A groundbreaking study on business ethics in South Africa has found many top listed companies face high levels of risk through paying ”mere lip service” to ethics management.
The Business Ethics SA (Besa) 2002 survey, conducted by the Ethics Institute of South Africa (EthicSA) on 53 of the Johannesburg Securities Exchange’s top companies, found ”worrying ethical lapses” in many of them.
This, according to EthicSA’s chief executive, Professor Willem Landman, indicated that corporate South Africa, while having taken some significant steps towards responsible ethics management, still had some hard work to do.
Addressing the media at a conference in Sandton on Friday, Landman urged companies, notably those in the media industry all of which declined to take part in the survey, to undergo ethical risk assessment as soon as possible.
He said that many of the recent catastrophic corporate collapses both abroad and locally were not due to external economic or political factors but rather to ”internal corporate greed and callous executive deception”.
After the release in March 2002 of the much publicised King Report on corporate governance, Landman said EthicSA decided to use the King criteria in a survey that has created, in effect, a national organisation ethics benchmark.
The benchmark is a business ethics index — composed of an effective ethical compliance index and a perceived ethical conduct index — which can be used to measure a company’s ethics performance by comparing its score against the Besa 2002’s index.
The Besa 2002 report found an average index score of 57% on the effective ethical compliance index. This measures not only formal ethical compliance (such as having an ethics code) but also the implementation of companies’ ethics codes.
This score, Landman said, indicated that most South African organisations had to build a ”culture of responsibility” rather than settling for a system of corporate ethics management where it was sufficient to follow rules by ticking a series of boxes.
He said Besa 2002’s perceived conduct index — measuring employees’ experience of ethical conduct in their company — which came in much higher than the effective ethical compliance index at 76%, was no reason for complacency.
”If an ethical culture functions only 76% of the time, it indicates a failure rate of, on average, one in every four instances…
”Corporate South Africa should strive for a values-drives organisational cultures, while formal compliance structures… still remain significant components of good corporate ethics management,” Landman said.
He said the three most significant ethical risk factors found in Besa 2002 were poor communication by senior management on ethics and compliance, theft, and employees not believing in their companies’ stated values.
”The prominence of poor ethics communication supports an important finding, namely, that impressive ethics infrastructures often do not go beyond mere appearances. Even the employees inside companies are often insufficiently aware of codes, ethics training and the like.
”And despite the strict controls, theft remains a serious problem in South African companies. The authors of the report believe that in addition to reactive measures, companies should address the problem proactively by introducing and cementing a values-driven culture,” he said.
EthicSA is an independent, non-profit organisation whose mission is to create an ethical South Africa in all societal sectors, not just business. Membership in EthicSA, whose fees vary between R2 000 and R8 000 depending on the size and function of an organisation, provides companies with ethics management consultation services, skills oriented ethics training courses and public recognition of membership. – Sapa