Written by: Chris Hattingh

Now that KPMG have ‘come clean’ on their murky dealings with the Gupta family, will we experience a resurgence in ethical conduct and the elimination of all corruption? Or will the status quo remain?

I tend towards the latter, as it is extremely difficult to pin down a standard of ethics in South African business, and South African society at large, by which we can adequately assess actions as ‘ethical’ or ‘unethical’. If anything, we are taught that the ‘good of society’ must serve as our standard. If this amorphous concept remains in place, we may well look back on the actions by KPMG as simply the tip of the iceberg.

Why should we act ethically, and by what standard?

I’m afraid that our understanding of ethics in general is insufficient, and when it is applied, it is done in the form of ticking boxes, instead of an integrated understanding.

KMPG’s report on the so-called ‘rogue unit’ in the South African Revenue Service resulted in the ousting of former finance minister Pravin Gordhan. While former KPMG CEO Trevor Hoole, COO Steven Louw, chairperson Ahmed Jaffer and five other senior executives have resigned, the auditing firm has not admitted to any wrongdoing. It merely “did not identify any evidence of illegal behaviour or corruption by KPMG partners or staff”, and admitted that the work “fell considerably short of KPMG’s standards”.

See no evil, hear no evil, speak no evil.

It seems that KPMG’s standard of ethics is, if you aren’t caught doing something illegal, you are good to go.

On the ‘Ethics and Compliance’ page of their US website, KPMG states “we are proud of our commitment to ethics and integrity.” Furthermore,

KPMG – through its people, values, programs, and policies – has made it a priority to help ensure that we have an ethical culture where everyone embraces a sense of personal responsibility for doing the right thing in the right way.

While a model of corporate ethics talk, the statement is very light on concretes.

In their Code of Conduct, they name compliance with laws as important and the need for individuals to take responsibility for their own actions. While that may look good on paper, the why of ethical conduct is never answered.

During my master’s degree studies, we were presented with a wide range of ethical theories familiar to philosophy students – theories such as utilitarianism (the greatest good for the greatest number) and Kant’s Categorical Imperative (you must do x because it is your duty) were given the spotlight.

While there were some good readings, being ethical in business boiled down to the imperative that you ought to be ethical because unethical behaviour is illegal. For those who desired a more philosophical perspective, the case was presented that you ought to be ethical because it is good for society and, even better, for the environment. In other words, you are ethical when you act according to, or for, an external standard. The individual and what is good for him is not taught in ethics courses.

If the other is the standard of what is good, ethics remains a matter of one feeling replacing another – there will always be someone or something else to which we must cede our own interests.

University students are taught that there cannot be an objective ethical standard, that all views are equal – what do we expect will happen when these students become business leaders? There is zero talk about long-term, rational self-interest in ethics. If we do not act for others or society or the environment, we must be selfish and therefore evil – this false dichotomy is hammered into students and they cannot hold an alternative in their minds, it must be one or the other.

Ayn Rand, however, developed an ethics which held reason as its method, and man’s happiness as its standard. As opposed to acting on the whim of the moment, or the vague concept of what is good for ‘society,’ Rand based Objectivist ethics on the individual. To act ethically is to rationally examine the world, to evaluate your values and how best to attain them. Those formerly in charge of KPMG did not act selfishly – they have now lost their jobs, their reputation and their standing. To act selfishly is to act with full knowledge of the consequences of your actions, not to try and cheat reality.

A proper code of morality, or of ethics, incorporates choice. When you act ‘ethically’ because the threat of force is levelled against you, your choice is removed from the equation and we can no longer talk about responsibility. To act out of duty removes your voluntary choice and negates your ability to decide for yourself whether path x or y is warranted. When we make ethics the realm of the legal, we remove the possibility of substantive engagement with the concept of ethics. Why is the individual the only legitimate base for a code of ethics? Because each person must decide for himself how he wants to live – we can only talk about morality when people are free to voluntarily decide for themselves how they want to live. Holding a non-entity such as society as the standard for ethical actions is a pointless exercise.

KPMG and others will be punished for their illegal behaviour. But we do not hold, never mind even acknowledge, that there is an objective standard of morality. We cannot, then, be outraged when these dealings come to light – we have no standard by which to measure them. The famous King ethics reports are held up, and taught as the ultimate guide for ethics in business, yet for all their talk about this or that part of King IV, the fundamental philosophy is flawed and ultimately self-defeating. We will only see a real uptake in ethical behaviour if people learn why they ought to be ethical.

Author: Chris Hattingh is a passionate advocate for free markets and free minds. He is a student of Objectivism and is currently a researcher at the Free Market Foundation.