Business Ethics and Responsible Management

This report discusses the ethical issues faced by Boohoo group plc, focusing on the recent incident in Leicester. It highlights the role of business in society, the impact on stakeholders, and the importance of responsible business management. Recommendations are provided to address the issues and improve ethical practices.

Business ethics and
responsible management

TABLE OF CONTENTS
Part 1................................................................................................................................................3
a) Letter to the senior manager of Boohoo......................................................................................3
Introduction..................................................................................................................................3
Ethical issues...............................................................................................................................3
The role of business in a society..................................................................................................4
Impact on Stakeholder.................................................................................................................4
Responsible business management..............................................................................................5
Conclusion and Recommendations..............................................................................................5
b) Application of ethical theories on Boohoo case study................................................................6
Utilitarianism...............................................................................................................................6
Kantian ethics of duty..................................................................................................................7
Part 2................................................................................................................................................8
Reflection on Ethical leader.............................................................................................................8
References......................................................................................................................................11

Part 1
a) Letter to the senior manager of Boohoo
Introduction
This report is written to the senior managers of Boohoo group plc regarding the ethical
issues of employees, supply chain purview and corporate governance that was recently witnessed
in Leicester. As per Boohoo Group Plc, (2020) supplier code of conduct, the ethical trade policy
of the company is based on ETI or ethical trade initiative incorporates certain standards in the
labour practice and a proper code of conduct. However, the recent incident in Leicester has
broken the code of conduct and ethical standards as labour were forced to work in the factories in
spite of Covid-19 pandemic, risking health and safety of workers in poor working conditions on
low wages, the cause of which was major oversight and compliance issues and lack of sense of
responsibility by the company (The guardian, 2020). This report will highlight the ethical issues
that company needs to focus upon, the role of business in a society, the impact of breaching
ethical issues on the stakeholders, responsible business management and will devise certain
recommendations for Boohoo.
Ethical issues
To begin with, Boohoo group has been a leading brand and online fashion retailer
founded in 2006 which aims at manufacturing apparels targeting the customers of age group 16
to 30. The company has been specialising in more than 36,000 products and operating several
brands across the world (Boohoo Group Plc, 2020). The issue highlighted in this report in
context to production of fashion cheaply and quickly and the heavy reliance on extended supply
chain has to be looked at from the ethical perspective due to the fact that the action so the
factories in Leicester has led to putting high number of workers at risk of getting infected by
corona virus due to the lack of social distancing and poor working conditions (BBC 2020). Apart
from this all the workers employed were working on less than minimum wage and overall health
and safety was compromised with. The company has failed to the corporate governance
functions of oversight and compliance, along with compromising integrity of the supply chain.
This can be referred o as irresponsible management of the business. This entire incident has
negatively affected the public image of the company, where the company has lost over 46% of
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the value and the shares have dropped as of mid-July along with high criticism from the political
speakers and the general public (The guardian, 2020).
The role of business in a society
The role of the business in a society is to production and distribution of goods and
services for the satisfaction of the demand and needs of the public, and it quite important as the
society does not exist without a certain form of economy while the business make up the
economic systems. The aim of the business can be debated upon but the actions intended for only
the shareholders and owners of Boohoo and focussing solely on profit making (Friedman, 1970)
while neglecting ethical issues is not right as it impacts the wider society. The role of the
business has to aim at acting responsibly and decision-making should assess the impact on the
various stakeholders which include community, customers, employees, government, suppliers
etc (Freeman, 2001). The people should largely view the business as a responsible one with
ethics and corporate social responsibility rather than just a business intended to make money
(Waddock, 2016).
Impact on Stakeholder
Stakeholders of a company be defined as those individuals or group that possess interest
in the major decisions and functions of the organization and are impacted by its various activities
and actions either directly or indirectly. The major stakeholders of Boohoo are its employees,
customers, suppliers, investors and shareholders and community. The actions of eh company
have majorly impacted all of them (Manu and et.al., 2019). The employees were directly affected
as a result of poor working conditions, low wage payments, security, health and safety risk of the
pandemic and risks of getting infected. The major losses were faced by the shareholders and
investors of the company as the unethical actions reduced the goodwill and brand equity and a
heavy loss of value and shares were faced. The reduced profits were directly borne by the
shareholders. The customers were also impacted indirectly due to such actions as many people
considered themselves responsible for the unfair treatment of the employees and refrain from
putting in their money in a company with a low brand reputation (Sudsakorn and
Rattanawiboonsoom, 2018). The extended supply chain was also impacted as the ones that or
adhered to the policies were subjected to termination a part of the independent oversight as a
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more ethical supply chain needed to be constituted. The local community was affected as the
employees who got infected in the pandemic could further lead to a wide spread of infection in
other areas of the city and country, which also affected the environment (Currie-Europe, 2020).
