Creating Value with Ethical Behaviour & Corporate Governance

Whole foods pricing and mislabelling case 

Whole Foods is one of the biggest food retailer in the United States owing to the four hundred and thirty-one supermarkets in the US, Canada, and United Kingdom. It has over 91,000 direct employees and thousands of others indirectly employed by the company. Whole foods boast of the integrity of the products it sells to its customers. Concentrating on the sale of food products, the food giant strives to sell organic and natural food products. In a world with advancing technology in farming and food production, the presence of artificial and genetically modified foods has become controversial in the eyes of the consumers. Therefore, Whole Foods concentrates on the sale of full organic food products. Owing to the high production cost and high quality of the organic food products, the prices have been high in the regular markets. However, in 2015, whole foods encountered several accusations from different states in the United States on mislabelling and overpricing of food products in their stores (Gillespie, 2017). In early 2016, the state of New York established massive pricing and labeling irregularities that overcharged the consumers of the whole foods. As a result of the irregularities, the company was open to litigations and class action lawsuits. In return, the company settled litigation of 800,000 USD in California and subsequent pay out of 500,000 USD in New York (Lobosco, 2017). 

Stakeholder’s theory 

The perspective underpins the stakeholder's theory that businesses exist for value creation on behalf of the stakeholders. Therefore, the company has a responsibility to be productive and preserve the interests of all the stakeholders. In corporate social responsibility, this theory is applicable as it gains the perspective of the interlinked nature of the stakeholders. Stakeholders in an organization include the customers, employees, the suppliers, the surrounding community as well as the shareholders of the company (Moriarty, 2016). The stakeholder’s theory is embedded in corporate responsibility as it involves the creation of value to all the stakeholders. 

Whole foods created a lavishing image to its customers and the community in its commitment to sell organic and natural food stuff. The strategy was effective increasing value for all the stakeholders of the company. It worked in the sense that the customers were satisfied with the quality of the product despite the high prices and shareholders gained in profits resulting from the sales (Miles, 2017).Similarly, the company satisfied its obligations to the employees and the community that surrounds it. However, the pricing scandal that unfolded in 2015 revealed ethical malpractices that undermined the value creation strategy. Since the outbreak of the scandal, customers and the community felt cheated and therefore the sales of the company reduced by twenty percent from the previous year. Similarly, the reduced profits and sales of the company affected the shareholders due to the drop in the company stock prices in the financial market. 

Corporate citizenship 

The concept of corporate citizenship arose from the fundamental understanding that any given company or corporation does not exist in a vacuum. Its decisions affect the individuals around them, especially the stakeholders of the organization. In retrospect, a company must exercise its responsibilities as a citizen of its right (Camilleri, 2017). Therefore, in similarity to the social expectation of a citizen, the organization ought to meet legal, ethical as well as the economic responsibilities undertaken and set by the stakeholders of the organization. The perspective is utilized in corporate social responsibility to emphasize the need for producing higher living standards as well as improved quality of life of the surrounding community. Whiling doing so, the organization must also maintain the interests of the shareholders by a maintained profitability profile. 

With the nature and size of Whole Foods, it has a responsibility to maintain to both the community and the shareholders of the company. The case of overpricing and mislabelling of products within the company was in violation of the responsibility to the stake holders of the company, in specific the consumers. The strategy was aimed to increase the profit margins of the company on behalf of the shareholders (Crane,2016). However, the irresponsible act was in violation of the standards set in the market in pricing labeling and weight of the products. Pricing of products rests in the hands of the seller of the product: which follows the principle of the free market of the willing buyer willing seller. However, some ethical responsibilities and regulations are enforceable to maintain the integrity of the market and the principle therein. For instance, by mislabelling the weights of the food products by whole foods, they contravene the principle of willing buyer since the product is misrepresented. 

Corporate social performance 

The concept of corporate social performance is underpinned by the need to ensure private institutions have a positive impact on the community and the society that they operate in. It's imperative therefore to understand the intrinsic nature of the relationship between this concept and corporate social responsibility. Corporate social responsibility strives to achieve a positive image in the society, and therefore the object is achieved through the perspective of corporate social performance(Cooper, 2017). A company forms part of the community and the society, therefore, it has a responsibility to underwrite towards the enhancement and development of the community like a regular citizen ought to do. Similarly, Whole Foods has a responsibility towards the community through which its stakeholders come from. The responsibility is aimed to ensure that structure and laws are followed through the creation of an environment that safeguards the interests of the stakeholders(Hahn, 2016). The pricing and mislabelling scandal of whole foods significantly undermined this responsibility and the ability of the community to perform significant and responsible actions. 

Legal, economic and moral perspectives 

In the point of view of corporate social responsibility, business ought to be conducted in a manner that adheres to the legal, economic and moral standards. For instance, any organization that seeks to go into business but abides by the legal rules and regulations set in the market. In respect to whole foods, they ought to adhere to the pricing and labeling regulations established by the various states they operate under. Undermining those rule risk rendering the company illegal. Similarly, economic rules and principles drive the sanctity of the economic world. In a free market economy, the principles of the free market must be maintained by the companies that operate in that area (Stangis, 2017). Disregard of the market principles result in unfair market situations that risk damaging the economy and the livelihoods of the people in the society. From a moral perspective, Whole Foods strategy to overprice products due to mislabelling gains outranges from the consumers and the society. The violation of the moral standards set by the society does not represent responsible corporate action. 

References 

Camilleri, M. A. (2017). Case Study 1: Corporate Citizenship and Social Responsibility Policies in America. In  Corporate Sustainability, Social Responsibility and Environmental Management  (pp. 99-117). Springer International Publishing. 

Cooper, S. (2017).  Corporate social performance: A stakeholder approach . Taylor & Francis. 

Crane, A., & Matten, D. (2016).  Business ethics: Managing corporate citizenship and sustainability in the age of globalization . Oxford University Press. 

Hahn, T., Pinkse, J., Preuss, L., & Figge, F. (2016). Ambidexterity for corporate social performance.  Organization Studies ,  37 (2), 213-235. 

Gillespie, P. (2017).  Whole Foods still suffering one year after price scandal .  CNNMoney . Retrieved 1 September 2017, from http://money.cnn.com/2016/07/27/investing/whole-foods-earnings-july/index.html 

Lobosco, K. (2017).  Whole Foods pays $500,000 to settle a probe into overcharging .  CNNMoney . Retrieved 1 September 2017, from http://money.cnn.com/2015/12/28/news/companies/whole-foods-NYC-overcharging-500000/index.html 

Moriarty, J. (2016). The Demands of Stakeholder Theory for Corporate Governance.  Business Ethics Journal Review ,  4 (8), 47-52. 

Miles, S. (2017). Stakeholder theory classification: a theoretical and empirical evaluation of definitions.  Journal of Business Ethics ,  142 (3), 437-459. 

Stangis, D., & Smith, K. V. (2017). 21st Century Corporate Citizenship: A Practical Guide to Delivering Value to Society and Your Business.