The tangled ethics of black economic empowerment

Following up form our last blog entry about South Africa, the latest issue of the magazine Ethical Corporation provides an interesting feature about he impacts of the black economic empowerment (BEE) policies in South Africa. Citing a recent report from Harvard economists that was commissioned by the South African finance minister Trevor Manuel, the article offers a damming verdict of the policy, which it suggests "is failing the poor of South Africa and not helping business... the policy designed to right the wrongs committed against the country’s black majority during apartheid is working only for a few"

'Reverse discrimination' always makes for some tense ethical debates, but in the South Africa case, the sheer scale of past inequities provided a powerful rationale for introducing some radical measures. Not everyone was completely convinced by BEE, but by going beyond simple hiring and promotion quotes to include a groundbreaking attempt to spread business equity and control to previously disadvantaged groups, no one could say that South Africa's leaders were not ambitious.

The evidence that seems to be emerging though suggests that perhaps they were too ambitious, particularly given the social, economic and political context that South Africa is faced with. The Harvard report points to corruption, personal enrichment, poor financing of BEE equity deals, and some pretty unrealistic targets as some of the key factors that have driven the scheme off the rails. Without sufficiently well-educated and trained talent to fill BEE places, quota programs have run into problems, whilst a skills shortage has been exacerbated by emigrating whites dissatisfied with the skewed labour market. Positive discrimination, if it is going to work, needs to take a root and branch approach that tackles the underlying conditions of inequality (education, poverty, health, and some of the institutional arrangements of business and society) alongside its attention to the symptoms.

BEE is far from a lost cause, and the latest report, whilst controversial, will provide some much needed oxygen to a debate that can all to easily collapse into anger, point scoring, and various forms of racism and political correctness. Supporting or criticizing BEE can sometimes come across as taking sides in a political debate, but ultimately the most ethical policies are those that actually improve people's lives in meaningful ways. So, upholding the moral purpose and principles of BEE is crucial, but clear sighted reform so that it has a greater impact on ordinary black South Africans may be the best, and the most ethical, way to go. Business and government will both have to play a part in making that happen.

A view from Africa on corporate citizenship

We are writing this blog entry on the long trip back from a fascinating trip to South Africa. We were there mainly to participate in a big international conference organized by the International Society of Business, Economics and Ethics (ISBEE) – a global network of organizations and scholarly societies dedicated to business ethics. The conference only happens every four years, and brings together people from every continent (it’s not for nothing that it’s called the Olympics of Business Ethics!), and it’s an exciting place to be to talk and learn about what’s happening across the globe.

We were there to launch 2 of our new books, to run some professional development workshops, but most of all, to talk about our work on corporations and citizenship. And the conference, and South Africa in particular, turned out to be a great location to do this. Questions and debates about the social and political roles and responsibilities of corporations are fundamental to countries like South Africa, where it is companies that are charged with the responsibility for implementing black economic empowerment legislation through their human resource programs. Companies are also a key player in the provision of various public goods, such as water, health, and education. For instance, on one of our trips outside Cape Town we passed a special needs skills school sponsored by the local Coca-cola bottler (see photo) that demonstrates just a little of how deeply embedded corporations are in traditionally ‘non-business’ activities.

Such issues also swirled in and out of the several of the keynote speeches at the conference. We heard an executive from the mining company Anglo American discuss at length their responsibility to ‘be a healthcare provider’ and ‘guarantee the human rights’ of South Africans through their impressive HIV/AIDS program. We heard the manager of the charitable foundation of the pharmaceutical company Abbott Laboratories argue that the legitimacy of their African health initiatives would be threatened by incorporating business goals into their social programmes. And Henk van Luijk, one of the original European pioneers in the business ethics field, and a founder of ISBEE, explicitly identified the political role of the corporation as one of the key challenges facing business ethics and CSR in the future.

So when we came to present on the final morning of the conference, rather than the usual smattering of diehard conference junkies that make it to the last paper sessions of such a long conference, we were greeted with a large, eager crowd that was fully primed for a serious discussion about corporations, politics, and citizenship. Now we’ve been presenting our ideas on all this for a good few years, refining and sharpening as we’ve gone along, but this was definitely one of our favorite, and most productive, conference presentations for a long time.

In what was an unusual occurrence for us, most of the packed room was in agreement that we had to develop better conceptual and practical tools to address the political dimensions of business. In other occasions though, people’s discomfort with the whole idea of business playing a role in politics has meant that they have done their best to shoot the messengers. In one of our recent papers, we discussed this fear in terms of ‘monster theory’ which we had a little fun with.

But this time, corporations and politics were clearly on the agenda amongst our audience. However, not so many of them were convinced that ideas like citizenship, and corporate citizenship specifically, were the best way forward. They could have a point, but at the moment, it is certainly emerging as one important piece of the puzzle. And what we need is more people engaging in the debate about corporations and politics, and eventually devising serious alternatives, rather than just wishing it would all just disappear. In our conference presentation we worked with our audience to think through some potential routes forward for doing this. And in our many conversations both inside and outside the conference itself, we learned a lot about some of the challenges that we face. So whichever way you look at it, spending time in South Africa definitely got us thinking… (oh, and having a little fun too, as you can see in the picture above).

Bad habits die hard

It is amazing with how little social responsibility some companies manage to keep up a reasonably good image. BP is one such example. A major contributor to climate change, with recent scandals and disasters in Texas and Alaska – it nevertheless still maintains this cosy, green, ‘we’ve-made-a-start’ image.

There are also examples for the opposite. Nestlé is a case in point. Yes, they had some major blunders in the past about the marketing of their infant formula. But by and large, the company is nowhere up there with the oil, tobacco or car industries; no large scale environmental disasters, no deliberate misinformation of the public and no negligent acquiescence in killing their customers. Nestlé’s products are by and large OK; yes, some of them, such as KitKat might not be the healthiest, but by and large Nestlé is a food company who even amongst its peers (such as McDonalds, Cadburys or other food companies) does not look like the worst villain.

Despite all that, Nestlé has ‘skillfully’ managed to be one of the most vigorously criticized companies; in fact they hold the record of the most boycotted one. The latest blunder of the Swiss multi reads a bit like a piece out of a cheap spy novel: allegedly, according to Swiss television, Nestlé has hired the private security firm Securitas to spy on the Lausanne chapter (next door to Nestlé’s HQ in Vevey) of the NGO Attac. Main point of interest for Nestlé allegedly was a book the group was writing about the company.

It is amazing how illiterate in an ethical sense a company with this legacy can be. It is even more bizarre considering that under its current CEO Brabeck-Letmathe Nestlé has made considerable inroads into systematically addressing CSR. Yet, the deeper DNA of the corporate culture seems more stubborn than – maybe ephemeral – CSR fashions dictated from the top floors. It obviously crossed nobody’s mind at Nestlé, that some companies have actually started to talk to their ‘adversaries’ – stakeholder dialogue we call this.

It might be interesting to speculate about the reasons why Nestlé is so clumsy in addressing its stakeholders. We won’t get into that here. Sure to say though, Nestlé still has more of a ‘Feindbild’, a stereotype of an enemy, when they think about their stakeholders…