The consequences of corporate theft

Theft is defined as “the dishonest taking of the property of another person”. And, on that basis, many managers or directors of companies are thieves.

Because companies — any corporate entities — are legal persons that managers have a fiduciary duty to protect to ensure long term survival while maximising the benefit to shareholders. Managers who extract capital , whether by massive bonuses or remuneration packages running into seven figures, are, therefore, robbing the enterprise, even if it is technically legal to do so.

Increasingly, this is the view of more people as job losses continue to mount. And it is a view that has been reinforced by the recent government bailouts and subsequent bonus payments to some US banks. Around the world — and South Africa is no exception — there is a growing demand that job retention should be a priority.

A blog on the South African Work Science Institute website states: “South African labour law provides a process to regulate work and as a last resort terminating employment for valid and fair reasons.....”

In a South African context, and in accordance with local labour laws, companies should prioritise the retention of jobs. This was recognised in February in a negotiated framework agreement between business, government and labour that was drawn up to deal with the current economic crisis. Part of this will now take the form of providing training on half pay for workers made redundant.

Government is also committed to providing “rescue packages” to ailing industry. However, there is an assurance that such packages will retain and create jobs and will be closely monitored.

But the debate now is whether the training should be for three or six months. However, as several critics have pointed out, the scheme presupposes that there will be an economic upturn, perhaps by the end of the year and that the newly retrained workers will have work to go to.

This could well be a naive hope and, in any event, redundancies continue to be the order of the day, with little attention being given to possible alternatives. The payment of multi-million rand bonuses on top of remuneration packages running into seven figures also remains all too common.

For the critics this continues to amount to theft, from the workers, the country and the shareholders. The trade unions have therefore decided to insist that all alternatives must first be examined before there are any layoffs. They argue that, in most cases, there is no need to lose jobs.

The major example quoted is that of synthetic fuels maker, Sasol, until 1979 a state-owned entity that pioneered commercial oil-from-coal technology. Sasol, say the unions and other critics, provides a perfect example of the manner in which South Africa and South Africans have been deprived of wealth.

They point out that when the oil price was low, taxpayers subsidised Sasol for decades. When the company became profitable, as oil prices soared beyond $30 a barrel, the company was privatised. But Sasol, which produces more than 30 per cent of South Africa’s liquid fuel requirements, sells its products at import parity prices although it probably produces fuel at a cost equivalent to $15 to $25 a barrel.

What this has meant has been massive profits for the company and, therefore, huge dividends for its shareholders, 40 per cent of whom live in the United States. The scale of such profits, seen against growing job losses and increasing poverty is widely seen as a contributory cause to high levels of social unrest at community level.

With every indication that the global economic crisis — a crisis rooted in over capacity and over-production — is unlikely to improve, retraining schemes and bailouts are looking more and more like futile, ad hoc reactions. And, so long as corporate theft, whether legally condoned or not, continues against this background, there is likely to be more — and more determined — resistance.