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1 Management Ethics Summer 2010
management ethics
In thIS ISSuE
Editorial
Speakers’ Corner
Microfinance
A World Apart?
New EthicsCentre Member
Accounting for CSR and Sustainable
Development in South Africa
In partnership with The Centre for Accounting EthicsUniversity of Waterloo
Summer 2010
2 Management Ethics Summer 2010
mAnAgEmEnT EThICs
EditorialBy sAlly gUnz
This is the third and final newsletter from the partnership of the EthicsCentre CA and the Centre for Accounting Ethics at the University of Waterloo.
This has been a very enjoyable relationship and I
thank the staff and editorial board of the Ethics
Centre for their gracious assistance. I also thank
the ever patient volunteers who assist with the
production of the newsletter. This is a mysterious process.
Somehow the clumsy scribblings that I produce emerge
as a polished publication. I fully understand that this is
inevitably a result of a large amount of effort and I am
most grateful.
The partnership with the Centre for Accounting Ethics
was always intended to be temporary and it is my great
pleasure to introduce the new editor, Sheerin Kalia,
who will be responsible for the newsletter starting this
fall. Sheerin is a lawyer, called to the bars of Ontario
and British Columbia in 1999. She has practiced law as
both a litigator and a solicitor, has taught courses in
Law, Business Ethics and Human Resource Management,
and has extensive work experience in the banking
industry in Toronto, Vancouver and on an international
joint venture in the Caribbean region. In 2007, Sheerin
was nominated as one of Ontario’s Best Lecturers and is
about to publish her first book with Lexis Nexis entitled
International Business Law for Canadians: A Practical Guide.
Sheerin has always been interested in the intersection
of law, ethics and business and I wish her well as she
assumes the role of editor of this newsletter
Each issue of the newsletter has had its own theme — the
first examined ethics in the financial sector; the second
focused on business ethics education in Canada. My
approach to editing the newsletter is to select interesting
people and ask them to write a short commentary on
the given theme. It is an extraordinary testament to
the goodwill of humankind that no one has refused
me. This issue began with the very general goal of
examining current environmental issues. Interestingly,
the focus has gradually shifted to an equally important
concern; namely, the complexities of providing aid to
disadvantaged communities. Inevitably here we are
talking of the advantaged providing the aid which in
turn leads to further serious ethical questions. Are
we genuinely providing what others want and need
or are we providing what we choose to give based on
what we determine others need? There is always a fine
line between assisting others and good, old-fashioned
paternalism. Even if we determine motives are sometimes
questionable, is this in itself reason to stop our actions?
A related question, and one which Olaf Weber discusses and
Norton Tennille and Gemma Obeth examine in another
context, is whether our efforts, however well intentioned,
may result in a culture of dependency. Olaf is the Canadian
Export Development Bank professor of environmental
finance at the University of Waterloo. He came to Canada
recently from a Swiss university and brings with him
considerable expertise in the sometimes difficult issues
surrounding microfinancing. Microfinancing has received
a good deal of publicity in recent years, particularly after
the award of the Nobel Prize to Muhammad Yunus. It
does however raise interesting questions, particularly
when conducted as a for-profit exercise. Most importantly,
what ethical issues are raised when the provision of
microfinancing services could be said to allow local
governments to avoid their own social responsibilities?
Olaf had the unenviable task of distilling these complex
issues into one short article for this newsletter and I
thank him for his work. Complementing this article is
one by Norton Tennille and Gemma Oberth of The South
African Education and Environment Project (SAEP) that
discusses the experience of one NGO working in the very
challenging environment of the South African townships.
Canadian Centre for Ethics and Corporate Policy ethicscentre.ca 3
SAEP has done some extraordinarily successful work and
the task I gave the authors was to evaluate critically the
challenges they inevitably face. I trust you will find the
resulting article to be as interesting as I do and again I
thank them very much for their work. For those interested
in learning about their projects I recommend a visit to the
SAEP website at http://www.saep.org/.
The third major column of the newsletter resulted, as
these things so often do, from sheer happenstance. It was
as I was working with the SAEP authors on their column
that I met James Munro, an MBA student from Wilfrid
Laurier University. James had just returned from South
Africa where he spent a co-op work term with a consulting
firm engaged in providing sustainability and safety
reports for businesses in that country. We started talking
about the experiences he had and I found the discussion
to be truly fascinating. Here was a bright and engaged
young person who had been on the ground floor of
activities that we all read and write about here, generally
from an ‘in principle’ position. James agreed to write
about his experiences and I asked him to focus on his own
observations of just how effective these often mandated
processes are. This is one person’s perspective, but it is the
perspective of a very thoughtful young man who is clearly
committed to further academic and practical study. Once
more we can be encouraged by the excellent contributions
of the next generation of scholars and practitioners as
represented here by Gemma Oberth and James Munro.
I conclude as always with some personal thoughts.
It is easy to assume that the issues addressed in this
newsletter relate only to some other country far away.
