Pot, Stop Calling Kettle Black – A Call for Effective Corporate Governance

Pot and Kettle - "Who are you to judge?"

Pot and Kettle – “Who are you to judge?”

“Politicians are all corrupt”. This statement is very popular with most of us and we are quick to expose the rot in the political class. In Africa, one of our first conscious discoveries is that you can never trust a politician and that they have a special place reserved in hell fire.

I will be very honest and disclose that I am also very wary of politicians and I am a vocal advocate of a radical change in the political landscape particularly in my beloved continent – Africa. I believe that when we start electing quality leaders, Africa would be on its way to greatness. Today, I am interested in the hypocrisy that is prevalent in our society. We shame the political class and mostly forget that even small fries in the private sector are destroying economies all over the world.

“James Roberts, director at BDO, global statistics revealed that as much as 7% of a company’s annual turnover was being lost to fraud, theft and corruption” (timeslive.co.za, 2011). Countries like Nigeria with very weak corporate governance structures might be doing much worse. But let’s even agree that 7% is a fair assessment and using Nigeria’s GDP – we will be sitting at a potential 36 Billion USD loss due to fraud! This might not be the case but it should give us an understanding of the kind of evil we are dining with whilst concentrating on the politicians alone. In 2011, reports suggested that South Africa had the second highest incidence of corporate fraud and corruption in the world with an estimated 100 Billion Rand annual loss (timeslive.co.za, 2011).

These figures might seem outrageous but a closer look at the loopholes that exist and the level of greed from the bottom to the highest hierarchy in the world of work would suggest otherwise. The most commonly reported economic crime types are: asset misappropriation, procurement fraud, bribery/corruption, cybercrime and accounting fraud (PwC, 2014). PwC (2014) also reported that 1 out of 3 companies have reported being hit by economic crime.

The effect of economic crime in organisations on the world economy is thus mind boggling and calls for a reflection. We concentrate so much on demonizing politicians and forget that the man next to you is most likely worse than the politician you hound. You might also be a demon in your small office but your hypocrisy smells to the highest heaven. I will give some examples of common corporate crimes that ordinary citizens don’t really consider as big deals. These are committed not only at executive levels.

1) You work in a company that sub-contracts to service providers. You either start your own company and sub-contract to it because you are in a position of authority or unduly favor a service provider for a cut. This is more rampant than you would ever think and cuts across many industries. Don’t look too far, the person sitting beside you at work might be doing it.

2) The company has given you provision for a project vehicle but you decided to procure three vehicles. Your wife takes one to work, the children use one and you have one, all with drivers attached. You pay for many residences for phantom project team members from abroad and not even your conscience haunts you.

3) Your company is facing quality issues. Why? Because you continue to victimize quality service providers and you never want them to work for your organization. You ask them for percentages in their revenue if it is a revenue share agreement.

4) Companies that use Millions of liters of diesel in a month are subjected to fraud. These fixers inflate the per liter cost and consider only 10 Naira per liter and how much they make in a month if 1M liters are used. That is a very conservative case study.

Many do not consider these things as crime but very normal. In fact, if you don’t participate in these schemes, your life might not be safe as the perpetrators are afraid you would rat them out. These guys go to church and mosques. They are not atheists or Ifa worshipers. They are most likely the biggest accusers of political corruption.

We need to introspect and start rethinking the harm done to our economies by greed not only by the political class. It is ridiculous and if we want great countries, it is not only the politicians that must change. Change starts with all of us! If you have gotten to the stage where these crimes look normal to you, then you have no moral rights to condemn a corrupt politician.

Companies must start investing in effective governance and risk management frameworks to reduce economic crimes. It will give them better credibility and improve their bottom lines. The message from the top must be strong and nothing should be left to chance in dealing with corrupt workers at all levels.

Companies must stop paying lip service to the recommendations included in King III report and should have concrete plans to implement in their companies. The use of technology is also important to reduce the risk of fraud. If the leadership and board of companies have integrity, it is hard for the employees to defraud the company.

In conclusion, pot – stop calling the kettle black. Until the private sector starts to clean its act, until all of us as individuals exhibit integrity in our personal lives, we lack the moral rights to hound politicians. I understand that politicians have a role to play in providing an enabling environment that dissuades corruption, but we can all start from somewhere.