Responsible business management
There is a dire need for the business become more responsible and ethical for overcoming
the existing implications of ethical behaviour that led to massive losses and diminished brand
equity and reputation. Embodying ethical values can also help the company in the long run while
not doing it can further cost the company in terms of legal expenses, government expenses, share
value and market penetration etc. If ethical values in terms of oversight and corporate
governance were taken care of for employees and extended supply chain, the company would not
have faced such major implications (Lehenchuk, Vygivska, and Barchak, 2020). A business that
follows good ethics, in leadership can help in higher motivation in employees, more retention
rate and higher productivity. Being ethical can help the company in gaining a competitive
advantage, higher support from the government and media, more loyal customers, higher
goodwill and brand equity more investment and highly satisfied stakeholders. It can also improve
the financial performance of the company and lead to favourable circumstances for the business
in the long run. As per a research by YouGov (2020) sixty percent (60%) British people like to
consume products and services from the company when it is giving a moral message and that the
values cannot be entirely separated from its financial performance. Therefore, Boohoo needs to
the impact of undertaking unethical practices and its long-term implications on consumers and
market share (Bakhshi and Chaudhary, 2020).
Conclusion and Recommendations
In conclusion it was understandable that the unethical practices have a direct impact on
the company, its financial performance, its various stakeholders and its reputation. It was
understood that Boohoo needs to correct all the wrong actions in terms of non-compliance of
supply chain factories, improper implementation of code of conduct, improper oversight and
corporate governance, putting employee lives at stake, wage related issues and being
irresponsible to overall business management.
Recommendations for the company:
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Boohoo needs to consider the extent to which it has monitored the Leicester supply chain
and what information it has regarding all allegations of unethical misconduct, assess the
company’s adherence to the relevant laws and further changes for future. In context to corporate
governance the company needs to appoint executive directors that look specifically into ESC or
environment social, and governance, appoint risk committees and supply chain compliance
committee (Solomon, 2020). The company needs to redefine its purchasing practices by
strengthening the sourcing team, implement new purchasing principles across all the brands
Boohoo owns in global apparel retailing, compulsory training and education for teams involved
in supply chain processes and purchasing and most importantly disciplinary actions to be taken
for unapproved order placement suppliers (Campling, 2020). The company has to raise standards
across supply chains, partnering up with more ethical production houses, implementation of
independent audit programs, periodical monitoring of compliance through audits. The company
also has to support the rights of workers of Leicester through establishment of Garment &
Textiles Community Trust, for support. The company needs to have minimum wage rights,
proper health and safety requirements at factories of the extended supply chain and take care of
employees’ issues. The company has to increase relations and support (Solomon, 2020).
b) Application of ethical theories on Boohoo case study
Ethics in business refer to implementation of right business practices and policies in
overall functioning of the business and take care of all stakeholders through effective corporate
governance and social responsibility. Various ethical theories have been devised which can have
different perspectives on the purview of ethics in Boohoo case. The two ethical theories selected
here for analysis of the case from ethical perspective are utilitarianism and Kantian ethics of
duty.
Utilitarianism
The ethical theory of utilitarianism portrays the core idea of the actions being morally
right or wrong majorly relies on its effects. The theory describes that the mere purpose of
morality is making life better through raising the value of good tings like happiness in the world
and reducing the amount of bad thing like pain. A wide range of things involving choices such as
actions, policies, laws, moral codes and character traits can be evaluated for determining if they
are good or bad (HÄyry, 2020). Utilitarianism represents a form of consequentialism as it is
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based on the idea that outcomes of actions determine if they are right or wrong and the best
choice should be the one that maximizes utility or the actions which produce the greatest amount
of good. In context to this case, outsourcing manufacturing in supply chains that have as a central
feature speed and low cost have been adopted as outputs are more important that the methods. In
this theory the actions need to result in the good for the greatest amount of people (HÄyry,
2020). In the first scenario, the stakeholders that are affected by the decisions of the company
can be divided into two categories: Group A consist of employees, shareholders, customers,
Boohoo, government, media, community and group B consists of the board of directors and
management. The actions resulted in greater amount of loss for group A as employees were
given low wages, put on risks, community was subjected to possible spread of infection despite
lockdown in UK, lower value of the shares for investors, lower trust of customers, while good
was short-term saving money which later resulted in major losses (Boralevi, 2017). The major
advantages of this theory is encouragement of self-awareness and helping the society in staying
more productive by using higher levels of emotional intelligence and empathy. The major
disadvantage of this theory is its subjectivity and quantifiability. For example, if the groups are
divided as C- Employees and the family members and D- The shareholders, investors, suppliers
and Boohoo. The use of low-cost manufacturing will lead to higher margins in profits for the
group D and also the end users will receive the product at relatively lower prices. The profits can
be sued to further expand the business and the other stakeholders also benefit. Also, the
employees were not impacted as there was no surety if the employees were impacted. Therefore,
this theory is highly subjective depending upon the one analysing it (de Lazari-Radek and
Singer, 2017).
