FORENSIC

1. FORENSIC From Being Apart to Being PartnersA South African Case Study - Barloworld Daniel Malan, Associate Director November 2006 SUSTAINABILITY SERVICES

2. Outline • Being apart • Conceptual framework • Integrated Social Contracts Theory • Corporate Citizens, Colonialists, Activists, Tourists • Being partners: the Barloworld case study • Concluding remarks

3. Being apart – one example from history • Cecil John Rhodes – arrived on the South African diamond fields in 1871 – acquired a few claims and started buying up those of others who failed • “Africa awaits us … it is our duty to seize every opportunity of acquiring more territory … means more of the Anglo-Saxon race … the most human, most honourable race the world possesses” • British South Africa Company formed with the blessing of Her Majesty’s Government, its own army, police force and flag • Motto: Justice, Commerce, Freedom

4. Top 10 economies in Africa

5. The Size of the South African Economy Source: World Bank, 2003 figures

6. Compacts, contracts, partnerships Compact compactus (to put together closely) compacisci (to make a bargain, tocovenant together) Partnership Pars (part) parcener (joint inheritor) Contract Contractus (agreement) Contrahere (draw together) Togetherness Consent Mutual benefit

7. Integrated Social Contracts Theory(Donaldson & Dunfee) • Pluralist approach that tries to avoid the pitfalls of both the relativist (when in Rome…) and absolutist (one size fits all) approaches to business ethics • Attempts to integrate and capture strengths of macro social contracts and micro social contracts, while avoiding the weakness of both • Vagueness of macro contracts • Danger of micro contracts to be morally out of bounds, e.g. a local community that decides to reserve the neighbourhood for members of a specific race

8. Categories of Authentic Global Norms Moral free space Hypernorms Consistent norms Illegitimate norms Incompatible withhypernorms

9. Social and political roles HIGH Corporate Citizen Corporate Activist Social Responsibility Corporate Colonialist Corporate Tourist LOW Political Involvement HIGH

10. Barloworld • Diversified industrial company founded in 1902 • Manufacture, market and distribute products and services and market and distribute leading international brands on behalf of principals (incl. Caterpillar and DaimlerChrysler, licensee for Avis in Southern Africa, Sweden, Denmark and Norway) • Operations in thirty-one countries around the world - approximately 50% of 25 000 employees are in South Africa • Management philosophy: Value Based Management • “The implementation of VBM is a key driver of increased cash flow, profit and value creation. VBM makes every management team within Barloworld focus on creating value for all our stakeholders and is a long-term strategic programme. The benefits of the many VBM-driven initiatives within the organisation will continue to grow value as we expand our asset base”

12. The Middelburg Forum (1980’s) • Launched by subsidiary (Middelburg Steel & Alloys), based on Group Code of Employment Practice • Forum: a partnership between the company, schools, churches and ANC community based organisations • Transformed the nature of the company and the conservative town of Middelburg • Integrated facilities (against the law) and improved opportunities for black staff • “If harmony, success and incredible growth is possible within an equal opportunity company such as Middelburg Steel & Alloys, why can’t it be extended to the town, region and country as a whole?” (John Gommersal, MD)

13. “It was during a full meeting of councillors, church leaders, business leaders and comrades from the township that we heard a knock on the door, and in walked Anglican Archbishop Desmond Tutu. We were obviously surprised, but he asked us to carry on while he sat at the back and listened. Later, he asked if he could say a few words. He started with a prayer and then said that if what was happening in Middelburg could be repeated throughout the country, then South Africa would have a great future ahead of it.” Mark Drewell, Group Executive, Barloworld (at the time communications manager of MS&A)

14. Learning from the Barloworld case • Microcontract • Compact between stakeholders • Stakeholders adhered to hypernorms • Against “normal practice” at the time – government of the day did not adhere to hypernorms • Corporate activism • Did not shy away from political involvement • Enlightened self-interest • Involvement of stakeholders

15. Implications for Global Compact UN Global Compact can only provide the hypernorms The real challenge is in the “micro compacts” • Second tier – the challenge of measuring and reporting (GRI)

16. Presenter’s contact details Daniel Malan KPMG Sustainability Services +27 83 5611292 daniel.malan@kpmg.co.za www.kpmg.com The information contained in “From Being Apart to Being Partners”is of a general nature and is not intended to address thecircumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. © 2006KPMG Services (Proprietary) Limited,the South Africanmember firm of KPMG International, a Swiss cooperative. All rights reserved.Printed in South Africa.