Business is not a Democracy or is it?

Address by Dr Reuel J. Khoza (Chairman of Nedbank Group Limited, Aka Capital and author of several books including Let Africa Lead and Attuned Leadership) to “Nedbank Group Technology Leaders”  I  22 October 2013

Excellencies and Members of the Diplomatic Corps,
MEC of Education in Gauteng, Mr Panyaza Lesufi
Fellow Chairpersons of various Boards
Fellow Members of the Nedbank Board
Nedbank Executives
Chief Executives of various institutions
Captains of Industry
Honoured guests and colleagues
Ladies and Gentlemen

Good Evening!
May I introduce this brief discourse with the words of Mwalimu Julius Kambarage Nyerere, as quoted in the New York Times Magazine on 27 March 1960:
"Having come into contact with a civilization, which has over-emphasized the freedom of the individual, we are in fact faced with one of the big problems of Africa in the modern world. Our problem is just this: how to get the benefits of European society - benefits that have been brought about by an organization based upon the individual -- and yet retain Africa's own structure of society in which the individual is a member of a kind of fellowship."

One of my main mentors in corporate governance, used to admonish me with the expression: “Business is not a democracy Khoza”. My response was, if it is not a democracy, what is it? An autocracy?

He went on to say: Jettison this wishy washy concept of Ubuntu, with its dictum of “Umuntu ngumuntu ngabantu” (I am because you are, you are because we are OR a person is a person because of others) and replace it with a more compelling philosophy such as that of René Descartes, who proclaimed “cogito ergo sum”, (I think therefore I am).

The force of the statement ‘I am because you are’ may be grasped in a moment by comparing it with what my mentor wanted me to embrace. Arguably the most famous statement of being in Western philosophy, ‘I think, therefore I am’ (Cogito ergo sum), was coined by René Descartes in his Meditations on First Philosophy in 1639. Significantly, while no one knows who coined the term Ubuntu – a fact that in itself signifies its deep communal roots – it was a single individual, on a known date, who broached the idea that thoughts in a person’s mind prove that person’s existence.
The contrast is striking. Ubuntu posits a collective existence; the Cartesian worldview rests on individual identity. In Descartes’ view, a person is an entity separate from others. The person may know him- or herself only be means of conscious thought. This is a far cry from reflecting that one human life is the product of all other human lives. In African humanist terms, one’s existence does not depend on what one thinks in the lone citadel of the mind, but on social ties, common values and ways-of-seeing, and empathy with others. It is an all-embracing intellectual, emotional, spiritual and psychological acknowledgement of commonality.

What I will briefly explore is an attempt at striking a healthy balance between “Umuntu ngumuntu ngabantu” (I am because you are, you are because we are), and “cogito ergo sum” (I think therefore I am)!

The sub-theme I would like to use is LIFT AS YOU RISE.

To “lift as you rise” is a motto that influenced the young Mandela. As a Thembu youth in the then Transkei, on the  south-eastern coast of South Africa, Mandela completed two years of secondary education at the Clarkbury Boarding institute from 1935. The mission school was situated at Engcobo, some distance from his rural home at Qunu. Mandela was dropped off by car – a symbol of his elevated status as a scion of the royal line. The Wesleyan mission station, founded in 1831, had by 1875 established an educational institute that adopted the motto as its slogan for upliftment. The origins of the phrase are not known but it was by no means new, and it resembled the mottos of African-American colleges of the day.  Mandela was to remark later in life that the mission school education was designed to mould “black Englishmen”. He was the first in his family to receive a Western education. Attending Clarkebury stamped him as a member of the elite who might be lucky enough to obtain a higher education and even join a profession. So it proved. Mandela, the son of Thembu chief Gadla Henry Mphakanyiswa, went on to study law. The fact that his father was chief councilor to Thembuland’s acting paramount chief meant that Mandela witnessed African tribal governance at first hand from an early age. Deeply impressed by the democracy and social justice represented by traditional councils, and with the sentiment of “lift as you rise” implanted in his mind, he would go on to place himself at the service of the nation and always remember to lend assistance to those less fortunate than himself.

