Corporate Governance of Tasty Meals Ltd in the Philippines - Case Study Example

Corporate Governance Case Study Student’s Name: Instructor’s Name: Course Code and Name: University: Date of Submission: QUESTION 1 The Philippines is mainly an export country, with some of its main export commodities being electronic and semiconductors products, garments, transport equipment, petroleum products, copper products, fruits, and coconut oil (Oxford Business Group 2009, p. 16). Its primary trading partners include Japan, the United States, China, Singapore, South Korea, among many others. The Philippines is a newly industrialized nation whose economy is shifting from an agriculture-based one to one based on manufacturing and services Institute of (Institute of Southeast Asian Studies 2005). Despite this relatively desirable development, the minimum wage in the Philippines still remains quite low, usually set by the day rather than by the hour. The minimum wage is also set as per each region, and so it varies depending on the region one comes from. These low wage rates attract many multinationals, like Tasty Meals Ltd., who view the Philippines as the best country for outsourcing work (Oxford Business Group 2009, p. 16). Early this year, labor groups joined hands in pushing for higher minimum wages, for all Philippines against the backdrop of a rising inflation rate of 4.5% in 2011. Groups in the National Capital Region (NCR) called for an increase of $2.83 a day, with others asking for more. However, the Central Bank of Philippines warned employers against raising their minimum wages by more than P25 ($0.58) citing inflationary pressures. In the recent months, many regions have experienced pay hikes, especially in the Eastern Visayas and NCR (Oxford Business Group 2009, p. 16). In this light, if Tasty Meals Ltd. has failed to hike its employees’ wages, then the criticisms are justified. However, its proposed raise its lower hourly wages should be able to counter such criticisms. QEUSTION 2 Ultimately, markets ought to serve the consumer’s well-being. This concept is subjective in the definition and application depending on different circumstances. In general, consumer well-being refers to the apparent overall quality of market processes, structures and supply. More specifically, it refers to the satisfaction with individual services and goods. Furthermore, at the most specific level, consumer well-being is equivalent to consumer’s satisfaction with isolated product or service prices and attributes. In a consequently, in a free market, like the Philippines, the principal condition for customer satisfaction is freedom of choice. Consumers are at liberty to select that option that provides them with the best match for their individual desires and requirements. The Philippines provides its consumers with a wide variety of product and service options, a variety in the set of viable alternatives, and variations in the costs incurred for enjoying the alternatives (Institute of Southeast Asian Studies 2005). Free markets also offer relevant platforms for consumers to exercise their rationality in getting the best from the market. Therefore, Tasty Meals Ltd. should in no way be blamed for the health complications brought about by its junk food, provided it acts within the limits of the conventional business ethics. QUESTION 3 The debate concerning the environment is a heated one in the modern world, but one that often lacks authoritative resolution. It is argued, and rightly so, that any person who has children has the responsibility to take great care of the environment. Similarly, environmental conservation is also a major concern for business establishments anywhere in the world. It is all about business efficiency, the best exploitation of natural raw materials, factors that directly or indirectly affects a business’ bottom-line. Due to the growing amount of environmental legislation, Tasty Meals Ltd. faces the threat of hefty fines, not to mention a damaged reputation, if it fails to comply with these rules. Many experts have also argued that engaging in corporate social responsibility may lead to increased performance and productivity of an organization (McWilliams & Siegel 2000, p. 603-4). In the modern world, consumers have grown increasingly conscious of environmental conservation, and are more inclined to purchasing goods from companies whose products and/or modes of business activities do not compromise the future (Detomasi 2007, p. 327). From the foregoing, Tasty Meals Ltd. should opt to forego their choice of tableware and containers, if they are perceived to pollute the environment, for its own benefit and that of its stakeholders. QUESTION 4 From Tasty Meals Ltd’s policies and previous business practices, it is evident that the organization is determined to uphold the well-being of the communities it operates in. Corporate social responsibility demands that companies behave ethically, contribute to economic development, and improve its employees’ quality of life as well as that of their families. In addition, companies ought to ensure the well-being of the local community as well as that of society at large (Detomasi 2007, p. 323-5). As such, businesses should not strive to better their competitive edge by exploiting people, or the planet. Child labor, poor working conditions, and forced labor, constitute a gross violation of laws and business ethics. These practices are in total contravention with the basics and essence of CSR, and as such, Tasty Meals Ltd. would not only be blatantly unethical, but also unlawful if it continues to buy toys from unethical suppliers from China, Pakistan, and other nation. It should have formal policies that are compliant with international conventions that denounce such affiliations in order to redeem and sustain its public image and relations (Detomasi 2007, p. 331-3). QUESTION 5 In Asia and Pacific region, corporate governance has been a major concern, especially following the Asian financial crisis of 1997. In many almost all countries, poor corporate governance is both a formidable hurdle to clear and a critical element at the forefront of economic growth and development issues. Sadly, it is possible for organizations to appear as if they are acting within the confines of good corporate governance when they actually don’t. Performance orientation is a critical objective of any business enterprise because it enhances economic value for all stakeholders by using the available resources economically and efficiently. The achievement of stakeholders’ value objective generates greater internal resources, improves the company’s prospects of accomplishing its community, environmental, and social obligations; train, reward, and retain Key staff. As pertaining to Tasty Meals Ltd’s case, the line that defines whether the company has been practicing good corporate governance cannot be drawn clearly. On the one hand, Tasty Meals Ltd. has been able to open more than 50,000 restaurants that