Criminal justice after corporate corruption is just the beginning
Companies must also repair the damage done by their actions — and this requires a lot more than vague apologies and returning ill-gotten gains
Most South Africans applaud the arrest of those alleged to be involved in the Bosasa corruption scandal. There is a strong sense that such arrests are long overdue and that many more in corporate SA need to be held accountable for their involvement in corruption, state capture and other acts of ethical misconduct.
While it is correct that our pursuit of justice starts with criminal justice, criminal justice alone is inadequate to achieve complete justice which returns society to the moral state before the misconduct. We have fallen into the trap of believing that once a company has been fined or executives are prosecuted, that justice has been served. This is not complete justice because it leaves other injustices and social harms unremedied.
To illustrate this point: If someone steals a farmer’s truck and gets sent to jail for the theft, we might feel that justice has been done. But what about the farmer? He is still without a truck and perhaps unable to earn a living without this transport. In this case, complete justice is only done once the thief, in addition to serving his punishment for breaking the law, also returns the farmer’s truck and compensates him for lost income and other inconveniences.
The focus on social harms is particularly relevant when corporate misconduct breaks no law yet causes suffering. In such cases harms would go unremedied (and unnoticed) if we relied on criminal justice alone.
Any such programme needs to be victim-focused rather than solely focus on the company, which is the typical approach.
To remedy the effects of their misconduct, companies must put in place a programme to repair the social harms caused by their actions. This requires more than a vague apology and return of ill-gotten gains. Consider the examples of McKinsey, Bain and KPMG, which issued forms of apologies and returned the fees they earned. Is this enough for stakeholders to trust them and offer them a social licence to operate? By my account, these efforts fall way short.
For a company board or management team that finds their company embroiled in a corruption scandal or another form of ethical misconduct, I suggest a six-step corporate reparations programme (6CRP), adapted from political atrocities reparations programmes, that they can follow to remedy the social harms caused and to put the company on a path to regaining public trust.
While companies reasonably respond to scandals by employing the services of legal and public relations experts to manage their downside risk, reparations require that they also gain input from ethics or reparations experts who can advise them on remedying the harm caused. This is what Bain did in hiring me to oversee their investigation into their work at the SA Revenue Service as well as advise them on a programme to repair the social harm.
Any such programme needs to be victim-focused rather than solely focus on the company, which is the typical approach. 6CRP seeks to identify individuals, groups or organisations, or even whole communities, who have suffered as a result of the corporate misconduct and then sets out a process of reparation which requires acknowledgement of the harm, apology for the harm done, followed by restoration of victims to a state before the misconduct, or where they would have been today had the misconduct not occurred.
Step 1 in the programme is to establish the facts of wrongdoing and harms caused. Most companies conduct internal investigations but wrongly only focus on their behaviour, ignoring the negative effects of their actions. Establishing the facts of what went wrong requires that the company identify the victims, what harm they have suffered and importantly, identify the internal and external enablers of these harms.
In the case of Bain for example, weak governance oversight was one of the internal enablers of its wrongful actions and remedying this deficiency became a core part of their reparations programme. Establishing the facts is complex and time-consuming and involves internal engagement as well as extensive engagement with victims and stakeholders.
Only with these facts in hand can companies move to the second step of designing solutions. Again a mistake that many companies make is to focus on solutions too quickly, without a comprehensive understanding of the harms caused. Two types of solutions are required, firstly, a restoration plan which focuses on compensation to victims and returning ill-gotten gains, and secondly, a change plan which punishes internal wrongdoers and focuses on organisational change to ensure that misdeeds are not repeated. Where necessary, the change plan must include external changes that companies can contribute to, such as strengthening public oversight institutions or establishing industry oversight bodies.
Steps 3 to 6 involve implementation. Reparation does not only require tangible compensation but importantly needs to repair damage to human dignity. In many cases, victims suffer emotional anguish or feel disrespected, which cannot be healed by tangible compensation alone. This makes step 3 and 4 so vital. Step 3 requires that the company acknowledge its wrongful acts and the harms caused, while step 4 requires that the company issue an apology for these wrongful acts and resultant harms. While these can be private or public, the main requirement here is that they are directed at specific harms and as specific victims as possible. A blanket apology for “our mistakes” or “your feelings” are grossly inadequate and often sets the company back in its reparation efforts.
In the fifth step, companies make tangible restoration by implementing their restoration plan. While it often does require financial payments, this is not always the case. If a company has engaged thoroughly and sincerely with victims, the appropriate restoration package can be developed. Finally the company can enact its change plan, which may involve changes to its structure, policies and even incentives.
The six steps do not have to be enacted strictly sequentially. Circumstances may dictate a different ordering. For example, at the outset of a crisis, a company may want to issue an apology for unspecified harms and then issue more specific apologies later. Or the company could repay fees up front and then make broader reparations later.
No reparations programme is perfect but companies can develop plans that can reasonably be accepted by their stakeholders and the broader public. The worst thing a company can do after a scandal is make random gestures and declarations of contrition. This does nothing but contribute to distrust of business and hampers companies’ efforts to move beyond the scandal, never mind the fact that it leaves victims to suffer the burden of unremedied corporate harms.
• Williams is a senior lecturer at the UCT Graduate School of Business and a research fellow at the Centre for Applied Ethics at Stellenbosch University.