Making news for all the wrong reasons
Time magazine has a long-standing tradition of identifying one person who has had a profound influence on the world during the year, and naming them “Person of the Year”.
The intention is to identify the most influential newsmaker of the year, and despots, dictators and dissidents have as much chance of influencing the news as celebrities, charlatans and political crusaders.
Consequently, Time’s wall of fame gives as much prominence to Selassie, Mandela and Merkel as it does to Nixon, Bush and Stalin.
The South African corporate landscape does not confer “Person of the Year” on anyone. If it did, the likes of Markus Jooste and Tshifhiwa Matodzi would lead the 2018 list.
Jooste’s destruction of the Steinhoff empire has turned out to be the greatest corporate fraud in SA. So complicated is the fraud, we still have no idea what actually happened. Equally important has been the realisation that Jooste was only able to pull it all off after he harnessed and cultivated the perfect corporate fraud equilibrium — a bullying and dominant personality, an inside circle made up of loyalists who apparently didn’t see anything of concern, a board of directors who now claim to have been clueless, and auditors who were allegedly duped.
The complex nature of the Steinhoff cross-jurisdictional fraud has made unscrambling the egg impossible.
On the local front, Matodzi engineered a similarly perfect equilibrium at VBS Mutual Bank. An overwhelmingly incompetent and dishonest executive team, reckless directors, a shady audit partner and greedy political fixers engineered the VBS heist.
As the Steinhoff saga meandered on and the VBS collapse accelerated this year, the ongoing fractures in our corporate systems were laid bare. In spite of their professed commitment to good governance and accountability, big companies are as likely to collapse as any other entity.
The accepted methods of oversight and lines of defence — management, auditors and the board — can easily be swept along by a wave of hubris that is amplified when the results are good and shareholders are getting their annual reward. The Steinhoff record of delivering apparently good results every year elevated the status of Jooste and his team to beyond scrutiny.
The tendency to employ the same people to serve on multiple boards of large entities creates the risk of them abrogating their duties when their capacity is constrained.
Luckily for both Steinhoff and VBS, in addition to the fraud equilibrium within the organisations, they also operated in a country where the capacity to enforce accountability for white-collar crime is poor.
As a result, there has been little in the way of hauling perpetrators before the justice system to account for their actions.
What particularly frustrates society is that, to the layman, there are prima facie exhibits of wrongdoing, yet the justice system seems unable to move on these.
This reminds us all of how the statecapture phenomenon rolled itself out. Society, innocent bystanders and the media could see trends of malfeasance. Those with the power to act — politically and administratively — apparently didn’t read or hear anything.
In that accountability vacuum, the gap was filled by investigative journalists, whistle-blowers and — as Momentum found out — Twitter activists.
The insurer’s case inadvertently exhibited the glaring disconnect between actions and consequences.
As a country where perpetrators of misconduct are not held to account, the story resonated with society as the act of nondisclosure by Nathan Ganas of a medical condition that had nothing to do with the manner of his death had unforeseen consequences for his widow.
The lesson for Momentum should be that we are all humans before we are executives of listed companies. In an age of evolving interactions between corporations and their stakeholders, a binary approach to matters of business and social justice no longer applies, and being right and doing right are not the same thing.
As Time magazine has repeatedly shown us, being the newsmaker of the year does not require a good story. Some 80 years ago, in 1938, Time’s Man of the Year was Adolf Hitler. And, just as Time might like to forget that, many of the companies that made headlines must be wishing they could forget about 2018 altogether.
But life doesn’t always work like that. A year after Hitler had won the award, a guy called Josef Stalin was the recipient.
Corporate SA would be best advised to avoid that trend.
He harnessed and cultivated the perfect corporate fraud equilibrium