Tesco: Code of Business Conduct - Essay Example

? Tesco: of Business Conduct Table of Contents Introduction 3 Critical Analysis of the of Business Conduct 3 Tesco’s code of business conduct 3 Analysis of Tesco’s code of business conduct 5 Strengths: 6 Weaknesses: 6 Component 1: Support from the top 8 Component 2: Commitment and values 9 Component 3: Effective communication 9 Conclusion 10 References 11 Introduction 3 Critical Analysis of the Code of Business Conduct 3 Tesco’s code of business conduct 3 Analysis of Tesco’s code of business conduct 5 Strengths: 6 Weaknesses: 6 Component 1: Support from the top 8 Component 2: Commitment and values 9 Component 3: Effective communication 9 Conclusion 10 References 11 Introduction Tesco, a multinational retailer of general merchandise, was founded in London in 1919 by Jack Cohen. Over its 93 years of existence, the organisation has expanded its operations different countries totalling 14 and where an estimated number of 500,000 personnel have been disclosed to serve millions of clientele in a week’s time (Tesco Plc: Our history, 2012). The secret of the organisation’s continued success stems, in part, from its conformity to a code of business conduct which provides guidelines for various personnel in different facets of the organisations’ operations and interactions with stakeholders. In this regard, the current paper aims to critically analyse the organisation’s code of business conduct and to identify three key components that demonstrate the company’s values and business ethics. This analysis will initially provide a description of Tesco’s code of business conduct and its analysis. A discussion of the three key components will subsequently ensue. Critical Analysis of the Code of Business Conduct Tesco’s code of business conduct Tesco’s code of business conduct is accessible through the online medium: http://www.tescoplc.com/media/126222/code_of_business_conduct.pdf. This is introduced by the organisation’s Chief Executive, Terry Leahy. It supports the contentions noted by Financial Executives International (2003) which have stipulated that a code of conduct should typically include, among other items, a support from top management in the organizational hierarchy, particularly the Chief Executive Officer, through a message or letter that indicates commitment of the organization to adhere to the highest standards of ethical behaviour; as well as conformity to moral and legal codes and regulations (Financial Executives International, 2003). The entire code contains twenty-three pages, which were published on October 1st 2009, by the organisation’s Corporate and Legal Affairs department. Accordingly, the code is divided into four sections: (1) the manner by which the organization conducts in business; (2) the organizations philosophy regarding business integrity; (3) the internal assets and resources of the organization and that of its customers; and (4) the organization’s human resources (Tesco Plc: Code of Business Conduct, 2009). These sections incorporate fourteen distinct areas. These are identified as requiring detailed guidelines when faced with challenging options that necessitate making decisions subject to ethical, moral and legal standards. On the first page, following the table of contents, Tesco’s values are presented, which indicates that the organization commits to taking care of customers by understanding them, meeting their needs, as well as acting socially responsible. Likewise, it was also disclosed that the ethics of reciprocity applies where the organizations treats various stakeholders through emphasizing that their people work as a team, acknowledge values of trust and respect, being good listeners and acknowledging appreciation, as well as in sharing various information that were learned through various organizational experiences (Tesco Plc: Code of Business Conduct, 2009). As such, it can be deduced that Tesco’s Corporate and Legal Affairs department has acknowledged that the design for the organisation’s code of conduct was based on creating guidelines through strategies and principles which embody their values. According to Crane and Matten (2007) the starting point for an organisation’s business ethics management is their mission, vision and value statements. For Tesco these corporate values were reportedly developed in 1997 through collaboration and solicitation of what various personnel perceives and believes of what the organization stands for; as well as what is the vision and mission that the organization actually aims to achieve (Tesco Plc: Our values, 2012). Likewise, according to Financial Executives International (2003), there are three (3) crucial components needed to execute a code to conduct to consider it successful: (1) appropriate definition; (2) carefully designed and executed communication pattern; and (3) vigilance and monitoring (paragraph 2). Part of the introductory section presents information on the manner by which the code of business conduct is to be used and the relevance of the code to the user; as well as ways in which to raise relevant concerns. Under the first section ‘the way we trade’, Tesco has identified three relevant concerns where guidelines are provided in terms of: (1) laws pertinent to competition; (2) trade sanctions and restrictions; and (3) relationships with various commercial suppliers (Tesco Plc, 2009, Code of Business Conduct, 2009: 2). It is commendable that these parts explicitly and specifically indicate the do’s and don’ts, as well as providing contact information for further advice and assistance, as required. The remainder of the first part of the code follows the same format. Thus it includes the provision of user guidelines and the required contact details: usually the local legal department, as well as other affiliates. In the second part of the code ‘personal and business