Analysis of Primark's Corporate Governance, Ethical and CSR Challenges

This case study examines the corporate governance, ethical challenges, and corporate social responsibility (CSR) practices of Primark, a major international retailer. The analysis begins with an overview of Primark's history, operations, and its relationship with Associated British Foods. It then delves into specific events and scandals, including the Rana Plaza collapse, unethical labor practices, and concerns regarding child labor and workplace conditions. The study explores the key corporate governance issues, such as risk management, employment law, cultural concerns, and environmental impact. It applies relevant theoretical frameworks, including stakeholder theory and transaction cost theory, to assess Primark's responses to these issues. The case study evaluates Primark's efforts to address these challenges and considers whether similar events could occur today. It concludes with general lessons learned and a discussion of investment considerations, providing a comprehensive understanding of Primark's corporate governance journey.

Case Study

Table of Contents
Case study........................................................................................................................................1
Introduction.................................................................................................................................1
Description of events...................................................................................................................2
Conclusion...................................................................................................................................4
Case study analysis..........................................................................................................................4
1. Main corporate governance issues..........................................................................................4
2. Theoretical, academic, professional or legal regulation..........................................................5
3. Responses to such issues.........................................................................................................7
4. Could similar events happen again in the UK today...............................................................8
5. General lessons learnt from this case......................................................................................9
6. Would you like to invest within firm....................................................................................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

Case study
Introduction
Purpose of the study
Here, Primark has been taken into consideration which is listed as the part of Associated British
Food on London Stock Exchange and follows UK Corporate Governance Code. Thus, the first
aim is to set out effective practice in relation to carrying out the best corporate governance
standards related to the board leadership and effectiveness (Carroll, 2015). Corporate governance
is considered as one of the effective systems that set the best rules, practices and regulations
formulated by the government about controlling the business functions. Primark possesses a
strong history related to corporate governance and involves different risk and ethics issues such
as unfair trade, abuse and various matters related to management.
Importance of case
Primark operates in an international market and thus possess several issues in different areas and
therefore, the current study has been undertaken which presents a detailed analysis regarding
corporate governance, risk and ethical issues. It also helps in identifying the effects directly or
indirectly which have upon business regarding improving business situations and overcome the
problems concerning the protection of the environment.
Structure of case study
Case study possesses following structure which begins with the description of Primark company
after that it will be showcasing some main scandals occurred within the company and which
impacts upon the business performance. All these scandals are related to corporate governance
and ethical issues (Zentes, Morschett and Schramm-Klein, 2017). Later, the analysis will be
focusing on corporate governance issues and scandals and thus presented in the case with the use
of theoretical studies and literature. Also, the methods used by Primark about overcoming the
problems and also evaluating the situations to attain desired results.
Overview of firm
Primark started its first store in 1969 in Dublin which opens its subsidiary i.e. Associated British
Food, and thus it proves to be beneficial for the company as it became famous throughout the
worldwide market. The company dominates the major street in the UK and thus progress
considerably around the world. Currently, the company enjoys more than 300 stores in Europe
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and America. Primary offers a wide range of products or services including clothing for all
customer segments, personal beauty accessories and household things. Primark is a subsidiary of
Associated British Food operating worldwide using different methods regarding improving their
stake such as overcoming the issues faced by workers, and thus management focuses upon using
different methods for resolving the problems. In recent years, Primark has tried to raise the
company's situation through becoming the member of ETI (Ethical Trading Initiative) and NGO
to work about labour rights and does not affect the same. The business also follows international
standards, but it sometimes faces issues that possess negative impact upon the firm.
Description of events
It describes different events that have been taken place within Primark such as risk management,
ethics and CSR. All these events occur problems for the company, and thus it is essential for
Primark to identify different events and thus provide ways regarding overcoming them (Preuss,
2013).
