LULAMA QABAKA: Succesful SOEs — yes, we do have some — are ethically effective

Articles written about state-owned entities (SOEs) in the last 15 or so years have tended to depict a bleak, overwhelmingly gloomy outlook. Yet there are slivers of hope that don’t receive the attention they deserve but could inspire people to perform better.

We consume so many negative stories about our SOEs that it clouds our ability to think of practical solutions that might yield positive outcomes.

A comparison with SA football is relevant. We can all agree that the level of SA football is nowhere near where it could and should be. Much like our footballers tend not to have the requisite technical skills, many of SA’s SOEs also lack the skills required to run large organisations efficiently and effectively. This is directly due to deployment issues — political interference has meant the individuals put in positions of power frequently do not have appropriate skills to successfully execute their mandates.

However, while this is indisputably so in many high-profile cases, there are in fact some SOEs that function pretty well given the resources available to them. Like Mamelodi Sundowns, a football team that somehow manages to excel on the field despite having no more resources than other teams. This is a testament to the fact that if one places the right people in the right positions — especially the coach and captain — the possibility for excellence increases exponentially.

The sad state of affairs is that all SOEs are painted with the same scathing, cynical brush. While harsh criticism of the many poorly performing SOEs is justified, we should invest as much energy in extolling the virtues of those performing well, rather than denying them their moment in the sun.

Such SOEs do exist, although they may not come to mind since they are overshadowed by the failures of their peers. You may be wondering which SOEs I’m referring to. While the answer is more complex than it should be, organisations such as the Development Bank of Southern Africa, Telkom and the SA Special Risk Insurance Association are examples of ethically effective SOEs.

It is interesting to note that the effective SOEs The Ethics Institute has had the privilege of working with have several traits in common:

• Good to excellent ethical cultures. Many have a relatively mature ethical culture, where ethics is taken seriously and proactively managed. Talking about ethics is part of the organisational “speak” and usually observable to employees at all levels. They have dedicated officials who manage ethics and provide support to individuals by allocating ethics-related resources to enable them to meet their objectives.
• Governance. Governance is diligently managed and features high on the agenda of board and executive meetings. Top leadership works hard at subscribing to leading governance standards and legislation (such as adherence to the Companies Act and the King IV recommendations).
• Empowered employees. Ethically effective organisations tend to have employees who work autonomously, without fear of retribution for carrying out their duties in good faith. Employees feel free to voice their concerns without being punished. While micromanagement does occur due to the somewhat bureaucratic nature of SOEs, this is not as prevalent as it is in SOEs with toxic working environments.
• Relationship with facts. Rather than denying the existence of structural and ethical issues, SOEs that are willing to engage with the facts make conscious decisions to mitigate potential and current risks. They are not afraid to make difficult decisions no matter how unpopular these might be. Management acts in the best interest of the organisation, rather than making selfish decisions (for example, favourable tenders for friends and family).
• Renaissance. A close glance at how these high-performing organisations came to occupy their current positions reveals that some went through large-scale organisational overhauls. They were not afraid to make unpopular changes and even tolerated mistakes. The result was a positive start to the demands of the 21st century.
• Bold leadership. Many employees and stakeholders do not feel comfortable with the leadership in successful SOEs. For example, leaders create environments where there is less tolerance for unchecked greed and wrongdoing, as well as increased accountability for decisions made and actions taken. The majority of functional SOEs are led by individuals not easily swayed by external influences. They fully understand and respond appropriately to the core calling of SOEs, which is to utilise taxpayers’ money responsibly and efficiently.

So how does one go about ensuring SOEs don’t fail as a result of bad governance? We know where the stumbling blocks are. Similarly, we’ve identified the paths to success, and we know that if we continue to keep our heads in the sand we are likely to plunge our country into further gloom. The well-governed organisations should function as guides on the route to efficiency.

The Ethics Institute has conducted a differential analysis on SA’s SOEs and found that ethically effective organisations have the following elements in place:

• Ethics accountability and responsibility: the degree to which employees are held accountable for unethical conduct and decision-making in a swift, decisive, fair and transparent manner.
• Employee commitment to ethics: whether non-managerial employees understand the importance of ethics for business and sustainable development and are committed to conducting themselves in an ethical way.
• Senior management and middle management commitment to ethics: the extent to which leaders understand the case for ethics in business, are committed to acting ethically, and act as ethical role-models for non-managerial employees.
• Ethics talk: has an environment been created where employees can openly discuss ethics and the potential ethical consequences of business decisions and actions?
• Ethical treatment of people: employees and other stakeholders perceive that they are treated with respect, dignity, and fairness.
• Ethics awareness: Are employees aware that ethics needs to be factored into the everyday functioning of the business in meeting organisational objectives?

It should be noted that ethics alone will not ensure a fully functional organisation. However, those that are ethically effective tend to be more efficient and productive than those that are not. This may not be the “aha!” solution we all seek, but it is a good starting point to get organisations that have fallen by the wayside back on track.

• Qabaka is an ethics and anticorruption specialist at The Ethics Institute.