The Effect Leaders Have On Ethical Conduct

This is an edited version of a speech delivered by Trevor Manuel to the 7th annual conference of the Ethics Institute on 15 May 2017. - blogs editor.

Chairperson,

Distinguished Delegates,

Ladies and Gentlemen.

Why do we have a problem?

Whatever I thought of the scale of the ethical challenges before, the events at Eskom continue to catapult the issue into sharp focus. The gist of the problem is that Eskom decided to re-employ Mr Brian Molefe as its CEO after [TP1] he announced his resignation as recent as November last year, and declared in his statement: "I have, in the interests of good governance, decided to leave my employ at Eskom from 01 January 2017. I do so voluntarily."

In its attempt to explain the reasons for the decision to reappoint Mr Molefe, the board of Eskom produced a set of the most incredible reasons – key amongst these was that when Minister Brown decided to decline the Board's request to pay him a pension of R30 million; the entire deal of his resignation fell apart and since they could not pay him the R30 million, they had to reemploy him. To this shocking mumbo-jumbo, Minister Brown added, that the re-employ of Mr Molefe is in the best interests of the fiscus.

The sum of the supposed payment, which was not raised at the point of the 'voluntary termination' merely complicates matters. There are a number of challenges associated with all of the actions, regardless of the sum involved.

Let me share some of my observations with you:

• The Eskom Conversion Act sets out the responsibilities of the Board as such: "The Board is responsible for providing strategic direction and leadership, ensuring good corporate governance and ethics, determining policy, (and) agreeing on performance criteria," and for good measure, the Eskom website has a lengthy definition of "Ethical Business Conduct." For the record, the Board is also defined as the Accounting Officer for Eskom. When the Board fails as patently as it has, who is responsible?
• All Pensions Funds are governed by the rules of such fund, and established in terms of legislation. In each case the value of a pension is determined by the rules and generally complies with one of two systems, namely "defined benefit" or "defined contribution". The rules would also ensure that each member of the fund has an equi-determined entitlement to the share of the fund. Brian Molefe joined Eskom in April 2015. He was the CEO for 18 months, and even if one were generous and stretched it to January 2017, it would add two months. There is absolutely no way that the combination of his contribution, the employer's contribution and fund growth over 22 months could create such an entitlement. One has to ask whether, by applying the same rules, Eskom could set a pension payout for a long-standing worker, who may have contributed to the fund for their entire working life, by a similar multiple of earnings. Surely the oversight vests with the Eskom Pension Fund that should have equal representatives of employer and workers s. And when this fails, what then?
• Mr Molefe was sworn in as a Member of Parliament on 23 February 2017. On this occasion, he took an oath committing to "obey, respect and uphold the Constitution and all other law of the Republic." The Constitution creates the Chapter 9 institutions including the Office of the Public Protector The Constitutional Court on 31 March 2016 placed beyond doubt the strength of recommendations of the Public Protector. So, is Mr Molefe allowed to play loose and fast with the Constitution, which we treasure and with all of its attendant oaths? Who oversees the conduct of Members of Parliament?
• On 4 May, I shared a platform at the World Economic Forum in Durban with Minister Brown. (The Eskom Chairperson, Dr Baldwin "Ben" Ngubane was also present). On that occasion I indicated my strong support for the appointment of a Commission of Inquiry into State Capture as recommended by the former Public Protector. Minister Brown announced that she also supported the appointment of the Commission and that she'd been public about this matter before. So what happened in the space of the week between 04 and 11 May?
• She also publicly rejected the Board's decision to pay Mr Molefe the R30 million bonus. Or was this merely a ploy to pave the way for his return to Eskom after he lost out of his Ministerial post?[TP2]

This is not a conference about either Eskom or Mr Brian Molefe, but in so many ways, the conduct of people appointed to lead key institutions such as Eskom speak to the nature of the ethical challenges confronting us in South Africa. I should declare that I know the three main protagonists referred to in this speech, and that I have known each of them separately for a very long time. When I look at their conduct as described, I am compelled to ask the Psychology 101 question – were they natured or nurtured to conduct themselves outside of the norms, morals and ethics of society?

Which brings me to the essence of ethical leadership.

The author Stein Ringen describes the issue as:

On human nature, I go by an understanding of humanity as inspired by Aristotle. Human beings have the potential for nobility but are not noble by instinct. They need (what I have elsewhere called) "social anchorage". They need to be trained, supported and guided. They need to be governed. It is not in isolation but in togetherness that we realise our potential.

The open question in philosophy remains, "Why be good?" I accept that ethical values are central to all major religions and philosophies of life. Our conduct is always a function of how we relate to others, and to society through the responsibilities we assume. I am also conscious of the fact that "the line between authentic power and the trappings of assumed power is a subtle one. The boundary between right and wrong is often crossed before one sees it coming. Those, once excluded from and alienated by the privileges of others, who find themselves in positions of influence and power are invariably subjected to opportunities and temptations that they never anticipated or even thought of."

Which returns us to the concept of 'social anchorage'. We have an enormous responsibility to ensure that all institutions have rules that are clear, and that legislation and regulation ought to play an important external role in creating the environment for well-functioning and well-governed institutions. Occasionally, of course, 'opportunities and temptations that were not anticipated arise." It is at times such as these that the core values of individuals in leadership is tested.

