Business as usual.

Are companies becoming increasingly insensitive to public censure?

Swellendam: - They break the rules, pay a fine and then move on…until the next time. The latest was another case involving South African Airways, which, the Competitions Commission has ruled must pay a penalty of nearly R20-million, and Singapore Airlines a further R25-million for fixing prices on the Hong Kong route.

Not so long ago, some food giants were found guilty of price fixing and faced penalties running into hundreds of millions. Then there were some players in the construction sector found guilty of bid rigging during the soccer world cup – and many more millions in penalties had to be paid. Last year, the Competitions Commission was investigating 361 complaints – up 25% on the previous year. Twenty one complaints were recommended for prosecution covering amongst others the storage and trade of grain, fruit and pelagic fish processing, tyres, chemicals, reinforcing steel bars, steel, copper tubes and pilings.

We seem to have short memories when it comes to this kind of behaviour. Fellow journalist Barry Sergeant, reminded me after my recent Goldman Sachs article that those very same revered bankers were fined $550-million in settling a fraud case in 2010. Actually I had not forgotten. It was included in one of my hyperlinks. But then it makes me as at fault as the rest in not making more of it and viewing the event as “history” and that we have “moved on”.

Then there’s the historic low level of trust in business, executive pay levels that are difficult to comprehend and defend, a decline globally in customer satisfaction and the number of complaints to the National Consumer Commission four times higher than they had expected. It all gives one a sense that business seems simply to shrug off protests from the public -- from shareholders to occupiers of Wall Street. Billions are being spent on brand building, reputation consultants and PR spin, which in theory can all be jettisoned in an instant by damaging coverage in the media and social media. I say in theory because it seems as if many, including customers, seem to view the transgressions as not much more than traffic fines and will continue doing business with the transgressors – Goldman Sachs included.

But this is really a rather narrow perspective of the business environment today. Yes, in many respects, a large number of businesses are failing to meet the moral and ethical standards the public is expecting of them. It is also true that greed, instant gratification, impatience and short-termism has flung Capitalism into a crisis and has left many sceptical of the current business model. But largely because of this the goal posts themselves have shifted remarkably. Public expectations of companies have exploded on many levels – customers, labour, government and lobbies such as the environment.

In the last 30 or so years we have had a mushrooming of rules, regulations and watchdogs. Laws, both domestic and international governing trade, competitiveness, labour relations, the environment and consumerism have been written or re-written. Historic practices that in the past may have been dubious at worst have today become criminal, and the old adage that “the more laws you make, the more criminals you create” becomes apt.

That business sadly and in most cases, is lagging behind this changing environment, is patently obvious. What it cannot excuse for any reason, particularly not profit maximisation, is that it starts applying “cost-benefit” calculations to misbehaviour. It will simply unleash more distrust and public wrath in the form of more laws and heftier penalties.

In response to this new environment, companies have undertaken a number of measures to ensure greater social commitment. King III is one on governance and transparency, and internal accounting processes have been bolstered with instruments such as the Integrated Report, Sustainability reports, the Balanced Scorecard and the Triple bottom line. Ironically, a number of the transgressing companies had these in place before their transgressions. Companies have also adopted broader accountabilities and statements of intention such as the Ethics statement and Ethics committees; a core values statement; statement of purpose and a statement of principles -- all of these, of course, to the delight of organisational theorists and management consultants.

Even as a consultant, I never fully subscribed to the need for all these lofty statements. Indeed, management guru Jim Collins has argued that great companies seldom found a need to formalise these qualities. Admittedly, today he and his former colleague Jerry Porras are making fortunes out of teaching companies how to put these statements together.

The simpler the better. There are many words that describe and define company behaviour: ethics, morals, a moral compass, values, principles and culture. Some consultants will most likely not agree with me, but I think the most powerful and valuable, and arguably the only two really necessary, are ethics and values. The clear distinction between them is that ethics are what you wear, values are what you are. Like a dress code, ethics can be articulated, communicated and enforced in a company. But they should be driven by universal values, which are notions to which the vast majority of humans would be able to subscribe. They include honesty, fairness, compassion, prudence, generosity and integrity. There are really only a few, and should not be confused with the concept of “that which we value”, or cultural values such as polygamy, wedding rituals; or even existential states such as liberty and equality.

For companies to address the current trust crisis, they have to really do only one thing very well: become exclusively, unconditionally, uncompromisingly and unwaveringly customer focussed.

