Stakeholder Theory and Supermarket Ethics

This assignment examines ethical issues within the Australian supermarket industry. It analyzes a case study involving Woolworths' 'Mind the Gap' payment scheme and its implications for stakeholders. The analysis draws upon Goodpaster's stakeholder theory and his concept of nonfiduciary obligations in business ethics. Students are required to evaluate the ethicality of 'Mind the Gap' payments and their impact on suppliers, considering legal ramifications and broader business ethics principles.

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Section One
a) Strategic Stakeholder Synthesis
According to Goodpaster (1991) strategic stakeholder synthesis involves going a step
further in decision making. These measures include the actual decision making and its
implementation. The synthesis provides a cycle on how to move from the process of stakeholder
understanding to coming up with a resolution.
Further, Goodpaster supposes that businesses that operate by making use of strategic
stakeholder synthesis do not qualify in introducing ethical issues during decision making. This is
because the strategic stakeholder is not eligible because it is non-moral (Goodpaster, 1991). This
is because consequences that result from one’s actions to others are confused with what people
regard as moral. Being moral constitutes avoiding unfairness to the affected since it is wrong
despite the retaliatory potential of the affected.
b) Goodpaster’s Nonfiduciary Approach
Goodpaster suggests adopting a new stakeholder synthesis by considering the morally
nonfiduciary obligations entitled to the third parties. The obligations involve duties such as not
coercing, not lying, cheating, or even stealing. These obligations are contained in the legislative,
regulatory, and judicial arguments which constrain business activities that are profit-driven.
The nonfiduciary approach is different from both multi-fiduciary and strategic
stakeholder approach. Stakeholder’s approach gives more concern to the stakeholders as factors
which may have an influence either positively or negatively to the economic interests. Multi-
fiduciary approach views the stakeholders as separate from their economic, contributory, or their
legal influence. However, non-fiduciary approach entails obligations surrounding the third
parties, and which are morally significant.

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c) Nonfiduciary Account of Business Obligations
According to Goodpaster's nonfiduciary approach, it offers enough protection for the
stakeholders’ interests rather than those of the shareholders. This is because it offers an
understanding of the corporation’s conscience as being logical and a moral extension of the
principals. The approach has further offered a moral posture that respects both the fiduciary and
the non-fiduciary between the managers and the stockholders.
The nonfiduciary approach avoids the problem of treating the stakeholders as regular
corporate ends. This is enhanced by identifying the ethical relationship between the stakeholders
and the management that is neither too weak nor too strong. Introduction of moral reasoning
consistent with Ruder’s belief helps in protecting the legitimacy of the private sector. The
economic mission can be maintained provided that it is in line with the fundamental moral
obligations.
Section Two
a) Violation of Moral Duties
Based on the radio program, the primary Australian supermarket chains do violate
primary moral duties such as stealing and harming their suppliers. It is evident that the margins
of the food producers are squeezed by the supermarkets with the intention of attaining higher
profits ("Casualties in the supermarket war," 2013). The supermarkets have gone a step further to
blackmail the suppliers who have provided evidence to the ACCC. Additionally, they request for
more money that is to be spent on products to keep it longer on the shelf.
b) Moral Duties
The Australian supermarkets owe specific moral duties to its suppliers. The supermarkets
should limit themselves from harming the suppliers by squeezing their margins. They should

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target at cutting prices of their products by for example absorbing discounts of the products
through efficient operation of their business rather than squeezing margins of the suppliers. Also,
the supermarkets should not try not to coerce their suppliers as evident in the radio program.
According to the program, there is a return on sales expected by the supermarket from the
suppliers’ products, which if not attained, a request is made on a lump sum of money that is
passed on as payment of such a shortfall.
Section Three
a) ‘Mind the Gap’ and Business Ethics
‘Mind the Gap’ payment that was requested by Woolworth form the supplies does not
comply with the business ethics. The supermarket demanded payments from its suppliers which
it had no right to do so ("Google Scholar," n.d.). Additionally, Woolworth threatened to harm its
suppliers if they did not comply with the demand. According to the ACCC, the supermarket
engaged in unconscionable conduct since it demanded payments which were not included in
their supply contracts.
If a supplier is entitled to such arbitrary demands, it is difficult for them to make
investment decisions in the future due to financial uncertainties (Sarah Danckert, Sue Mitchell
and Catie Low, 2015). As a result, it is right to say that Woolworth was not consistent with the
business ethics.
b) ‘Mind the Gap’ and Stakeholder Theory
‘Mind the Gap’ payments is consistent with the stakeholder theory since there are
suppliers who are affected by the objectives of the supermarket (Low, 2016). This is because
Woolworth makes demands from the suppliers to pay a certain amount of money which they
have to pay if they want to be seen to support Woolworth. Every decision made by Woolworth

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affects its suppliers while in other instances, the suppliers influence the decisions that are made
by Woolworth.

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References
Casualties in the supermarket war. (2013, March 20). Retrieved from
http://www.abc.net.au/radionational/programs/backgroundbriefing/2013-12-29/5158628
Goodpaster, K. E. (1991). Business Ethics and Stakeholder Analysis. Business Ethics
Quarterly, 1(01), 53-73. doi:10.1017/s1052150x00008782
Google Scholar. (n.d.). Retrieved from https://scholar.google.com/scholar?
hl=en&as_sdt=0%2C5&q=K.+E.+Goodpaster%2C+
%E2%80%98Business+Ethics+and+Stakeholder+Analysis
%E2%80%99%2C+Business+Ethics+Quarterly%2C+Vol.+1%2C+No.+1.+%28Jan.
%2C+1991%29%2C+pp.+53-73.+&btnG=
Low, C. (2016, December 8). Court clears Woolworths of 'unconscionable conduct'. Retrieved
from http://www.smh.com.au/business/retail/woolworths-did-not-break-any-law-with-
mind-the-gap-scheme-federal-court-20161208-gt6t1t.html
Sarah Danckert, Sue Mitchell and Catie Low. (2015, December 11). ACCC accuses Woolworths
of unconscionable conduct. Retrieved from http://www.smh.com.au/business/retail/accc-
accuses-woolworths-of-unconscionable-conduct-20151210-glkfz2.html