Professional Service Industries: Facilitating malfeasance for a fee (I) – Understand professions

25 June 2019

This brief is the first of four considering the role of lawyers, auditors, accountants, and management consultants in facilitating corruption. It considers what it means to be a “professional” in a formal sense. The second brief explores constraints, or lack of them, on professional behaviour. Some of the institutional mechanisms currently in place to ensure that professionals conduct themselves appropriately will be discussed. The third brief discusses instances of malfeasance by members of these professions. The fourth looks at what can be done by various role-players to curb further misconduct.

“PROFESSIONAL” – A TITLE CONNOTING GRAVITAS, OR JUST GRAVY?

The word “professional” generally conjures up favourable associations – authority, knowledge, respectability, ethical behaviour, and prestige. Professions entail “work that needs special training or a particular skill, often one that is respected because it involves a high level of education”[i]. There is no doubt that a certain weight is accorded to the work of a “professional”, weight that is denied to blue-collar and routine non-manual workers.

The question posed in this brief series is whether the so-called “professional services industries” – specifically, lawyers, accountants, auditors, management consultants, and the like - have leveraged off this weight in a way that has enabled their clients to benefit from corrupt activities, including the capture of the state. The answer, unsurprisingly, is yes. A more searching question is whether or not the institutional structures within these professions are enough of a bulwark against corrupt influences. Is it the case that professions are tarnished by a few errant individuals? Or is there something wanting in the way professions conduct themselves?

This brief considers what it means to be a professional (and reaches an interesting conclusion about one of the four “professions” listed above). Next, the expanded notion of “professional” will be discussed – as roles within institutions require increased knowledge and skill, should other jobs be brought under the banner of “profession”?

“PROFESSION” – THE ROOTS OF THE CONCEPT

“Professionals profess. They profess to know better than others the nature of certain matters, and to know better than their clients what ails them or their affairs. That is the essence of the professional idea and the professional claim.”[ii]

This statement captures the notion that professionalism is more than a mere occupation. Rather, a professional must have skills and knowledge not readily available to the average person. These are usually acquired after a long period of study that, in many cases, involves a period of apprenticeship under the supervision of someone with extensive experience.

But this is not all there is to it. What constitutes a profession, and the role that professions play in society, has been the subject of academic study for decades. Historically, the “professions” began as occupational groups set up “under a system of protective patronage and formalisation of expertise”[iii], and included the likes of medicine, engineering, architecture, and law. The process of professionalisation has advantages, such as enabling standardisation and coherence in various service industries.

Wright formulates a list of characteristics of “professions” as follows[iv]:

- The offering of a service to the public;

- The possession of a special skill;

- Having undergone specified training and education;

- The possession of privilege or state recognition;

- Membership to a self-disciplined group, with a “community of interest in theory and in fact among the members of the calling”; and

- “A measure of unselfishness or freedom from purely personal considerations”.

This list captures three elements that must be satisfied: the cognitive (specialised knowledge and training), normative (ethical standards and a commitment to provide a public service) and organisational (being subject to an oversight body with disciplinary powers).[v]

But Wright’s list does not present the complete picture. For instance, it fails to include one author’s view that a profession is marked by “high exit costs – and hence substantial authority over members”.[vi] Nor does it contain the aspect of external recognition as a profession.[vii] Another missing element is that of trust that the public at large – and the professional’s client specifically – has in that professional’s ability to further their interests.[viii] A professional serves her client, but also serves the public good.

The designation of “professional” has become aspirational, with a greater number of occupations or trades seeking to show that they have “professionalised”.[ix] However, professionalisation has been subject to criticism. One critique is that occupations “professionalise primarily to exclude competing interest groups and produce a monopolistic market for their services”.[x] Bellis points out that professionals can also “reduce competition between themselves by setting minimum fee scales or refusing to take clients away from fellow members”.[xi]

What does this mean in the context of state capture, corruption, and other acts of malfeasance? In simple terms, there is the need for the public to remain circumspect when engaging the services of professionals. The designation as “professional” does not automatically mean that the holder will act ethically. Skills and knowledge can be put to nefarious ends, and trust can be abused. While state recognition and the presence of oversight bodies can promote ethical behaviour, their presence can provide a veneer of rectitude that can be exploited. In the event that wrongdoing is uncovered, sanctions must be applied in a way that sends a strong deterrent message to other professionals.