That is not only captured in the most powerful human value of all, care for others, but it is a return to the essence of what has always been good business. Sincerity creates consistency.

Goldman Sachs: The real issue.

There’s a growing desire for business to be held accountable to a broader set of values.

Why, one can only wonder, does the resignation of a lower ranking executive at one of the world’s leading banks make international business news?

That’s what happened with the resignation of Greg Smith at Goldman Sachs who cited the loss of a moral compass at the firm and its “toxic and destructive” culture as no longer tolerable.

So what? Whitney Tilson, founder of hedge fund T2 Partners LLC has responded: “The argument that Goldman has become increasingly profit- driven, sometimes at the expense of clients’ best interests, and that some employees use vulgar and disrespectful language, is hardly news”. And from the Editors at Bloomberg: “If you want to dedicate your life to serving humanity, do not go to work for Goldman Sachs.” And then Moneyweb’s Felicity Duncan also weighed in this week.

But a critical point is being missed. It is never okay for any business to view, speak about or treat its clients or customers as an exploitable resource existing purely in the pursuit of profit – “muppets” as Goldman Sachs directors are alleged to have called them. The attention Smith has received reflects a growing desire for business to be held accountable to a broader set of principles than shareholder value. One need only examine the prescriptions of King III to confirm that there has been a very clear evolutionary shift in what society expects of business. It clearly is falling far short of these expectations as reflected by the fact that about half of informed people believe business and their executives cannot be trusted.

The Goldman Sachs behaviour is a sad throwback to the “greed is good” era of some decades ago, and while it is certainly not unique in a profit driven business world, its callousness will fuel greater general distrust. Trust today is based on far more than simply delivering a sound bottom line and not breaking the law. When people like Allan Greenspan (“My theory of the world was wrong”) could be fooled by the motives and machinations of people he trusted, then principles like caveat emptor are simply no longer germane.

Bloomberg’s response itself is a throwback to a dying era – also a bit strange given Michael Bloomberg’s own belief in the need for “a moral compass”. The satirical “one imagines Goldman bankers spending their days delivering fresh flowers to elderly shut-ins and providing shelters for abandoned cats” reflects a rather disdainful understanding of the importance of general public trust in all business institutions. But they are also being nothing short of mischievous in presenting profit and benevolent purpose as being mutually exclusive. It is not simply a case of “profit or charity”. There is a very profound principle of generosity that underpins all transaction: it is that supply exists to serve demand. Behaving that way with transactional correctness guided by natural laws of supply, demand and price is the ultimate guarantee of sustainable success.

The issue is really simple: do you serve because you make a profit, or do you make a profit because you serve? If they are NOT mutually exclusive but indeed mutually supportive, where do you place your sincere emphasis? We have had decades of profit emphasis very often at the expense of service, and where has it got us? The world is demanding something different.

The real tragedy is that we have not given enough credence to those giants in business (recorded extensively by Collins and Porras) who have consistently argued that profit did not rank above meaning and making a difference in their business models. Bill Kellogg’s definition of the purpose of business as being “to add value to people’s lives” is scoffed at as being smug and insincere.

Sincerity is easily tested. There is a good Afrikaans idiom that says: “Waar die hart van vol is, loop die mond van oor.” It means simply that we talk most about what is dear to us. If you want to check what companies are really about, be a fly on the wall at board, executive and management meetings. I have not been privy to many at board level, but certainly to executive, senior management and levels below. The higher up you go, the more they mostly echo what Greg Smith found at Goldman Sachs: “I attend derivatives sales meetings where not one single minute is spent asking questions about how we can help clients.”

Yet, there are many where that is not the case. There are many top entrepreneurs who literarily “effervesce” with enthusiasm when they talk about their markets, customers, products or service. I have written about them before and will not repeat it here.

Credibility lies at a deep level. Conflicting messages arise at different levels of discussion in the absence of common purpose and common fate. This starts at the very top, with mission and strategy. The purpose of the collective may be defined in the mission statement as a contributory one, but to determine the real motives behind the purpose all one need do is attend the regular meetings of functionaries.

The topics of discussion are the ultimate reflector of motives. The income statement is the driver, and the driver of the income statement is maximisation of profit. So the mission may be a benevolent one, but the motive is the opposite. Already at this level the “serving” message becomes distorted. The information that flows from the board to management contains the same language the board was preoccupied with: profit and cost.

