Due to the increasingly complicated financial risks and fictional reporting, changing expectations in the distinct business organizations as well as the rapid development of economic integration, corporate governance has been placed on the worldwide agenda in recent fifty years. Moreover, the essence of modern corporate governance is shifting from a mode of shareholder primacy which is the core principle of former supervisory towards creating value, balancing the interests of stakeholders, and promoting stable development of the market. Now the corporate social responsibility is no longer focus on the question of “whether” is fulfilled, but concentrate on the issue of “how” to perform. That is to say, good corporate governance especially the effective internal control, social accountabilities and independent third-party supervision play an active role in establishing a healthy and effective business operation and the environment in order to achieve the interests and expectations of both internal and external stakeholders (as cited by Solomon,2013). For the external governance in the broad view, this essay will base on the latest news of M&S to examine its financial and non-financial strengthens and weaknesses relating to their various stakeholders critically utilizing five forces of Porter; moreover, leadership and effectiveness of internal control will be elevated firstly, followed by its corporate sustainability, environmental performance and their interrelationships and influences will also be revealed using stakeholders’ perspectives.
Marks & Spencer now develops rapidly from the original convenience store in 1884 to a world-known chain retail department store. In recent decades, M&S has flourished and expanded constantly. It owns a variety of well-known private and sub-brands and this chain group currently employs 85,209 employees in the world and has operated more than 600 stores in the UK and more than 275 stores in over 40 regions and countries.
The first threat is from existing competitors. Take fashion as an example, both John Lewis and M&S are centuries-old famous companies in the UK. John Louis has a wide range of goods and it is attractive for its price and quality although it will be easy to allow customers to get tired of because of the too mainstream and traditional style. However, since 2012, Louise Department Store has paid its attention to women’s products which is the biggest market for the fashion industry. The series of new products launched by designer Alice Temperley has been highly praised by the broad masses and has earned a great reputation for the changing and innovating John Lewis. In addition, John Lewis believes that relying solely on the UK’s local merchandise is difficult and expensive; therefore, John Lewis gets supplies from around the world. At the same time, it not only launches a variety of their own brands but also sell many world-renowned brands. These tactics implement its perennial principle of reasonable price and fine quality and meet the needs of various levels of consumers; also, some fast fashion brands, for example, Zara and H&M now are taking up more market share because of its relatively cheap price and very quick react towards changing fashion. In contrast, due to the relatively sole product, price and cost constraints, M&S cast away its advantage in fashion slowly.
The second threat is from potential rivals and substitutes. With its low prices and high profits, M&S has gained great popularity in the global retail market in the former decades, especially its self-designed clothing. However, there are fewer barriers for new entrants to enter the markets both in the online and offline market. With the development of e-commerce and its economy of scale, the diversion of consumers will become more and more obvious and the benefits of this traditional department store will gradually fade away. What’s more, M&S is not as good as a modern shopping center in terms of the consumer experience. Compares to street stores, M&S also has no competitive advantage on convenience. Hence, the superior position of M&S will be no longer firm in the future market( Freeman & Reed, ).
The third is bargaining power of external stakeholders, for example, customers and suppliers. Nowadays, products appearing in the market are more and more standardized, and the differences between them especially daily products, are getting smaller and smaller although they are sold by different stores. There are many selections that provided with consumers, and there is almost no cost to choose a different department store. To cope with this problem, these retailers have to cut their price to maintain their clients and their profits have been reduced during these ten years. That is to say, the switching cost in the whole market is increasingly lowering ; also, M&S is mainly relying on its self-employed products and its profits come from the transaction efficiency of minimizing inventories, so it is of importance to accurately grasp the preferences of target customers, adjust designing and materials flexibly according to the fashion trend rather than just rely on the traditional series every seasons and every years which achieved success a few years ago so that M&S could maintain the loyalty of customer maintenance, hold a seller’s market and improve its profitability. Regarding the influence of suppliers’ bargaining power, some suppliers would raise prices, reduce the quality of products and services or even use dilatory tactics in supplying when they notice M&S are short of source supplies or M&S is gaining more revenues in order to seize the initiative from the process. This is simply because M&S depends heavily on local resources and brands, which allows M&S itself to walk into a dilemma. Managerial branch of the stakeholder theory predicts that management is more likely to focus on meeting the expectations of powerful stakeholders, who have the greatest potential to influence the organizations’ ability to generate maximum financial returns (Islam & Deegan, 2010). Hence, under the fierce competition among existing rivals, the potential extension of e-commerce, and dependence and inflexible operations, if M&S cannot adjust in time, these weaknesses and threats from its stakeholders will affect the overall management more profoundly.