In fact, the very difficult business of doing good for
others and not to others, creating an environment of
independence and not dependence, providing what
others genuinely need and not merely what we think
they should need, are ones that exist equally well in
Canada as in less advantaged countries. Our culture
of public funding of not-for-profit social agencies is a
fine one but it can also lead in the worst-case scenario
to fragmentation of services and turf wars where the
focus is upon protecting employment and the status quo
which in turn will be assisted by dependency rather than
independence. Thoughtful service providers are all too
familiar with these risks and work hard and effectively
to avoid them. But where there are few incentives to
coordinate agencies and many not to, there will always
be pressures to act not entirely in the best interests of
those for whom the work is being done. All of us, as we
contribute to our communities in our various ways, must
be mindful of these risks just as others are when they
extend their work to countries outside of Canada. I thank
all the contributors to this issue for raising the difficult
questions that they do.
mAnAgIng fInAnCIAl CrIsEs And mArkET
rEform: govErnmEnTs shoUld do ThE
‘rIghT ThIng’
March 4, 2010
Dr. John Pattison
Dr. John Pattison, a retired senior banking executive
and author of works on regulation and international
policy co-ordination, shared his expertise and insights
into the complexities of policy-making in the wake of
the global financial crisis with the EthicsCentre CA at
the Albany Club. Great financial crises are not new and
the devastation is unfair and random. As with the crisis
of 1929, the events of 2008 will shape people’s financial
decisions for life. How did history repeat itself in 2008?
He reminded us that it is human nature to give less
weight to what happened in the past. He stressed that
risk is a collective action issue. Many experts including
regulators assumed that with good governance and
technology, banks could safely manage their own risks.
It is clear from what happened over the last couple of
years that those assumptions were incorrect. To win
customers and improve profitability banks will often
take on greater risk. The banks’ appetite for risk needs to
be balanced with regulation. How were all the symp-
toms missed? Dr. Pattison outlined the causes including
imbalances between major countries, governments and
regulatory authorities deciding not to act and repeated
bail outs leading bankers to think they could take big-
ger risks. On a positive note, Canada has an advantage
over the U.S. because there are fewer financial institu-
tions to supervise. The Minister of Finance can get them
in one room and have a confidential discussion; the
banking regulator can do likewise. While some may
disagree with this method, Dr. Pattison believes this is
a better way than the alternatives to manage systemic
risk if both sides are honest and show their cards. This
ethical approach differs from other countries where
governments and regulators enact a multiplicity of rules
that must be followed and where banks hire lawyers to
find ways to do indirectly what is often not permitted
directly. Moving forward what are we trying to achieve
with financial reform? Governments and regulators
must address the challenges of modifying financial
behaviour, improving the management of banks and
markets, enforcing the rules and finding an answer to
the too-big-to-fail conundrum.
Speakers’ CornerPresentations available at EthicsCentre CA website:
http://www.ethicscentre.ca/En/events/past_
events.cfm
4 Management Ethics Summer 2010
Microfinance By dr. olAf WEBEr
Dr. Olaf Weber holds the Export Development Chair in
Environmental Finance at the university of Waterloo.
his research and teaching interests are in the areas of
environmental and sustainable finance with a focus on
sustainable credit risk management, socially responsible
investment, social banking and the link between
sustainability and financial performance of enterprises.
There are four billion people at the base of the
economic pyramid (BOP) who live in relative pov-
erty. Although incomes (in current USD) are less
than $3.35 a day in Brazil, $2.11 in China, $1.89
in Ghana, and $1.56 in India, together this population
has substantial purchasing power. The BOP constitutes $5
trillion of the global consumer market (Hammond et al,
2007 p. 3). Only 2-10 percent of Europeans and Americans
lack a deposit account, whereas this figure is between 65-
85 percent in developing countries (Solo, 2005).
Four billion people live in relative poverty worldwide
and need support. There is also a huge market for finan-
cial services and products that conventional banks could
see as attractive. Since the population growth rates in
developing countries are higher than in industrialized
countries, those markets will increasingly become more
important for banks. It is in this context that the cur-
rent popularity of microfinancing will be evaluated.
WhAT Is mICrofInAnCE?
Microfinance provides financial services for clients with
low or no income and who are not able to provide col-
lateral or a credit history showing that they will be able
to repay a loan. While microfinance is a broader concept
than microcredit — it includes more financial products
and services (e.g. savings, insurance, and fund transfers) –
the terms are often used synonymously. Both rely on trust
between lender and borrower and the assumption that
the borrower will repay the loan.
ThE rIsE of mICrofInAnCE
In the late 1970s and early 1980s, several organizations
in different parts of the developing world – for example,
Grameen Bank or BRAC in Bangladesh, ACCION in Latin
America, and the Self Employed Women’s Association
(SEWA) Bank in India – began providing small-scale sav-
ings and credit, typically for the development of income
generating activities (Coyle & Wehrell, 2006). The United
Nations declared 2005 as the International Year of
Microcredit. The real impetus for the expansion of micro-
finance came when microfinance pioneer Muhammad
Yunus received the Nobel Peace Prize in 2006.
