Whistleblowers must be rewarded
THE collusion saga in the construction industry refuses to go away. Critics argue that business has not been as vociferous in its response to the manipulation of tenders and the price-fixing scandal as when corruption occurs in the public sector.
Corruption is unacceptable, regardless of who is committing it.
Companies should make a new, explicit commitment to a clear set of values against which executives should be measured and rewarded.
Also, employees need incentives to report corrupt conduct.
The US Securities and Exchange Commission (SEC) has a good system of paying 10% of money recovered through fines for corrupt conduct to whistleblowers. We need to consider that system, with perhaps the added guarantees of job security to employees who blow the whistle on their bosses.
Business leaders need to be active in condemning collusion by some of their peers. They should lead from the front to regain public trust.
Shareholders need to ensure that executives are rewarded not just for delivering profits but by delivering them in an ethical and responsible way. Unethical profits should be punished, not rewarded.
Shareholders should insist on claw-back policies to force corrupt executives to repay bonuses paid for profits delivered in unethical ways.
South Africa has a great track record of producing outstanding business leaders. Some of our top companies are ahead of their global counterparts on corporate social investment, innovation, and research and development.
However, we need to review the efficacy of the mosaic of codes of good governance to ensure a robust oversight system that roots out improper conduct.
The institutionalisation of corruption in a key industry requires us to go back to the drawing board and fix the basic architecture of checks and balances to secure the integrity of our economic system.
The construction rot is an indictment of the ethical backbone of the industry’s leaders. It highlights the need for an effective regulatory system that protects the interests of consumers, taxpayers and shareholders against the greedy instincts of some executives driven by short-term financial gains to ramp up their bonuses.
The private sector likes to portray itself as an epitome of good governance and anti-corruption, but we have always known that it takes two to tango. Corruption by politicians and civil servants has always been inextricably intertwined with rogue elements in the private sector.
The construction scandal requires us to pose questions on the role of business in our society. What breed of leaders do we have? What calibre of leaders do we need to have globally competitive, trusted and admired companies?
Trust matters, which is why the unethical conduct of a group of business leaders widens the trust deficit between business and society. The notion that the end justifies the means should have no place in SA’s business landscape.
So how do we inculcate a pervasive philosophy of ethical accountability among our business leaders? There is a need for leadership development and selection processes that account for the ethical dimension, over and above technical competencies.
What are the implications of this saga for SA Inc? Not good at all.
Collusion subverts the normal logic of market forces, a key hallmark of a globally competitive economic system. It is ironic that this case tells us that the greatest threat to the free-market system can sometimes be the very advocates of that system.
What the construction industry has done is to make a compelling case for the government to intervene decisively to protect the interests of shareholders, consumers and taxpayers who ultimately pay the price.
In the aftermath of the scandal, we need to reinvent the industry to regain public trust.
A few media statements and apologies here and there will not be enough.
We need a substantive philosophical shift, backed by a concrete demonstration of ethical behaviour by industry leaders.
Kuseni Dlamini is former head of Anglo American SA and Old Mutual SA & Emerging Markets