You are currently viewing our desktop site, do you want to download our app instead?
Moneyweb Android App Moneyweb iOS App Moneyweb Mobile Web App

NEW SENS search and JSE share prices

More about the app

Seething at Steinhoff and others

Pointing the finger of blame in the right direction.
Business needs to make the shift from a focus on self-gain to that of contribution. Picture: Shutterstock

It may take a while to unravel the wicked web that Steinhoff’s leaders and mercenary executives elsewhere have woven and who have flung another layer of tarnish on free enterprise. But after countless examples of the recent past and present, including the state capture thugs, we should now be very angry at those who play shareholder-value Sudoku for maximum self-gain; at executive remuneration which encourages this behaviour and constantly reduces the line between the acceptable and unacceptable; at the highly-paid watchdogs turned scavengers who now need watching themselves; adding another tier of watchers, more rules and prescriptions. And at those who have morphed capital from being a greater enabler into being a parasite.

The point is simply that we have been duped by theorists, economists and academics into believing that the overall purpose of enterprise is maximum short term self-gain for its owners. What mad creature defines itself and its success by the motives of greed and self-gratification? What species can hope to survive if it is built on the premise that each individual pursues his or her own immediate self-interest, tempered only by laws and prescriptions? What folly creates a premise that relies on the worst in us to extract the best: and then constructs institutions and systems to entrench and give expression to that premise.

It’s been a central theme to my writing for many years, backed by decades of experience in the field as a journalist, as management consultant and as one who has studied and closely followed the actions and thoughts of great business leaders and companies. I have admired them and have never quite understood how such a magnificent construct, that for the most part has created so much value and made such a difference to humanity, could fail so dismally at getting this across and earn such a tarnished reputation in populist parlance. It is partly, perhaps, explained by the ideological divisions that took shape in the 19th century and crystallised starkly in the cold war that brought humanity to the brink of a war to end all wars. Many of those dogmatic assumptions still linger and give direction to much of the debate and policies that we pursue. But they are fraying as we begin to understand that economics is not a system, but an evolutionary process that will inexorably force us to adapt or die. (See article here.)

Some years ago it dawned on me that a fundamental flaw in organisational theory was the default assumption that each individual is driven by their own immediate material self-interest, that their first and driving response to situations and interactions was “what’s in it for me”, tempered only by a fear of breaking a law or some cognitive mechanism called “enlightened self-interest”. I challenged that assumption in my article “Survival and empathy” some years ago, and in my book Empathy: the real power within.

Organisational theory has for many years tried to see business as a science, giving it systemic form and institutionalising it as a predictable, measurable entity with a specific purpose and defined inputs and outcomes. In that pursuit it was convenient to simplify the “human” driver in the default mode of immediate self-gain, and then construct processes and reward systems to optimise this driver. All that is then needed are rules and disciplinary procedures to ensure order and “acceptable” behaviour. That understanding was simply extrapolated to the collective called a company, business or enterprise – a mercenary, predatory entity pursuing maximum gain, tempered only by law and growing definitions and prescriptions around ethics and governance.

How on earth can we ever expect such a collective to be authentic; to have sincere benevolent intent; to be seen not as an exploitive gang but as a collective of people serving people?

In my own experience this understanding is so ingrained that any detraction from it is immediately interpreted as an assault on free enterprise and socialist outpourings. That is pure nonsense. It is contradicted by the behaviour of both great entrepreneurs and successful companies. An empathetic understanding of business does not detract from sound business principles. Indeed it should imply greater value creation for all, a point argued in my article in 2014, called “A two-faced business”.

Our dehumanised view of business, which was more widely adopted in the shareholder value expression of the past three or four decades, has downplayed the important perspective that ultimately business is about meaningful, mutually enabling human relationships, between the company and its community, customers, suppliers and government, and then between workers, management and shareholders. If these relationships are forged on mutual exploitation, trust goes and they collapse. If they are based on principles of common purpose and common fate, they are perpetually strengthened.

Yes, we should be angry at an understanding and expression of business that regularly exposes it to malfeasance, criticism and ridicule. With some vindication, but more out of pique, I posted a comment on a LinkedIn group that read:

“The Steinhoff debacle will unleash a plethora of “governance” wisdom and advice. And all will miss a critical point: that regulations, rules and prescriptions will fail regularly if there is not a change of heart. The triple bottom line is a 30-year-old burdensome governance framework that does nothing to get to the heart of the matter – sincerity of intent! You have to change hearts and minds away from creating shareholder value to creating value for all.”

I was encouraged by the responses of the mostly professional readers: at their own anger and disillusionment. Clearly it is time for a complete paradigm shift around enterprise.

  • Redefining purpose from shareholder value to customer and community value
  • From profit to value added (the magnificent metric)
  • From capital gain to community and customer gain
  • And from conventional cost accounting to contribution, inclusive or stakeholder accounting in strategy and operations.

I have always had faith that value-creating cells in the form of businesses large and small will survive any tectonic shift in their environment. All it takes is to throw that switch from self-gain to contribution, and then measure the right things.

COMMENTS   15

Sort by:
  • Oldest first
  • Newest first
  • Top voted

You must be signed in to comment.