Microfinance is now of interest to conventional banks
and the concept of microfinance has spread to, for
example, micro-insurance and to microfinance in
industrialized countries (e.g. Grameen Bank in the USA).
Germany’s GLS Bank was hired by the German govern-
ment in 2010 to establish a microfinance network in
Germany (see www.gls.de). In Canada some of the big
conventional banks are engaged in microfinance either
by co-operation with other Canadian institutions such as
the Mennonite Economic Development Associates (MEDA)
Canadian Centre for Ethics and Corporate Policy ethicscentre.ca 5
1. BRAC’s Microfinance (MF)
Programme was launched in
1974 to encourage the increase
of income for the poor through
the setting up and expansion
of income-generating activities
and micro-enterprises. BRAC
continues to play a pioneering
role in providing diversified
financial services to serve differ-
ent segments of the population
who lack access to saving and
credit provided by financial
institutions. In 2008, BRAC’s
Microfinance Programme
increased its member base
to more than 8 million, with a
cumulative disbursement of
nearly uSD 6 billion.
2. BRAC Bank Limited, with
institutional shareholdings
by BRAC International Finance
Corporation (IFC), and
Shorecap International, has
been the fastest growing Bank
in Bangladesh from 2004 to
2007. the bank operates
under a “double bottom line”
agenda where profit and social
responsibility go hand in hand
as it strives towards a poverty-
free, enlightened Bangladesh.
3. As a fully-operational commer-
cial bank, BRAC Bank focuses
on pursuing unexplored market
niches in the Small and Medium
Enterprise segment (SME), which
hitherto has remained largely
untapped within the country.
Since inception in 2001, with 56
branches, 30 SME Sales & Service
Centres, 430 SME unit Offices,
more than 150 AtMs, 30 Cash
Deposit Machines and more than
1,800 Remittance Delivery Points,
BRAC Bank is one of the coun-
try’s fastest growing banks. the
bank has already proved to be
the largest SME financier in just
7 years of its operation and con-
tinues to broaden its horizon into
SME, Retail, and Corporate Bank-
ing. Customer Service and staff
development towards delivering
global standard service remains
this year’s priority.
ThE BrAC BUsInEss CAsE Source: http://gabv.org/Banks/BRAC.htm
the following case provides the example of Bangladesh Rural Advancement Committee (BRAC), one
of the biggest microfinance institutions and a member of the Global Association for Banking on Values.
or with microfinance institutions in developing countries
(Coyle & Wehrell, 2006). Some commercial financial
products like Sarona Funds (www.saronafund.com) or
ResponsAbilty (http://www.responsability.com/site/index.
cfm/id_art/44230/vsprache/EN) already show that they
can provide both financing with an impact and financial
return for the investors.
The increased popularity of microfinance leads to serious
questions. For example, what is the balance between so-
cial impact and profit maximization? What are appropri-
ate interest rates given high inflation rates and the high
rates of alternative lenders?
ThE Pros And Cons of mICrofInAnCE
The microfinance movement is increasingly the subject of
critical evaluation. It remains the case that one of the most
important benefits of microfinance is the improvement
in quality-of-life for the borrowers by creating financial
service structures for those who did not otherwise have ac-
cess to banking services. It also may be highly profitable for
lenders due to the low default rate and long-term growth.
Part of the difficulty with evaluating the movement is
that most reports of its success remain largely anecdotal;
there is as yet little evidence-based research (Dichter,
1996) even if the positive impact on quality-of-life and
development seems obvious. The primary criticism of
microfinancing is often leveled at the public policy level.
Because a goal of microfinance is to help people out of
poverty it often takes the role of national and interna-
tional public organizations and governments that, as a
consequence, can neglect their responsibilities in these
areas. Further, the evidence of environmental factors be-
ing considered in the lending decision is at best mixed.
At the individual level, in many programs it appears that
many borrowers need further loans to maintain their busi-
nesses, thus creating a relationship of dependency through
a cycle of borrowing and repayment. A resolution to this
consequence calls for microlenders to combine financial
services with technical advisory services, training for local
partners, and long-term project management.
By first world standards, interest rates may appear to be
unduly high. Clearly if high interest rates are motivated
primarily by the desire for high returns for the providers
of capital, they are not acceptable. If they are a reflection
of the high volatility of the respective currency and high
6 Management Ethics Summer 2010
inflation rates, they may well be justifiable. Not surpris-
ingly, there is some evidence of abusive practices by
lenders. For example, there are rumors about field officers
using violent methods to put pressure on borrowers –
mostly women – to repay loans.
