Question:
Discuss about the Management Theory and Practices for Theology.
The concept of ethics in business should be integrated in all aspects of operation. Ethics refers to abstract concepts derived from the theology, professional societies and philosophy, which define the right and wrong behaviour Crane & Matten (2016). Ethical decision should be taken for an organisation that would regulate the organisational behaviour. A business can integrate the profit making goals with the social goals of management. Social goals emerge from the obligations of the business towards social responsibility. A multinational organisation can face many ethical dilemmas which can be understood by recognising the ethical obligation of a business. Ethical decisions are necessary for the future development of the organisation by gaining the competitive advantage (Dion, 2012). The aim of the assignment is to identify the ethical dilemma faced by an organisation that is in news since last two years. In response to the ethical dilemma, the theoretical concepts from the managerial ethics are used to discuss the issue critically. The essay cortically evaluates how these theoretical concepts influence the managerial practices in the chosen organisation. For this purpose, 7-Eleven company is chosen and ethical dilemma pertains to the Australian franchised stores of this company. Based on thorough literature review on how ethical decisions can be made. In conclusion, the essay critically reflects on how the leaders may ensure organisational decisions are made ethically.
The organisation that is chosen for the critical analysis of the ethical dilemma is 7-Eleven with the focus on the company’s Australian franchised stores. In Australia the first 7-Eleven was opened in 1977 in Melbourne. 7-Eleven is the American-Japanese organisation. It is the international chain of convenience stores that franchises, operates and licenses more than fifty thousand stores in 18 countries. The company in the US sells partially frozen soft drink named Slurpee. It also sells Big Gulp beverages. Other products of this company are carbonated beverages, energy drinks, coffee, 7-Select private-brand products, bakery items, fresh fruit, salads, fresh sandwiches that are daily made, Bakery items, dairy products, product delivery service and the financial services (Fraser, 2016).
In Australia the majority of the stores of 7-Eleven are located in the central business district areas of metropolitan cities. These stores in Australia sell wide range of products including drinks, confectionery, snack foods, daily newspapers, gift cards, three types of visa cards. There are a total of 75 7-Eleven stores established in Australia. Majority of the stores located in the suburban areas are the petrol stations having the central admission. These stores are operated as franchisee (About Us – 7-Eleven Corporate, 2017). Since, the last two years, the organisation is in news due to unethical operations and is discussed in subsequent sections.
In 2015, the joint investigation conducted by the Fairfax and the ABC Four corner, revealed that 7-Eleven’s Australian franchised stores is engaged in unethical employment practices. As per the investigation, there is strong evidence on the underpayment of staff (7-Eleven Wage Scandal Reflects Corporate Irresponsibility, 2017). The employees were forced to work for long hours. For international students, there is a rule of investing 20 hours per work. These students were afraid to complain about the wage theft to the Fair Work Australia, as they were blackmailed about visa cancellation on the ground of breach of regulations. As per the investigation, this issue was prevalent since six years and went unreported. Inspite of the strong evidence the company argues that this use was faced by employees of small number of Franchisees. The wage theft was mainly experienced by the migrant workers in Australia. The joint investigation thus concluded that the franchisee business model cannot work in Australia as they are unable to pay according to the Australian Law of payment (Ferguson et al., 2015).
7-Eleven Australian stores wok as 365 days business. Therefore, the wages that are to be paid to the employees should be significant. The scenario was however opposite. The stores work 24 hours every day and yet the total wage given to the six staff as per the documented financial statement showed $64,000. As per the law the payment of each employee per hour should be A$24.69. 7-Eleven Australian stores was paying its staff around A$10-A$14 per hour (Gartrell, 2016). It was evident that the company had no other option but to underpay its staff to maintain its position in Australia. If 7-Eleven had to follow the law, then it must compromise on profit. Further, detailed investigation into the matter showed that there was serious manipulation of the records of the employee working hours. The employees were even deprived of legal entitlements of the penalty rates for overtime, public holidays, and others. The issue was investigated by the Allan Fels, who is the chairman of Australian Competition and Consumer Commission. As the consequence of the overall investigation, Russ Withers (the chairman) and Warren Wilmon (chief executive), resigned from 7-Eleven. Therefore, this is the case of the ethical failure of leadership and led to lawsuit against the organisation (Planforpersonalsuccess.com, 2017). Highlighting the ethical dilemma faced by the chosen organisation, the essay further aims to discuss the theoretical concepts of managerial ethics in this regard.
