Corporate ethics, government ethics – are we accepting double standards?

South Africa has an excellent corporate governance regime, with a raft of laws, codes and guidelines.

October 9, 2012

South Africa has an excellent corporate governance regime, with a raft of laws, codes and guidelines designed to enforce compliance with the highest global ethical standards.

“At its heart, ethical business practice is about accountability,” says Kevin Phillips, MD of idu Software. If I am the director of a business, I am in effect managing the money of the shareholders in that business – and I have a duty to manage it with care, skill and honesty, and to account for my actions. That is what a “fiduciary duty” is – to uphold the trust people place in us when they give us charge of their cash. The principle is ancient (the word “fiduciary” comes from the Latin), but nowadays it is also enshrined in statutory as well as common law. Directors who fail in this duty now face criminal prosecution and even prison time.

But accountability cannot work without transparency. I cannot hold those in charge of my money to account unless I know in accurate, timely, appropriate detail exactly what they are doing with it. Information is, as always, power.

But if we are so diligent about holding the corporate custodians of our investments to account, what about that other custodian of our money – government?

We should be able to view our taxes as another kind of investment, one we make in the basics of a decent life and decent opportunities for all. Functioning schools, affordable health care, working roads and railways and public order are services and deliverables paid for by individual taxpayers – not to mention essential for the long-term success of any business. Are we getting the delivery we’ve paid for? As citizens, as taxpayers and as business people, it is absolutely in our interests to hold government closely to account for what it does – and fails to do – with our money.

In the old days of paper ledgers (remember those?), there were technical obstacles to the level of transparency that would allow robust accountability. But that time is long gone – these days, there are plenty of systems on the market that can deliver accurate information on this month’s spending, even before the month is out.

Sure, it takes money and time to implement these systems – but the more time passes, the thinner those excuses become. Eventually, we are going to have to ask the question: If it’s technically possible for an organisation to deliver timely, accurate information that will enable its stakeholders to hold it to account – and it chooses not to – what is it trying to hide?

Criminal and unethical behaviour thrives in the dark. If information trickles in months or years late and is hard to interpret, it means there are plenty of dark places to hide in. And that, pretty inevitably, means someone will succumb to temptation. It is beginning to happen, quite visibly, all around us.

So if our government is failing to abide by the same ethical standards it demands of the rest of us, what then? Is it unrealistic for us to demand the same level of ethical governance from our government as from the corporate sector? Company directors can face prison time for failing to manage investments entrusted to them by shareholders in line with their fiduciary duties. Should elected officials not face the same level of accountability for failing to manage the monies we entrust to them?