An Analysis of Ethical Issues and Risks for 7-Eleven Australia

This report provides an in-depth analysis of the ethical issues faced by 7-Eleven Australia, focusing on the wage scam scandal and its implications. The study identifies and examines the ethical dilemmas, including the underpayment of employees, particularly foreign students, and the falsification of payroll records. It analyzes these issues through the lens of ethical theories such as Utilitarianism, Justice Theory, and Virtue Theory, evaluating the impact of these practices on employees and the organization. The report highlights the risks associated with these ethical breaches, including legal liabilities, damage to corporate image, decreased productivity, and internal employee conflicts. Furthermore, it offers actionable recommendations for 7-Eleven, such as implementing fair working conditions, providing fair wages, establishing an accurate payroll system, and ensuring fair treatment of all employees to mitigate risks and restore ethical conduct.

Running head: SUSTAINABILITY AND ETHICS
Sustainability and Ethics
Name of the Student:
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Author’s Note:

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Executive Summary
Ethics are the set of principles, which guide an organization in conducting its business in right
way. Ethical issues bring system of principle and morality into conflict. This study has described
the ethical issues of 7-Eleven in Australia. The study as identified the ethical issues of the
organization in terms of wage scam. Apart from that, the study has also analyzed the ethical
issues through different theories of ethics like Utilitarianism theory, Justice Theory, Virtue
Theory. Apart from that, the study has also assessed the risk for the organization associated with
the ethical issues. It has been found that, the ethical issue of the organization has created various
legal risks, disruption of corporate image and many others. Furthermore, the study has also
provided some suitable suggestion to the organization for resolving their risks. Moreover, the
organization should immediately set flexible working hours and provide adequate wage to the
employees for avoiding the organizational risks.

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Table of Contents
1.0 Introduction................................................................................................................................3
2.0 Identification of Ethical Issue....................................................................................................3
3.0 Analysis of Ethical Issue...........................................................................................................4
4.0 Risks for the Organization.........................................................................................................6
4.1 Legal Risk..............................................................................................................................6
4.2 Disruption of Corporate Image..............................................................................................7
4.3 Decreased Productivity..........................................................................................................7
4.4 Internal Employee Conflict....................................................................................................7
5.0 Recommendation of the Organization.......................................................................................8
5.1 Proper Working Condition....................................................................................................8
5.2 Fair Wage...............................................................................................................................8
5.3 Accurate Payroll System........................................................................................................9
5.4 Fair Treatment to Employees.................................................................................................9
6.0 Conclusion.................................................................................................................................9
References......................................................................................................................................11

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1.0 Introduction
Ethical issue can be defined as the problem or situation, which requires an organization to
choose between two alternative options that must be evaluated as right (ethical) or wrong
(unethical). As per Sekerka et al., (2014), organizational ethics defines the set of principles and
code of conducts, which guide an organization in behaving in ethical way. Organizations face the
ethical issues, while they disobey the set of moral principles for their own benefits. This study
will discuss the ethical issues face by the 7-Elevel of Australia in the recent year.
The purpose of the study is to identify and analyze ethical issues occurred in 7-Eleven.
Furthermore, the study will also recognize the risks for the organization, which are associated
with this ethical issue. Apart from that, the study will also provide some suitable
recommendation for the organization for overcoming the ethical issues and their associated risks.
2.0 Identification of Ethical Issue
Ethical issues evaluate the right and wrong in the organizational activities. According to
Dietz and Kleinlogel, (2014), ethics define the set of rules and principles, which governs the
organizational code of conduct and guide them towards behaving in ethical way. Any
organization, which breaches the ethical principles for their own benefits, is likely to face ethical
dilemma. On the other hand, Pullen and Rhodes, (2014) opined that fairness is business dealings
defines the objectivity and interest, which can create win-win situation both the parties like
employer-employee and company-client. However, 7-Elevel of Australia is incapable of
maintaining the ethical principles in their business and causing ethical issues in its business.