EffECTIvE ImPlEmEnTATIon
Although microfinancing is no longer in its infancy,
there remains little regulation and still less hard data
from which its effectiveness may be measured. Until
these limitations are overcome, Rhyne (2009) and
others provide the following basic guidelines that
should be followed to ensure an appropriate system:
1. Provide decent quality of service
2. Establish transparent pricing
3. Ensure fair pricing
4. Avoid over-indebtedness
5. Implement appropriate debt collection practices
6. Maintain privacy of customer information
7. Ensure ethical behavior of staff
8. Provide feedback mechanisms
9. Integrate pro-consumer policies into operations
and connect financial services with technical advisory
services, training for local partners, and long-term
project management
10. Finance businesses that are both environmentally
and socially sustainable
If the microfinance industry obeys these 10 rules it can
provide benefits for both investors and for borrowers.
rEfErEnCEs
Coyle, M., & Wehrell, R. (2006). Small is Beautiful, Big is Neces-
sary; Canada’s Commercial and Cooperative Answers to the
Global Challenge of Microfinance Access. Paper presented
at the Global Microcredit Summit.
Dichter, T. (1996). Questioning the Future of NGOs in Microfi-
nance. Journal of International Development, 8(2), 259-269.
Hammond, A. L., Kramer, W. J., Katz, R. S., Tran, J. T., & Walker,
C. (2007). The next 4 billion. Washington, DC: World Re-
sources Institute and International Finance Corporation.
Rhyne, E. (2009). Microfinance for Bankers and Investors. New
York: McGraw Hill.
Solo, T. (2005). The high cost of being unbanked. Washington:
The World Bank Group.
Speakers’ CornerPresentations available at EthicsCentre CA website:
http://www.ethicscentre.ca/En/events/past_
events.cfm
EThICs And vAlUEs In BUsInEss
April 13, 2010
Robert Dutton, President and CEO, ROnA
Are ethics good for the bottom line? Robert Dutton,
RONA CEO since 1992, responded enthusiastically “Yes!”
to members of EthicsCentre CA at the Albany Club.
For Mr. Dutton “business equals people” and the RONA
corporate values (service, unity, respect, responsibility
and pursuit of the common good) are expected to be part
of the DNA of all employees and are an essential compo-
nent of RONA’s success. The RONA interviewing process
is designed to help identify candidates who will embrace
these values. Mr. Dutton expanded on each of the RONA
values, and their commitment to the environment and
the RONA Foundation to benefit youth at risk. He noted
that at RONA, values influence the way they manage,
ensuring benefits for investors while generating return
for all stakeholders. Mr. Dutton does not subscribe to
the cynical view that business and ethics are mutually
exclusive. When you get right down to it, he affirmed, the
success and sustainability of not just individual compa-
nies but our entire economic system – and, by extension,
society – relies on little more than confidence: confidence
that we will conduct our affairs in an ethical manner
that takes into account not only our fiduciary duty to
shareholders and the corporation but also our obligations
to all stakeholders – customers, suppliers, employees and
communities. In that regard, a company’s reputation and
values – in other words, its “ethics capital” – is arguably
as important to its long-term success as financial capital
and human capital.
Mr. Dutton’s passionate description of RONA’s corporate
commitment to its values clearly expresses that ethics
is a subject near and dear to his heart. He spends a great
deal of his time visiting RONA retail locations to dialogue
with his employees and demonstrate “tone at the top.”
Canadian Centre for Ethics and Corporate Policy ethicscentre.ca 7
To the casual eye, Cape Town, South Africa, has
stunning topography, with dramatic mountains
rolling into white sand beaches and tumbling
surf amid ocean view homes and condomini-
ums. Its nearby national parks suggest well-groomed and
eco-friendly environments. Yet, a 15-minute drive away
from the downtown city centre and popular tourist areas,
one sees a different world: a world of corrugated iron
shacks, young children playing in the streets, and people
living on less than a dollar a day. More than a third of
Cape Town’s population lives in informal settlements
or shanty-towns (known locally as ‘townships’) such as
Philippi, Khayelitsha, and Guguletu. These townships
are located in a flood plain, and experience heavy rains
during the winter. They are comprised almost exclusively
of historically disadvantaged Black Africans and Cape
Coloureds (as they are officially classified). In Philippi,
one of the largest, 46 per cent of people lack flush toilets,
29 per cent lack access to formal refuse disposal, and
population density exceeds 12,820 per square kilometre
(approximately eight square metres per person). Living
conditions in parts of the township were so extreme that
as far back as 1978 the Cape Supreme Court declared
Philippi as an ‘Emergency Camp’ and called on the then
Apartheid State to significantly improve its provision of
clean water and refuse removal.
Many of the responsibilities of government and socially
conscious corporations have yet to be met. As a result,
social and environmental challenges overwhelm Philippi
and its neighbouring townships. The hazards of poor
human waste disposal and the lack of a clean water
supply are made worse by a ‘tragedy of the commons’
with respect to refuse disposal. More than 43,000 resi-
dents do not have their garbage removed by local authori-
ties. Instead, they have little choice but to dispose of waste
in informal communal dumps, often located in the open
fields near township schools.
