Ethics in Australian Retail Industry: A Case Study

The study discusses the ethics adopted in the Australian retail industry and factors affecting its operations. It highlights the importance of corporate governance and ethical standards for sustainable growth. The study includes 10 cases related to ethical issues in the industry. Subject: Ethics, Course Code: ACCG315

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ACCG315 Case Study

Ethics
Abstract
The success of a company relies on implementation of ethical activities and this study assists
in discussing the ethics adopted in the Australian retail industry. In relation this, there are
factors that assists in affecting the operations of the retail industry. Nevertheless, an
illustration of a leader has been discussed wherein many attributes have been taken into due
consideration. Besides, the responses are provided by exerting a thorough analysis on the
issue and other favourable resources to the Australian retail industry. The cash study
highlights the fact that both non-financial and financial factors are crucial in an
organization’s performance. Further, the businesses must comply with all necessary rules and
regulations so that they can attain sustainable growth in due course of time. Overall, the
measure of integrated reporting must also be focused upon by the businesses so that they can
not only increase their productivity but also sustain in the competitive market on a whole.
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Contents
Introduction...........................................................................................................................................3
Case 1 – Good faith...............................................................................................................................5
Case 2 Voluntary code...........................................................................................................................5
Case 3 Decision making power.............................................................................................................6
Case 4 Response by the CFO.................................................................................................................6
Case 5 Developed country standards of employment conditions to less developed countries...............7
Case 6 OxFam Australia survey............................................................................................................7
Case 7 Audit fraud.................................................................................................................................8
Case 8 Integrated Reporting..................................................................................................................8
Case 9 At risk component of remuneration............................................................................................9
Case 10 Stakeholders.............................................................................................................................9
Conclusion...........................................................................................................................................10
References...........................................................................................................................................11
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Ethics
Introduction
The retail industry of Australia has been experiencing massive pressures and this study has
highlighted various segments that have not been accounted for by bigger brands. Hence,
minimization of costs can serve as the best possible solution to this issue and the same must
be done in the prevalence of legal and ethical compliances. Furthermore, the judgement of
management primarily concentrated on the process of attaining maximum profits but failed to
focus on how overall success can be attained. Nevertheless, the retail industry of Australia
facing immense pressures has been effectively highlighted through the study. Besides, bigger
conglomerates like Woolworths and Coles had witnessed a decline by 1.5 and 2 percent
respectively in the year 2015-2016 and that can serve as best illustrations that highlight the
amount of pressure in the entire industry.
Minimization of expenses or increasing the selling prices can be adopted by companies to
enhance their gross profit ratio to get rid of the complications. In relation to the previously
mentioned diagram, it can be easy for the retailers to seek an effective option as there may be
immense pressure on the sales segments. Therefore, Wesfarmers and Coles disintegrated on
ethical issues (Bauer & Hann, 2010). Coles started utilizing its bargaining power that was
illegal in nature and therefore, it continuously forced payments from its suppliers (ACCC,
2014). Besides, these payments clearly relied on purporting benefits wherein refusal to offer
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Ethics
such payments would result in threatening by the company to their suppliers in relation to
decreasing the goods quality supplied to them. Further, loopholes in the profits were also seen
that was related to lesser sales (Beattie, 2016). Nevertheless, it was also seen that Tesco also
delayed their supplier payments to gain a better position in the industry. In contrast to this, it
took time to repay all the debts attained for business purposes.
Furthermore, it was also observed that the big brands paid no prior attention in the
management of corporate governance and ethical measures. Besides, they falsely used their
power to adopt illegal or unethical measures and that played a key role in their downfall.
These big conglomerates became confined to global or supplier base locally that they attained
undue advantages of. The reason behind the adoption of such measures was to enhance their
reputation in the industry and attain maximum profits thereafter. Hence, negligence on their
part towards ethical and corporate governance measures facilitated in their downfall in the
long-run even though they attained huge profits (Bennet & Garvey, 2016). Therefore,
focusing on effective corporate governance practices and ethical standards are crucial for
every company to sustain in the long-run. Further, it is significant for every company to
perform in the stakeholders’ best interests because the entire community must be looked after
while working in the competitive environment (ACCC, 2014). Moreover, this is a vital step
in the path of achieving long-term goals in the future. This measure can be attained by the
adoption of non-financial measures that can assist in addressing the requirements of all
groups of stakeholders including the entire community and society.