This gets broken down into greater detail so that it permeates all discussions as the information cascades downwards along the hierarchy. Accountabilities are affected and often the most fundamental message of all, that we are here to serve our customers, becomes blurred. The responses I had as a consultant from employees, and even middle and senior management, were an overwhelming confirmation of this feature: “They profess one thing but do another.”

The first and most important task is to change the dialogue and information content flowing in companies. To do this one must assess and perhaps even partly dictate the agenda of all operational meetings. This is where communication really happens – regularly and one-on-one. It simply cannot be replaced by non-personal means.

It is indeed possible to make things dear simply by talking about them. It’s a habit worth cultivating.

Labour has commoditised itself.

Without commoditisation trade unions could hardly exist.

When nurses abandon patients they lose their humanity. When teachers neglect their pupils they lose their integrity. When civil servants stop serving they lose their dignity. When workers withhold their efforts they negate their self-worth. In losing these things we also lose, albeit only for a while, that which makes us truly human: the capacity to care for each other.

When people behave in this way because of a pay dispute, they have in an instant defined themselves as a “thing”, as a commodity…bags of kilojoules accessible in a labour market and expendable in the workplace, its value influenced by supply and demand but finally determined through bargaining and haggling; agreements and laws; threats and intimidation. To entrench and enhance bargaining power, cartels called Trade Unions are marshalled and the price and benefits of the exchange can then be manipulated by withholding labour; forcing others to do the same; sometimes trashing streets and destroying property; sometimes even with violence and murder.

This is not an attempt to bash Trade Unions. Even the most vehement libertarian will have to concede that while Unions represent a cartel of labour, they are a legitimate balancing of power between employer and employee and have been a justifiable response to abuse and exploitation that is still a risk today. But as much as power can be balanced by equal players, it can also be thrown out by the opposite. The balance itself is seldom objective or universal and has to be tempered by circumstance.

Without the commoditisation of labour, Trade Unions would lose an important validating mechanism. The things that labour cartels so vehemently oppose are also the things that ensure their existence. This makes the denouncing of the “commoditisation” of labour by Cosatu somewhat devious but also quite profound and emotive. For the implication, as Cosatu’s Patrick Craven enlightens us, is that “we are no more than commodities like office furniture or stationery”. While this was said in the context of the labour broker storm, it is of course, a throwback to slavery and the ideological notion of “labour commodification” or commoditisation. The distinction between labour as work and labour as people is cleverly lost.

But this is a very fine line. No-one today can seriously equate any form of labour practices in South Africa with slavery. There may indeed be “wage slaves” in the narrow context of people forced to work for below minimum wages simply to stay fed. You don’t need an employer or a labour broker for that. Illegal miners, about 20 of whom have just perished in pursuing their “work”, are a prime example of wage slavery, or more specifically, being “enslaved” by circumstances to a particular activity.

If one accepts the argument that labour inflexibility championed by the unions is a major force behind unemployment which promotes wage slavery, then simple logic (albeit at a bit of a stretch) tells us that Unions are a prime cause of wage slavery. My definition of a wage slave is a bit broader: it is anyone motivated mainly or exclusively by money, “shackled to daily drudgery by the chains of mortgages and debt in an attempt to maintain comparative lifestyles and excesses in consumption and acquisition.” By that definition many, if not most are wage slaves.

Clearly today you can no longer commoditise labourers (people). But you can commoditise their labour, or efforts and skills. That is an intrinsic part of modern economics and is not restricted to free market systems or unbridled capitalism. The supply and demand for skills and qualifications will always be a major factor in determining wages and salaries despite the severe shortcomings in the labour market at both the lower skilled and executive levels. It is the only explanation for wage differentiation and not even Craven at his socialist best can wish that away. It is this very system that gives Unions their raison d'être.

In the commoditisation of skills and effort we have indeed created something of an inherently repressive system that tends to define people as commodities, seeing them as bags of kilojoules to be placed in buckets on an organogram in the grand design of maximising profit. Even the more labour friendly modern day organisational speak cannot avoid terms such as “human resource”; “human capital”; and “people as assets”, all of which imply some or other “product” or entity that has an exploitable strategic value. The method of “exploitation” may vary from seduction to coercion.

We are locked into this concept by the current expression of business as being profit rather than service driven. This is reinforced by an accounting system that defines labour as a cost, a drag and a burden to profit. The model itself has to change to being service driven without sacrificing productivity logic and fully involving labour in concepts such as common purpose and common fate. Yes, it may demand greater flexibility. But is that such a bad thing in a highly volatile world?

