MGN409 Management Theory and Practice Assignment

Answer:

Introduction

In an ideal business world, the business people and the managers would always act adhering to business ethics i.e. conduct their business fairly with the customers and the employees as well. However, unfortunately, in the real business world, organizations suffer from ethical dilemmas due to various reasons (Ferrell & Fraedrich, 2015). Primary of them being the attempts to make profits and due to this reasons many of the companies in the past have suffered from scandals where the managers of such companies could not perform under pressure or overcome temptations and did something unethical. Ethical dilemma is the stage prior to commit something unethical in the business where the managers have to choose between an immoral and moral act to suit their purpose. In comparison to the managerial ethics, it is shown how the theoretical concepts of self-interest and obligations to people and principle can be related to this case in the later part of the assignment. In the end, the recommendations are provided to explore the ways through which the company can re-establish ethical practices in the organizational culture.

The organization chosen for this assignment as an example of a victim of ethical dilemma is the global chain of convenience stores, 7-Eleven. Headquartered in Texas, U.S 7-Eleven operates across 18 different countries and has license for around 56,600 stores in these countries (7eleven.com.au, 2017). The stores sell soft drinks and beverages, prepared foods, dairy products, gasoline, fresh fruits, juices, energy drinks, dairy products and the like. The largest convenient store brand also offers product delivery services and financial services. In Australia, the first store of 7-Eleven opened in 1977 in the suburb of Oakleigh, Melbourne (7eleven.com.au, 2017). The majority of the convenience stores are, however, located in the metropolitan cities, especially in the business areas central in the districts. In the suburban areas, there are 7-Eleven stores but they are largely operated by a central management as petrol stations. The major expansion of the brand in Australia happened when 7-Eleven bought all the remaining petrol stations of Mobil in 2010 and overnight transformed them into the convenience stores outlets (Rhodes, 2015). The stores in Australia sell a variety of products, starting from newspapers to snack foods, confectionaries and even gift cards. This 24 hours service and the easy availability of the daily essentials have made the brand’s stores easily popular in the country. Moving from the Southern Australia, 7-Eleven is planning to expand in Western Australia too where the first store in this region was opened in Fremantle in 2014. The secret behind them being the marketplace leader is the idea of making the lives of people easier (Ford & Richardson, 2013). Besides, the popularity of the products also increases the brand value largely especially because their products are constantly driven by innovation in flavors and recipes. Moreover, the b (Ferguson & Toft, 7-Eleven: The Price of Convenience, 2015)rand has development pursuit in business processes as well by consistently investing in the software and store operational activities.  

Ethical Dilemma

Ethical Dilemma, as a term can be defined as the choice between two options, one typically being one rightful and the other being unjust  (Ferrell & Fraedrich, 2015). Overall, the ethical dilemma brings a negative consequence on business hampering the organizations to progress freely  (Ford & Richardson, 2013).

News and Discussion Regarding Ethical Dilemma

A couple of years back, 7-Eleven fell a victim to the unfortunate ethical dilemma and regrettably, could not overcome the dilemma in a positive way. The incident occurred in August, 2015 when in a joint operation ABC’s Four Corners and Fairfax Media reported the grim truth of underpayment and wage theft hugely practiced in the Australian stores of 7-Eleven (Ferguson & Toft, 7-Eleven: The Price of Convenience, 2015). The investigation held, revealed that instead of the award rate of around A$24.69 per hour that is recommended by Australian labor legislation, 7-Eleven was paying as low as A$10 to A$14 per hour as the wage (Ferguson & Danckert, An inconvenient year for 7-Eleven, 2016). Leaving this underpayment, there were instances of fraud too, as the franchisees practicing this, used to maintain rosters where it showed that they were paying the legally recommended rate. Indeed, it is illegal because it does not go in favor of the Australian principle of letting every individual in the country to have a “fair go”. Now, the ethical dilemma faced by the 7-Eleven franchisees was that whether to comply with the wage regulations or to grab the opportunities of securing huge profits (Guiso, Sapienza, & Zingales, 2016). The doctored rosters and time sheets, understated wage bills however, clearly state that the 7-Eleven managers chose to adopt the unethical ways to gain business advantages. The investigation conducted by ABC’s Four Corners and Fairfax Media also revealed that the employees were deprived from penalty rates and loadings that they were supposed to receive according to the Fair Work Act for overtime working as well as working at nights, public holidays and weekends (fairwork.gov.au, 2017). For 7-Eleven especially, the loadings and penalty rates should have been a part of the employees’ basic wages as these convenience stores remain opened all days 24 hours. Hence, avoiding these legitimate awards was a huge profit to the organization while a giant loss to the employees (Ferrell & Fraedrich, 2015). The unethical practices, however,, did not stop here. After the investigation came into light, allegedly the franchisees started to pay the legitimate amount top the employees, but asked the staffs soon after to pay back half of their wages to the organization in cash.

