Many companies have caused significant damage and cost to South Africa, and yet there has been no sanction or ban applied to them, writes Wayne Duvenage.
Treasury’s recent decade long banning of Bain and Company from doing business with Government, is a welcome move to punish companies that have participated in collusion, fraud and corruption with state departments. But it could do more damage than good if not applied consistently and with meaningful corrective action and reparation steps.
Many companies have caused significant damage and cost to South Africa, and scored hundreds of millions through their dubious dealings with State entities and government departments (until they were caught out), and yet there has been no sanction or ban applied to them.
In the case of McKinsey, KPMG, SAP, Hitachi, Asea Brown Boveri (ABB) and others, these companies conducted themselves in a corrupt and/or highly unethical manner in their respective dealings with South Africa's State entities and government departments. As was the case with Bain, they all apologised for their conduct, paid back the money, introduced preventative changes to their internal processes and removed the offending executives from their midst.
So why is it that only Bain has been singled out for banning by the South Africa government? Please note that in my asking of this question, I am in no way batting for Bain. I seek only clarity and consistency while providing several suggested solutions.
This issue of corrupt and unethical corporate conduct goes far beyond the inconsistency applied by both government and the various industry oversight and business associations. It exposes a lack of clarity, rules and expectations of what should happen when such companies have been found wanting. It is far too easy to apologise and pay back the money, without ensuring that meaningful accountability is meted out to the individuals within these businesses who gave rise to the problem.
In many instances in the corporate world (and possibly the case with some or all of the above-listed corporate entities), senior managers implicated in corruption are allowed to resign (often with a golden handshake) and thereby avoid rigorous internal disciplinary proceedings. This, in turn, allows the perpetrators to escape a highly probable 'dismissed from service' outcome that should emanate from a fully processed disciplinary enquiry.
However, the disciplinary hearing process is only one of some measures of accountability that businesses largely fail to implement in these situations. What civil society wants to see is meaningful action that sets out to halt the resurfacing of these delinquent individuals and directors into other businesses, where they often continue to ply their dubious conduct. By not following through with additional actions of accountability (a list of which is provided below), businesses fail to address the systemic corruption problem, both here and abroad.
When senior corporate managers and executives have acted illegally or unethically, and in conflict with the business's and the state's best interests, their conduct is nothing short of being delinquent. Their actions have the power to bring the company into disrepute, and in so doing, it is actually the brand and all the employees of the organisation that suffer when the company has to downsize due to the fallout and loss of business.
From a general public perspective, the obvious reaction is to call for the demise and outright banning of these organisations from doing business with the state and other companies in the country. But it is important to note that brands cannot carry out actions of corruption and fraud. Only people behave unethically, corruptly and fraudulently. This begs the question: Is the death of the brand and the loss of jobs by the entire company the best outcome or solution for everyone concerned, when the conduct has been perpetrated by one or a few unscrupulous people at the top?
In my opinion, society and government should call for several meaningful accountability actions against the individuals concerned. I sincerely believe that in such instances, if these companies are found wanting, they should carry out the following steps in a transparent manner:
- Ensure full internal disciplinary hearings are undertaken and followed through to the end, even if the individual(s) resign or abscond before the process has followed its full course. It is important that the reason for the termination of employment (e.g. dismissed or absconded as opposed to resignation), which emanate from the outcome of a hearing, is reflected correctly in the company's records, for future external reference enquiry purposes.
- The company should conduct a full independent investigation of the incidents that unfolded and, thereafter, ensure that a full report of the incident(s) is made available to the company's executives and all board members, including international head-office leadership, if applicable.
- If the corporate individuals are found guilty of misconduct and in transgression the companies act, the company should file a criminal complaint with the law enforcement authorities, and then regularly follow up with the investigating officer on the progress of the case.
- They should also file a report to the government department concerned, as well as send a copy to the government department's oversight bodies, detailing what took place and the names of the people within government who were clearly implicated in wrong-doing, with a request for internal enquiries and corrective action to be conducted against these individuals.
- In the case of executive managers/directors where evidence permits, the company should instruct their lawyers to proceed with a civil case of delinquency charges against the individual(s) concerned. If successful, this will ensure the individual(s) are disqualified from being registered as directors with any company again, as per the CIPC registry system. This should happen even if the individual has left the country and has found residency and/or employment in another country
- They should demonstrate that internal governance process changes, along with robust, safe and convenient whistleblowing practices have been introduced, to ensure that all future corruption and material conflicts of interest are dealt with swiftly and meaningfully.
- In the event that any internal whistle-blowers were side-lined or removed from the company due to their correct and courageous actions taken to expose the misconduct, these individuals should be re-employed and/or compensated for the outcomes that transpired.
- The company must pay back their ill-gotten gains with interest to the government department or state entity that was defrauded.
- They must also apologise to the nation, and within reason, they should explain how they have handled and addressed the above actions of accountability and reparations.
From a government and civil society perspective, initial bans should be applied until such above-listed corrective action steps have taken place. In addition, should the company be found wanting for similar conduct a second time, the government and business oversight bodies should introduce a total ban on the company trading in South Africa again, and formal complaints should be lodged with the governments of those countries where these companies international headquarters reside.
Businesses that fail to implement all these robust and authentic actions of accountability are simply being lazy and remain part of the problem when it comes to corruption.
However, if these implicated companies do carry out these steps with sincerity and impact, I believe they become part of the solution in the fight against corruption, and their actions provide hope and the continuation of the careers for the hundreds of good people that work within these organisations. For these reasons, I believe bans should be applied and lifted but only if and when the proposed corrective action steps have been taken and independently verified in accordance with a list of standards and guidelines that has input and oversight by civil society.
- Wayne Duvenage is the CEO of the Organisation Undoing Tax Abuse.
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