A CCG case study NAZ PDF

Preview

Summary

a case study for the accounting assignment....

Description

Naziul Haque

Student ID: 46494715ACCG1000 Case Study

For most Australians, retail supergiant Woolworths requires no introduction. Woolworths is known as one of Australia’s largest supermarket chains, providing for consumers through their retail/grocery stores, distribution centres and support offices. Added to this, the Woolworths Group Limited is a recognised stock on the ASX (WOW stock) which includes Woolworths and its notable subsidiaries in the alcohol/hospitality industry (such as Dan Murphy’s, BWS and ALH Group), and discount department store BIG W. It is evident that Woolworths has an overwhelming presence in the spotlight, and while Woolworths is typically reputable to the public eye, one conflict is currently threatening to tarnish the company name and image; the Woolworths pay scandal.

Woolworths most major ethical dilemma surfaced in late 2019 with an abundance of reports of its employees being underpaid. It began in early February 2019 when a Woolworths employee was offered a salary package as part of his “store manager” role, but upon inspection through a consultant, it was found that the deal did not cover him under the appropriate Industry award/agreement, which was a major issue considering the employee constantly worked overtime shifts and was paid ‘nothing..’ (Bachelard and Schneiders 2019). The employee raised a dispute, and shortly after, the company increased his base salary and organised a backpay, without paying him for his overtime. Furthermore, Woolworths’ Head of Workplace Relations issued a letter to the employee’s consultant threatening legal action for “trespass” because he had spoken to other store managers about their salary conditions. Another letter was also issued to the consultant requesting a “confidential release”; offering his client money in exchange they don’t approach the Fair Work Ombudsman (Bachelard and Schneiders 2019). The affected parties did not proceed with the agreement, instead chasing this issue up further. Shortly after, it became evident that this employee was one of ‘nearly 6000 employees’ (Carey 2020) within the Woolworths Group affected by this scandal, with records showing underpayment tracking back to 2010.

The ethical issues surrounding this conflict arise from the manner with which Woolworths and its board executives handled the issue. Woolworths breached its own ethical codes of

Naziul Haque

Student ID: 46494715ACCG1000 Case Study

integrity by withholding wages which rightfully should have been given to employees working beyond the conditions for their salary, thus failing to comply with industry awards under which employees are legally entitled to earn wages/bonuses in such circumstances. Furthermore, the letter threatening legal action and the other letter requiring that the employee does not approach relevant workplace relations tribunals showcases an obvious breach to the Woolworths codes of ethics, particularly the company’s lack of integrity and professional behaviour in handling the issue. Also, the company failed to act with professional competence, as they were going against industry standards/legislations, in what can only be described as a “systemic wage theft” (Hall 2019). It can be said that the Woolworths employee and the consultant holding their ground retained their integrity and showed professional behaviour by legally escalating the issue without signing the agreement.

This ethical issue consequently impacted various stakeholders; first and foremost being the company itself. Due to these findings, Woolworths issued statements and reports revealing that it had underpaid workers upwards of $315 million since 2010 (Carey 2020), including employees working in subsidiary businesses Dan Murphy’s and BWS (Hall 2019). This spawned heavy media coverage exposing this dilemma and claims from law firm Adero Law that Woolworths may have been underreporting its underpayment findings (Hall 2019). This in turn, negatively impacted the business on a financial level and blemished its reputation in terms of being a credible and transparent employer. The impact on the image of Woolworths could be extended to potential candidates interested in working in the retail industry, who would avoid the prospect of a job within Woolworths Group given the reports of underpayment and mishandling. Furthermore, this scandal also affects the shareholders and investors who own shares in the company, because compensating all employees gives rise to a financial loss. Notable investors to be impacted by Woolworths’ redress scheme include JPMorgan, BNP Paribas and IOOF Investment Management group. Provided that shareholders at the Woolworths annual general meeting described this conflict and its consequences as “(not) edifying…” (Lannin 2019), it can be inferred that potential stakeholders in the future could be deterred from investing in WOW stocks.

Naziul Haque

Student ID: 46494715ACCG1000 Case Study

To conclude, it is evident that the decision by Woolworths Group to misrepresent the truth to its employees, and mishandle the entire situation before it made headlines, was not ethical at all. As such, Woolworths is now currently suffering on a financial, legal and internal level. Due to the current compensation scheme in place to backpay all affected employees, the company has reported a subsequent drop in profit for the first half of the 2019-2020 financial year (Carey 2020). Furthermore, Woolworths is currently defending itself from Adero Law’s class action lawsuit which alleges the underpayment bill may be upwards of $620 million (Druce 2019). Another consequence is that the company’s board directors (CEO and chairman) are now facing cuts to their salary and bonuses, with both executives expecting ‘further financial “consequences”’ (Carey 2020). Therefore, had the Woolworths Group been more transparent as a business and more ethical about their approach to handling the issue, the consequences would not be as dire as they are now.

References Ben Schneiders, M., 2019. Woolworths Pay Scandal: How The Retail Giant Played Hardball. [online] The Sydney Morning Herald. Available at: [Accessed 21 April 2020]. Carey, A., 2020. Woolworths Owes Workers At Least $315 Million Amid Profit Drop. [online] NewsComAu. Available at: [Accessed 21 April 2020]. Dominic Powell, P., 2019. Woolworths Executive Bonuses Cut After Workers Underpaid Up To $300M. [online] The Sydney Morning Herald. Available at: [Accessed 21 April 2020]. Druce, A., 2019. Woolworths To Defend Wage Theft Class Action. [online] Forbes Advocate. Available at: [Accessed 21 April 2020].

Naziul Haque

Student ID: 46494715ACCG1000 Case Study

Hall, J., 2019. Woolies Under Fire Over Underpaying Staff $300 Million. [online] NewsComAu. Available at: [Accessed 21 April 2020]. Lannin, S., 2019. Woolworths Has Begun Paying Back Millions In Unpaid Wages, Shareholders Told. [online] ABC News. Available at: [Accessed 21 April 2020]. Mitchell, S., 2020. Woolworths' Mea Culpa As Wage Repayments Bill Blows Out. [online] Australian Financial Review. Available at: [Accessed 21 April 2020]. Wow2017ar.qreports.com.au. 2017. Shareholder Information (As At 1 August 2017) Woolworths Annual Report 2017. [online] Available at: [Accessed 21 April 2020]....