Time To Build Our Own Local Precedents

Last week I was speaking to someone who works for an international organization with headquarters in the United States. She recalled how her colleagues at HQ were oscillating between various stages of fear, angst and utter despondency at the ongoing George Floyd anti-racism protests that had resulted in looting and curfews in multiple American cities. Her American colleagues were shaken to the core and struggling to find answers to how the country’s society was seemingly unravelling fast. The lady chuckled, recalling how the during the Kenyan post-election tensions in 2017, her American colleagues were fairly reticent in their direction, guiding the Kenyan office to just work from home, but continue working. The social tensions in a far off remote corner of the globe were distant and incomprehensible. But now the same kind of tensions, laying to bare existential questions on the equality of citizenry and police brutality, pulled at the tenuous strings of the peaceful American societal fabric.

As a large consumer of American literature, movies and academic case studies, last week’s protests coupled with the never ending squabbles between the federal government and state governors on the appropriate response to the Covid-19 pandemic threw me for a loop. How could a country that has for decades lectured the rest of the world on human rights and democracy and upended various regimes in the Middle East fail to provide basic personal protective equipment to frontline health workers? How could a country, whose movies the whole world has consumed, including those that fictionally promised they would save the world in the event of an alien invasion or hurtling asteroid – cue Independence Day and Armageddon – be reduced to political grandstanding in the distribution of life saving ventilators to states that were led by Republic governors? I have so many questions.

In the academic space locally, we have for years drawn on many case studies of American companies that have brilliantly succeeded or spectacularly failed in business. The reason local academia has relied heavily on these American case studies, in my limited experience, is because there exists in America an abundance of academic writing skills as well as troves of published financial data, analyst reports produced after numerous detailed investor briefings and, most importantly, unbridled willingness on the part of current and former management to tell their side of the story. But for many of my East African corporate governance students consisting of directors in both the public and private sectors, the stories ring hollow to their seasoned ears. For years, consistent feedback has been that they want more local stories based on local circumstances as the directors are well aware that what happens in Western climes is based on an extremely different socio-economic and political context. Very few academic case studies exist for local companies and a handful have been written by American universities who’ve managed to crack open tightly sealed corporate lips. The challenge has largely been around the fact that our closely knit society whether in Kenya, Tanzania, Uganda or Rwanda ensures that it is difficult to get data from existing management that may indict former management or vice versa. Further, there isn’t the same amount of corporate information symmetry as exists in developed markets for unlisted companies. I once used a local case study in class, based on data collected anecdotally and from the media and was embarrassed to find one participant avoid the class altogether as he was related to the shareholders and couldn’t bear to listen to the class dissect the decisions and internal politics that were causing the company to decline.

The upshot of this is that recent events in the American socio-political milieu, as well as the global disruption of supply chains will lead local consumers to become more discerning of, and demanding for local content and products. The benefits of this era will definitely be a deeper sense of Afrocentricity and looking for local solutions to local problems and needs. Watching developed nations struggle with managing this public health crisis and the resultant recessive economic impact is a stark wake up call for Africans to realize that not all answers come from the West. And for those of us in local academia, now more than ever is the time to establish a body of local case studies particularly of companies that will have successfully or unsuccessfully navigated this period. Our problems are our own to solve.

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Twitter: @carolmusyoka

How Not To Grow Revenues-A Lesson From Wells Fargo

[vc_row][vc_column width=”2/3″][vc_column_text]In case you missed it, the United States provided yet another wonderful case study in bad corporate governance in the Wells Fargo case this past September.

On September 8th 2016, Wells Fargo Bank was fined $185 million (Kes 18.5 billion) by regulators after it was found that more than 2 million bank accounts and credit cards had been opened or applied for without customers’ knowledge or permission between May 2011 and July 2015. Employees had been opening and funding accounts in order to satisfy sales goals and earn financial rewards under the bank’s incentive-compensation program.” Dice it or slice it, this was a fraud of monumental proportions that had to have been known from the top. Or was it known? Well, John Stumpf was not trying to take one for the team. Following the termination of about 5,300 employees (about 1% of the workforce) in relation to the allegations, the champion stallion appeared on television on September 13th 2016 quite unapologetic. “I think the best thing I could do right now is lead this company, and lead this company forward,” in response to calls for his resignation. Stumpf was acting straight out of the African leadership playbook titled “Id Rather Die Than Resign.”

