Importance of Corporate Governance
Question:
Discuss about the Corporate Governance of 7 Eleven.
In the modern business environment, it is critical for the companies to consider good corporate governance so that it can create business integrity and market confidence. Good corporate governance assures an organization of or equity capital thus improves its investment. According to Safari, Mirshekary, and Wise (2015), the accessibility to equity capital has ensured companies to become future-oriented thus balance their increasing leveraging. This principle also focuses on inclusivity, where an organization considers the needs and expectations of various stakeholders (Nevondwe, Odeku, & Tshoose, 2014). The 7-Eleven is never exceptional because it has placed significant efforts to achieve its growth through good corporate governance. Based on the significance of corporate governance, the paper will analyse this principle with reference to 7-Eleven, especially following the widespread claim of wage underpayment system.
Corporate governance is a principle founded on the relationships between stakeholders, such as boards, management, shareholders, suppliers, and creditors, and customers (Al-Ramahi, Barakat, & Shahwan, 2014). The corporate structure shows the structure that an organization uses to pursue its objectives and monitoring the performance. Through corporate governance, the stakeholders can determine how the firm is setting its goals right. Without a doubt, the corporate governance is achievable through different aspects, such as ethical behaviour, disclosure and transparency, and relations with stakeholders. It also involves management practices, financial controls, Board’s oversight responsibilities, and environmental policies (PCSC, 2016a). Given the current corporate scandals infiltrating many companies, it has become critical for the businesses to utilize this management principle. Indisputably, the public have increased their level of scrutiny on various corporate practices. This has made corporate governance relevant to the society.
The government, especially the United States adopted the Sarbanes-Oxley Act so that companies could enhance their financial disclosures and reporting standards. This followed the worst corporate scandals that almost brought the global economy to its knees. Enron, WorldCom and Tyco accounting scandals drew the attention of government to corporate malfeasance (PCSC, 2016a). Therefore, corporate governance confirms the increased public scrutiny of businesses thus call for transparent dealings (PCSC, 2016). The most common practices that the public have addressed include green initiatives, management practices, and offering financial incentives to the management.
The 7-Eleven company has been hit by the culture of compliance following its continued onslaught on the workers’ wages. The underpayment claims against the company has put it on the spotlight thus making many people, including the Fair Work Ombudsman to question its intention. For instance, the company has continued efforts to reduce the employees working hours recorded is unfortunate and justifies the level of corporate fraud. The company’s network operating model confirmed that the organization engaged in a non-compliance practice (Regan, 2016). According to Regan (2016), the company has thrived in wage underpayment practice. Further, the management has intimidated and coerced workers to work excessive long hours without offering even the standard minimum wages. This issue regarding the accessorial liability in safety and employment sector has attracted the attention of researcher to scrutinize its corporate governance policies.
Corporate Governance Principles and Practices
In this convenience store, shareholders are the drivers of the company’s success. Through regular shareholders’ meeting where the board of director’s share and report to the owners on the performance levels of the organization (Disclaimer, 2014). This implies that the shareholders have entrusted the management and operations of the company to the board of directors.
The office of the president is responsible for corporate management, strategic planning and administration, and public affairs management and planning. The president is answerable to the board of directors (Hermes, 2016). Through the operation group, it has been possible for the company to plan its operations across the stores while the marketing group focus on the product marketing and development strategy planning (PCSC, 2016). However, the administration group is responsible for the planning and management of the back office resources. Within the framework, the company has established the ethical operations team, finance office, occupational safety office, and internal audit office.
7-Eleven has invested massively in the delivery of services by providing clients with friendly and comfortable shopping space in all its convenience stores as described by PCSC (2016d). Currently, its large stores business strategy has easily worked for it by allowing the stores to feature unique characteristics. It has also ensured it serves its customers with safe food that are sourced directly from customers (PCSC, 2016). In fact, the company has contracted various farms where it has allowed its employees to oversee the operations. It has also established a quality control laboratory to examine the produce thus offer the customers comprehensive protection. Recently, the company developed the city café brand that saw it improve coffee flavour and quality thus launched new delivery service (PCSC, 2016b).
The 7-Eleven is also rooted in mutual benefits and trusts that have seen it share such benefits with stakeholders. Based on this philosophy, it has adjusted its franchise profit sharing system to improve its operation quality and franchisee profitability. The convenience store is also expanding into related retail businesses thus increase its stores across the world. The company’s subsidiaries are striving to improve and meet the needs of customers through its excellent services (PCSC, 2016b).