The question is whether people who behave as described in my opening paragraph by nature (or nurture) have no humanity, integrity, dignity and self-worth? Clearly not. Most of them probably live decent, honest and caring lives. But in order for them to rationalise their behaviour to themselves and find some approval and endorsement from others, they have created a split between who they are and what they do at work. There they are just vessels of kilojoules, suppliers of skills and effort which can be turned on or off according to circumstances and for a purpose higher than that of the function itself.

There are obvious flaws in this approach at both a practical and a moral level.

At a practical level, no supplier can establish longer term value for his product or service by withholding supplies and holding customers to ransom. Not even powerful global cartels have been able to do that for too long. Even with the backing of laws and government, you cannot escape the fundamental logic that the more expensive and bothersome you make something the more you restrict demand. This is obviously affecting employment in South Africa.

But at a moral and human level the cost is much higher. Ultimately our true value lies in our capacity to make a contribution to others and for most the best place to do this is the workplace. To restrict this contribution for any reason and for any length of time detracts and damages this capacity. There can be no higher purpose to any function than service to others.

Whether at work or elsewhere, we are defined by what we do – but more importantly why we do it.

Labour brokers and ripe peaches.

It’s been very, very hot here in the Overberg these last few weeks, with temperatures soaring to past the mid 30’s. In the peach orchards, extreme humidity destroys any relief to be had in the shade of fully leafed branches bending under the strain of rapidly ripening fruit.

As I drive past this picture of bounty, I see people, ladders and crates between the rows and I am heartened by the efforts that will soon ensure luscious Kakamas peaches reaching the shelves of retailers here, but mostly in Europe, China and the United States. But then comes the flipside: for I am reminded of the cotton picking scenes of Steinbeck’s immortal “Grapes of Wrath” in which wage slaves toil in unbearable heat for little more than a loaf of bread a day.

Here too, in the sweltering heat and humidity, they work without pause from dawn to dusk. Some come from communities several kilometres away finding temporary residence with family, friends, acquaintances, or even makeshift shelters on the outskirts of local townships. Some are “aliens”, including Zimbabweans, who are generally preferred as part of the fruit-picking crews. For most, it is the first opportunity in a while to earn some money and augment meagre incomes needed to support themselves and their families.

Some pick slowly and indiscriminately. It is a behaviour that may be encouraged by a harvesting contract based on a set fee per day. But strangely, that behaviour seldom changes even when they are paid per basket or crate of suitable fruit. There are a handful of mostly locals who look down on the more energetic and sometimes intimidate them into picking less to ensure that their own lethargy is not revealed. For them, the few days’ income is simply a means to binge on cheap wine. Their lives are paths of exuberant intoxication interspersed with periods of melancholic abstinence, reluctant effort and debilitating withdrawal.

There are whole communities here that are dysfunctional – perhaps “barely functional drunks” would be a better description. It is a throwback, they say, to the “dop-stelsel” (tot-system) where a generation or so ago, many of the wine and fruit farm workers in the Western Cape would receive a daily ration of wine as part of their pay. Some are born addicted, or with foetal alcohol syndrome. They may march for permanent work, but it is the last thing they really want. Being from the Western Cape, Cosatu’s Tony Ehrenreich should know this better than most, and is being just a little short of mischievous in his call for the abolition of labour brokers that hold the seasonal work system together.

But even amongst the functional drunks, there are many who go about their work with a sense of urgency, understanding that no ripe fruit should be left on the trees because the heat will cause them to pass their “pick-by” hour very quickly. A few hours delay in harvesting fruit that is ready, can lead to tons of losses, making or breaking the solvency of the whole crop. So they toil tirelessly in the blazing heat and oppressive humidity and prove that even in such a group, workers can be involved beyond pay itself and can focus on the contribution they are making…albeit only for a few days and the prospect of bliss in a bottle.

One peach farmer here faced discarding tons of his harvest when the bulk was ripe for picking and on the day, no “outworkers” (contract labourers) pitched. After some frantic calls, he discovered that the group that had worked in the orchard the week before were not paid by the broker and refused to return to work. After more frantic calls he managed to put a crew together, but many of the original crew were left with nothing to show for their several days of work in scorching heat.