To fill the void left by municipal government and the cor-
porate sector, community-based initiatives have mobilized
in Philippi. Founded in 1994, The South African Education
and Environment Project (SAEP) works to develop environ-
mental awareness and help youth and their communities
to address their issues of environmental degradation in the
urban township environment. SAEP organizes after-school
and weekend Environment Clubs for township youth, with
activities ranging from garbage clean-ups of the neighbour-
hood and outdoor excursions to learning about preserva-
tion of local flora and fauna, global warming advocacy and
stewardship of their environment.
Graeme Bloch, education policy analyst with the Devel-
opment Bank of Southern Africa (DBSA), bolsters SAEP’s
oUr ConTrIBUTors
norTon TEnnIllE is the founder of South African
Education and Environment Project (SAEP) and lives in
Cape town, South Africa. A former Rhodes Scholar, he
practiced environmental law in Washington, DC before
moving to Cape town to establish SAEP in 1994. Born
in Winston-Salem, nC, he holds degrees from the
university of north Carolina at Chapel hill, harvard,
and Oxford. As an environmental lawyer he received
numerous awards from environmental organizations in
the uSA, and in 2008 was presented with the Inyathelo
Exceptional Philanthropy Award for his work at SAEP.
gEmmA oBErTh is a Ph.D. Candidate in Political
Studies at the university of Cape town. She holds
a Masters degree in Political Science from York
university in toronto and a Bachelor of Arts in
Political Science and Economics from the university
of toronto. With a passion for public health and
development politics and experience volunteering
for AMREF (African Medical and Research Founda-
tion) in Kampala, uganda, Gemma joined SAEP
to provide volunteer support in fundraising,
institutional development and communications.
A World Apart? CorPorATE soCIAl InvEsTmEnT
And sUsTAInABlE dEvEloPmEnT
for soUTh AfrICA’s ToWnshIPs
8 Management Ethics Summer 2010
belief in the critical connection between environmental
awareness and improvement on the one hand and educa-
tion for development on the other. In The Toxic Mix: What’s
Wrong With South Africa’s Schools and How to Fix It (2009),
Bloch hails a particular rural South African school for
“getting it right”. He believes the increase in the high
school graduation rate from 18 per cent in 1998 to 91
per cent in 2003 is directly correlated with the school’s
environmental policy. The entire village has mobilized
around the school’s vegetable gardens, sites for perma-
culture, agro-forestry, boreholes and rain-harvesting
initiatives. The school has become a community resource.
The South African government and local corporations
rely heavily on international donors. Roughly half of
SAEP’s total annual income (and the majority of its staff)
comes from Europe and North America. This interna-
tional donor support has been, and will continue to be,
essential. The larger problem is one that affects a broad
spectrum of civil society in South Africa: government is
failing in major areas of service delivery, most notably
in education. Donors – both local and international –
increasingly earmark their funding to enable NGOs to
deliver the services that the government is spending vast
amounts on but failing to provide. South Africa spends 20
per cent of its budget on education, but produces among
the worst academic results in Africa, and the world.
In her article “The Forgotten Role of Civil Society” (Cape
Times, 4 March 2009), Shelagh Gastrow, Director of
Inyathelo – The South African Institute for Advancement,
speaks to the philosophical issue of philanthropy where
donors are funding organizations to produce markers,
outputs, and measurable outcomes, such as the number
of plates of food provided or short-term improvements in
test scores. Donors demand “metrics,” quantitative mea-
sures of success at the end of short periods of funding.
This emphasis makes it increasingly difficult for NGOs
to play their historical role of innovation, advocacy, and
challenge to government and society. SAEP has experi-
enced, first-hand, how donor funds tend to steer NGOs
into a ‘service delivery’ role, which should be the respon-
sibility of the state. NGOs like SAEP need to be able to step
back and reflect, monitor and evaluate their programs
in a broader context, write and publish, get involved in
policy issues, play an advocacy role and pave the way for
creativity and innovation in education.
SAEP’s greatest long-term challenge is to build a Centre
for Innovative Education and Community Service – an
incubator for new initiatives in community development
service and a base for community-based research and
evaluation of educational and other community develop-
ment projects. Seeing NGOs as merely the sum total of
their projects and indicators precludes organizations like
SAEP from playing their primary and critical role in a vi-
brant and innovative civil society that produces new ideas
and promotes and protects human rights (Gastrow, 2009).
Corporate Social Responsibility, in the global context, can
make meaningful contributions to addressing the needs
of South Africa’s townships without perpetuating the
problem of the “service delivery trap.” Gastrow calls for
a “moral renewal” among the public and private sectors
alike, to redefine what it means to financially empower
civil society. While Canada has historically acted on its
belief that the nation’s social responsibility transcends its
own national borders, consistently outranking the USA
in terms of Official Development Aid (as a percentage of
Gross National Income), we hope there are new lessons to
take away from this on-the-ground account of how Afri-
can NGOs struggle. It’s not just what you invest, but (and
perhaps, more importantly) how you invest it. An infusion
of support for the more reflective and creative capacities
of grassroots organizations, such as active involvement in
policy development and advocacy for systemic change and
social justice, will go a long way towards reviving South
African civil society.
rEfErEnCEs
Bloch, G. (2009). The Toxic Mix: What’s wrong with South
Africa’s schools and how to fix it. Cape Town: Tafelberg.