I recently recalled a discussion that took place when a group of Cabinet Ministers, led by the late Professor Kader Asmal, were tasked with drafting the Executive Ethics Code. The in-committee [TP3] debate focused on how extensive the rules should be. Some of us argued that we needed a code to cover all aspects of 'opportunities and temptation', but were persuaded by Kader Asmal that we needed a light touch because "people who ascended to executive office were noble in their intent, that these were people who had been prepared to sacrifice everything for liberation, and that they were unlikely to be scoundrels."

History reflects that we needed more than noble intent. The question, however, remains how institutions ought to govern their members and how seriously individuals in positions of leadership should take their responsibilities, beyond the day-to-day tomes of paper they have to get through. The truth is obviously not what leaders want their followers to believe.

If the abuse of state power is unchecked, it stands to reason that the corporate sector will follow suit and that the mechanisms of accountability to enlightened stakeholders through the publication of reports and the convening of shareholders meetings are unlikely to result in voluntary compliance.

Let me share an example from an article published in the Business Day today – in fact an op-ed contribution from Minister Edna Molewa on corruption in which she argues, "far from 'doing nothing, we have a comprehensive policy and legislative tools that empower the state to battle both public and private sector corruption." Exasperatedly one has to ask, if these exist, why are they unutilised? Why is the political will so lacking?

Some of these are matters that relate to the core values that we shape in people throughout their lives.

Let me lift two of these core values:

• Firstly, there is shame, that deeply disturbing feeling of guilt, incompetence, indecency or blameworthiness...."The four most important effects of shame are isolation, loss of internal resources, hopelessness, and the inability to reality check." Just last week, Professor Gideon Pogrund of GIBS published an article titled, "Shameless leaders appear impervious to wrecked reputations", in which he wrote, "In shame cultures, morality is defined and driven by what others expect of people. What deters or discourages people from behaving unethically is the fear of shame – the disapproval, disgrace and humiliation they would experience if other people found out what they had really done. Shame is related to social conformity and control." The question that confronts us why these normative checks and balances do not function in South Africa now.
• The second issue, and one that is largely deficient, is accountability. Our democracy is designed for public representatives and institutions to be accountable to parliament. This facility is created by Section 92(2) of the Constitution that requires that "Members of the Cabinet are accountable collectively and individually to Parliament for the exercise of their powers and performance of their functions." This then creates the basis for an accounting officer (such as the Board of Eskom is) in S 36 of the Public Finance Management Act; and the same norms apply mutatis mutandis to the private sector as provided for in the Companies Act and the King Codes. But for the accountability framework to function, those who occupy positions on either side of the accountability framework, require the faculties of self-assessment, the voluntary commitment to account and a relationship between those to whom the institution or individual need to be accountable.

So dare I say, that the public institutions in South Africa appear to observe these norms in the exclusion. Part of our responsibility is to win it back, as anticipated in our constitution. As Justice Mogoeng reminds us, our constitution was drafted to "make a decisive break from the unchecked abuse of state power and resources that was virtually institutionalised during the apartheid era." Of course, the Constitutional Court found that "the President had failed to fulfil his constitutional obligations" and "amounts to a failure by the National Assembly to fulfill its constitutional obligations." So we are compelled to ask, "Quis custodiet ipsos custodes?", or "Who guards the guardians?"

If the abuse of state power is unchecked, it stands to reason that the corporate sector will follow suit and that the mechanisms of accountability to enlightened stakeholders through the publication of reports and the convening of shareholders meetings are unlikely to result in voluntary compliance.

At the root of this discussion, is of course, the root of all evil. The authors Robert and Edward Skidelsky write in How much is Enough? as follows:

Experience has taught us that material wants know no natural bounds, they will expand without end unless we consciously restrain them. Capitalism rests precisely on this endless expansion of wants. That is why, for all of its success, it remains so unloved. It has given us wealth beyond measure, but has taken away the chief benefit of wealth: the consciousness of having enough.

I accept, of course that the love of money is not the only aspect of ethics in society. For some people, their belief system is premised so strongly on doing no harm, that it impacts on their dietary preferences. For others, it relates to their general conduct of how they treat others, how they remunerate, the concern they express for the vulnerable and displaced in society. This is a state of being and of consciousness that we all might strive towards. For the purposes of this discussion, I would wish to confine myself to the conduct of leadership of institutions of authority, and of the responsibility of those who occupy such positions to demonstrate by their actions that they understand their responsibilities in relation to the shaping of the institutions.

Essentially the measure of their conduct is their approach. Whether they not only narrowly comply with the set rules, but whether they will create the culture of mutual responsibility and accountability. It is about whether they will treat others in the manner that they wish to be treated – including, of course, being listened to in forums, and in private – to enable the whistleblowers to be heard, and to know that their concerns would be acted upon.

Leaders should be expected to act with fairness, with integrity and in trust, and to use these intangible values to shape inclusive and accountable institutions. The conduct we have to counteract is, "what can I get away with", and replace it with "How we can best serve." It is about understanding the responsibility of both tone setting and calling out conduct unbecoming. It is about knowing the relative position of the lines that should not be crossed. The quality of leadership must be measured by the ability to interpret between fairly limited rules, acting as though the rules are comprehensively drafted[TP4][MOU5] . And, it is about the ability to persuade others that the incentive structures are based on doing what is right.

It is a set of issues dominated by the attitude to leadership.

Thank you.