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Beyond Reasonable Greed

Beyond Reasonable Greed:

From Accounting to Accountability

Article by Wayne Visser

In our recently launched book entitled Beyond Reasonable Greed (Visser & Sunter 2002), we attributed the phenomenon of unreasonable corporate greed to boards “being collectively swept along by the prevailing paradigm of success which is purely financial.” However, we added the following rider: “In light of Enron’s failure, this judgment may be overly kind and more cases of dodgy accounting, inflated profits and insider trading by the board may pop up in Corporate America and Corporate Europe.”

Well, since publication of the first impression of the book, they have popped up! Starting with WorldCom, but extending to other corporate heavyweights as well. Big business is under the whip like never before from the public and politicians alike. And the accounting profession, in particular, is feeling very uncomfortable under the harsh interrogative spotlight. However, if the response to all the accounting irregularities and other misdemeanours is merely to throw a few CEOs in jail and threaten the rest with a long prison sentence unless they check the figures personally, a great opportunity for real transformation will be lost.

Corporate Governance Under Fire

As business and the accounting profession begins to respond to the rising tide of international scrutiny, the word “corporate governance” is on everybody’s lips. Even more so in South Africa, where the revised King Report on Corporate Governance is hot off the press. But the critics remain skeptical, maybe justifiably so. If the Enron and Worldcom sagas are revealing anything, it is that corporate governance is sometimes not worth the paper it is written on. Should the people involved in implementing corporate governance not have their hearts in the right place and just be going through the motions, the process becomes a charade.

You can have all the non-executive chairpersons, non-executive directors, board committees and external auditors you like, but things will go hideously wrong if ceremony has replaced substance and cynicism is the order of the day. Some non-executive directors sit on so many boards that it is physically impossible for them to exercise their fiduciary responsibilities properly. Worse still is a situation where the Chairman and CEO are one and the same person and he (it still almost always is a “he”) has managed to load the board with his buddies. If things go right, they are the first to congratulate him and approve a handsome bonus. If things go wrong, they are the last to ask the tough questions needed to expose malpractice. They would prefer to have the wool pulled firmly over their eyes even though ignorance is no excuse in terms of the law.

Seeking a Reformation in Business

Rather than implementing a smattering of short-term corporate governance fixes (which are necessary, but not sufficient), what is required is nothing short of a Reformation in business, along the same lines as the one precipitated by Martin Luther in 1517. On October 31 of that year, he wrote an attack on the sale of indulgences (remissions of punishment for sin) in 95 theses which he  …

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Visser, W. & Sunter, C. (2002) Beyond Reasonable Greed: From Accounting to Accountability. Accountancy SA, September 2002.

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The Art of Business

The Art of Business

Prose by Wayne Visser

~ The art of business is, if anything, the art of being human ~ 

Business is, by its very nature, an adventure in creativity, an exercise in imagination, an enterprise in innovation.
 
If you think about it, commerce is all about creation – creation of markets, companies, products, brands and jobs – as well as finding inventive ways to target, design, position, package and sell these.
Even before ‘entrepreneurship’ entered the business lexicon, successful enterprise has always been the nexus where invention meets opportunity, innovation meets needs and resourcefulness meets markets.
 
So it is somewhat surprising to reflect on how little business has drawn on that paragon of creativity – the arts – to challenge, inspire, inform and project itself.
By contrast, the arts themselves have never shied away from using business as the inspiration for their creative endeavours.
 
So what happens when we open the Pandora’s Box of artistic perspectives on business?
Can we piece together a mosaic of creative visions on commerce?
Or join up the dots of imagination on trade?
By using the arts – including painting, film, theatre, literature, cartoons and poetry – we get to see business’s public persona reflected (including its shadow self).
We are able to illustrate, through the medium of the arts, how business is perceived in different parts of the world and at different times in history, including up to the present day.
 
So where might we start looking for images of business-in-the-looking-glass?
Would it be movies like Wall Street (“greed is good!”) or The Corporation (“the pathological pursuit of profit and power”)?
Or perhaps the poetry of former Fortune 500 executive James Autry (author of “Love & Profit”) or the literary genius of Shakespeare (“all that glitters is not gold”)?
 
