Business Ethics Report: Analysis of Seven Eleven Editorial

This report provides an in-depth analysis of the Seven Eleven editorial, focusing on the wage theft scandal and the unethical business practices that have come to light. The editorial highlights the exploitation of employees, particularly those on student visas, who were paid significantly below the standard wage, sometimes as low as $10 per hour. The report examines the misleading dealings between the head office and franchise stores, where payroll discrepancies and manipulation were prevalent. It also discusses the financial implications, including the company's substantial revenue generation and the impact of the franchise model, which places significant financial pressure on franchisees. The response of Seven Eleven authorities, including the chairman's acknowledgment of payroll issues and the appointment of an independent panel to address employee concerns, is also analyzed. The report underscores the need for greater scrutiny from politicians, government authorities, and regulators to address labor market matters and ensure fair treatment of employees. The report concludes with an examination of the measures taken to rectify the situation and improve payroll transparency.

Running head: SEVEN ELEVEN EDITORIAL
Seven Eleven Editorial
Name of the Student:
Name of the University:
Author Note:

1SEVEN ELEVEN EDITORIAL
The Financial Review
The seven eleven scandal is widespread and is bringing to light the inhuman nature of the
prevalent corporate practices in different parts of the world. It is a very big issue in the economic
and financial context of the term. The students with visa who are allowed to work for 20 hours a
week without tampering the Visa conditions were affected the most as they are the most prone to
work abuse.
This company is paying a fee as low as $10 to its employees with the stores stealing from
the pockets of the customers by up to two third of the total revenue generation. The amount of
wage abuse is currently reported to be at a level of ten million dollars a year. Raids recently
carried out by Fair Work Ombudsman claim that sixty percent of all the twenty stores across
Australia are burdened with issues related to the payroll.
Workers have claimed that working for the store had become a nightmare for them as
they were paid wages as lows as $10 and $14 whereas the standard rate of working fee was at
$24. Also there was the concern about the penalties that were not paid for working on extra shifts
at night and on public holidays and weekends.
The seven eleven issue is also gaining impetus because of the misleading nature of
dealings between the head office and the franchise stores. For example in one of the franchise
stores the updates of the working hours and schedules were perfect but the payroll was incorrect
wherein the store showed the records of only four workers working. However, there were seven
people working in the store in real. However, unlike most other head offices, Seven Eleven
authorities have made no report to the police or taken any legal actions against the franchise store
managers in spite of being well aware of the situation. According to the latest financial statement

2SEVEN ELEVEN EDITORIAL
made in 2015, the total revenue generation of the company is around $143 million. In fact, this
firm is reported to make more money than most other Australian firms in the Australian
Securities Exchange. The business models used by the Seven eleven franchisees are in fact very
different from other business models.
The franchise agreement of Seven Eleven is such that the head office takes back 57% of
the total revenue generated and pays all costs related to payroll, utilities, equipments and rent
from this money. The rest of the money is taken back by the franchise which is at arrange of
$300,000 and $1.7 million out of which around $171,000 was the amount that was paid
according to payrolls leaving a profit of $90,000. However, it has been studied that if all the
wages are paid properly and at the proper rates, the franchisees should be left with a profit of
around $40,000 after deduction of interest payments. It is reported that some stores had even a
lesser amount of revenue generation such that if they were forced to pay the workers a wage that
is at par with the ongoing and existing rate, they would have to shut down or go broke.
Politicians, government authorities and other regulators should start looking into such
labor market matters with more vigor and seriousness.
The Australian
The view of the authorities integral within Seven Eleven is deemed important in the
current situation. The Chairman of the stores is reported to agree to the fact that there exists a
payroll issue that needs to be addressed however, he also agrees that the extent to which the issue
was exploited was much more than the issue really is. He also disputes the fact the current
situation had anything to do with the business models followed for the working of the franchisee
stores.

3SEVEN ELEVEN EDITORIAL
The chairman has further agrees to pay the outstanding wages if the employees in spite of
this being the responsibility of the franchisees and not his. In the wake of a public disaster, to
avoid further degradation of the market rank, if the firm takes up the responsibility of paying the
remaining wages, they will have to spend millions of dollars. The Chairman, Mr. Withers claims
that this has happened under the watch of the prescribed authorities and so it is their own
responsibility to make sure that all the workers are compensated for their loss.
Mr. Withers has in fact disproved the business model that divides the profit margin
between 57 % and 43% between the head office and the franchisees. He also asserts that it is
impossible to believe that there has been such a humongous loss to the workers and outs forth
that Seven Eleven would in that case not be able to operate for a period of over 38 years and built
a chain of around 620 stores from no stores at all.
Mr. Withers has confirmed the appointment of an independent panel that will take care of
the concerns of the employees that have been underpaid. The employees can make their personal
claims and without revealing their identities if they feel threatened or are under the fear of being
identified as individuals who have gone against the visa regulations. To make the payroll system
transparent and flexible, assistance will be taken from Ernst and Young.
On being interrogated on the grounds as to why the authorities at the head quarters did
not take up the simple initiative of spot-checking the franchisee stores and regulating the
payrolls, Mr. Withers claims that the franchisees had good business relations with the head office
and the information provided by the franchisees were trusted on the face value instead of being
rigorously and meticulously regulated and investigated which was definitely a mistake and a
wrong step in the process of decision making.

4SEVEN ELEVEN EDITORIAL
Records from the raids by the Fair Work Ombudsman claim that they conducted around
twenty spot checks around twenty stores of Seven Eleven across Brisbane, Melbourne and
Sydney as a part of the investigation framework and one of the Melbourne store owners admitted
that he had cut wages of workers by around ten thousand dollars and then manipulated the
payroll accordingly.