Kantian ethics of duty
The ethics of duty theory by Immanuel Kant is based on a non-consequentialist
perspective and the argument is based on the approach that the morality is independent of the
outcomes of any business or individual’s actions. Instead, the value was emphasized on the
ethical nature of the actions undertaken by the person. Also, he proposed that a rational human
being didn’t need to depend community for discovering the right and the wrong. They also need
not see the consequences of actions or who was doing them (Baron, 2018). As per this theory the
moral values need to be universalizable and the actions need to be in such ways that the maxim
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becomes a universal law. The ethics of duty theory is based on morality being unchangeable
obligation defined by moral code aiding the duty to be categorial imperative. The three principles
of the ethics of duty that can be applied to the case are universality, consistency and human
dignity. In the first maxim of universality, the company cannot say that their actions are
universal and that’s what people do in context to high price of the fashion industry (The wall
street journal, 2019). In the second maxim, consistency, the decisions and actions by the
company can become a universal law. In the third maxim, human dignity, the employees are not
being respected. The theory does support the first and second maxim as the decision by the
Boohoo which incorporates mistreatment of employees, forcing them to work on low wage
payment and in the times of Covid-19 risking the health and safety cannot be viewed as
rationally acceptable (Kant and Gregor, 2017). The workers may even get infected by the virus
and further spread it in the community in spite of strict regulations of lockdown and containment
of the virus, therefore it can be deemed highly unethical. All the actions of missing out on
corporate governance, acting irresponsibly and poor management of supply chain can be deemed
as thinking about only the profits of the company through low-cost apparel manufacture and not
thinking about the implications on the employees and no respect for human dignity is seen.
However, the theory has certain disadvantages that it allows making the world a less good place
as the results don’t matter and the duty-based rules are absolute rules (Timmons, 2017). In
conclusion, the allegations resulted in massive loss of the market share and share value of
Boohoo group. It can be noted that all the actions by the company were highly unethical.
Part 2
Reflection on Ethical leader
After I evaluated the wrong actions taken by the Boohoo group plc in context to the
supply chain overview, management and compliance, low-cost manufacturing, oversight issues
in corporate governance and mistreatment of employees, it has helped me understanding the
needs of implementation of ethical values through strategies for any business. The outcomes of
not operating ethically had not only a major impact on the employees and their stakeholders but
also the financial performance and public reputation of the company (Engelbrecht, Heine and
Mahembe, 2017). As a student in the university with career goals in the business management
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field, I consider this an appropriate time to consider what it is meant to be an ethical leader in the
field of business, its impact and consequences.
I can define ethical leadership as the leadership that is directed by respect for ethical beliefs and
morals and dignity. In other words, ethical leadership sets high standards for ethical behaviour
and building a corporate culture that supports ethical values of honesty, responsibility,
trustworthiness, accountability (Ko and et.al., 2020). The role of an ethical leaders is creation of
such a workplace which effectively aligns the objectives of the mission and vision of company
with the values and objectives of employees. Shareef and Atan (2019) has elucidated that for
effectively managing and communicating the company’s ethical values and culture, it is
necessary that I become an ethical leader for becoming an inspiration for employees of the
company and that I can lead through such actions that believe in valuing employees, other
stakeholders, corporate governance and social responsibility. It also made me self-introspect on
the present qualities of an ethical leader I possess and if I can further improve them in future to
lead a sustainable business. Ethical leaders can also support the company through making
investors, shareholders and suppliers gain trust on the functions and operations and increase the
financial performance, and imprint a positive image on the minds on end users and consumers to
improve brand equity (De Roeck and Farooq, 2018). The practice of ethical leadership thus
improves the financial outcomes, trust and integrity, brand reputation and equity, investor and
shareholder relations, higher job satisfaction, motivation and retention of employees and loyal
customers. Therefore, an ethical leader operates from all the aspects of business to take care of
both the interests of the company as well as the stakeholders and universal values and ethics.
