Corporate Responsibilities, Ethics and Governance

This report discusses about the significance of ethical business practices and the consequences of unethical business conduct like misappropriation of trade secret, breach of conflict of interest and contravention of privacy. The legal consequence that arises from such unethical business practices has been explained with the help of three significant companies that has been alleged to have practiced such unethical business conducts. The report also relates the unethical business practices with the ethical theories of Kant and the utilitarianism theory to explain how such unethical conduct not only affected the reputation of the company but also had an adverse impact on the individuals and the society altogether.

Running head: CORPORATE RESPONSIBILITIES, ETHICS AND GOVERNANCE
Corporate Responsibilities, Ethics and Governance
Name of the Student
Name of the University
Author Note

1CORPORATE RESPONSIBILITIES, ETHICS AND GOVERNANCE
Executive Summary
This report discusses about the significance of ethical business practices and the consequences of
unethical business conduct like misappropriation of trade secret, breach of conflict of interest and
contravention of privacy. The legal consequence that arises from such unethical business
practices has been explained with the help of three significant companies that has been alleged to
have practiced such unethical business conducts. The report also relates the unethical business
practices with the ethical theories of Kant and the utilitarianism theory to explain how such
unethical conduct not only affected the reputation of the company but also had an adverse impact
on the individuals and the society altogether.

2CORPORATE RESPONSIBILITIES, ETHICS AND GOVERNANCE
Table of Contents
Introduction......................................................................................................................................3
Trade Secret.....................................................................................................................................3
Case study........................................................................................................................................3
Company Background.................................................................................................................3
Court Case...................................................................................................................................3
Conflict of Interests.........................................................................................................................4
Case study........................................................................................................................................4
Company background..................................................................................................................4
Court case....................................................................................................................................4
Breach of Privacy............................................................................................................................5
Case study........................................................................................................................................5
Company Background.................................................................................................................5
Court case....................................................................................................................................5
Argument.........................................................................................................................................6
Conclusion.......................................................................................................................................8
References......................................................................................................................................10

3CORPORATE RESPONSIBILITIES, ETHICS AND GOVERNANCE
Introduction
In Australia, ethical business conduct implies whether the business transactions is
conducted ethically and honestly or whether it is ensuring respect for privacy and individuality as
well as honest and direct communication. An ethical business practice not only enhances the
reputation of the company in the society but also strengthens and builds confidence of the
stakeholders in the company. The primary issues that are to be discussed in this report are related
to unethical business practices like trade secrets, conflict of interests and breach of privacy that
not only affects social standing of the organizations but also impacts adversely on the
stakeholders of the company.
Trade Secret
In the context of corporate law, the concept of trade secret refers to any secret
commercial information that places one business at an advantageous position over the other
business. Confidential information refers to any information that is considered as confidential
and business secrets are considered as subsets of confidential information. A confidential
agreement is necessary to ensure confidential information is not disclosed and is kept as business
secret without using it for other unauthorized purpose.
In Searle Australia Pty Ltd v Public Interest Advocacy Centre [1992] FCA 241, the
court defined the concept and mentioned the three essential elements associated with the concept
of ‘trade secret’. It includes any formula for the products or information about its customers in
each case such information is a secret, which if procured, may be benefiting for the rival
companies.
Case study
Company Background
The Australian catering company Spotless Group Holdings is an Australian listed
company that provides Integrated Facility Services in New Zealand and Australia through a
number of in-house brands.

4CORPORATE RESPONSIBILITIES, ETHICS AND GOVERNANCE
Court Case
In a legal claim brought against the Australian catering company, Spotless Group
against one of its former employee for misusing of confidential information, which amounted to
disclosure of the company’s trade secret, was decided in favor of the company. This case
demonstrates the difficulty that organizations face while recovering damages for
misappropriation of trade secrets to prevent any further misconduct.
In this case, Mr. Reynolds was employed at Spotless and during his employment he was
seeking for new job opportunities in Blanco Catering, which was a rival catering company. Mr.
Reynolds acquired an interest in the rival company and disclosed confidential information of
Spotless including supplier and customer information, sensitive financial data and proprietary
financial models (Spotless, 2018). Additionally, he even provided details about the bidding that
Spotless was working for Adelaide Zoo project to the rival company, which ultimately won the
contract. However, since court found it difficult to assess the exact damage amount, it only
awarded 1/10th of the amount claimed by the company for the lost profits from the Adelaide
project.
Conflict of Interests
Under the Corporations Act 2001 (Cth), directors must avoid any conduct that gives rise
to conflict of interest. Under sections [180-183] of the Act, the directors must discharge their
responsibilities diligently and in good faith. They must not take undue advantage of their
position to cause damage to the company and neither misuse confidential information of the
company for personal gains or benefits of third party, causing damage to the company.
Case study
Company background
The Washington H Soul Pattinson and Company Limited (Soul Pattinson) and
Brickworks Limited (Brickworks) were ASX listed companies that held substantial cross
holdings.

