The Voice of Business Schools Should Not be Silenced

Business Education, News from GBSN

Brazil’s Fundaçao Dom Cabral (FDC) is what I call “a business school with a heart”. Ranked 8 th worldwide by the Financial Times for customized executive education, it trains about 40,000 executives from mid-size and large companies every year. All FDC’s activities are informed by a Covenant drawn up in 2006, which expresses the institution’s commitment to ethics in its relations with all its stakeholders. I quote Article VII: “Ethics: concentrating on practicing loyalty, trust and transparency in our relations with third parties while recognizing our mistakes and correcting our paths”.

Disasters

Last week I was privileged to participate in an extraordinary journey organized by FDC for its International Advisory Council.  The School’s main campus is situated in the state of Minas Gerais, the heart of Brazil’s mining industry. On the 5 th of November 2015 a dam owned jointly by Vale, a major Brazilian mining company, and Samarco – a dam builder/operator controlled by Vale – breached, unleashing some 60 million cubic meters of toxic iron waste, engulfing a small low-income rural community, killing 19 people outright and polluting the Rio Doce all the way to the Atlantic, affecting some 500 towns. .

We traveled by bus to the ruins of the tiny village of Paracatu de Baixo. Only the church and the schoolhouse were dug out.

Emerson de Almeida, FDC’s Founder, the Dean, Antonio Batista, other senior FDC staff and members of the International Advisory Council met in the church, where we listened to four of the villagers. What used to be a close-knit community growing crops, raising a few cattle and fishing in the Rio Doce was obliterated.

Tragically, a similar retaining dam fully owned by the Vale was breached this January, killing 272 people (20 of whom are still missing), sending a tidal wave of mud along the 620 kilometer length of the Rio Doce and a plume of waste into the ocean some 17 days later. There are more than 500 such dams in the state.

Response

The iron mines that caused the disaster are owned by Vale and Broken Hill Billiton of Australia.  When the 2015 dam broke corporate leaders “weren’t there to listen” to the survivors. Eventually it emerged that structural problems with the dam (as well as others) had been known. This led to government charges against company executives and eventually to lawsuits seeking billions of dollars in social, environmental and economic compensation. It also emerged that the German company which certified that the dams were safe also knew of the structural problems.

The Renova Foundation was established, tasked with trying to mitigate the disaster’s impacts all along the Rio Doce. Samarco, Vale and BHP are its main funders.

Until now, however, survivors have received very little support, leaving them in a kind of “existential void”. Most villagers moved to nearby Mariana – to us a small town but to them a bewildering metropolis, leaving behind only a few of the older villagers who refused to move. The four villagers who spoke at the church were in a state of acute distress. In the words of one of the ladies who was in tears: “I feel like a tree without ground”, “I want my life back”.

Reflections

            We spent the next two days reflecting on what we had seen and learned. The discussions included the state’s Vice-Governor, the Chair of the Brazilian Mining Association, Renova Foundation’s president, other company and government officials, FDC faculty and members of the International Advisory Council.

I think that those of us who had been to Paracatu de Baixo were somewhat in a state of shock. I feel angry at the disconnect between the actions of government, corporations and foundation on the one hand, and the handful of low-income victims left, as far as I can see, to fend on their own four years after their lives were devastated.  What I see is a massive example of institutional inadequacy.

Laws and regulations were never designed for rapid action. Legal obstacles crop up each step of the way. For example, according to the law compensation requires proof of ownership. Even if the victims had pieces of paper showing that they owned the houses which they themselves had built or this or that cow, these documents would likely have been engulfed in mud.  Here is a picture of the school house:

Or take the perceived need for Renova foundation to consult every conceivable stakeholder, including many nonprofit organizations. One participant likened the process to that of the United Nations. No wonder that the foundation employs 500 staff, who are struggling valiantly to help about 400 persons.  Some cash has been paid out to Bento Rodrigues victims which was quickly dissipated by villagers who lack in financial literacy.

Business education can definitely play a role in improving company leadership. Vale seems to have been caught like deer in headlights by an event that was, to put it mildly, not unpredictable. During the discussions one of the Council members suggested that mining and other high risk companies should establish emergency procedures to be followed when disaster strikes, and train permanent rapid response teams answering to a top executive who can cut across routine procedures. That would seem to me an elementary precaution, one which could also save companies billions of dollars in lost stock value and damages.

More broadly, Piet Naudé, Director of the University of Stellenbosch Business School gave a passionate and inspiring talk. His theme: the voice of business schools should not be silence. He drew on the many social and political injustices afflicting his native South Africa, which, to a large extent, are mirrored in Brazil, concluding that if they wish to be at all relevant, business schools must “walk the talk”. FDC’s leadership and faculty fully endorse Piet’s message.

I am deeply thankful to Emerson, Antonio and his colleagues for having invited me to take part in this journey.


Guy Pfeffermann is the Founder and former CEO of the Global Business School Network. He currently sits on the GBSN Board of Directors.