Ethical Consultancy Report: Corporate Governance at Tesco PLC Analysis

This report serves as an ethical consultancy report for Tesco PLC, a multinational grocery and general merchandise retailer. It begins with an executive summary outlining the importance of business ethics and the role of normative ethics in guiding organizational conduct. The report delves into t...Read More

Running head: Business Ethics Assignment: Ethical Consultancy Report
Business Ethics Assignment: Ethical Consultancy Report

Business Ethics Assignment: Ethical Consultancy Report 1
Executive Summary
Ethics in business revolve around relationships between the organization and its clientele on the
various social and economic levels. Business ethics thereby describe the relationship amongst the
business and its stakeholders including its employees, various areas of government and the
community. There are various set of ethical approaches followed by the organizations.
Normative approach is one of them.
Normative Ethics in business deals with the study of ethical actions and doings. It provides the
answer to the question about how one ought to act. It investigates the benchmark for the
rightness and wrongness of actions. The Normative Theories of Business Ethics are divided into
two parts viz. Consequentialist and No consequentialist Theories. The former determines the
moral rightness or wrongness of the acts of the business depending upon the results of those
actions while the latter is related with assessing the moral rightness or wrongness of the actions
depending upon their features and character.
So, as an ethical consultant of Tesco PLC which is a multinational grocery and general
merchandise retailer based in Great Britain, I would present an Ethical Consultancy Report to the
stakeholders of the company.
The report would be based on the theories followed by the organization in the area of Corporate
Governance. Also, the impact of the mentioned ethical approaches would be analyzed on two
groups of stakeholders of the company.

Business Ethics Assignment: Ethical Consultancy Report 2
Contents
Executive Summary.........................................................................................................................1
Introduction......................................................................................................................................3
Two major theoretical normative ethical approaches applied in Tesco PLC..................................3
What is Normative Ethical Theory..............................................................................................3
Role of Normative Ethical Theory in Tesco PLC........................................................................3
Consequentialist and Non-Consequentialist Theories of Ethics..................................................4
Application of the Ethical Approaches to the organization’s conduct in the areas of Corporate
Governance at Tesco PLC...............................................................................................................5
Tesco PLC Structure of Governance...........................................................................................5
Impact on ethical behavior of Tesco PLC on its Stakeholders........................................................8
Conclusion.....................................................................................................................................10
References......................................................................................................................................12

Business Ethics Assignment: Ethical Consultancy Report 3
Introduction
With the increase in the rights and expectations of the stakeholders, the organizations are
becoming more ethically responsible in the present scenario. Business ethics form of the basis of
the four core values viz. attitude, integrity, moral uprightness and behavior which are essential
for the long term growth and sustainability of the business.
Various ethical approaches are followed by the organizations. Normative ethics is one of them. It
is the branch of philosophical ethics which studies the ethical actions. It provides the solution to
the set of questions which arise while considering how one ought to act (Hendry, 2013).
So, as an ethical consultant of Tesco PLC, I would be preparing an ‘Ethical Consultancy Report’
of the organization. It is a British multinational grocery and general merchandise retailer which
is headquartered in Welwyn Garden City, Hertfordshire, England, United Kingdom (Tesco PLC,
2018).
Two major theoretical normative ethical approaches applied in Tesco PLC
What is Normative Ethical Theory
Normative theories or moral theories are the branch of philosophical ethics to figure out which
actions are right and wrong. They describe the ways to conduct business in the organization
(Kazeroony, 2016). According to the Normative Ethical Theory, there are three components of
any act viz. firstly there is an agent i.e. the person performing the act. Secondly there should be
an act; thirdly there should be the consequences of the act. So, there are three types of normative
ethical theories –virtue, deontological and consequentialist, each defining one of these elements
(Salloch et al., 2015).
Role of Normative Ethical Theory in Tesco PLC
Normative Ethical Theory in applied in Tesco PLC by clarifying the arguments related to the
areas of morality. It answers the doubts related to the substance and precision to the arguments
in the area of ethical dilemma. It suggests the validation of judgment regarding the rightness and

