That conversation fundamentally changed the way I think about organisational reputation…
There are two stories about organisational reputation that occasionally surface in my memory. They stuck with me primarily because I was somehow in the thick of things. These stories are stark reminders of how negative organizational reputation has an impact on the innocents in the organisation. Reputation is never confined to the boardroom, and ethical failure always creates collateral damage.
The earlier memory relates to the KPMG South Africa scandal that publicly broke around 2017 when multiple senior executives resigned, and the firm faced severe criticism over its audit work. The bubbling under the surface before the public became fully aware stretched back at least a year. It is not my intention to recount or focus on what constituted the scandal. Rather, I want to focus on an inevitable human story that very few of us reflected on at the time, or beyond. How the human beings caught up in the tangle were affected and how ethical failure radiates far beyond the people who caused it.
I cannot remember whether this happened before or after I was appointed to the SAICA Independent Inquiry Panel chaired by Adv Dumisa Ntsebeza SC. Nor can I remember which city I was in. What I remember with perfect clarity is the conversation itself. These two things matter in the story. My seat on the Panel would have impacted my view of reality. As the KPMG head office is in Johannesburg, proximity to that center of the fallout would also matter.
I was at a regional IIA SA conference. Part of my duties as the CEO of the institute at the time was to attend and speak at the major regional events. Mostly to ensure that members were up to date with progress against strategy and the direction the Institute was taking. During a lunch break, I shared a table with a few members. I do recall that most of them were much younger than I was, but the individual my focus zeroed in on was really younger. In his twenties, I would say. At some point, the conversation moved to KPMG. Naturally. These were internal auditors. They had a vested interest in the impact on the broader auditing profession. The general public did not make a distinction between external and internal auditors. A blemish on one would be contagious for the other. At some point in the conversation, the young man revealed that he worked for KPMG. What created an emotional response in me (which is why I remember that moment vividly. The stronger the emotion, the stronger the memory – that is how our brains function), was him recounting how he had personally been affected by the scandal. Because he worked for KPMG, people started to see him as corrupt. The point that moved me was this: “even people close to me are accusing me of being corrupt”. This is how innocent people become carriers of someone else’s ethical failure. I still see the pain in his eyes. He found out about the scandal with the rest of us. Through the media. Insane, I know. But guilt by association is something we pronounce very easily as humans. And we don’t care that we may be wrong and destroy someone in the process. I know that pain. After I joined the Eskom board, I felt that same judgement. Guilty by association, even when you are part of the cleanup crew. It certainly was not easy sitting in conversations where otherwise rational people would make statements like: “Eskom is corrupt from the top to the bottom”. All of us in one sweep.
A lot of that has to do with our ability as humans to think in absolutes and ignore the nuances. Humans also tend to simplify complexity by assigning moral identities. People are either good or bad, corrupt or honest, innocent or guilty. We don’t like uncertainty, and we certainly do not like opacity or ambiguity. In some ways, that protects us, but thinking in absolutes inevitably results in innocent casualties.
A few years later, I found myself in a fabric shop. In my element, lost among all the beautiful fabrics. The next moment, I am approached by a young woman. Evidently, being engrossed in the decision-making process, while arguing with my wallet, made me look like I was clued up about the place. She asked me for assistance on how to navigate the store and then what to choose. A fellow lover of beautiful things. Of course, that made me chatty. I asked what she did for a living. I did not expect the response. Shame fuelling a reluctance to tell me. She worked for Eskom. For the non-South Africans: At the time, Eskom’s reputation was six feet under because of severe loadshedding (daily rolling blackouts) and signs of significant fraud, corruption and criminality. As the engine of the country’s economy, this naturally would have attracted every single South African’s attention to what was catastrophic. What the young lady did not know was that she was talking to a Board member and the one who chaired the Human Capital and Remuneration Committee. I am convinced that the universe had set me up. I needed to see her shame and feel her pain. A stark reminder of what employees’ lived experience is as they move through society. It is quite likely that with my memory issues I could walk past her today without recognising her face, but what I would never forget was my social brain witnessing her pain. Flashback to that young KPMG employee who had to live in the consequences of decisions made by those who steer the ship.
Although I am sure there are others to explore, two lessons stand out for me. The primary lesson is that leaders must be cognisant of the fact that it is not only the organisation’s reputation that gets affected when they behave badly and turn the organisation into a rogue corporate citizen, but that one of the inevitable outcomes is that employees shoulder a significant part of the burden. In fact, what rogue leaders do is to transfer some of the risk to the employees and can in fact make them unemployable. Imagine wanting to scrub a major employer off your CV because you are deemed guilty by association. At the time, both KPMG and Eskom could boast of glory days in years gone by. There was a time when their employees would not have dreamed of a reality where the organisation appearing on their CV would be a liability. Leaders don’t merely create financial risk. They create:
- employability risk
- identity risk
- psychological risk
- relational risk
- reputational risk for innocent people
One of the least discussed governance failures is the transfer of reputational risk from those who create it to those who had no role in causing it.
The other lesson for me is how society becomes complicit in harming the innocents caught up in the crossfire. Employees who had contributed nothing to the demise of the reputation find themselves ostracised by society. It is particularly painful when the scorn comes from people you considered close to you. We very seldom give a thought to the harm we are causing when we judge mindlessly. We behave like a pack and create outcasts. Outcasts who have to live with the psychological scars with physiological implications. How do you move through the world when the first reaction you draw is misplaced judgment? We believe that we are right, of course. We are good people, and we distance ourselves from bad people. However, when we ostracise people for things that they have not caused, does that make us good people?
A very good question, though, is whether leaders of organisations that suffered reputational damage ever consider the implications for their staff. Do they consider interventions that are needed to help employees navigate impossible situations? When the damage penetrates the skin of the organisation, and there are no healing interventions, the poison that spreads may over time become impossible to extract.
The correct response does ask for a presence of mind. It requires the ability to regulate oneself and ensure that we do not become complicit in the ostracism of the innocent. Perhaps that is the forgotten responsibility of ethical leadership. It is not simply to protect the organisation’s reputation. It is to protect innocent people from having to carry the consequences of leadership failure.
If you are exploring these questions in your own leadership journey, you are welcome to connect or learn more about my work here: Board Services and Executive Support