As part of its corporate governance efforts, the company has invested in efforts to achieve sustainable operations thus meet its corporate social responsibilities as expected under the corporate governance principles (PCSC, 2016). Through the sustainable operations, the company has focused on environmental protection and social engagement. In enhancing corporate governance, 7-Eleven continues to strengthen its transparency and timeliness regarding the information disclosure (PCSC, 2016d). This corporation has featured among the stocks making up of the Global Sustainability Indices as explained by PSC (2016a). In an effort to achieve its corporate responsibility, it has collaborated with various interest groups thus maximize the available resources (Hermes, 2016). For instance, it is investing in community activities that are meant to improve the livelihood and health of the special interest groups like the elderly.
As part of its corporate governance plan, the company has established the best corporate social responsibility code of conduct (Disclaimer, 2014). This has helped it in managing the corporate social responsibilities. It has further established the interdepartmental corporate social responsibility committee that has categorised the teams into employee and franchisee relations, environmentally friendly, sustainable product and services, corporate governance, and coexisting with the community (PCSC, 2016a). These teams are mandated to propose and implement the concrete plans regarding the corporate social responsibility systems and policies as explained by Hubbard, Garnett, Lewis, and O’Brien (2014). The company has established a labour auditing training that has incessantly scheduled the CSR training and education regarding the areas of responsibility. It has further designated workforce to facilitate and implement its corporate social responsibility. In fact, through the senior management, the company has managed the SCR policy thus give regular updates to the board of director.
Corporate Governance and Public Scrutiny
The company has further established the best remuneration policies that integrate the performance evaluation systems and other CSR policies (PSC, 2016b). This has seen it establish proper effective discipline and incentive systems to help pay the employees competitively thus ensure it achieves the provisions of fair work. According to 7-Eleven, its sustainable environmental development plan remains stable because it focuses on utilizing its resources efficiently to reduce the environmental impacts (OECD, 2015). Currently, it has implemented the best energy conservation plans within its stores. For instance, it has implemented an elaborate energy saving measures including utilizing inverter systems, building insulation, few light fixtures, outdoor energy conservation, energy-efficient lighted fixtures, and indoor lighting management.
Based on this principle, 7-Eleven has done worse as it abuses the rights of the workforce. The management, for instance, force the workers to work long-hours without pay. It has even completely disregarded the health and safety aspects in the workplace. This is against the Fair Work Act 2009 provisions (CA, 2016).
7-Eleven stores have established the best ethical operations programs and policies. Through the corporate governance best practices and principles, 7-Eleven has created an article to define its ethical policies and methods. The Board of management remains committed to implementing the ethical operations programs and policies (OECD, 2015). The programs that the Board remains committed to include code of conduct that prevents unethical behaviours, ethical corporate management best practice principles, and standards governing awards and discipline (PCSC, 2016c). By formulating these programs, the company intend strives to remain true to its obligations as every operations remain within the ethical standards. The company is alive to the widespread corporate scandals in the modern times (PCSC, 2016). To this effect, 7-Eleven has established an Audit Reporting Line thus help to eliminate bribery and prevent corruption. With the code of conduct, it has become possible to prevent the immoral behaviours.
Despite having this corporate governance practice, it has failed to comply with it in principle. For instance, the managers have continuously harassed and intimidated workers to agree with their unethical practices (CA, 2016). In fact, the managers have even threatened the employees of deportation for exposing the incidences of underpay.
7-Eleven has established a friendly and safe workplace that has encouraged positive interactions between workers. In fact, the organization has further guaranteed workers of their employee interest and rights by defining its crisis management policies (PSC, 2016b). It has further acted on various issues based on the Labour Safety and Health Act by establishing a health and safe organization. It is also implementing a health and safety management practices based on the labour laws. Indeed, the company has frequently provided bulletins on safety and health thus updating employees on the new regulations (OECD, 2015). The organization has further engaged in the safety and health drills and training. To this effect, it has engaged both old and new employees in these training programs.
Instead of protecting its workforce, the company has incessantly coerced and intimated workers into working excessive hours without pay (CA, 2016). This exposes the company’s real intention in implementing its corporate principles.
