Wits Business SchoolUniversity of the Witwatersrand

Masters of Business Administration1st Quarter 2013 Part-time MBA

Ethics, Governance & Sustainable Development (ESG)

BUSA 7010

Professor Stu WoolmanElizabeth Bradley Chair of Ethics, Governance &

Sustainable DevelopmentAcademic Director, South African Institute for Advanced

Constitutional, Public, Human Rights & International Law

Editor-in-Chief, Constitutional Law of South AfricaManaging Editor, Constitutional Court Review

WBS phone: (011) 717-3512; Cell: 082-828-8056; E-mail: stuart.woolman@wits.ac.za

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COURSE OUTLINE AND READINGS

Prescribed Texts (T) -- Purchase Necessary(1) R Hamann¸S Woolman and C Sprague (eds) The

Business of Sustainable Development in Africa: Human Rights, Partnerships and Alternative Business Models (United Nations University Press/UNISA, 2010).

(2) L Hartman, J DesJardines Business Ethics: Decision-Making for Personal Integrity & Social Responsibility (McGraw-Hill, 2011). Suggested, Valuable Additional Reading – No Purchase Necessary

(3) G Brenkert & T Beauchamp (eds) The Oxford Handbook of Business Ethics (Oxford University Press, 2010)

(4) A Crane, A McWilliams, D Matten, J Moon, D Siegel (eds) The Oxford Handbook of Corporate Social Responsibility (Oxford University Press, 2009).

(5) CK Prahalad The Fortune at the Bottom of the Pyramid: Eradicating of Poverty through Profits (Wharton, 2010).

(6) R Naidoo Corporate Governance: An Essential Guide for South African Companies, 2nd Edition (LexisNexis, 2009).

(7) T Wixley & G Everingham Corporate Governance, 3rd

Edition (SiberInk, 2010).(8) J Ruggie Guiding Principles on Business and Human

Rights: Implementing the United Nations “Protect, Respect and Remedy” Framework United National Human Rights Council and Report of the Special Representative of the Secretary-General on the Issue of Human Rights and Transnational Corporations and Other Business Enterprises (United Nations, 2011).

(9) A Sen Development as Freedom (1999).

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NB: ++ One Mandatory Article for Entire Class

NB: ** Two Mandatory Case Studies for Entire Class

Class Topic

Reading & Preparation & Class Presentation

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Ethics, Ethical Conflicts, Conflict Resolution and the Business Case for Ethical Conduct

Required Reading:(1)Antigone (Web: http Link) **(2)Case Study: Pioneer (Web)**(3)Case Study: Tikkun (Web)**Optional (4)L Hartman & J DesJardines ‘Philosophical Ethics

and Business’ Business Ethics: Chapter 3. (Text)

(5)Social Network (Video)(6)Inside Job (Video)

Syndicate 1: 10 minute PowerPoint presentation on AntigoneSyndicate 2: 10 minute PowerPoint presentation on PioneerSyndicate 3: 10 minute PowerPoint presentation on Tikkun

2 Business and Human Rights

Required Reading(1)S Woolman ‘Truly Enlightened Self-Interest:

Business, Human Rights and the UN Global Compact’ in R Hamann, S Woolman & C Sprague (eds) The Business of Sustainable Development in Africa: Chapter 4. ++ (Text)

(2)United Nations Global Compact** and Ruggie Guiding Principles (Web)

(3)Case Studies: (a) Pharmakina in Hamann, Woolman & Sprague (eds)(Text)

(b) VCP in Hamann, Woolman & Sprague (eds) (Text)**Syndicate 4: 10 minute PowerPoint presentation on PharmakinaSyndicate 5: 10 minute PowerPoint presentation on VCP

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Class Topic Reading & Preparation & Class

Presentation Syndicate 6: 10 minute PowerPoint presentation on United Nations Global Compact and Ruggie GuidelinesWoolman: ‘Truly Enlightened Self-Interest’Class Discussion: 2012 World Bank Report on South Africa

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3 Ethics

Required Reading(1)L Hartman & J DesJardines ‘Ethics and

Business’ Business Ethics: Decision-Making for Personal Integrity & Social Responsibility (McGraw-Hill 2011) Chapter 1. ++ (Text)

