Business Case Study: Ethics of the Retail Industry of Australia

Ethics of the Retail Industry of Australia

The current paper provides an analysis of a business case study. Specifically, this case study concerns the ethics of the retail industry of Australia. According to the aforementioned case study, there is enormous pressure on the retail business in Australia. The lack of strict laws that govern the practice of business has made it even more dire. Such companies as Coles of Wesfarmers can afford to breach contract agreements. Employees are frequently overworked, and some companies fail to provide their stuff with appropriate working conditions. The employees’ salaries are low, despite the fact that they are coached to provide positive feedback about their employers to external auditors. Additionally, unhealthy competition and the application of strategies that maximize the returns without considering their impact on consumers are among the important issues relate to the case study. Professional accountants have a pivotal role in the control and management of organizations. Their duties are to define, promote, and implement performance measures and to ensure remuneration based on performance. The case analysis involves answering questions which are related to the case study but require profound research of other materials. Therefore, in order to answer the case study questions, careful interpretation of the case and further research based on external sources are provided. The materials related to ethical practices in business (similar case studies, website articles, and journal articles on the topic) have helped to respond to the questions. Being acquainted with the case and answering the questions provided knowledge on the effects of unethical practices in business. The work with this case study has helped the author to realize that supporting ethical principles in business can lead to achieving success. Additionally, the author has learned more about independent and confidential auditing techniques.

The retail industry in Australia is under pressure. There are several reasons why it is currently suffering, including the relatively small size of the market and the implementation of unethical practices in the operation of businesses. The proposed case study concerns ethical business practices of retail companies in Australia (Munir n.d). The retail industry is experiencing growth. but the growth, in turn, compromises the integrity of business practices. Some retail shops and supermarkets value the profits that they make without considering the means that the management might use to reach them. The companies are competing not in term of the quality of the products they offer, but in the amount of profit they get. For instance, Woolworths and Coles accuse each other of having poor quality of goods and utilizing ill-motivated business strategies (Boyd 2016). The case demonstrates the ethical aspect of business practices of various Australian companies, such as Coles, Woolworths, RANA Plasa, and Wesfarmers. The case touches upon the ethical practices of retail units on the Australian market.

Environment/Context of the Case

The case handles the issue of ethical business practices in the competitive business environment of Australia. Different companies compete for market shares for their products. The major players in the retail industry of Australia are Woolworths, Coles, Wesfarmers, and RANA Plasa. Corporate governance is not developed properly, since companies care only about themselves and do not protect the interests of other key stakeholders, especially the employees and the customers. The organizations often manifest the culture of greed and selfishness. Each company cares only about itself. For instance, Coles does not protect the welfare of its suppliers, and its employees work 14-16 hours per day (Munir n.d). The companies have freedom to operate their businesses in ways hey find appropriate. This factor has led to the emergence of rivalry between the companies, such as the conflict between Coles and its suppliers. The case is a reflection of ethical practices common among Australian retailers and traders. The companies abuse auditing and accounting laws to protect themselves from the wrath of inspectors.

Challenges and Issues

A major issue of the Australian business environment is the lack of strict rules and regulations that control the actions of businesses and corporations. The absence of such laws has triggered cases of malpractice in this field. For instance, certain firms have coached their employees to give false information during audit sessions (Crane & Matten 2016). They are forced to answer the questions of the external auditors for fear of losing their jobs. Another issue characteristic for Australian retailers is poor working conditions. For example, RANA Plasa is not only unethical, but may also prove dangerous to its workers (Weiss 2014). Inappropriate remuneration and unfair competition among the retailers are common things, because each retailer wants to be the best in the market and uses all possible means to achieve success. Third, some companies refuse to honor their agreements. For example, the case of Coles and its suppliers demonstrates multiple counts of breach of contracts agreements.

Responses to Case Questions

Q1. “Acting in good faith” means doing what is right for the consumers and the suppliers and respecting the Food and Grocery Code of Conduct (ACCC 2014b). This code is set to ensure that each company acts honestly towards its stakeholders as the binding law stipulates. The principle of acting in good faith is applied to retailers, wholesalers, and suppliers, as well as other people entering negotiations with a wholesaler or a retailer to become a supplier. Therefore, during the term of agreement, all sides should act in good faith towards each other (ACCC 2014b). In Australia, according to the ACCC, an agreement between a retailer and its suppliers should have a provision that requires the supplier and the retailer/wholesaler to act in good faith in their dealings.

