Ethics or self-interest?
‘If the law isn’t enough then compliance with the law isn’t enough’
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