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Tesco And The Horsemeat Scandal Essay

1378 words - 6 pages

This essay attempts to critically evaluate Tesco with regards to the Horsemeat Scandal. The aim is to critically asses this event through the application of theories and readings. A brief background on how the scandal arose will be provided. Key question that must be asked are did Tesco misbehave at all? And if they did, how could they have been able to justify their actions to themselves?
According to Cooper and Owen (2007) accountability is a somewhat unclear term. This is not because the exact definition of being accountable ‘required or expected to justify actions or decisions; responsible’ (Oxforddictionaries.com, 2014) is hard to understand, it is because the question still remains ...view middle of the document...

Background
The horsemeat scandal first came to light on the 15th of January 2013 with the Food Safety Authority (Henceforth known as FSA) identifying horse and pig DNA in a number of burger products.

Corporate Social Responsibility

Agency Theory
Agency theory is the principle that the value of the firm will not be maximised because managers may make decisions that are in their own best interest and may not be in line with the company’s or shareholders best interests (Abrahamson and Park, 1994) (Albrecht, Albrecht and Albrecht, 2004) (Turnbull, 1997). The conflict between the two parties’ interests can be referred to as the agency problem, and the best solution to this problem is to artificially bring managements goals in line with shareholders. As managers animate a corporation when an agency problem exists it is the managers’ actions that impact the stakeholders. This was best seen in ruling of Chief Justice Marshall in Darthmouth College vs. Woodward.

‘A Corporation is an artificial being, invisible, intangible, existing only in contemplation of law. Being the mere creature of law, it possesses only those properties which the character of creation confers upon it, either expressly, or as incidental to its very existence’ (Dunn,1991).
The agency problem occurs when there are information asymmetries in relationships where one party (the principal) delegates work to another party (the agents) (Wiese and Toporowski, 2013). In the case of Tesco and the horsemeat scandal the principal party is Tesco and the agents are the managers. It is clear that information asymmetries existed in Tesco, both with testing the meat and with providing the results of these tests to Tesco’s stakeholders. This is evident as if people had known there was horse in their beef products the whole scandal would not have occurred. Information asymmetries can arise in three ways through hidden characteristics, hidden intentions and hidden actions. (Mishra, Heide and Cort, 1998) (Wiese and Toporowski, 2013)

So when an agency issue occurs and the managers are acting in their own best interests scandals such as the horsemeat one can occur. According to Gellerman (1986) corporation misconduct happens for one of four reasons: A belief that the activity is within reasonable ethical and legal limits; A belief that the activity is in the individual’s or corporation’s best interests; a belief that the activity is “safe” because it will never be found out or publicised; and the belief that because the activity helps the company the company will condone it and protect the person who engages in it. Each of these reasons can be can be used by the agents of Tesco as to reason why the scandal was able to occur. To reason the first belief it could be said that horsemeat is a delicacy in some cultures and we never specifically say that its 100% beef so I don’t see an issue with it. The second belief could be argued that it was in the managers/companies best interest as it brings...

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