This farmer is as disgusted with the labour broker system as the out of pocket labourers are. Brokers are contracted in two ways. In one they negotiate the harvesting, sorting and packing of a crop, pay the crew out of that fee, and then keep the remaining profit for themselves. In the other the farmer pays either the broker or the workers directly, a minimum fee (depending on the farmer involved) of R60 a day each, and a fee of about R90 a day for the broker. This is above the legally prescribed minimum wage for farm workers, and as paltry as it may appear, barely affordable by the dozens of small privately owned farms in this area.

At completely the other end of the scale, this same farmer was approached by one of the contract workers who wanted to know where he could sign up for the “permanent position” that the farm was obliged to create after Wednesday’s Cosatu marches.

The above cameo may strengthen emotions against the labour broker system. While it is useful always to go from the general to the specific, from theory to the practical, it can also disguise complexities and other realities. For one thing, only a very small percentage of labour brokers misbehave in the way our villain broker did and no doubt he will be dealt with legally. Both employers and employees in this community are not happy with the broking system even when it works like it should. It is messy, not conducive to sound industrial relations and a threat to farm security. But there simply is no other way of handling seasonal farming work.

Labour broking is at the cutting edge of the real issue which is labour flexibility. It is seen by organised labour as the last bastion of resistance to labour rights and the emotional, politically charged call for its abandonment ignores many of the realities that keep it in place. Business has estimated that some 1 million jobs would be lost if labour brokers were to be banned. Labour expert, Andrew Levy has told the e-News Channel that current labour laws and the intended further regulation of labour brokers are sufficient to prevent abuse of the system.

If Cosatu were to have its way on labour brokers, it would be further proof of how, in wallowing in populist rhetoric and political manoeuvring, it is prepared to sacrifice practical solutions to the real problems of unemployment, poverty and income disparities.

But there’s no chance that the broking system will be scrapped and Cosatu will have to rest with at best (for them) more stringent regulation. One can only hope that the discussion itself will come back to the issue of labour rigidities which many, including this writer, have argued over a number of years, are the main force behind unemployment. The latest independent IMF study quoted by Felicity Duncan gives scientific credence to that view. A coherent, practical and thoroughly researched national discussion on labour inflexibility and the effect on unemployment is long overdue, a point supported by Finance Minister Pravin Gordhan.

Cosatu has always been politically very astute and one cannot ignore tri-partite muscle flexing ahead of important ANC party policy meetings and electioneering as playing some role in the marches this past week. Embattled consumers, the semi-employed and unemployed were clearly attracted to the causes that were being championed. But probably much more so by the very real global issues of unemployment, poverty and income disparities.

Zwelinzima Vavi was quick to exploit these dimensions by using the slogan “economic apartheid” and referring to the event as “Occupy Johannesburg”. As a play on the global “Occupy Wall Street” movement it certainly broadened the message to cover the issues just mentioned.

But one wonders what significant contribution, if any would be made to these problems if Cosatu had its way with toll roads and labour brokers.

Missing the moment

I’ve been wondering what’s been missing. After a few weeks of many economic headlines, discussions and endless columns before, during and after Pravin Gordhan’s budget speech last week, there’s been a nagging thought that a pivotal point is being missed. After Trevor Manuel’s National Planning Commission’s report, President Jacob Zuma’s state of the nation address, and then Gordhan’s generally favourably received budget, I found myself agreeing with Alec Hogg’s assessment that it was a week that our world got changed.

Well, it could be…if we don’t miss the moment.

First and in a nutshell the budget did three important things. It kept the deficit to below expectations, albeit on the back of some good fortune. But that’s a budget for you: estimates, intentions, forecasts, guesses. At the very least it should keep the rating agencies at bay and give breathing space to continue on the intended path of controlling current spending, including disciplining the wage bill. That is the second important feature. The third is the pronounced shift to spending on infra-structure.

The scepticism around the latter is understandable against the background of project planning and capacity constraints, corruption, labour pressures and political intrigues. But this is one area where scepticism should not be allowed to create its own inertia. The benefits are simply too valuable. While the likes of Moody’s may not agree, there is a completely different context to deficits based on infra-structure spending and those created by current spending. The former is like borrowing to build a house; the latter is like using credit to buy groceries. And if you are spending a larger amount on your bond, you clearly are going to be squeezed on what you spend on groceries. By its very nature, greater capital expenditure positively changes the structure of fiscal policy.

Then there are the more obvious benefits: such as creating jobs, encouraging training and skills development, and perhaps even putting pressure on some of the more debilitating features of affirmative action, BEE, and labour inflexibility. I do not understand the scepticism based on the “white elephant argument”, which cites the soccer stadiums as an example. Obviously, expanded economic activity is needed to justify the infra-structure spend, but conversely this expansion won’t happen without power supplies, roads, rail, bridges, and dams to encourage and sustain it.