(2)Utilitarianism: P Singer ‘Famine, Affluence and Morality’ (Web)**

(3)Development Theory: A Sen ‘100 Million Women are Missing’ The Lancet (Web)**Semi-Optional: Syndicates should read texts appropriate for their PowerPoint presentation

(4)The Capabilities Approach: M Nussbaum ‘Capabilities as Fundamental Entitlements’ (Web)

(5)uBuntu: T Metz; D Cornell, Y Mokgoro, S Woolman (Web)

(6)Deontological Ethics: I Kant ‘Metaphysics of Morals’ (Web)Syndicate 7: 10 minute PowerPoint presentation on Singer and UtilitarianismSyndicate 1: 10 minute PowerPoint presentation on Kant and Deontological EthicsSyndicate 2: 10 minute PowerPoint presentation on Communitarian Ethics and uBuntuSyndicate 3: 10 minute PowerPoint presentation on Development Theory and the Capabilities Approach

4Corporate Governance in South Africa

(1)King Code on Corporate Governance (Web) ++(2)Companies Act of 2008 (Web) ++(3)Short Readings on Social and Ethics

Committees (Web)(4)Sasol* in Hamann, Sprague & Woolman

(Text)**Syndicate 4: 10 minute PowerPoint presentation on King and Companies ActSyndicate 5: 10 minute PowerPoint on Social and Ethics Committee required by Companies ActSyndicate 6: 10 minute PowerPoint presentation on SASOL

5 Corporate Social Responsibility in

Required Reading(1)Case Study: General Electric Ecomagination

Report 2009**(Web)(2)SA National Anti-Corruption Forum (Text)**

Optional Reading(3)S Woolman ‘Two Ruggies?’ (Website)

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South Africa

Syndicate 7: 10 minute PowerPoint presentation on GESyndicate 1: 10 minute PowerPoint presentation on SANAC

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Sustainable Development:The Bottom of the Pyramid &Alternative Business Models

Required Reading(1)C Sprague ‘Alternative Approaches to Reaching

the Bottom of the Pyramid’ in Hamann, Woolman & Sprague (Text) ++(2)Case Study: Aspen Pharmacare (Text)(3)Case Study: Vidagas* (Text)Optional Reading:

(4)CK Prahalad: The Fortune at the Bottom of the Pyramid (Web)Syndicate 2: 10 minute PowerPoint presentation on Sprague Syndicate 3: 10 minute PowerPoint presentation on Vidagas

Syndicate 4: 10 minute PowerPoint presentation on Aspen

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Sustainable Development:Profit and the Environment

(1) Fuel Retailers Association (Website)++(2) L Feris ‘Sustainable Development’

(Website)**(3) D Tladi ‘Reply to Feris’ (Website)**(4)E Basson & M Van der Linde ‘Environment’ in S

Woolman et al (eds) Constitutional Law of South Africa (2010) Chapter 50

Syndicate 5: 10 minute PowerPoint presentation: Fuel Retailers

Syndicate 6: 10 minute PowerPoint presentation: Feris & Tladi

8Corporate Citizenship

(1)R Hamann ‘Introducing Corporate Citizenship’ in The Business of Sustainable Development in Africa: Human Rights, Partnerships and Alternative Business Models Chap 5.* (Text)++

(2)Case Studies: a. ‘Who is Responsible for Squatter Camps’ in

Hamann, Woolman and Sprague (Text)*b. Report on Marikana Massacre (Web)*c. Tata (Web)**Syndicate 7: 10 minute PowerPoint presentation on Hamann and Corporate CitizenshipSyndicate ?: 10 minute PowerPoint presentation on Squatter Camps and Marikana Massacre (Extra credit)Syndicate ?: 10 minute PowerPoint presentation onTata (Extra credit)

9Exam Revision & Class Prep

Course Overview, Packet of Class Notes for Exam, Review of 3 Previous Exams and Discussion of Model Answers for Final Exam