5CORPORATE RESPONSIBILITIES, ETHICS AND GOVERNANCE
Court case
Perpetual Investment Management Limited acquired an interest in both the companies in
1980. Since 2011 onwards, Perpetual presented five different to the Soul Pattinson and
Brickworks which were developed to loosen the cross-shareholding and open their Boards as it
was considered to be undermining the value of both the organizations.
The companies rejected all the proposals and Perpetual claimed that both the boards of
the company were put in conflict of interest as they had shareholdings within the organization
and were directors of both the organizations. This prevented both the boards from acting in the
best interest of the company, which resulted in oppressive affairs that prejudiced Perpetual
unfairly. The Court held that the directors of both the company were diligent while acting in the
best interests of the company.
Breach of Privacy
The Privacy Act 1988 (Cth) regulates the business corporations as well as the federal
government agencies in dealing with personal information using the 13 Australian Privacy
Principles (APPs) stipulated within the statute. An APP entity includes an organization, which is
obligated to safeguard confidential information related individuals which includes, clients,
employees and customers of any organization.
Case study
Company Background
Telstra Corporation Ltd is an Australian telecommunications and media company that
operates and builds telecommunication networks and other entertainment products and services
like internet access, pay television, mobile, etc.
Court case
During an investigation conducted by the Federal Privacy Commissioner, it was found
that the company committed a breach of the Privacy Act by causing exposure of online data of
approximately 15,775 Telstra customers as it failed to ensure safety of the information of its

6CORPORATE RESPONSIBILITIES, ETHICS AND GOVERNANCE
customers. Due to such breach, private data of the customers, which includes telephone numbers,
business and home addresses, could be easily found through Google searches.
In this case, the company failed to undertake reasonable steps to ensure security of
personal information that was held by the company amounting to a contravention of the National
privacy Principles [NPP] as was stated in the investigation report of Office of the Australian
Information Commissioner (OAIC).
Argument
Business ethical theories may be deontological that concentrates on action or decision
itself while other theories are teleological which primarily deal with consequence or outcome.
According to Deontological or Kantian ethical theory, people are perceived as moral actors who
are capable of making decisions by applying universal principle, which is termed as ‘categorical
imperative’. Ferrell and Fraedrich (2015) states that an act is considered either right or wrong
and even if a arising act leads to good results, the act shall be considered as wrong. The essential
element of categorical imperative is that while making any decision, one must determine whether
any rational person would have applied such decision universally.
Thus, Bowie (2017) points out that this principle establishes an ethical rule of universal
reciprocity, thus placing every person in the position where he or she is obligated to others. The
Kantian theory states that a decision is determined as ethical if it is right irrespective of the
outcome that may result from such act or decision. Further, one person cannot use another person
for his own benefit and interests.
Further, the other ethical theory or approach that can be related to the above case studies
is the theory of utilitarianism. This theory is known as the consequential or teleological theory
that is used to make any ethical justification. This theory emphasizes on the morality of an act,
which is determined by the good or bad consequences that results from such act and assesses
such consequences in terms of social utility or benefit (Mill, 2016). It upholds the principle that
an action is morally proper if its results in greatest amount of good for the greatest number of
people who are affected by such action. In other words, a decision or a conduct is said to be
ethical if it brings about social good, that is, good for the society, altogether.

7CORPORATE RESPONSIBILITIES, ETHICS AND GOVERNANCE
In the case studies, the issues pertaining to conflict of interest, privacy or
misappropriation of trade secrets not only breaches statutory provisions of Corporations Act
2001 (Cth) but also amounts to unethical business conduct. In order to determine whether such
three significant issues amounts to unethical conduct, the deontological or Kantian ethical
theory and utilitarianism theory may be applied to the individual circumstances.
In the context of the above case scenario, it can be argued that trade secrets in the
contemporary era is fundamental for a business to perform smoothly and successfully as the
disclosure of confidential information of one business may be beneficial to the rival company
resulting in loss of the company whose information has been disclosed. Allhoff et al., (2016)
states that a claim for misappropriation of trade secret arises when confidential information of a
company is disclosed through improper means amounting to breach of confidential relationship
and unethical conduct. In this case, disclosure of trade secret of Spotless Group to Blanco
Catering Group was misappropriation of trade secret.
The misappropriation of trade secret committed by Reynolds amounts to an unethical
business conduct that can be analyzed in the light of both Kantian and utilitarianism theory. As
per the Kantian theory, misappropriation of trade secrets is a wrongful act which if determined
based on the concept of categorical imperative, it can be said that no rational person would have
acted in the same way. This is because Reynold being an employee of Spotless Group owes an
obligation towards the company so long he is employed within the company. Further, the
Kantian theory states that one person cannot use another person for his own benefit and interests.
In this case, Reynold has used his company Spotless causing its loss of the zoo project only to
obtain job opportunity in the rival company, Blanca Catering.
As per the utilitarianism theory, it evaluates the consequences of a conduct in terms of
social good. In other words, any act that achieves greatest happiness for the greatest number of
people is considered ethical. Therefore, disclosure of trade secret to rival company without
authorization for own benefit is unethical business practice.
In case of the issue related to conflict of interests, it refers to a situation where a
professional gives more priority to personal gains instead of professional interests. It is a fact that
in any workplace, a professional will have both professional and personal interests that are said