Managerial ethics refers to set of principles that define the wrong and right operations of business, and helps analyse the situation of conflict (Dion, 2012). There are several definitions of Ethics. It is not merely adhering to law and it is seen as beyond this obedience. May it be business or a –eleven is the personal work the virtue of honesty is essential. The unethical business operations of 7-Eleven clearly indicate the conflict between the business ethics and the moral values. The given ethical dilemma can be explained by ethical theories discussed in subsequent sections.
According to the Utilitarian theory developed by Jeremy Bentham in 18th century, one must look beyond self interest and make decisions impartially taking into considerations all the people who will be affected by the outcomes of the decision (Sheng, 2012). This theory focuses on the impact of the decision on the stakeholders. As per this theory, when making decisions, the utilitarian recognises the existing trade-offs. As per this theory, decisions made by utilitarian do least harm to all the stakeholders involved in business and maximises the profit. The theory is concerned with rule of “Greatest Good for the Greatest Number” and aligns with the “cost-benefit analysis decision-making” (Babalola, 2012).
Using the utilitarian theory to critically analyse the business practice of 7-Eleven, it can be interpreted that the franchisee in Australia worked as per self-interest. It was not ethical as it does not promote greater good as per utilitarian theory. The manipulation of the employee’s records of work hours was unethical and selfish behaviour. According to Fraser, (2016) the 7-Eleven developed false records that showed employees worked only for half hours. The business tried to prove its innocence showing in the false records that it paid double rates instead of flat rate. As per the raids carried to investigate the wage theft it was found the both the directors of the business were aware of these contraventions. It means that the malfunction in the business was taking place with their will and mind. They were least bothered about the pain caused to the employees when measuring the personal happiness. Since employees at 7-Eleven worked overtime and yet were underpaid, it cannot be said that that the business catered for maximization of everyone. The franchisor threatened the employees for executing personal motives, which caused heart wrenching pain and harassment to the employees (theconversation.com, 2017). In conclusion the business failed to think neutral and accept multiple perspectives when making decision.
The theory of ethical subjectivism emphasise on determining the moral truths on an individual level. According to subjective ethics right and wrong cannot be determined by absolute standards. The theory of ethical relativism focuses on the development of self consciousness. According to this theory people express their feelings and desires by making moral judgements (MacKinnon & Fiala, 2014). The decision of wage theft reflects the self-interest and it motivated to perform selfish actions. One of the reasons for the store’s underpayment was lack of huge profit generation. This motivated the selfish actions.
Under the theory of psychological egoism, the leadership of 7-Eleven is based on the selfish behaviour. This theory also states that it is not possible for a person to be unselfish in every action (Broad, 2014). As per this theory it may be considered ethical for 7-Eleven to franchise. Under this theory it may be justified for the franchisee to only think of profit maximisation. The franchisor is greatly benefitted by accepting the parentage of the net profit from each store. This ensures shareholder’s benefits when the staff is underpaid (Karp, 2017). Every company makes a strategy to ensure the shareholder’s benefits. Wage theft was one such strategy of 7-Eleven for profit maximisation. Therefore, there is strong conflict of interest in this case. It is because, if the franchisee paid legal wages to the employee and acted unselfishly. This would have led to huge loss and unsustainable for the franchisee stores.
According to the Justice-based ethical theory formulated in the 15th century by Aristotle and Plato, any decision should ensure the fairness, equity and impartiality. According to this theory, any action taken by the organisation should demonstrate the comparative treatment of all the stakeholder who will be effected by the outcomes of decision (LaFollette & Persson, 2013). The malpractice helped the business to sustain Australia’s strict law but was unfair to employee. Applying this theory to ethical dilemma of 7-Eleven, it can be said that for personal gains, the franchisee did not pay the wage that the employees were legally entitled to. In this case only one party is at loss and other gains profit, there is no equity. The leader did partiality that does not justify the employees’ hard work.
Another theory that can be explained in the context of unethical business practice conducted by 7-Eleven is the “Agency Theory”. According to this theory, in business, people mainly focus on profit maximisation. The morality of the practices in business context is determined by the market trend. It means that the position of the business in the market decides what is right for the business. External factors do influence the moral choice that may cause bias in perception and judgment of the businessperson (Shafer-Landau, 2012). Applying this theory to the 7-Eleven case, it can be said that, the franchisee blindly followed the basic model of business. With this model it was easy for the business to maintain the operational funds and underpayment to staff appeared correct decision. It did not appear to the organisation as wage theft. The leader was unethical at being failed to recognise the prominent line between the business needs and personal choices. In case of 7-Elevne the personal choice of the leader was subjective that negatively influenced the hard work of the employees. Hence, it is necessary for any business leader to be aware of the managerial ethics and corporate code of conduct. There is the change in the line between the tics and law in business due to turbulent world. What might be ethical in one business may turn unethical for other business. This situation demands taking into consideration the perspective of stakeholders on ethics. Ethical leadership is the one that maintains the respect, dignity and interests of employees (www.abc.net.au, 2017).
