institutions and infrastructure. But until we treat business as a national asset, ours will remain a dream unfulfilled.
● Mohale is CEO of BLSA.