Background of Case-Study: 7-Eleven Australia
An ethical dilemma occurs in a business entity or organization when the expected code of ethical behavior is not adhered to or ignored. The code of principles and values that is morally grounded governs the action that will be taken by an individual or organization and the outcomes therein. There is a thin line between what is right and wrong from the perspectives of ethics and the codified law that governs a nation. What may be legal at times may not be moral and ethical as the following case study will show. The modern business manager should be well versed in managerial ethics so as to make decisions that will be socially responsive and carrying obligation both to the stakeholders, the employees and the organization.
The typical worker that is employed to work at the 620 7-eleven stores across Australia is paid less than half of the stipulated minimum of $24.50 an hour. Most of those employed to work in this stores are international students who are trying to support themselves as they study. An investigation that was done into the working conditions of most stores showed that most employees are overworked and underpaid and that this was a systemic problem across Australia. The investigation carried out was able time to identify malpractices where the sheets and roster for these workers were doctored so as to reflect that the minimum wages were being paid according to the law. (Ferguson & Danckert, 2015).There was one set of documentation that was filed to the authorities while the actual payment documentation was kept secret by the store owner.
The typical franchisee was underpaying their workers and in cases where such employees asked to be given their full wages, they were threatened with deportation for breaching the maximum number of hours allowed for foreign students to work. Most of the students work typically for 40-plus hours with the aim of meeting their basic needs while studying. This is well above the 20 hours allowed on their student visa. When it comes to payment, most are paid less than the 40 hours worked which is more a form of slave labor. The other form of illegal employee treatment is asking potential employees to work for a given probation time on the promise that they would be emplyed, but which eventually turns out to be a lie. Most such students end up working for free and not getting hired.
Application of Managerial Ethics
Employees working who happen to incur any loss are deducted money from their wages, despite being underpaid and overworked in the first instance. Employees working in petrol stations incurred the loss when vehicle owners did not pay for their fuel as the employee was too busy doing work that was meant for two people. Such an employee is expected to be at the pump station as well doing the general cleaning within the store. Another form of unethical behavior noted at some stores was where the employees were deducted money from their wages even when the situation that occurred was not one of their making. In one store, the manager expected the employee to fight off armed robbers who robbed the store and yelled at them after the robbery took place. This is unethical behavior as it implies that the employee is expendable and has little value to the store owner or operator.
The response from the head office on revelation of the labor malpractices by the franchisees was cursory and half-hearted. It turned out that the head office was aware of the malpractices, but was turning a blind eye on such store owners. This was premised on the fact that such practices helped to drive up their overall profitability. (Velthouse & Kandogan, 2007).The margin left that is meant to cater for the remaining store expenses would make the store unprofitable to operate. The organizational response was lacking in ethics as new franchisee owners were mentored into the same practices with the full knowledge of the head office. The offer to assist such franchises to sell their stores was unethical and morally wrong as the head office stood to make a profit from every sale that was concluded. (Marsh, 2013). There was no concrete plan to remedy the situation in terms of corrective justice or systemic reforms.
The ethical dilemma that was seen at 7-eleven was that the store owners were caught in a situation where making alternative choices would have been deemed undesirable and the consequences potentially negative. Reporting students who have worked for more than stipulated 20 hours is legal according to law, but moral and ethically wrong. The outcome is that the owner is able to make more profits by underpaying the student while disenfranchising the student employee who is forced to work for slave labor.
The student is also at an ethical dilemma of having exceeded the maximum number of hours allowed by law to work and is faced with the decision of facing risk of deportation by reporting such an employer or keeping quiet. (Parris & Peachey, 2013). The head office is also faced with the ethical dilemma of enforcing the store owners to pay the minimum wages as stipulated by the law and thus make fewer profits or turn a blind eye and make substantially less profit margins.
Moral rights theory- This theory asserts that each human being has certain inalienable fundamental liberties and rights that cannot be taken away. This then calls for ethical behavior that will at the fullest extent maintain those rights of the individual. (Green, 2013). The six fundamental rights of the moral rights managerial theory are: the right of free consent, right to privacy, right of freedom of conscience, right of free speech, right to due process, right to life and safety. Each aspect will be critically interrogated in relation to the above case study.
Right of free consent- The right of an individual to be treated as they freely consent and from a knowing position. If each student employ who was told upfront the reality of the situation before taking up the employment offer would have been the starting point of each store manager. The potential employee who accepted the terms and conditions would then be working from the position of knowingly and freely giving the consent to be treated as such.