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Case 1 – Good faith
Any business can encounter massive complications and damages if it fails to act in good
faith. Furthermore, when the timely payments are denied to the suppliers, it means the
creditors number will outgrow that can create complications in the path to improve.
Moreover, this is not an illustration that must be followed by any company as it assists in
reflecting the unwillingness and unworthiness role on the company’s part. Nevertheless, the
financial resources of a company may also be blocked to repay the obligations if there are
immense number of creditors, thereby facilitating in an obstruction of smooth flow of
operations (Hemmer & Labro, 2008). Therefore, acting in good faith signifies that the
wholesalers and retailers must work in the best interest. In addition, big conglomerates
conduct immense number of transactions on a daily basis and therefore, double payments to
the suppliers may happen if there is extra delay in the payments to suppliers. This can further
result in shortfall of resource and therefore, the company may become incapable of managing
its liquidity segment, thereby failing to maintain its working capital requirements on a whole.
Besides, the reputation and goodwill of the company may also be influenced in a negative
way owing to such delayed payments to suppliers and incapability to act in good faith.
Overall, concerns of cash flow can also come into light with such denying or delaying
payments and there may be feasibilities that the suppliers or creditors may break contact with
the company, thereby resulting into another major loss. Therefore, it can be concluded that
acting in good faith on the part of wholesalers and retailers imply that there must be a
smoother flow of operations and the same must be within the guidelines offered by the Food
and Grocery Code of Conduct.
Case 2 Voluntary code
FGCC can be said to be a voluntary code of conduct as it assists in inculcating a wider range
of measures that can be adopted by organizations to attain long-term objectives in the future.
It also contributes to an organization’s role to perform in overall community. Besides, the
prime motive behind adherence to the code can be attributed to the fact that the code
facilitates in creation of value. Moreover, compliance to the code assists an organization to
maximize their quality of corporate reporting. Nevertheless, it is known that incentives and
measures of remuneration adopted by a company is directly interconnected to the creation of
value in the long-term, short-term, and mid-term (Hoque, 2016). In addition, FGCC is a
voluntary code and therefore, the regulatory bodies do not eradicate this code and instead,
they monitor how the organizations are performing in the market and how they have been
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reporting their performance to the users. Overall, compliance to such code assists in
enhancing the company’s market value and attainment of better outcomes in the future.
Case 3 Decision making power
Based on strategic theory, the decision-making strength of a company becomes effective in
nature when it is observed that their performance has been declining. In relation to this
scenario, it is crucial that the power must be duly exercised for better outcomes. Further, the
supply and power are major segments that require due consideration when it comes to
strength (Parker et. al, 2011). Moreover, with the deterioration in performance of a
company, the processes of decision-making are greatly pressurized and therefore, exercise of
power must be done in a proper way. In addition, there is an attachment of rebate with the
stocks and it becomes difficult to be sought and thereafter, the inventories are also maximized
with the presence of such rebates (Smyth, 2017). Hence, it becomes problematic for the
management accountants to seek every stock that has incorporated rebates within them.
Hence, it is the prime motive of the accounts department to exert enhanced focus on the
performance of stocks and their behaviour. In addition, the level of inventories must also be
traced because rebates can result in an enhancement of inventories (NAB, 2016).
Case 4 Response by the CFO
It is the prime motive of an organization to perform with proper corporate governance
measures and ethical standards. Hence, it is imperative that the management and auditors will
make decisions ethically in relation to financial accounting. Moreover, if the Chief Executive
Officer intends to delay the payments to suppliers, under ethical means the same must not be
undertaken as it can destroy the company’s goodwill and reputation in the entire industry.
Furthermore, such suppliers may break connections with the company that is a negative
indicator as well. Therefore, it is to be believed that both the suppliers and management must
operate legally for facilitating smooth flow of operations. Nevertheless, it is also clearer that
all firm decisions are associated to ethical zones that are influencing the firm’s profitability,
thereby resulting in impacting the stakeholders. There are also few principles that are usual
when it is associated to both the non-financial and financial management accounting of the
company (Kacperczyk, 2009). Overall, the lawful decisions can be distinct in several
segments as the management accounting primarily concentrates on major internal factors
ethically.