Conclusion
7-Eleven is a leading convenience store that has dominated the market across the world. Despite its outstanding corporate governance principles, the company is accused of underhand play in its activities. For instance, it has mastered the culture of wage underpayment thus disregards the standard minimum wage provisions. The article has thus provided relevant information regarding the ethical practices in the organization.
The company must remain true to these principles and comply with the corporate governance principles and international labour law conventions. The Fair Work Ombudsman has already provided the way forward to restore the company’s reputation, especially following the prosecution of the 7-Eleven. Given the continued culture of non-compliance claims against this convenient store, it is essential that the shareholders replace the top management because these managers have failed to comply and regulate the employment procedures and safety.
References
Al-Ramahi, N., Barakat, A., & Shahwan, Y. (2014). The Impact of Corporate Governance Principles Application on Financial Performance of Public Shareholding Companies Listed in Amman Stock Exchange. European Journal of Accounting Auditing and Finance Research, 2(6), 106-123.
Commonwealth of Australia (CA). (2016, Apr). Ombudsman’s Inquiry into 7-Eleven: Identifying and Addressing the Drivers of Non-compliance in the 7-Eleven Network. <https://www.fairwork.gov.au/ArticleDocuments/763/7-eleven-inquiry-report.pdf.aspx>
Disclaimer. (2014). Corporate Governance Principles and Recommendations, 3rd Edition. Australia: ASX Corporate Governance Council.
Hermes. (2016, Apr). Corporate Governance Principles. Retrieved 8 May 2017, from <https://www.hermes-investment.com/wp-content/uploads/2016/04/China-and-HK-CG-Principles-Apr-2016.pdf>
Hubbard, R.G., Garnett, A.M., Lewis, P., & O’Brien, A.P. (2014). Microeconomics. Australia: Pearson Australia.
Nevondwe, L., Odeku, K.O., & Tshoose, C.I. (2014). Promoting the application of corporate governance in the South African Public Sector. Journal of Social Science, 40(2), 261-275.
OECD. (2015). G20/OECD: Principles of Corporate Governance. OECD Report to G20 Finance Ministers and Central Bank Governors. Retrieved 9 May 2017, from <https://www.oecd.org/daf/ca/Corporate-Governance-Principles-ENG.pdf>
PCSC. (2016c). Corporate Governance: Ethical Corporate Management. Retrieved 8 May 2017, from <https://www.ir-cloud.com/taiwan/2912/irwebsite/index.php?mod=pages&id=19>
PCSC. (2016d). Employee Workplace and Protection Strategy for Personal Safety. Retrieved 9 May 2017, from <https://www.ir-cloud.com/taiwan/2912/irwebsite/index.php?mod=pages&id=24>
Philippines Seven Corporation (PSC) (2016a). Manual on Corporate Governance: 7-Eleven. Retrieved 8 May 2017, from <https://www.7-eleven.com.ph/corporate/corporate-governance/manual-on-corporate-governance/>
Philippines Seven Corporation (PSC). (2016b). Corporate Governance. Retrieved 7 May 2017, from <https://www.7-eleven.com.ph/corporate/corporate-governance/>
President Chain Store Corporation (PCSC). (2016). Corporate governance. Retrieved 9 May 2017, from <https://www.ir-cloud.com/taiwan/2912/irwebsite/index.php?mod=corpgov_chart>
President Chain Store Corporation (PCSC). (2016a). Corporate Governance. Retrieved 9 May 2017, from <https://www.ir-cloud.com/taiwan/2912/irwebsite/index.php?mod=letter>
President Chain Store Corporation (PCSC). (2016b). Corporate Governance Practices. Retrieved 9 May 2017, from <https://www.ir-cloud.com/taiwan/2912/irwebsite/index.php?mod=pages&id=17>
Regan, L. (2016, Aug 17). Australia: Time for Change at 7-Eleven: Workplace Responsibility of Upper Management. Mondaq. Retrieved from <https://www.mondaq.com/australia/x/519812/employee+rights+labour+relations/Time+for+change+at+7Eleven+workplace+responsibility+of+upper+management>
Safari, M., Mirshekary, S., & Wise, V. (2015). Compliance with Corporate Governance Principles: Australian Evidence. Australasian Accounting, Business and Finance and Finance Journal, 9(4), 3-19. Retrieved 6 May 2017, from <https://ro.uow.edu.au/cgi/viewcontent.cgi?article=1627&context=aabfj>
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