The Plague of 2019 – Executive Fraud

The citizens of South Africa are prejudiced by the extent of fraud, misrepresentation and corruption in the public sector.  What is fascinating is the boldness and entitlement demonstrated by the perpetrators and the cowardly complicity of the bystanders.  The wrongdoing goes on unabated, despite there being extensive legislation, watchdogs and law enforcement.

No sector of society is free from malpractice as we hear of misappropriation in government, fraud in the private sector and in NGO’s. I don’t really want to reiterate the stories our SA media is replete with, but I need to dig under the surface, to try and understand what is going on!

I am intrigued to find out what the motivations behind theft, fraud and copyright infringement.  How do people not rationalize that they may be caught? Donald Cressey’s Fraud Triangle is widely used in analyzing the causal factors of fraud.

“Pressure,” or motivation, is one of the three causal factors of Donald R Cressey’s Fraud Triangle, along with opportunity and rationalization. A quick summary of the theory is that a person commits fraud when under difficult or threatening personal circumstances (pressure) and he or she has access to a valuable target for personal gain (opportunity) that they can justify internally (rationalization).” 1

2 Laura Downing a Certified Fraud Examiner has developed the triangle further in examining perpetrators motivation as illustrated in the diagram below.

The franchise industry has had very few cases of fraud.  When compared in quantity and rand value, to those in the wider private sector that are exposed on a weekly basis, they are insignificant.  In the main, players in the franchise community are ‘angels’, compared to what is going on in the wider private sector and government.

In franchising there are too many checks and balance to allow for fraud.  Franchisees, existing and potential, go through many processes of scrutinizing the franchisor and vice versa.   Responsibility and accountability between people are the themes of a franchise agreement.  The mutual interdependency of franchisor and franchisee, which forms the foundation of franchising, leaves little to chance.  Also, cash flows are not always in excessive volumes to allow for misappropriation as in the case of the Steinhoff, VBS, and Eskom situations.

My experience of shenanigans in franchising involves theft of intellectual property where executives have “stolen” my intellectual property at will. Infringement of my works has been perpetrated by no other than the franchise “industry authority”.  The quest, in my experience, to keep wrongdoing in check is expensive and exhausting. It seems that people have forgotten the basics of how to treat their fellow-man.

Franchisors and franchisees lead the franchise sector with their mature and admirable practices in managing relationships.  Trust, respect and consultation is inherent in the moral fiber of the people involved in franchising.

 

executive-fraud-triangle The Plague of 2019 – Executive Fraud
Source: https://www.fraud-magazine.com/article.aspx?id=4294988229

 

We live in a fractured society where in my opinion, some parties, when in a position of power, have fallen off the fence that separates acceptable from unacceptable practice.  Three of the Ten Commandments, which have existed for some 3000 years, most relevant in the corporate world, and which should govern the relationship between individuals:

“Though shall not steal.
“Though shalt not bear false witness.
“Thy shalt not covet they neighbor’s house…”3

I can only conclude that the parties involved in any fraudulent activity, including knowingly infringing copyright, to be plagued by three elements of the triangle GREED, PRIDE AND ENTITLEMENT.  Perhaps perpetrators may never know that the world is bigger than their own line of vision and personally motivated needs for power and recognition.

 

1 https://blog.lowersrisk.com/organizational-fraud-motivation/ Lowers and Associates 19 November 2015
2 https://www.fraud-magazine.com/article.aspx?id=4294988229
3 http://www.chabad.org/library/article_cdo/aid/2896/jewish/The-Ten-Commandments.htm

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