Corporate crashes affects jobs, suppliers and pensioners by dean Jon Foster-Pedley

When you’re the captain of the aircraft and your crash the plane, you die. When you are the captain of a business and you crash a business, you don’t. The causality isn’t quite as stark. You can say “it was just a business mistake” or “I’ve gone bankrupt and that’s that”, but the collateral damage is massive.

It’s not evil people that do this, indeed to quote the great 20^thcentury philosopher Hannah Arendt, “the sad truth is that most evil is done by people who never make up their minds to be good or evil”.

The problem lies in the lack of situation awareness as it is called in aviation, or in legal terms a lack of understanding the consequences of your actions. It’s this lack that we have to address.

I think the best way is through corporate activism, which can be defined as a movement to stop people in businesses from harming themselves, their companies, the economy and society by colluding in corruption, criminality and state capture.

Far too many people are self-deluding and self-unconscious, so when mistakes do occur they are self-inflicted. There are many reasons for this; profiteering, growth for the sake of growth, toxic competitiveness, short term gains and a lack of collaboration.

We need to reinstitute a framework for how we take decisions; along the one axis write legal and illegal, along the other legitimate and illegitimate. Draw lines between them to create four boxes. Establish into which box your decision falls. The top left box is the optimum, where your decision is both legal and legitimate, the bottom right is the worst; illegal and illegitimate. The two other boxes are the more problematic because your decisions might be legal but illegitimate; like screwing over your friend to get a business deal or illegal but legitimate; such as the fight against apartheid or fighting for LGBTI rights in Africa.

The problem is that laws should reflect the highest form of social aspiration, not just the minimum legal requirement between order and anarchy. It’s in the grey areas between the two that we become lost in a morass of moralising our decisions.

The corporate casualty ward in South Africa is cluttered at the moment because of this; SAP, McKinsey, Standard Chartered, HSBC, Eskom, Transnet, while the morgue is starting to fill; Bell Pottinger is on the slab and Steinhoff is just about receiving last rites.

When an aircraft crashes, there are always warning signs that were ignored. In one of the most famous crashes, in the Everglades in 1972 an Eastern Airlines Tristar crashed because everyone fixated on the fact that the warning light for the under carriage came down, little knowing that the captain had knocked off the autopilot when he turned to speak to the flight engineer, and was now descending. When they realised it, it was too late, because they had been focussing on the minutiae and ignoring the warning signs.

Corporate crashes cost a lot of money: Carillion, the second largest construction company in the UK, collapsed with £7 billion in liabilities, 2 300 people lost their jobs, 30 000 suppliers were affected and more than 28 000 pensioners, Steinhoff lost $30billion, Siemens paid $1.6billion in fines, while Cambridge Analytica closed down entirely.

There are no case studies charting the consequences of collusion and silence. Take Themba in the township. He’s working, he’s educating himself getting the skills he needs to be competitive to take part in the economy. You could actually chart the effect of corruption on his life. For every rand spent on every project you can write off say 10 percent on bribery, which goes to someone before the tender even gets allocated. Then there’s the loss from the multiplier effect of that money being spent in South Africa because it’s been squirrelled offshore into a secret account and lost to the economy. On top of that there’s the cost of inefficiencies. That money has not gone to Themba who has trained himself, but to Jim who’s a friend of a friend and knows nothing about how to build buildings. Jim’s going to double the cost, take twice the time and produce a sub-standard product that’s going to fall down. People could die in the process.

We need to start charting the consequences of that and the effects on the life of someone like Themba; in a benign environment, the jobs he competes for and gets because he deserves them, the wealth he creates, the jobs he provides, the skills that are transferred – or the malign environment where he can’t compete and what that means for the country as a whole.

It’s true that captured companies do better than uncaptured companies in a captured society and if you are uneducated and naïve and you see someone driving around in a big flash car you will get super-impressed as they flash their money.

What you won’t realise is that they are destroying your children or grandchildren’s future. The only way to change this is through education, so that everything gets better. People get better trained, get better jobs, earn money in a society that is based on transparency and rewards merit and capability, not connections.

There is plenty of reason to hope that we can achieve this. The international partners at McKinsey put aside R1.2billion of their own incentives into an escrow account to be able to repay the money they received in this country because they are so horrified by what was committed in their name.

At the moment we think the captains of industry just crashed their aircraft, we don’t realise that they’re taking their passengers and the people on the ground with them. The captains of doomed aircraft normally perish in the wrecks of their decisions, but the captains of industry walk away unscathed. The only way we can change this is to create a society where those captains feel the full brunt of the consequences of their actions – to their reputations, to their careers – and to their liberty.

We do this by preaching about the consequences of collusion and corruption all the time at every opportunity.

When unconscious collusion becomes conscious it’s very hard to deny after the fact – and when those consequences are in your face they’re not going to go away no matter how hard you try or how far you flee.

(Published in The Star 22 May 2018)