Mgt712 Corporate Governance - Ethics Assessment Answers

Introduction:

The ethics and values along with the CSR have a major importance in the modern business world. The modern business world is highly competitive and in that case the organizations largely depends on the CSR activities in order to get some added advantage in the market (Schwartz, 2017). It is evident that the organizations which are observed to be taking stand for the people by their CSR activities, are able to achieve the belief of their customers in a significant manner. The preferences of their customers in buying a product is highly influenced by their belief regarding which organization is thinking about them and the ethical approach to conduct the business by the concerned organization (Fromm, 2013). The paper discusses the attributes of an organization in dealing ethically and the effect of CSR in their business. The chosen organization for the purpose is Kmart Australia Limited.

Background of the Company:

The organization is a well-connected chain of low price retail stores which is owned by Wesfarmers Limited. The organization is having its headquarters in Mulgrave, Melbourne and is operating across 228 stores of both Australia and New Zealand ("Kmart Official Website", 2018). The organization faced some severe challenges in operating smoothly in the market which forced them to change the leadership team. The restructured team of Kmart is having the excellence of Guy Russo (CEO Department Stores Wesfarmers), Ian Bailey (Managing Director, Kmart), Rob Scott (Managing Director, Wesfarmers Limited), Anthony Gianotti (Chief Financial Officer, Wesfarmers Limited), Maya vanden Driesen (Group General Counsel), John Darker (Managing Director, Coles), David Baxby (Managing Director, Wesfarmers Industrials), Linda Kenyon (Company Secretary, Wesfarmers Limited), Ed Bostock (Managing Director, Business Development, Wesfarmers Limited), Naomi Flatter (EGM, Corporate Affairs, Wesfarmers Limited), Alan Carpenter (Senior Advisor), Jenny Bryant (Chief HR Officer) along with Michael Schneider (Managing Director, Bunnings Group) ("Kmart Official Website", 2018). As the parent organization for the Kmart is Wesfarmers, the board is similar to the parent organization with significance power to Guy Russo and Ian Bailey (Group, 2018). Critics and business leaders termed the business of the concerned organization to be crumbling and directionless. Guy Russo took the responsibility from there and remodelled the stores. Along with that he was able to focus on the low pricing of the products as well. The brand development under Russo was able to partially eliminate the adverse impact of negative brand image on the concerned organization.

Public Scandal:

In November 2011, the organization started selling female underwear keeping a focus on the emerging youth market but the organization tried to promote their product in a controversial way. The underwear had written texts on it which were considered to be not appropriate like “call me”, “email me” or “I love rich boys” ("Kmart Official Website", 2018). The organization received criticism from all sectors of the society and was forced to withdraw their products and issued an apology to their customers. The normative ethical theories like consequentialism can be discussed on the mentioned controversy as the approach of considering the particular controversy to be good or bad, depending on the outcome of the controversy was observed (Ahlstrom-Vij & Dunn, 2014). The organization was forced to withdraw their product and the outcome was absolutely justified with the wrong formation of product processing. The theory of Utilitarianism is also observed there as the product was not considered to be best and appropriate and the withdrawal of the product ensured its lack of utility (Mill, 2016). The apology from the part of the organization was a reflection of the contractarianism as that ensured their responsibility towards the better image of the state (Vanberg, 2014).

Stakeholders:

Australian and New Zealand Government: Taxation, legalities and employment.

The organization was a major source of revenue for both the governments and the amount of tax that the organization was paying was a triggering factor for the government in helping it get bigger and better. The organization was able to build employment in the concerned regions.

Employees: Job security, Recognition of the work, pay structure

The organization cut off significant amount of employment and closed many non-profitable parts of it in order to reduce the amount of loss it faced before the takeover of Guy Russo. Guy Russo made sure that the available workforce be satisfied with their job and that is considered as one of the major points of their comeback.

Customers: products with the proper display of ethics, value of the money

The assurance of quality in the products of the given organization was significant for the customers of the organization. Even with the few controversies, the organization proactively managed them in order to make sure that the bond between the customers and the organization remains intact.

Suppliers: quality materials

The assurance of quality material from the part of the supplier chain was instrumental for the revival of the organization and the stable growth of the organization after the remodelling done by Guy Russo.

Social Community: Involvement of the community, jobs, environment protection

Wesfarmers: profitability, return on investment, growth of the organization

Wesfarmers, being the parent organization was significantly proactive in restructuring the organization and with the recruitment of the new CEO and marketing director, the organization succeeded in the adverse situation.

Australian Security Exchange:

The concerned organization is able to declare their leadership team publicly according to the first principle of the guidelines ("Home - Australian Securities Exchange - ASX", 2018). The organization specified the roles and responsibilities for each and every board members and the management. The organization was able appoint the concerned employees or the member of the managements according to the outcomes of their thorough check on the experience and work history of the employees. This enabled the organization to check whether a particular candidate for a given post has any other directorships currently held by him or her. The organization has written contract with every key members of the organization in order to stay connected. This enabled the organization to specify the terms and conditions of them. The organization employed a keen focus on evaluating the performances of the key members of the organization and that helped them to calculate the difficulties and their reasons which were faced by the organization. The analysis played a major role in restructuring the senior management team which was visible with the introduction of the new managerial team in Kmart.

Philanthropic Responsibility:

The Carroll’s concept of CSR was demonstrated by four part definitional framework where the philanthropic model was one of the four key parts (Carroll, 2016). The philanthropic model generally specifies the interest and belief of the customers regarding getting something back. The philanthropic model for an organization generally serves the concept of corporate social responsibility (Nalband, N. A., & Kelabi, S. A. (2014). The organizations in the competitive business market significantly depend on the CSR for achieving extra limelight from the market. The campaign of wishing tree appeal from the organization Kmart, was a significant step forward in expressing the philanthropic responsibility of the organization. Since 1988, the organization along with the Salvation Army collected gifts over five million from the customers in order to help the needy people by distributing the gifts to them. The concept was first proposed by one of the employees of a store of the concerned organization in Noarlunga who came up with the idea of converting the store into a gift collection centre in order to distribute the gifts to the needy people on Christmas. This was one of their major steps in getting socially connected to the people of that region.

Conclusion:

The organization had a major restructuring in the organizational context in order to survive serious situation and was able to do so with the active participation of the entire workforce in maintaining the ethics and values. The social responsibility and the appropriate management from the part of the organization in the controversies was significant for the organization in achieving a stable business.

References:

Ahlstrom-Vij, K., & Dunn, J. (2014). A defence of epistemic consequentialism. The Philosophical Quarterly, 64(257), 541-551.

Carroll, A. B. (2016). Carroll’s pyramid of CSR: taking another look. International journal of corporate social responsibility, 1(1), 3.

Fromm, E. (2013). Man for himself: An inquiry into the psychology of ethics. Routledge.

Group, D. (2018). Home. Retrieved from https://www.wesfarmers.com.au/

Home - Australian Securities Exchange - ASX. (2018). Retrieved from https://www.asx.com.au/

Kmart Official Website. (2018). Retrieved from https://www.kmart.com.au/

Mill, J. S. (2016). Utilitarianism. In Seven Masterpieces of Philosophy (pp. 337-383). Routledge.

Nalband, N. A., & Kelabi, S. A. (2014). Redesigning Carroll’s CSR pyramid model. Journal of Advanced Management Science, 2(3).

Schwartz, M. S. (2017). Corporate social responsibility. Routledge.

Vanberg, V. J. (2014). James M. Buchanan’s contractarianism and modern liberalism. Constitutional Political Economy, 25(1), 18-38.