Governance of Marks & Spencer - Case Study Example

Running Head: Ethics and Governance Ethics and Governance of Ethics and Governance Case: Marks & Spencer Task 3: Outline the ethical and/or governance standards on the basis of which key actors might be praised or blamed. The main actors are Marks & Spencer and Legal and General is considered to be its second largest shareholder. M & S had given promotion to Sir Stuart Rose and he had become executive chairman without giving a notice to other shareholders. Because of this action, institutional investors got into troubled because of lack of consultation. Deontology: is an ethical system that demands that the actions, or means, themselves must be ethical. (Physicsisphirst) L& G following the principles of deontology objected to the elevation of Sir Stuart Rose due to the following reasons 1. Violation of the combined code on corporate governance specification that there should be separate chairman and chief executive (FRC, A.2.1,June 2008) 2. Sir Stuart Rose was assisted by his own appointees and there was no one to counteract him to provide a check and balance approach. 3. The “comply or explain” principle was too lax and provided a loophole which could be exploited. 4. There was a need for better succession planning, more disclosures of plans and processes and independent directors. L & G should be praised for pushing for what it saw as boardroom standards and its insistence that companies should comply with the core principles of corporate governance. Utilitarianism: Utilitarianism is an ethical system that believes that the end justifies the means. Utilitarians are more concerned with the outcomes and take a pragmatic and economical view. Sir Stuart Rose defended M&S‘s decision for its utilitarian value as he believed his promotion was in the best interests of the shareholders. M & S believed that it would be difficult to identify a successor if Sir Rose were to leave in 2009. Virtue: M & S also tried to reassure investors by means of letters, press releases and annual reports. It informed them of its plan to revert to having a separate chairman and chief executive in 2011. M & S believed that the decision was in the best interests of the shareholders. Egoism: M & S can be criticized for following an egoistic culture. It gave a lot of power to one individual. The Board members were all handpicked by Sir Stuart Rose and there was no one to counteract him. Questions were also raised about the independence of its directors. Non-executive directors should be independent in judgement and have an enquiring mind. (Higgs Report 2006) Task 4: Taking account of their actual words, what do you think of how key actors justify (or blame) themselves? What about how their critics condemn them? Try to identify instances of confused or unreasonable thinking by people described in the case. M & S tried to justify its actions by the following ways: Sir Stuart said that if he was to go in 2009, it would be hard to identify a successor early enough and that they had to do the right thing for the investors who would probably welcome the decision. (But Schroeder’s’ Richard Buxton could not find any shareholders who were supportive of this). Sir Stuart also said that his promotion involving transfer of some of his current responsibilities to his senior lieutenants would give them elbow room to develop their skills and take up the challenge to become his successor. In a letter to investors Lord Burns assured them that M & S would revert to having a separate chairman and chief executive in 2011.( But Pirc and the Local Authority Pension Fund Forum were not satisfied with the justification of the letter.) When M & S sought to lower Sir Stuart Rose’s target to earn his bonus, they insisted that the shareholders were supportive, but not all investors were in favor. Sir Stuart Rose also triggered a ₤1.2 billion slide in the groups share by giving a profit warning. L & G justified its criticism in the following manner: L & G strongly believed in the separation of the roles of chairman and chief executive. L & G could not see how the new structure would enable the selection of a successor to the present chief executive. Peter Chambers, chief executive of L & G Investment Management argued that the “comply or explain” principle was too lax. He told that they had a moral responsibility to uphold corporate ethics in the U.K. (But another CEO complained of L & G’s institutional policing). Peter Chambers felt that M&S had to give some assurance to shareholders that this was a temporary measure and they had to give greater clarity in how they were going to manage the conflicts of interest. But Sarah Wilson criticized L & G saying that to lose Rose’s expertise would be rash. L & G was also criticized for its box ticking approach. Task 5: Identify regulatory changes that might make people behave better in cases like these, or existing measures that, if only observed, could have done so. Discuss whether, instead, virtue is what we need to make us behave well. Changes in Regulatory Frameworks In order to ensure that corporate behave better, it is important for international law to implement strong and robust strategies (Annas, 45, 2003). The laws available for such cases are inadequate because of the inadequacies of the judicial system or the government cannot take the action(Hursthouse, 205, 2002). International regulatory bodies must work with national and regional organizations and non governmental organizations in order to deal with the issues of bribery, violation of environmental rights, human rights, etc. Therefore, it is essential for the regulatory bodies to authorize and direct CSR practices. Virtue Ethics Virtue ethics is considered to be that branch of ethics which concentrates on examining the character of individual rather than concentrating on the behaviour and attitude (Anscombe, 85, 2007). In simple terms, it is based on the action of the individual: It concentrates on morality of the individual rather then the ethical duties and rules ( Crisp & Slote, 105, 2007). It instructs a person to become a better individual so that he or she can benefit the society. In order to achieve this state, a person has to practice virtue consistently and constantly. Virtue ethics does not concentrate on the actions of the individual. It mainly concentrates on the morality. In a way, it deals with the individual’s entire life rather than specific incidents or actions (Stocker, 456, 2006). It is considered to be a practical and constructive theory since human beings have the nature to judge and evaluate the character of another rather than making judgements on particular action (Foot, 145, 2002). This indicates that it can be a useful way to create a constructive society which would help its people to become good citizens. In this ways, societies would not need laws and punishments to avert crimes and deviant behaviour. Principle Virtue ethics is based on the following principle: An action committed by a virtuous person is always right no matter what the circumstances were. A virtuous individual is one who shows virtuosity A virtuous individual follows the ideals of virtuosity Virtue concentrates on morality Analysis The benefits of virtue ethics are: it promotes morality and ensures that the individual will live according to virtues and it covers the entire life of the person (Pence, 285, 2004). However, it has some negative points as well. It fails to offer a clear guidance and insight on how to deal with moral dilemmas. At the same time, it assumes that all people would want to be good. At the same time, it assumes that a virtuous individual act as a model to guide the entire society Conclusion After analyzing the principles of virtue ethics, it should be noted that virtue ethics cannot alone deal with moral dilemmas. It is important to have laws and regulatory frameworks to punish criminals. http://www.cheathouse.com/essay/essay_view.php?p_essay_id=35635#ixzz0caoiUHbc Bibliography Physicsisphirst,http://www.physicsforums.com/showthread.php?t=15622 FRC, (2008), The Combined Code on Corporate Governance, p7. Higgs Report, (2006), Good Practice Suggestions, p5. Annas, Julia. The Morality of Happiness. New York: Oxford University Press, 2003. Anscombe, G. E. M. "Modern Moral Philosophy." In Virtue Ethics, edited by Roger Crisp and Michael Slote. Oxford and New York: Oxford University Press, 2007. Originally published in 1958. Crisp, Roger, and Michael Slote, eds. Virtue Ethics. Oxford and New York: Oxford University Press, 2007. Foot, Philippa. Virtues and Vices. Oxford: Oxford University Press, 2002. Hursthouse, Rosalind. Dependent Rational Animals. Chicago: Open Court, 2002. Pence, Gregory E. "Recent Work on the Virtues." American Philosophical Quarterly 21 (2004): 281–297. Stocker, Michael. "The Schizophrenia of Modern Ethical Theories." Journal of Philosophy 14 (2006): 453–466 http://science.jrank.org/pages/11567/Virtue-Ethics-BIBLIOGRAPHY.html#ixzz0cb5VEjS0 http://science.jrank.org/pages/11567/Virtue-Ethics-BIBLIOGRAPHY.html#ixzz0cb59dGH6 Read More