The conflict been the business ethics and the moral values during ethical dilemma can be addressed by the use of utilitarian theory. Using the agency argument a business can protect the personal interest. However, from the perspective of the utilitarian their actions will have direct impact on the employees (Broad, 2014). Analysing the ethical dilemma of 7-Eleven it can be concluded that there is a complete failure of leadership. When some of the staff approached the head office before communicating with the Fair Work Australia, the concerns should have been addressed. The malpractice would not have then led to this big scam. It can also be concluded that there is a need of developing leadership style and business structure that ensures satisfaction of all the -stakeholders of 7-Eleven. Studying the theoretical concepts of managerial ethics had well explained the influence of the ethical dilemma on managerial practices and is discussed in subsequent sections.
A thorough literature review was performed to understand the factors contributing to the ethical dilemma in 7-Eleven. The given theoretical concepts seem to influence the managerial practices in 7-Eleven. The franchisees fail to handle the operational expenses, when sharing the profit. The new chief executive after replacing Mr. Wither announced the company is ready for prevention of wage abuse. It was demonstrated that the company is ready for satisfactory remediation (Regan, 2016). However, this decision hit the company with worse outcomes. Due to lack of sufficient resources, the company failed to pay the running cost of the stores. Consequently most of the stores were sold. It may add to unemployment. This outcomes predicted in advance could be the cause of unethical practices. Therefore, the leader’s decision aligns with the Agency theory, which is concerned with the profit maximization (Johnson, 2017). Following the utilitarian theory would not have led to profit maximisation.
The 7-Eleven franchise models in the Australia works in an unfair manner, the model has unique style of sharing profits. In Australia, the head office takes 57% of the net profit from the franchisee stores. Therefore, only 43% is left with the franchisee. Since the head office was unfair, the franchisee is left with no option but wage theft to manage expenses. Under the theory of psychological egoism, this is the selfish behaviour of the head office that influenced the managerial practices of 7-Eleven’s franchisees in Australia. Without sharing 50-50 profits by the head office, it is difficult to eliminate the wage theft (Terry-Armstrong, 2016).
When international students are working for extra income, they need to manage the funds. In order to so there is a need of government support. The regulators must be more supportive in this matter by regularly monitoring the operations. They need to be more responsible in creating the awareness among students and should be better resourced. It is the lack of government support that the workers feared to expose their hardships. They were afraid of visa cancellations. Therefore, it was easy for the franchise of 7-Eleven to blackmail the workers and prevent them from seeking help (Regan, 2016). It is due to lack of government support and regulation that the Franchisee practiced in discrimination when recruiting the foreign students from Asian countries and other places. The head office was only profit oriented and never checked the profile of these students. On the other hand, these international students were willing to work for less spay. Due to language barrier thee students could not opt for any other job. They were an easy prey for 7-Eleven scam. The regulators were negligent in duties and in ethically safeguarding these employees. These students were not aware of the rights and pay system that they deserve. According to Terry-Armstrong, (2016) there is a need of induction training for the foreign students for work rights awareness.
In this situation the remedial option would be to avoid the profit sharing model. If the head office shares or contributes some percentage to the running cost, it will help in efficient operation of stores while eliminating the staff underpayment. Therefore, it can be concluded that there is need of adopting the alternative operational model. There is also need of strict regulation by the government against the malpractice in the franchisee. The business needs to understand the line between the personal interest and the corporate needs to behave ethically. This malpractice is influencing the whole franchisee network, as stores practices what other stores does (MacKinnon, & Fiala, 2014).
Based on the above discussion, it is recommended that there is further investigation into the head office responsibilities in this regard and in auditing. Since the entire business model is flawed there is no point in implementing the payback solution. Some evidence based measure that the companies can implement in such events includes development of strict code of conduct and impose penalty for breaching the legislations such as cancelling of the franchisee agreement (Babalola, 2012). There should be regular auditing of the operations by both franchisee and the company. When the employees complain of the workplace issue there is a need of immediate investigation. The employee recruitment process must be monitored particularly for vulnerable groups. To indentify the noncompliance, independent investors should be present in the company. 7-Eleven can develop union to implement the model for supporting the equal benefit for multi-stakeholders (Ferguson et al., 2015).