MANAGEMENT CONSULTING – THE CUCKOO IN THE “PROFESSIONAL” NEST?

Thus far, this brief has treated management consulting as a profession. The application of Wright’s factors above, however, reveals something different. Global consulting firms Bain & Company (Bain) and McKinsey – both of whom were criticised for work done for the South African government during the height of state capture – were approached to provide their input regarding the factors mentioned here. Only Bain provided a response, which is discussed below.

Regarding educational qualifications and a mandatory period of training, management consultants are often highly skilled, but that skill is not necessarily specialised. While certain qualifications are preferred or encouraged (such as a Master’s in Business Administration), management consultants can be drawn from various backgrounds – something which can be viewed as adding diversity in the way that consultants approach problems. There are no standardised tests that must be completed before one can practise as a management consultant. Nor is there any required period of internship or articles. Bain’s consultants attend a global training session every 18 to 24 months where they are trained by current managers and partners, along with regular training through the course of their work. While this training must be important to Bain’s work, there is no standardised syllabus that must be completed before one commences work as a management consultant, as is the case with chartered accountants or lawyers, for example. Training may differ markedly between consulting firms. One cannot expect a universal base line of skills or knowledge held by all consultants.

Further, there is no statute or set of rules regulating the conduct of management consultants. There is no professional organisation with which management consultants are required to register which sets standards regarding who can perform the work, how this is done, or provide guidelines as to fees. Any controls on consultants’ behaviour to ensure they conduct themselves ethically are exerted from within the consulting firm. Bain confirmed this, noting that its Operating Principles guides it in its “commitment to helping [its] clients, [its] people and [its] communities succeed”. It has a code of conduct, which its employees are required to sign annually, and which applies to all its employees, regardless of seniority. McKinsey also refers to “strict policies and professional standards” on its website.[xii] Whatever these standards may be, they are internally determined and enforced. They are not made available to the public. This can be contrasted with the rules for auditors, accountants, and other professionals.

Presently, membership in any association of management consultants is voluntary. In South Africa, the Institute of Management Consultants and Master Coaches South Africa (IMCSA)[xiii] seeks to fulfil the role of professional association for management consultants. The IMCSA does not publish a list of its members, and so it is not possible to determine whether the management consulting industry in general is receptive to the idea of registering with a professional association (Bain did not confirm whether or not it was registered with the IMCSA in its response). While the IMCSA states that its mission includes the “maintenance of a code of conduct and the required disciplinary procedures”, no information is publicly available regarding such procedures. Given this dearth of information, it is difficult to ascertain whether any sanctions applied are effective in preventing misconduct among management consultants. The IMCSA was asked to elucidate on its role for the purposes of this brief, but did not do so.

As to the question of public trust in the ability to further not just the client’s interest, but that of the public generally, an appropriate response would be that management consultants have a narrow mandate: their only responsibility is to their clients. Bain confirmed to the HSF that its objective, “first and foremost, is to create outstanding results for our clients”. (It stated later in its response that it aims “to conduct [its] business in accordance with the highest ethical standards, to ensure [it is] doing the right thing for [its] company, [its] clients and [its] communities”. Its response did not critically engage with what happens when the interests of client, community, and/or company conflict – ostensibly, this is dealt with in its Operating Principles and Code of Conduct, which is not a public document.)

Even the values and mission of the International Council of Management Consulting Institutes, the umbrella body of which the IMCSA is a member, refer to the “best interests of the client” with no express consideration for the impact on other persons beyond acting “in accordance with all laws and legislation”. It would appear, then, there is no broader public interest served by management consultants.

After considering all the factors, it appears that management consultants are not actually professionals in the formal sense. This distinction is meaningful. This is because the public may allow the work of professionals a greater degree of authority and weight than that of other occupations. Management consultants, when considered to be “professionals”, benefit from the positive associations without any serious institutional safeguards against misconduct.