City of Cape Town. (2006). A Socio-Economic Profile of
Ward 33 (Kosovo, Philippi, Philippi West, Samora Michel,
Weltevreden Valley) looking at the Economic and Human
Development Department’s Programmes and Projects in
2005/06. Economic and Human Development Department.
Gastrow, S. (2009, March 4). The Forgotten Role of Civil
Society. Cape Times. Retrieved from www.inyathelo.co.za/
media/docs/126777643405.pdf
ConTACT InformATIon:
The South African Education and Environment Project (SAEP)
Unit 14 Block B Waverley Court, Kotzee Rd Mowbray 7700
Cape Town, South Africa
Tel: +27 21 447 3632
http://www.saep.org
Canadian Centre for Ethics and Corporate Policy ethicscentre.ca 9
Speakers’ Corner
EThICAl BEhAvIoUr In An AmBIgUoUs ErA
thursday May 27, 2010
Dr. William (Bill) Dimma
Dr. Dimma is Chair Emeritus of Home Capital Group Inc.,
Past President of Toronto Star Newspapers, CEO of Royal
LePage, Executive Vice-President of Union Carbide, Dean
of the Faculty of Administrative Studies at York Univer-
sity, and author of Excellence in the Boardroom: Best
Practices in Corporate Directorship.
Starting the summer off right, Dr. Dimma addressed a full
house with a presentation that can only be described as
clever, direct and very thought-provoking. In his address,
Dr. Dimma described the current economic situation as a
rogue variant of the free enterprise system, caused by despi-
cable behaviour in an era of conspicuous greed. This variant
has caused substantial losses and it can all be traced back
to the real estate debacle in the USA in 2007, the effects of
which are still being felt now. For example, in March 2010
the downgrading of 93 percent of AAA-rated sub-prime
mortgages to junk status equalled losses totalling $1.75
trillion USD. Those are just the direct losses. Some countries
are affected more than others. How did this happen? Dr.
Dimma provided an explanation that identified the actions
of various players, motivated by an injudicious balancing of
risks and rewards, that allowed for high risk investments in
a time when the industry was not constrained by appropri-
ate regulatory legislation. What is the solution? Dr. Dimma
argued for the reinstatement of the Glass-Steagall Act and
a hastening of the CSR movement. His question to the audi-
ence was whether or not that would happen, which led to
various theories and of course, further questions.
from lEfT To rIghT
William Dimma (Speaker), Hélène Yaremko-Jarvis (Executive
Director, Ethics Centre), Mimi Marrocco (Chair of the Board,
Ethics Centre) and Martin Reid (President of Home Capital
Group Inc. and Event Sponsor)
Presentations available at EthicsCentre CA website:
http://www.ethicscentre.ca/En/events/past_
events.cfm
Established in 1994 and headquartered in Mississauga,
Ontario, Walmart Canada is a national retailer operating
a growing network of 317 retail stores nationwide serving
more than one million Canadians every day. Walmart’s mis-
sion is to help Canadians save money so they can live better
by providing everyday low prices on the widest range of
general merchandise and groceries under one roof. Employ-
ing more than 83,000 associates, Walmart is Canada’s third-
largest employer and was recently ranked one of Canada’s
top corporate cultures. The company donates and raises close
to half a million dollars every week to Canadian causes and
is the largest corporate donor to three of Canada’s biggest
charities: The Canadian Red Cross, The Breakfast Clubs of
Canada, and The Children’s Miracle Network. A recognized
leader in environmental sustainability, Walmart is aggres-
sively pursuing three bold goals: to generate zero waste, to
be powered 100 percent by renewable energy, and to sell
products that sustain resources and the environment.
New EthicsCentre Member
10 Management Ethics Summer 2010
In a co-op placement through the MBA program,
I spent the past four months working as a junior
consultant in South Africa. Embracing the park-life
conveniences of a wealthy suburb during the week
and volunteering in various township communities in
Soweto on the weekends, the “tale of two cities” imagery
depicted in the previous article was readily apparent.
The call to arms for Canadian donors and corporate
citizens is well founded: beyond supplementing failed
state service delivery, opportunities for financial empow-
erment abound. Issues of income disparity are reflected
in high crime rates and inequitable access to education:
the standard of living in Parkhurst would be unrecogniz-
able in Snake Park. However, in this and other areas of
corporate social responsibility (CSR), some headway has
been made. In my limited experience in South Africa, the
positive impacts of CSR practices were as apparent as the
shortcomings. Moreover, the corporate social investment
issues highlighted in the previous article represent only
one piece of the puzzle.