Would we question why so many business leaders take inspiration from Sun Tzu’s “The Art of War” or Machiavelli’s “The Prince”?
And would we be amused or infuriated by the doctored logos of multinationals or spoof corporate websites that fall foul of anti-globalisation protesters?
Is there “many a truth in jest” to be found in the “fat-cat” businessman caricatures that go back centuries, or the cartoon vitriol of Enron’s jailed executives?
 
Do these artistic commentaries give us a window into the soul of business, or simply a superficial view of its popular mask?
Whichever way you see it, these highly visual, evocative and stimulating illustrations all have something to say about the role of business in society, especially its contribution to (or violation of) the public good.
All the current debates around environmental responsibility in the face of climate change and ecological destruction, or trade justice in the context of persistent poverty for the majority of the world’s population, are brought into sharp, colourful focus by the arts.
 
And the picture they conjure is not always negative.
 
The creativity of the arts has often been used in business to encourage innovation, motivation and responsibility, whether it is the use of industrial theatre for AIDS awareness in South Africa, or Haiku poetry in leadership workshops in the UK.
And after all, what can be more creative than the advertising industry itself?
 
The power of using the arts as a lens through which to view business is that we get an insight into the psyche of the modern corporation.
We tap into the mood of the public and their often unspoken fears and prejudices about business.
And we also begin to see business for what it really is – a deeply human enterprise, with all the foibles and potential which that implies.
 
Hence, the art of business is, if anything, the art of being human:
An eternal stage for playing out so many of our most familiar dilemmas –
The struggle between head and heart, between ambition and morality, ego and altruism, self-fulfilment and service to others.
And the art, as opposed to the science or economics, of business, is to find beauty, truth, and yes, even love, in the creative process that is enterprise.
 

Wayne Visser © 2002

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Economics: An Environmental Perspective

Economics: An Environmental Perspective

Unmasking the Myths of the Predatory Lion Economy

Article by Wayne Visser

It is not uncommon to hear our present global economic system being compared to a predatory natural environment. We might imagine the market as a great African plain where competition for scarce resources dominates the life of every species. We can see successful companies as the supreme hunters in this eat-or-be-eaten world, like the awesome lions of the bushveld.

It is certainly a compelling analogy and one that is perpetuated in boardrooms and business schools around the world. We need only look at our economic and business language to realise that predatory behaviour is believed to be imperative to survive and thrive in the marketplace. We must “target” our customers, “chase” higher growth and better profits, “hunt” for potential merger or acquisitions partners, and “go for the kill” in our sales pitches.

But is this lion-king economy really the kind of place that we want to live in? Of course, it’s great if you’re at the top of the food chain, but what about the other, more vulnerable species? Is the free market really working “for the common good”, as it should according to Adam Smith’s “invisible hand”? Or are communities and the environment being sacrificed to keep companies well fed?

This article questions many of the beliefs which dominate economic thinking today, and asks whether we can design an economy “as if people and the planet mattered” – a sustainability-driven elephant economy.

Myth 1: The bushveld exists solely to serve the lion-king

One hundred years ago, nobody questioned the role of the economy in our lives. Business and the economy existed to serve the welfare of society – to provide the goods and services we needed in order to maximise our quality of life. Certainly, it was not the other way round. People did not exist to serve the economy.

And yet, some time in the past century, the tables have turned. Personal, community and even country survival are increasingly dependent on working within the formal, money economy. Furthermore, companies are able to justify all kinds of unethical practices in the name of profits or job creation, whether it is restricting the accessibility of lifesaving drugs, or causing wholesale destruction of the natural environment.

Partly this is a systemic problem in the way our economy works. It encourages dependency on money, institutionalises growth and incentivises short-sighted thinking. It is also about the balance of power and accountability. Today, many companies are more influential than whole countries, yet they remain accountable only to their shareholders, whose sole criterion is dividends.

This entrenched situation is the same as saying that the entire bushveld exists only to serve the lion-king. Which, of course, is neither desirable nor sustainable, even in a “survival of the fittest” context. In actual fact, nature is dominated by cooperative, symbiotic relationships that weave together into a complex, dynamic balance.

