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MICHAEL HILL INTERNATIONAL LIMITED CASE STUDY

Bryan Naing School of Business Western Sydney University

Introduction Michael Hill International Limited, also known as Michael Hill Jewellers, is a specialty retailer of Jewellery actively operating in North America and Australia. It has recently been found that Michael Hill has underpaid its staff nation-wide by as much as $25 million over the past six years (Hatch & Patty, 2019). The United Nations Global Compact outlines ten principles regarding corporate sustainability of which specifically the fourth principle, the elimination of all forms of forced and compulsory labour, can be related directly to the Michael Hill case (The Ten Principles of the UN Global Compact, n.d.). In regard to business ethics and corporate social responsibility, Michael Hill is ethically obliged under utilitarianist views to look out for the greater good of all, which includes employees. The business should work to make repayments to its employees for any financial losses they have incurred, as well as re-writing employee contracts to meet Fair Work Australia’s and UN Global Compact’s standards. Ethical Responsibilities Fair Work Australia is an Australian Industrial Relations tribunal that was set in place by the government to regulate and monitor organisation’s in Australia. This government tribunal set in place the Fair Work Act (FWA) 2009 which outlines minimum employment terms and conditions for each industry (Pagura, 2011). Each and every organisation that wishes to conduct business within Australia must comply with the FWA as Fair Work Australia may actively investigate and take appropriate enforcement action when a breach does occur (Fair Work Australia, 2009). By underpaying their employees, Michael Hill Jewellers was in breach of the FWA and seemingly did not mind as the financial benefit they received was higher than the

punishment they will receive. Ethically speaking, Michael Hill has an obligation to pay their employees the minimum wage set out by the FWA as all other companies within their industry. The United Nation Global Compact Principle The UN Global Compact plays a largely important role in placing corporate social responsibility on the agenda for organisations by establishing a global norm for ethical standards for business through its ten principles (Voegtlin & Pless, 2014). The UN Global Compact’s purpose is ‘create a world where all could lead a humane life. The vision is to give a human face to the global market. The mission, the way chosen to realise the vision, is to “facilitate a dialogue”’ (Williams, 2014). Michael Hill Jewellers through its underpayment and non-compliant employee contracts is in breach of a number of principles from the UN Global Compact. The fourth principle of the UN Global Compact states the any and all forced or compulsory labour is to be eliminated. Forced Labour has a wide variety of forms including exploitative practices and underpayment of employees which violate minimum pay laws (The Ten Principles of the UN Global Compact, n.d.). By this definition of the fourth principle of the UN global compact, Michael Hill would be breach this principle. This is not the principle breached, another principle Michael Hill is in violation is principle one, which seems to be an all-encompassing rule set in place as it also speaks of forced labour but not to the same depth as principle four. Application of CSR and Ethic Theory Corporate Social Responsibility (CSR) is a field study that encompasses a wide range of theories and approaches. It can also be defined as business approach that contributes to sustainable development by delivering economic, social and environmental benefits for all

stakeholders. The CSR theories can be broken down into four categories: instrumental, political, integrative & ethical theories. Mueller et al. (2012) claim that CSR was positively related to employee’s commitment to their jobs. If Michael Hill Jewellers had paid their employees minimum wage set by the Fair Work Act (2009), providing proper remuneration, the sales and performance for each retail store would increase which would benefit the organisation. This is an example of instrumental theory of CSR as it is considering the social responsibilities of the company but only regards to their economic profit for their stakeholders. Business ethics are a form of applied ethics that examine ethical principles and problems that may arise in a business environment. There four main views of business theory which are as follows: Kantian, Aristotelian, Utilitarian & Eastern Philosophy. Each of these theories apply a different view upon handling ethics issues that arise in business. Michael Hill Jewellers seems to an organisation that prioritises financial benefit over all else which Schneider and Barsoux (2003) would claim to be as “Profit maximisation as the ultimate goal to be achieved”. This ideology is consistent the utilitarian view of business ethics as if Michael Hill Jewellers were to take into consideration that if they were to pay employees a higher wage it would incentivise them to work harder and hence, higher productivity which lead to more sales. Recommendations In order to comply by the UN Global Compact, CSR, and FWA, Michael Hill Jewellers will need to act on their transgressions. To start, they need to re-issue new contracts that compliant with the Fair Work Act (2009) as well as making sure to meet UN Global Compact standards so as not to breach either document. Also, apart from any fines incurred, in order to amend any financial losses that staff may have incurred a back-pay to staff of wages taken out would need to paid.