Risk management
It can be assessed that Primark has been involved in different scandals, but the biggest was in
April 2013 when the Rana Plaza commercial building collapsed in Savar in which almost 1127
people lost their live and more than 2438 people were injured. The main people who were
responsible for such big collapse was building owners, local council and auditors who try to
avoid their responsibility.
There was another unethical thing occurred which assesses that it has been assessed that
one of the suppliers of TNS Knitwear and also it is one of the largest manufacturers of Knitwear
uses illegal and unlawful practices regarding workers and thus employs workers in adverse
condition and also paid Pound 3 per hour which is very less as per the minimum wage rate in UK
(O'Shea and et. al., 2013).
However, business tried to improve their standards through implementing innovative techniques
as compared to other firms and thus provided different facilities regarding treat workers as
efficient and effective (Aguinis and Glavas, 2012).
The owners of the building are least interested in other factors while they mainly focus on their
profits and do not worry about poor or inadequate conditions in which work is carried out there.
Ethics issue
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The business also faces ethics issues about workers working conditions, increasing child labour,
avoiding health and safety at workplace and violation of basic rights owned by workers. Further,
there are several other factors that influence workplace conditions and influence business
operations in the market (Servaes and Tamayo, 2013). All such factors affect business operations
and thus help the company to get proper value regarding delivering better quality performance.
However, it has been identified that company aims to deliver better quality products at low
prices. But as compared with another retail chain, Next its quality was low as compared to
Primark. Both the businesses were obtaining raw materials from the same supplier . Thus, quality
could not be different maybe it all depends upon the child labour working within business, and
thus it decreases the performance of Primark in the market. Thus, it is essential for the company
to comply with the ethical rules and does not affect the operations of the firm in the market.
In the year 2016, Primark also announced that it is going to start a new partnership with DFID
and thus aids in improving the health and safety condition of the workplace and also try to
minimise the poverty conditions within the countries that are less developed (Greening, Wall and
Elias, 2012).
Corporate social responsibility
Corporate social responsibility assists in managing the business process regarding
producing an overall positive impact on society. It possesses a continuous commitment to firm
regarding behaving ethically and contributing to economic development and enhances the quality
of life of workforce (Chin, Hambrick and Treviño, 2013). However, it is essential for Primark to
undertake various CSR activities and demonstrate in different ways such as
sponsoring/supporting charity work, contributing time/money to enhancing environmental
factors. The business also embraced to carry out trade practices ethically and deliver quality
goods to consumers without affecting the environment.
However, Primark is a global company and operates in an international market with a global
supply chain and growing to retain chain. The firm believes that they are responsible for the act
and carries out trade responsibly and ethically. Further, Primark does not own the factories in
which products are made but is the company which is responsible regarding workers, customer
and shareholders regarding making sure that products or services are carried out ethically
(Garriga and Melé, 2013).
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Business is operating across three continents around 700000 jobs in relevance with the code of
conduct, and thus workers aim to work for around 48 hours per wee. Thus, exceeding the set
limit affects the business ethically.
Conclusion
It can be evaluated from the case study analysis that there are various events faced by Primark
about risk management, CSR and ethics so that Primark could carry out business operations
ethically. It also identifies that it is essential for the firm to carry out effective CSR activities and
thus provide quality products to clients. Also, different risk management factors have been
assessed regarding managing the risk ethically regarding delivering better quality products to
satisfy consumers needs.
Case study analysis
1. Main corporate governance issues
Corporate governance acts as the system of rules, practices and legislation that comply with the
business practices regarding direct and control the business operations. Furthermore, the business
also faces several issues regarding ethics and CSR so that business operations could not be
affected. Following are different corporate governance issues faced by Primark such as-
 Risk management- There are various scandals linked with Primark and thus building
collapsed in Rana Plaza affected different people, and thus it harms the ethics of firm. The
company is also involved in illegal practices such as obtaining raw materials of equal
quality from suppliers but employing child labour affects the quality of products.