Myth 2: The bushveld contains unlimited food for the lion

We all know that economies depend on the natural environment, both to supply resources and act as a sink for our wastes. But the rate at which most modern economies are gobbling up raw  …

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Visser, W. (2002) Economics: An Environmental Perspective – Unmasking the myths of the predatory lion economy. The Enviropaedia: World Summit Edition, Eagle Environmental: Durban.

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Reformation and Pragmagic

Reformation and Pragmagic

Chapter by Wayne Visser

Extract from Beyond Reasonable Greed

As we write this introduction we are very conscious of magic. Magic, it seems, is a catchy theme right now, both in our own lives and in the world around us. This is hardly surprising, what with J.R.R. Tolkein’s Lord of the Rings and J.K. Rowling’s Harry Potter stories having come to life on the big silver screen. But the magic we are talking about is not of the wizardry kind. Merlin can stay in his cave. Nor is it of the David Copperfield genre where the audience knows that they’re being hoodwinked but are prepared to suspend their belief in the interests of excitement. No, we are talking about something more genuine, more tangible, more practical – what brain-mind researcher Marilyn Ferguson called ‘pragmagic’.

In our interpretation of the word, magic is the revelation that results from a profound change in perception or understanding. The superstitious world of the Middle Ages was magically transformed by the wizards of art and science – Da Vinci, Galileo, Copernicus and Newton. Then the quantum physicists waved their wands and subtly altered Newton’s clockwork universe. Today, the magic continues as the seemingly impossible is conjured up with breakthroughs in areas like biotechnology, artificial intelligence and human consciousness.

But magic is not restricted to the sciences. Nelson Mandela and F.W. de Klerk weaved their own form of magic to create the New South Africa. Unlike in art and the sciences where the magic is normally provided by individuals working on their own, the magic in politics often comes from the development of a positive chemistry between the leading players. This chemistry then leads to an outcome greater than the contribution of any individual member and takes them all by surprise.

Nevertheless, as with everything in life, there’s good magic and bad magic. The Swastika was bad magic. When Hitler unfurled it, he temporarily turned the most scientifically advanced nation on Earth back into savage barbarians. In his footsteps followed Stalin, Mao and Pol Pot who turned their followers into killing machines of their own people. By the millions. And the chemistry was pure evil. Today bad magic continues to bedevil regions like the Middle East and Northern Ireland where thirst for revenge plunges ordinary people into acts of lunacy and callousness. In the name of God or Allah. And He is always on your side.

What, you may be asking, has all this to do with business? Well, magic has everything to do with business and this book. For the simple reason that bad magic has moved many companies into a state that is beyond reasonable greed. And the public have a good idea of the boundary between ‘reasonable’ and ‘obscene’. Recently, in South Africa, we have had several disclosures on the size of individual packages and the terms of share incentive schemes which have caused tremendous hue and cry. They have been clearly out of wack with the norm. To give companies the benefit of the doubt, they may not have consciously exceeded the limits of reasonableness. Their boards probably comprise the normal spectrum of saints and sinners; but somehow they have allowed themselves to be collectively swept along by the prevailing paradigm of success which is purely financial, and that in turn has led to unreasonable behaviour. …

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Visser, W. (2002) Reformation and Pragmagic, In W. Visser, Beyond Reasonable Greed: Why Sustainable Business is a Much Better Idea! Cape Town: Tafelberg Human & Rousseau,  11-17.

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Greening the Corporates

Greening the Corporates:

The Transition, Local business and Sustainable Development

Article by Wayne Visser

The Short History of Sustainable Development

“Sustainable development” hustled its way into the English vocabulary and onto the world’s political agenda in 1987, with the publication of Our Common Future, an official report of the World Commission on Environment and Development, chaired by former Norwegian Prime Minister, Gro Harlem Brundtland. In terms of this document, sustainable development is defined as:

“Development which meets the needs of the present generation without compromising the ability for future generations to meet their needs.”

This cleverly crafted concept tactfully allied the fears of powerful business lobbies in the developed countries of the North by not being “anti-economic growth”, while at the same time soothing the governments and civic organisations of the developing world in the South by talking “development and equity”. It also befriended and found a guardian-for-life among the environmental pressure groups by putting their “green” issues on the map.

