Lurking in the shadows

Why listed companies should disclose what consultants they’ve hired

It was difficult not to feel some sympathy for Business Leadership SA (BLSA) CEO Busi Mavuso as she struggled to explain to Bruce Whitfield why Bain had been allowed back into the fold before the final curtain is drawn on the Zondo commission.

Her organisation had taken a principled stand in 2018 following the findings of judge Robert Nugent’s inquiry into the SA Revenue Service (Sars). Nugent was scathing about the role Bain played in the near-destruction of the tax collector.

Mavuso told Business Day in September last year that the readmittance decision followed an independent investigation by law firm Baker McKenzie, as well as discussions with large companies and Bain over the three years. Baker McKenzie was evidently encouraged by the interventions Bain had put in place to prevent a repeat of the Sars debacle.

Regardless of its recently announced withdrawal, Bain’s attitude made BLSA’s stance hard to defend. There may be legal reasons why, unlike McKinsey and

KPMG, it initially refused to apologise for its role in the Sars/state capture scandal. Perhaps it feared an apology would trigger a multibillion-rand damages claim, or discourage some of its fee-paying private sector clients. Or perhaps it just didn’t feel sorry.

It may even be that through a certain lens Bain’s actions appear to be a mere lapse of judgment. Ironically, the tonedeaf manner in which Bain has responded to justice Raymond Zondo demonstrates its inability to understand the environment in which it operates, one of the essentials of an effective consultant.

Unsurprisingly, Bain has said it is disappointed with the conclusions of the Zondo report and raised the issue of the affidavits it submitted to the commission. It seems to have forgotten what Zondo said about those affidavits in March last year when Bain wanted them published. It was welcome to apply to testify, then all the evidence it wanted would be put before the public, said Zondo. Bain chose not to, just as it chose not to participate in the Nugent inquiry.

So here’s what BLSA should do to make up for its less-thanrobust stance on Bain: launch a campaign to require that all companies, public and private, disclose details of their use of consultants. At present the only consulting-type services that have to be disclosed by listed companies are those provided by auditors and remuneration consultants.

Generally it seems the only time we hear about consultants is when they behave badly in the public sector. Should we assume that either the private sector doesn’t use consultants or that consultants never behave badly when dealing with private sector clients? Probably not.

Or should we assume because of the almost complete lack of action against private sector wrongdoing that no wrong is ever done there, even at Steinhoff? Also probably not. Perhaps private sector wrongdoing is better camouflaged. Or its whistleblowers are more effectively intimidated.

A push for some disclosure of the use of consultants is only partly related to the current difficulties facing some of them. Given what we know now, it would be good to know if Bain, McKinsey, KPMG or any other of these previously untouchable consulting firms were trawling around the bowels of our private sector companies.

Surely shareholders of listed companies have a right to know to what extent the executive team is relying on external help to run the company? Is this help limited to a one-off project? Or is it driving a longer-term project of a restructuring nature? How long has the consulting team been on site? How long is it expected to stay on site? What sort of fees are involved?

Consultants provide an excellent opportunity for a company to access a temporary need for expertise but quite often they contrive to extend a brief contract into an indefinite one.

For decades we have accepted the story, created and embellished by the consulting industry, that these are super-competent and ethical experts. Frequently they are, but too often they aren’t.

They have been allowed to work in the shadows, accountable only to the executives who appoint them. A little oversight by shareholders might help to ensure they’re providing the temporary expertise for which they’re getting generous fees.

It’s the right time for BLSA to launch the disclosure campaign and try patch up the damage it’s done to its reputation.

Should we assume that consultants never behave badly when dealing with private sector clients? Probably not