Therefore, it is considered as one of the effective corporate governance issues, and thus it
needs to be overcome by improving the business standards and using innovative
technology within the firm (Gast and Ledford, 2014).
 Employment law- It is essential for the company to follow employment law and
regulations regarding providing them proper working conditions, minimum wages, and
thus it does not influence the business process. Such law carries out business practice
effectively and provides proper actions to firm about maintaining the standards and thus
attain desired results (Giroud and Mueller, 2010).
 Cultural concerns- It is another corporate governance issue faced by Primark and thus
for this firm is required to determine new workers and customers concerning maintain the
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culture within the firm and thus determine the fairness of activities to be followed.
Primark management aims to carry out effective advertisement and sales promotion
campaigns and thus produces better cultural events so that it does not hamper the
productivity of firm in the market (Goddard and Melville, 2004).
 Environmental concerns- Such activities affect the business, and thus it is essential for
Primark to protect the environment by safeguarding the society. However, if the firm is
involved within any such environmental concern that for that proper CSR activities needs
to be regulated and thus UK government does not affect the business operations in society
(Haniffa and Hudaib, 2006).
 Child labour- It is another corporate governance issue and thus Primark faces such issue
as it was identified that the supplier of raw material are same and thus they deliver same
quality products to businesses. But then also the quality of products of Primark is low and
thus it is because of child labour employed within the firm. Thus, it decreases the product
quality and affects the brand image of the firm in the market (Harford, Mansi and
Maxwell, 2012).
 Workplace conditions- It is also involved in corporate governance issue and thus
Primark is required to maintain its workplace in an effective way and thus it is essential
for a firm to provide best workplace conditions to its employees so that they can perform
the operations ethically. It should not impact upon the working and enhances the morale
of workers so that better opportunities can be provided to them (Klein, Shapiro and
Young, 2005).
 Unethical labour practice- Employees of Primark also carries out unethical practice and
thus raise similar issues regarding product delivery and therefore, it affects business
operations. The business also gets affect due to sexual abuse of employees and thus it
affects them regarding carrying out best results in the market (Kotler and Lee, 2005).
2. Theoretical, academic, professional or legal regulation Stakeholder theory: It will be beneficial for the Primark as it focuses more on the
relationship building. So by following this concept, Primark will be able to gain their
confidence. It aids in understanding the responsibility of each stakeholder, power and
obligation so that no confusion will take place. By this way, the organization will be able
to accomplish its objective effectively (Larcker and Tayan, 2015). When there is no
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miscommunication, and every one is clear about their duties, then kit can help to enhance
the performance of the entity to a great extent. So cited firm will be able to produce
quality products. Transaction cost theory: There are many costs attached such as transaction, contracting,
coordination, search cost, etc. It will support to Primark to understand the governance
assumptions. This concept defines that operation cost will get an increase if Primark is
getting involved to children for production in the workplace. When someone else does the
work without having any proper knowledge, then the cost will get raised. Furthermore, it
is very important for the Primark to involve top management and board of directors in the
process (Saunders and et. al., 2007). By this way cited firm will be able to attain its man
objective. Experts will examine the each activity by this way quality products will get
manufactured. It will enhance the overall performance of the organisation.
Were such events or features consistent with or in contrast to the theoretical, academic or legal
regulation
Through carrying out the theoretical, legal regulations it is identified that these are weak so it is
essential to create new features which can support in the development of effective corporate
governance:
 Relationship with stakeholders: It is found that Primark is not having the good
relationship with its stakeholders. That is the one reason of poor quality of products. By
developing the ethical culture in the workplace, employer will be able to gain the trust of
stakeholders. It will support to overcome the fundamental issue of the workplace. Thus,
the firm will be able to accomplish its objective (Smith and et.al., 2011).