SIGN IN SIGN UP

Sir, I too have written in these pages that I consider the entire SA economy as one giant Ponzi scheme – with everyone trying to maximise their gains before the curtain comes crashing down. I have also suggested that the country needs to be re-built from the ground up to correct the wrongs of the past. The long lasting impact of the 1913 lands act is everywhere to be seen in my erstwhile country. Finally I have warned about these so-called “Rand hedges” stocks – which of course drove the Steinhoff share price. So no Sir I’m not surprised – my only surprise was that it took a middle aged ex social worker & two Aussie kids to discover what the country’s best analysts couldn’t. Indeed numerous analysts were still lauding this share up until early December.

Robert

Here I was, hoping that your “told you so” comments were a thing of the past and you are sipping good Cape wine with Mr M Heystek – discussing how stuffed SA is and had your warnings been taken seriously this African country would be thriving.

Your comment is – as always – not of value to me – although many many others may find it useful to soothe their pain for no longer living in the land of milk and honey.

I really hoped you would find peace in your decision to go live in AUSTRALIA – but I see its not to be.

Perhaps you should return and join EFF – you seem to say the same things

I recently purchased 30 000 Steinhoff International shares (R8.74 each) and 15 000 Steinhoff Africa Retail shares (R18.01 each).

After the recovery I’ll buy Robert a ferry trip around the Sydney Opera house to enjoy his new found home, or a plane ticket to Cape Town and an uber past the GoodHope Centre in Cape Town, they both look the same and are just as run down.

Were you around then, How could you know?….

Aai Rob my man. The writer’s statements are clearly not limited to South Africa. South Africans have recently felt the shortcomings of the system in their pockets hence the example, but the system that is described is a global one. Please remember that Steinhoff’s primary listing is in Frankfurt. To stand back and pretend that the issues that are outlined is unique to South Africa and that your beloved Australia is somehow immune to these issues lies somewhere between silly and stupid. Trust you to twist the words of the author in order to push your self serving beliefs. Aikona

My guess is another “muistoter” rabbiting (Oz knows about those) on about the “1913 land act” without having a clue about what it means.

Australia is a lovely place for a day trip: you get to see the nice bridge and fancy building.

Arrive on the Saturday morning and fly out the same night. Avoids the jetlag too.

Because there is really is nothing else worth staying for.

To be successful, law have to be on your side. By not studying the written rules you will never be independent. The main players of any corporation have law study done before moving upwards. Making sure that law is on their side, farming becomes the main activity. In what can be put down as stock and money, yours.

Agree in part with Robert, what were the analysts up to? Most of them hide behind the title and get tips at the coffee station.

As for King 1,2,3 and 4. what good does all that do when those implementing it have no integrity at all, that is why criminal charges must be laid and jail time given out. Or this will happen again, we need directors that follow King to the letter with the threat of criminal proceedings if they don,t.

directorships are given out to all the buddies and they drink gin and tonic at lunch and don’t even bother to read the minutes of the meetings. lets not even touch on balance sheets now……

Point the problem at “short term self interest”. Nothing wrong with economics.
A businessman’s/woman self interest is to make a good living. He/she can only make a sustainable “good living” by serving the customer to the best of his/her ability. only when he/she satisfactorily serves the customer’s needs can he/she achieve a sustainable good outcome.

Short term self interest is not economics, its utter greed.

One rarely sees this kind of ballsup in owner managed businesses be they massive or modest. I include in this monster corporations that are minority owned by founders – Apple before Jobs died, Amazon, etc

So perhaps the problem lies in owners having abdicated the responsibilities that go along with their rights

1. Vastly overpaid hired help run companies on massive packages of share options that only reward, never penalize.
2. Today most listed shares are overseen by so-called professionals. Fund managers that invest other people’s money. Owners do not make direct decisions, the fund managers decide where to invest and largely vote all the shareholder decisions, Most (not all) fund managers are themselves hired help that have never ever started or run a real business. Sorry boys, but spending 15 years at a bank or insurance company does not count as business experience – witness what sanlam and absa ceo’s achieved at steinhoff. Witness how a procession of professional accountants and mba’s could not spot the very obvious inconsistency between cashflow and earnings at steinhoff

I have yet to meet an investment professional that I would employ in a business to actually run something tangible with assets and stock and manufacturing and customers.

But, good for them, they have made billions out of the stupid investors that actually only have themselves to blame for abdicating.

The big debate about active passive is missing something bigger: in active investing the investor that is equipped to make a proper study will never get taken by a steinhoff. Sadly, none of the active funds seem equipped. What is left? Invest directly.

Once again hitting the nail on the head, Jerry. Well thought through and well written. On two small points I disagree: 1) I do not believe that the purpose can only be customer and community value – customer-, community- (staff, creating jobs, care for the environment,contributing to social welfare and charitable causes), and shareholder value (creating an incentive to invest) must be in balance. 2) Nit-picky lawyer speaking – it should be benevolent motive, not intent. Intent is doing what you set out to do, motive is why you do it.

Human nature never changes.

So what companies in your opinion conforms to this more ethical approach as per article Jerry?
And which of those have you invested in?

It’s called rent seeking and is a worldwide phenomenon… it’s also apparently what’s making the world go around at the moment. And where is collective action by anyone – institutions and share-holders alike? You can’t leave this one to Magda to do something about as well. Where is a minority shareholder class action to voice your disgust and stimulate changes to the current rules and practice. If I had Steinhoff in my portfolios I would be the first to sign up.

End of comments.

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR
BTC / USD
INSIDER SUBSCRIPTIONS APP VIDEOS RADIO / LISTEN LIVE SHOP OFFERS WEBINARS NEWSLETTERS TRENDING PORTFOLIO TOOL CPD HUB

Follow us:

Search Articles: Advanced Search
Click a Company: