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Corporate arrogance: is there an antidote?

There’s a need for South African business owners to practice ethical sensitivity and humility.

In an ideal world, successful private companies would distribute their wealth responsibly among stakeholders. Instead, many companies allow the unchecked pursuit of financial success to distort their thinking and their values, leading to extremes of wealth accumulation. In our materialistic society, displaying financial success is accepted, even overtly encouraged. However, many such habits lead to a deadly culture of arrogance and a (barely concealed) disdain for those who are less successful.

There is no doubt that some organisations in South Africa can be described as arrogant, in which a sense of superiority, entitlement and blame-shifting is allowed to pervade. The accompanying danger these organisations pose to society is that they do not feel bound by the normal rules of the game that give them their social licence to operate. They believe they can do whatever they want.

That is not to say that success should not be celebrated and rewarded. The question at hand is this: When does confidence, based on pride of achievement, cross the boundary to overconfidence and arrogance? And when is it ethically insensitive? There are a number of telling signs.

Corporate euphemisms

A clear sign of arrogance is the dehumanisation or depersonalisation of employees and others, who are treated as objects rather than as people. There is a tendency in the corporate world to refer to an organisation’s staff complement as its ‘headcount’. With this and other euphemisms such as ‘rationalisation’ or ‘restructuring’ or ‘getting rid of the dead wood’ frequently being used in reference to retrenchments or other major changes, it makes it easier to forget human lives are being severely affected.

Corporate opulence

Does a company need to erect new headquarters in an affluent CBD when its current premises are still adequate? Does it need to build a multi-story monument imposing itself on the landscape in an ostensible gesture of confidence that, in fact, is more likely to be read by competitors, the poor and the jobless as an insulting brag? Lest we forget: wrapping the company’s headquarters with a gigantic set of sunglasses to signify that they were the ‘coolest company in the world’ preceded the demise of Enron.

Lavish expenditure on premises can be a red flag that an organisation’s priorities are misplaced; think, for example, of the (not uncommon) case where the price of the leather couches in the lobby is greater than the receptionist’s annual salary.

Evasiveness

When ethical failures occur in arrogant organisations, the first reaction is to either deny the wrongdoing or to refer to the incident as ‘a slight problem’ that ‘we’re attending to’. What they do not grasp is that ethical failures are often caused by the very mindset of arrogance that blinds organisations to the legitimate needs of all stakeholders, and vulnerable stakeholders in particular.

Excessive executive remuneration

Arrogant companies do not care much if their executives are compensated beyond reasonable and ethical limits. Inflated executive compensation manifests as post-wrongdoing golden handshakes or as bonuses to executives in spite of poor financial performance. South Africa’s Gini coefficient is the highest in the world, which implies that nowhere else is the income of the rich as disproportionate to the income of the poor as in this country. Excessive executive compensation is largely to blame for this.

Read: Executive pay under the microscope 

Effects and a possible antidote

Corporate arrogance contributes substantially to the low levels of trust that society has in business in South Africa. Telling signs of arrogance send signals to society that reinforce the perceived chasm between the ‘haves’ and the ‘have-nots’. It projects an insensitivity to societal social concerns, particularly when accompanied by ’corporate monologue’ (speaking ‘at’ society and further reflecting executives’ detachment from reality). Sadly, often the first thing to be compromised when someone is promoted to executive level is empathy for others.

The fine line between confidence and arrogance needs to be recognised and managed. Embracing a sense
of humility, which is a vastly underrated quality in the corporate world, may go a long way to managing the fine line. Humility, which is linguistically close to ‘humiliation’, is derived from the Latin word for ‘low’.

Genuine humility, though, is far from ‘low’. It does not portray insecurity or weakness. It implies a respectful appreciation of the strengths of others, a lack of personal pretence and a comfortable sense of confidence that does not require constant recognition from others.

Can a ‘soft’ value like humility be a competitive edge? One organisation that has selected humility as a core value is the Kellogg’s Company. They describe this value in terms of being willing to learn from anyone anywhere, seeking and providing honest feedback, being open to personal change and continuous improvement, learning from mistakes and successes in equal measure, and never underestimating their competition.

If a successful organisation such as Kellogg’s can embrace humility in this way, it would be foolish to infer that humility implies weakness or insecurity. An appreciation of humility and translating it into organisational and employee behaviour can help in countering overconfidence and the sin of corporate arrogance, even in the wealthiest and most powerful companies.

Professor Leon van Vuuren is the executive director of  Business and Professional Ethics at The Ethics Institute. 

COMMENTS   23

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Excellent observations and points, Prof Van Vuuren!

Applies not only to business, but to EVERY leader anywhere.

Every politician at Municipal, Provincial, Government and Trade Union level needs to sign off on this also. One of the reasons our democratic organs are not functioning effectively is PRECISELY because of the excessive arrogance of the participants (and pretty much ALL of them!)

May I add “respect towards others” to the list of good traits required from corporates, as it is overtly absent in the dealings of big companies with their clients, shareholders or the community at large.

The inexcusable arrogance as highlighted by Prof Leon Van Vuuren, has infected not only the boardrooms and behavior of most senior management in the private sector, but similarly also so at most public institutions. Arrogance is of course a menace to any sense of humility or to treating others with dignity and respect. It’s presents is always a clear sign of an ill personality and regressive to the view others form of such transgressor. It befits the association with Steinhoff International NV.

The economic world we live in is not designed for humility, but for arrogance.

It is the same type of arrogance that took the world to the brink in 2008 forcing citizens to bail out ‘too big to fail’ arrogant corporate entities.

The antidote is better regulation and policing regulation.

When you apply to use other people’s money to grow a company then you need to have better rules on shareholder participation and minority protections.

As a quick start, compulsory psychiatric analysis of candidates for a position as a director or a senior manager and recurring annual analysis of persons occupying such positions (similar to the competency tests for pilots) , will go a long way to identify and address ill personality traits and poor behavior such as arrogance and detachment from reality.

Rules and regulations offer the perfect hiding place to criminals. Rules and regulations offer a false sense of security, similar to the bunji-jumping harness without the rope. We need less rules and regulations, we need a free market that punishes mistakes with bankruptcy. The market punished Christo Wiese with a loss of 90% in a few weeks, while all the rules and regulations do not protect us against being looted by the criminal crowd in Luthuli House.

Where was this free market when the banks and other large corporates looked to being bailed out with the citizen’s money?

For the free market to work you need perfect information and the creative destruction that goes with poor decisions and wrongdoing.

indeed markets punish mistakes if they are allowed to and they always self correct when they make mistakes. They should be allowed to run their course and if it means demise of too big to fail they must be allowed to fail. But then the guys in black suits frightened politicians into thinking they cannot be allowed to fail. If the Americn banks were allowed to fail I am certain a new and more functional financial system and a new world order would’ve emerged out of the wreckage, possibly with China leading and Americans were not about to let that happen.

Sensi oh great and wise one…your rule did not apply in your beloved USA because if it did the companies that you hold dear, like most of the financial sector, would not exist today.

So you got to ask, what regulation and for whom. There seems to be two sets of regulations in the West, one for the poor and one for the rich and powerful.

The guys in the black suits own the politicians, and force them to set the two sets of rules.

Investors are lazy and credulous, so they abdicate the responsibility to manage their wealth, to fund managers who are just as lazy and gullible.

Warren Buffet is rightfully seen as an ethical, hardworking and well-informed investor. He will not invest in a company that has a grandiose head office or if the managers spend money on yachts, private jets or race horses. He believes if a manager has so little respect for his own money, he will show even less respect for the investor’s money. Buffet stated there are only 2 figures in the annual financial statements of any company that can be trusted. Those are the dividend-yield and the page numbers. The dividend yield can be verified, because it is paid into your bank account.

This bring us back to the point – if investors took the responsibility for their own money, they would not have allowed their employees, who manages their investments, to invest in a company like Steinhoff who has a pretentious head office, a pretentious CEO with race horses that cost R 100 000 per month to feed, and a pretentious chairman of the board whose daughter bought a R 90 million house and whose son bought a perfectly sound house to the value of R 19 million and demolished it to build something new.

All of this insulting, cheap, degrading, johnny-come-lately-millionaire pretentiousness, while Warren Buffet, lives in a modest house in an average suburb and works in a modest office with few staff and drives a modest car and does not own a yacht.

Investors are lazy and gullible because they are easily impressed by the facade of success. The investor who is serious about his money understands the time-value of money. Why spend R 3 million on a car, when that same R 3 million will be worth more than R 12 million in 15 years time if invested properly. The car will be worth R 500 000. The true price of that car was not R 3 million, the real price was R 14.5 million. People who drive expensive cars do not have the means to add value to assets. Those who have the ability to add value, will invest their money and multiply it.

Those who understand compound interest earn it, while hose who don’t pay it.

Totally agree. Except about the car. R1.5m Porsche 911 will still be worth R1.5m in 5 years time, and R3m in 15 years’ time. Cheapest car you can buy.

“Buffet stated there are only 2 figures in the annual financial statements of any company that can be trusted. Those are the dividend-yield and the page numbers. The dividend yield can be verified, because it is paid into your bank account.”

I must say Buffet’s quotes are classic and truthful. His annual letters are a please to read.

If you want to get to the top, you have to throw “ethical sensitivity and humility” out the door, otherwise somebody who will, will beat you to it.

MoneyChief – and the one that wins that unethical rat-race, will be the fattest, most disgusting rat of them all. Not worth the chase.

MoneyChief:

It would appear Money is your Chief

Just because I make an observation, does not mean I agree with it.

The author picked up a lot of the symptoms and causes.

the public only have two weapons:

Shun their products in favor of ‘nicer’ companies
Do not invest in their shares

IMO the big stick should be the retirement funds and big investors. Unfortunately the same culture pervades the asset managers. Most have never run a real business and are buddy-buddy with the boards instead of behaving like owners would. VERY few private companies have the symptoms described, mainly because the owners are the managers or at least very close to the business.

It’s high time an ethical fund or ETF gets launched, which only invest in companies evaluated to have strong ethical principles and which value their shareholders (similar concept to shariah compliant funds but focused on moral and ethical principles).

Really enjoyed this article. Worked in corporates and private business for years and I am personally aware of bullying behaviour, greed and lack of empathy. Why for example are cashiers, telephonists, counter staff and yes front security paid such poor salaries when these people are the face of the company. You are entrusting these people with your image, cash and inventory and you think that your fancy office is more important. Another personal example, executive meeting, first item, how many must we retrench?. Second item, replacement of executive cars. Decision – luxury cars, namely Mercedes. This is true. Story comes from one executive who went along with it.

“Another personal example, executive meeting, first item, how many must we retrench?. Second item, replacement of executive cars. Decision – luxury cars, namely Mercedes. This is true. Story comes from one executive who went along with it.”

Some of the opulence by executives is only possible if you have no soul, no empathy and no care. You have to wonder whether these people acquire their characteristics once they assume positions or whether that is the criteria for promotion.

It has always puzzled me how executives are treated like demigods by many people in companies and that is why that arrogance develops because they start to believe that they are demigods. It starts with people treating executives like ordinary people because that is what they are just managers!

Thanks for reply. I always ask myself what could have I done about it? Really nothing as I was not an employee, but it still bothers me.

Many executives behave as though they have no soul. One has to wonder whether this is a criteria for promotion or whether ordinary people acquire this quality once they assume positions.

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