 Leadership: It is the great concept and code of practice which can support to Primark
regarding leadership. As it will support in making everyone clear about their roles and
responsibility. Apart from this leadership will be beneficial in building strong relations
between stakeholders. Thus, it will give the optimistic outcome to the cited firm, and it
will be able to improve its quality of products (Sullivan, 2011).
 Effectiveness: The main objective of Primark is to implement effective management
practices in the workplace. Thus, it will support the organisation to identify the cause of
the problem and reduce mismanagement and CSR activities. It will assist in getting the
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positive results and will enhance the performance of the enterprise (Vaismoradi, Turunen
and Bondas, 2013).
3. Responses to such issues
 Primark joined the Ethical Trading Initiative in 2006, with trade unions, and NGO's to
work on labour rights issues in their supply chains. Since involvement of the child labour
in its supply chain company has to face may controversies. To solve this issues company
commit members to working towards. The code of conduct based on the international
labour organisation (Aguinis and Glavas, 2012).
 In 2005, the company was scored the lowest marking in the Ethical index. To solve this
issue company announced a new partnership program with the International Developing
to improve working condition for garments workers. The department will combine with
the networks and expertise of both organisations to improve the life of local workers and
development of a nation (Greening, Wall and Elias, 2012).
 All factories that supply their product in Asian country are merged with the safety
programme. The company is conducting the highest international standards by an expert
team to product their buildings from the fire which us3ed by the garment industry.
 To slove the issues of environment company open green stores which based on the
energy management systems to control energy consumption by monitoring lights. As an
international retailer, they want to ensure wider ethical trade team with suppliers and
workers. Company starter a cleaner production programme in 2011 under this programme
company provide training to suppliers on how to make improvements in operations. They
train to them to reduce water and chemicals energy and ensure waste water is treated
properly (Gast and Ledford, 2014). Primark has paid $14 million in aid to compensation and support the victims of Rana
Plaza, which collapsed in April 2013. The company also provides educational resources
through the NGO'S to create ethical trading and suitability that can use by the teachers as
well as students. Company code of conduct is the core principles that suppliers and
another factory must follow (Giroud and Mueller, 2010).
Did it address the fundamental issues at stake:
It can say that mistakes occur within the organisation company need to deal with them inn regard
to deliberately breaches the actions and thus overcome the problems so that target can be attained
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and company can maintain its customers. Also, its significant for the firms to effectively take
actions on the unethical behaviour to overcome with such crises. Therefore, the company need to
bring more transparency in their work to ensures its long-term growth and deliver benefits to
society. We can say that enterprises focus on the ethical practises regarding their business
(Goddard and Melville, 2004).
4. Could similar events happen again in the UK today
It can be stated that similar events could happen again in the UK and regarding overcoming such
events to happen within the country, it is essential for the government to bring certain regulation
and thus comply with the practices so that best results can be carried out. Following are the
different suitable events that could happen in the UK today such as-
 Legislation- Businesses operating within the UK are required to formulate different laws
and legislation. About this, it is essential for Primark to follow employment law and thus
does not impact upon the business performance. Through such way, it helps firm tp
maintain its product quality and does not affect its customers by delivering them low-
quality products (Tricker, 2015). Also, maintaining legislation regarding minimum wage
rate and thus workplace conditions so that workers does not get affected and carry out
best results within the firm. Hence, such type of legislation would bring changes and
develop appropriate corporate governance guidelines to make principles and codes legally
so that quality of products can be improved. Further, it is also essential for the enterprise
to carry out appropriate ethical codes and practices and thus attain desired results (Carroll,
2015).
 Limiting guidelines and principles- There are the possible chance of occurring similar
events in the UK again and therefore it is essential for businesses to maintain appropriate
guidelines and principles so that proper actions could be taken about overcoming the
issues faced by the firm. It is also significant for business to overcome corporate
governance issues and thus enhance the business operations so that suitable results can be
attained. Therefore, it is essential for Primark to undertake proper guidelines and
principles and thus improve the business performance about meet the best results. Further,
it is essential for the firm to comply with the regulation and thus practice the applications
so that best results can be carried out (Zentes, Morschett and Schramm-Klein, 2017).
