The importance of corporate ethics and values :building a sustainable strategy model for effective implementation of good corporate governance within a state-onwed enterprise in South Africa

Abstract

The South African Government, through its Department of Public Enterprises, has made it clear that it expects state-owned enterprises (SOE’s) to be run in line with strict corporate governance principles (Business Day, 2005). There has been a lot of theory and information in the body of knowledge on the principles of good corporate governance. Many countries have developed guidelines, codes and legislation on good corporate governance. In addition, many corporate governance change programmes have been developed and used in the implementation of governance codes by many organizations and institutions. Regardless of all these corporate governance developments and implementation initiatives, many catastrophic corporate failures, caused by unethical individual behavior and weak corporate cultures, still continue to this day. These corporate failures have resulted in serious economic consequences with grave socio-economical implications of job losses, loss of revenue by inland revenue, erosion of pension reserves and loss of investor confidence, etc. The real challenge and the question that remains is: Why have most, if not all, of these corporate governance developments and implementation efforts yielded little or no satisfactory results at all? What is the best corporate governance implementation model required to bring about not only effective but also sustainable corporate governance in organizations, whether they are private, public or state-owned?

The purpose of this research is to understand how Eskom, as the chosen South African state-owned enterprise, has evolved in its corporate governance environment for the past 10-year period from 1994 to 2004. 5 This study will attempt to understand the processes that this organization went through, challenges that it faced, and strategic interventions that it applied to overcome those challenges in ensuring a sustainable good governance environment. Specifically, the research has the following three objectives: To identify the relationship between corporate ethics/values and the corporate culture and their influence on corporate governance environment. To identify the roles of leadership and the influence that they may have had in ensuring good corporate governance environment in Eskom. (Leadership here refers to the government, as a shareholder, the board of directors and management). To recommend a strategic model and approach in ensuring the effective implementation of sustainable good corporate governance in a state owned enterprise in South Africa. Therefore, the following is a high-level summary of the chapters making up this research report: In chapter 1, the purpose was to give the reader some background information on the study and the background information on the company used for the research. The problem statement, that forms the basis of this study was identified, defined and explained. The chapter also detailed challenges and obstacles experienced in the process of completing this research. Chapter 2 discussed the theories around corporate governance and various other subjects that are important in the successful implementation of corporate governance. Subjects such as corporate ethics and values, organizational culture, 6 leadership and strategy are also discussed in linking them with the main focus. Based on what the writer deemed relevant literature and the writer’s view of the facts presented on the corporate governance study and other disciplines linked to the subject, the foundation was set as a basis for the research study. Chapter 3 identified research methodology deemed relevant to be used in establishing how successful Eskom was at implementation of corporate governance, based on the foundation of formalized corporate ethics and values programmes. The chapter also presented the research methodology structure and process that has been followed by the researcher. Multiple methods of data collection were used, hence the combined method drawing on both qualitative and quantitative data-collection procedures (survey and in-depth interviews). The ethical challenges encountered with the company being researched were also highlighted in this chapter. Research instruments used in the research were in the form of interviews and questionnaires. Chapter 4 summarized the overall findings emanating from all the data that was collected, summarized and interpreted. The summary of findings centered on how Eskom, the company that was the subject matter of this research, has evolved with its corporate governance programmes over the past 10 years, from 1994 to date. Chapter 5 outlined the overall conclusions (refer paragraph 5.1 of this report), drawn by using a combination of deduction, induction and generalization. The basis for such conclusions flowed from having applied a hybrid method of qualitative and quantitative research approach. The emphasis of these overall conclusions was to address the specific research objectives, as identified in the introductory Chapter 1 of this report. 7 Finally, based on the overall findings as per paragraph 4.4 and issues identified per Table 9 of this report, recommendations specific to Eskom were made in paragraph 5.2 of this report. These recommendations are not prescriptive, however they are intended to be value-added inputs and suggestions as to what the company has to focus its attention on in an effort of ensuring continuous improvement in its corporate governance programmes and related milestones achieved to date.