Five years later, in 1992, 178 country leaders paraded on the world stage of the United Nations Conference on Environment and Development, more endearingly referred to as the “Earth Summit”, and committed their nations to a variety of conventions, agreements and programs aimed at making the now politically acceptable notion of sustainable development a reality.

Global Business and the Environment

The corporate sector is not generally one to be caught napping and the global gearing up on environmental issues proved no exception. In 1991, a group of 50 of the world’s top executives formed the Business Council for Sustainable Development (BCSD) and issued its report to the Earth Summit entitled Changing Course: A Global Business Perspective on Development and the Environment. (Pick ‘n Pay’s Raymond Ackerman was one of these contributors). In a parallel initiative, the International Chamber of Commerce (ICC) launched its 16-principle Business Charter for Sustainable Development in 1991 and contributed a book to the Earth Summit entitled From Ideas to Action: Business and Sustainable Development.

Today, there are more than 2 000 corporate signatories of the ICC Charter for Sustainable Development and the World Business Council for Sustainable Development, which grew out of a merger between the BCSD and the World Industry Council for the Environment, has more than 120 international member countries.

Other environmentally oriented corporate standards have enjoyed similar growth in world-wide support, for example: the International Council of Chemical Associations’ Responsible Care Programme, the Coalition for Environmentally Responsible Economies’ (CERES) Principles, the Keidanren Global Environmental Charter, the British Standard (BS) 7750, the European Eco-management and Audit Scheme (EMAS) and the International Standards Organisation (ISO) 14001 standard for Environmental Management Systems.

Environmental Awareness in South Africa

In general, South Africa has tended to lag behind international developments in public policy and corporate responsibility by between 10 and 20 years. For example, while the US enacted their National Environmental Policy Act in 1970, South Africa had to wait two decades for its own comparable legislation in the form of the Environmental Conservation Act 73 of 1989. Similarly, while the ICCA launched its Responsible Care Programme for the international chemicals industry in …

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Visser, W. (1999) Greening the corporates: The transition, local business and sustainable development. Development Update, Special Issue: Election 1999: Where have we come from? A balance sheet of the political transition, Volume 3, No. 1.

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Grassroots Ecological Economics in South Africa

Grassroots Ecological Economics in South Africa

Article by Wayne Visser

South Africa’s recent political transformation is like a hard won gift which keeps giving, and the environment is one of its greatest beneficiaries. For example, South Africa is now one of the few countries in the world to have the environment enshrined in its Constitutional Bill of Rights, according to which:

“Everyone has the right:

(a) to an environment not harmful to their health or wellbeing; and

(b) to have the environment protected, for the benefit of present and future generations, through reasonable legislative and other measures that:

(i)   prevent pollution and ecological degradation;

(ii) promote conservation; and

(iii)secure ecologically sustainable development and use of natural resources while promoting justifiable economic and social development.”

From this basic premise has flowed a stream of national policy reforms, culminating in a host of new and emerging environmental legislation, including, for example, the Environmental Management Bill, Water Bill, and Environmental Impact Assessment Regulations. As important as the results of these, has been the multi-stakeholder participative process followed.

On the Agenda

Fortunately, the role of economics in this environmental revisioning process has been included on the political agenda. Towards the end of 1993, the Department of Environmental Affairs and Tourism established an Environmental Resource Economics Steering Committee, which issued a number of discussion documents on the use of economic instruments in environmental management. More recently, a discussion document on “A National Strategy for Integrated Environmental Management in South Africa” was released which contains a whole chapter on market-based instruments, covering the following items:

Resource charges, non-consumptive user charges, pollution charges, product charges, land-use charges, input charges, investment credits, accelerated depreciation, product/service subsidies, basic needs subsidies, tradable permits, tradable quotas, tradable shares (resource shares), deposit refund system, environmental performance bonds, green funds and environmental valuation.

The implementation of these various concepts remains to be seen, although they are already finding expression in the anticipated changes to the water laws. In essence, South Africa will be moving towards a “true cost” pricing of water (to reflect its scarcity and ecological value) and effluent charges will increasingly be linked to levels of pollution. In addition, to address the “tragedy of the commons” and inequitable access currently associated with the country’s water resources, the practice of riparian rights will be replaced by a system of regulated water leasing (amidst much political and commercial controversy).

