Busi­ness needs to de­fine its ethics

CityPress - - Business - Lyal White busi­[email protected]­press.co.za

We are ex­pe­ri­enc­ing a cri­sis of ethics and gov­er­nance in the South African pri­vate sec­tor. Over the past year alone, some of the big­gest names in cor­po­rate have been em­broiled in scan­dals that brought trusted house­hold brands to their knees. How the mighty have fallen.

But South Africa is not alone. Across the At­lantic in Brazil – ad­mired by South Africans as the emerg­ing power to emu­late – the coun­try has been caught up in what has quickly be­come the big­gest cor­rup­tion scan­dal in world his­tory.

Oper­ação Lava Jato, or Op­er­a­tion Car Wash as it is known in English, has brought hun­dreds of in­ves­ti­ga­tions into busi­ness lead­ers and politi­cians since 2014. The seem­ingly never-end­ing saga led to the ar­rest of high-pro­file CEOs, in­clud­ing Marcelo Ode­brecht, the head of one of Latin Amer­ica’s largest firms, and the im­pris­on­ment of for­mer Brazil­ian pres­i­dent Luiz Iná­cio Lula da Silva just months be­fore the na­tional elec­tion, in which he was the fron­trun­ner.

Petro­bras, the state-owned oil com­pany at the cen­tre of the scan­dal, ad­mit­ted to pay­ing more than $2.5 bil­lion in bribes. With other com­pa­nies such as con­glom­er­ate Ode­brecht, con­struc­tion firm OAS, as well as the world’s big­gest meat pro­ducer JBS, the total value of graft is ex­pected to ex­ceed $10 bil­lion.

The fla­grantly un­eth­i­cal be­hav­iour of such busi­ness lead­ers begs the ques­tion: What is the purpose of busi­ness? Is it to gen­er­ate profit, and cre­ate wealth, in­no­va­tion or pros­per­ity? Few will agree on the an­swer to this fun­da­men­tal ques­tion.

A gen­eral con­sen­sus con­firms that busi­ness ex­ists to cre­ate value, but what sort of value and for who?

These ques­tions, as busi­ness school aca­demics Thomas Donaldson and James Welsh con­tend, can­not be an­swered by the tra­di­tional the­ory of the firm. The con­ven­tional un­der­stand­ing and de­scrip­tion of the firm is ill-equipped to han­dle the vast ex­pec­ta­tions of busi­ness to­day.

This is es­pe­cially the case in the so­cioe­co­nomic con­text of South Africa and Africa more broadly.

In de­vel­op­ing coun­tries like South Africa, where low lev­els of tax col­lec­tion, fiscal con­straints, un­em­ploy­ment and ac­com­pa­ny­ing wide­spread poverty are preva­lent, the role of busi­ness in ad­dress­ing these chal­lenges is crit­i­cal. Busi­ness is no longer on the pe­riph­ery of devel­op­ment.

It is in­tri­cately in­ter­twined with so­ci­ety and its cit­i­zenry role. Lapses in ethics and moral­ity – at a sig­nif­i­cant so­cial cost – are sim­ply un­ac­cept­able.

In the high-con­text en­vi­ron­ment in which we live, where so­ci­ety, sus­tain­able devel­op­ment and busi­ness are part of the same story, trans­parency is key. The old anal­ogy of “busi­ness as usual” no longer ap­plies. Busi­ness needs to move be­yond tra­di­tional mea­sures of suc­cess to­wards sus­tain­able busi­ness that is so­cially re­spon­si­ble and eth­i­cal. This re­quires a fo­cus that is less rules­based and more based on prin­ci­ples, shift­ing cul­ture from one of com­pli­ance to one of val­ue­based lead­er­ship that is committed to “do­ing the right thing”.

Many would agree, based on emerg­ing lit­er­a­ture and new think­ing around busi­ness, that this is in­creas­ingly based on the no­tion of shared value and cit­i­zenry. This im­plies that so­ci­etal is­sues are at the core of busi­ness and its de­sired out­come.

The fourth in­dus­trial era re­quires busi­nesses to adopt so­cially re­spon­si­ble, trans­par­ent, val­ues-led prac­tices with all of their stake­hold­ers – from employees and cus­tomers to in­vestors and reg­u­la­tors. To be glob­ally com­pet­i­tive and to build smart, sus­tain­able busi­nesses, eth­i­cal lead­er­ship must be a core purpose of busi­ness and those that pri­ori­tise eth­i­cal prac­tices and true en­gage­ment will suc­ceed and win in the long run.

These are some of the con­cepts and chal­lenges that were dis­cussed at a lead­er­ship and gov­er­nance di­a­logue re­cently hosted by the Jo­han­nes­burg Busi­ness School at the Univer­sity of Jo­han­nes­burg, in part­ner­ship with the Oliver and Ade­laide Tambo Foun­da­tion and Absa, on the legacy of the late strug­gle stal­wart and his style of lead­er­ship.

The dis­cus­sion delved into the need to re­store trust and con­fi­dence in busi­ness and gov­ern­ment. Ma­pun­gubwe In­sti­tute ex­ec­u­tive direc­tor Joel Net­shiten­zhe’s key­note ad­dress painted a pic­ture of Tambo’s lead­er­ship, which was char­ac­terised by a deep com­mit­ment to ethics, in­tegrity, re­spect and moral prin­ci­ple. Tambo’s val­ues are still rel­e­vant even to this day, as we ac­knowl­edge that busi­ness, gov­ern­ment and so­ci­eties are in tran­si­tion.

As we seek to re­de­fine the purpose of busi­ness, these are guid­ing prin­ci­ples that will be­come even more crit­i­cal if we are to re­store trust and faith in lead­ers and in­sti­tu­tions, and max­imise busi­ness value to the ben­e­fit of all members of the South African so­ci­ety.

White is se­nior direc­tor at the Jo­han­nes­burg Busi­ness School. He par­tic­i­pated at the re­cent lead­er­ship and gov­er­nance di­a­logue

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