Cor­po­rate SA should re­think “peo­ple power”

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BRI­TISH-head­quar­tered public re­la­tions agency Bell Pot­tinger was this week placed un­der ad­min­is­tra­tion. It has been a dizzy­ing fall, the speed of which has not only taken the agency and its sup­port­ers aback, but has fu­elled un­re­al­is­tic ex­pec­ta­tions re­gard­ing the ex­er­cise of “peo­ple power” through so­cial me­dia.

Within months of the race­hate cam­paign it had been wag­ing in South Africa, be­ing ex­posed, Bell Pot­tinger had shifted from ar­ro­gance to faux hu­mil­ity, from de­fi­ance to ab­ject public apolo­gies, and thence to fi­nan­cial and rep­u­ta­tional ruin.

Bell Pot­tinger had set out to de­flect at­ten­tion from the al­le­ga­tions against Pres­i­dent Ja­cob Zuma and his con­tro­ver­sial cronies, the Gupta clan, by scape­goat­ing whites for all South Africa’s ills and at­tack­ing crit­i­cal jour­nal­ists of all hues. Given that it used fake Twit­ter and Face­book ac­counts as ve­hi­cle for its ef­forts, it is po­etic jus­tice that it was the out­rage of tens of thou­sands of real peo­ple on so­cial me­dia that stymied its machi­na­tions.

If such an in­flu­en­tial and wealthy ca­bal of spin wiz­ards – skilled at ma­nip­u­lat­ing the cur­rents and ed­dies of public opin­ion – can be brought to its 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 of the ob­vi­ously good over the ob­vi­ously evil, it would be a mis­take to take what might be just a po­lit­i­cal flash in the pan and el­e­vate it into a po­lit­i­cal trend. The crack­ing of Bell Pot­tinger does not mean that spon­ta­neous public anger, fo­cused by ac­tivist groups 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 $44m. McKin­sey world­wide has 14 000 staff and a turnover of $8bn, while KPGM in­ter­na­tion­ally is even big­ger, with 189 000 em­ploy­ees and a $25bn turnover in 2014.

It takes some stretch of the imag­i­na­tion to think that lo­cal ac­tivists could bring them down in the same way that they did Bell Pot­tinger. It would be like down­ing an ele­phant with a pel­let gun.

Para­dox­i­cally, though, 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 starts to of­fend in­ter­na­tion­ally, the lo­cal op­er­a­tions can be sac­ri­ficed with rel­a­tively lit­tle cost to their world­wide part­ners.

Although the tainted con­tract with Eskom al­lowed McKin­sey SA to pocket R1.6bn, the firm has fewer than 10 part­ners in the coun­try. And while KPMG SA is far big­ger – un­sur­pris­ingly, as be­fits the au­dit firm ser­vic­ing the Gup­tas, it is dif­fi­cult from its glossy, vac­u­ous mar­ket­ing ma­te­rial, to pin­point ac­tual size and rev­enues – it’s not so big that it can’t be am­pu­tated, should the gan­grene from the SA limb start spread­ing.

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.

And the pres­sure is telling. The In­sti­tute of Di­rec­tors in South­ern Africa has al­ready sus­pended all co-branded ac­tiv­i­ties with KPMG‚ while it con­sid­ers its fi­nal po­si­tion. As­set man­ager Syg­nia cut its ties fol­low­ing a meet­ing between CEO Magda Wierzy­cka and KPMG at which she at­tempted, fu­tilely, to as­cer­tain how the firm’s part­ners had missed a “big mon­ey­laun­der­ing ex­er­cise” re­lat­ing to the in­fa­mous Gupta wed­ding.

On Fri­day, KPMG CEO Trevor Hoole, COO Steven Louw, chair­per­son Ahmed Jaf­fer and five other se­nior ex­ec­u­tives re­signed. The firm also with­drew its Sars rogue unit re­port, ad­mit­ting its ear­lier as­ser­tion that the for­mer fi­nance min­is­ter Pravin Gord­han knew, or should have known, about the unit, was sim­ply wrong.

As rec­om­pense, KPMG will ei­ther re­fund its R23m Sars re­port fee or do­nate the money to char­ity. The R40m earned in fees from Gupta re­lated en­ti­ties, stretch­ing back to 2002, will go into ed­u­ca­tion and an­ti­cor­rup­tion not-for-prof­its.

It will be in­ter­est­ing to see whether this ap­peases public anger and gives cor­po­rate SA the wrig­gle room it needs. It may let off the hook Stan­dard Bank, Old Mu­tual, In­vestec and Gold­fields, who all have re­mained clients.

It may be that their in­ac­tion stems from an un­der­stand­able re­luc­tance to be seen bow­ing to public pres­sure. On so­cial me­dia, right­eous anger can quickly de­te­ri­o­rate into a ram­pag­ing lynch mob and who knows who the hoi pol­loi will next tar­get?

They are mak­ing a strate­gic er­ror. To avoid the kind of 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 ex­cel­lent 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.

Fol­low WSM on Twit­ter @ TheJaun­dicedEye

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