When it comes to the internal management, an important issue should be organization structures. The structural model of modern companies has gradually changed from tall enterprises to flat ones, M&S is not an exception. In other words, tall organizations call for narrow control spans and well participation in order to assist daily and all layers of planning and training while flat organization prefers to delegation so that there will be relatively high-speed communications, effective and pointed management. M&S roughly divided its internal organization according to the Anthony hierarchy. The first one is strategic management, the board, is responsible for direction settings and the stewardship of the company, overseeing its conduct and affairs to create sustainable value for the benefit of its shareholders (2017). To adhere this strategic objectives, members in the board who have rich experience in investment banking, accountancy, store management and consumer goods industry establish clear roles and accountabilities firmly and involve in nine scheduled meetings enthusiastically in the year of 2007. Individual attendance was recorded and disclosed to the public by the annual report. Each time before the boards’ meeting, there will be plenty of time for intercommunication among the chairman who is responsible for the board, the Senior independent director and the non-executive directors which monitor conducts of the board and operate independently to acquire suggestions on the feasibility of implementing the phased strategies and policies, and to put forward constructive opinions on any issues that have emerged recently(as cited by Council, 2007). This way would give an access to build a bridge among internal management, listen to the relatively fair voice in order to achieve long-term goals of all shareholders effectively. The main responsibilities of board members are concerned with the group’s risk status, protecting the company’s normal health operations, and correctly predicting and deciding the company’s strategic direction (as cited by Ravenscraft,1996). Directors and senior management not only focus on the short-term and long-term development of the company, but also actively participate in risk management and internal control to ensure the company’s long-term sustainable development. Moreover, the selection of the board is transparent and scientific and gender and region diversity is kept in the board. People enter into the board must identify the philosophy and culture of M&S, have profound interpersonal connections and business working experience. For non-executive directors in M&S, these non-executive directors also have broad practical experience and they are encouraged to take on additional roles to richen their visions and resources, but they do not have management responsibilities and is a balance to executive management although That is due to the fact that this independent pattern may avoid the interference of shareholders’ impacts and offer reassurance to stakeholders and other outside parties; however, these non-executive directors is hard to recruit and maintain because they have limited available time and feel it is meaningless that their views are probably ignored by executives. In M&S, the average tenure of non-executive directors is longer than that of executive. Moreover, Discrimination on the grounds of sex remains globally just because women are easily emotional and their fertility may affect their careers; however, the resignation of Laura Wade-Gery in the 2017 and the target of keeping at least 30 percent females in the board show women in M&S would shatter the glass ceilings little by little (M&S’s annual report, 2017). Also, members in the top have international backgrounds, which might help M&S own a global vision, reputation and resource through their bonds with their motherlands. The other management is tactical one. It is to lead and serve to a particular area or market and functional management has responsibilities to make specific strategies for different departments. This kind of structures may avoid heavy workload, inspire employees’ motivation easily due to the wide control span. Lastly, the root reason of the turmoil in the markets comes from the lack of transparency in organizations which is the most important core of corporate governance. Improving internal controls, establishing a strong auditing system, and accurately disclosing company performance will help increase investor confidence and maintain an orderly market. The information disclosed by M&S is of value relevance, comparability and transparency demonstrated through data from recent years in the annual report. Asymmetric and untimely information for the stakeholders can be well resolved through authentication opinions from auditors; so, operational risks and multiple agency costs could be reduced this benefits the further development of the company(as cited by Council,2003).
M&S has always upheld the principle of independent or donating to any political organizations or independent election candidates all around the world. This kind of governance rule that is independent of political disputes. It may allow M&S to avoid sanctions or passive orientation and impacts on public opinion in political competition and is of great crucial to the sustainable development of the company. What’s more, M&S has always offered equal and fair humanitarian care for people with disabilities. Never discriminate against persons with disabilities and give them fair consideration for the appropriate vacant positions. For employees who have caused disability during their employment, M&S promises to do its best to ensure its minimum living standards, keeps its job position as much as possible, and actively cares about employees’ mood. Always providing opportunities with disability employees to adjust and adapt to their employment help them to strength and build confidence. M&S also promises to cooperate further with external organizations providing more job opportunities through the Marks & Start program, and work closely with Jobcentre Plus. The Marks & Start scheme was introduced into the distribution centre at Castle Donington in 2012/13, working with Remploy providing health monitoring and necessary help for people with disabilities. In 2017, total global greenhouse and gas emission of both operational process and location-based has decreased as they promised before. M&S shows its sincere initiatives to be more sustainable and environmental through a series of corporate governance schemes and these behaviors help M&S to win more favors and support the recovery of M&S to a certain extent. This interrelationship in the case of M&S reveals the connection between corporate governance and corporate sustainability. According to the targets of creating obdurate values, corporate governance should be regarded as a tool of building corporate values pointing to a set of institutional arrangements for the internal responsibility, rights, and benefits of the whole company. The key function is that rearrange the resources invested from stakeholders and non-stakeholders, establish a coordination mechanism and improve the efficiency of decision-making through their involvement in order to gain both economic and social value of the company; therefore, a better corporate governance mechanism provide a platform with stakeholders to achieve the most benefits and in turn give a plenty of resources and foundation to bear social responsibilities, which would increase the credits, optimize relationships among different stakeholders, such as governments, suppliers and customers, reduce the multiple agency costs and transaction costs among stakeholders, create social value for enterprises, attract more investors, and then realize the sustainable development of the company (as cited by Campbell,2007) .
In conclusion, this essay analyzes the threats from M&S’s stakeholders and its own defects through Porter’s five forces model, and identify M&S’s internal management structure and governance strategies through agency theory and stakeholder theory, and finally based on the case of M&S, the connections between corporate governance, social responsibility commitment, and continuous sustainable development. Corporate governance allows M&S to improve the efficiency of decision-making, create value and provides a resource basis for corporate social responsibility commitment(as cited by Barone et al, 2013). Corporate social responsibility, in turn, helps M&S to enhance corporate reputation, thereby realizing its targets for earning benefits of all stakeholders.
References
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11.6.2018