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CHAPTER 1
INTRODUCTION TO ACCOUNTING
Other stakeholders that contribute towards the wealth-creation process must also be con-
sidered. A dissatisfied workforce can result in low productivity and strikes while dissatisfied
suppliers can withhold vital supplies or give lower priority to orders received. A discontented
local community can withdraw access to community resources. In each case, the owners’
wealth will suffer.
Real World 1.4
describes how one well-known business came
to recognise that future
success depended on the support of key stakeholder groups.
Adopting a customer focus
John Menzies plc, a distribution and aviation logistics business, states:
We believe that the passion of our people, and their commitment to delivering great customer
experiences, are crucial to delivering shareholder value – and this
belief informs our entire
approach to doing business.
Source
: www.johnmenziesplc.com [accessed 2 January 2019].
The price of clothes
Nike is a highly successful business with a globally-recognised brand. However, it was not
so long ago that the business was mired in controversy. It had
become a focal point for
protesters who regarded the business as a byword for ‘sweatshop’ labour practices. In 1992,
an article was published that exposed the low wages and poor working conditions of those
producing Nike products in Indonesia. Subsequent protests and further revelations resulted
in unwanted media attention to which the business was, at first, slow to properly respond.
However, by 1998, weakening demand for its products meant that the issue could no longer
be lightly dismissed. Nike publicly acknowledged the reputation it had gained for ‘sweat-
shop’ labour practices and the adverse effect this was having on customer attitudes.
Its management realised that, if nothing else, it was good business to improve the working
lives of those producing Nike products in third world countries. This resulted in a commit-
ment to better working conditions, higher wages and a minimum working age. A code of
conduct for Nike suppliers concerning the treatment of their workforce was established and
independent audits were implemented to monitor adherence to the code. The business also
committed to greater transparency: it now publishes reports on its responsibilities and the
ways in which these have been fulfilled.
Although Nike was not the only large business engaged in sweatshop practices, it took a
lead in trying to eradicate them and, by doing so, removed the stain from its reputation. This
has been rewarded by a continuing demand for its products.
Source
: Based on information in Nisen, M. (2013)
How Nike Solved it Sweatshop Problem
Business Insider 9 May and
Allarey, R. (2015)
This Is How Nike Managed to Clean Up Its Sweatshop Reputation
8 June http://www.complex.com.
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