The right to privacy- Each manager should have respected the freedom of privacy for each employee as the information about their student visa is private. Taking advantage of this information by the store manager to hold them ransom to work for slave labor wages is ethically wrong for the store manager.
The right to freedom and conscience- The managers should have been guided by the tenet of refraining from carrying out any action that was contrary to their religious or moral norms. (Palmer, 2009). As a new franchisee, the older store operator who is tasked into mentoring them in the same practices which are unethical, has the right to refuse to adopt such practices.
The right of free speech- The new operator as a manager should have the right to truthfully criticize the systemic shortcomings of the 7-eleven organizational work culture without fear of recrimination from the head office. (Bishop, 2013). The right should have extended to criticizing other store operators that maltreat their employees. The managers should also have extended the same right of freedom to speech to their employees to voice their complaints as that is a fundamental right.
The right to due process- The ethical manager should have given each employee the opportunity to fair treatment and impartial hearing when an employee makes a complaint that touches on their work. (Flynn, 2008). Resorting to blackmail in order to short circuit this due process that is a fundamental right is unethical behavior that a manager with ethical behavior should have avoided.
The right to life and safety- The behavior of a manger with managerial ethics training should be guided by the fundamental right of the employee to work in a an environment that is safe and healthy. The example of the store owner expecting their employee to fight off the armed robbers who had attacked the store is morally irresponsible and unethical.
Theory of justice- The other theory that can be applicable in this situation is the Justice Approach theory. This theory based on moral decisions that are founded on standards of fairness, equity and impartiality. This theory is underpinned by three types of justice that should give ethical direction for the manager at the workplace: procedural justice, distributive justice and compensatory justice.
Procedural justice- Procedural justice is a philosophical perspective that is concerned with establishing and implementing decisions that are based on processes that are fair. This philosophical perspective postulates that consistency is one pillar that guarantees fairness and all cases should be treated equally. (Brown & Mitchell, 2010). The fair processes should be geared towards generating unbiased and reliable information. Those tasked with carrying out the fair treatment such as managers should be neutral and impartial. The party affected by the decisions made should be given representation in the process of decision making.
In the case of 7-eleven, when the head-office was alerted of the malpractices, the top management should have instituted an investigation that was neutral and impartial in the stores affected. The student employees should have been a voice in the process of investigation in order to allow the substance of procedural justice to be tested. The approach that was taken by the management was deficient and unethical as it was left up to the courts to affect the procedural justice that the students deserved.
Distributive justice- This perspective of justice requires that individuals are treated equally to the extent that they all posses the fundamental skills, unless there is a substantive difference to warrant the contrary. The individuals and in this case the workers, should not be treated differently because of characteristics which are arbitrary. (Eubanks, Brown & Ybema, 2012). The treatment that is different should be based on a clear relationship to goals and tasks within the organization. An example in an organization is where men and women earn different salaries, based on gender alone.
In the case of 7-eleven, some of the students were studying for their master’s degree and yet were treated arbitrarily on the basis of their visa status. The treatment given to native Australians and the foreign students should have been equal across the board, more so noting that most student employees were more qualified academically than the native Australians. (Poff, 2010). Paying one set of workers a pay that is different from the rest on the basis of their residence status fails the notion of distributive justice that each manager is expected to implement at the workplace.
Compensatory justice- This perspective of justice states that every individual should be compensated to the fullest extent for their injuries by the party that is responsible for their injuries and should not be held liable for an issue over which they have no control. Compensatory justice falls under the collective progeny of what is known as diorthotic justice that is applicable between men. (Price, 2007). Under the voluntary transaction that two parties will engage in, failure by one party to fulfill their obligation will result in the other party suffering loss which needs to be remedied by compensation, redress, reparation or restitution.
In the case of 7-eleven, the student employees who had sued the stores needed to be compensated immediately in order to redress the suffering and injustice they were subjected to. The opposite was seen in some stores who preferred to put their stores in voluntary administration by the courts in order to try to circumvent paying of the settlements as prescribed by the courts. (Milkman, Rogers & Bazerman, 2008). Some student employees were claiming substantial amounts of money with claims reaching as much as $150,000 in compensation. For justice to redress the injustice of being underpaid, speedy payment would be seen as compensatory justice and would restore the employees to the status quo ante.