integrity’, the following concerns are expounded: facets regarding corruption, as well as issues on bribery and fraud; concerns regarding conflicts of interests; scenarios that reveal market abuse and situations on insider dealing; accepting gifts; as well as relevant issues regarding political endeavors (Tesco Plc: Code of Business Conduct, 2009). Part three of the code is related to the resources of the company and its customers and presents the do’s and don’ts in relation to the following areas that involve money laundering, privacy and confidentiality, issues pertaining to intellectual property, as well as ensuring responsible handling of the resources of the organization, particularly focusing on information technology (Tesco Plc: Code of Business Conduct, 2009). Finally, part four of the code is related to the organisation’s people; it discusses issues and concerns which are pertinent to (1) equality opportunities; and (2) unacceptable behaviour. Analysis of Tesco’s code of business conduct According to Erwin (2011: 535) “corporate codes of conduct are a practical corporate social responsibility (CSR) instrument commonly used to govern employee behaviour and establish a socially responsible organisational culture.” Erwin (2011: 538) indicated that to ensure the effectiveness of the codes of conduct, organisations must be cognisant of the need to conform to code quality, where elements such as support from higher management, easy access to the general public, comprehensibility with incorporation of comprehension aids, inclusion of statement of non-retaliation, values commitment, integration of risk identification and management, as well as effective format and presentation structure (Erwin, 2011). Strengths: Using the quality components disclosed by Erwin (2011) as criteria for evaluating Tesco’s code of business practice, the following strengths are noted: The code is available and accessible to the public and all stakeholders; The introduction provides a message from the Chief Executive, as noted above, signifying conformity and support from the top most level; The language and style is straightforward and easy to read; At the onset, the code explicitly identifies the values which embody ideals and philosophies for confirming adherence to ethical, moral and legal standards; The presentation and style is effectively and simply structured; making it easy to understand and access; Likewise, the presentation of the code, with all pertinent information contained in its entirety, make it easy for users to locate needed information in just one published document; and It has been recently created (2009) making the information, guidelines, and protocols applicable in contemporary times. Weaknesses: There is an evident absence of conformity of management that there would be non-retaliation in cases of the need to report violations on the code; “The code (did not) address all of the appropriate and key risk areas for the company’s given industry” (Erwin, 2011: 538); Although the code indicates that Tesco operates in fourteen different countries, it appears to be published solely in English; making it difficult for language users in non-native English speaking countries to comprehensibly understand it without the needed translations; The comprehension aids are insufficient. There are no sections for question and answers (Q&As) or frequently asked questions (FAQs) which would enable users to locate immediate responses to frequently asked issues and concerns. Despite these weaknesses, Ewrin’s study (2011: 545) revealed the following findings: “low quality codes of conduct do not necessitate poor CSR performance. While companies with lower quality codes exhibited lower ethical rankings on average than those with higher quality codes, they were equally likely to rank throughout a full range of ethical performance”. This simply means that these weaknesses do not indicate that Tesco is performing poorly in terms of its CSR performance. In fact, the organisation’s Corporate Responsibility Review (2012) indicated a firm belief, commitment, and the impetus to abide by the five pillars of the CSR which were explicitly indicated to include: responsible trading of products; protecting and conserving the environment; commitment to be socially responsible through actively supporting to the local community; being able to offer alternative healthy products to the clientele, and being able to offer productive jobs. To attest to the exemplary performance in terms of the CSR, Tesco has been a recipient of the following awards: the Green Retailer of the Year award given by the Grocer Gold Awards. Accordingly this award was given to acknowledge that the organization has rendered exemplary work that encompasses all identifiable markets to significantly decrease the negative effect to the environment (Tesco Plc: Awards, 2012). In addition, in March 2012, Tesco was given a rating of 95 out of 100 by the FTSE 4 Good Index, a responsible investment index (Tesco Plc: Awards, 2012, paragraph 2). Finally, in the same year, Tesco was also acknowledged to belong to the top ten organizations in the United Kingdom that were identified to be committed to environmental protection and conservation; as well as to climate change, through the Carbon Disclosure Project (Tesco Plc: Awards, 2012: paragraph 4). Tesco’s code of business conduct contains crucial key components which make it effective and can be considered to be of a high quality. It not only demonstrates the relevance accorded to focusing on its organisation’s values; but details information and guidelines pursuant to the standards set in ethical, moral, and legal situations. As emphasised by Erwin (2011: 545) “high quality codes of conduct are more effective in guiding employee behavior and establishing a more socially responsible organisational culture”. Therefore, managers seeking to utilise