Now, the question remains that why 7-Eleven chose to fall a victim to unethical practices where they are such an established brand in numerous countries. The investigation, however, answers this question directly stating that the very foundation of 7-Eleven business model grounds on exploitation of the employees. According to the insiders of 7-Eleven, without letting these unethical practices happen, it was not possible for 7-Eleven to run the organization as profitably as it has been and the rapid expansion of the convenient stores would have been unattained as well (Pullen & Rhodes, 2015). The targeted section of exploited employees is majorly the students who do part time jobs in Australia and 7-Eleven took the advantage of them, as they were not well acquainted with the labor laws of a foreign country. However, as the investigation started doing the rounds in the social media and business world, 7-Eleven was compelled to set up an inquiry to look into the instances of underpayment and other frauds. Taking the support of Deloitte and Australian Competition and Consumer Commission, the investigation invited the submissions of the employees who brought the charges of underpayment against the organization (7eleven.com.au, 2017). After the assessment of individual claims, the Chief Executive Warren Wilmon and Chairman Russ Withers announced their resignations. Thus, the instance of 7-Eleven explicates how fatal submission to ethical dilemmas can become and this can be explained better in the context of theoretical concepts of managerial ethics (Gössling, 2016).  

Discussion based on Theories

To talk about the theoretical concepts of managerial ethics, there are many but considering the case of 7-Eleven, two theories are extremely relatable and useful to explore the case critically. These theoretical concepts are the influence of self-interest in business ethics and obligations to principle and people (Ferrell & Fraedrich, 2015). The advocators of laissez-faire capitalism often proclaim that the managers should take the decisions of business exclusively on the ground of self-interest, the extent to which law permits. In the personal interactions, this type of behavior is bound to be seen as unethical but the companies that have championed the free market economics state that organizational behavior motivated by self-interest is most likely to gather profit and produce wealth. It has been argued that since the managers cannot understand what precisely would benefit the society and therefore, it is better that the managers should concentrate on their self-interest that would suit the most for their organizations (Certo, 2015). Thus, to justify any business decisions taken managers often use this theory. This theory of managerial ethics also supports the idea of ethical dilemma well, as it refers to the conflict between the managerial economic interests and the interest of larger society. Studies show that majority of the managers, who are posed with such conflicts prefer to follow their own self-interest. In the case of 7-Eleven, the managers were found to be unreservedly opportunistic while there are some who constrain the behavior of self-interest out of sheer ethical conscience and sensibility (Crane & Matten, 2016).

On the other hand, the theoretical concept of obligations to people and principles is a rather hypothetical one where an idea is propagated that business managers should act according to the market rules and regulations as well as the best interest of the employees, stockholders and the community (Weiss, 2014.). In fact, the business leaders are entitled to carry out some duties beyond their self-interest. Regarding this duty, however, numerous arguments exist as to who and what precisely the business managers have obligations. The theory therefore, states that in case a business has stockholders, the firm has legal obligations to act in the best financial interest of them (Shaw & Barry, 2015). Moreover, the theory also states that the business owners have an ethical duty to look into the interests of the employees and other stakeholders who back the success. This theory is perhaps the most relevant with the case of 7-Eleven where the violation of employee interest is prominent.

The discussion of these concepts on managerial ethics can be linked with the chosen organization 7-Eleven where the managers have tried to hide their ethical failures by distancing from the entire scandal stating that the responsibility entails on the Franchisees. The theory of self-interest especially is relative to this case as the business managers of 7-Eleven concentrated on the interest of their firm rather than the ethical and legal considerations (Rhodes, 2015). The managers, in any circumstances cannot blame the law on the ground that the system is not letting them operate profitably. The self-interest of the managers became so important that has resulted in underpayment and wage theft occurrences. The case of 7-Eleven also shows the lack of managerial control over the Franchisees and clearly, a lack of fair wage practices can be seen in the ethical practice of the organization (Ferguson & Toft, 7-Eleven: The Price of Convenience, 2015).