A week later, Stumpf met the inimitable Massachusetts Senator Elizabeth Warren. Ms. Warren had done her homework extremely well and in 17 short minutes excoriated the bank CEO. I’ve extracted the first painful minutes here:
Warren: Thank you, Mr. Chairman. Mr. Stumpf, Wells Fargo’s vision and values statement, which you frequently cite says: “We believe in values lived not phrases memorized. If you want to find out how strong a company’s ethics are, don’t listen to what its people say, watch what they do.” So, let’s do that. Since this massive years-long scam came to light, you have said repeatedly: “I am accountable.” But what have you actually done to hold yourself accountable? Have you resigned as CEO or chairman of Wells Fargo?
Stumpf: The board, I serve —
Warren: Have you resigned?
Stumpf: No, I have not.
Warren: Alright. Have you returned one nickel of the millions of dollars that you were paid while this scam was going on?
Stumpf: Well, first of all, this was by 1 percent of our people.
Warren: That’s not my question. This is about responsibility. Have you returned one nickel of the millions of dollars that you were paid while this scam was going on?
Stumpf: The board will take care of that.
Warren: Have you returned one nickel of the money you earned while this scam was going on?
Stumpf: And the board will do —
Warren: I will take that as a no, then.

Two things to note here: First of all is how Stumpf was trying to bring in his board of directors as the reason why he was not resigning. We will never know if his board quite frankly wanted him gone by this time but couldn’t get garner the guts to ask him to leave, after all he was both Chairman and CEO. Secondly, he also laid the decision to pay back his past bonuses squarely on the board’s hands. Under Warren’s probing eye, he was not trying to take the flak for not paying back unfairly earned bonuses. On this one, he was going to go down with his board. Having seen how Wall Street executives had walked away with a slap on the wrists following the global financial crisis of 2008, Warren went for the jugular:
Warren: OK, so you haven’t resigned, you haven’t returned a single nickel of your personal earnings, you haven’t fired a single senior executive. Instead evidently your definition of “accountable” is to push the blame to your low-level employees who don’t have the money for a fancy PR firm to defend themselves. It’s gutless leadership.

Stumpf, who had probably had the best legal brains prepare him for the Senate hearing, had even been trained on the classic “I don’t recall” technique for any questions whose answers might lead to self incrimination. But Warren was in no mood to take prisoners and gave the classic ultimatum.
“You know, here is what really gets me about this, Mr. Stumpf. If one of your tellers took a handful of $20 bills out of the cash drawer, they probably would be looking at criminal charges for theft.
They could end up in prison. But you squeezed your employees to the breaking point so they would cheat customers and you could drive up the value of your stock and put hundreds of millions of dollars in your own pocket. And when it all blew up, you kept your job, you kept your multi-million dollar bonuses and you went on television to blame thousands of $12 an hour employees who were just trying to meet cross-sell quotas that made you rich. This is about accountability. You should resign.
You should give back the money that you took while this scam was going on and you should be criminally investigated by both the Department of Justice and the Securities and Exchange Commission. This just isn’t right. A cashier who steals a handful of twenties is held accountable. But Wall Street executives who almost never hold themselves accountable. Not now, and not in 2008 when they crushed the worldwide economy. The only way that Wall Street will change is if executives face jail time when they preside over massive frauds. We need tough new laws to hold corporate executives personally accountable and we need tough prosecutors who have the courage to go after people at the top. Until then, it will be business as usual. ”
It is noteworthy that it is not only Kenya that is struggling to get corrupt practices actively prosecuted, especially those perpetuated by “untouchables”. And after that lacerating and very public questioning, the bank’s independent directors announced on September 27th that Stumpf would not be receiving $41 million (Kes 4.1 billion) of promised compensation while they launched an independent investigation. Clearly, being thrown under Stumpf’s bus was not what they had signed up for and necessary action was taken.

