Bitter pill: why BLSA’s position on Bain is complicated

Business lobby group Business Leadership SA (BLSA) has had a torrid time as questions mount on why multinational consulting firm Bain has retained its membership within BLSA after the damning findings made against Bain in the state capture commission report. BLSA’s challenge with respect to Bain seems to be compounded by a long-standing conundrum in corporate crime of identifying who is to blame in the event of a corporate scandal, because whereas a corporate enjoys legal personality in law, it is not all members and/or stakeholders of a corporate that can be directly linked to the wrongdoings of a corporation.

Among the recommendations made in the first instalment of the report is the introduction of what are commonly referred to as deferred prosecution agreements (DPAs). In this regard, the report recommends that the government bring in legislation for the introduction of DPAs by which the prosecution of an accused corporation can be deferred on certain terms and conditions, including that such a corporation must have self-reported facts from which criminal liability could be inferred, the corporation must have agreed to engage in specific conduct to ensure that such conduct is not repeated, the corporation must pay a fine and the terms of such agreement must be sanctioned by the tribunal of the Public Procurement Anti-Corruption Agency, another important body recommended under recommendation two of the state capture commission report.

DPAs have become a permanent feature of Western criminal justice systems including in the US, the UK, France and others. In these jurisdictions, albeit with some variations, the DPAs are implemented on similar basis as that described on page 815 of the state capture commission report. The report acknowledges the work and contribution of Corruption Watch, it having done extensive work on the viability of DPAs in SA. The report also notes the early considerations of DPAs by the SA Law Reform Commission (SALRC), which commenced its work in this regard at the twilight of apartheid in 1989. The report was presented to the democratic government in 2002. Though the SALRC work focused on various forms of diversion programmes for individual of criminal offenders, it mooted the introduction of DPAs without much detail. 

Some of the reasons commonly cited across the international jurisdictions for DPAs, which on the face of it may appear to be a slap on the wrist for big corporates, are the lack of capacity of prosecution for complex commercial crimes and the complexity of apportioning criminal liability on a corporation for acts of individual employees or directors, as well as the preservation of companies assets and reputation to protect innocent stakeholders such as employees and shareholders including pension funds.

The state capture report, on making the case for DPAs, does not proffer the protection of innocent stakeholders as one of the reasons for introducing them, but judging from some of the literature quoted in the report under this topic it is apparent that this reason would have weighed heavily on the commission in recommending the introduction of DPAs.

As is evident from the public pressure on BLSA regarding Bain, it is understandable that the public and those who have suffered incalculably, directly and indirectly, from the conduct of offending corporates, including whistleblowers and employees that were hunted out of employment for resisting malfeasants, would bay for the blood of a corporation that has been found wanting. In such an environment the possibility of a corporation being afforded a way out through a DPA may seem unfair and unconscionable.

On the other hand, the argument that a corporation, guilty as it may be, would naturally have a large number of employees and stakeholders who would not have been involved in such conduct, is compelling. 

In a professional services firm, for example, which is typically multidisciplinary with partners and professionals practising in varying areas and servicing a variety of clients, it is not inconceivable that a number of practitioners may be earning an honest living doing excellent work for their clients while their fellow partners are engaged in unscrupulous conduct and securing business opportunities through corrupt means. When such a firm implodes because of the conduct of a few, long standing careers are unwittingly destroyed and a mere association with the brand can ruin a professional’s career for life. In conventional corporations with listed or unlisted shares, the shareholders, the pension holders and employees who are far removed from the rogue elements stand to suffer a great deal when such a corporation collapses because of the conduct of a few.

Whereas most of us are inclined to seek swift justice against rogue corporations, we may need to spare a thought for those who are caught in the crossfire. The introduction of DPAs may be the bitter pill that we all need to swallow.

Matodzi Ratshimbilani is a director at Tshisevhe Gwina Ratshimbilani Inc.