In A sensible difference that is based on

In
this essay, I will look at how one of the UKs largest fast fashion retailers
was exposed for mal practise towards its employees in 2015.  I will discuss how zero hour contracts seem
to be the root of all problems and how they disobey general business ethics and
how these contracts played a part in the discovery of Sports Directs mal
practise and how Mike Ashley and other shareholders have worked to improve on
the situation which gained a lot of media attention. If a businesses cooperate
image is damaged it often has severe consequences on many aspects of the
business. Also applying the concepts of sustainability to the company Sports
Direct and talking about CSR and its four pillars in relation to sports direct
and how it sells incredibly cheap products but behind closed doors they
practically have employees acting as slaves in 2015 how this went on for so
long before being notice is unacceptable.

Zero hour contracts, they have been around for decades, but
never before have they had so much attention surrounding them up until the past
few years. The so-called “no-hours contracts”, or zero hours contracts,
have become the protagonists and popular use of contracts since the British
government announced in June 2012 the formation of a commission to investigate
whether employees working these zero-hour contracts were serving as tools for
labour exploitation. The question is often raised, is it flexibility or
slavery?

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Many media outlets such as The Guardian or The Daily Mail
have exposed some of the embarrassments of large companies in relation to these
types of contracts.

 

Good for the company, good for the worker? The problems with
this type of contract are very obvious: economic and personal instability are
high, and salaries are lower. According to a study carried out by the
Resolution Foundation, employees working on this type of contract charge an
average of 236 pounds per week, compared to 557 pounds for workers hired on a
regular basis. A sensible difference that is based on reducing redundancy, that
is, the hours paid in which the worker has nothing to do and, therefore, they
are not productive. What are these so called “zero hours” contracts?
Although they roughly resemble your normal contracts for hours in other
countries, since the work is only for short periods of time and without a fixed
working day, its operation is quite peculiar. With this type of document, the
company obliges the worker to always be available before an eventual call and
to maintain an exclusive relationship with it, but at the same time, the
company has no obligation to guarantee the employee who will provide work with
a certain frequency. The worker is also not obliged to accept the proposal of
their contractors if they chose to or not. This type of contract is seen as
ideal for students who are wanting to combine their studies with a job.
Nowadays, it is rather a useful formula to save costs and facilitate labour
flexibility in times of economic uncertainty, in that the worker is required to
work specific and limited periods of time in which his productivity is maximum.
However, the increasing adoption of this type of working relationship by many
large companies has led the British government to consider whether or not they
will be used as a way to replace traditional contracts or, in some cases, as a
control tool.

 

The question is often raised, flexibility or exploitation?
How much does Sports Direct actually obey simple business ethics? Channel 4
released a documentary called “The secrets of Sports Direct” as part of their
“Dispatches” series which aired on April 27, 2015. Reporter Harry Wallop explored the hidden
cost of the clothes, shoes and discount gear that have helped the company make
millions, he examined Sports Directs practices a little closer to home. We
often are taught and believe that if a product which we buy has the phrase
‘Made in the UK’ makes this item and purchase automatically morally good.
However, this documentary exposed sports directs for the treatment of their
workers here in the United Kingdom at their packing and shipping plant in
Shirebrook, Derbyshire. Mike Ashley the CEO of Sports Direct, designed a
company which many believe puts efficiency first at the expense of worker
happiness

Workers for the company are subject to an authoritarian
management regime similar to that we would have seen in the past in a Victorian
factory. In the documentary, you see workers funnelled through corridors lined
with posters promising financial reward and success for those that work within
the system this is purely propaganda to attempt to dampen the miserable
existence that follows. With workers being named and shamed both in English and
polish over a tannoy in the warehouse if they are not working fast enough. Over
2000 workers estimated to be on these zero-hour contracts if they have more
than six warnings against them placed by any managers then the face the sack.
Ethically-strong businesses can enjoy strong customer loyalty, attract
better-quality employees and attract finance from funds that prefer to invest
in companies with strong ethics

