Business Ethics Report: Wesfarmers vs. Mondragon Cooperative

This report examines business ethics through a comparative analysis of Wesfarmers Limited and Mondragon Cooperative Corporation. It explores how each company treats its shareholders and employees, highlighting ethical considerations and practices. The report details Wesfarmers' focus on providing returns to shareholders while considering sustainability and ethical conduct, and contrasts this with Mondragon's worker cooperative model, where employees are also members and the primary focus is on community and job creation rather than maximizing shareholder profit. The analysis includes ethical dilemmas faced by both organizations, such as insider trading, executive remuneration, and conflicts of interest. The report concludes by emphasizing the increasing importance of stakeholder management and ethical business practices in contemporary corporate environments. This document, contributed by a student, is available on Desklib, a platform providing AI-based study tools.

Student’s Name
Date : 21-May -2019
BUSINESS ETHICS
Running Head: BUSINESS AND CORPORATION LAW 0

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Contents
Introduction.................................................................................................................................................2
Ethical Treatment of shareholders and Employees......................................................................................2
Conclusion...................................................................................................................................................4
References...................................................................................................................................................4

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Introduction
Ethics is an important part of behavior as it regulates the same and diverts the practices towards
morality. It provides an outline and let the people know about standard practices. The topic
becomes more significant when a study in the context of business. Business ethics play an
important role in practices as they let the management of the organizations know about the
standard position. Different organizations treat their shareholders and employees in a different
manner that reflect their ethics and morality status. The chosen organization for this report is
Wesfarmers Limited which is a traditional capitalist organization. In the presented report, the
discussion will be made on the manner in that this company treats its shareholders and
employees. This manner will be compared and contrast with the practices adopted by another
organization named Mondragon Cooperative Corporation. In addition to this, ethical dilemmas
presented in relation to employees and shareholders will also be discussed.
Ethical Treatment of shareholders and Employees
Firstly to discuss practices adopted by Wesfarmers this is to state that the company has been
incorporated in Australia and been ethical since years. This company is very proactive in
response to its shareholders. As per the policies of the company, the primary objective of this
company is to provide an adequate return to its shareholders by performing financial discipline
and managing a diversified portfolio of businesses (Sustainability.wesfarmers.com.au, 2019a).
Here it is clear that the company takes enough responsibility to provide an adequate and
appropriate return to shareholders but also consider ethics and morality. The company also

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develops its focus to sustainability improvements and while making profits consider this factor.
In the financial year 2018, company has provided $2.23 dividend per share which is a very good
amount. In addition, to provide returns to its shareholder, the company ensures that such return is
not short term and will not make any negative impacts in the future. The company seems to be
very ethical when it comes to the discussion of shareholders and their returns. In the Shareholder
review report 2018 of the company, the same states that the company believes it can go in a long
way by considering other factors such as market demand, the interest of other stakeholders and
ethics in practice. As mentioned above the main motive of the company is not to provide a return
to shareholders but to provide a balanced and managed return with consistency.
Further company behaves in a responsible manner while conducting its business activities as
they know that an irresponsible or inappropriate decision can lead an adverse impact to many of
its shareholders. Shareholders are important stakeholders for the company as they provide funds
to the company by investing their capital and show their trust in the same. Rob Scott, managing
director of the company stipulated in the above-mentioned report that in the financial year 2018,
Wesfarmers has made certain changes in the portfolio and while doing the same, company
ensured the sustained value creation. As a company, Wesfarmers acknowledge that the same can
only provide a satisfactory return to shareholders each year by creating long term value for all
the stakeholders. The company does not take a risk in this area as the same understand dealing
unethically with one or more stakeholders can defeat the profits of the company and returns for
shareholders in an indirect manner. Not only for shareholders but for the company is also
working in a positive and ethical manner for its employees.
As of June 2018, the company had approximately 217000 people employed globally
(Sustainability.wesfarmers.com.au, 2019b). Company is one of the largest employers in the

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private sector of Australia (Pash, 2018). The company ensures that all the laws and regulations
are properly followed while dealing with employees and they are not exploited in order to earn
maximum profits. The manner in which Wesfarmers deal with its employees can be checked
through its code of conduct. As per the code of conduct released by the company does not
tolerate unlawful discrimination against its employees and demotivates all the related activities.
In addition to this, the same provide a safe and healthy working environment to its employees
considering the ethical element in practice (Wesfarmers.com.au, 2019). In addition to all other
stakeholders, employees also have enough flexibility that they can report unethical issues to
senior management. In this manner, it is clear that Wesfarmers treats its employees as well as its
shareholders in a very fair and ethical manner.
Moving towards the discussion of Mondragon Cooperative Corporation (MCC) this is to say that
it is a federation of a worker cooperative. The same has been founded in the early 1950s by Jose
Maria (Nembhard, 2014). The corporation started its working by the manufacturing of plastic
appliances and then marked its presence in a white good industry. The company cannot be
treated as shareholder-owned companies. Now while discussing nature and manner of working
of this corporation, this is to state that individual co-operatives support finance to the
corporation’s development and establish its strategies (Bibby, 2012). It means workers of the
same are the manager and also the shareholders of the company. The main motive of this
corporation is to produce job and value of communities. In this manner, the company does not
make its focus on profitability of its shareholders. Profits paid to its members are retained in the
co-operation itself and members receive interest on the invested capital in those situations where
business works profitably. In this manner, it would not be wrongful to states that members and
employees are generally the same in MCC. The business is developed from cooperative values

