Ladies and gentlemen
I would like to thank the leadership of the Institute of Corporate Governance for having invited me to speak at this event. I was requested to talk about corporate governance as a force for transformation of economies and societies.
What is good governance?
It is my view that effective corporate governance is a pre-condition for sustainable economic development. It is a critical element in the implementation of our socioeconomic development agenda. In today’s highly globalized economic system, goods and services can now be produced anywhere in the world and as a result the traditional competitive advantage due to either a geographic location, climate or the existence of natural resources no longer holds true. All countries are now able to leverage the information technology and other technologies that are readily available and join the global economic system. But it does appear as if a clean, efficient, rational and predictable government has become an important competitive advantage. And without it, our development agenda will be less than successful.
The World Bank defines good governance as the “manner in which power is exercised in the management of a country’s economic and social resources for development”. In our context, the concept of good governance should go further to include the improvement in the processes of decision-making and implementation to transform the lives of the people.
How we decide on how best to utilise our resources, or what to prioritise with the limited resources, or the order in which to implement our priorities is a function of effective governance. Effective governance is therefore part of the necessary infrastructure needed to achieve the goals and objectives contained in any development plan.
As a Government we have long ago recognized the importance of promoting good governance and therefore the fight against corruption. It is therefore no coincidence that improving our institutional framework and capacity to tackle corruption has been an important feature of our Government. Corruption or even the perception of corruption, can have a negative effect on our national development. While Namibia ranks favourably on regional and internal indices, such as the Transparency International’s Corruption Perceptions Index, the Mo Ibrahim Index of African Governance and the Afro-Barometer Survey, challenges of corruption still remain.
It is for this reason we signed and ratified the United Nations Convention against Corruption in 2003. We went as far as enacting several laws aimed at creating an enabling environment for the prevention of corruption and promotion of ethics and integrity. The Anti-Corruption Act (Act No 8 of 2003) is the key legislation dealing with the prevention and combating of corruption in Namibia. We have recently also enacted legislation dealing with the protection of whistle-blowers and the protection of witnesses in cases of corruption.
Initiatives to deal with corruption in Namibia started much earlier before the signing and ratification of the UN Convention in 2003. For example, in 1996 the then Prime Minister and current President, His Excellency Dr. Hage Geingob, established a Technical Committee on the Promotion of Ethics and Combating of Corruption. In 2015, the President has gone further by taking an unparalleled step to lead by example when he publicly declared his assets and those of the First Lady. The President also introduced Ministerial declarations of intent together with Performance Agreements for Ministers. These are all efforts in the promotion of transparency and ethical behaviour and therefore to improve effective governance in the country.
Why is corruption bad?
Not only does corruption affect economic development in terms of economic efficiency and growth. It also affects equitable distribution of resources and thereby increasing the income inequality.
There are various ways in which corruption affects economic development.
For example, corruption has the potential to undermine our ability and capacity to collect tax revenue. When taxpayers evade and avoid their responsibilities to pay taxes, this is a form of corruption and it has an adverse effect on the budget. Corruption also has an eroding long-term effect on economic growth at the corporate enterprise level. We all know that all successful and dynamic economies have one feature in common – strong and competitive enterprises. It is enterprises – whether publicly or privately owned – that create wealth for society. Enterprises are therefore at the centre of economic growth. In highly corrupt economies, enterprises find it difficult to grow and prosper; they are less competitive and highly inefficient. More often than not, such enterprises tend to spend an inordinate managerial time on negotiating unhelpful regulations and red tape with bureaucrats, instead of growing the enterprise.
Corruption is not only bad for economic growth and enterprises. It is also bad for ordinary citizens, especially the poor and the most vulnerable. For example, when the investment cost in large public infrastructure is highly inflated because of corruption, it reduces the Government’s capacity to fund social welfare. When companies and individuals evade their responsibility to pay the required taxes, it diminishes the Government’s ability to fund programs aimed at poverty alleviation – thereby perpetuating the existing income inequality.
What causes corruption?
The failure of corporate governance necessarily leads to corruption. It also my contention that corruption is usually as a result of lack of ethical leadership – a leadership that is more altruistic in its outlook as opposed to a self-seeking one. Ethical leaders are those who will always aspire to leave things in a better shape than they found them. It is necessary to have anti-corruption laws but that will not prevent corruption – all what it does is to hopefully catch those who are corrupt. However, with ethical leadership – whether in Government, private sector or civil societies – you are assured of the absence of corruption.