serve more than 70 million people across 100 countries on a daily basis. Furthermore, unlike many other global companies, Tasty Meals Ltd. operates its outlets almost single-handedly-no franchising, licensing, or joint ventures. This noble feat reflects and affirms its efficient internal management strategies. On the other hand, all the criticisms against it are not unfounded, and they contradict the hallmarks of good corporate governance. QUESTION 6 Every top manager of a company owes his/her allegiance to the company, and is required not to act in their interest, but for the best interest of the company. As far as I am concerned, most of the propositions for the Philippine’s market target at improving the company’s public image and profitability, which I believe is the objective of every profit-oriented business. However, others may be in total contradiction with my perspective. For instance, the proposition to scrape off ‘unhealthy’ meals from the menu and replacing them with salads does not appeal to me at all. In my view, these meals have dominated the company’s menu for years, largely helping the company achieve the status it boasts of today. In fact, such dishes might be defined as the trademark for the company; they have become an important element of the company’s deeply-ingrained corporate culture. Consequently, scraping the meals off the menu is tantamount to compromising the company’s culture. Furthermore, consumers have the freedom to go for other alternatives-it is a free market. However, the propositions reflect and pursue the interests of the entire company, and if the majority in the management votes for them, I would also feel obliged to follow suit. QUESTION 7 When all the negative criticisms finally spread through the media, Tasty Meals Ltd. recorded sharp decline in its quarterly global sales reports, and profits were uncharacteristically low. Its share prices also went down by 25%. Observers and analysts further forecast a deteriorating situation unless necessary, relevant measures were put in place. Some of the most important remedies to Tasty Meals Ltd’s woes included rejuvenated engagement in constructive social affairs and addressing its corporate governance issues. Among business strategists, there exists a divide between those who believe that CSR is profitable and those who refute this claim. One proposition is that CSR helps consumers learn about a company’s profitability, thereby inferring brand value (McWilliams & Siegel 2000, p. 605). Therefore, given the appropriate conditions, CSR can effectively compliment or replace traditional branding activities, like advertising. In the Philippines, Tasty Meals Ltd. faces stiff competition from other restaurants. This means that the cost of advertising could be high, and CSR could help reduce such expenses, translating to profits (Hill and Knowlton 2008). Secondly, CSR helps consumers and prospective investors realize that a firm enjoys a good financial position. Consequently, consumers attach greater value to the company’s products/services, translating to increased sales and profits. This might, however, take time. A desirable financial position attracts more investors, thereby enabling the company’s share prices to go up. The Tasty Meals Ltd. could enjoy all these benefits by adopting and implementing its proposed policy amendments. QUESTION 8 CSR comes into contact with most of the issues traditionally addressed by the government, such as community investing and human rights. The dominant perception among the masses is that these sensitive societal issues ought to be handled by the duly elected government, not corporate. According to Friedman, businesses exist but just for only one reason—using their resources to generate as much profit as they possibly can as long as they operate within the limits of law. The adoption of CSR principles involves costs, either short-term or continuous outflows. Such costs are reflected in the books of accounts as expenses, which reduces a firm’s profit margin. Ethical issues and social responsibilities, therefore, act in confliction with a firm’s profitability (Hill and Knowlton 2008). QUESTION 9 Most of the proposed remedies to the raised questions seek to seek effective and efficient corporate governance and social responsibility. They are aimed at improving the company’s public relations and redeem its tarnished glory. However, I would be opposed to the second proposition concerning the abolishment of allegedly unhealthy meals from the restaurant’s menu. These meals are part of the company’s corporate culture, and have significantly contributed to the success of the company. As much as I would be concerned about our customers’ health, am also convinced that not every customer thinks that the dish is unhealthy—tastes and preferences are relative. Instead, I would push for a more realistic compromise, like reducing the amount produced or improving its quality, but not total elimination. The Philippines also has rational consumers, who should buy that which pleases and suits their needs, considering the fact that we are operating in a free market. QUESTION 10 In today’s competitive business environment, unethical companies that feel threatened by the most progressive companies might be tempted to engage in unscrupulous business dealings in order to maintain their competitive edge. Therefore, regarding the issue of business ethics, the government should take charge in order to protect the public from exploitation from the private sector (Baron 2001, p. 23). Ethics will be instilled in businesses through licensing, legislation, and heavy penalties should any business entity violate the set statutes. In the same way, the government should also oversee corporate social responsibility activities because company activities affect the environment. Factories release harmful substances into the environment, exploit natural resources, and use manpower, in production. Firms are, therefore, supposed to share the social costs they help create (Baron 2001, p. 25-7). The government sets the minimum wage and champions the right of the public so that private sectors do not misuse them. List of References Baron, D 2001, “Private Politics, Corporate Social Responsibility and Integrated Strategy,” Journal of Economics and Management Strategy, Vol. 10, No. 1, pp. 7-45. Detomasi, DA 2007, ‘The Multinational Corporation and global governance: Modeling global public policy networks.’ Journal of Business Ethics, Vol. 71, No. 3, pp. 321–334. Hill and Knowlton 2008, Reputation and the war for talent: Corporate Reputation Watch 2008, Viewed December 03, 2011. . Institute of Southeast Asian Studies 2005, Southeast Asian affairs, Volume 2005, pp. vii-vii. Oxford Business Group 2009, The Report: The Philippines 2009, Oxford Business Group, London. McWilliams, A & Siegel, D 2000, “Corporate Social Responsibility and Financial Performance: Correlation or misspecification?” Strategic Management Journal, Vol. 21, No. 5, p. 603-609. Read More