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Case 5 Developed country standards of employment conditions to less
developed countries
There may be various ways by which the employment standards of a developed country can
be adopted in the same. The first way is to accommodate the overall environmental and social
measures of a country and ascertain the prime effectors of the company’s performance
through the use of top-down measures for the introduction of various affairs. The next
method is to introduce a fresh viewpoint in the country that can assist the companies to
possess a distinct view of the conditions of employment and sustainable development on a
whole. Therefore, these kinds of measures can assist the organizations in enhancing their
overall performance, thereby facilitating in adoption of ethical means in the environment.
Lastly, through making an assumption that the determined environmental or social scorecard
cannot be equal to other scorecards, the employment standards can be developed for a
country.
Case 6 OxFam Australia survey
This can be understood that if the management is stronger, it can utilize its resources more
effectively, thereby facilitating in attainment of long-term objectives and sustainable
development as well. However, the same can be attained in the presence of a model of cost
price leadership. Moreover, short-term objectives can also bring relevant profits of uncertain
nature. Further, the market trend is varying in nature owing to the prevalence of political,
economic, and competition trends. Therefore, when the customers are willing to expend more
for the merchandise, the company must surely abide by the cost price model. Besides, it is
feasible for the organization to thrive in the market with such variations. Therefore, it is
needed that the organizations must focus on growth ability and strategy to thrive in the entire
industry and make gains thereafter. Such strategy and ability are clearly linked to the model
of cost price that can allow them in achieving such motto (Oxfam Australia, 2016).
Moreover, if the organizations remain incapable of concentrating on these segments, it is
more likely that they will fail in the longer-run and cannot survive in the competitive
environment. Therefore, it is very vital for the organization to possess a brand reputation,
goodwill, and emotional bonding with their customers. Nevertheless, for obtaining a cost-
effective measure and growth in the market, it is crucial that the business must focus more on
the cost price model.
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Case 7 Audit fraud
The most feasible way to facilitate in the audit of performance measurement can be through
the usage of reconciliation system. In other words, it can be described as the evaluation of
overall employees’ progress that may result in tracking down the employees who have
adopted illegal or unethical measures during fulfilment of company’s objectives. Further, the
utilization of a balanced set of strategies is more likely to possess an aggregate employee
performance that comprises of both non-financial and financial segments. Nevertheless, when
it can be observed that an equivalent place of performance measurement in relation to a
junior employee is attained, a general key performance indicator (KPI) can be utilized to
supervise the performance in a thorough way. Hence, it is required to pursue a feasible and
statistical way of financial measure that can be utilized to influence the work affairs of the
company (Manoharan, 2011). Moreover, if the employees are in a vulnerable position to lose
their jobs, they are more likely to fear that there has been fraud within the company’s overall
environment. Therefore, such audit may incur in a spontaneous way without any previously
acquired knowledge.
Case 8 Integrated Reporting
Integrated reporting plays a key role in performing a significant part in inculcating a wider
range of measures so that it can assist organizations in attaining its long-term values. Further,
it contributes to a role that a company is bound to perform in the society. Factors like social
goodwill, human capital qualities, etc are based on such reporting measure. Furthermore, the
prime objective of integrated reporting is the creation of value that can assist in changing the
performance of organizations but can also maximize the reporting quality on a whole. In
addition, it is already known that the organizations’ incentive and remuneration measures are
directly associated to the creation of value in all short-term, long-term, and mid-term. Hence,
the organizations’ inputs are converted into outputs through which all intended goals are
attained with the assistance of integrated reporting that in turn can assist in offering
advantages to the investors. Overall, integrated reporting can assist in enhancing the market
value of companies and it initiates from the time when value is established irrespective of the
fact whether the same is tangible or intangible in nature. Besides, the same terminates when
such value is transformed into outcomes and performance.
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Case 9 At risk component of remuneration
It can be observed from the study that the remuneration of employees were based on risk-
remuneration, which implies that part of their remuneration has been reliant on their
performances. Further, the companies have offered maximum remuneration to their
employees based on this concept when they were able to perform effectively and vice-versa.
