Real Pressures on the Australian Retail Industry
The Food and Grocery Code of Conduct is a voluntary code under the Competition and Consumer Act 2010 that governs the behavior and the performance of wholesalers in how they deal with suppliers in Australian supermarket industry. According to this conduct, the retailers and the wholesalers should act lawfully and in good faith. This means that this requirement includes the wholesaler, retailer, supplier in their everyday interaction and in their dealing whenever they sign contracts.
Even though the code does not directly define the meaning of good faith in any of its provisions, it shows and clearly explains what good faith could look. From this, we could determine good faith as a provision in the code that requires the wholesaler, retailers to act within their agreement with the supplier reasonably in exercising their powers (Tricker 2015). It means that their behavior should not have some illegitimate interest or their actions should not be dishonest with ill motives to the supplier.
Despite the code requiring the wholesaler and retailer to pay attention to the rights of the supplier in their agreement, it does not limit the retailer or wholesaler from thinking of their interest in making profits in their businesses. It also does not advocate for the wholesaler or retailer to act just according to the interest of the supplier (Whish 2015).
The code provides the determinants that the courts should have in recognizing whether the actions are done within the provisions of good faith which include:
(a) If the supplier’s action or business relationship is because of pressure or threat
(b) If the relationship between the supplier and the wholesaler is conducted in “recognition of the suppliers, need for certainty about the risks and costs or trading, particularly about production, delivery, and payment.”
(c) If the supplier action is by the good faith requirements
As mentioned earlier, under Competition and Consumer Act 2010, the Food and Grocery Code of Conduct is a voluntary code. It regulates the conduct of wholesalers, retailers, and suppliers by ensuring transparency in their commercial dealings and the ACC has not moved to have the government legislate this code into law since it is a voluntary code. Therefore, the question is, does it mean to be a voluntary code?
This code of Grocery code of conduct is a voluntary code in that it is only applicable when the retailer, wholesaler and the supplier voluntary choose to be bound by the Code (Yeager 2015).
International Retailers and New Business Models
The retailer is bound by the code if the retailer, by use of a written notice, writes to the corporation an application and then the corporation agrees. At this point, the retailer is bound by the code. Individually, section 4(1) or if the retailer was a party to a grocery supply agreement that the retailer was tied to before being banded by this code, section 5(1) and lastly if the supplier concerned accepts the offer within six months, section 5(3).
The wholesaler becomes a member of the corporation has agreed to a written notice written to the commission from the wholesaler, section 4(2) and if the concerned supplier accepts the offer within six months. The same rule applies to the membership of the supplier.
All the parties which entail the wholesaler, the retailer the supplier have the option of quitting this agreement by use of a withdrawing agreement that bounds them to the code and the requirements attached to them during the signing of the code agreements.
It is suggested by Strategic Theory that being in possession of power is desirable and is better than lack of it. Having power is better than being powerless. An example of power is purchasing and pricing power. It is desirable because it brings bottom line benefits. The only problem is how to determine whether the decision made is legitimate even as one possesses power (Goodwin and Wright 2014).
The senior manager will assess whether the decision made is legitimate if it is by the regulations and principles of Australian corporate governance principle which are:
The manager will recognize if the decision made is ethical according to the available legislation and codes such as Food and Grocery Code of Conduct and Competition and Consumer Act. The decision should create a safe and nondiscriminatory judgment should be environmentally friendly and should promote honest dealings between wholesalers, retailers, and consumers in an organization, lastly responsibility should be portrayed in the decision especially when dealing with other partners or fellow workers (Shapiro and Stefkovich 2016).
A manager should make decisions at the correct and relevant time, and the decision should safeguard confidential information of the organization, they should ensure that the decision made is honest that the decision does not undermine the power or responsibility of others in the organization just because of possession of the power to do so.
The decision made should be able to deal with the issue at hand peacefully without rating further conflicts within an organization
Reducing Costs to Improve Profits
The decision made should not infringe the rights of anyone in any way according to the Australian Bill of rights (Furman, Branden and Spaller 2018).
The decision made should be a representation of the docket occupied with the voice of the whole organization at mind and heart and a decision that can clearly be defined further
The decision made by the manager should not in any way violate the vision and mission of the company since decisions made by the manager are the ones that mostly run the organization
As a chief financial officer, when approached by the CEO of the organization I work for to postpone the payment of supplier for our own company to improve its capital position, I would respond by telling him that I will not do it. Instead, I will insist on paying the supplier at the correct time as stipulated in the contract.
