The Role of Organisational Values in Business Ethics: Challenges and Impacts on Ethical Leadership
QUESTION 1 [16 MARKS]
Critically assess the need for creating a common set of organisational values within the company’s business ethics framework. In your response, consider:
- The role of shared values in guiding ethical behaviour and organisational decision- making;
- The potential challenges of implementing a universal value system in a diverse organisation; and
- How an articulated value system can support ethical leadership, stakeholder trust and corporate social responsibility.
Support your answer with relevant theoretical frameworks and practical examples.
QUESTION 2 [16 MARKS]
Using the example of Nestlé’s marketing of infant formula in African countries, critically assess how unethical business practices can impact profitability, stakeholder trust and corporate reputation. In your response, discuss the ethical issues involved, the consequences for the business and the broader implications for doing business ethically in Africa.
QUESTION 3 [18 MARKS]
Read the following article and answer the question that follows:
The “shareholder rule”: No longer a bar to a company asserting privilege against its shareholders?
For more than 135 years, the ‘shareholder rule’ has prevented a company from claiming legal professional privilege against its shareholders (save in respect of documents created for hostile litigation against that shareholder).
In a highly significant decision, the High Court has held that this rule has no proper justification and should no longer be applied.
While it may be subject to appeal, the decision as it stands will be welcome news to all companies and their directors, especially those facing shareholder securities actions.
Investor group claims were brought against Glencore plc (Glencore) and certain former directors for alleged misstatements in published information under sections 90 and 90A/Schedule 10A of the Financial Services and Markets Act 2000. At a case management conference in May 2024, the court was asked to determine whether Glencore was entitled to assert privilege against the claimant investors, which required consideration of the validity and scope of the shareholder rule.
Earlier cases applying the shareholder rule appear to have been decided on the basis that shareholders had a proprietary interest in the company’s assets, including any advice procured using company funds. In such instances, the company’s shareholders were treated as being in an analogous position to beneficiaries of a trust.
It was common ground between the parties that this original rationale for the rule was untenable. In particular, the judge noted the seminal House of Lords decision of Salomon v A Salomon & Co Ltd1 in 1897, which established that a company is a legal entity distinct from its shareholders, and that shareholders have no interest in company property. The court, therefore, specifically rejected the analogy with a trust.
The Claimants submitted that the modern justification for the rule lay in conceptualising it as a form of joint interest privilege, which arises between a company and its shareholders by a shared interest in communications relating to the administration of the company.
This argument was rejected by the court. On a detailed review of the authorities, there was no binding decision which found that joint interest privilege could be the justification for the rule, nor did the cases engage in any meaningful analysis of the point. As a matter of principle, there was no good basis for finding that the concept of joint interest privilege applied as a general matter to the shareholder/company relationship. It was found that the existence of the rule may deter directors from obtaining legal advice where this is necessary for the performance of their duties owed to the company, for fear of disclosure to its shareholders, thereby undermining the public policy rationale for legal professional privilege. In any event, the cases suggested that joint interest privilege was simply a convenient shorthand for what was a range of narrower (and more conventional) circumstances in which a party cannot claim privilege against another, rather than an independent, freestanding concept.
Though not strictly necessary, given his decision as to the validity of the rule, the judge went on to find that, if he was wrong and the shareholder rule did exist, then:
Rather than being an absolute rule, its application depended on whether there was a genuine joint interest as between company and shareholder on the facts of the case.
It applied to legal advice and litigation privilege, but not to the without prejudice privilege. Among other reasons, the Judge held that to find otherwise would have a deterrent effect on third parties engaging in settlement negotiations with companies.
It was not limited to direct or registered shareholders. The Court recognised that shares are often held on an intermediated basis, and so beneficial ownership of shares may well be more relevant to determining whether there was a sufficient joint interest with the company than bare legal title. The question of a sufficient joint interest was to be assessed at the time the relevant communication was made, and so the rule was not limited to current shareholders.
In principle, the rule extended to documents belonging to subsidiaries in the same group. Where there was a chain of holding companies and each shared a joint interest in a communication, then the ultimate subsidiary company would be prevented from asserting privilege against any of them, including the ultimate holding company.
The decision of the High Court to depart from what had long been perceived as a well-entrenched rule of English law is a fairly bold one. In a recent case cited in the judgment, a different High Court judge expressed doubts as to the traditional rationale for the shareholder rule, but ultimately concluded that only a higher court could determine that the rule did not exist or should be abolished.
