/ 14 March 2021

Corporate amends: What is enough?

Safrica Politics Taxation Kpmg Demo
Damager: KPMG was linked to VBS Mutual Bank that was looted and its 2014 report on a rogue unit in the South African Revenue Service has been discredited and retracted . Photo: Gulshan Khan/AFP

In an episode of the sitcom, The Office, the manager of the paper supply company apologises to a client for supplying her business with paper that bears an offensive watermark. As compensation, he offers her free paper for six months. “May we consider this matter ended?” he asks. “I’m very angry,” the client responds, to which the manager says: “We are truly, truly sorry.” But the client is not satisfied. 

This is a familiar scene played out every day. What is reasonable to expect from a company by way of reparations? How much is enough, especially when the transgressions are more serious? 

Closer to home, in the wake of corporate corruption scandals, we face the same situation. Companies caught in some wrongdoing relating to corruption or state capture have been issuing apologies and repaying fees. Management consulting firms such as McKinsey, Bain & Co, KPMG and Deloitte have repaid large sums of fees earned from their botched work in the public sector. 

Steve Carrell as Michael Scott in the Netflix series, The Office.

Yet every day we read and hear people asserting that repaying fees is not enough. So we find ourselves asking: “What must companies do to make proper amends for the wrongs they’ve done?”

This is difficult to answer. What we need is an objective standard or a guiding framework by which we can determine what is enough. Rather than following the usual playbook of denying responsibility, blaming a lone rogue, admitting to inane mistakes, issuing a hollow apology and making vacuous statements about amends, I propose the following framework, which outlines the six steps companies can take to develop a reparations plan to effectively and meaningfully set things right.

1: Identify wrongful actions

The first step is to understand what has gone wrong and specifically what the company has done wrong and who in the organisation was involved. In the case of the paper supply company, it was wrong to supply the client with a faulty product. This happened because of a lapse in the company’s quality assurance function. Understanding the wrongful actions entails comprehensive internal reviews, possibly requiring the services of external investigators, and consultation with the parties harmed. The wrongful actions are usually in the company’s control and stem from decisions made.

2: Identify harms and victims

This is the most overlooked step because it is here that perpetrators have to face the harms they have caused and those whom they have harmed. Yet, without this step, which has to be conducted iteratively with step 1, any remedy plan is meaningless. The victim could be individuals, an organisation or a whole country. Any approach aimed at reparations that ignores the victims is fundamentally flawed. 

In the paper company example, the client’s business has been damaged because her clients reacted negatively to the faulty product and she herself was offended by it. The apology and offer of free paper didn’t make up for the harm she has suffered. The company couldn’t possibly know what would satisfy her because it never involved her in a constructive process. The apology thus rings hollow and it feels to the client that she is being bought off with some free paper. 

What is required is a series of mediated, open discussions where the perpetrator listens to the victims to determine the harm caused and commits to a continued process to determine the appropriate reparations.

Harm cannot only be thought of in financial terms. Harm can be done to people’s dignity or to an organisation’s functionality, which can be reduced to financial terms but will always miss something human that cannot be quantified. 

3: Design the solution

Only now is a company in a position to develop a solution. This is again an iterative process about what may be required, the costs and what internal people are prepared to do. It is a difficult process, especially when companies discover that doing the right thing can cost more than what they’re willing to spend. But they need to remember that this is not a public relations exercise but a process of repairing the harm. What the solution is will depend on the circumstances. In some cases it can be as simple as an apology and a financial payment, but in other cases it may need a lot more.

4: Issue apologies

An apology requires that the victim, the harm they’ve suffered and the wrongful actions that caused the harm be acknowledged. Most apologies are hollow because they are not directed at anyone in particular and make no acknowledgement of the harms and wrongful acts. The paper company manager said: “We are truly, truly sorry.” This sounds heartfelt, but what is he sorry for? He cannot apologise for the harm caused because he hasn’t tried to understand it. Who is he issuing his apology to — the client only, but what about her employees and her clients? 

The more specific the apology can be the more meaningful it will be. It is okay to issue generic apologies in the early days while information is still being gathered, but this needs to become more specific very quickly.

Perpetrating companies will have to apologise to all affected parties and sometimes on multiple occasions. The only way to move past this step is to do it properly the first time and this requires the inputs of steps 1 to 3. 

5: Implement the solution

This step is here for two reasons. First, to emphasise where in the sequence of steps it should be done. 

We see many companies taking action they claim is remedial but without the proper inputs and so are often meaningless. Worse than meaningless, sometimes they are viewed with scepticism if the proper consultation hasn’t happened. How can you make reparations for a harm that you have not identified? 

Second, this step is included because this is where the rubber hits the road. Often companies announce their intent to make amends but then do nothing once the media attention abates. It is in this step that compensation starts being made and that companies can forfeit benefits they may have derived from the wrong they did. With the preceding work done, the company is far better able to justify the form and quantum of compensation rather than making arbitrary payments as most do.

6: Make internal changes

In the paper company example, the manager eventually says to his angry client: “We are going to do everything humanly possible to ensure that this will never happen again.” This is the kind of assurance we’d like from companies who have done wrong but these words mean nothing without action. With the insight gained from Step 1 on what caused the wrongful actions, the company can make internal changes to its structure, policies, incentive schemes, culture or personnel to ensure that there is never a repeat.  In this step the company would punish wrongdoers and make organisational changes.

This framework offers society a much-needed way of holding companies accountable. If it’s done right, all parties can sign a declaration that they have been through this rigorous process and that they consider reparations to have been made.

In this way, after a company has done wrong we won’t need to debate whether they did enough to make amends — we can simply ask whether it has followed the process. 

Athol Williams is the chief executive of the Institute of Social and Corporate Ethics and a research fellow at the Centre for Applied Ethics, Stellenbosch University

The views expressed are those of the author and do not necessarily reflect the official policy or position of the Mail & Guardian.