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Course Design, Objectives and Methodology1. Course Design This course engages everyday problems in virtually all corporate environments. Businesses, for reasons due to almost entirely to the profit motive, largely engage these matters in sub-optimal ways. The course is designed to provide you with a picture of a complex adaptive system – the firm – capable of agile performance that delivers ethical and sustainable results. In short, one purpose of the class is to assist you in building a business case for meeting ethical, governance and sustainable development goals. Such goals will become more and more necessary for the short and long term success of many firms today. A reasonably strong grasp of ethics, sustainability and governance issues enables entrepreneurs to manage risk more effectively in an increasingly volatile world. 2. Course Objectives You must develop the ability to understand critical ethical, governance and sustainability issues that shape (and constrain) South Africa and the world’s existing business environment. Your written product must reflect a critical and a coherent understanding of ethics, sustainability and governance. Please use the readings and case studies to better understand how entrepreneurs and managers, such as yourself, can address ethical, governance and sustainability issues in a manner that still enables a firm to deliver a profit to its shareholders and benefits to a broad array of other stakeholders.3. Course Methodology

The reading is rather limited. I expect (a) each syndicate to do the reading assigned to them in order to make a presentation; (b) every class member must do the mandatory reading. I have

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limited the amount of reading per class because I know how busy you are. But our contract, as signed in the first class, requires that you be prepared for each class: and that you do the reading in advance. I promise to do the same.

However, to ensure that you come to grips with the material and to ensure that the reading is done, each syndicate will be responsible for several PowerPoint presentations of an article or case study over the course of the term. This component of your grade is worth 5% of your entire mark. However, it is ungraded. Done properly, each individual member of your syndicate receives 100% for the class participation mark (assuming everyone does the reading for class). We do best when we teach ourselves.

The same holds true for in-class teaching methodology: We do best when we teach ourselves. The syndicates drive class discussion. I am your guide (a facilitator). I will ensure that each class covers necessary points and it ends with clear takeaways. I will begin each class the same way: connecting the takeaways from the last class to the goals of the next class. Our goal, collectively, is to determine whether a business case can be established for ESG – either in terms of risk management or actual profit over time. In order for this collective method to work, everyone must be minimally prepared and to be able to speak to what you have read. Listening and learning from others requires skill, dedication and imagination. The rewards are boundless.

I am asking you to read a report by the World Bank on the unsustainable nature of the South Africa – economically and politically -- and to write a 2 page (500 word) response to the work that

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engages such recent events as the Marikana Massacre and recently disclosed findings on the systemic failure of our system of public education. My purpose is simple. You need to be able to read, absorb and critically evaluate the subject matter in this class. Either you will demonstrate your ability to read, absorb and critically evaluate the report. Again: it is but 5 % of you final mark. It is pass/fail: a pass is worth 100%. To pass you must demonstrate that you have understood the report, can apply its findings to other current or recent events, are able to use other materials (from the course or your own research) to reach your own conclusions about the report’s meaning and importance. You must also demonstrate your ability to cite your sources correctly. The purpose of this assignment is to give you a chance to write, and for me to give you feedback both on the clarity of your writing and the coherence of your arguments. Writing, like any other skill, requires practice and repetition – and some good coaching. This mini-paper and the individual assignment are designed to do just that . . . give you an opportunity to write and to receive feedback on your writing.

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4. Course Evaluation A. Individual assignment

20% B. Syndicate assignment

20%C. Syndicate PowerPoint presentations

5%D. Paper on World Bank Report on SA

5%E.Exam 50%

100%5. The Website as ESG Portal The ESG website has been developed in manner designed to enable you to do the required reading, pursue topics of interest, facilitate the writing of your assignments and the final exam, and to put together in-class syndicate presentations. We will upgrade the site as we receive feedback from you.

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Components of ESG GradeA. Syndicate PowerPoint Participation (5 % -- Ungraded)

Each syndicate must produce power-point presentations as assigned in the syllabus (roughly 3 per term). Two bonus power-point productions exist at the end. Let’s be clear: if the syndicate produces properly, then each syndicate member receives 100% for this portion of your grade.