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 Complying with child labour- Such issue also arises in the UK and thus it is essential
for businesses to comply with such acts and thus businesses comply with such regulation
to protect child labour. Hence, it is essential for a business to overcome the child labour
issues and result into protecting them and deliver quality products to consumers (Preuss,
2013).
5. General lessons learnt from this case
There are various general lessons learnt regarding improving the understanding of corporate
governance, risk and ethics. Therefore, it is essential for firm to comply with different business
and personal perspectives such as-
 Readership demand compared to moral outputs- Primark obtains several challenges
regarding reputation damages as its affect the customers due to the involvement of child
labour producing products which hampers product range of Primark. The firm needs to
assess the profit motive and thus breaches the code of conduct so that unethical practices
does not affect the business practices (O'Shea and et. al., 2013).
 The role of good governance in ethical reporting- Primark carries out effective, ethical
reporting so that effective corporate governance can be maintained about following
proper codes and practices. The role of good governance carries out effective practices as
it aids in improving product quality and thus best products are delivered to clients.
Through this way, it is essential for Primark management to focus upon such corporate
governance issues and thus overcome the issues faced by the firm (Aguinis and Glavas,
2012).
 Corporate social responsibility- It assesses that it is essential for the business to carry
out effective practices which do not affect the operations of the firm in the market.
Therefore, it is essential for Primark management to carry out best practices and protect
the environment while preparing the products. The firm also develops effective CSR
activities and thus identify the business objectives so that it helps in improving business
performance in the market and thus enhance the brand image of the firm in the market
(Greening, Wall and Elias, 2012).
 Future operations of Primark- It could be learnt from the corporate governance case
that Primark needs to identify its practices and thus improve the business performance so
that future operations can be carried out significantly. Also, it is essential for the business
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to maintain its ethical actions and thus follow appropriate relationship so that best
practices can be carried out (Garriga and Melé, 2013).
6. Would you like to invest within firm
It could be assessed that it would be profitable for the firm to invest within Primark and thus for
that, they need to study the financial statements of business. Following are the different options
available to assess the benefits of investment available within firm such as-
 ROI Vs Shareholder voice- It is considered as one of the best methods to identify the
choices that could be made by Primark for investment and thus it is essential for them to
identify the ROI and shareholder voice which is high will depend upon the investment to
be done within firm (Chin, Hambrick and Treviño, 2013). However, through such way it
would result in improving the investment option within the firm and thus enhances the
business operations so that high investment can be done within the firm.
 Interpretation of company accounts- In this, a shareholder who is planning to invest
within firm aims to interpret the financial accounts and thus it would result in improving
business performance. Through providing financial accounts for reviewing on website
and journals, it would help in attracting investors and thus enhances the business capital
so that performance of firm can be enhanced (Giroud and Mueller, 2010). Thus, financial
statements of Primark needs to made available to its shareholders as well as improve its
CSR activities and overcome unethical trade practices which would result in improving
investment within the firm and thus enhances business share.
 SWOT analysis- Further, carrying out SWOT analysis would help business in enhancing
its strengths, weaknesses, opportunities and threats would result in improving investment
ratio of the firm and thus enhance business performance. Further, it would also result in
performing effective business operations and thus review the financial statement so that
brand image of Primark can be enhanced (Harford, Mansi and Maxwell, 2012).
CONCLUSION
It can be concluded from the study that Primark aims to undertake effective legislation and code
of conduct which aims to overcome the issues faced by the firm. There are various unethical
practices, code of conduct and environmental practices carried out by the firm about affect firm's
operations in the market. Hence, it is crucial for the firm to provide the overview of its financial
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accounts regarding improving business performance and assess the ways of enhancing
investment within the firm.
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