 

 

As I said in my previous essay, legal is not always ethical
or moral. Ethics is concerned with the
study of morality and the application of reason to elucidate specific rules and
principles that determine right and wrong for a given situation. These rules
and principles are called ethical theories (Crane and Matten 2016). Morality is
concerned with the norms, values and beliefs embedded in social processes which
define right and wrong for an individual or a community (Crane and Matten 2004). Around
the world all businesses no matter their size or value within the marketplace
they are expected to follow certain ethical guidelines and be held responsible
for their actions and suffer any consequences. It is important for a business to
be ethical but also obey the law. David
De Cremer and Henri-Claude de Bettignies argue that the black and white terrain of business ethics is
often, in fact, grey. A certain “grey area” which exists between
ethics and law where certain values may conflict one another. Sports direct
have not disobeyed the law however many believe Mike Ashely should be held
accountable for these conditions and neglecting the basic wellbeing of his
staff. The
firm was warned it will be seen as a poster boy for bad business if it does not
take urgent steps to address “serious malpractice”.  The firm’s
reputation was damaged by this unethical decision and situation came to the
public eye and exposing the company’s managers, leading to costs and falls in
share prices, thereby damaging the shareholder value. Sports direct are now
trying to eventually recover from such scandal, however it takes time to
rebuild an ethical reputation, especially with customers. 

 

However, it proves that this type of contract is
being used by many other large companies such as Subway, NHS (National Health
Service), Buckingham Palace, Tate Gallery, Boots or Cineworld usually use this
type of contract, which according to a survey carried out by the British
government, have gone from representing 4% of the English workforce in 2004 to
8% in 2011. In addition, the survey also showed that “the largest
companies are more likely to use this type of contract”. The sectors in
which they predominate are the hospitality industry and the hotel sector (with
19%), followed by the health sector. The exponential growth of this type of
contract has led the Secretary of State for Business and Innovation, Vince
Cable, to start with an investigation into the use and abuse of this work
formula and to warn that maintaining an exclusive relationship with a company
that it does not guarantee work is an unfair situation. The government are
looking carefully into the matter of these zero hour contracts as they seem to
be causing quite a stir within the business world and the topic of business
ethics. Many parliamentarians of the Labour Party have pointed out that a
reform is necessary to prevent these contracts from leading to labour exploitation.
In a report from a committee of MPs about Sports direct revealed that Sports
Direct is unlikely to be the only organisation that operates in such a way.

The term sustainability is now commonly used in relation to
business ethics and the three components of sustainability known as the triple
bottom line (Elkington
1998). The triple bottom line contains three sections of a business
being sustainable and ethical; Economic, Social and Environmental. Sustainable
development is development that meets the needs of the present without
compromising the ability of future generations to meet their own needs (World Commission on
Environment and Development 1987). Bob Willard who spent 34 years
working for IBM and has a doctorate on business case for sustainability at the
University of Toronto believes that four concepts play a part in sustainable
business which all refer to the same thing which is managing today while
preparing for tomorrow in ways that set your business up to be resilient in
light of changing: The triple bottom line, the three E’s; Equity, Environment
and Economy. The three P’s; People, Planet and Profit and then Corporate Social
Responsibility. Willard said that it is important to realize from a business
perspective that although all four concepts points are relevant, some will
resonate with a company’s culture more than others. In 2003 the journal of the
academy of management executive released and article authored by both Stuart C.
Hart and Mark B. Milstein entitled “creating sustainable value” they both argue
that when viewed through the right set of business lenses sustainability can
actually help organizations drive value creation while addressing some of our
most pressing challenges. Bob Willard also showed and put forward with evidence
that if a typical company were to use best practise sustainability approaches
it can increase its profit by between 51% and 81% within three to five years.
Since the scandal surrounding Sports Direct and the zero hour contracts and the
fact these contracts work against the UN sustainable development goals along
with the uproar about the worker conditions it all caused a huge drop in the
company’s share price. This drop actually resulted in Sports Direct offering
guaranteed hour for its employees. This change is a response by the company to
all the media attention and pressure to change its ways to become a more
sustainable practise. The underlying ability to develop a sustainable business
strategy relies heavily on a company’s leadership and is embodies in its values,
culture, capabilities and communications. These means implanting a
sustainability enabled culture throughout the whole of the organisation and
company. Sustainability means that things keep going. The earth is a system and
everything is connected, society, environment and the economy. Sustainability
is just smart business.