B. Individual assignment (20% of final mark): Narrow Case Study

o The content of the individual assignment is a brief segmented case study. As noted above, the individual assignment should form part of the overall case study the student will put together with the rest of her syndicate.

o The student is to assess the company in terms of its ethical behavior, its compliance with human rights codes, its corporate governance structures, its commitment to alternative business models, its environmental policies OR its corporate social responsibility programmes. Only 1 segment required.

o The case study must draw it’s conclusions from at least one interview with a member of the company under scrutiny.

o You must engage critically with the company. Does the company’s rhetoric match reality? Do not rely solely on one company employee responsible for making the company look good. Use secondary materials that call the company’s claims into question.

o Desktop assignments that reflect no critical thought will have that absence of critical though reflected in the grade.

o The case study should be no more than 5 pages long, double-spaced.

o The submission date is week 5: The assignment must be sent in electronic form and handed in via hard copy.

o Students will be penalized for late submission.C. Syndicate assignment (20% of the Final Mark): Broad,

Collective Case Study The content of the syndicate assignment is a case study of a single company. The syndicate must assess the company in terms of its ethical behavior, its compliance with human rights codes, its corporate governance structures, its commitment to alternative business models, is environmental policies AND its corporate social responsibility policies or programmes. The optimal way to achieve an excellent syndicate mark is for each syndicate to have each individual member take responsibility – in their individual assignment – for a portion of the syndicate’s overall report. Unlike the individual assignment, the syndicate assignment covers virtually the entire scope of a company’s ethical, governance and sustainability practices.

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The syndicate case study should be 20 pages long, double-spaced. If you believe a fellow syndicate member has not behaved in an ethical manner in the course of conducting her work, then you are obliged to let me know The submission date is the date of the exam .

D.Short (500 word) Written Assignment on (5%). This short assignment is designed to give you an opportunity to

write and to receive a careful reading and response. The submission date is week 3.

E.Exam (50% of the final mark) o Length of the exam: 2.5 hours + .75 hours for readingo Open book: Materials and Notes as You Chooseo Revision, based upon previous exams and class notes, will

take place in last class to prepare you for the exam.

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BIOProfessor Stu Woolman, Elizabeth Bradley Chair of Ethics, Governance and Sustainable Development, at the University of the Witwatersrand Graduate School of Business Administration, and holds degrees in philosophy from Wesleyan University (BA)(Hons), and Columbia University (MA), in law from Columbia Law School (JD), and in jurisprudence from the University of Pretoria (LLD). Stu is the creator, the editor-in-chief and primary author of the 4 volume treatise, Constitutional Law of South Africa (‘CloSA’). CLoSA is the most influential and widely cited work on the subject (by both academics and jurists, here and abroad). He is the author, co-author and/or co-editor of 6 other monographs or collections: The Constitution in the Classroom: Law and Education in South Africa, 1994 – 2008; Constitutional Conversations; The Business of Sustainable Development in Africa: Human Rights, Partnerships and Alternative Business Models, (winner in 2010 of the Hiddingh-Currie Book Award for Academic Excellence), The Dignity Jurisprudence of the Constitutional Court of South Africa; The Selfless Constitution: Experimentalism and Flourishing as the Foundations of South Africa’s Basic Law; Is This Seat Taken? Conversations at the Bar, the Bench and the Academy. He currently has almost articles and book chapters in print. He is the founding editor of the Constitutional Court Review: South Africa’s only international journal of record on the work of the Constitutional Court. Stu is also a Co-Director of the South Africa Institute for Advanced Constitutional, Public, Human Rights and International Law. He has practised commercial and public interest law in Washington, DC, and New York City and is currently a public law consultant with Ashira (Pty) Ltd in Johannesburg. Prior to returning to Wits Business School in 2010, Stu taught constitutional law and jurisprudence at the University of Pretoria, Columbia Law School and the University of the Witwatersrand. He has also worked on the UN Human Rights Committee and the Goldstone Commission. Contact information:

THE BIG PICTURE TAKES THE FORM OF A VIRTUOUS CIRCLE We begin with ethics – how people ought to treat other people. Ethics is hotly contested territory. We immediately ask how ethics can be applied, in a practical manner, to how corporate entities operate. We will look at business ethics through the prism of uBuntu, virtue ethics, deontology, utilitarianism and international human rights (through the UN Global Compact to the Ruggie Reports). From this practical, theoretical and normative approach to business ethics, we move to the voluntary codes on ethics developed here in South Africa. The King Reports and the King Code form the basis for this next stage of analysis. However, the government of South Africa has not been content to leave ‘good business behaviour’ to the discretion of business alone. It has passed legislation – governing companies and the environment – that expressly mandate how firms must act (eg, Companies Act of 2008). Moreover, corporations are also subject to the Constitution – s 24, the right to a healthy environment, sets parameters on what the state and

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private actors can do, and suggests that sustainable development requires more than environmental protection. The Constitution also demands that we take into account ground level economic development and respectful social, community engagement – even as we consider the potential environmental depredations of a given business operation. Beyond our Constitution lies international norms and best practices – from the United Nations Global Compact, to the UN sanctioned Ruggie Reports, to Bottom of the Pyramid analysis, to UN-sponsored Alternative Business Models, and to new notions of Corporate Citizenship. As we have already seen, these new norms and notions of international best practice loop back into our original understanding of business ethics. That’s the big picture this course is designed to paint. The subjects covered may be in tension with one another. However, over the course, we shall see that they actually form a virtuous circle.

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Session 1Ethics, Ethical Conflicts & Resolution, and

The Business Case for ESG Goals:

The course is designed to provide you with a picture of a complex adaptive system – the firm – capable of an agile performance that delivers ethical and sustainable results. In short, the purpose of the class is to build a business case for meeting ethical, governance and sustainable development goals. Such goals are actually necessary for the short and long term success of many companies today. From a strategic management perspective, a firm grasp of ethics, sustainability and governance should enable entrepreneurs to engage in effective risk management in an increasingly volatile world.

Some students and academics will invariably ask whether a strong code of ethics will impede a firm’s efforts to work with other entities to secure deals and projects that make the firm a success. Good reasons exist to believe that sound ethical principles and impeccable corporate governance will actually give a firm a competitive advantage over other amoral businesses. The firm will be able to say, without fear of contradiction, that its zero tolerance ethical standards will differentiate it from other firms in a given sector. The ethical firm will be able to claim that its ethical framework is an innovation that vouchsafes the interests of all who work for the firm, conduct business with the firm and who own the firm. Empirical research out of Harvard and the University of London shows that firms that take CSR seriously outperform competitors who merely engage in box ticking exercises.

That said, it’s not always clear the good conduct elicits extrinsic rewards. Some firms – say Pioneer – will accept administrative fines as a cost of doing business. Goldman Sachs had 14 ethical principles, but they were undercut by a 15th principle: push your business practices as far as you can – into the grey zone – where the legality of the behaviour is fuzzy at best.

Session 2Business and Human Rights

Goals: Traditionally, human rights have been described as rights

against the State, that is rights against the intrusion of the State into the affairs of the individual (or associations). However, after World War II, human rights discourse – post-Nuremburg – developed notions of rights and duties that operate horizontally. That is, legally rights and duties are understood to apply to relationships between individuals, natural and juristic, in a manner similar to the way that they apply between the State and individuals. Nowhere are such horizontal relationships more evident than in the South African Constitution. Corporations are generally bound by the dictates of the

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basic law. And they are, at the same time, beneficiaries of that basic law. International law – through the UN Global Compact and the UN’s Ruggie Reports and Guidelines – is moving in a similar direction. The UN and its member states aim to hold businesses accountable to a minimum of 10 basic principles. While not yet enforceable, the members of the UN Global Compact hope that growing adherence to those 10 basic principles in many of the weak states within which they operate will strengthen both the state, civil society and the citizens who live within low governance zones. Pharmakina and VCP provide good case studies in which to test the success of this approach.

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Session 3Ethics

Goals: This class builds upon the practical discussions that we have

had discussed in the first two sessions. Instead of looking at theory first, and practice second, we aim to draw from practical experience, well-grounded notions about what proper conduct ought to be. We can now look at what ethics in means from a number of different philosophical perspectives. These different perspectives may have a great deal to do with nature of the relationship of employers and employees within a business, with stakeholders who do not have a direct interest in the business, with the local community and with strangers in the broader community in which the business operates. Most importantly, I want you to see how ethical arguments – based upon Aristotelian ethics, deontology, utilitarianism, development theory, the capabilities approach and uBuntu -- can be used within the firm (and with outsiders) to solve problems and motivate for various forms of organizational change. I want you to understand how to build a persuasive ethical argument.