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(Wedreambusiness.org, 2013). Cooperation in its dealing consider the best interest of members,
employees as well as of community as profit is not the main motive. Most of the powers are with
worker-members as they can hire and fire managers and it is too way opposite from traditional
organizations. How much concerned this cooperation is towards community can be understood
by the fact that even at the time of double pin recession of Spain, the company was providing
employment to around 84000 people. Further in 2009, when wages reduction was normal in
Spain, MCC has not contributed (Tremlett, 2013). In this manner, cooperation always proved
itself ethical by securing jobs for its employees and interest of members in a similar manner.
Organizations often face many issues while dealing with their stakeholders specifically to
shareholders and employees. These issues are also known as ethical dilemmas. These are
situations where organizations cannot decide what to do. In order words, this is a decision-
making issue with two or more possible moral imperatives. Almost every organization faces
these dilemmas in day to day business operations. Insider trading, executive remuneration, ethics
in private equality are some such identified ethical dilemmas with respect to shareholders (Crane
and Matten, 2016). Wesfarmers deal with these issues in a very clear cut manner. As it is already
been prescribed by the company, the same choose interest of other stakeholders over and above
the interest of shareholders. It means earning a profit is important but the same is not everything
to the company. As the company is a profit making company, shareholders have some
expectations from the management but the same cannot always consider the interest of
shareholders and sometimes faces oppose of them. Similarly, Wesfarmers has many employees
and they expect the organization to be highly supportive. Workplace diversity, sustainable
employment, work-life balance are a few types of ethical issues presented with employees.

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Wesfarmers manages these issues very well as it supports working collaboratively and maintain
a proper balance between personal and professional lives of employees/workers.
MCC also faces ethical challenges. One of the main motives of the cooperation is to promote
community and to fulfill the ambitions of each member. In such a situation, sometimes a conflict
of interest arises there between the workers who are also a member of the company and workers
who only work in this capacity. In this manner, the same deals with such issues considering the
best interest of all. Both of the studies companies are different in their manner and working
ethically in the best possible manner.
Conclusion
In order to conclude the discussion, this is to state that shareholders and worker are becoming the
most important stakeholder of an organization and in this manner, each organization faces
different issues related to these stakeholder groups. After the above-mentioned reading, it is clear
that Wesfarmers is a profit making organization and in this manner, the same consider
shareholders interest to the ethical level. On the different side, MCC is worker cooperation where
workers are members in general. Manner of working and dealing with shareholders and workers
are different in both of the organization but at last, they both seem to be ethical in their practices.

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References
Bibby, A. (2012) Co-operatives in Spain - Mondragon leads the way. [Online] Available at:
https://www.theguardian.com/social-enterprise-network/2012/mar/12/cooperatives-spain-
mondragon [Accessed on 21st May 2019].
Crane, A. and Matten, D. (2016) Business Ethics: Managing Corporate Citizenship and
Sustainability in the Age of Globalization. UK: Oxford University Press.
Nembhard, J., G. (2014) Collective Courage: A History of African American Cooperative
Economic Thought and Practice. US: Penn State Press.
Pash, C. (2018) Wesfarmers is about to lose its title as the largest private employer in Australia.
[Online] Available at: https://www.businessinsider.com.au/australia-largest-private-employer-
in-australia-2018-10 [Accessed on 21st May 2019].
Sustainability.wesfarmers.com.au. (2019a) Ethical and responsible behavior. [Online] Available
at: https://sustainability.wesfarmers.com.au/our-principles/governance/robust-governance/
ethical-and-responsible-behaviour/ [Accessed on 21st May 2019].
Sustainability.wesfarmers.com.au. (2019b) Our employees. [Online] Available at:
https://sustainability.wesfarmers.com.au/our-principles/people/people-development/our-
employees/

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Tremlett, G. (2013) Mondragon: Spain's giant co-operative where times are hard but few go
bust. [Online] Available at: https://www.theguardian.com/world/2013/mar/07/mondragon-
spains-giant-cooperative [Accessed on 21st May 2019].
Wedreambusiness.org. (2013) Mondragon Corporation. [Online] Available at:
https://wedreambusiness.org/Mondragon-Corporation.html [Accessed on 21st May 2019].
Wesfarmers.com.au. (2019). Code of Conduct. [Online] Available at:
https://www.wesfarmers.com.au/docs/default-source/corporate-governance/code-of-conduct---
may-2015.pdf?sfvrsn=10 [Accessed on 21st May 2019].