John Stumpf threw in the towel and finally resigned on October 12th 2016 from the Wells Fargo Board and also stepped down from Chevron Corp and Target Corp on October 19th 2016 where he served as a non-executive director. An honorable action that was a day long and a dollar short.
[email protected]
Twitter: @carolmusyoka[/vc_column_text][/vc_column][vc_column width=”1/3″][/vc_column][/vc_row]

Profiting From Dangerous Driving

[vc_row][vc_column width=”2/3″][vc_column_text]Many years ago as a masters student in the United States, I needed to renew my student visa and in those days, you needed to apply for the visa outside of the country’s borders. I therefore had to drive 946 kilometres, from Washington DC where I was living to Montreal, Canada where I had booked my visa appointment. Driving in a northeasterly direction through New York State is about as stimulating as watching yellow paint dry on a concrete wall. The highways are well patrolled by State Troopers who are always looking out for speed offenders breaching the 65 miles per hour (105 km/h) speed limit, and you could be busted at anytime as they had a knack of hiding on embankments and behind grassy knolls on the highway. So I drove the rental car sedately until the Canadian border, where the speed limit changed to the metric system, and was set at 100 km/h. By this time I was ready to slit my wrists in boredom, noting with consternation the number of cars that zoomed past me at extremely high speeds. (To assist your supercilious judgment over my choices, I was young and foolish at that time so speed was the most tempting way to kill the boredom). Having nothing better to do than observe what I thought were brave, foolhardy souls, I realized that the drivers would suddenly drop their speeds at certain sections, and sure enough I’d see a police cruiser parked surreptitiously over a brow or under a bridge, prowling the highway for its traffic offending prey.

These daredevils had speed detector kits (illegal in the US but not banned in Canada at the time) and would therefore drop to within the speed limit in time to daintily saunter past the unsuspecting cops. Never one to let opportunity ceaselessly knock on my forehead, I latched onto the next daredevil, hugging his bumper for dear life and together we danced the speed detector waltz all the way to Montreal. I must have shaved off an hour on that trip, arriving breathless and exhilarated at having dodged not one but several police traps. On my way back, I hadn’t even left the Montreal city limits when I foolishly choose to follow what I thought was another speed detecting daredevil. It turned out that he didn’t have the detector. But this is the clincher: he got away while I got the much dreaded “wiiiiuuuuw” sound followed by the even more heart thumping red and white flashing lights in my rear view mirror. The Canadian cop was a gentleman. He got me to park my car on the side of the road, hop into the back of his Bat-mobile and drove me to an ATM machine at a nearby strip mall. I had to pay $250 Canadian dollars as a speeding fine. That was the entire salary I had earned in the month of June and July working as a research assistant for a professor in law school and, mercifully, I had just been paid the day before. I limped back to the Canadian border at 90 km/h and never looked back again. I’m still smarting from that traffic fine which completely changed my driving habits thereafter. This story came back to mind when I, and many Kenyans, woke up to the news of yet another mind boggling family decimation at a road accident in Salgaa some days ago.

The definition of insanity is doing the same thing over and over again and expecting a different result. Except we don’t seem to be doing anything, let alone over and over again at notorious accident black spots. We know our traffic police force have a penchant for enforcement, the kind of enforcement that misdirects on-the-spot penalties into non-government coffers. This may be the time to introduce quotas in our traffic department. Each traffic officer is given a target to raise a certain amount of money in the form of penalties from dangerous driving (all one has to do is stand beside any single Kenyan roadside for 3 minutes and he’ll be spoilt for choice, in fact he’ll probably bust his daily budget within an hour), driving without seatbelts, overlapping, overtaking on a continuous yellow line, driving without indicating and the mother of all mothers: driving above the speed limit. The income from the fines can and should be used to train the police to become 21st century law enforcement officials as well as provide the police with modern law enforcement equipment including patrol cars and on board computers linked to individual identification and motor vehicle national databases.

I did a little research and found the use of traffic ticket quotas in Australia and the Netherlands. However, in the United States where ticket quotas have been widely used in the past, a number of state legislatures have passed laws to remove the quotas as they are viewed to be exploitative of motorists. In Florida for example, the state legislature passed a law in July 2015 making traffic ticket quotas illegal. The law requires the police to submit reports to the state legislature if their traffic ticket revenues cover more than 33% of the costs of operating their agencies. The agencies may also be audited and face investigation by the state attorney general. But these are first world problems, in jurisdictions where law enforcement is credible and extremely visible.

It cannot be that we look at our own lives as mere transactions, transitory on this earth until extinguished desultorily. We have become completely inured to the rusty, twisted metal scraps that occupy pride of place on many of our highways, an attempted reminder by road safety authorities of the horrific outcomes in death and maiming. We see through these grim reminders the way we see past the drudgery that cakes the feet of our accident tired national psyche. Perhaps looking at prevention of loss of lives as a lucrative revenue source is the ethically challenging mindset shift that we need.

[email protected]
Twitter: @carolmusyoka[/vc_column_text][/vc_column][vc_column width=”1/3″][/vc_column][/vc_row]