Ethics or self-in­ter­est?

‘If the law isn’t enough then com­pli­ance with the law isn’t enough’

Finweek English Edition - - Private Buy - SHAUN HAR­RIS shaunh@fin­

ARE ETHICS and cor­po­rate busi­ness mu­tu­ally exclusive? Of­ten it looks that way – and it’s a de­press­ing thought. Even more de­press­ing is it seems one of the key lead­ers in this field also has doubts, though he’s not blunt like me and voices his con­cerns far more sub­tly. Now I know busi­ness lead­ers will protest, point­ing to what the com­pany does for em­ploy­ees, cor­po­rate so­cial in­vest­ments, sup­port­ing char­i­ties, etc. That’s all good stuff: but there’s an el­e­ment of self­in­ter­est in it. And it’s not re­ally what “ethics” is about.

When a per­son does what he truly be­lieve is right – not nec­es­sar­ily what the law or com­pany rules say is right – and does it re­gard­less of what other peo­ple might think of him or what might hap­pen to him, then I think we’re get­ting close to what Fi­nan­cial Ser­vices Providers Om­buds­man Charles Pil­lai refers to as the “eth­i­cal mind”.

Pil­lai was speak­ing to guests of the Univer­sity of KwaZulu-Na­tal Grad­u­ate School of Busi­ness. His back­ground is in law, mainly as a con­sti­tu­tional and hu­man rights lawyer and di­rec­tor at the Le­gal Re­sources Cen­tre for a while. In his cur­rent role as the Om­bud, Pil­lai is run­ning up against ethics, or the lack thereof, in cor­po­rate be­hav­iour all the time. It’s a sub­ject that must oc­cupy his mind.

He says eth­i­cal be­hav­iour “de­mands a cer­tain ca­pac­ity to go be­yond your own ex­pe­ri­ence as an in­di­vid­ual. You need to be­come more like an im­par­tial spec­ta­tor of the team… you may need to sac­ri­fice re­spect for some­one if your ethics de­mand that you do.”

Pil­lai cites an early ex­am­ple of act­ing for an eth­i­cal per­son while still with the Le­gal Re­sources Cen­tre. He was a whistle­blower who went to the chair­man to com­plain about his CEO at the Road Ac­ci­dent Fund.

Says Pil­lai: “He was threat­ened with dis- missal and came to us. Now what’s im­por­tant is that whistle­blow­ers dis­play eth­i­cal minds. We know of many peo­ple who might see a top man­ager do­ing some­thing un­eth­i­cal but won’t do any­thing about it be­cause they want to keep their jobs or they feel they must re­spect the boss.”

The real dam­age oc­curs when or­gan­i­sa­tions lack fo­cus on cor­po­rate gov­er­nance, in­clud­ing wider is­sues such as ethics. Pil­lai lists some in­ter­na­tional (and lo­cal) dis­as­ters stem­ming from that: • The Bhopal gas tragedy in 1984 – civil­ians were housed down­wind from the fac­tory. The Her­ald of Free En­ter­prise ferry dis­as­ter in 1987. The King’s Cross un­der­ground fire in 1987. Our own El­lis Park soc­cer dis­as­ter in 2001 – 43 spectators were crushed to death; 4 000 tick­ets were miss­ing due to cor­rup­tion. “The greater tragedy in all of this is that we con­tinue and will con­tinue to have dis­as­ters for as long as peo­ple con­tinue to ig­nore eth­i­cal con­cerns and the re­spon­si­bil­i­ties as­so­ci­ated there­with,” Pil­lai says.

I learned some­thing about the his­tory be­hind the FAIS Act. Pil­lai says it was a re­sult of Master­bond, where 22 000 in­vestors – mainly pen­sion­ers – lost R600m. “Aris­ing from the fall­out, at least 16 pen­sion­ers com­mit­ted sui­cide,” Pil­lai says.

Laws try­ing to en­force eth­i­cal be­hav­iour didn’t stop Master­bond from hap­pen­ing, and SA’s pros­e­cut­ing au­thor­i­ties didn’t man­age to stamp down hard enough on the per­pe­tra­tors. It cer­tainly did noth­ing for the 16 pen­sion­ers who com­mit­ted sui­cide or for their fam­i­lies. Same with the Lead­er­guard scam, also aimed largely at pen­sion­ers, a mat­ter Pil­lai presided over.

He sees sim­i­lar cases. Smaller per­haps, but also com­ing from un­eth­i­cal be­hav­iour, just about ev­ery day. It’s re­mark­able he’s not more cyn­i­cal.

He goes back – and it’s a long story from his child­hood I can’t re­peat here – to the prin­ci­ples of ubuntu and hu­man­ism. We are who we are be­cause of other peo­ple. That re­la­tion­ship isn’t gov­erned by reg­u­la­tions but by sim­ple trust.

“The pun­ish­ment for break­ing that trust was that in tra­di­tional so­ci­eties you’d be os­tracised for such un­eth­i­cal be­hav­iour,” Pil­lai says. “The need for reg­u­la­tion arose be­cause of mar­ket fail­ures driven by noth­ing other than greed and self­ish­ness. That came also with the his­tory and evolve­ment of the mod­ern com­pany or cor­po­ra­tion as we know it.”

It’s a mat­ter Fi­nance Min­is­ter Trevor Manuel has also dwelt on. Look­ing at the myr­iad cor­po­rate statutes that seek to pro­tect hu­man rights and so­cial part­ner­ships, Manuel con­cluded: “The law isn’t enough. If the law isn’t enough then com­pli­ance with the law isn’t enough.”

So if the laws and reg­u­la­tions can’t en­sure eth­i­cal be­hav­iour, what can? It’s up to in­di­vid­u­als, Pil­lai says, and in the more com­plex case of cor­po­rate ethics, up to the busi­ness leader, usu­ally the CEO. Pil­lai says he’s a prag­ma­tist and while the ideal would be to pre­vent mar­ket fail­ures “at this stage let us at least try to mit­i­gate them”.

Just don’t tell the good peo­ple at the JSE. They’ll try and come up with an “eth­i­cal in­dex”. Won­der which com­pa­nies would get stuck in there?

Mar­ket fail­ures driven by greed and self­ish­ness. Charles Pil­lai

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