Just as important is that few things motivate people more than being surrounded by people engaged in work. Some of us can remember the atmosphere and vibrancy that was prevalent in Johannesburg and other cities when, in the sixties to mid-seventies, the city-skylines were proliferated with towering construction cranes. Things were happening. It felt good, buoyant. It was a time of opportunity. It was a time of inspiration. One simply had to be part of it!

And that’s what is missing in South Africa at present.

The budget may have hit for the first time that magical mark of R1trn, (follow this link to see what $1trn looks like) but it lacked magic. It may have been impressive economics, but it lacked inspiration.

Yet, it had many inspirational thoughts. The most important line in the speech was when Gordhan tried to enthuse his audience not to ask what government could do but to ask: “what can I do for my country, my people, our future!”

There were others, but all fell quite flat. Perhaps it is because of his “amiable” and ostensibly “technocratic” personality. But then an arguably more charismatic Zuma also failed to inspire with similar lines in his state of the nation address. One must be careful, of course, not to rely on immortal lines. Gordhan’s “cribbing”, albeit not directly and most likely unintentionally, of John F. Kennedy’s famous “Ask not..” inaugural address detracted from his own sincerity. Memorable sayings such as Martin Luther King’s “I have a dream”; Horatio Nelson’s “England expects..” Churchill’s “Never was so much owed..” and Obama’s “Yes, we can” are difficult to repeat in a different context without sounding clichéd.

It may appear trivial, but the finance minister should lose the text reflectors, or learn to use them properly. One does not “read” text off an “autocue” or similar presentation aid without running the risk of appearing to be an inanimate puppet. I first saw the instrument used to great effect by Ronald Reagan in the early 80’s. But then, he was a trained actor well versed into “talking” from a script. These instruments are there to encourage animation. If they don’t do that, then better to stick to a prepared speech.

Inspirational thoughts that have impacted on society have mostly been spawned in a particular context of need. We cannot argue that South Africa at this time has this context in great measure. What is needed is not so much political leadership, but statesmanship. Our hunger for inspiration has been best reflected by the media frenzy that followed the admission of a nonagenarian to hospital for routine treatment. History may have encouraged some to question aspects of Nelson Mandela’s presidency, but we simply cannot deny that he was able to inspire a nation during extremely delicate and difficult times.

Inspiration is essential to entrepreneurship, innovation and creativity – all major drivers in a dynamic economy. Cynicism and scepticism are a deadly poison to inspiration. And perhaps they have gained such a grip on our national psyche that inspiration is mostly still born. We may simply be incapable of seizing the moment.

But here’s the real pity. Inspiration is also an essential ingredient for our own personal success. Indeed it can only happen at an individual level. While the environment may not be conducive to inspiration, we should not make our own personal inspiration dependent on it. Without inspiration we commit aspirational suicide.

So, if you don’t want to miss your own moment and with some apologies to JFK: “Ask not what you can expect out of life. Ask what life can expect out of you.”

Masters of illusion.

Abracadabra! The veil of illusion lifts, only to find another, quicker sleight of hand; and out of the blue a growing number of shareholders baulk at poorly explained remuneration decisions.

There’s the case of cement producer PPC, where, panicked by the departure of the former CEO, one long term director, Peter Esterhuysen’s pay was increased by 147% to R9m. “We felt it very important to retain Mr Esterhuysen” it was explained. Another, CFO Tryphosa Ramano received a R1.2m “welcoming handshake”, repayable if she leaves within a year. Shareholder activist, Theo Botha’s request for clarity on pay policy had both the Chairman and head of the remuneration committee “groping for answers”, reported David Carte.

And then there is the case of Reunert, where Nick Wentzel former CEO of the electronics group walked away after just over a year R18.2m richer. R12m was “severance benefits”. There was also the demeaning behaviour of Remuneration Committee Chairman, Dr Len Konar at the JD Group’s annual meeting. In similar vein, and many spurred on by the presence of Theo Botha, we have also seen executive pay being questioned at Sappi, and Barloworld.

As an aside, and in the light of the hackneyed argument that executive pay is warranted on the basis of a “shortage of talent” and indispensability to shareholder value, I seem to be the only one a bit bemused by the reduction of the ABSA board by half. One would have thought that the share price would have collapsed at the loss of such indispensible talent.

