The Price of Doing Good: Tesco’s Ethical Decision Making

Subject: Business Ethics
Pages: 5
Words: 1468
Reading time:
6 min
Study level: Undergraduate

Introduction

Unethical behavior in organizations has crowded the global media for the last decade, particularly in the wake of high-profile corporate scandals involving blue-chip corporations such as Goldman Sachs, Satyam Computers, Siemens, and Lehman Brothers. It has been documented in the literature how individuals’ unethical behavior and actions sit at the core of these scandals, making the topic of ethical decision making an important one in contemporarily organizational context (Pitera & Thao, 2013). Although it has been the norm for many scholars to investigate unethical behavior in organizations and subsequent corporate scandals, this paper aims to go against this tradition by illuminating an organization whose leaders have acted ethically to solve an ethical dilemma. Specifically, I focus attention on UK’s retail giant Tesco and how its leaders have successfully dealt with the ethical dilemma involving the sale of clothes from Bangladesh’s garment factories.

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Brief Description of the Ethical Dilemma

In the recent past, Tesco has had to contend with the issue of whether to continue sourcing its clothing items from Bangladesh garment factories, particularly after widespread global condemnation arising from poor working conditions, minimal pay for workers, and other forms of employee exploitation prevalent in these factories (Siegle, 2013). In 2012, for example, a fire tragedy occurred at Rana Plaza garment factory due to poor working conditions, resulting in the death of over a hundred workers engaged in producing garments for multinational firms such as Tesco (French & Martin, 2013). Mainstream commentators and global media outlets have also continuously exposed unethical practices perpetuated by most of these garment factories, including the use of child labor and unjustifiable compensation for labor. The ethical dilemma for Tesco and other global retailing giants, in my view, revolved around trying to maintain low costs of production for their clothing lines while at the same time attempting to substantially reduce such tragedies and unethical practices perpetuated by their suppliers.

Description and Analysis of Ethical Decision Making and Actions taken by Tesco

It is my considered opinion that Tesco’s continued interaction with Bangladesh’s garment factories presented weighty ethical issues, particularly in light of accusations from campaigners that multinational companies were to blame for fueling the demand of clothes, and hence encouraging Bangladeshi manufacturers to exploit workers and employ child labor to meet the rising demand (French & Martin, 2013). Thousands of workers were stationed in poorly built buildings and worked for long hours in the hope of meeting the demand from Tesco and other global retailers, implying that demand for products led manufacturers to employ unethical practices to maximize their profits while endangering the lives of workers.

Tesco leaders had to move fast to solve the ethical dilemma or risk losing a lot of customers, most of whom were increasingly believing that the global retailer was playing an active role in causing death and exploitation to employees working in these factories. Owing to the fact that it was not prudent to stop sourcing from Bangladesh due to obvious business reasons, Tesco’s leadership developed a raft of rules and regulations that were to be adhered to by its suppliers in a rationalized attempt to solve the ethical dilemma. Upon careful analysis of available scholarship, I am convinced that Tesco’s leadership took concerted efforts aimed at ensuring suppliers meet the company’s ethical standards on worker welfare, employees in garment factories are compensated according to international standards, and standards are improved across the Bangladesh garment industry as a whole. Additionally, Tesco’s leadership developed policies and frameworks that would assist the retailer to be directly responsible for ensuring safe working conditions at suppliers’ factories, including paying for chartered engineers and inspectors to visit and evaluate structural and fire safety at each of the 100 Bangladesh factories contracted by Tesco to produce clothes (Siegle, 2013).

Analysis of the Ethical Situation

Ethical decisions have been characterized in the literature “as value-based, volitional choices with interdependent consequences” (Gunia, Wang, Insead, Wang, & Murnigham, 2012). The Tesco case scenario represents yet another example whereby leaders are called upon to make value-based ethical decisions with far-reaching consequences not only for the long-term profitability and performance of the retailer, but also for its global customers and employees in the garment manufacturing industry in Bangladesh. I contend that although Tesco may have experienced short-term financial setbacks in developing and implementing the outlined ethical decisions, the long-term outlook was far much favorable for the global retailer, particularly in terms of ensuring all workplaces are fundamentally safe for workers, protecting the image and reputation of the company as it continues to source from Bangladesh, ensuring that customers continue to trust that their garments are made ethically, and also guaranteeing that the millions of hardworking employees dependent on the industry have their jobs protected (Siegle, 2013).

