Belinda Beresford
Something is rotten in the state of South African business. The legacy of the old South Africa has been disrespect for the law and a culture of entitlement, and the past influences the present.
Ahead of the latest round of awards to companies that do business honestly and openly, some of the seedier practices have again come to light.
The man behind the third annual Corporate Governance Awards, Roy Shough, says a lack of respect for business ethics not only contributes to the declining moral climate, but can also undermine a company’s economic performance.
South Africa’s years as an international pariah had encouraged disrespect for law. As sanction busting became a means to success, a secretive and devious mindset took root among South African businesses.
Shough said South Africa’s history had contributed to an erosion of ethical culture within businesses. A pervasive “culture of entitlement” had developed. Shough argues that some people who had been deprived of opportunities in the past now feel it is their turn to enjoy the fruits of success, earned or not.
Similarly some people argue that their forefathers built South Africa’s business wealth, and it is their right to continue to enjoy it.
The Corporate Governance Awards were instituted to try to encourage companies that genuinely implement good governance practices rather than simply complying with disclosure requirements by “ticking boxes on a check list”.
They are sponsored by accountancy firm Deloitte & Touche, where Shough is a partner, in conjunction with the Johannesburg Stock Exchange. This year there were approximately 40 entries from listed, unlisted, private and public sector organisations.
Good business practice is not limited to financial probity and disclosure. Rather it means people have to behave properly and do the right thing for the right reasons. Sexual harassment, for example, could be considered a violation of good corporate governance.
Similarly companies must consider all stakeholders – including for example the environment in which a factory is situated.
A critical test of corporate governance of companies is what happened to transgressors – do they simply suffer a slapped wrist, or were their activities a slip from required standards that needed proper correction.
Without a national culture of transparency, it is often easier for companies to cover up corporate governance problems than to follow the correct procedures. The struggling judicial system also encouraged businesses to try to hide breaches of morality.
Shough said if individuals are caught in unethical behaviour, they should be “publicly in for the high jump”. But typically companies tend to be embarrassed, and often the person is rather encouraged to leave quietly.
If companies tolerate an ethically lax culture, however, employees soon come to regard this as normal – similar to the declining respect for the rules of the road. People tend to think “if taxis can do it, so can I”, said Shough. Enforcing ethical practices needs to be an open issue within the company, if not to the public at large.
One impetus to change is the globalisation of South Africa. Successful ventures with foreign partners would be less likely to succeed unless there was a degree of trust on both sides. Failing to react to unethical practices would soon affect a business’s reputation both internally and externally.
There are signs of change in South Africa. Many businesses have adopted corporate governance guidelines and increasingly are offering employees hotlines to report unethical behaviour anonymously.
Sometimes this is offered externally – for example by putting hotline numbers on invoices so suppliers could report any malpractice.
The degree of graft and corruption in South Africa is under dispute. The local branch of international watchdog Transparency International recently said corruption was overplayed by the media. But this week Deputy President Thabo Mbeki was reported as saying that there could be no “African renaissance” when there was endemic corruption in both private and public sectors.
Shough said he felt malpractice was probably roughly the same in the private and public sectors, with laxer attitudes to good business practices among smaller private companies.