But seriously, the most significant story on the subject in a long time was written by Moneyweb Editor, Monique Vanek this week. In her report on the PIC (Public Investment Corporation) voting against the remuneration policies of at least 5 major corporations, she highlights the important impact that King III is having. It is forcing companies to disclose the rationale behind these policies, and so far it has done little more than raise more questions that companies are finding difficult to answer.

We can only hope that this will gather momentum and that some of the arguments and features of remuneration based on shareholder value will be exposed as being a little short of absurd. They include retention bonuses, “welcoming” bonuses, and self-designed targets and budget-based pay criteria.

Remuneration should never be based on “hypotheses” but on real performance. The “target” approach is based on the pretext that one cannot be held accountable for things outside one’s control and that doing “better than expected” deserves some reward. This is senseless. If a company has not created additional wealth, no one (including general staff) deserves additional pay. I’ve never understood the logic of paying a bonus to someone when the company has done badly, merely on the pretext that it would have been worse if that someone had not been there.

Hopefully, in the new disclosure milieu the sweetheart relationship between Chihuahua packed remuneration committees and Company boards will also be scrutinized.

But here’s the real issue: it is time to let the real market determine executive pay.

This is not shareholder value, but real tangible value in the marketplace. The two are not the same. Indeed Enron and many others, including some company behaviour in South Africa, have shown that one can create shareholder value, albeit often short term, while neglecting the fundamentals of service and real market value. On the other hand, the recent performance of Shoprite (JSE:SHP) shows how tangible value can create shareholder-value, particularly if you examine the customer focused factors that drive the executive team headed by Whitey Basson. This clearly puts him in that rare group defined as creators or builders and that stand outside the “executive” market. Using the often quoted pop-star analogy, Basson can be described as the Michael Jackson of retailing. But you don’t create pop-stars simply because you pay them well!

The delinking of shareholder value from tangible customer value challenges decades of assumption about what really drives the free market system. But it goes much further: there’s increasing evidence that an exclusive focus on shareholder value has played a significant role in today’s global economic problems such as impatience, greed, immediate self-gratification, short-termism and in turn the financial crisis, social unrest, burgeoning public debt, unemployment and inequalities.

This has been recognised for some time, especially after Enron, and we have seen responses in the form of Triple Bottom lines, Balanced Scorecards, sustainability reports, integrated reports and of course, the King reports. Some remuneration committees are partly informed by these criteria in calculating executive bonuses, but for the vast majority share value formulae are either the exclusive, or the biggest determinant.

There is an appalling lack of public trust in business -- less than half of informed respondents to the latest global Edelman trust Barometer say they trust business to do the right thing. The latest Accenture global customer satisfaction survey shows a further decline in customer satisfaction with more than 60% reporting that they had switched suppliers because of poor service. In South Africa, National Consumer Commissioner Mamodupi Mohlala told a TV programme that they were receiving four times more consumer complaints against companies than they had originally expected. Add to that our lack of global competitiveness, and then we can argue that most South African companies are not succeeding in being market, service or customer driven.

The “real” market for executive pay requires first that the scarcity myth be exploded. I am not going to repeat the arguments I used before in at least two articles: “Don’t tax it: fix it!”; and the recent one: “The manager myth” apart from confirming that the “scarcity of talent” is largely either an illusion or self-perpetuated.

To have real meaning, executive remuneration, indeed arguably all remuneration in a company, should be driven by the value it adds in the product or service it provides to society as a whole. This is measurable in value added, or wealth created more robustly and less open to hypothesis or illusive and arduous remuneration reports.

It is really quite simple: shareholders and boards are not the ultimate paymasters: customers are!

Big balls and angry bees.

Denzel came charging around the corner of the house as if helplessly possessed. He was the first of many part time gardeners, all of whom absconded after falling victim to the effects of regularly consuming large quantities of moss, a home distilled “wine” that gets sold here in 2- and 5-liter plastic containers.

So for a brief moment I was convinced that Denzel had simply succumbed to delirium tremens. His arms were flaying about in all directions. His legs were pumping like pistons dislodged from their cylinders with his knees passing his ears as he desperately tried to take the biggest steps as fast as possible. As this apparition headed straight for me, I heard before I saw the real cause of his frenzy…an exceedingly loud, electronic like hum which was followed by a thick black cloud trying to engulf the hapless man. It was a swarm of angry bees and Denzel was bringing them straight towards me!