 

 

Corporate Social Responsibility is often seen as a very
controversial topic.  “The idea of social
responsibility supposes that the corporation has not only economic and legal
obligations but also certain responsibilities to society which extend beyond
these obligations” (McGuire,
1963, p.144).

“There is one and only one social responsibility of business
– to use its resources and engage in activities designed to increase its
profits for the owners and shareholders… so long as it stays within the rules
of the game…. engages in open and free competition without deception or fraud” (Friedman, 2009, p.133).
A corporation has the same legal status as a person.
It has legal rights but no clear responsibility to the wider community. In a
news article which was published by The Telegraph on the 28th
September 2015 it makes the bold statement that corporate social responsibility
(CSR) allows companies to parade their virtue and look good while internal
standards are allowed to slip. With this quote “The social responsibility of companies is very simple – to make good
products, to honour their contracts and to pay their staff and suppliers on
time. Everything else is just a smokescreen.” from the article sticking out it leads me
to look at CSR as an example with Sports Direct. It’s incredibly cheap products
and constant sale prices – these encase a very large consumer base who believe
they are getting quality products for knock off prices however the work and
conditions in which theses unbelievably priced products are produced are
essentially unethical but kept under wraps. Keeping these conditions from the
public is because there is a high consumer demand for products to be
environmentally and ethically friendly therefore when finding out how these
products are produced it effectively impacts the business. According to Carrol,
1991 there are 4 kinds of social responsibilities which constitute to total
corporate social responsibility; Economic, Legal, Ethical and Philanthropic. Therefore,
I believe that with ethics being one of Carrols four pillars, ultimately in
today’s day and age and the current business environment in which we live in
ethical decision making is becoming more and more important as each day goes
by. It is now more vital than ever before for managers of large, even small and
medium sized, public or private businesses to get right. Essentially in today’s
business environment making the correct decisions ethically speaking is so important
to avoid huge blows to the company and reputational damage.

In
2017 there is no better time for managers of public companies to make sure all
their decisions they make are ethical. Managers in public companies who still believe
that profit maximisation is more important than ethical decision making would
probably agree with Milton Friedman who argued that “the business of business
is business” and that managers only responsibility to society is to operate
within the law.

 

I Georgia Hale declare that I am
the sole author of this assignment and the work is a result of my own
investigations, except where otherwise stated. All references have been duly
cited.

 

References

 

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§  Carroll, A.B., 2016. Carroll’s pyramid of
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Responsibility, 1(1), p.3.

§  Carroll, A.B., 1999. Corporate Social
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§  Carroll, A.B., 1991. The Pyramid of
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§  Crane, A.
and Matten, D. 2016. Business Ethics: Managing
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§  Crane, A. and Matten, D., 2010. Business
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§  De Cremer, D. and de
Bettignies, H-C. 2013.Pragmatic Business Ethics. Volume 24, Issue 2.

§ 
Dowling, T. (2016). The Secrets of Sports Direct review:
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Accessed 20 Dec. 2017.

§  Elkington, J., 1998. Cannibals with Forks:
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Series).

§ 
Greg Heffer, P. (2016). MPs told Sports Direct worker so
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§  James Jr, H.S. and Rassekh, F., 2000. Smith,
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§ 
James Moore. 2016. Sports Direct attacked for
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28 December 2017

§ 
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§ 
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§ 
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§ 
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Accessed 20 Dec. 2017

§  Riar. G Singh. 2014 Why is Ethics Important
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§ 
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§ 
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§  World
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YouTube. (2015). The
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