8CORPORATE RESPONSIBILITIES, ETHICS AND GOVERNANCE
to be in potential conflict with each other. This implies a situation where the professional aims at
achieving personal benefit instead of the benefit of the company, which includes society as one
of its stakeholders (Mill, 2016). In other words, it fails to achieve social good. Hence, it amounts
to unethical conduct as per the utilitarianism theory. Under such circumstances, from the
Brickworks case, it can be inferred that in case of doubt regarding the competency of the
directors to act in the best interest of the company, the director must not be involved in the
decision–making process of the concerned matter.
As per the Kantian theory, the conduct that results in conflict of interest is perceived as
wrong as any rational person would not have taken any decision giving more preference to
personal gains than interests of the company, particularly, when such obligation is a statutory
obligation. Further, persons breaching the duty to avoid conflict of interest are using the
company for his personal use, thus, amounting to unethical conduct (Ferrell & Fraedrich, 2015).
In the third case study, the issue related to privacy also amounts to unethical conduct
under both the Kantian theory and Utilitarianism theory. As per the utilitarianism theory, good
is more important than being right and ethical decision can be made to determine greatest useful
goodness for the greatest number of people (Donaldson & Walsh, 2015). In regards to the
privacy issues in corporate sector, information related to the organization including clients or
employee related information, sensitive data are to be kept confidential to achieve confidence of
the clients or employees and that the company derives benefits from such information. Telstra
failed to ensure such protection of the information of its clients and employees, resulting in
unethical business conduct.
This establishes the element ‘good’ where maintaining confidentiality will ensure success
of the company achieving happiness of its employees as well as clients but breaching the same
would amount to unethical business practice (Donaldson & Walsh, 2015). As per the Kantian
theory, breaching of privacy would amount to wrongful conduct which will inevitably lead to
bad consequences and even if achieves good consequence, it will still amount to an unethical
conduct where the infringer will disclose the confidential information for its personal gain or
purpose.

9CORPORATE RESPONSIBILITIES, ETHICS AND GOVERNANCE
Conclusion
From the above discussion, it can be inferred that unethical business conduct not only
affects the business but also has an adverse impact on the community and society within which
the business operations are carried out. It is a fact that the society is dependent on the
corporations largely as a source of goods and services, source of employment and environment
conservation to a considerable extent. Therefore, if these unethical business practices are not
addressed and it persists to misuse the ethical values, it is very likely that it will affect the social
standing of the company as well as have an adverse impact on the community altogether.

10CORPORATE RESPONSIBILITIES, ETHICS AND GOVERNANCE
References
Allhoff, F., Vaidya, A., Ciulla, J. B., Martin, C. W., & Solomon, R. C. (Eds.). (2016). Business
in Ethical Focus: An Anthology. Environment, 225, 231.
Bowie, N. E. (2017). Business ethics: A Kantian perspective. Cambridge University Press.
Corporations Act 2001 (Cth)
Donaldson, T., & Walsh, J. P. (2015). Toward a theory of business. Research in Organizational
Behavior, 35, 181-207.
Ferrell, O. C., & Fraedrich, J. (2015). Business ethics: Ethical decision making & cases. Nelson
Education.
Ferrell, O. C., & Fraedrich, J. (2015). Business ethics: Ethical decision making & cases. Nelson
Education.
Hoffman, W. M., Frederick, R. E., & Schwartz, M. S. (Eds.). (2014). Business ethics: Readings
and cases in corporate morality. John Wiley & Sons.
Mill, J. S. (2016). Utilitarianism. In Seven Masterpieces of Philosophy (pp. 337-383). Routledge.
Privacy Act 1988 (Cth)
RBC Investor Services Australia Nominees Pty Limited v Brickworks Limited [2017] FCA 756
Searle Australia Pty Ltd v Public Interest Advocacy Centre [1992] FCA 241
Spotless. (2018). Catering and Hospitality | Spotless. [online] Available at:
https://www.spotless.com/services/catering-hospitality/ [Accessed 27 Apr. 2018].