Therefore, even though these strategies are not known to all, yet the same is regarded as
lawful in nature. Moreover, employees have the right to take lawful actions if significant
needs in the same context are not addressed completely. Further, this measure is an agency
dilemma and is observable in bigger organizations. Besides, for bigger organizations,
segregation of shareholders and directors becomes problematic in nature. Hence, this
demands the management to focus on the short-term advantages for their personal needs by
making specific decisions (Pilbeam, 2009). Moreover, if they fail to observe this matter, there
would be negative outcomes in the future through such remuneration increment.
Case 10 Stakeholders
Stakeholders can be a person, group, or organization that possesses some interest in a
company. Besides, they can be influenced or get influenced owing to the company’s actions,
strategies, etc. Nevertheless, they can be creditors, directors, government, owners, and the
overall community or society where resources are attained. If a company does not possess
proper ethical measures, it can become problematic to attain long-term goals and vice-versa.
Moreover, employees are the ones who initiate the process of working towards compliance of
ethical measures. This can assist in boosting their morale and maximizes their overall
productivity (Saber, 2013). Nevertheless, since both management and shareholders
collectively work for the organization’s well-being, it results in an agency wherein the agent
is to function in their personal interests instead of performing in the company’s best interests
if there is a dispute betwixt both. Therefore, ethics is crucial to avoid these situations.
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Conclusion
From the previously mentioned study, it can be noted that the retail industry progressed and
attained huge profits because of compromising the needs of suppliers. The prime gap was
associated to ineffective bargaining tactics that resulted in various issues. Therefore, in
relation to this, it must be noted that commercial decision making on the part of organizations
are not required in this scenario and instead, the entire community must be given due
consideration. This can be achieved by cost reduction measures wherein the main role is of
the accounting department who can promote, state, and adopt performance measurement, and
thereafter report the same for proper decision-making. Overall, this can also result in
generation of huge revenues but ethics must not be disregarded in any situation.
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References
Australian Competition and Consumer Commission (ACCC) 2014, Court finds Coles
engaged in unconscionable conduct and orders Coles to pay $10 million penalties. Available
from https://www.accc.gov.au/media-release/court-finds-coles-engaged-in-unconscionable-
conduct-and-orders-coles-pay-10-million-penalties [Accessed 12 September 2018]
Bauer, R & Hann, D 2010, Corporate environmental management and credit risk, Maastricht
University.
Beattie F2016, Wesfarmers confirms Target scandal, Available from
https://www.businessnews.com.au/article/Wesfarmers-confirms-Target-scandal [Accessed 12
September 2018]
Bennet, M & Garvey, P 2016, CBA hit with bonus backlash, Available from:
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executive-pay-20161103-gshs0g.html [Accessed 12 September 2018]
Hemmer, T & Labro, E 2008, On the optimal relation between the properties of managerial
and financial reporting systems, Journal of Accounting Research, vol. 46, pp. 1209–1240.
Doi: https://doi.org/10.1111/j.1475-679X.2008.00303.x
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https://www.fastcompany.com/3049856/the-7-fundamentals-of-sustainable-business-growth
[Accessed 12 September 2018]
Kacperczyk, A 2009, With greater power comes greater responsibility? Takeover protection
and corporate attention to stakeholders, Strategic Management vol. 30, pp. 251–285. Doi:
https://doi.org/10.1002/smj.733
Manoharan, T.N. 2011, Financial Statement Fraud and Corporate Governance, The George
Washington University.
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Oxfam Australia 2016, Still in the dark: Lifting the cloak on the global garment trade,
Available from: https://www.oxfam.org.au/wp-content/uploads/2016/04/Labour-Rights-Still-
in-the-Dark-Report.pdf [Accessed 12 September 2018]
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Parker, L, Guthrie, J & Linacre, S 2011, The relationship between academic
accounting research and professional practice, Accounting , Auditing &
Accountability Journal, vol. 24, no. 1, pp. 5-14. Available from:
http://media.accountingeducation.com/1304/Parkeraaaj24(1).pdf [Accessed 12
September 2018]
Pilbeam, K 2009, Finance and Financial Markets, Palgrave Macmillan
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shops, The Conversation viewed 15 October 2017 http://theconversation.com/bangladesh-
disaster-shows-why-we-must-urgently-clean-up-global-sweat-shops-13899
Smyth, J 2017, CBA cuts executive bonuses over laundering charges, Available from:
https://www.ft.com/content/6cb01602-7bcf-11e7-ab01-a13271d1ee9c?mhq5j=e5 [Accessed
12 September 2018]
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