Not having Denzel’s youth, fitness or agility, I froze as they swarmed around me. Mysteriously, the swarm simply parted as if intent only on getting Denzel and treating me like some irrelevant minor obstacle. I could not trust this subterfuge to last, so I “ran” – if that’s how one can describe an overweight near septuagenarian making haste like a threatened walrus trying to get back to the ocean. Before reaching the front door, I noticed a strange, fairly large “log” on the lawn. It was making a puzzling “putt-putt” sound which I realised afterwards was the abandoned idling engine of the petrol lawn trimmer. The swarm had attacked and covered every inch of it, imbedding thousands of kamikaze stings in every non-metallic part and covering previously black plastic in a white blanket of tiny venomous bubbles.

It took hours for things to settle down. Denzel had found refuge in the garage and needed coaxing with a litre of the good stuff before being convinced that he could emerge safely. I never saw him again after that day. If he had returned I could have shared with him the fruits of a neighbouring farmer, Pottie Potgieter, removing the hive from where it had illegally squatted too close to my home for comfortable co-existence. Pottie is known as the Red Ants to bees here. He left me with a bucketful of honeycomb dripping with the clearest, sweetest and most palatable honey I have ever tasted and certainly never with the store bought stuff.

One simply cannot beat nature at its benevolent best. Bees are a good example. Apart from nutritious and tasty honey as their unique product, they are also the chief pollinators on the planet and are the prime enablers of most of what we consume. It is estimated that about one third of all plants or plant products eaten by humans are directly or indirectly dependent on bee pollination. So it is understandable that panic close to a natural disaster is inflamed when strange fungi or parasites threaten the hives.

Reflection on the wonder of bees makes one realise how benevolent our world has been structured – indeed how important benevolence is to our very existence. I am by nature a pessimist, sometimes to the point of dysfunction. But even in my darkest hour, I cannot escape the logic that our world would simply fall apart if by and large, good did not outweigh evil, if benevolence did not exceed malevolence, if generosity did not overshadow greed. While popular media more often report on acts of malevolence and anti-social behaviour, it does not prove their prevalence over goodwill. Indeed it more likely proves the opposite because news by its nature is driven by the unusual, the unexpected and not by the mundane and routine.

So surely the structuring of things on the basis of benevolence and generosity will be affirmed by creation; ensure its sustainability and likely success? This makes the assumptions about the self-interest motive in economics rather puzzling and counterproductive. Of course, followers of this column will know that I believe the assumptions themselves are wrong, and that economics and all transactions have a benevolent basis. But I must concede that behaviour too often counters the caring underpinning of business, which explains the global mess we are in.

It was procrastination in staging my own small protest against such behaviour that saved me from a million bee stings on Denzel’s day of doom. Pottie said the mysterious behaviour of the swarm in ignoring me and going for Denzel was because bees get terribly riled up by unwashed human bodies and the musky smell of days old human sweat and will attack the source. They also get very mad at the smell of petrol or diesel fumes, and tractors have on occasion been disabled by their ire.

On the morning of that fateful day, I had decided to discontinue using underarm deodorant. I was tired of changing brands in following my own preference for the small-ball roll-on. The small ball allows you to be far more precise and conservative in applying the fragrant liquid. But knowing this, and clearly dissatisfied with sales volumes, all brands have opted for the big-ball roll-on, creating a wet underarm mess from elbow to hip and depleting twice as fast. The container is also shaped like something from the shelves of an adult shop (or so I have been told). But the Scrooge in me decided to finish the bottle I had, before taking my protest further. So the bees left me alone on that day. Sweltering heat and prolific perspiring subsequently tempered my resolve. I am changing to the stick applicator, having tried the spray to the disgust of every benign insect in my bedroom.

The devil is indeed in the detail. Millions of rand spent on PR spin get trashed by constant small reflections of selfish, profit driven intent. Like those chocolate bars that shrink from 50g to 46g in the same wrapper; a covert increase in bank fees while the CEO gets a multi-million rand bonus; badly explained increases in medical aid premiums; and, and, and. It’s not only the big headline events such as bread price collusion, large scale corruption and gulf oil spills. It is the death of trust by a thousand cuts. It is also more real and tangible to the person who experiences it and as we have seen, can get a life of its own through the social media.

There is a very simple condition to the granting of trust: you earn it by having the interest of the other at heart. Behave as if you do, for it affirms your value in a world structured on benevolence.