Nepotism is a festering tumour

2010-01-30 14:07

ALLEGATIONS that former chief executive of Vodacom, Alan

Knott-Craig, practised nepotism by awarding business contracts to companies run

by his son, niece and nephew have raised questions about the depth of the

problem in conducting business in the country.

Corporate governance guru Mervyn King said nepotism was common

practice at small, medium and micro-enterprises (SMMEs).

Family businesses regularly survived due to the support given by

family members at ­inception.

“But a business person has to be careful, especially when ­issues

of conflict of interest arise and they need to make a decision that will be in

the best interest of the business,” he said.

King cautioned that it would be wrong for family businesses to

­continue with nepotism if they ­received public funding.

“If public money is involved in a business, an entrepreneur has a

­duty to manage the business in the interest of the shareholders and not just

family members,” he said.

South African family businesses that have grown into dynasties

include the Oppenheimers with Anglo American and De Beers, the Ruperts with the

Remgro Group and the Ackermans with Pick n Pay.

Head of the employment law ­department at legal firm Webber

Wentzel, Nick Rob, said only properly governed companies implemented policies to

deal with nepotism.

“It is advisable that such policies should clearly state that work

or business cannot be given to family members without the approval of the

board,” he said.

In a case where an individual ­related to a decision-maker in a

­company applies for a business ­contract or job, the decision should be taken

by the board.

The decision-maker should be ­excused from the meeting that

­discusses the fate of their relative because of the potential conflict of

interests.

Benjamin Mophatlane, the chief executive of Business Connexion,

said the board of the JSE-listed IT company had absolute power in ­hiring or

awarding business contracts.

“In my company we have procurement and human resource divisions

which make recommendations to the board, which in turn makes final decisions on

the companies or ­employees that should be employed.”

Mophatlane, who started the company with his twin brother in 1996,

added that a company could steer away from nepotism only if the right systems

were in place.

Rob advised that it was not ­guaranteed that such policies would

prevent nepotism.

“The policies are there to act as guidelines so that if somebody is

caught practising nepotism in a company, they can’t claim ignorance,” he

said.

He said he was not aware of recent cases of nepotism that had been

­contested in court.

“This might be due to people not opening cases against their

bosses. But I do not doubt nepotism is rife in companies,” he said.

Rob suggested that the practice of awarding business contracts to

­family members of an executive or influential figure in both private and

government organisations was pure corruption.

“It is like you are indirectly ­enriching yourself because it is

highly likely you’ll get a share of their profit,” he said.

Grant Thornton managing partner Tony Balshaw said most successful

family businesses strived to fill management positions with competent

­professionals.

“Family businesses should try to employ the best person they can

find and not practise nepotism,” said Balshaw.

“But there might always be an ­inclination to provide jobs or

business contracts to family members, especially to those who are unemployed,”

he said.

Balshaw said listed companies could employ a whistle-blowing

mechanism for use by employees who are being forced to hire or award tenders to

family members or relatives of a superior.

Vodacom spokesperson Richard Boorman said the company had

­developed policies to deal with ­nepotism.

“The policies, referred to as ‘related party transactions’, require

­people to declare any external business interest they have,” said

­Boorman.

“Vodacom also requires executives to recuse themselves when matters

that could benefit them are discussed,” he added.


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