Business Ethics Assignment: Ethical Consultancy Report 4
wrongness of actions. They provide claims about moral obligations. It is applicable to the
philosophical investigation from the point of view of moral principles to the organization. It
argues and asserts that as long as the activities of the business are legal and accepted by the
customers and stakeholders , the actions can be considered as ethically sound (Ogbari et
al.,2016).
The normative ethical theory is the origin of the ethical analysis in Tesco PLC. It forms the basis
of the Corporate Governance and is imbibed in the vision and mission of the organization.
Consequentialist and Non-Consequentialist Theories of Ethics
Consequentialist approach is one of the classes of normative ethical theory. It pertains to the
ideology that the results of the person’s behavior form the basis of the judgment about the
righteousness or wrongness of the actions. So, according to the consequentialist approach, a
morally right act is the one which results into a good result. The ideology of consequentialism is
summarized in the saying,” the end justifies the means”.
Utilitarianism is a theory of normative ethics which states that something is moral or good if it
produces the greatest amount of good for the largest amount of people. Proposed by Jeremy
Bentham, it answers to the question which asks if a specific action is good or bad, moral or
immoral. It is derived from the word utility which implies that the action which enhances the
utility is the one which maximizes the total benefits and reduces the negative results for the
majority of the masses (Marques, 2015).
Its advantages are that it is based on the simple principle of enhancing happiness and decreasing
pain. It is fair since its principles are widely accepted. It is related to actions which can be
experienced in the real world.
However, it has certain disadvantages too. Since happiness is not the only good. Utilitarianism
ignores the other elements such as love, human life and freedom. Also, the future consequences
of the acts can’t be predicted, so it is impractical to base the choices on what is going to happen
in the future. It is impossible to measure the amount of pleasure derived from happiness.

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The non-consequentialist theory of ethics evaluate on the basis of the sum total of the results of
choices. However, it does not always avoid consequences. The theory considers the actions to be
wrong or right, their righteousness and wrongness does not depend upon their results (Cortez,
2015).
Kantian Ethics is an example of non-consequentialist theory. It was proposed by German
philosopher Immanuel Kant. According to Kantian Ethics, one should ask two questions within
himself while deciding to act viz. the activity being planned to act would be done by everyone?
If the answer is negative, then he must not do that act. Secondly if the action does not help the
human beings to accomplish their moral objectives in general rather it is used for own purpose
then it must not be performed. According to Kant, there was a supreme principle of morality
namely The Categorical Imperative. It describes about the moral duties of individuals
(MacKinnon and Fiala, 2016).
The advantages of Kantian ethics are that it is logical and not dependent upon results and taboos.
Kant’s theory states that the rightness or wrongness of the actions is not dependent upon the
results but whether they fulfill the intention of the moral objectives of the humans or not. The
Categorical Imperatives describe the rules which apply to every individual and command to
respect human life (Follesdal, 2013).
The disadvantages account to the inapplicability of theory. It is abstract and informs only about
the category of good actions. It fails to explain the right things to do in a particular situation. This
theory is based on some idea of God to explain the rationally ordered world which means that the
atheists will not accept this theory.
Apart from the consequentialist approach, virtue ethics are another branch of normative ethical
theories which focus on virtues of mind and character. It is an ethical view originating from the
ancient Greece which describes ethics as learning to live well. The theory was proposed by
Aristotle (Norman, 2013).
The Postmodern ethics are another branch of ethical approach which has a flexible approach to
ethics. They are not based on universal or unchanging principles. According to this ideology,
there is no way to say that anything is wrong or immoral. However, it suggests that people desire

Business Ethics Assignment: Ethical Consultancy Report 6
to live free of the wrongful actions such as murder and theft if they agree not to engage
themselves in such acts. This approach does not state the wrong action rather provides a way to
restrict these from occurring (Lyon, 2017).
Application of the Ethical Approaches to the organization’s conduct in the areas of
Corporate Governance at Tesco PLC
Corporate Governance refers to the methodology as to how the corporates are run and the
interests of the stakeholders are considered while decision making. The term refers to the
framework of internal controls which the company has applied to assist the management to act in
the best interest of the stakeholders. The principles relevant to the Corporate Governance to
achieve maximum shareholder wealth are attributable to three aspects namely:
1. The ability of the stakeholders to have a voice in the decision making of the company.
2. The managerial activities are according to the ethical principles towards the company and its
stakeholders to ensure its smooth and efficient operations.
3. The stakeholders are well informed about the financial activities of the company on regular
basis, which will result in maximum profitable allocation of resources and capital (Tesco,
2014).
Tesco PLC Structure of Governance
According to ICAEW (2018) Tesco’s international operations have allowed it develops a strong
and efficient framework for running the company across all the markets it operates in. The Board
comprising of the Chairman, the Chief –Executive along with Non-Executive Directors who
provide their independent opinions on the commercial activities of the company are at the
forefront of Corporate Governance. Also, a senior Independent Director is also present to resolve
the conflicts amongst the Board and the stakeholders. It adheres to the UK Corporate
Governance Code. In the current scenario, Tesco PLC supports its vision with the help of five
committees namely:

Business Ethics Assignment: Ethical Consultancy Report 7
1. The Audit Committee: The committee is allotted with the task of ensuring that the risk
management principles of the company are effective and updated to keep the risk
management of Tesco aligned with the strategies. Also, interim audits and financial
disclosures are verifiable and available when demanded by the investigating authority.
2. The committee is responsible for hiring of an independent external auditor for the yearly
audit and inquiring the management regarding the matters it deems fit. The committee has
also hired legal counsel to receive their suggestions which have raised concern.
3. The Remuneration Committee: The Remuneration Committee is accountable for determining
the compensation agreements of the senior managerial personnel and to evaluate the payment
structures for the executive members to retain the competent and experienced management
for overseeing the company.
4. The Corporate Responsibility Committee: The committee incorporates the principles of
Companies Act to assist in governing the scope of operation. It ensures that Tesco operates in
a sustainable manner so that the communities and the environment are benefitted. It also
tracks the impact of the operations of Tesco on the ethical culture present across all the
markets in which it operates (Tesco, 2016).
5. The Nominations Committee: The committee has been allocated with the task of managing
the operations of Tesco PLC. The committee ensures that the board of directors possess
appropriate skills to project strategies for the achievement of the goals of the business. It also
ensures that proper balance is maintained between executive and non-executive directors to

Business Ethics Assignment: Ethical Consultancy Report 8
maintain the independence within the company. It also links the management performance to
compensation with the help of regular appraisals to ensure that the most cost effective
expertise is extended at every level (Bingham and Druker, 2016).
6. The Disclosure Committee: The committee deals with incorporating a framework regarding
the handling of ‘Material non-public information ‘and how it is disclosed. It ensures that
consistency is maintained in the financial statements and verifies the annual reports to make
sure that the estimates and policies are appropriate for treatment of various financial matters
(Tesco PLC, 2018).
Apart from the committees formulated at the Executive Management level, Tesco PLC ensures
that at the business strategy level, each division has its own strategic plan to increase its
performance and assist the company in accomplishing its vision. The following committees are
formulated by the company in addition to the above mentioned committees:
1. Compliance Committee
2. Multichannel Committee
3. People Matters Group
4. Property Strategy Committee
5. Social Responsibility Committee
6. Technology Committee
7. Commercial Committee
The Chief Executive Officer is accountable for the efficient working of these committees.
The normative ethical approach is applicable to Tesco PLC when the board needs to take any
action or formulate any strategy and it faces the dilemma of what is the right thing to do or which
mode should be adopted for accomplishing the objectives of the organization. Cases such as
merger and acquisitions, downsizing and large investments involve conflicting versions of what
is right in the moral sense.

Business Ethics Assignment: Ethical Consultancy Report 9
The normative ethical theory solves the problem of the management. When the directors choose
to act on individual decisions, they would be able to decide about the rightness or wrongness of
the actions based on their fundamental and unspoken assumptions (Kaptein, 2017).
Utilitarianism theory denotes that maximum good should be done to maximum people. It is
applicable to Tesco PLC when the compensation scheme is designed in such as way by The
Remuneration Committee so that managerial personnel are benefitted and the company can
retain the talent. But along with this, it brings some difficulties like the increasing inequalities
between different groups and emphasizing too much on material wealth thus ignoring other
aspects of wellbeing. By implementing such policies, the share of profits towards the employees
will be reduced (Tesco PLC, 2015).
Kantian Ethics pertains that if the action performed by the individuals does not fulfill the moral
objectives, then it should not be done. So, in context of Tesco PLC the management should not
deceive, cheat or manipulate for achieving their personal gains. Kantian approach criticizes these
as the violations of human dignity (Stanford Encyclopedia of Philosophy, 2016).
Virtue ethics in the context of Tesco PLC refers to the cultivation of business virtues to pursue
the objectives of the company while the postmodern ethics refers to restriction of the wrong
things from occurring. In Tesco PLC the management and the workers should follow the code of
ethics to prevent wrong things from occurring (Besser and Slote, 2015).
Impact on ethical behavior of Tesco PLC on its Stakeholders
Though the main objective of managers is to maximize the profit, but Tesco PLC has started to
focus on the effect of the ethical behavior on its stakeholders. The views of the stakeholders are
considered to be the basis of the corporate governance and corporate social responsibility. The
company frames its policies to minimize the shareholder conflicts, litigations and turnover.
Stakeholders are the group of individuals whose interests affect or are affected by the activities,
objectives and policies of the company. These can be defined as the internal and external.
Internal shareholders can be categorized as managers and employees. External are shareholders,
customers and suppliers (Tesco, 2014).