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7-Elevel is actually underpaying the employees as per their long working hours.
Furthermore, Danckert, (2015) opined that the organization has also been claimed with the
falsification of payroll for avoiding any legal constraints. Apart from that, the organization has
also been claimed with exploitation of foreign employees, who are actually the students coming
from foreign countries. Moreover, Tham, (2016) stated that the organization is threatening the
foreign student with the fear of Visa cancelation and forcefully making them work hard for
longer hours. In some extent, the organization is initially paying the employee right amount of
reward. However, later on, they are forcing the employees to paying back some portion of their
remuneration to the organization.
3.0 Analysis of Ethical Issue
According to Karp, (2016), 7-Eleven is forcing the employees of its Australian
franchisees to work for longer hours, which quite more than normal working hours. Furthermore,
the organization is also underpaying the employees as per their longer working hours.
Abc.net.au, (2015) pointed out that the organization is paying very lower wage per hour to the
employees. Therefore, the employees are facing financial crisis in their life. Longer working
hours are also creating physical problems for the employees.
As per the ethical theory namely Utilitarianism theory, an activity is ethical, when it
yields greatest benefits to most of the people. As per Arntzenius, (2014), utilitarian seeks
benefits to most of the people, but it should be through fairest and most just means available.
While evaluating 7-Eleven through the Utilitarianism theory, the organizational practices are not
yielding greatest good for most of the people. Rather, it is actually harming the employees
through underpaying them and making the m fall into financial crisis. Furthermore, long working

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hours of the employees are creating physical stress for the employees. Overall, as per
Utilitarianism theory, the organizational practices of this organization are at all yielding well for
most of the people and causing ethical issues.
7-Elevn is deliberately exploiting the employees by forcing them to work for longer
hours and underpaying them. Furthermore, Ferguson, (2015) pointed out that the organization
has also been claimed with having cash back system. In such system, the organization is initially
providing reward to the employees for their huge level of effort. However, later on, the
organization is forcing the employees to pay back some portion of their compensation. The
organization is mostly doing such behavior with the vulnerable foreigner employees. On the
other hand, Ferguson and Danckert, (2016) stated that the organization is also doing unethical
behavior with the foreign students, who work with them for earning some money for surviving in
foreign country. The organization is also imposing long working hours on such students and
even underpaying them. Furthermore, Tham, (2016) mentioned that the organization is also
threatening the students with the fear of Visa Cancelation for preventing them from disclosing
such unethical organizational practice. Moreover, the organization is also destroying the
educational life of the employees through creating mental stress with threatening.
Justice Theory of ethics looks at the balance of benefits and burdens distributed among
the groups. Moreover, Michaelson et al., (2014) stated that there should be balance of benefits
and burdens provided to the employees of an organization. On the other hand, May et al., (2014)
opined that theory of the justice look after the feelings and interests of others and deal fairly with
them. While evaluating the organizational practice of 7-Eleven through the theory of justice, it
can be said that the organization does not have equal distribution of benefits and burdens among
the employees. The organization is not paying adequate amount of compensation to the

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employees as per their long working hours. Therefore, the burden of the employees is quite more
than their benefits in terms of compensation. Threatening the foreign students in terms of
cancelation of their Visa is actually creating mental stress for them. It is actually hampering their
educational life in the foreign country. Apart from that, the cash back system is also forcing the
foreign students or employees to distribute some portion of their compensation to the
organization. In this way, the cash back system is actually causing financial crisis for the foreign
students, who are employed in the organization. In this way, such organizational practice is
actually breaching the code of conduct of the organization and leading to ethical issue.
According Su, (2014) Virtue Theory of ethics judges a person through its characteristics
rather than its actions, which may deviate from normal behavior. On the other hand, Wang et al.,
(2016) opined that virtue theory of ethics takes into account person’s moral, motivation and
reputation. As per this theory, organization can face ethical issues, when is perform activity that
breaches the moral principle. As per Danckert, (2015), the managers of the organization have
also been claimed with manipulating or falsification of the payroll of the organization. This
payroll is actually claimed with “half-pay scam”, where the employees are actually paid for half
the hour recorded in the payroll system. Such organizational practice is actually is actually
breaching the moral principles, which is causing ethical issue in the organization.
4.0 Risks for the Organization
4.1 Legal Risk
According to Ferguson, (2015), 7-Eleven has been alleged with strategic underpayment
to the employees. The Franchisees of Australia has admitted that the organization is not paying
right wage to the employees as per the working hours. Therefore, the organization has got legal

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notice against their organizational practice. On the other hand, May et al., (2014) opined that the
employer always have to comply with National Employment Standards (NES) under Fair Work
legislation. However, the organization is behaving unethically with their employees through
underpaying them. Therefore, the organization can be imposed by penalty charge from legal
jurisdiction.
4.2 Disruption of Corporate Image
The unethical behavior of 7-Eleven has also disrupted its corporate image in the market.
Moreover, Fraser, (2016) opined that the several media is highly interested in writing the wage
scam of the organization in different ways. Therefore, it is actually disrupting the corporate
image publicly. On the other hand, Terry-Armstrong, (2016) opined that the unethical behavior is
also hampering the brand identity of 7-Eleven in the market. Therefore, the wage scam of the
organization is severely hampering the overall corporate reputation in the market.
4.3 Decreased Productivity
The wage scam and employee threatening behavior is actually making the existing
employees frustrated and de-motivated. They are highly inclined to leave the organization for
this unethical organizational practice. Moreover, the employees are no longer interested
enhancing their productivity for organizational success. In this way, the unethical organizational
practice is actually decreasing the overall organizational productivity with decreased employee
productivity.
4.4 Internal Employee Conflict
7-Eleven investigation has exposed shocking employee exploitation in terms of wage
scam and many others. As per Ferguson, (2015), such unethical business practices are creating