However, there are various challenges in being ethical that I can face. These include having
conflicts on interest with other people and parties. The various areas that can raise issue is the
difference of opinions of owners, shareholders, senior management and board of directors where
the areas like profit maximisation over ethical issues can be prioritised by other parties. These
include examples like accounting frauds or cooking the books, transparency and online reviews
that damage company reputation, harassment and discrimination, privacy and technology, health
and safety etc (Sarwar and et.al., 2020). In extreme cases this can lead to bribery, clashes and
whistle blowing. I need to understand the aspect of becoming a moral manager who
demonstrates being a role model via actions, discipline, behaviour, attitude, rewards and
communication of values and ethics. A code of conduct of the company is highly important for
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ethical leadership and management as it aims to effectively communicate all the ethical values
that need to be practiced by the entire organisation and develop the behaviour the needs to be
encouraged and embedded in the artifact and core of the company. If a leader fails as [er the code
of conduct, then this sends a weak message to employees who might not follow the ethics in the
organisation very seriously. In order to become an effective moral manager, I need to empower
employees through rewards, performance appraisal, mentoring, guidance, motivation and
inspiration. Apart from that in order to implement ethical behaviour I might need to use
disciplinary actions for certain intolerable behaviour (Ahmed Iqbal and et.al., 2020). However,
there are contrasting characteristics of ethical leaders categorised into toxic triangle contributing
to destructive leadership, which are susceptible followers, destructive leaders and conductive
environments. Leaders who make efforts for creating a positive workplace tend to be away from
such leadership that it is based on the manipulation and intimidation of employees and not
communicating effectively. Thereby, I can differentiate between the destructive and ethical
leaders tend to be that the former doesn’t lead rather they rule. After the reflection on my own
characteristics and moral codes, I consider myself to be a good ethical leader in any business
environment, but I need to learn how to deal with the challenges in being ethical in business
environment. I can become an efficient ethical leader after I am able to counter all such
challenges and have courage in my values which aspire me to flourish (Ko and et.al., 2020).
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References
Books and Journals
Ahmed Iqbal, Z., and et.al., 2020. Ethical leadership and innovative work behavior: The
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Bakhshi, P. and Chaudhary, R., 2020. Responsible Business Conduct for The Sustainable
Development Goals: Lessons from Covid-19. International Journal of Disaster Recovery
and Business Continuity, 11(1), p.2835.
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Boralevi, L.C., 2017. Utilitarianism and feminism. In Jeremy Bentham (pp. 417-436). Routledge.
Campling, P., 2020. Covid-19: What’s going on in Leicester?. bmj, 370.
Currie-Europe, M., 2020. Stakeholder primacy in the post-COVID world.
de Lazari-Radek, K. and Singer, P., 2017. Utilitarianism: a very short introduction. Oxford
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De Roeck, K. and Farooq, O., 2018. Corporate social responsibility and ethical leadership:
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Engelbrecht, A.S., Heine, G. and Mahembe, B., 2017. Integrity, ethical leadership, trust and
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HÄyry, M., 2020. Just better utilitarianism. Cambridge Quarterly of Healthcare Ethics, pp.1-25.
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Sarwar, H., and et.al., 2020. Ethical leadership, work engagement, employees’ well-being, and
performance: a cross-cultural comparison. Journal of Sustainable Tourism, 28(12),
pp.2008-2026.
Shareef, R.A. and Atan, T., 2019. The influence of ethical leadership on academic employees’
organizational citizenship behavior and turnover intention. Management Decision.
Solomon, J., 2020. Corporate governance and accountability. John Wiley & Sons.
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Sudsakorn, C. and Rattanawiboonsoom, V., 2018. Ethical Business Culture and Its Impact on
Unethical Behaviors in the Workplace: Conceptual Implications. PSAKU International
Journal of Interdisciplinary Research, 7(1), pp.132-140.
Timmons, M., 2017. Significance and System: Essays on Kant's Ethics. Oxford University Press.
Waddock, S., 2016. Foundational memes for a new narrative about the role of business in
society. Humanistic Management Journal, 1(1), pp.91-105.
Online
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