The Ethics Of Profit In The Australian Retail Industry

The Ethics of Profit in the Australian Retail Industry
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Questions for Ethics Case Study

1.The Food and Grocery Code of Conduct which provides guidelines to the Australian supermarket industry has a requirement that “retailers and wholesalers act lawfully and in good faith”.

-What do you think is meant by the term “good faith”?

2.Why do you think the Food and Grocery Code of Conduct is a “voluntary” code? Why hasn’t the ACCC moved to have government legislate this code into law?

3.Strategic theory suggests that having power is a good thing. Generally, it is thought that having power is better than being powerless. For example, pricing and purchasing power brings bottom-line benefits. But when is it appropriate to use the power you have? How do you assess if the use of your decision making power as a senior manager and/or group is legitimate?

4.If you are the Chief Financial Officer and you are approached by the CEO or other senior manager to deliberately delay the payment to the supplier simply to improve your company’s cash position, how would respond? On what grounds would you base this response?

5.To what extent do you believe that you can apply developed country standards of employment conditions to less developed countries? What information and/or frameworks can you use to determine what is appropriate?

6.The case says (p4) that an OxFam Australia survey suggests that Australian consumers are willing to pay more garments if this means that less developed country suppliers are also paid more. If you felt strongly about this and you were on the senior management team discussing this idea, how would you convince a CEO or Chief Marketing Officer that this is a good thing if the company’s strategy follows a cost (price) leadership model?

7.The case states (p4) that even where retailers try to do the right thing and conduct audits on their suppliers, “audit fraud” is a problem – workers being coached to say the right things even to independent auditors. If you were conducting the audit how would you approach this possible problem particularly given that the employees and management you are auditing may be in fear of losing their jobs if they are truthful?

8.What is Integrated Reporting and what is it trying to achieve? How do you think the use of this framework may change performance and remuneration system design?

9.What do you understand by the concept of an “at risk” component of remuneration? Why do think it appears to be a larger component of total remuneration for CEOs and senior management the bigger the company as found by the Productivity Commission report?

10.What is your understanding of who the stakeholders of a company are? Who do you think are the stakeholders of a large supermarket company? Why is the concept important to ideas concerning the ethical behaviour of companies?

11.The CEO of Wesfarmers made a statement in response to the Target rebate issue saying that “we encourage and expect strong adherence to a strong culture of managing for long term sustainable growth over short term gain” (p7). How can this type of culture be developed inside an organisation?

12.The Administrators report into the Dick Smith Group stated that “poor and declining performance appear to have led to management making decisions on what stock to buy based on the rebate attached to the stock, rather than customer demand” and that “rebate driven buying contributed to a build-up in inventory and encouraged poor product mix decisions” (pp8-9). Given that these were buyers’ decisions and that accountants would not directly be involved in this, what responsibility do accountants have in identifying this type of problem? If there is some level of responsibility, how would you go about identifying these issues?

13.Why does management accounting theory promote the idea of using “non-financial” measures – that is, to not simply rely on “financial” measures? Provide some specific examples of what may be important nonfinancial measures to a retailer. What relevance can this concept have to the idea of what it is to be an “ethical” organisation?
14. As a CFO, would you prefer your performance to be measured and remunerated based on simply financial measures (for example, TSR) or on a more balanced set of measures? Why? Would this differ if, instead of the CFO, you were a more junior accounting officer?