What is clear though is that corruption is possible in any system, regardless of the philosophy or ideology of the founding fathers of a particular government or corporate enterprise. No one and no country is therefore immune from corruption. And once corruption has set in, it is rather difficult to wipe it out quickly. It is therefore important that we make ethical and principled leadership a core issue in our choice of our leaders – be in the private sector or the public sector. The American science fiction writer, Octavia Butler, had this to say about the importance of choosing leaders.
“Choose your leaders with wisdom and forethought. To be led by a coward is to be controlled by all that the coward fears. To be led by a fool is to be led by the opportunist who control the fool. To be led by a thief is to offer up your most precious treasures to be stolen. To be led by a liar is to ask to be told lies. To be led by a tyrant is to sell yourself and those you love into slavery.”
The question is still, however, what causes leaders to go astray. Does it mean that those leaders that turned out to be unethical are necessarily bad people even before they became leaders? Or did something happen to them in between?
Given that we are talking about corporate governance, we have heard of some of famous names in the corporate world who fell from grace because of corruption – because they loss their moral compass. You will remember names such as Jeff Skilling, former CEO of Enron; Bernie Madoff, former chairman of NASDAQ; or Bernard Ebbers, former boss of WorldCom. These were iconic names that were admired in the world of business where during their heydays every CEO wanted to be like them. They were admired; they were corporate heroes. But when you follow the stories of all these former icons of business, the main cause of their troubles is that they lost their moral compass.
Why do leaders lose their moral compass?
There are a number of reasons why leaders lose their moral compass. The thing is that the more successful you become as a leader, the more temptations will surely come your way. As a leader in business or in public service, there will always be those who would want to tempt you to do the wrong things. There will always be those who will offer you inducements in exchange for what seems, at the time, to be a career-enhancing opportunity. It is therefore important – as a leader – to always be on the outlook for what could turn out to be career-ending. As they say, if it sounds too good to be true, it probably is.
Another aspect of ethical leadership is that of examining my motive of wanting to be a leader. There are wrong reasons why someone may want to become a leader; and there are also the right reasons to become a leader. It is therefore very important to ask yourself the question – why do I want to become a leader?
Do I want to be the CEO because of the attractive compensation package it offers? And a number of CEOs certainly do have attractive remuneration packages and I guess we all agree that having money is a great feeling. Do I want to be the leader because of the prestige that accompanies the leadership position? We all know that when you are the CEO or the Minister, most people tend to be polite to you. They even forget that you have a name and only call you sir or honourable; they will even stand up for you when you enter the room; they will insist to carry your bag even when it is empty. Do I want to be the leader because of the power attached to the leadership position? Some leadership positions are indeed very powerful where the leader decides who leaves and who stays; who gets promoted and who gets demoted; sometimes even who lives and who dies. It feels rather invigorating or does it?
If these are the most important reasons why I want to become a CEO, why you want to be the leader; then you are at risk of losing your moral compass and more often than not the end result is likely to be personal devastation. But it can be avoided if you stay grounded, if you continuously strive to be an ethical leader.
There are also cases where successful leaders fell from grace not necessarily because they did something wrong. These are leaders who year in year out they deliver great results. Corporate CEOs who have made their shareholders wealthy. Political leaders who won elections with huge margins and in the process making their political parties symbols of success. In the process such leaders become famous; they receive accolades and they become sought-after keynote speakers at important events. Unfortunately for some such leaders, the success becomes an end in itself. They start to desire more and more success, in the process becoming addicted to the prestige and the fame they have obtained. When that happens, such leaders start to believe that they are the alpha and omega – and nothing can happen without them. It is when they start to lose their moral compass.
The challenge to all leaders will be to master the necessary self-discipline to always do what is right and to do so even when it is not a popular thing to do; and also to do so irrespective of the consequence. It is not easy and it requires great courage, but it is what it takes if you as a leader wants to leave a lasting positive legacy. And it is equally what those you lead expect from you.
We also need to realize that the world has changed where things do no longer work as they used to be before. We live in times where trust between the leaders and the followers is no longer as strong; times where those we lead are no longer prepared to follow the leaders blindly. They demand integrity from their leaders; they want leaders with integrity; they want their leaders to be held to the highest standard of integrity where corruption is regarded as an abomination by all citizens. It therefore looks like if I want to be a successful leader, if you want to be a leader of note, you have no choice but to be a leader with a steady moral compass.
I want to end my remarks with an Albert Einstein quote that says that “The world will not be destroyed by those who do evil, but by those who watch them without doing anything”.
Let us all therefore make it our responsibility to promote good governance, in the process combating the evil of corruption, and thereby accelerating our development. In the same vein I wish to commend the Institute of Corporate Governance for the noble objective you have embarked upon. Your efforts need to be supported by all of us.
I thank you.