ASSIGNMENT PRINCIPLES OF MANAGEMENT (MGM 3101)

GROUP 8

STAKEHOLDER THEORY AND BUSINESS ETHICS FRAMEWORK

HOW ETHICAL IS NESTLE DURING A CRISIS

GROUP MEMBERS

AININ SOFIA BINTI MOHD FADZIL (214838)

NURUL AIN SOFIA BINTI MOHD ROSDI (216598)
NURLIYANA BINTI ABD. NASIR (SA00264)
1.0 INTRODUCTION

Henri Nestle founded Nestle, one of the largest food and beverage companies in the world,

in 1866. The company’s headquarters are in Vevey, Vaud, Switzerland. Nestle got its start

in 1886 when the Anglo-Swiss Condensed Milk Company was established. Henri Nestle

created a revolutionary baby food in 1867, and the business merged with an Anglo-Swiss

company to become the now-famous Nestle Group. At that time, the growth of cities,

railroads, and ships, which reduced the cost of commodities, encouraged international trade

in consumer goods. With over 130 years of operation, Nestle has become the largest food

company in the world through product innovations and business acquisitions

The Maggi controversy in 2015 has taken a toll on Nestle's executives in India, leading to

cancelled leaves, missed family engagements, and sleepless nights. The crisis erupted when

a food inspector in Uttar Pradesh found issues with Maggi noodles, turning it into one of

the biggest controversies of the year. Nestle has been in firefighting mode, with its entire

team working tirelessly, including global CEO Paul Bulcke and executives from around the

world. The company cancelled leaves for all employees, working 20-hour days to manage

the situation. Nestle faced criticism for its delayed response and is now working to restore

consumer confidence. The market cap has dropped, and the company is expected to incur

significant losses in sales. The entire instant noodles category in India has seen an 80%

decline in sales, affecting rivals as well. Nestle is facing a challenging situation as it works

to address the Maggi crisis and its impact on the company's reputation and financials.
2.0 IDENTIFY STAKEHOLDERS

2.1 Stockholders

These are the people or organizations that possess stock in the business. They frequently

attend shareholder meetings and cast votes on significant business decisions since they

have a financial stake in the company's success.

Interests: The company's long-term success and financial performance are of the most

importance to investors. Profitability and a return on their investment are what they

seek.

Concerns: Investors can be worried if these demands from the workplace have a

detrimental effect on staff morale, as this could have an impact on output and the

company's reputation.

Influence: During shareholder meetings, investors have the opportunity to voice their

concerns and vote on company policy. They might support a well-rounded strategy that

guarantees both worker satisfaction and business success.

2.2 Managers

These are the people in charge of the company's daily operations and strategic decision-

making. Directors, executives, and other important leadership positions could be among

them.

Interests: Managers are in charge of accomplishing the goals of the business and

operational effectiveness.
Concerns: Managers may be worried about a rise in staff attrition as a result of sleepless

nights and cancelled leaves, as well as employee fatigue and lower productivity.

Influence: Decisions about scheduling and resource distribution are within the power

of managers. The long-term effects on worker performance and welfare should be taken

into account.

2.3 Customers

Customers are the individuals or businesses that buy goods or services from the

company. Since they produce income and are the company's main source of motivation,

their happiness and loyalty are essential for company success.

Interests: Customers anticipate prompt delivery, excellent customer service, and high-

quality goods and services.

Concerns: A decrease in client satisfaction and service quality may result from anxious

and sleep-deprived staff.

Influence: Consumers can have an impact on a business by sharing their experiences

via a variety of platforms, giving feedback, and selecting rivals. Positive client

experiences are frequently influenced by contented personnel.

2.4 Community, Society and Nation-state

This category includes the nation-state or government that the firm is governed by, as

well as the larger community and society in which it operates. These stakeholders might

be worried about how the business handles social responsibility, the environment, and

legal and regulatory compliance.

Interests: Social responsibility, labor law compliance, and the company's effect on the

larger community are issues that these stakeholders are worried about.

Concerns: Restless nights and lost vacation time could worry society about the health

and happiness of the staff, their work-life balance, and even labor law infractions.

