by Prof Deon Rossouw | Published on 3 December 2018 for The Ethics Institute monthly newsletter
Respect for the law is a cornerstone of a just and safe society. Societies that flout legal standards tend to be unsafe; prone to corruption and moral decay. And yet, while legal compliance is essential to a good society, it is not sufficient. More is needed, and that “more” is morality. This is not a new argument, nor is it a particularly innovative one. Yet it warrants repeating, once again, as South African society continues to be shown examples of its truth, with the latest being the extraordinary case of Momentum and the public response thereto.
We need look no further than the state capture project, currently being revealed in front of our eyes, for evidence of the importance of laws and standards. Transgressions of those standards, at several key points, aided the looting of state resources, fuelled corruption in the private and public sectors, and seriously damaged the professional accounting and auditing fraternity. To make matters worse, the key institutions on which we rely to enforce the law, such as the National Prosecuting Authority and the Hawks, were disempowered through a combination of blatant political interference and internal subservience to political agendas.
No one in their right mind would thus question how essential legal compliance is for creating a safe, just and prosperous society. Ironically, though, it is exactly at this time of renewed appreciation for legal compliance that the limits of legal compliance are being exposed.
Three landmark incidents demonstrate the shortcomings of a compliance mindset and highlight the need for moral awareness in applying what is written in the rulebook: Jacob Zuma’s resignation in February, Nhlanhla Nene’s resignation in October, and insurer Momentum’s about-turn on the life insurance pay-out of the deceased Nathan Ganas.
On Valentine’s Day 2018, romantic dinners across South Africa were interrupted by the news that the President had submitted his letter of resignation. In a television interview a few hours earlier, Jacob Zuma had requested that the ANC explain to him what he had done wrong, and especially that the party provide “evidence”. He made the point several times, and his logic was crystal clear: wrong behaviour equals illegal behaviour. He failed to recognise that not (or not yet) being convicted of illegal conduct is not the same as not having done wrong. There was no glimpse of understanding that, by failing to put the interest of the country and its people before personal interests (or the interest of family, friends, and business connections), he had failed in his moral duty as President, and his legal standing could no longer conceal his moral bankruptcy. Unfortunately, the ANC leadership moved on without ever giving much of an explanation – beyond vague technicality-type comments about two centres of power – and entirely missed the opportunity to reset the party’s moral compass.
In October 2018, then-Finance Minister Nhlanhla Nene appeared before the Zondo Commission of Inquiry into State Capture and admitted under oath that he had had several meetings with the Gupta family during his tenure as Deputy Minister. This admission came after he had explicitly denied on public television two years earlier that any such encounters took place. In meeting with the Guptas, and then coming clean about it, Nene did not break any law; his untruth on television was also not illegal. And yet, the incident gave rise to ethical concerns about his honesty, integrity, and trustworthiness in occupying a role of such public importance. To his credit, Mr. Nene took responsibility for betraying the public trust, and voluntarily resigned. There was clearly a different logic at play (compared to that applied by Zuma) in which “legal” does not automatically mean “hunky dory”.
In November 2018, a social media furore broke out over a dispute between insurer Momentum and Denise Ganas – widow of Nathan Ganas, who died last year in a violent hijacking incident – over her husband’s life insurance claim. Momentum was refusing to pay the claim on the grounds that Mr Ganas had acted in bad faith by allegedly withholding information about his blood sugar levels when he first entered into the policy. Full disclosure of one’s medical conditions upfront is, according to Momentum, a precondition for the validity of the eventual claim to pay out the insured amount, irrespective of whether the nondisclosure is relevant to the reason for the claim. Momentum’s decision was then taken on appeal to the Ombudsman for Long Term Insurance, which confirmed that the company was well within their rights to not pay out the claim. Momentum was thus not acting illegally; indeed, the important principle of both parties providing accurate and honest information when entering into a contract was widely recognised and supported.
Despite this, a sense of deep unfairness about the way in which this case was handled prevailed amongst the broader public. Concerns revolved firstly around the fact that the there was no correlation between the cause of death (by fatal gunshot) and the nature of the alleged nondisclosure (high blood sugar levels). Secondly, there was no small degree of moral discomfort about apparent double standards, as the standard of proof of medical conditions used for entering into a life insurance policy is not the same as the standard which gets used to decide whether or not a life policy should be paid out. In other words, a lower standard of thoroughness applies when the decision to insure someone’s life is made, which then results in the insured client’s obligation to pay their insurance premiums. However, when it is the turn of the insurance company to pay out the insured amount, the standard of medical criteria applied is much higher. It is an asymmetrical relationship, with the power sitting primarily with the big company.
Under the very first principle of the Fourth King Code on Corporate Governance for South Africa, leaders are called to lead ethically and effectively, and then they are specifically urged to “act ethically beyond mere legal compliance”. This indicates that mere legal compliance is not sufficient; it must be complemented or even surpassed by ethical conduct.
The moral intuition that Momentum’s decision was legal but not ethical eventually won the day and resulted not only in Momentum deciding to pay out Ganas’s claim, but also to revise their policy approach to avoid the reoccurrence of similar situations. This is an example of how ethical imperatives can drive regulatory reform.
Legal compliance is important, but it also needs to pass ethical muster. If legality does not coincide with morality, even legal decisions might still be regarded as morally wrong. And there is the inverse category as well, where the ethical course of action may fall outside of the law. In the centenary year of Nelson Mandela’s birth, we should remember that he is regarded as a moral hero because he considered compliance with Apartheid laws to be morally unacceptable, and had the courage to voice his moral concerns and pay personally for his moral convictions.
We should be wary of the argument that, until someone’s actions are declared unlawful, they are immune to moral judgement. On the contrary, sometimes the line of ethical unacceptability gets crossed much sooner than the line of technical illegality.
A version of this article was published in Business Day.
Prof Deon Rossouw is CEO of The Ethics Institute. He holds a Doctorate in Philosophy from University of Stellenbosch.