As the involvement of the management consulting in corruption and state capture faces scrutiny, solutions need to come from within the industry. It is not enough to attempt to pay back fees received after the public interest is grievously harmed. The move towards registration with professional associations may be a step in the right direction, particularly if this means subjecting firms to a code of conduct that is enforced through more transparent processes. If consulting firms are not willing to address the systemic deficiencies that enable their consultants to act unethically, some thought must be given to regulation in a more formal sense, particularly as management consulting roles change and develop.[xiv]

WIDENING THE FIELD

The good reasons to bring management consultants within the ranks of a “profession” as formally understood can also apply to other occupations. An example would be the provision of information technology services. Technology firm SAP was implicated in state capture by allegations that it paid “commissions” to a Gupta-linked company in order to secure contracts with Transnet and Eskom.[xv] This formed the basis of a criminal complaint against SAP by the CIPC.[xvi]

As more industries become reliant on information technology, the influence of IT employees has increased. The time is ripe to consider whether this industry should be “professionalised”.[xvii] A first step could be developing standards by which these individuals are required to conduct themselves.[xviii] Governments may not be suited to regulating information technology with all its dynamism and complexity. A self-regulation model (or even something completely novel) might be preferable.

CONCLUSION

This brief has tried to bring clarity on the concept of “profession” by discussing the roots of the concept. More than that, the purpose was to show that professionalisation can be used as a mechanism to engender accountability in industries that have an impact on the public.

The next brief in this series will examine the mechanisms that can be used to hold professionals accountable for their conduct.

By Cherese Thakur, Legal Researcher, HSF, 25 June 2019

[i] Cambridge Online Dictionary. See https://dictionary.cambridge.org/dictionary/english/profession.

[ii] EC Hughes “Professions” Daedalus 1963 (2)4 pages 655 – 668 at page 656.

[iii] EA Burns “How does a short history of professions help us think about professionalisation today?” Conference Paper – 14th Australia Studies Conference in China, accessed at https://www.researchgate.net/publication/271457595_How_does_a_short_history_of_professions_help_us_think_about_professionalisation_today.

[iv] P Wright “What is a Profession?” Canadian Bar Review 1951 Vol 29 page 748.

[v]C Bellis “Professions in Society” British Actuarial Journal 2000 6(2) pages 317 to 364 at pages 318 – 319.

[vi] B Donabedian “Self-regulation and the enforcement of professional codes” Public Choice 1995 85(2) pages 107 – 118 at page 112.

[vii] C Bellis (above note v) at page 319.

[viii] Hughes (note ii above) at page 656.

[ix] Hughes (note ii above) at page 658.

[x] M Neal and J Morgan “The professionalization of everyone? A comparative study of the development of the professions in the United Kingdom and Germany” European Sociological Review 2000 16(1) pages 9 – 26 at page 10.

[xi] C Bellis (above note v) at page 322.

[xii] See https://www.mckinsey.com/about-us/social-responsibility/responsible-professional-practice.

[xiii] The website for IMCSA can be accessed at https://imcsa.org.za/.

[xiv] See A Sturdy et al “The successful slow death of management consultants” The Conversation, accessed at https://theconversation.com/the-successful-slow-death-of-management-consultants-37400 on 25 April 2019.

[xv] S Comrie “What SAP really knew when it paid the Guptas a R100m commission” News24 accessed at https://www.fin24.com/Companies/ICT/what-sap-really-knew-when-it-paid-the-guptas-a-r100m-commission-20180625-3.

[xvi] L Steyn “CIPC’s net should catch other big fish” Mail & Guardian accessed at https://mg.co.za/article/2018-01-19-00-cipcs-net-should-catch-other-big-fish.

[xvii] For an interesting take on the contrast between software programming and engineering – an established profession – see I Bogost “Programmers: Stop calling yourselves engineers” The Atlantic accessed at https://www.theatlantic.com/technology/archive/2015/11/programmers-should-not-call-themselves-engineers/414271/.

[xviii] One proponent of regulating IT is MY Vardi “Cars are regulated for safety – why not information technology?” The Conversation accessed at https://theconversation.com/cars-are-regulated-for-safety-why-not-information-technology-111415.