codes of conduct to have a positive impact on the CSR performance of their organisation should develop new codes or revise existing codes to meet critical standards.” In Tesco’s situation, weaknesses could be addressed by integrating those parts that are deemed to be lacking or insufficient (non-retaliation and reporting, risk topics, and comprehension aids). Component 1: Support from the top One of the most commendable components that is evident from Tesco’s code of business conduct is support from the top. This is validated by the presence of the Chief Executive’s message which appears on the very first page of the code. As emphasised by Terry Leahy, the organization’s Chief Executive, “the code of business conduct can help guide us when we face complicated or sensitive issues and is one of the ways we can put our values into practice at work” (Tesco Plc: Code of Business Conduct, 2009: 3). Therefore, as validated by Erwin (2011) the tone from the top effectively communicates that the commitment of the organization to adherence to ethical standards actually come from the top most level of the organizational hierarchy. In the review of corporate responsibility, the new Chief Executive, Philip Clarke, shares the same sentiment and commitment to the code and to the values promoted by Tesco. Thus he asserts that “you will see Tesco doing the right things for all its stakeholders – customers, communities, suppliers, shareholders and staff – and that means listening more, behaving responsibly across the business and measuring ourselves against the highest standards” (Tesco Plc: Corporate Responsibility Review, 2012: 3). As such, the same support and commitment has been relayed and expressed from the top; enabling the rest of the personnel to be encouraged to emulate the guiding force and principles defined in the organisation’s code of conduct. Component 2: Commitment and values Tesco’s values appear on their official website under ‘About us’ (Tesco Plc: Our values, 2012); and also as an integral part of the organisation’s code of business conduct. Again this is a strength and confirmation of the organisation’s commitment to their defined values. In the introductory section of Tesco’s code, the Chief Executive, reiterates these values. As expressly noted, higher members of the echelon should have the responsibility to clearly explain the rationale of the code; as well as be able to link the stipulated guidelines to the values that were expressly communicated and disseminated by the organization. Tesco’s values are clear and easy to understand; which makes them self explanatory. These values are effectively linked to the four identified parts that are distinctly categorised under the code. For instance, in expounding ‘the way we trade’ section, there is an introductory part which states that “our values help us be first for customers, without compromising our strong relationships with suppliers. This section of the code covers issues that are critical to how we buy the products that are sold in our stores” (Tesco Plc: Code of Business Conduct, 2009: 8). Component 3: Effective communication As indicated by Financial Executives International (2003) effective communication is a key component for ensuring that an organisation’s code of conduct is appropriately disseminated and understood. In its most simplest and effectively structured form, in using English as the universal language, Tesco has appropriately communicated all of the relevant information and guidelines necessary for assisting various stakeholders in their decision-making when faced with the most challenging situations. This has been corroborated by the Ethics Resource Center (2001) who emphasised that the code of conduct and ethical behaviour is a means to promote open communication on ethical, moral and legal standards espoused by the organization. As such, through regular communication and monitoring, the code becomes imbedded in the culture of the organization. The weaknesses include an insufficient comprehension aid and translation to other languages which if improved could ultimately better the code and should be taken as a means through which to accord greater understanding from people of various cultural orientations. Likewise, another form of improvement would involve indicating examples of challenging situations; and how stakeholders could address these given the expressly detailed guidelines. In addition although the code indicates the departments which can be contacted for inquiries or when there is a need to expound on complex issues, the code does not expressly indicate any contact numbers or provide an online link. Thus it would be helpful for these contact details to be provided to indicate that a level of supportive management. This could be achieved through the provision of landlines, e-mail addresses, links, or office addresses. Conclusion Tesco’s code of business conduct is a perfect example of a code that complies with all the necessary key components in order to achieving its goals. At the onset, Tesco expressly discloses that “the code sets out the minimum requirements that we expect from our staff wherever in the world they are located” (Tesco Plc: Code of Business Conduct, 2009: 4). Likewise, as emphasised, “the best codes are actually structured to liberate and empower members…to make more effective decisions with greater confidence” (Ethics Resource Center, 2001: 2). Therefore Tesco’s code of business conduct embodies an effective code of conduct as it integrates the crucial elements that it is expected to contain. References Crane, A. and Matten, D. (2007). Business Ethics, s.l., Oxford Press. Erwin, P. (2011). Corporate Codes of Conduct: The Effects of Code Content and Quality on Ethical Performance. Journal of Business Ethics, 99, pp.535-548. Ethics Resource Center. (2001). 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