The injunction to lift others as you yourself rise is widely understood and deeply felt in all our communities. It is an extension, of course, of the Ubuntu ethic that a person is a person because of other people, or as they say in Sesotho, Motho ke motho ka batho babang. Success in life may be personal as a result of hard work and initiative, but we are moved to ensure that others also benefit from our achievements. President Thabo Mbeki once said that “lift as you rise” was a new paradigm for members of the Proudly South African community. Efforts to market the country and its products abroad, he urged, would contribute significantly to eliminating the blight of poverty at home. The phrase was adopted by Nafcoc (the National African Federated Chamber of Commerce and Industry) and is also used by successful African women to encourage entrepreneurs to mentor their sisters.

As a man of two worlds, African and Western, I have often had occasion to contrast Lift as you rise with the more familiar aphorism, A rising tide lifts all boats. The first calls for a person to make a voluntary moral effort, the second sees rising tide as a force of nature, something that happens independently of morality. It seems that President John F Kennedy first brought A rising tide into the public sphere. In a 1963 speech pledging to continue military support for Europe he quipped: “As they say on my own Cape Cod, ‘A rising tide lifts all the boats.’” Kennedy apparently also applied the proverb to defend a large dam against critics alleging that it was a “pork-barrel” project for pals. The phrase soon became a touchstone of Wall Street wisdom. The richer bankers and brokers became, the more they could congratulate themselves on boosting world wellbeing. The converse is that a fast-withdrawing tide – as we have seen with the global recession of 2008-9 – can wreck many boats on the rocks.

When the economy is performing well, everyone gains. When it falls, we all fall with it. This is a rather fatalistic way of looking at things but there is nevertheless something strangely comforting to Westerners in the idea that economics is like the tides, for which we bear no personal responsibility. We do, of course, bear responsibility. We all help to make the world we live in. Even if we are only minor functionaries in the machinery of business or government we still hold a stake in the outcomes and should serve notice on decision-makers that they must be responsible and accountable. By the same token, if we have ascended the rungs, we should reach down to help others up and be responsible and accountable ourselves.

Lifting means empowering. Rising means gaining power and prestige – but never, in terms of Ubuntu, forgetting where you came from. As a businessman and (I would hope) an objective observer of economic trends, I do realise that in recessionary times, businesses draw in their horns and are less likely to dispense largesse. Corporate and personal philanthropy are limited by the realities of the situation. But a crisis situation like the global recession should prompt corporate organisations to put the interests of their communities first and their private interests second. It is true, as Jack and Suzy Welch said in a Businessweek article, that “you have to make money first to give it away”. Jack Welch, the former General Electric CEO and master of leadership techniques, has experience on his side. It is also true, though, that unless you make a special effort in bad times to contribute to society – say by focusing on survival skills training for those who have been retrenched, and helping them to develop forms of mutual support – the business will gain less traction with its surrounding communities in the good times. It is not just a matter of riding the tides. It is a case of showing compassion, acting as if you care, and doing something practical to alleviate suffering.

Compassion is as important in corporate governance as profitability. The African humanist worldview impels us to regard community involvement as a central pillar of the well-led organisation. It is morally necessary and practically wise to spread benefits to stakeholders. Good governance is attuned leadership in action – with all that that implies about efficacy, ethics, personhood and probity, along with the humane qualities of empathy, humility and honesty.

We are often told that reward for taking a risk and succeeding is to reap profits. The question we need to ask ourselves is: Who takes the risks, on behalf of whom, and who gets the profits? The way managerial capitalism has developed in our era, those in charge (managers) may not be risking their own money; those who are most at risk (employees and their dependents) have the least say; and those who walk off with the winnings (investors) may be unknown, faceless entities with no involvement in the lives of those who produce their profits. We have to question this unfair division of spoils and seek anew for ways of uniting organisations with their foundational members. In the spirit of Ubuntu, we do not seek to overthrow the structures that employ and feed us, but to find consensus about what is fair and right. I believe that stakeholder capitalism, if properly implemented, goes a long way towards giving people rights of participation in the structures that generate wealth.

