An MBA Oath taken by a group of Harvard Business School graduates earlier this year has tongues wagging. Instead of the “above all, no harm” Hippocratic Oath for medical doctors the MBA pledge includes a statement, “I will safeguard the interests of my shareholders, co-workers, customers and the society in which we operate.” The purpose of the voluntary pledge for graduating MBAs and current MBAs is to “create value responsibly and ethically.” Needless to say the initiative was shot down summarily by some pessimists, who described it as “naïve.” They said that the students’ good intentions won’t last in the real world. However, many people have hailed the emphasis on the interests of co-workers, customers and society itself. Some reckon that it has been high time for business people to make a similar oath as the medical doctors. A journalist wrote, “The uncomfortable fact is that many of the business leaders who played a part in the current financial crisis are MBAs.” Accusations have also been levelled at business schools that they are failing to produce ethically accountable graduates.
The bottom line is that people and the students in particular have become more aware of the wider impact of financial irresponsibility where bigger bonuses and higher profits became the be all and end all.
The world has changed. And the slowdown in the economy has created space for reflection which some experts believe can result in a Rubicon for sustainable business. Professor Frans Berkhout of the Vrije Universiteit in Amsterdam attributes it to a more resource-efficient attitude. “In times of rapid economic growth, all the focus is on expansion and on promoting growth. In a recession there’s time to turn your attention to environmental and social issues.”
The increasing demand for corporate social responsibility, sustainability and operational transparency by stakeholders has also been highlighted in Professor Mervyn King’s latest report. Stakeholders and the man and woman in the street are now putting more emphasis on how do you do what you do. But isn’t social responsibility an expensive luxury for businesses during a recession?
A marketing tool that is only affordable during good times?
Economist and Nobel prize winner Milton Friedman stated a truism but neglects to mention other truths, when he said that “business has one and only one social responsibility to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”
It is true that nobody gains if companies don’t make profits the drop in revenue is testimony of that! And we all need to prioritise and streamline in the face of the recession. But corporate social responsibility is too important to be swept aside not only for humanitarian reasons but also for long-term sustainability.
Human Rights activist Martin Luther King said, “The time is always right to do what is right.” Social responsibility also makes economical sense. To Niall Fitzgerald, former CEO of Unilever and Chairman of the Nelson Mandela Legacy Trust in the United Kingdom (UK), corporate social responsibility is a hard-edged business decision. “Not because it is a nice thing to do or because people are forcing us to do it, because it is good for our business.”
Regardless of the recession some cutting-edge companies are capitalising on the growing consumer interest in corporate social responsibility both to do good and to differentiate themselves at the same time. A Boston College survey on the “State of Corporate Citizenship, 2009” identified reputation as the no one driver of corporate citizenship as indicated by 70 percent of the 756 senior executives engaged in the study.
Issues, such as reputation, become crucial when business is coming under threat of having to cut back. Trust becomes paramount. And there is more a feeling of collective responsibility everyone is expected to do something to pull the country through.
The survey also showed that the senior executives believe that business should be more involved today in addressing major public policy issues, including health care, product safety, public education and climate change. In our developmental state of South Africa we can just say, “Amen.” We agree.
Government needs the hands of all our citizens to improve the lives of all our people. Poverty remains our biggest enemy and the widening gaps between the very rich and the very poor create tensions between communities. We are all aware of the student dissatisfaction when they are not re-admitted because their fees are in arrears. Research has shown that most students who drop out of university do so for financial reasons. This has serious repercussions – not only for the students’ self-esteem but also for the fiscus. Ahmed Essop of the government-funded National Student Financial Aid Scheme (NSFAS) was quoted in the Sunday Independent of 15 August 2009 as saying that nine years ago it was estimated that R1.5 billion a year in government funding was being wasted due to students dropping out. The current figure is likely to be several times greater.
Many students cannot find the money to top up the inadequate amount from government. Despite National Treasury’s increased funding to NSFAS from about R250 million 12 years ago to about R1.27 billion in this financial year, we simply do not have enough money to meet all the needs.
Some students do not qualify for loans, because their parents earn more than R120 000 a year the cut-off for qualifying as needy. Their parents can still not afford the university expenses given their other family commitments. These students pay a registration fee to enter university hoping that they will find extra funds, but seldom do.
They struggle to pay for books, accommodation and even food. We are aware of cases where desperation has forced some students into prostitution and dating rich sugar daddies, while others are driven to criminal activity to pay their fees or buy food. While it will certainly help to take out the cheque books to help our students to cope financially, there is also a huge opportunity to assist them with academic challenges.
Research has shown that most first-year students need extensive support to have a chance of obtaining a degree. Many require an extra year at university, which further chews up money.
Measures to assist them are critical, not only for the students’ own sake but also to address the country’s skills shortages. It is clear that social responsibility cannot simply be an add-one during times of prosperity. It needs to become part of our lives. We have to take a holistic look at the role and impact of business, government, civil society and individuals on our communities. We have to engage actively in bringing all our resources together to address society’s challenges.
Corporate social responsibility is a key-strategy in business today also during tough times. But the recession has also taught us that social responsibility needs to evolve to survive.
While cash, products, grants, goods or services are great, community involvement through support of employees’ children and other worthy causes can also be included. The best prize is to integrate social responsibility fully in all key areas of business. When the tide is low social responsibility can play a powerful part in recruiting talent, retaining talent and keeping up morale.
We know that cash flow is critical during troubled times but we cannot abdicate our social responsibility. The decision now becomes how to distribute a smaller pot of money. We need to be innovative. Rather than always reaching for the cheque book, social responsibility can also involve staff volunteering their time and expertise.
President Jacob Zuma paved the way when he initiated Mandela Day where individuals and companies are called to recognise their power to make an imprint and change the world around them by spending 67 minutes of their time to worthy causes on 18 July each year. Last Tuesday the United Nations announced that the annual event has gone global. Madiba’s birth date will now be Nelson Mandela International Day.
Some businesses are increasing their support to communities during the recession to minimise the impact of job losses. In addition to financial donations a company in Canada was to give all their staff a day off on the firm’s time to volunteer in their communities. They also have community excellence awards to recognise staff members who have made significant or unique contributions to their communities. The awards include donations to the charities or causes of the winners’ choices. Last year was the company’s first full year of implementation of its commitment plan to reduce its environmental footprint. Additionally it also has a business goal to work towards an environment of inclusiveness, partnering with women and visible minorities, e.g. local support for Black History Month.
Tonight’s occasion is an opportunity to help our needy students. We thank our partners for helping us to improve the lives of all our people. Ethics is becoming the new competitive environment. To me the MBA Oath makes perfect sense. The change is happening. Who will lead and who will be left behind?
I thank you.
Issued by: Department of Finance, KwaZulu-Natal Provincial Government
12 November 2009
Source: Department of Finance, KwaZulu-Natal Provincial Government
(http://www.kzntreasury.gov.za)
