Business needs to define its ethics
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