I will do this because according to Competition and Consumer Act 2010 division two on payment of suppliers, the retailer should pay the supplier for their service delivery by the agreement in the contract. This entails the correct time frame as agreed 1(a) and within a reasonable time after receiving the supplier’s invoice for the product. In this case, if I delay the payment, I will be going against this policy.
Secondly, the same act warns against the setting of any amount or time in the supplier’s invoice or remittance unless the supplier has consented in writing so unless the supplier agrees without any form of pressure to the decision of delaying the payment I won’t suspend the payment.
In looking at the case study of Tesco Company that knowingly, delayed paying money to the suppliers to improve its financial position for a period of twelve to twenty-four month. After investigations, Tesco’s management was questioned for ethics and administration. Thus it was found that there was a need to train the finance and management in ethics in business.
I will also fail to delay the payment as an accountant in the institution according to section 100 of Code of Ethics for professional Accountants 2010 that clearly points out that an accountant responsibility is not to satisfy the needs of an individual client or employer in action but the needs of the public interest should be the priority and in this case scenario the need of the supplier will be my priority and not my obligation as a member in the organization or the lack of the CEO according to the ethics of the accountancy professing that I am pursuing.
Sourcing Products from Overseas Suppliers
Applying advanced country standards of employment conditions to less developed economies is possible to a considerable extent depending on several factors that can be considered based on the framework obtained in The Fair Work Act 2009 and the Employment Standards Act which entails:
To change the standards of the less developed countries, one must inquire whether there are the available professionals that are needed to do this and in the new framework, one would wish to come up with. An example is when one wants to change the education system of a country I is right to ask whether there are available teachers to undertake to teach the new curriculum the same applies to any employment profession especially if adjustments are to be made in the business.
There is need to consider the available policies and laws in issues to do with the duration of work, the taxation policies, the payment, and punishments. It could be challenging to introduce new employment standards in an area where the systems do not allow. For example, if Australia provides a law on the considerations of scrutinizing commodities produced another country say, New Guinea, it might never work.
A very critical issue to consider is financing budget allocated in the employment sector to the employees in the country that is in question. There is need to determine the payment range of professions and the taxation system. There is also need to specify the overtime policy of the country or organization in question whose employment standards you need to change. An example is in a state where there is little money allocated as wages. If you increase the standards of quality delivery in the sector of employment, there will be demand for more standards that cannot be produced by the government.
A survey by Oxfam Australia shows the consumers of Australia can pay extra cost for garments so long as the suppliers from less developed economy is also paid high. This is about the fact that most of the garments (of up to 90%), imported into Australia come from Asia. However, Asia is experiencing a low wage environment. I have felt strongly about this and as a member of the senior management team discussing this idea, I would convince the Chief Marketing Officer that this is a good thing. This is because we will be doing it as a way of charity in that, if the Australian citizens have agreed to pay more garments for the sake of the suppliers in the less developed country our organization could we could do this even without the aim of soliciting profit but just as a way of charity. Secondly outsourcing for the garments, our organization would be the best practice since it will be a cost reduction strategy (Dumay 2016).
Ethical Implications of Overseas Sourcing
The survey conducted by Oxfam Australia indicate that the consumers Australia are ready to make payment expensively for garments so long it implies less developed economies suppliers are further paid expensively. In case a consumer strongly feels the expensive cost paid and given an opportunity to be a part of senior management to discuss it, what strategy would you employ to persuade the chief executive officer or chief marketing officer that it is a promising thing so long as the strategy of the firm follows price- or cost-leadership model. The organization needs to manage our supply chain. This entails being able to monitor the way that the products we are outsourcing are coming from and if an audit is carried realizing that the garments are made amidst overwork and minimum wages we should be responsible for trying to help this organization as a company.
In trying to convince him I will base my argument on the case of RANA Plaza located in Asia, Dhaka where thousands of people worked for about 14-16hrs a day each day in poor working conditions until which led to collapsing of the story building hence killing people.
I am external auditor called to investigate the performance of an organization conducting an audit. The audit is performed on organization’s suppliers, but there is no cooperation or withdrawal of information. This is because of fear in the employees and the management that they might lose their jobs. They are fearful because as an auditor, I report to the board of management or top management or ministry in charge (Goetsch 2014).
Firstly, I would consult the executive board assessing the possibilities to commit audit fraud and assuring them of the need to undertake this audit as a way of increasing the performance of the organization and convince them that I will give them a copy of report so that they can improve in the areas mentioned furthermore I would need their support during the study to assist in answering the question and to tell the other employees that everything would be okay.
Secondly, I would try to identify possible fraud schemes and scenarios between the management and the employees and amongst employees in the organization, then I would try to break this fraud ties by talking to the necessary people.