Given the significance of the court’s key finding, it is likely that the decision will be appealed. Both companies and shareholders should not assume that this is the final word on the existence of the rule.
- Leland, T. & Tjong, A. (2024), The “shareholder rule”: No longer a bar to a company asserting privilege against its shareholders?, https://www.dentons.com/en/insights/articles/2024/december/11/the-shareholder- rule#:~:text=In%20a%20highly%20significant%20decision,those%20facing%20shareho lder%20securities%20actions (accessed May 08, 2025).
Explain the principle of separate legal personality and discuss its significance for corporate governance. In your answer, describe how the Shareholder Rule developed in English law, including its original justification based on shareholders’ proprietary interest and the contemporary challenges to that justification. Comment on how the modern understanding of the distinction between the company and its shareholders affects corporate governance practices.
QUESTION 4 [25 MARKS]
Access the following research paper, for context, before attempting the question that follows:
- Niazi, A. & Ali, M. (2015), The Debacle of Satyam Computers Ltd: A Case Study from Management’s Perspective, https://www.researchgate.net/publication/346232108_The_Debacle_of_Satyam_Computers
_Ltd_A_Case_Study_from_Management ”’s_Perspective (accessed May 08, 2025).
Examine how governance and control measures are applied in the business environment, using the Satyam Computers scandal as an example. In your answer, discuss the role of internal controls, risk management frameworks and regulatory compliance in ensuring ethical business conduct and accountability. Evaluate the effectiveness of these measures, drawing on relevant case studies and theoretical frameworks from both developed and emerging markets.
QUESTION 5 [25 MARKS]
Unilever is one of the largest fast-moving consumer goods (FMCG) companies globally, operating in Europe, the Americas, Africa, and Asia, with its headquarters in London. As of 2024, Unilever employs around 125,000 people. The company’s success is largely attributed to its strong leadership, which is rooted in effective corporate governance and a willingness to embrace organisational change.
Unilever has also made efforts to incorporate local cultures within its global framework, demonstrating adaptability and inclusiveness. Central to its leadership approach is the commitment to its Code of Business Principles, which mandates that all Unilever operations and subsidiaries adhere to internationally accepted best practices. This code ensures that the company maintains high ethical standards, promotes transparency and operates responsibly across all regions. Through these governance measures, Unilever demonstrates a commitment to sustainable and responsible business practices, fostering long-term growth while maintaining its reputation and meeting stakeholder expectations.
Access this document here:
- Unilever. (2023), Code of Business Principles and Code Policies, https://www.unilever.com/files/92ui5egz/production/a7ad961ef886a578ab4dd316b4e5195cb c0965a0.pdf (accessed May 08, 2025).
Examine the accountability and responsibility of directors, board committees, auditors and the company secretary in the context of corporate governance and ethics, using Unilever as an example of best practice. Discuss their respective ethical obligations and legal duties and evaluate how each contributes to ensuring transparency, integrity and adherence to governance standards.
Expert Answers on Above Questions of Corporate Governance
Answer 1: It is highly important to create a common set of organisational values within the company’s business ethics framework for a number of reasons. Let’s have a look at the most important ones:
The role of shared values in guiding ethical behaviour and organisational decision making: Shared values play a crucial role in laying the foundation for ethical alignment, consistency and accountability across all levels of the organisation. They are quite effective in defining the acceptable behaviour wherever there are lack of rules and policies in solving ethical dilemmas. The theoretical framework that is highly relevant is Schein’s organisational culture model that comprises 3 levels such as artefacts, espoused values and underlying assumption. The espoused value indicates the values of an organisation such as integrity, innovation or respect and they must be aligned with the actual behaviour in order to build trust.
Challenges in Implementing A Universal Value System
The main challenges in implementing a universal value system in a diverse organisation includes cultural relativism whereby one culture may consider a step ethical while the other may regard it as unethical. Another important challenge is resistance to change whereby employees may resist in adapting values that they believe are misaligned with their personal values. Hofstede cultural dimension is an important theoretical framework that explains this situation which indicates an important value of individualism versus collectivism.
| Disclaimer: This answer is a model for study and reference purposes only. Please do not submit it as your own work. |