Q2. The Food and Grocery Code of Conduct is a voluntary code, because it is an initiative of retailers and wholesalers that have chosen to be bound by the code. They have createed the ACCC to confirm their commitment (Productivity Commission 2014). The code is based on internal deliberations between retailers and wholesalers that express the will to work under certain regulations. The code came into play following the business misconducts of Wesfarmers’ Coles. It has to protect the interests of all consumers and enhance healthy competition, as well as promote ethical business practices among retailers and wholesalers. ACCC has not ratified the code, because it does not override the existing competition and Consumer Act of 2010 (ACC 2014b). All of the provisions are captured in this act. For this reason, ACCC has decided not to authorize it.

Q3. In the business world, the power to make decisions, set prices, and regulate certain business activities is the most important thing for managers. However, the appropriate timing for using this power is a point of concern (Mirshekary & Carr 2015). There are business enterprises that use their authority in dishonest ways to suppress their competitors. It makes it hard for these competitors to operate smoothly. In a fair market environment, business people and entrepreneurs cannot use their authority and power to control or make decisions that affect business operations of other entities (Sadek, Evans & Prusan 2013). For instance, a company cannot just lower the price of a product to the extent that its competitors become unable to make sales. Businesses do not attempt the same pricing of products due to differences in their manufacturing costs or sources of raw materials. However, if a business is on the verge of collapse because of poor sales, a manager has the right to use their power to save it from failing (Crane & Matten 2016). A manager assesses whether their decision-making power is legitimate by determining the impact of such decisions on the progress of a company. The decisions should lead to success as outlined in the company’s statements about its vision and missions.

Q4. Working agreements and codes of conduct bind businesses and companies. Each party has to respect them in business operation. Therefore, it is inadvisable to delay the payment to supplier. A supplier has to honor and abide by the rules of agreement, and regulations just like the company receiving supplies should. A payment delay will be a dishonest move that can negatively influence the relationship between the company and its suppliers (Sadek, Evans & Prusan 2013). Suppliers need capital to continue the manufacturing processes. Therefore, a delay of payment will disrupt their working formula and operations. As a CFO, I will respect the existing rules and regulations that are stated in the contract between the company and the supplier. I will have to take into consideration the fact that suppliers are always necessary, and a supplier has the right to cut all business links with any company, which would be harmful for the business.

Q5. The employment conditions of the developed and developing nations differ significantly. Developed nations provide better working standards and employment conditions as compared to the developing ones (Crane & Matten 2016). Therefore, the practice of business in these two environments is quite different. The application of the standards of employment conditions, which are common in the developed nations, must be guided by the company performance in less developed countries (ACCC 2014). To determine what is appropriate, I would use the information related to the performance of a company at both the local and international levels. Such data can offer a good platform for determining what a company is capable of providing. If a company makes huge profits and is considered successful by local standarcs, then the workers should feel the benefits of such favorable outcomes and be properly rewarded.

Q6. A survey conducted by OxFam Australia indicates that Australian companies can receive better profits due to the reduction of prices on products. If the companies provided the goods at low prices, the suppliers would manage to sell them in the developing countries (Hoskins 2015). Therefore, being a part of the decision-making process, I would convince the marketing officer to consider accepting the offer of Australian consumers to reduce the prices on products. The developing countries are a great market for the products that Australian companies produce. The suppliers would be able to expand to other developing nations. Thus, there would be many benefits for the companies involved, because they would have a new market for selling their products. I will explain the long-term benefits of this idea to the marketing officer. The company will be able to set prices in the future and control the market, and the competitors’ decisions will be dependent on what the firm will be doing or will be planning to do.

Q7. The best way to conduct a company audit is to do it secretly. I would employ the Australian accounting codes of conduct to perform the activity (APES 2010). These codes and principles state that the auditor(s) should not disclose confidential auditing information acquired from the clients to other persons without following proper legal procedure (APES 2010). The codes prevent the auditors from using the information obtained from specific employees for their advantage and compromising the confidentiality of the information, which the respondents give (APES 2010). Therefore, I will uphold the existing codes and principles to ensure that the auditing process will be kept secret from everyone inside and outside the organization.

Q8. Integrated reporting is one of the communication strategies that organizations use to report their progress in their respective industries (IIRC 2013). It is centralized communication between all departments of an organization and its stakeholders on the strategy, governance, and priorities that a company should focus on to achieve its short-term or long-term objectives (IIR 2013). It involves concentrating on what a company needs to reach its goals in the future and shows how it plans to realize its objectives. Through IR, the management of a business can think holistically, evaluate their strategic plans, and make informed decisions (Weiss 2014). Therefore, in order to evaluate the existing goals of a company and outline its future aims, the management of an organization will have to create a remuneration design that will not contravene the realization of these objectives.