Thirdly, I would assess the degree of evaluating possible losses that could arise from the audit fraud in my work as I seek to determine the supplier problems in the organization. After this, I would then formulate or modify the audit plan based on the results of assessing fraud risks. An example is if I were supposed to start with the manager who could go and train the other workers how to respond I would then change my plan by beginning to question the other employees, or I would change my method of asking from being systematic to being randomized.
Monitoring Supply Chains to Avoid Worker Exploitation
Today’s organization must manage an extensive range of resources which are tangible and intangible assets to create value over time. This includes intellectual capital, natural and human capital, research and development which represent a significant portion of market value (Adams 2017).
Integrating report is a communication of an organization evaluation on areas such as financial sector, performance, strategy, governance, and prospects explaining how they are going to create value in their organization which could be short term, medium or long term.
Some of its benefits are that it provides an organization with a platform for performance analysis overviews of external environments, room for the creation of strategies and planning of resource allocation (Busco 2016).
It helps the organization to emphasize the future strategic focus and directions regarding information access, connectivity, and simplicity of the information.
It helps in remuneration in that, during the process of developing an integrated report, one can develop skills and techniques that are necessary to build an organization. This can by coming up with financial reports with future issues, and it can help future remunerations by enabling planning of activities, and it may change remuneration system design in that it will make it easier to deal with.
Decision made by the management sometimes are of short term benefit yet they have a negative impact in the long run just because they have the buying power to do so, in order to deal with this there have been discussions an agency dilemma that suggests the separation of shareholders and the management who are the directors and managers (Melis,2015),but this has caused a problem as management will act in their interest and not necessarily the expectations of the organization, this model has been tested by starting a senior management remuneration where the managers are rewarded based on measures like Total Shareholder Return.
The “at risk” concept is where a portion of the total remuneration of the senior management is held so that the managers will get it only if the shareholders gain (Bertone 2015). The structure of this remuneration is determined by a fixed element such as short-term incentive that is paid as cash and long-term incentive payment that is funded by issues of shares based on performance over an extended period (Bertone 2016).
It is a more significant component of total remuneration for CEOs and senior management. This is because the CEOs and the senior management are the people in charge of decision making. Therefore, they are the ones who run the organization. This person determines the profit or loss in an organization thus playing a vital role in the shareholder. The bigger the company, the higher the need for a more critical decision, therefore, a more significant component of the total remuneration is taken.
Active Stance on Managing Supply Chain
Stakeholders are a group, persons or organizations that are concerned or have interest in an organization. A stakeholder refers to a group of people who are affected directly or indirectly by the decisions that are made in the organization example of stakeholders in an organization include the customers, the creditors, employees, community, government, suppliers, and shareholders.
For a company or organization to be successful the expectation of both the shareholder and the stakeholder need to be met (Ferrell and Fraedrich 2015). In a supermarket company, the stakeholders are customers, employees, shareholder and the community. The stakeholders are very crucial in the ethical behavior of a company because for a company to be successful the stakeholders should be treated with respect even though they don’t have to manage all the stakeholders equally (Bolman and Deal 2017).
References
Accounting Professional and Ethical Standards Board 2010, APES 110 – Code of Ethics for Professional Accountants https://www.apesb.org.au/uploads/standards/apesb_standards/standard1.pdf
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Adams, C., 2017. Understanding integrated reporting: The concise guide to integrated thinking and the future of corporate reporting. Routledge.
Australian Competition and Consumer Commission 2015 Food and Grocery Code of Conduct https://www.accc.gov.au/business/industry-codes/food-and-grocery-code-of-conduct.
Bernstein, M. and Jain, V. K., 2014. Ethical decision-making. In Neurosurgical Ethics in Practice: Value-based Medicine (pp. 135-146). Springer, Berlin, Heidelberg.
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Bertone, M. P., Lagarde, M. and Witter, S., 2016. Performance-based financing in the context of the complex remuneration of health workers: findings from a mixed-method study in rural Sierra Leone. BMC health services research, 16(1), 286
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Melis, A., Gaia, S. and Carta, S., 2015. Directors’ remuneration: A comparison of Italian and UK non-financial listed firms’ disclosure. The British Accounting Review, 47(1), 66-84.
Safari, M., Cooper, B. J. and Dellaportas, S., 2016. The influence of remuneration structures on financial reporting quality: evidence from Australia. Australian Accounting Review, 26(1), 66-75.
Shapiro, J. P. and Stefkovich, J. A., 2016. Ethical leadership and decision making in education: Applying theoretical perspectives to complex dilemmas. Routledge.
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