Truth about crime hurts, but companies will gain in long run

Something has clearly gone awry in some SA workplaces, but how many? Is it that we just happen to know about the goings-on at, say, Bosasa and VBS, but that similar behaviour is taking place at other companies too? These are questions business leaders should be asking.

Those who maintain an “ignorance is bliss” attitude have fundamentally misread the historical moment we are living through. Those who respond with openness may feel the heat at first, but with the right intentions and steadfast ethical leadership will benefit from increased trust in future.

EOH, which is going through the sort of credibility crisis that haunts all executives’ nightmares, has opted for the latter approach of openness. It has a long road still to walk, but has begun it with the right sort of attitude, accompanied by a crucial practical step: launching a whistle-blowing facility.

It was reported in February that EOH has invited its entire employee base to utilise a new whistle-blowing app. Importantly, the process is being spearheaded publicly by the CEO, Stephen van Coller.

On February 25 he announced that the app had been launched as a “public service” and went on to make rousing statements about doing one’s duty. This kind of public endorsement from leadership is a vital ingredient for any whistle-blowing function to be trusted.

The second is independence of the line, which is paramount. Employees must be able to trust categorically that their submission is going through a secure channel that cannot at any time be accessed by anyone other than the independent third party who is trained in precisely how to receive and process such reports. Anonymity must be unambiguously guaranteed.

Say organisation X is far from being in EOH’s unenviable position and is in fact doing quite well and enjoying a strong reputation. Why go to the trouble of investing in a safe reporting line? (Safe reporting is a term with less baggage than whistle-blowing and, arguably, is preferable.)

Consider the statistics. PwC’s global economic crime and fraud survey of 2018 again found SA to have the highest rate of reported economic crimes in the world. Asset misappropriation is listed as the crime most committed, and procurement fraud, and bribery and corruption, are third and fourth, respectively. These findings tie in neatly and painfully with the evidence presented at the Zondo commission of inquiry into

state capture that huge amounts of government and shareholder assets have been, well, wasted. Businesses must take note: they are not immune to crime. Encouragingly, it seems that many business leaders are taking a more active interest in their governance responsibilities and want to be informed of unethical conduct in their organisations — before they hit the headlines.

A study into business ethics, conducted by The Ethics Institute in 2016, found that one in every four employees knows of misconduct but only half of them report it. Their main reasons for not reporting are a fear of victimisation, a belief that the report will not receive attention and the worry that they cannot report anonymously.

While most organisations in SA, in compliance with the Companies Act, have safe reporting mechanisms in place, these trends imply that there is a lack of trust in such reporting channels. Again, we are back to the importance of independence and anonymity, and the backing of an authentic leader who actively advocates for Pandora’s box to be opened.

The irony will not be lost on the leadership at EOH that it was a whistle-blower report to the US Securities and Exchange Commission that led to Microsoft’s alleged unilateral cancellation of its contract with EOH, an action that has sent its already fragile share price into a tailspin. But that is how it works with openness, and why it is so hard for many organisations to embrace: sometimes it hurts. Leading with an iron fist, where orders and information flow only from the top of the organogram to the bottom, seems a lot easier and less risky.

But, just like silence is something to be suspicious of with small children, so is it something to be suspicious of in organisations.

If the new EOH safe reporting application can deliver on its promise of independence and anonymity and continues to be supported by the organisation’s leaders, EOH will be in a much better position to judge the state of its ethics. It might not like what it sees, but at least it will be seeing it clearly.

GLOBAL ECONOMIC CRIME AND FRAUD SURVEY OF 2018 AGAIN FOUND SA TO HAVE THE HIGHEST RATE OF REPORTED ECONOMIC CRIMES IN THE WORLD