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Corporate governance, ethics & how to expose the corrupt

Peter Eigen – Founder, Transparency International

I love picking my nine-year-old son from school. This is literally the highlight of my day. There is no end to the multiplicity of mischief that children get up to at this age. The account of day’s events is usually very animated – complete with sound effects. I was therefore surprised when, about a month ago, I found him nearly in tears and reluctant to speak. When I eventually pried some information from him, it turned out that he had told on his classmates for making noise in class and even taken the liberty to write down a list of the offenders for the class teacher. While this had earned him praise from the class teacher, the rest of the class – including those whose names were not even on the list – had taken to calling him a ‘SNITCH’ and had refused to play with him all day. Needless to say, I was heart broken. Worse still, I was unsure how to react.

You see, telling on others is not something that is very common even in the adult world. Every day, we see acts of corruption taking place on our streets, in our work places, schools and public offices and none of us says anything. How about telling on yourself? This is nearly impossible. Why would you create certain doom, immediate punishment not to mention self-inflicted shame? And yet, this is at the heart of integrity. I just spent the last 3 days attending the Landmark Forum. This is an international personal and professional growth, training and development program that offers an education in living. From the program, I got that when I do not call out another person for their wrongdoing; I lack integrity. For me, it is easier to excuse their behaviour or turn a blind eye. I discovered that this is because I can see my own behaviour reflected in theirs. If we do not call out our own bad behaviour, it is difficult to hold others to account because our past behaviour still has power over us.

Could this be why corruption remains such an issue in our African society?

Corruption is the single biggest threat to Africa’s growth. According to Transparency International, around 75 million people in Sub-Saharan Africa paid a bribe in 2015. The NGO ran a survey in 28 countries in sub-Saharan Africa in 2014 and 2015 to attempt to measure the level of corruption. The type of bribes most commonly paid were to police officers and court officials. Half those surveyed had paid such bribes more than once. This means that that having gotten away with paying a bribe, one was likely to do it again. A report on the role of Corporate Governance by the Center for International Private Enterprise (CIPE), states that in dealing with corruption, there are no simple answers. In some instances business can be a source of corruption, while in others it is simply a victim. Crucially, the private sector can be a force in developing solutions to the corruption problem in a number of ways.

One key way of addressing corruption problem through internal measures is the establishment of strong corporate governance within companies. Good corporate governance is not only a tool that raises efficiency, improves access to capital, and ensures sustainability — it is also emerging as an effective anti-corruption tool. On the day-to-day transaction level it makes bribes more difficult to give and to conceal. At the decision-making level, corporate governance injects transparency and accountability, so that it is very clear how decisions are made and why. Economies only work if companies are run efficiently and transparently. We have seen vividly what happens if they are not- Investment and jobs will be lost and in the worst cases – Shareholders, employees, creditors and the public are ripped off.

whistleblower

Whistle blowing or reporting wrongdoing is relevant and plays a critical role in implementing Corporate Governance Practices. This was clearly evident when Sherron Watkins blew the whistle on Enron’s Management in the U.S. Companies are encouraged and, sometimes, required to set up channels for reporting or raising a concern about malpractices within the organization or through an independent structure associated with it. This is not easy especially in our society that has become so entrenched in doing wrong that corruption and violation has become the inherent part of the public and private life.

It is however a proven fact that companies and brands who mess up bounce back quicker when they confess, take responsibility and move aggressively to make things right.

The same is true of people. Landmark is onto something. Maybe more companies should get their employees to attend the Landmark Forum. Eating a slice of humble pie is tough, especially when it is our pie. But, like anything worthwhile, it’s the tough stuff that is most effective. Telling on yourself lessens the power that the wrongdoing has over you and puts you in an authoritative position to tell on others.

I am now living in the possibility of being authentic and powerful. I also have an answer for my son’s school dilemma.

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Is there an African word for Climate Change?

Is there a Xhosa word for climate change? Mitigation in Luganda? In Yoruba? And what of ‘my carbon footprint’ in Shona? These are the opening lines from the beautiful Mbali Vilakazi’s thought-provoking poem. This poem speaks to the heart of Sustainability Marketing Africa’s purpose: creating an African context and narrative for sustainability. In other words, ‘What does sustainability made in Africa look like?’