Hence, at least in theory and partially in practice, environmental resource economics has secured a sound basis on which to justify its importance in the national macro-policy arena. That is good news, but not the whole story.

A New Perspective

What interests me equally is the way in which ecological economics is finding applications at a grassroots level – especially in local communities, and among South Africa’s most marginalised people.

This is as important, if not more so, than the government-led national policy initiatives. It is what will decide whether protection of the environment can escape its historical “white, colonial, nice-to-have” image and become a relevant developmental movement enjoying the support of the wider …

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Visser, W. (1998) Grassroots Ecological Economics in South Africa. The Ecological Economics Bulletin, Fourth Quarter.

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Productivity Through Interdependence

Productivity Through Interdependence:

Heeding the Lessons of Nature

Article by Wayne Visser

In our modern economies and businesses, unlimited growth is constantly striven for, institutionalised, almost idolised.  We hold it up as the measure of success.  Yet, by doing this, we could be sowing the seeds of our own destruction.  We know this because in nature, unlimited physical growth is almost nowhere to be seen.

When it does occur, we call it cancer, or imminent species collapse, or ecosystem decline.  Also, we are already seeing many of the signs of exceeding what environmental scientist Donella Meadows called ‘the limits to growth’.

Growth in Nature

In his visionary book on the evolution of life (The Awakening Earth), scientist and business author Peter Russell makes the critical observation that, while exponential growth does frequently occur in nature, it always levels off into an S-shaped curve as soon as a harmonious and life-supporting situation has been reached.  What actually happens is that quantitative growth is always superseded by qualitative growth after a healthy infrastructure has been established.  Our own human growth patterns are testimony to this.  US ecological economist Herman Daly extends this principle to the economy, suggesting that a distinction needs to be made between traditional economic growth (typically measured by Gross National Product), and holistic development.

According to Daly, ‘growth’ means a quantitative increase in the scale of the physical dimensions of the economy, while ‘development’ means the qualitative improvement in the structure, design and composition of the physical stocks of wealth that results from greater knowledge, both of technique and of purpose.

A growing economy is getting bigger; a developing economy is getting better.  In a business context, impetus for this change has already been provided by MIT Professor Peter Senge’s concept of a ‘learning organisation’ and World Business Academy fellows Willis Harman and John Hormann’s notion of Creative Work, in which “employment exists primarily for self development, and is only secondarily concerned with the production of goods and services.”

Practically, this shift away from blind growth will only occur as companies begin to value, measure and integrate qualitative dimensions into their strategic planning, operations and public reporting processes.  Two excellent tools for achieving this are the Balanced Scorecard and Social Auditing.

Productivity in Nature

Another common misconception about Nature is the dominance of competition in its processes – the so-called ‘survival of the fittest’ adage.  In fact, in nature, competition is the exception and cooperation and symbiotic relationships are the rule.  The principle incorrectly ascribed to Darwin could more appropriately read ‘survival of the species best adapted or integrated within their dynamic environment’.  Size, strength or physical agility are seldom the best survival qualities (remember the dinosaurs?).

Among the unsung prophets of the 20th century who first described the dynamic complexity of Nature in these terms was former South African Prime Minister, Jan Smuts.  His Theory of Holism was the precursor to modern day Living Systems Theory, which Fritjof Capra has subsequently applied to the economy and Peter Senge has applied to business organisations.  According to their observations, the key to productivity is synergy – creating the cooperative relationships which …

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Visser, W. (1998) Productivity through Interdependence: Heeding the Lessons of Nature. Earthyear, Edition 17, June.

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Afrocentric Business in Southern Africa

Afrocentric Business in Southern Africa

Article by Wayne Visser

In the dizzy wake of socio-political euphoria following the birth of its new ‘rainbow nation’, South Africa now faces the sobering task of creating an accompanying economic miracle.  The prevailing mood is pessimistic, with many business and economics critics all too ready to point out the grim facts:  In 1996, South Africa saw a dramatic weakening of its currency, a lower-than-expected growth in Gross Domestic Product of around 3 percent, a steady trickle of the emigration ‘brain drain’ of its professional skills, and an unwillingness of foreign investors to commit their resources in a crime-anxious climate with relatively high labour costs and low productivity.

