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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


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


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)


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


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:


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.”


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


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

[email protected]

http://www.saep.org


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:


events.cfm

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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


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.


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.


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

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