I had the privilege of meeting Mbali last week at the picturesque Intundla Game Lodge near Pretoria in Gauteng, South Africa. I was attending the Sustainability Practitioner seminar run by the University of Cambridge. It is a rare treat to be able to spend time away from work reflecting on what you do and why it is important. In a time where everything seems to evolve faster and faster, it is easy to get stuck feeling that we need to hurry. Even the leaders of the past who made great achievements knew the importance of going slow. The founder of the Roman Empire, Augustus, would use the Latin phrase “Festina Lente.” This translates to: “Make haste, slowly.” In this way, we were reminded to ‘quieten our cleverness’ as we began our 4-day exploration of how to regenerate how we talk about sustainability.

We used the ‘U-theory’ as a roadmap for the seminar and began by exploring how we got to the place where, as a planet, water is not only a huge social issue but there are also huge inefficiencies around our food production system. You may be as surprised as I was to discover that it takes 2,400 liters of water to make a small burger! And then there are the amazing and sad ways that the natural system is adapting to the changes in the environment. Around Tokyo, Japan, twigs and other natural materials are hard to come by in the busy metropolis, so crows settle for the next best thing, and that seems to be wire coat hangers.

bees plastic bags 2
In Canada, 2 species of the urban leafcutter bees have learnt to adapt to our increasingly polluted world by using small pieces of plastic found in litter to build their hives

With the world being in need for rapid growth, the dilemma is that that we also need scalable solutions to tackle the impacts of this growth. When an unstoppable force meets an immovable object, something has to give! Any ambitions we may have to deliver a sustainable future for mankind are inextricably linked to the degree to which businesses, from large to small, embrace and deliver sustainability. At the seminar, we built a framework based on 2 parameters i.e. categorizing how business’s regard their sense of responsibility to the challenge of achieving sustainable societies and categorizing the fundamental concepts that inform how the business actually responds to its responsibility. This framework, known as the 5 principles model, formed the basis of our discovery of our options and what it means for our work.

Some of the most exciting sessions at the seminar were the ‘Inspiration’ evenings. Each day we concluded with presentations from change agents such as the ‘Spinach King of South Africa’ Lufefe Nomjana, a social entrepreneur, who is starting a health revolution in Cape Town’s townships. He tells us the story of how he found his calling while on his quest to serve others by improving the eating habits of his community. His company, Espinaca Innovations produces over 200 loaves of bread, as well as spinach muffins, spinach pizza bases, rusks and spinach juice – all from a container converted into a bakery in Khayelitsha. The company has about 12 employees and supplies various hotels.  There was also Achenyo Idachaba from Nigeria who bid her corporate career in the United States goodbye and relocated back home to start a new chapter as a social entrepreneur. She tells the story of turning the destructive water hyacinth into a profitable income earner for women in Bayeku, a riverine community in Ikorodu, Lagos. Her company also conducts training workshops for locals on river handicraft product development.

These stories illustrate the kind of regenerative thinking that will create a context for sustainability in Africa. The reality is that on our continent, some of the ‘innovations’ around sustainability hardly novel. Many middle class Africans can relate to having to take a bath using a bucket and recycling what’s left of the bath water to clean the house. However these reminders of our childhood are unlikely to be successful as interventions for positive action. We are eager consumers. As Mbali puts it,

‘What will we say to the aunt who has just gotten electricity for the first time in her life, For whom it is untouchable by words like ‘saving’ and ‘consequence’, words she does not care for. It is her first time! She wants everything on ALL the time. She wants to see it, she wants to hear it, she wants to feel it. It is her first time! What will we say to her?’

Many consumers in Africa are driven not only by their basic needs, but by the desire to achieve a social status that until recently was out of their reach. It is unlikely that any ethical consumerism campaign or educational drive is going to take this away from them. These newly empowered masses want to consume, they want to show off their new status and their achievements, and they want social recognition. For any behavior change campaign to be successful, it must provide real, personal and tangible advantages for today’s African consumers. Appeals to self-sacrifice and self-denial will fall on deaf ears. The new consumers joining the market in Africa are all too used to going without. If business is going to reach them and influence their behavior, it will have to invest in understanding just what makes them tick and then deliver very real benefits to them.