In conclusion, the essay discussed in detailed the ethical dilemma of 7-Eleven’s franchisee stores in Australia. The theoretical concepts of managerial ethics thus helped in evaluating the ethical dilemma of 7-Eleven and it is now better known how the big companies engage profit maximisation. Staff exploitation is the major pathway in this process. Although the joint investigation revealed that the company had direct involvement in the malpractice, the company denied accepting the fraud. The ethical theories helped to understand the influence of ethical dilemma on managerial practice. Therefore, it is the lesson for other companies to scrutinise the payroll and other work records of the employees. It is not easy to implement the payback solution to such huge wage theft. Implementing the utilitarian theory is the best way to resolve the conflicts of interest between business needs and moral values. It is necessary for very organisation to have defined “ethical policy” for such conflicts. Only with the help of such policy a business can engage in rationale thinking and greater good. Subjectivism will emerge when the leader is engaged in personal preference and partiality. Various external factors hamper the decision making of any organisation. The leaders thus need to have strategic goals and specific operational plans. The values and mission statement should be effectively communicated to the employees. Overall considering the stakeholders of the Australian market there is a serious revision to the Franchisee model of 7-Eeven for fair share of profit. Stringent government policies are needed to penalise the culprits of scam.
References
7-Eleven founder flags changes to business model. (2017). ABC News. Retrieved 13 October 2017, from https://www.abc.net.au/news/2015-09-10/7-eleven-founder-flags-changes-to-business-model/6765940
7-Eleven Wage Scandal Reflects Corporate Irresponsibility. (2017). Workplace Ethics Advice. Retrieved 13 October 2017, from https://www.workplaceethicsadvice.com/2015/10/7-eleven-wage-scandal-reflects-corporate-irresponsibility.html
About Us – 7-Eleven Corporate. (2017). Corp.7-eleven.com. Retrieved 13 October 2017, from https://corp.7-eleven.com/corp/about
Babalola, Y. A. (2012). The impact of corporate social responsibility on firms’ profitability in Nigeria. European Journal of Economics, Finance and administrative sciences, 45(1), 39-50.
Broad, C. D. (2014). Five types of ethical theory (Vol. 2). Routledge.
Can 7-Eleven be trusted to clean up its own mess?. (2017). The Conversation. Retrieved 13 October 2017, from https://theconversation.com/can-7-eleven-be-trusted-to-clean-up-its-own-mess-59302
Crane, A., & Matten, D. (2016). Business ethics: Managing corporate citizenship and sustainability in the age of globalization. Oxford University Press.
Dion, M. (2012). Are ethical theories relevant for ethical leadership?. Leadership & Organization Development Journal, 33(1), 4-24.
Ferguson, A., Danckert, S., & Toft, K. (2015). 7-Eleven: A sweatshop on every corner. The Sydney Morning Herald. Retrieved 13 September 2017, from https://www.smh.com.au/business/workplace-relations/7eleven-a-sweatshop-on-every-corner-20150827-gj8vzn.html
Fraser, M. (2016). Investigating 7-Eleven: Who are the real bad guys?. Gr
Gartrell, A. (2016). Malcolm Turnbull’s financial stake in 7-Eleven under scrutiny. The Sydney Morning Herald. Retrieved 13 September 2017, from https://www.smh.com.au/federal-politics/political-news/malcolm-turnbulls-financial-stake-in-7eleven-under-scrutiny-20160204-gmlikw.html
Johnson, C. E. (2017). Meeting the ethical challenges of leadership: Casting light or shadow. Sage Publications.
Karp, P. (2017). 7-Eleven workers beaten and forced to pay back wages, Senate inquiry hears. the Guardian. Retrieved 13 October 2017, from https://www.theguardian.com/australia-news/2016/feb/05/7-eleven-workers-beaten-and-forced-to-pay-back-wages-senate-inquiry-hears
LaFollette, H., & Persson, I. (Eds.). (2013). The Blackwell guide to ethical theory. John Wiley & Sons.
MacKinnon, B., & Fiala, A. (2014). Ethics: Theory and contemporary issues. Nelson Education.
Planforpersonalsuccess.com. (2017). 7-Eleven Scandal an Ethical Failure of Leadership. planforpersonalsuccess.com. Retrieved 13 October 2017, from https://planforpersonalsuccess.com/7-eleven-unethical/
Regan, L. (2016). Time for change at 7-Eleven. Proctor, The, 36(5), 36.
Shafer-Landau, R. (Ed.). (2012). Ethical theory: an anthology (Vol. 13). John Wiley & Sons.
Sheng, C. L. (2012). A new approach to utilitarianism: A unified utilitarian theory and its application to distributive justice (Vol. 5). Springer Science & Business Media.
Terry-Armstrong, N. (2016). 7-Eleven: A case study of a flawed franchise model. Busidate, 24(2), 8.
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