But while many shiver beneath the shadow of these ominous storm clouds, a visionary core of business thinkers and practitioners in Southern Africa has their eyes on the rainbow.  They see the “failure” of most African economies in terms of a neglect of their peoples to foster home-grown indigenous business cultures that are in harmony with the African soil and soul.  And they are working hard to rekindle native values in business contexts, to provide the sparks needed to transform the economy into a blazing sun of new traditions in Afrocentric management.

Values – Colonial Hangovers and Ubuntu

Colonialism is a process whereby one dominant set of values gets imposed on the diverse cultures of ‘conquered lands’.  This has been the thread of the world’s political history and is now being repeated in the economic sphere through globalisation of corporations and trade.  South Africa, which was invaded by Dutch burghers in 1652 and English settlers in 1820, became industrialised with a pervasive Eurocentric mode of commerce, and more recently has begun to internalize the seductive consumerist culture of America as well.  Add to this the legacy of economic marginalisation of the majority of native South Africans through the apartheid system, and it is unsurprising that traditional African ideas about trade and business have to date been totally ignored (note the root word ‘ignorance’).

The values inculcation that has accompanied the North Western hemisphere’s footprint on Southern Africa has left many of its people culturally schizophrenic.  Some of these conflicts between African and North Western culture that manifest in a business context are, for example:

  • Social harmony and cohesion versus individual performance and reward;
  • Participative decision making versus bureaucratic managerial authority; and
  • Creative expression and motivation versus rationality and quantitative argumentation.

Underlying these dynamics is a value concept fundamental to African culture that has been largely overlooked by outsiders and hardly explicitly acknowledged by Africans themselves until recently.  This is the concept of ubuntu, or African Humanism.  In South African culture, it is often associated with the proverb:  Umuntu ungumuntu ngabantu, which literally means, “A person becomes human through other people.”

South African manager Reuel Khoza describes ubuntu as the philosophy of “I am because you are, you are because we are.”  It is a concept, he says, “which brings to the fore images of supportiveness, cooperation, and solidarity, that is, communalism.”  Zimbabwean businessman …

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Visser, W. (1997) Afrocentric Business in Southern Africa. World Business Academy Perspectives, Volume 11 No. 3, September.

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Ethical Investment

Ethical Investment:

Money With Values

Article by Wayne Visser

Ethical investment – also called social investment, socially responsible investment and green investment – is an international trend which refers broadly to the conscious use of investments to achieve social, ethical and environmental performance objectives, over and above the usual financial returns. The relevance of the ethical investment movement lies in its potential to deliver good financial returns while also helping to deliver on the countries social objectives, like empowerment, good labour practices, and environmentally sustainable development for instance.

Apartheid as a Catalyst

The phenomenon can be traced back to the beginnings of the corporate social responsibility movement in the United States in the 1930s, although it only really became visible in the 1970s. At this time, church and university groups set up the first funds, such as the Pax World Fund, to avoid investment which supported the Vietnam War and the Apartheid regime in South Africa. Since the political transformation of South Africa is widely regarded as one of the great motivators and success stories of ethical investment, this background is worth recalling.

Many would argue that it all began in 1970. South Africa had just been ejected from the United Nations for its apartheid policies, and Reverend Leon Sullivan proposed that this be reinforced by the adoption of a set of minimum standards by US companies with South African operations. These standards, formalised as the Sullivan Principles in 1977, included clauses on non-segregation of facilities on racial grounds, affirmative action for blacks, and social upliftment for underprivileged employees. Various civil rights, labour and religious groups took it upon themselves to monitor and report on companies’ adherence to these principles.

In 1982, Connecticut became the first US legislature to require all its investments to be screened against the Sullivan Principles, setting the precedent for similar action by other bodies. Then, as the South African regime toughened its stance on apartheid, complete disinvestment began. As a result of increasing stakeholder pressure and led by Citibank and Chase Manhattan Bank, 135 US industrial companies pulled out of the country between 1985 and 1987. Over the same period, the level of US Funds screened for South African links rose from less than $100 million to nearly $400 million.