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internal employee conflict within the organization. Moreover, the employees are raising several
questions to the management regarding the organizational ethics. Therefore, it is becoming too
much difficult for the management to handle such internal conflict of the employees. Moreover,
the absenteeism rate of the employees is also increasing due to such unethical organizational
practice of 7-Eleven.
5.0 Recommendation of the Organization
5.1 Proper Working Condition
7-Eleven is facing ethical and legal constraint for forcing the employees to work for
longer hours than normal working hours. Therefore, the organization is should immediately
reconfigure their working condition. Moreover, the employees should be provided with flexible
working hours, which would be equal to the normal working hours. The reduced working hours
of the employees would make the employee refreshed and enthusiastic. Therefore, complaints
will less likely be raised from the employees, which will reduce the potentiality of legal and
ethical issue in the organization.
5.2 Fair Wage
Wage is mainly highlighted among all the scandals of 7-Eleven. Moreover, the
organization has also got penalty for underpaying the employees. Therefore, the organization
should immediately start to provide fair wage to the employees as per their actual working hours.
Furthermore, the organization should provide dissolve their cash back system and initiate actual
reward system as per the contribution level of the employees. Such fair wage provided to the
employees would satisfy the employees with proper valuation of the employee efforts. Therefore,
it would reduce the potentiality of legal and ethical issue in the organization.

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5.3 Accurate Payroll System
The falsification of the payroll system is one of the prime reasons of ethical issue in the
organization. The organization has been severely alleged with the falsification of the payroll
system. Therefore, the organization should prepare justified payroll system for the employees. In
the payroll system, the organization should include the actual pay paid to the employees against
actual working hours. It is make the payroll system clear and transparent to the legal entity,
which will reduce the legal risk of the organization.
5.4 Fair Treatment to Employees
The ethical issue of the organization is also related to exploitation of the employees in
their workplace. Most of the employees of the organization have claimed that the managers of
the organization treat them as their salve. Therefore, the managers of the organization should
immediately change their behavior and provide them adequate value. It will reduce the
potentially of ethical issues in the organization.
6.0 Conclusion
While concluding the study, 7-Eleven is having a major ethical issue in terms of wage
scam. Moreover, the organization is underpaying the employees as per their longer working
hours. Furthermore, the organization has also been claimed with cash back system, where the
employees are initially paid with adequate reward, but later on, they have to pay some portion of
the compensation to the organization. Apart from that, the organization is also threatening the
foreign students with the fear of visa cancelation, who are employed here. The organization is
threatening to stop the foreign students for preventing them from disclosing their wage scam.
Such ethical issues of the organization have created legal risk for the organization. Furthermore,

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the brand image of the organization has been severely disrupted for these ethical issues.
Therefore, the organization should set flexible and normal working hours for the employees.
Furthermore, the organization should also provide adequate wage to the employees as per their
efforts.

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References
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http://www.abc.net.au/news/2015-08-31/exploitation-part-of-7-eleven-business-model-
insider-says/6733682
Arntzenius, F. (2014). Utilitarianism, decision theory and eternity. Philosophical
Perspectives, 28(1), 31-58.
Danckert, A. (2015). 7-Eleven's Starbucks chain had wage issues, Senate hears. The Sydney
Morning Herald. Retrieved 29 August 2017, from
http://www.smh.com.au/business/workplace-relations/7elevens-starbucks-chain-had-
wage-issues-senate-hears-20151120-gl48fw.html
Dietz, J., & Kleinlogel, E. P. (2014). Wage cuts and managers’ empathy: How a positive emotion
can contribute to positive organizational ethics in difficult times. Journal of business
ethics, 119(4), 461-472.
Ferguson, A. (2015). Revealed: How 7 Eleven is ripping off its workers. Smh.com.au. Retrieved
29 August 2017, from http://www.smh.com.au/interactive/2015/7-eleven-revealed/
Ferguson, A., & Danckert, S. (2016). 7-Eleven's wage fraud sparks $170 billion blow back. The
Sydney Morning Herald. Retrieved 29 August 2017, from
http://www.smh.com.au/business/retail/7elevens-wage-fraud-sparks-170-billion-blow-
back-20160826-gr264h.html