What lies ahead this year in the area of corporate social responsibility (CSR), which concerns business and its role in society, and corporate social investment (CSI), which refers to the grant-making or corporate giving aspect of CSR?
BEE will at once make both CSR and CSI more problematic, but also present new opportunities, this year as the BEE Codes of Good Practice start to filter through business. That is if they do what they are intended to do, which is to emphasise a range of issues outside of what many people still consider the sum total of BEE, deals that transfer ownership to black people.
And government’s broad-based BEE strategy does seem to be having some effect.
Certainly in mining, which is the area CSI consultant Merle Favis has most experience in at the moment, the pressure is building for CSI in the context of BEE, for instance the five non-ownership, non-management components of the mining charter. She notes the interface between BEE and the CSI component of CSR is where the pressure is.
There is more awareness of the need to do something beyond writing cheques to buy kudos from communities and the public at large, she says.
Markus Reichardt, who consults on a wide range of sustainability issues, wonders about the message sent out by the Public Investment Corporation’s (PIC’s) intervention in the Barloworld deal regarding the form of shareholder activism it espouses. It cannot be, he says, that the PIC CEO Brian Molefe is focusing on only one narrow aspect of transformation, namely the number of black executive directors.
Generally, he notes a confusion in companies about what sustainability really means, coming across companies which say, ‘We are empowered, we are sustainable.”
Reichardt wonders if the big trend this year is simply an amplification of the existing confusion about the issues. Internally, companies are struggling with too many phrases being employed to cover parts of sustainability and are used interchangeably.
‘We are reaping the harvest of a lot of buzzword bingo by consultants.” For example, he points out that CSR and CSI, abbreviations for very different concepts, are used interchangeably. He is not arguing for textbook definitions but for a clearer understanding of what the field is all about.
However, there is a problem and an opportunity in the weak definitions of CSR. Companies can adopt something to their own circumstances. The danger is that companies fall prey to buzzword bingo salesmen.
Favis believes the tendency within corporates is still for CSI to be the poor cousin, a convenient place to put people who are no longer needed. This exists side by side with the new pressure to take social development seriously.
Favis finds a lack of understanding about CSI issues within many corporations.
‘You’ve got this fairly progressive framework set up by government (in the BEE codes and charters) which corporates feel pressured to engage with, but many executives within the corporates don’t begin to understand. They don’t have a clue.”
This is not for want of trying, though. ‘I think they really battle to deal with the realities and the complexities of social development. Community development, for example, is incredibly complex.”
Even people drawn from the very communities, the BEE representatives in corporations, struggle to take it on board and overcome the corporate culture, and this places them under enormous pressure, she adds.
Senior researcher Ralph Hamann detects a number of new issues (see box on page 4), one of them being the greater awareness of the responsibility of companies to take into account human rights. This naturally applies especially to mining and oil companies in Africa, and should concern South African firms that increasingly operate in volatile political environments in Africa.
This, indeed, was the theme of a conference early this year in Johannesburg arranged by the Foundation for Human Rights. The Business Accountability and Human Rights conference featured such luminaries in its opening as Mary Robinson, the former president of Ireland and a United Nations Human Rights Commissioner, former Education Minister Kader Asmal and former Speaker of Parliament Frene Ginwala.
An important theme of the conference was that the argument that host governments were solely responsible for policing human rights violations did not hold water. Because of their immense power, multinational corporations had to be held accountable too.
The trouble with the conference was that it was mostly a monologue: few business representatives bothered to attend, and none from any big company. Since attendance was likely to bring an antibusiness diatribe by one or other ultraleftist, you cannot really blame them. Anti-business feeling was strong among the civil society activists in the audience.
This does not bode well for future dialogue between business and civil society. On the one hand, street protest, abusive language, fairy tale economic prescriptions and angry press statements are likely to be counterproductive. On the other, business sometimes has seemed a bit smug in the wake of the receding tide of socialist ideals and the end of the cold war and does not see the need to try to persuade critics.
Let’s hope this kind of non-communication on important CSR issues will not be a trend this year.
The strange case of Barloworld
Shareholder activism came to South Africa this year with a dramatic public intervention by the Public Investment Corporation (PIC) in the governance of Barloworld.
PIC CEO Brian Molefe’s stated problem was that Barloworld had not a single black executive director. Moreover, he saw a governance problem in that the new CEO Clive Thomson was chairman Warren Clewlow’s son-in-law and that Clewlow was not resigning as promised. He vowed, as the PIC’s single biggest shareholder, to make life uncomfortable at the AGM.
The publicity did the trick. Clewlow did not stand for re-election as chairman and Barloworld appointed Rhodes scholar Isaac Shongwe, a dynamic black business and social entrepreneur as its first executive director.
The PIC’s intervention raised a host of issues, not least around corporate citizenship, or social responsibility.
Asked to comment by Bruce Whitfield on Radio 702 shortly afterwards, I welcomed this new vigorous shareholder activism, but wondered whether the PIC would be as active on other issues, such as Telkom’s exploitation of its monopoly to maximise profits at the expense of the consumer.
These have clearly raised the cost of doing business in South Africa, and as such have retarded economic growth and development.
It was noted that the PIC is supposed to model its investment on Californian fund Calpers, but while Calpers investment principles are available on its website, the PIC’s are not easy to find.
As an example of Calpers’ view of shareholder activism, take the following quote from its website: ‘The board expects those who manage the companies whose equity securities are held in the fund’s portfolio to conduct themselves with propriety and with a view toward responsible corporate conduct that is consistent with practices and policies including, but not limited to, those articulated in the Global Sullivan Principles of Corporate Social Responsibility and the MacBride Principles.”
It goes further than many South African companies appear to want to do on issues such as human rights. ‘If a company operates in a country or environment where serious human rights violations occur, the board expects to see maximum progressive practices toward elimination of these violations.”
If there is information on the PIC’s detailed approach to shareholder activism on its website, I can’t find it.
To take Telkom again as only one example of a big company in which the PIC is a major shareholder, will the PIC act to restrain Telkom if it once again embarks on a round of sweeping retrenchments to preserve its massive profitability, citing the interests of shareholders?
Just as importantly, what will the PIC do if one of the companies in which it invests is found to have intervened in one of the dirty civil wars that foul the African continent? — Reg Rumney