How pow­er­ful are the peo­ple?

So Bri­tish firm Bell Pot­tinger has fallen. Next in line are au­di­tors KPMG SA and in­ter­na­tional man­age­ment con­sul­tants McKin­sey – but they will not be knocked over as eas­ily.

The Citizen (Gauteng) - - OPINION - Wil­liam Saun­der­son-Meyer

Bri­tish-head­quar­tered pub­lic re­la­tions agency Bell Pot­tinger was re­cently placed un­der ad­min­is­tra­tion. It has been a dizzy­ing fall but has fu­elled un­re­al­is­tic ex­pec­ta­tions re­gard­ing the ex­er­cise of “peo­ple power” through so­cial me­dia.

If such an in­flu­en­tial and wealthy ca­bal of spin wizards can be brought to their knees so swiftly, what is the likely fate of other en­ti­ties in­volved? The civil so­ci­ety group Save South Africa warns that “KPMG could be the next Bell Pot­tinger”, be­cause of its work for the Gup­tas.

But while the im­plo­sion of Bell Pot­tinger was a rare tri­umph, it would be a mis­take to take what might be just a po­lit­i­cal flash in the pan and el­e­vate it into a po­lit­i­cal trend. It does not mean that pub­lic anger, fo­cused by ac­tivists to bring in­tense pres­sure, will van­quish larger, more for­mi­da­ble, more en­trenched foes.

Next in line are au­di­tors KPMG SA and in­ter­na­tional man­age­ment con­sul­tants McKin­sey – but they will not be knocked over as eas­ily.

These are se­ri­ously big play­ers. Bell Pot­tinger had 240 staff and an an­nual rev­enue of $44 mil­lion. McKin­sey world­wide has 14 000 staff and a turnover of $8 bil­lion, while KPMG in­ter­na­tion­ally is even big­ger, with 189 000 em­ploy­ees and a $25-bil­lion turnover in 2014.

It is the very scale of these firms in­ter­na­tion­ally that makes their SA op­er­a­tions vul­ner­a­ble. If the stench from their wal­low­ing in the Gupta trough of­fends in­ter­na­tion­ally, the lo­cal op­er­a­tions can be sac­ri­ficed with lit­tle cost.

Al­though the tainted con­tract with Eskom al­lowed McKin­sey SA to pocket R1.6 bil­lion, the firm has fewer than 10 part­ners in the coun­try. And while KPMG SA is far big­ger, it’s not so big that it can’t be am­pu­tated.

Pres­sure is cer­tainly be­ing ex­erted. The civil so­ci­ety group Save South Africa has called on blue-chip names, in­clud­ing the Jo­han­nes­burg stock ex­change and the coun­try’s big­gest banks to drop KPMG.

The In­sti­tute of Di­rec­tors in South­ern Africa has al­ready sus­pended all co-branded ac­tiv­i­ties with KPMG. As­set man­ager Syg­nia cut its ties.

Nev­er­the­less, most of cor­po­rate SA sits de­fi­ant, al­beit faintly em­bar­rassed. Stan­dard Bank, Old Mu­tual, In­vestec and Gold­fields all re­main clients.

It may be that their in­ac­tion stems from a re­luc­tance to be seen bow­ing to pub­lic pres­sure. They are mak­ing a strate­gic er­ror. To avoid the rep­u­ta­tional dam­age that can make them hostage to pop­ulism, cor­po­rates need to place eth­i­cal in­tegrity at the heart of their de­ci­sion-mak­ing. They have to be squeaky clean and trans­par­ent.

This week, Iraj Abe­dian, chief ex­ec­u­tive of Pan-African Re­search, stepped down as a non-ex­ec­u­tive di­rec­tor at Mu­nich Re be­cause the rein­surer would not fire KPMG SA. In an anal­y­sis in Daily Mav­er­ick, he gets to the nub of the is­sue: it is not about the nar­row def­i­ni­tions needed to bring crim­i­nal charges, nor about the lim­ited author­ity of the au­dit in­dus­try reg­u­la­tory board to pun­ish pro­fes­sional fail­ings.

“[These] have ab­so­lutely no bear­ing on the eth­i­cal judg­ment that KPMG clients have to make. On the ba­sis of what is al­ready in the pub­lic do­main – and KPMG has not de­nied any of it – there is noth­ing to wait for.”

So, too, with McKin­sey.

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