Accounting Business Reporting for Decision Making

CHAPTER 2 Accounting in society 69

The second area targeted was product safety. The ACCC believes that entities need to pay attention

to the stewardship and integrity of their supply chains. Outsourcing manufacturing to cheaper oper-

ating companies overseas to help manage the competitive environment does not negate responsibility.

The need to have quality assurance systems in place was the key message of the infringement notice

received by Toys ‘R’ Us Australia Pty Ltd for selling the Nantucker 4-in-1 cots that did not comply with

mandatory Australian safety standards.

The third area identified was truth in advertising. It is illegal for a business to engage in conduct

that misleads or deceives, or is likely to mislead or deceive, and for a business to make a false or

misleading claim. Pirovic Enterprises Pty Ltd was found to engage in misleading conduct and to

make misleading representations when labelling and promoting its ‘free range’ eggs. The free range

eggs depicted pictures of hens in open pastures when in fact, due to the placement of openings, the

number of hens and the operation of the barns, the hens could not move freely on an open range.

The court acknowledged that credence claims are powerful tools for businesses to distinguish prod-

ucts with the expectation that consumers will pay a premium. Pirovic was ordered to pay a penalty

of $300 000.

Source: Australian Institute of Company Directors 2015, Remain ahead, stay informed, be in the game, Essential Director

Update: 15.

Debate surrounding the impact of globalisation also has at its core the trade-off between the benefits

of free enterprise, the promotion of private property rights and the encouragement of competition, thus

leading to a greater level of overall national wealth, and the benefits of state ownership, planning and

protection (Wolf 2004). However, it is becoming increasingly apparent that the free enterprise culture

may be coming at a high cost to social and environmental needs. This enlightenment is creating a wave

of discontent throughout many communities and has brought about a new interest and questioning of

appropriate political and ideological systems. Democratic capitalist systems that were accepted as the

ideal for economic prosperity are now being questioned. Economic growth comes at a cost. Even the

move towards sustainable development is being criticised and the new call is now for sustainable com-

munities and a more appropriate distribution of wealth. The advances in technology, free trade over

global markets and the changes in policy and regulation will always benefit some people more than

others. Economic theory does contend that winners gain more than the losers lose (Peck 2011), but

redistribution through government and policies can compensate for this. However, there is now wide-

spread belief that this does not practically occur. So, as class differences increase and the ecosystem

struggles, the link between ethics, governance, sustainability and politics becomes stronger. Nordberg

(2008) puts forward a framework, presented in table 2.2, to help consider the relationship between these

elements.

TABLE  2.2 Relationship between ethical theories and economic theories

Personal Corporate

Consequentialism (teleology) Agency theory Shareholder value

Ethical idealism (deontology) Stewardship theory Stakeholder theory

Source: Nordberg 2008, p. 44.

At a personal level, management and directors of corporations are acting in their own self-

interest as suggested by agency theory or have some stewardship role on behalf of others or a

cause, while at the corporate level, the emphasis on shareholder value represents the self-interest

teleological approach, and the stakeholder view gives rise to consideration for others and what ought

to be done.