Influence: Through public opinion, legislative acts, and labor rights activism, the

government, society, and community can have an impact on the corporation.

2.5 Suppliers and Distributors

Suppliers give the business the components, raw materials, or services it needs to make

its products or render its services. Distributors assist in getting the company's goods to

clients. The effectiveness of the company's distribution and supply chain may be

impacted by its interactions with various stakeholders.

Interests: Suppliers desire timely payments and the maintenance of positive business

ties.

Concerns: Demands from the workplace that affect employees may cause disruptions

in business operations and have an effect on the company's capacity to meet its

obligations to suppliers.

Influence: Suppliers can negotiate terms and contracts based on the dependability and

stability of the company, even though they may not be able to directly affect employee

leave policy.
2.6 Employees

Employees are an essential component of any business. They comprise every employee

in the company, ranging from managers to entry-level workers. Employee engagement,

well-being, and satisfaction are critical to the productivity and profitability of the

business.

Interests: The work-life balance, overall well-being, and job satisfaction are of concern

to employees.

Concerns: The scenario outlined may result in stressed out employees as well as

possible health problems.

Influence: When their rights are abused, workers may take legal action to change the

corporation. They may also use collective bargaining, feedback, and other channels.

The inability of the business to draw in and keep talent may also be impacted by high

turnover brought on by such circumstances.

3.0 ETHICAL RULES

3.1 Utilitarian Rule

Benefits: Employees that put in more hours and forwent vacation time may help the

organization with higher output and productivity. There may be immediate financial benefits

from this.

Cost: When workers are getting less sleep and their leave is cancelled, it can have a negative

impact on both their physical and emotional well-being. Stress, burnout, a decrease in job

satisfaction, and an increased chance of staff turnover are possible outcomes. Stressed-out and

overworked workers are more likely to produce low quality products, which could leave

customers unhappy. The company's reputation might be damaged, which would be bad for

interactions with customers, staff, and the community at large.

According to the utilitarian rule, the company's activities in this situation are unethical since

they have a net negative effect on stakeholders' satisfaction and well-being as well as the

company's long-term prospects. In order to take an ethical approach, the stakeholders must take

action and be involved to create a more sustainable, accountable workplace that fosters long-

term success and employee well-being.

3.2 Moral Rights Rule

Fulfilment of Rights: While the business may prioritize short-term profit, this may not

necessarily fulfil the rights of other stakeholders, such as those of employees, customers, and

the community at large.

Intrinsically Wrong: Although they have a vested financial interest in the company's success,

shareholders are not inherently entitled to maximize their profits at the expense of other

stakeholders.
From the perspective of moral rights, the company's practices, which include making workers

stay up late and cancelling leave, are inherently wrong. The fundamental rights of workers,

clients, the community, and suppliers are all violated by these acts. Even if investors might

experience short-term financial problems again, this does not excuse violating the rights of

other stakeholders.

3.3 Justice Rule

The justice rule is an ethical decision that distributes benefits and harms among people and

groups in a fair, equitable, or impartial way. In this case, the lack of communication between

the staff and executive have led to sleepless nights due to excessive workload. This is not fair

for both parties, as they too deserve some leisure time, and the company has stripped them of

that right. The company should always try to find a middle ground in which the company can

gain their profits without taking away basic rights of their employees, even in such a crisis.

3.4 Practical Rule

Practical rule means that an ethical decision is one that a manager feels comfortable talking

about with anyone, inside or outside the company, because it's something most people would

agree is the right and proper choice. It's a decision that doesn't need to be hidden because it's

in line with commonly accepted moral values and principles. For this scenario, the company

themselves have told their employees not to talk to anyone about the conflict, unless they had

approval from their legal team. This highlights a potential ethical dilemma within the

organization.
4.0 STAKEHOLDER THEORY ANALYSIS

In order to make thoughtful and ethical decisions, conducting a stakeholder theory analysis

involves a comprehensive process of identifying, assessing, and prioritizing the diverse

stakeholders and their respective interests. In the current context, it is evident that the company

has unfortunately disregarded the concerns and interests of its stakeholders, which has, in turn,

given rise to conflicts within the organization. This disregard for stakeholders' concerns is not

in accordance with the fundamental tenets of stakeholder theory.