My definition of good governance is that it is attuned leadership in action, and ultimately  it is a human rights issue. The leaders of any institution are responsible to ensure that the rights of stakeholders are protected and enhanced. This responsibility, however, is mutual: for it is up to stakeholders to defend their rights and hold the management and leadership accountable. For instance, when there is gender discrimination in pay and working conditions, this is a human rights issue. Those at the top of the organisation must demonstrate leadership by stating the principle of equity and acting to eliminate disparities. There should be explicit rules of procedures for addressing the issue. But in many organisations little may be done until pressure is brought to bear from below. Attuned leaders hear the complaints of the followership and respond with empathy; together; leaders, managers and stakeholders bear collective responsibility to uphold human rights.

A principle underlying collective responsibility is respect for the common good.  The so-called “tragedy of the commons” is a subject matter that I elucidate in Chapter 3 (Ethics) in my latest book Attuned Leadership. Here let it suffice to say you cannot have individuals or sections within an organisation reaping huge benefits at the expense of others who are also stakeholders. In silo-style organisations, departmental heads may see advantages to themselves in acting against the interests of the collective. Once again, both the leadership and the followership should be on the alert. Healthy in-house competition is a good thing and can promote innovation. The spirit of corporate communalism will spread, not restrict, benefits throughout the organisation on the basis of mutual advantage. At root, this too is a human rights issue because undue secrecy and underhandedness disempowers people.

To regard governance as a human rights issue may strike some as an unusual, if not far-fetched, use of words. What is generally understood to be governance embraces good, clean administration with standard routines and duties spelt out; strict controls on finances; best practice in manufacturing, sales and customer relations; accountability to owners; legal and regulatory requirements met; and commitment to a mission statement. What does this have to do with attuned leadership or human rights?

Essentially, for governance to succeed in an era of stakeholder capitalism, the leadership of organisations must be responsive to all of those who own, work in, buy from, supply to, or have community links with, the enterprise. For employees in particular this means that the organisation must show respect for the individual and fairness and equity in collective dealings. The environment in which the organisation tries to sustain itself constitutes a relational matrix – a network of human relations – in which justice and decency should be paramount. Mention of “sustainability” brings me to the point that the purpose of an organisation always lies outside of itself: it cannot last long unless it serves some greater purpose.
Leadership will recognise this principle, while accountability to the broader society will action it. Leadership always serves a higher purpose beyond management and administration because the leader is concerned with human interests and not just profit and loss. Our interests include a decent quality of life, safety, environmental health, and recognition of our human rights and dignity.  Thus to say that good governance is attuned leadership in action is to assert that when leadership places itself at the service of the stakeholders it seeks to realise the true purpose of the organisation: to build a better, more humane, more equitable society. Everything that we normally consider to be features of governance falls in under this overarching goal.

Although terms like governance and stakeholder have until recently been mostly associated with business leadership, one can see that today they have flowed over into politics and indeed into all spheres of civic organisation. This is hardly surprising. We live in a participatory era. Most organisations have claimed to flatten their hierarchies in order to open themselves to ideas and energies emanating from below. Here I make little distinction between business, political and civic governance because the core idea of all governance is relational, and Ubuntu resonates most effectively with this core idea.

In a world that is seeking new models for leadership, I believe that Ubuntu may hold the key to ethical, forward-looking, effective methods of governance. I am not so simple as to believe that the world will turn to Africa for a solution to its problems! Africa is by and large regarded as a basket case because of its wars, corruption, disease, malnutrition and poverty, a beggar for aid and a playground for Big Men who exploit their own people. Of course, there is an Africa of humane values, noble achievements in statecraft, wonderful music and dance, booming entrepreneurship, and peoples who are among the most warm and hospitable on the planet. But I am really referring to neither of these Africa’s: my concern here is with the African insight into the nature of the human community.

A human ecology in which we see ourselves as fellow inhabitants of a fragile planet must disallow exploitation – of other living souls or of the Earth and the resources that we all depend on. Governance as a moral discipline founded on our collective being is really a major part of reforming our organisations, our country and our world. Leaders are there to lift as they rise.

Allow me to again borrow from the words of Mwalimu Nyerere’s 1973 book Uhuru na Maendeleo (Freedom and Development).

“We can try to cut ourselves from our fellows on the basis of the education we have had; we can try to carve for ourselves an unfair share of the wealth of the society. But the cost to us, as well as to our fellow citizens, will be very high. It will be high not only in terms of satisfactions forgone, but also in terms of our own security and well-being.”