Conclusion In conclusion, there are a large number of implications found within Michael Hill Jewellers breach of minimum wage payments to staff. They were found to have underpaid their staff by $25 million over six years as well as having non-compliant contracts for the employees (Hatch & Patty, 2019). In relation to the UN global compact, they were indeed in breach of two main principles which were the first and fourth principle as effectively staff were considered to be under forced labour without proper remuneration. Corporate social responsibility claims that Michael Hill Jewellers would have met much more beneficial circumstances if they had considered instrumental theories of CSR as these theories only consider social responsibility when in favour of financial benefit for the corporation. The Utilitarian business ethics view also slots in quite well in this circumstance as this theory outlines the consideration of benefitting all parties in question, which would be both Michael Hill and it’s employees, as previously mentioned in regards to CSR.

Reference List 1. Voegtlin, C, Pless, N.M., 2014, Global Governance: CSR and the role of the UN Global Compact, Journal of Business Ethics, Vol. 122, no. 2, pp. 179-191, viewed 26th September 2019, SpringerLink Journals – AutoHoldings database, https://doi-org.ezproxy.uws.edu.au/10.1007/s10551-014-2214-8. 2. Garriga, E & Mele, D, 2004, Corporate Social Responsibility Theories: Mapping the Territor, Journal of Business Ethics, Vol. 53, no. 1, pp. 51- 71, viewed 26 th September 2019, SpringerLink Journals – AutoHoldings database 3. Pagura, I, 2011, The Fair Work Act 2009 and You, Journal of the Australian Traditional-Medicine Society, Vol. 17, No. 3, pp. 161, viewed 26th September 2019, Business Source Complete, EBSCOhost. 4. Mueller, K, Hattrup, K, Spiess , S.O. & Lin-Hi, N, 2012, The Effects of Corporate Social Responsibility on Employees’ Affective Commitment: A Cross-Cultural Investigation, Journal of Applied Psychology, Vol. 97, No. 6, pp. 1181-1200, Psycarticles Database, EBSCOhost, DOI: 10.1037/a0030204. 5. The

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https://www.fairwork.gov.au/about-us/legislation> 7. Williams, O. F. (2014). The united nations global compact: what did it promise? Journal of Business Ethics, viewed 26th September 2019, doi:10.1007/s10551-014-2219-3. 8. Schneider, S & Barsoux, J, 2003, Managing across Cultures, 2nd ed, Prentice Hall, Harlow, England.

News Michael Hill underpaid staff $25m over six years Patrick Hatch and Anna Patty 377 words 12 July 2019 The Sydney Morning Herald SMHH First 5 English © 2019 Copyright John Fairfax Holdings Limited. www.smh.com.au Jewellery chain Michael Hill has said it underpaid staff by as much as $25 million over the past six years, making it the latest major company to confess to short-changing workers. The revelation has raised questions about whether the penalties for underpayment are a big enough deterrent to breaking the law. Michael Hill, which employs about 2000 people in its 171 Australian stores, yesterday said an initial review of store staff contracts and rosters instigated by its new chief executive Daniel Bracken found "non-compliance" with the applicable award rates. A more detailed review by auditors PricewaterhouseCoopers is being undertaken "with urgency" to determine exactly how much each worker is owed, it said. The Shangri-La Hotel in Sydney has also admitted it underpaid staff an estimated $250,000 in wages after a review found employees had not received full entitlements to penalty rates and overtime. The hotel said it "sincerely apologises and deeply regrets" that it had failed to pay staff correctly, a statement from the Shangri-La read. The hotel's general manager Philippe Kronberg said the underpayments were unacceptable and the hotel was taking steps to ensure it does not happen again. It is the latest company to confess to making payroll errors. Earlier this year, Beaurepaires Australia discovered it had underpaid workers close to $2 million since 2010. An early estimate for the total backpay bill is between $10 million and $25 million. Michael Hill did not notify the Fair Work Ombudsman (FWO) about the breach, which said it was "concerned by the scale of the reported underpayments" and would contact the $200 million company itself. The FWO can pursue fines for breaching workplace law, with the maximum penalty for a company $630,000 per contravention. The highest penalty the FWO has ever secured through litigation is $660,000. Former competition tsar Allan Fels said the Michael Hill case showed potential penalties were not enough of a deterrent. "It's alarming, the disparity between the amount of underpayment ... and the actual fine." He said penalties should match those under

consumer law, where companies can be fined up to $10 million, or three times the financial benefit they received. Document SMHH000020190711ef7c00016...