Similar ethical investment forces were at work in the UK over the same time. Lobby organisations like Christian Concern for South Africa, End Loans to South Africa, and the Anti-Apartheid Movement, put tremendous pressure on the major UK banks (Midlands, Standard Chartered and Barclays) to withdraw from South Africa. There were also campaigns against users of South African gold and suppliers of oil to South Africa (especially Royal Dutch Shell). These were given added weight by the emergence of screened ethical unit trust and investment funds with avoidance criteria for oppressive regimes chiefly targeting South Africa. By 1985, South Africa was forced to default on its foreign loans, and in 1986 the US passed the Comprehensive Anti-Apartheid Act, with the European Community following suite shortly after to consolidate international financial sanctions.

Types of Ethical Investment

There are basically two types of ethical investment: shareholder activism and screened investments …

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Visser, W. (1997) Ethical Investment: Money With Values. Money Values online column.

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Community Economics

Community Economics:

Local Empowerment

Article by Wayne Visser

There are a growing number of critics who claim a direct link between the advancement of industrial development based on neo-classical economics thinking and the erosion of communities. This erosion has in turn exacerbated numerous other social problems and created negative effects such as economic dependence, community disempowerment, cultural breakdown, social diseases and environmental destruction.

The call by a growing number of new economists is for a more community-centred economics. This includes various concepts, such as person-in-community, self-reliance, counter-development and eco-communitarianism. On a more practical level, the establishment and support of community businesses and other organisations, as well as of local currencies or exchange systems needs to be encouraged.

The benefits of this community approach are wealth creation, empowerment, social cohesion, ethical conduct, sustainability and fulfilment of human needs.  These are all the subjects to be briefly introduced in this chapter. Many of the concepts and ideas will be dealt with in more detail in other chapters. The theme, however, is a thread that runs throughout the book, namely that we need a new economics with a human face and planetary perspective.

The Effects of Industrial Development on Community

The Specialisation Trap

One of the fundamental principles of neo-classical economics is the division of labour through specialisation. For many communities or countries, however, specialisation can lead to dependence. Developing countries, for example, have found themselves reaping a bitter harvest for decades due to declining prices and terms of trade in primary goods. Often, these patterns of specialisation have been reinforced by conditions imposed by the World Bank or International Monetary Fund. This leaves countless communities, as new economist Guy Dauncey (1986) puts it, “at the mercy of the international trade winds, which can destroy a mono-crop economy overnight.”

Absentee Executives

Another aspect of economics dependency is the tendency in industrial development for economic power to become concentrated in the hands of large, usually transnational, corporations. The result is that the destiny of local economies becomes subject to the whims of managers making decisions in distant boardrooms, or shareholders chasing the highest returns on their computer screens, neither of whom have any appreciation for the impacts of their decisions on real communities. Offices are transferred, retail outlets moved or factories shut down with little concern for how this affects the economic viability of the local communities in which these activities operate.

Community Disempowerment

Closely related to economic dependence is the loss of any sense of self-determination in communities, a situation exacerbated by international trade agreements and roller-coaster financial markets. This in turn changes people’s behaviour, with increasing levels of passivity, apathy and people abdicating personal responsibility – a phenomenon which community development activist Helena Norberg-Hodge (1991) observed in the remote area of Ladakh. New economist Paul Ekins (1986) calls this “learned helplessness” and ascribes it to the trend in industrialised countries of replacing neighbourhood communities with “communities if interest”.

Cultural Imperialism

Another claimed effect of industrial development is the reduction of cultural diversity and creation of a monoculture.  Individuals experience a loss of identity, as they feel pressured to conform to …

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Related websites

[button size=”small” color=”blue” style=”tick” new_window=”false” link=”http://www.csrinternational.org”]Link[/button] CSR International (website)

[button size=”small” color=”blue” style=”info” new_window=”false” link=”http://www.waynevisser.com/books/business-frontiers”]Page[/button] Business Frontiers (book)

Cite this article

Visser, W. (1997) Community Economics: Local Empowerment. Money Values online column.

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