It will have to ask the difficult questions like, ‘Is there a word for sustainability in Swahili?’

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Corporate governance & can our children trust us anymore?

I have just finished reading ‘The Goldfinch’. This beautiful piece of literature is a moving tale about a boy who loses his mother in a museum explosion when he is just 13. Being a minor, he is obliged to go live with his father – a recovering alcoholic. His father dies in car crash, stoned and driving in the wrong lane, only 2 years later. Much as the boy cannot stand his father, he eventually grows up to be just like him – a duplicitous drug addict. This may be a work of fiction however the chilling reality is that our children will turn out to be just like us. We may take them to expensive schools and give them the latest and best that money can buy however, their characters are shaped by what they see us do – even when we think they are not looking.

And we think our children do not know what we really do at work.

In the recent past, potential corporate governance malpractices may have contributed to significant loses to the investing public. According to recent report, the total number of companies that have incurred investor losses relating to corporate governance now comes to 8 – CMC, Imperial Bank, Uchumi, Mumias, Kenya Airways, TransCentury, Chase Bank and NBK.

Against this background, I cannot help but reflect on the legacy we are leaving for our children and the generations to come. After all, we are the ones who run these companies. The governance of the companies we run, and work for, are a reflection of who we are. Do we trust that what these companies represent through their brands is genuine? Even more importantly, can we trust our children with the brands we work for? Trust is the invisible but crucial glue that holds communities together and social contracts in place. It is a precious commodity. Every time a company poisons our atmosphere, violates the rights of children or of its workers or is involved in corrupt practices; they are doing something else that is just as destructive: poisoning the well of public opinion.

A growing number of companies in Africa now view sustainability as a key element in business strategy. Diverse companies such as General Electric, P&G, Safaricom and Unilever are strengthening their brands by making their consumers increasingly aware of a company’s impacts on the environment and society. These companies have concluded that expanded commitments to sustainability and transparency directly aid their business strategy and reputation in a progressively digital era.

Negotiating this newfound path is fundamentally about trust.

A survey conducted by Hill+Knowlton Strategies revealed that one of the more significant drivers of public confidence in a company is its commitment to sustainability, and its efforts to communicate about and deliver on that commitment. Among the key findings were that a company can gain public trust through an honest and transparent reporting of its efforts to be more sustainable and greater visibility of its corporate sustainability efforts. Set against this backdrop, suspect business practices by brands take on new meaning. Not only do they chip away at the public’s trust in businesses to act in good faith (and in accordance with the law), they also play into a wider skeptical narrative – that is that the private sector is using green-wash to keep the profits rolling in.

Last year, the United States’ Environmental Protection Agency (EPA) issued a notice of violation of the Clean Air Act to Volkswagen Group, after it was found that the automaker had intentionally programmed turbocharged direct injection (TDI) diesel engines to activate certain emissions controls only during laboratory emissions testing. Following this revelation, Volkswagen became the target of regulatory investigations in multiple countries, and its stock price plunged in value by a third in the days immediately after the news. Volkswagen Group CEO resigned and the company announced plans to spend billions of dollars on rectifying the emissions issues. Similarly, the current Olympics in Rio have a foul undercurrent with a huge furor around doping by some athletes with Russia and Kenya being right at the heart of it. What is sad about the scandal is that some of the doping is actually state-sponsored.

For businesses operating transparently, the test, is not what the company or its leaders say, but what they actually do. The Capital Markets Authority recently enacted a new Corporate Governance Code. The Code advocates that companies adopt standards that go beyond the minimum prescribed by law, and sets out specific recommendations on the structures and processes companies should adopt in order to make good corporate governance an integral part of their business.

We think we can disconnect our personal lives from our what we do at work. The sustainability of business is very much linked to our sense of responsibility in response to the external pressures of our time. At a time when global political leadership appears to be at an all-time low, it is business that will innovate and invest most effectively in the new technologies and systems needed for a sustainable economy. Chief executives must take a holistic approach, as sustainability is critical to business; it’s not niche anymore. Businesses that integrate sustainability into the very core of their value proposition gain a greater license to operate.

They may even become businesses that our children can trust.