Q9. “At risk” component of remuneration refers to a type of remuneration that is not guaranteed, because it is dependent on the performance of someone else. For instance, in an organization a management team gets remuneration if the owners or shareholders get it as well. If they do not, the team does not obtain it either. It appears to be a component of total remuneration for CEOs and senior managers of bigger companies, because those groups constitute the management (Weiss 2014). They are in charge of running their companies. That is why they get a large portion of remuneration through allowances.

Q10. Stakeholders of a company are its employees, suppliers, customers, policy-makers, bankers, and the government. Supermarket stakeholders include consumers, employees, suppliers, partners, policy-makers. and others (Mirshekary & Carr 2015). The understanding of business stakeholders is an important aspect of operating a company, because it helps supermarkets to act ethically towards each actor. It guarantees future and prosperity to an organization. Additionally, it can help a business to embrace ethical working practices and form fruitful relationships with other stakeholders. Organizations need to know who their stakeholders are to ensure excellent working environment for all parties involved.

Q11. An organization can develop a culture of long-term sustainable growth by stating the goals and objectives that indicate what a company needs to do in the future (Mirshekary & Carr 2015). A company needs to have long-term strategies and goals in the industry that keep it committed to production and operation. Short-terms objectives should be set in a way that facilitates or enables organizations to achieve its long-term aims. Companies should refrain from making short-term decisions (Weiss 2014). Despite the fact that they yield benefits, short-term decisions still have the potential to ruin the performance of companies in the future.

Q12. To avoid the recurrence of such problems, accountants must check the products that the customers buy before authorizing entering them for records analysis. Accountants must exercise a certain level of accountability when documenting the products that a company purchases. They should carefully look at what they record or authorize for payment. As an accountant, I would ask the management team to make decisions based on consumer demands. By taking this position, I would have a duty to know what the company buys to ensure accurate recording. Due to the check-up, I will disclose the issue affecting the company.

Q13. The success of a business entails not only financial gains, but non-financial aspects as well. Therefore, it is important to evaluate the performance of an organization through the use of non-financial measures. The non-financial measures target and define performance. which is core for the delivery of chosen strategic drivers. It is the acknowledgment of legitimate contribution and the role of organization’s stakeholders that prove to be a catalyst for having an extensive view of the ingredients of performance management (Mirshekary & Carr 2015). For example, in non-financial measurement, an organization may opt to evaluate the views of the customers and consumers of a company. Non-financial measures can help an organization to establish a healthy relationship with its stakeholders, including suppliers and customers. These measures also help a company to act diligently and build a positive image for the public, consumers, and suppliers.

Q14. As a CFO, I would prefer my performance to be evaluated and remunerated based on a more balanced set of measures. The reason for it is the fact that when measuring the performance of an employee, one has to consider a number of factors that have influenced the operation of a company during a specified period (Sadek, Evans & Prusan 2013). The same mechanism should apply when measuring the performance of a junior accounting officer. The accomplishments of the employees should follow the criteria of balanced measures instead of discrete financial measures.

Conclusion: Impacts of Issues and Challenges

The practice of business requires a component of faith and goodwill from each of the stakeholders involved. The companies have an obligation to act justly towards external and internal stakeholders. The management team and the board of directors should put the interests of a company before anything else and consider the fact that the prosperity of a business is the result of the work of employees. Coaching employees to answer question a certain during auditing periods is a short-term solution, and its implications are hard to rationalise when coaching is no longer possible. Breaching business agreements (the case of Coles and its suppliers) harms the relations between companies and their suppliers. A retail company, such as Coles of Wesfarmers, always needs supplies, but breaking the rules and regulations stated in the agreement ruins the working rapport for both parties. The company employees should be treated justly. The management of an organization should avoid any unethical manipulations.

Auditing is the most important element of the life cycle of an organization. It helps the management team and outside stakeholders to understand the aspects of operating a company, including the availability of various resources and the accountability of assets. Additionally, auditing helps to eliminate the loopholes in a company’s operations that can harm its functioning. Genuine auditing, unlike the coached kind, can help improve the working environment for employees. For instance, according to the OxFam study, almost 89% of Australian consumers are ready to pay extra money for products if that will allow workers to get better wages and improved working conditions (Munir n.d). Such issues as employee coaching, unfair competition, and breaching of agreements have to be solved. Therefore, the implementation and support of appropriate rules and regulations that define the standards of business ethics are necessary. In business, the lack of strict rules can be dangerous for everyone who is involved in the filed, including the companies themselves, employees, and consumers. Any business environment needs laws and policies that define its nature and regulate the conduct of actors. However, such laws and policies should not limit market freedom.