Ethics and Governance: Governance in Globalised Environment

ETHICS AND
GOVERNANCE

Agenda Item: Governance in globalised environment
Paper Type: Board Paper for discussion
Sponsor:
Draft Resolution: For the review of the issues, directors’ responsibilities’, challenges and the
recommendations in the implementation of governance framework in the enterprise.
Executive Summary: The following paper introduces the issue of the ethics and governance
in the management of the corporates with the aid of the case study of one the most renowned
organisations and retail giant, Walmart Inc. The paper evaluates the charges against the
company in light of the applicable directors’ duties and responsibilities, ethical principles and
the relevance of the corporate social responsibility of the business organisations.
Background:
The proposal has been raised to the directors of the company through the following board
paper to present the issue of the Walmart agreeing to pay hefty amount for the settlement of
the overseas corruption allegation. The objective of the following board paper is to highlight
the analysis of the issue, significance of the director duties in the corporates, the
recommendations on the issue and the barriers therein.
Issue and implications:
Ethics is a significant concept not just in the context of the individual lives but for the
conduct of the businesses as well. This is because; the ethical principles guide the businesses
to be considerate of the interests of the varied groups of the stakeholders (Elms et.al, 2010).
One of the most renowned organisations Walmart was in news in context of the ignorance of
the proper anti-corruption procedures in the wake of the international expansions. As per the
reports, the company had issues with the anti-corruption programs in the various countries
such as Mexico, Brazil, and China, through its foreign subsidiaries (Merle, 2019). Recently,
the company agreed to settle the criminal and federal charges by the payment of $ 282
million to the Justice Department and the Securities and Exchange Commission. The
corruption charges included the company executives bribing the foreign officials for the help
in the businesses. Hence, it can be rightly stated that the company focussed more on the
international growth and cost cutting rather than the compliances of the applicable laws and
regulations. Thus, not only the Walmart officials were aware of the discrepancies, but also
they failed to act as per the documents.

The analysis of the above issue in the light of the duties of the directors of the corporation is
conducted as follows. The chief reason behind the said issues of corruption and scandal is the
violation of the director’s fiduciary duties by the Walmart’s directors. In Australian context,
the matters of the corporate administration and the duties of the directors. It is known that the
chief duties of the directors are mentioned in section 180 to 183 of the Corporations Act,
2001 (Cth) (Legal Services Commission, 2019). The said general duties of the directors
ensure that the corporates are managed legitimately on the behalf of the shareholders and
other stakeholders. The general duties of the directors state that the directors of the company
must exercise their duties and power in good faith and with due care and diligence. In
addition, it has been stated that they should not improperly use their positions to gain an
unfair advantage over others. Hence, it can be rightly stated that the duties of the directors
have been prescribed in light of the fiduciary relationship of the directors and the corporate.
Thus, it is the responsibility of the board of the directors of a corporation to manage the
affairs and take the decisions of the corporate in the capacity of the agents and in the best
interests (AICD, 2019). In addition to the general duties of the directors, the yet another duty
of the director is to oversee the maintenance of the books and records of the entity and the
compliance with the rules and regulations.
On the analysis of the case of the Walmart in light of the directors’ duties, it can be stated that
the directors of Walmart failed to act in the interests of the shareholders. In addition, the
matter was hidden for almost six years. The said decisions were made in the personal
interests of the directors during the year 2000 to 2011, where the certain third-party
intermediaries were paid certain amount without extending the reasonable assurances that
such transactions were consistent with the prohibition that was made against improper
payments to government officials, or consistent with the stated purpose. In addition to the
above mentioned the directors of the company, on learning about the risks of the corruption,
failed to take the sufficient steps for the investigation of the allegations and the mitigation of
the risks. This is explained as follows. As per the reports of the Mexico Subsidiary Lawyer,
there were deficiency in the internal accounting controls, and the recommendations were
made for the additional procedures of the internal accounting records apart from those
existing. Those recommendations were not addressed by the implementation of the sufficient
anti-corruption related internal accounting controls until the year 2011 (SEC, 2019). Yet
another irregularity in the functioning of the company was identified in the form of breach of
the Section 13(b)(2)(A), Section 12 and the Section 15(d) of the Exchange Act which