Business Ethics Assignment: Ethical Consultancy Report 10
The impact of the ethical behavior of the company can affect the interests of two of the above
mentioned stakeholders in the following ways:
1. Employees: The employees form the basis of the company as they are the ones which transform
the objectives of the company into reality. They endeavour to maximize the profits of the
company so that it can accomplish its mission and vision. The employees convert inputs into
outputs and are involved in every process of the company right from the procurement to the final
delivery of goods to the consumers including the after sales services.
In return of their efforts, they expect maximization of their salaries and benefits on particular
skills from the company. Most of the employees want an employment with continuity. When
discrimination and exploitation happens in the company, the conflict of interest occurs amongst
the company and the employees.
Tesco PLC has formulated policies for the welfare of the employees. It gives equal opportunities
to the employees belonging to various cultures, employees with disabilities, older and younger
employees. It conducts training sessions and provides lifetime learning opportunities to all its
employees (Tesco Corporate Responsibility, 2018).
Tesco follows its core values which says,” Treat people as you like to be treated”. It has created a
healthy atmosphere in the workplace by following the principles of mutual trust and respect ,
support to each other, sharing knowledge, enjoying work and celebrating success and above all
considering each and every employee irrespective of his/her cadre in the organization as a part
of one team (Tesco , 2015).
Tesco believes in the theories of Normative Approach, Utilitarianism, Kantian Ethics, Virtue
ethics and postmodern ethics.
The normative approach suggests that morally right act is the one which produces good results.
According to utilitarianism approach, the maximum good should be done to the maximum
people. Tesco PLC follow these approaches by formulating policies which are committed to
staff development so that the employees feel motivated and their personal interest are aligned
with the interests of the organization.

Business Ethics Assignment: Ethical Consultancy Report 11
Kantian Ethics suggests that the organization should avoid doing those practices which do not
accomplish its moral objectives. Tesco PLC provides promotional opportunities to every staff
member. It organizes the Options scheme which is a development program to promote those
employees who have the potential to do better job.
The virtue ethics suggests the virtue of mind and character. Tesco PLC has imbibed the policies
related to health and safety of its employees into is core values. The postmodern ethics provide a
way to restrict the wrong actions from occurring. Tesco has formulated the whistleblower policy
so that the employees from any cadre can complaint about the faults and inaccuracies occurring
in any process directly to the management.
2. Suppliers: According to Tesco Corporate Responsibility (2018) the company has supported the
local economy and worked with the country’s food and agricultural industry. It has committed to
support the local economy and initiated various programs in this behalf. It has promoted
entrepreneurial development in the food and agricultural sector and evaluated export
opportunities for the same.
It has also initiated ‘Local Supplier Programs’ to promote the local suppliers to provide high
quality products to the Tesco stores. The company is providing storage spaces to its suppliers for
the storage of their goods. Also, it provides opportunities to small local suppliers to interact with
the buyers and the technical team. It also conducts training programs to assist the suppliers
dealing in dairy products, seafood, beverage and frozen sectors for developing their skills to
achieve sustainable growth at the multiple retail level.
Tesco applies the theories of Normative Approach, Utilitarianism, Kantian Ethics, Virtue ethics
and postmodern ethics while dealing with its suppliers.
The normative approach states that the rightness and wrongness of the actions decide the
uprightness of the act. So, Tesco applies the normative approach in dealing with its suppliers. It
has initiated the ‘Tesco Nature’s Choice Growing Standard’ which recognizes the suppliers
which show the best ecofriendly agricultural practices (Rode et al., 2015).

Business Ethics Assignment: Ethical Consultancy Report 12
The utilitarianism approach suggests that maximum people would be benefited by doing the
good. So, the company observes ethical trading practices by imbibing the principles of ethical
trading initiatives in its business policies. It helps to bring more products within the reach of
ordinary people by providing beat quality products at nominal prices.
Kantian Ethics suggest that the organization should avoid doing those activities which are
unethical. So, Tesco requires that its suppliers meet the strict criteria on labor standards (Ferrell,
Fraedrich and Ferrell, 2016).
The virtue ethics describe ethics as the moral uprightness of mind and character while the
postmodern ethics define the ways to confine the unethical activities from occurring. The
company aims at providing high quality products at nominal prices to its customers. It also
observes the ethical trading practices by procuring goods from suppliers who promote
ecofriendly agricultural practices (Tesco PLC, 2018).
Conclusion
Thus, to conclude, Tesco PLC which is the third largest retailer in the world in terms of profits
has imbibed the ethical approaches in its core values. It adheres to the principles of ethical
trading initiatives and sustainable environmental impact in its business practices.
It has assimilated its core values and normative approaches, utilitarianism, Kantian and virtue
ethics and the postmodernisation approach in to its mission and vision statements. It is
committed to work hard to progress and addressing the issues faced by its stakeholders. It is also
committed to uphold the human rights and provides safer working environment for its
employees.

Business Ethics Assignment: Ethical Consultancy Report 13
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