It is evident from the Tesco’s case that the leader’s decision making pitied basic moral values (e.g., honesty, empathy, justice, compassion and duty) against basic self-interest behavior (e.g., maintaining the status quo to avoid investing in the recommendations made). Consequently, the right-wrong decisions included “alternatives that are clearly ethical (reflecting normative values) and clearly unethical (reflecting the temptation to violate normative values for personal gain)” (Gunia et al., 2012 p. 14). Drawing from existing literature, I am of the opinion that Tesco’s leadership went for ethical decisions that had the capacity to promote the greatest general good for all the people (Chiu, 2002), hence it can be argued that the organization employed the utilitarianism-based ethical framework which balances the benefits of any action against the risks and costs involved (Audi, 2007).

Upon critical analysis, I am convinced that Tesco’s decisions in the ethical dilemma were destined to promote the common good and assist all the players involved to have a fair share of benefits in the global sourcing initiative. For instance, through ensuring good working conditions and justifiable pay for workers in Bangladesh garment factories, Tesco’s leadership reduced the amount of complaints coming from customers and campaigners on unethical practices perpetuated by owners of these factories. Additionally, employees were now able to benefit from their labor, while Tesco and other retailers could justify their interactions with these factories as based on ethical tenets. Further afield, the decisions allowed Tesco a ‘right’ to override the self-interested rights of factory owners, with the view to bringing about happiness and satisfaction in the wider community (Audi, 2007).

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It is well documented in the literature that ethical decisions are fraught with both positive and negative consequences, as well as trade-offs between competing interests (Gunia et al., 2012). In this particular case, I am of the considered opinion that positive consequences superseded negative consequences. In making the ethical decisions as demonstrated in this paper, for example, Tesco improved its image and reputation in the eyes of customers and stakeholders, ensured that its global supply chains are predicated upon ethical decisions, and availed a platform through which Bangladesh factory employees could get adequate pay and work in safe environments. Among the negative consequences, I am of the opinion that the disclosure of engagement or association with illegal, inefficient, or unethical practices perpetuated by Bangladesh garment factories had the capacity to adversely affect Tesco’s profit margins, image and reputation (Chiu, 2002). Furthermore, Tesco risked losing its morally-conscious customers if management had failed to initiate actions aimed at enhancing safe working conditions and adequate pay for employees working in Bangladesh garment factories.

Available literature demonstrates that organizational decision making often calls for trade-offs between the interests of the organization on the one hand, and those of other interested parties on the other (Glac, 2009). In the described case scenario, the trade-off was between Tesco’s desire to maintain low costs of production for its clothing line and its obligation to be seen as an ethical organization in the eyes of customers and stakeholders. The decision by Tesco’s leaders to introduce strategies and approaches aimed at directly ensuring safe working conditions at supplier’s factories, in my view, could have cost the retailer a substantial amount of money, not mentioning its potential to destroy supply chain relationships with some of the factory owners. However, failure to take these actions could have been more disastrous for the global retailer not only in terms of exposing more employees to unsafe working conditions, but also losing business opportunities to morally-conscious local and international customers. Consequently, Tesco’s leadership chose to promote the greatest general good for the people, rather than the self-interested approach to maintain the status quo at the expense of marginalized workers.

Conclusion

Overall, this paper has demonstrated how Tesco’s leadership successfully dealt with the ethical dilemma, the ethical framework used in making the decisions, as well as the consequences and trade-offs involved in making these decisions. Above anything else, the paper demonstrates how an ethical framework can be used to solve an ethical dilemma and the consequences that may exist in ethical decision making.

References

Audi, R. (2007). Can utilitarianism be distributive? Maximization and distribution as criteria in managerial decisions. Business Ethics Quarterly, 17(4), 593-611.

Chiu, R.K. (2002). Ethical judgement, locos of control, and whistleblowing intention: A case study of mainland Chinese MBA students. Managerial Auditing Journal, 17(9), 581-587.

French, J., & Martin, M. (2013). The roof is on fire: The ethical minefield of the textile industry in Bangladesh. Journal of the International Academy for Case Studies, 19(8), 85-85.

Glac, K. (2009). Understanding socially responsible investing: The effect of decision frames and trade-offs. Journal of Business Ethics, 87(1), 41-55.

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Gunia, B.C., Wang, L., Insead, L.H., Wang, J., & Murnighan, J.K. (2012). Contemplation and conversation: Subtle influences on moral decision making. Academy of Management Journal, 55(1), 13-33. doi. 10.5465/amj.2009.0873.

Pitera, M., & Thao, S. (2013). Compliant sinners, obstinate saints: How power and self-focus determine the effectiveness of social influences in ethical decision making. Academy of Management Journal, 56(3), 635-658. Web.

Siegle, L. (2013). Tesco: How ethical are your clothes? The Observer. Web.