Environmental issues often took the foreground. Com-
panies in South Africa face water and electricity short-
ages, which in the long term may threaten the economic
viability of production. In this regard, it is not surprising
that many have directed their attention to water conser-
vation and alternative sources of energy. However, in my
experience, much of this was attributable to voluntary
reporting standards, like the Global Reporting Initiative
(GRI) sustainability guidelines, and pressure from inter-
national corporations looking to manage their supply
chain and corporate image. In light of this observation, I
thought it worth considering the role of – and motivation
behind – the GRI reporting guidelines and limitations
that may be inherent to this form of accountability. As I
delved into the literature on the subject, I discovered that
the topic was already a source of great debate.
InTErnATIonAl rEPorTIng sTAndArds: CIvIl
rEgUlATIon vs. CorPorATE PErformAnCE
The GRI was originally conceived to intervene in the CSR
field and improve corporate accountability by ensuring
stakeholders have access to standardized, consistent
non-financial information akin to corporate financial
reporting. The hope was that these standards would not
only enable stakeholders to better measure and enforce
a company’s adherence to standards set from Ceres
principles, but also empower NGOs to hold corporations
accountable. On the latter point, it is largely agreed that
the GRI has fallen short. This may be partly attributable
to the shortcomings identified in the previous article,
however it also points to a deep-rooted challenge in the
formulation of international reporting standards.
As David Levy, Halina Brown, and Martin de Jong point
out in “The Contested Politics of Corporate Governance,”
the GRI guidelines attempt to make two seemingly
contrasting logics compatible. The first: “civil regulation,”
positions social reporting as “a mechanism to empower
civil society groups to play a more active and assertive
role in corporate governance” (90). The second: “corporate
social performance,” emphasizes “the instrumental value
of social reporting to corporate management, the inves-
tor community, and auditing and consulting firms” (90).
If the objective of the GRI is to develop a non-financial
reporting (NFR) system that is comparable to those in cor-
porate financial reporting, it would be essential to invoke
the corporate sector. As Levy, et al, observe, the resulting
focus on developing the business case for sustainability
reporting and encouraging collaboration with multina-
tional corporations (MNCs), diverted attention away from
activists and eclipsed the “civil regulation” component
of the standards (91). This imbalance was obvious in my
experiences with sustainability consulting.
Accounting for CSR and Sustainable Development in South Africa A sTUdEnT’s PErsPECTIvE
James Munro is currently enrolled in the Co-op MBA program at Wilfrid Laurier University. He is a graduate of Mount Allison University and has a strong interest in corporate social responsi-bility and sustainable development. He recently spent four months working in South Africa with a sustainability consulting firm.
Canadian Centre for Ethics and Corporate Policy ethicscentre.ca 11
Although it can partially be attributed to my perspective
(I was benefiting from the reporting process in a corporate
setting), it was apparent that the involvement of NGOs was
largely limited to the ‘corporate social performance’ sphere.
Large MNCs seldom answered to NGOs for their sustain-
ability performance, but more often invoked them to meet
their corporate social investment goals. In general then,
rather than facilitating a shift in corporate governance
toward civil society stakeholders and “civil regulation,” CSR
continues to be employed “strategically as a form of regula-
tion that serves to accommodate external pressures (and)
construct the corporation as a moral agent” (94).
However, there are exceptions
to the rule and, in some cases,
the corporate performance
logic may even prove to culti-
vate a form of civil regulation.
Puma’s “Transparency in the
Supply Chain” initiative, devel-
oped in partnership with the
GRI, is a good example.
TrAnsPArEnCy In
ThE sUPPly ChAIn:
CorPorATE PErfor-
mAnCE fACIlITATEs
CIvIl EngAgEmEnT
As a precursor to its involve-
ment in the Global Action
Network for Transparency in the Supply Chain, Puma
worked with the GRI to support its Small and Medium
Enterprise (SME) suppliers in South Africa. The process
involved capacity building through GRI certified training
and assistance in the preparation of a GRI sustainability
report. The initiative is a perfect example of the “cor-
porate social performance” logic of the GRI guidelines:
strategic collaboration with a MNC looking to establish
itself as a moral agent and accommodate international
consumer pressure. However, the resulting benefits are
far more widespread.
The manufacturing sector in South Africa faces many
challenges, including a relatively high cost of labour and
the energy and water shortages mentioned above. In this
environment, Puma’s work with its SME suppliers not
only benefitted the corporate image but also ensured the
long-term viability of these production facilities. One of
the suppliers I worked with, Impahla Clothing, took the
resulting change in corporate governance to another level.