In particular, the company's actions appear to run contrary to the Principle of Externalities. This

principle highlights the consequences of economic activities that spill over and affect third

parties, either positively or negatively. In this case, the ongoing conflict within the organization

has resulted in a situation where employees are compelled to make personal sacrifices,

including losing sleep and adjusting their plans, all in an effort to address and overcome the

issues at hand.

The fact that employees are sacrificing their well-being and personal commitments due to the

organizational conflict underscores the serious nature of the situation and the need for the

company to realign its actions with the principles of stakeholder theory. This not only highlights

the importance of considering all stakeholders' interests but also serves as a stark reminder of

the significant impact that neglecting these interests can have on the individuals involved.
5.0 RECOMMENDATIONS

One suggestion that might be made is that the Nestle Company should allocate resources

towards more effective electronic communication methods. This is a result of occasional

breakdowns in communications in day-to-day operations. After all, the business does business

around the world in a variety of cultural contexts. Effective communication is crucial, as is the

requirement for planning, coordinating, and making decisions. Through electronic

communication, users may share photos, sounds, graphics, and interactive software over the

internet and converse with ease. Electronic communications, according to L.C.Bovee, is the

transmission of information using sophisticated devices like computers, fax machines, voice

mail, e-mail, videotapes, private television networks and teleconferencing.

Furthermore, by embracing people for who they are and are not, organizational conflict may

be resolved. Due to the fact that each person is unique, they will all process information and

arrive at conclusions in various ways. It is important for managers at Nestle to have a

comprehensive awareness of their team member’s work approaches. This will enable them to

use each other’s talents and avoid casting doubt on the work styles or habits of their colleagues.
6.0 CONCLUSIONS

Organizational conflict enables businesses to restructure their internal cultures and find

solutions to problems without compromising the values of their clients and suppliers. Managers

might reevaluate their objectives and duties when there is organizational conflict. It promotes

constructive dialogue among staff members and enhances the company’s general performance

and productivity. Conflict in the workplace can inspire individuals to think creatively and

outside of the box’ Employee creativity is stimulated by conflict. Unstructured thinking is

facilitated by organizational conflict and is crucial for handling unpredictable situations.

Frequent occurrences of organizational conflict encourage individuals to think creatively,

handle it more readily and effectively.

According to SWOT analysis, Nestle’s strength is its recognition as a worldwide brand.

Nestle’s successful advertising and brand strategy allow them to establish a reputation as a

worldwide recognisable brand. The most well-known brand in the world is Nestle. It has

established a solid name in the food and beverage industry by offering premium goods that are

suitable for daily usage anywhere. Nonetheless, Nestle has several flaws, such as an

organizational structure and a control gap that contributed to disputes. This is as a result of

Nestle using a matrix organization. With a matrix layout, several brands fall within logical

groupings. This is often the start of a fight and the continuance of a disagreement inside the

organization.

To put it succinctly, organizational disagreement should be settled since it will never provide

a positive outcome for the business. A corporation has to have a dispute resolution strategy in

place to keep employees calm and prevent bad press. Employee productivity may rise in a

healthy work environment, which boosts the bottom line of the business.
7.0 REFERENCES

1. Sleepless nights at Nestle, as staff and executives try to find what went wrong. The Economic

Times. (n.d.). https://economictimes.indiatimes.com/industry/cons-products/food/sleepless-

nights-at-nestle-as-staff-and-executives-try-to-find-what-went-

wrong/articleshow/47593361.cms

2. Nestle and its Communication Networks: Essay. Thesisliader.com. (2018, November 29).

https://thesisleader.com/essays/nestle-and-communication/

3. How ethical is Nestlé Sa?. Ethical Consumer. (2023, August 22).

https://www.ethicalconsumer.org/company-profile/nestle-sa

4. Stakeholder engagement to create shared value. Nestlé Global. (n.d.).

https://www.nestle.com/sustainability/responsible-business/stakeholder-engagement