The influence of this theories can be understood from first gaining an insight into what leadership means and understanding the decision making process. Leadership can be defined as the process that gives direction and purpose that is meaningful towards effort that will achieve purpose. Decision making is the choice that is available between two or more alternatives that are governed by the advantages and disadvantages given therein. (Thomas, Olin & Hartman, 2009). It is a decisive and deliberate action that is made when a problem arises in the society. The leadership style that is taken will greatly be influenced by the managerial ethics that is also taken to complement the leadership style.
There are three major leadership styles which are the autocratic, the participative and the delegative styles. The autocratic style (also known as the authoritative) style is seen in leaders who have absolute control over an organization and decisions are made based on their absolute input to the exclusion of other views. Participative leadership is democratic and allows the expression of different views within a group in the decision making process. (Shapiro, 2005). The delegative style (also known as the laissez-faire style) allows the latitude of independent decision making within a group by providing the necessary resources needed to run an organization.
The type of leadership at 7-eleven was on two styles: at the top management (from the head-office) the style was delegative to the franchisee, while at the store level it was authoritarian. (Jones & Millar, 2010). The head office exhibited the leadership style that delegated authority to the individual franchisee but without the accompanying resources to ensure proper and ethical management of the store. Each store owner was largely left to run their store as they deemed fit. The individual store owner operated with the autocratic style of leadership that did not allow for any input from the employee and did not tolerate any dissent.
The theory of moral rights is not applicable within the context of 7-eleven from the following argument. The decision making structure at 7-eleven is deficient in that the leadership style taken cannot be enforced due to the loose chain of command between the head-office and the franchisee. The decisions made cannot be enforced since there is no uniform codified code of ethics that is expected of the franchisee. (Harris, 2010).The lack of strong codes of ethics to be adhered by the store owner nullifies the ideal managerial ethics of moral rights to the employees of the individual store owner. (Verbos, Gerard, Forshey, Harding & Miller, 2007). The only consideration that is shown that is applicable to the theory is the right of free consent to the new franchisee under mentorship by an older franchisee in the mentorship program. The new store owner under the program is indoctrinated into a system that is faulty and can either accept and maintain the status quo or reject it, out of their rights of free consent.
The theory of justice does not influence the managerial decision making by the leadership of 7-eleven in the response taken after the labor malpractices were reported to the top management. The lack of a clear managerial code of conduct by the leadership is shown by the response taken which does not move to remedy the situation in compensatory justice. (Yukl, 2010). The response taken was at best one of ethical dissonance as they stood to benefit from the situation. By proposing to assist the guilty store owners sell their franchises, they stand to make a fee out of every sale of such store. The compensatory justice that will address the suffering of the employees is not addressed at all. Thus the leadership in their decision making process is severely flawed from the perspective of managerial ethics.
Part D- Leadership and Decision making. Ethical decision making is based on the decision of the organizational collectively as well as the individual leader in the form of the manager. The manager is influenced by their behavioral traits and personality in the course of making decisions. (Yukl & Lepsinger, 2005).The behavioral traits are influenced by their stage of moral development which operates between three levels: the preconventional, the conventional and the postconventional. (Hsiung, 2012). The preconventional level is concerned with fitting in and following rules for its own sake. The conventional level is concerned with living up to the expectations of others while fulfilling social duties. The ideal level is the preconventional where the manager will follow principles of right and justice that are self-driven. (Stanovich & West, 2008). The manager at this level proactively seeks solutions for ethical dilemmas and creates balance between common good and individual good.
The other level of leadership decision making is at the organizational level, based on the ethical making model that will nurture a culture of trust, dedication and transparency within the organization. (Ejimabo, 2013). The model is underpinned by the following steps which will lead to decision making that is ethical and beneficial to the organization, in this case to 7-eleven. The first step is to identify the problem with the existing franchisee model, followed by identifying the potential issues critical to running the model. (Burnes & By, 2012).This should be followed by a review of the current ethical codes while learning about the relevant laws that are applicable to their business model. Consulting with the store owners and other stake holders will lead to a new course of action after considering the available and probable course of action. (Thompson, 2008).This will lead to a new paradigm shift in doing business ethically.
In conclusion, the above case study shows the importance of ethics in business entities. The use of managerial ethics is important in the business environment in order to ensure that the rights of the employee are maintained and guaranteed which in turn affects their productivity. The lack of a clear ethical code of conduct in the above study resulted in store owners operating their stores with total disregard for the welfare of the employee and at times tending to exploitation. The use of managerial ethics should be applied at the top leadership and at the individual store level in order to ensure the collective success of the business. The leadership should make decision that is founded on ethical considerations of doing business across the whole organization in order to reduce litigation in courts and maintain an environment that is conducive for growth.
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