The reporting process became a day-to-day process:
monitoring water consumption, modifying the factory to
facilitate alternative energy sources, improving its health
and safety processes and focusing further on stakeholder
engagement & training processes. Most importantly from
a civil society standpoint, this shift in corporate gover-
nance and management priorities resulted in greater
involvement of the NGO community. On top of invoking
Food and Trees for Africa to offset its carbon footprint
(which is still within the corporate performance realm),
Impahla has worked with the National Cleaner Produc-
tion Centre (NCPC) to consider ways in which the com-
pany might be able to participate in a project geared to
recycling fabric cut-offs, and with industry stewardship
programs and the Department of Trade to discuss invest-
ments in solar panels for the factory. These burgeoning
partnerships not only represent further cost savings for
Impahla, but heightened accountability to both govern-
ment and civil society. In pur-
suing its corporate aims, Puma
helped cultivate a different
form of civil regulation.
Beyond this theoretical debate,
there still lies the important
question of whether or not
corporate citizens are meet-
ing their responsibilities. My
personal experience and that
of the authors of “A World
Apart” would suggest they
have a long way to go. Progress
is, however, being made and
I illustrate this from my own
experiences. While driving
from Cape Town to Site B in Khayelitsha I had the oppor-
tunity to have more candid conversations with employees.
They cited challenges with transportation to and from
work, managing expenses at home, and concerns around
safety and crime. However, before the lively streets, pit
latrines, and corrugated roofs were visible, one employee
also described the way in which she felt empowered at
work and saw the company as one she was connected to
and could grow within. Others cited training programs,
upward mobility and job enrichment as drastic improve-
ments over previous employers. In short, the company’s
extended stakeholder involvement, a result of the sustain-
ability reporting process, was empowering previously
disadvantaged people of the “other world”.
rEfErEnCEs
Levy, D, Brown, H, & de Jong, M (2010). The Contested Politics
of Corporate Governance: The Case of the Global Reporting
Initiative. Business & Society, 49 (1), 88-115.
12 Management Ethics Summer 2010
BoArd of dIrECTors
M.J. (Mimi) Marrocco,
University of St. Michael’s
College, Chair
Michael Davies, (Ret.) General
Electric Canada Inc., Vice Chair/
Secretary
Georges Dessaulles,
Vice Chair
Joan Grass, Business Ethics
Consultant, Vice Chair
Derek Hayes, (Ret.) CIBC, Past Chair
Blair Peberdy, Toronto Hydro
Corporation, Vice Chair
Vincent Power,
Sears Canada, Treasurer
Thomas A. Bogart,
Sun Life Financial Inc.
Louise Cannon, Scotiabank
Hentie Dirker, Siemens Canada
Ruth Fothergill, Export
Development Canada
Sally Gunz,
University of Waterloo
Howard Kaufman,
Fasken Martineau DuMoulin LLP
Christopher Montague, TD Bank
Financial Group
Flip Oberth,
Flipside Solutions Inc.
Hilary Randall-Grace,
Deloitte & Touche LLP
Robert Timberg,
Former Director, Ethics, Nortel
Maureen Wareham,
Hydro One Inc.
Robert Yalden, Osler, Hoskin &
Harcourt LLP
sTAff
Hélène Yaremko-Jarvis,
B.C.L., LL.B., Executive Director
Lois Marsh, Administration
CAlEndAr of EvEnTs
sPECIAl
rEgIsTrATIon rATE
Purchase now and save!
Take advantage of this special
registration rate of $120 for
three (3) luncheon events.
Tickets must be purchased in
advance. Tickets are transferable.
Tickets are non-refundable.
BrEAkfAsT EvEnT
Sept. 16 – Dr. Marie Legault
President, Legault & Associates
Leadership Development Inc.
“Becoming an Ethical Leader”
lUnChEon EvEnT
Sept. 28 - Jim McArdle
Senior Vice-President, Corporate
Secretariat and Legal Services,
Export Development Canada
“Ethics in the Financial Sector:
At Home and Abroad”
lUnChEon EvEnT
Nov. 4 – Dr. Barbara Killinger
Clinical Psychologist and Author
“Workaholism and the Loss
of Integrity”
BrEAkfAsT EvEnT
Nov. 18 – Hilary Randall-Grace
Associate Partner, Chief Ethics
Officer & Director of Risk
Management, Deloitte
“Ethics and Enterprise Risk
Management 2010 – Part II”
lUnChEon EvEnT
Dec. 2 – Stephen Griggs
Executive Director, Canadian
Coalition for Good Governance
“Say on Pay and Executive
Compensation”
mAnAgEmEnT EThICs
is published seasonally by
EthicsCentre CA.
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articles of 300 to 1,000 words (which
will be subject to usual editorial pro-
cesses) and suggestions from readers.
Management Ethics is edited by
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Back issues of Management Ethics are
on-line at the Centre’s web site. the
opinions expressed in Management
Ethics do not necessarily represent the
opinions of EthicsCentre CA.
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AnnoUnCEmEnTs
AgrEEmEnT rEAChEd
on Iso 26000
An agreement has been reached
on the Final Draft of the ISO/
FDIS 26000 Social Responsibility
Standard. It will be published as an
International Standard in October
2010. A previous version of the
guide can be found on the Ethics-
Centre CA website: http://www.
ethicscentre.ca/En/resources/
articles_submissions.cfm.