Session 4Corporate Governance in South Africa

Goals: The King Reports, its new Code of Corporate Governance, and

the new Companies Act mark a series of watershed events in South African economic history. King Report I might be viewed as some as a craven attempt by the business community to signal to the new democratically elected government that it was willing to get its own house in order – and thus avoid undue state regulation – and willing to cooperate with the new governments political agenda (whether it be RDP or BEE). However, the King Reports have proven – over 16 years – to have legs. The Company Act 71 of 2008 now holds directors and boards of directors legally culpable for company malfeasance in ways heretofore not complicated by South African corporations. This sea-change in the manner in which corporate officers are expected to behave -- and their new legally-enforceable responsibilities to greater commonweal -- are aspects of doing business in South Africa of which all members of management must be cognizant and compliant.

Session 5Corporate Social Responsibility in South Africa

Goals:

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Simply put, how good are companies – whose first purpose is profit and survival -- at meeting the triple bottom line: environmental protection, economic development and community engagement and enhancement. What philosophical sensibility and organizational culture is required to make CSR work? Does CSR make sense for all companies? Do cookie cutter approaches – the UN Global Compact or the Companies Act – work for all companies? Why do we have corporate social responsibility at all? Is it tantamount to more than advertising or putting a pretty face on capitalism? Or – more provocatively – can we justify the triple bottom line in terms of the long term bottom line? Recent research suggests that we can.

Session 6Sustainable Development:

The Bottom of the Pyramid & Alternative Business Models

Goals: Until now, we have described businesses as more or less passive

agents in the larger ethical and legal universe in which they operate. I want to suggest, over the final set of sessions, that businesses have an important role to play in the reconstruction and economic development of the communities in which they are situated. Profits and development can be made to go hand-in-hand under the right conditions. Put more strongly, a strong business case can be made that firms would do well to see all communities, from rich to the very poor, as opportunities and markets in which to do business.

Session 7Sustainable Development and the Environment

Goals: One inconvenient truth when it comes to discussions about

sustainable development is that human beings, over the course of the last 2 centuries, have done substantial, and potentially irreversible, damage to the environment in which we all live. Unless we do something with relatively immediate effect, we run the risk of bequeathing to our grandchildren a largely uninhabitable planet. That truth does not sit comfortably with another goal of sustainable development: creating jobs and opportunities that enhance the well-being of the worst-off amongst us. How we chart a course between the Scylla of economic development and wealth and Charybdis of a hospitable and habitable environment causes deep rifts – and odd bedfellows -- amongst policy makers in the Northern Hemisphere and the Southern Hemisphere.

Session 8

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Corporate Citizenship

Goals:Like ‘sustainable development’, corporate citizenship can sound

like a catch-phrase forever in search of a meaningful definition. In this session, we are going to explore some of the core – and often contested – components of ‘corporate citizenship’:

‘Prosperity for all . . . may . . . lie in business broadening its citizenship role and becoming a more conscious and informed social participant.’

Corporate citizenship may embrace(1)Risk avoidance and protection of reputation(2)Increased competence througha.Managing diversityb.Creating partnerships with different sectors of

society(3)‘Doing the Right Thing’(4)Greater transparency and accountability(5)Creating a work environment in which employees

take pride in their work and the manner in which it enhances the lives of other members of the community within which they live.

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Session 9Class Revision for Exam

Goals: During this class, we will go over three previous exams so that

you will know what the most important lessons to be drawn from the class are, and what you can expect on the final exam. No surprises – the exam is very straightforward!!!

Please contact me now – before the term – with questions and concerns about the class and its construction. And don’t worry. You can handle the methods of assessment as long as you do the reading and PowerPoint presentations required for class and turn in the assignments in a timely fashion. A contract between the class and myself handed out in the first class will specify our respective obligations.

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