On the other hand, although the organization culture, mission and vision appear to recognize the value of employees and other stakeholders, the practices of the firm reveal the difference. In the brochure of 7-Eleven, the company openly acknowledges the contribution of the employees but they differ when it is time to pay back. Now, employees are an essential asset to every company but not adhering to the theory of obligations to people and principles, 7-Eleven purposely hires more immigrants as the store staff who are most vulnerable to succumb to the bare financial necessities in a foreign country (Carroll & Buchholtz, 2014). The instances of underpayment of 7-Eleven have also been found in U.K and it is possible that the same is practiced in U.S as well.  Although in U.K and U.S, the condition of the employees is not as wretched as in Australia. In the other countries, there are employee reviews in favor of the organization and that employees have confessed about loving their job that offers them a variety of facilities such as paid weekends, occasional free Slurpees, food and the like (7eleven.com.au, 2017). Whereas on the contrary, there are allegations on employees’ part that their convenience is not, being looked after and that they are not appreciated enough for their hard work. In addition, the complaints about minimum wage are in every nation where 7-Eleven has their stores. In fact, the CEO of 7-Eleven DePinto came to be admitting in an interview that changes are needed in the corporate culture of 7-Eleven to let the perspectives of employees come in front.

Conclusion and Recommendations

Therefore, in the first place, the organization needs to frame a strong labor policy to be implemented strictly and thoroughly not only in the 7-Eleven stores but also in all the Franchisees. The stringent implementation of the wage policies will ensure that the firm does not suffer from any such ethical dilemmas in the future. While framing the policies the factor of organization’s profit should also be looked into, as policies made without causing profit to the organization will not be able to save it from being a victim of ethical dilemmas in the future. Regular monitoring of the rosters and taking stringent actions against the instances of doctoring payment documents can ensure ethical practices in the firm. Besides, the leaders need to think beyond the interest of the company and about improving the working conditions of the employees. The mentality of exploiting students must also be changed in this context. In brief, without the willingness from the managerial level, 7-Eleven cannot guarantee ethical practices being implemented uniformly in the organization. Hence, in conclusion it can be said that ethical business practices should essentially be a part of any business and that instances of ethical dilemma as well as violation of ethics are definitely not very welcoming for the reputation of the big brand like 7-Eleven.

References:

7eleven.com.au. (2017). Retrieved from https://www.7eleven.com.au/about-us.

7eleven.com.au. (n.d.). About us 7-Eleven. Retrieved from https://www.7eleven.com.au/about-us.

Carroll, A., & Buchholtz, A. (2014). Business and society: Ethics, sustainability, and stakeholder management. Nelson Education.

Certo, S. (2015). Supervision: Concepts and skill-building. McGraw-Hill Higher Education.

Crane, A., & Matten, D. (2016). Business ethics: Managing corporate citizenship and sustainability in the age of globalization. Oxford University Press.

fairwork.gov.au. (2017). Fair Work Legislation. Retrieved from https://www.fairwork.gov.au/about-us/legislation

Ferguson, A., & Danckert, S. (2016). An inconvenient year for 7-Eleven. Sydney: The Sydney Morning Herald.

Ferguson, A., & Toft, K. (2015, September). 7-Eleven: The Price of Convenience. Retrieved from abc.net.au: https://www.abc.net.au/4corners/stories/2015/08/30/4301164.htm

Ferrell, O. C. (2015). Business ethics: Ethical decision making & cases. Nelson Education.

Ferrell, O. C., & Fraedrich, J. (2015). Business ethics: Ethical decision making & cases. Nelson Education.

Ford, R. C., & Richardson, W. D. (2013). Ford, R.Ethical decision making: A review of the empirical literature. In Citation classics from the Journal of Business Ethics. Springer Netherlands, 19-44.

Gössling, T. (2016). The Managerial Sources of Corporate Social Responsibility: The Spread of Global Standards. In C. R. Thauer. Cambridge University Press.

Guiso, L., Sapienza, P., & Zingales, L. (2016). The value of corporate culture. Journal of Financial Economics, 60-76.

Pullen, A., & Rhodes, C. (2015). Ethics, embodiment and organizations. Organization. 

Rhodes, C. (2015, October). 7-Eleven, Volkswagen cases show why we should push back on ‘corporate ethics’. Retrieved from theconversation.com: https://theconversation.com/7-eleven-volkswagen-cases-show-why-we-should-push-back-on-corporate-ethics-48739

Shaw, W. H., & Barry, V. (2015). Moral issues in business. Cengage Learning.

Weiss, J. W. (2014.). Business ethics: A stakeholder and issues management approach. Berrett-Koehler Publishers.