A&B is a chain of department stores, selling clothes, food and hardware. It employs 10,000 UK workers in retail, distribution and office positions, mostly on permanent, full-time contracts. In addition, around 1,000 manufacturing workers, employed by its main subcontractor, are highly dependent on A&B’s success and employment policy. This case study presents an opportunity to assess the ethics of the business at all stages in its development (was it doing the ‘right thing’ towards employees?), and to address a major contemporary dilemma between remaining competitive as a business and retaining a reputation as an ethical employer. It allows you to explore various ethical theories and to consider this business dilemma as a choice between different ethical frames of reference.

In the beginning
A&B was founded in 1900 as a small store in a medium sized Scottish town by an austere, very religious Presbyterian (with his elder brother as a ‘sleeping partner’). In the early days, the founder knew all his employees by their first name and exercised a strong ‘fatherly’ influence over their lives in and out of work. This had both benign and harsh aspects. The company was generous at times of family sickness, with the founder often visiting in person, though sometimes employees wondered if he was really checking up on them. And any employees who were caught with the smell of alcohol on their breath at work, or even drunk outside work, were summarily dismissed. The founder also promoted a strong sense of family values, organizing (alcohol-free) works picnics and providing a free hamper every Christmas and at the birth of any child (up to three in number) and 200 cigarettes to the ‘employee of the month’. Christian prayers were compulsory before each morning’s work began. He also initiated and contributed towards various ‘self-help’ savings and mortgage schemes. Wages were generally slightly above the industry norm, according to the discretion of the founder, who liked to quote the parable of ‘The Workers in the Vineyard’ and reward those whom he thought deserved and needed most. Women employees who married were required to leave, in order to fulfil their family duties, and all managerial positions were reserved for men with families. The firm promised lifetime job security for male employees and encouraged children to follow their parents into the trade. For many years, jobs were only rarely advertised externally.
Growth
The founder died in 1940 and ownership and control passed completely into the hands of his two sons. The boys had been educated at an English public school and lived in the Home Counties. But the founder’s personal control had declined long before, as the company grew first into a Scottish chain in the 1920s, and then a nationwide chain during the Second World War. The founder had always strongly opposed trade unions as inimical to the family atmosphere of the firm, and in 1923 the firm fought off an organizing campaign by the shop workers’
union which was already well established in the stores of the strong Scottish co-operative movement. As a result, 20 ‘ringleaders’ were dismissed. During the ‘hungry thirties’, A&B gained a good reputation for maintaining employment when other businesses were laying people off. This was partly due to good business performance, but it was also widely believed that the owning family accepted lower profits in order to continue both to keep the loyal workforce and invest in the expansion of the firm.
The workforce was now counted in thousands rather than tens, so it was impossible for senior managers to retain personal, face-to-face contact – though local store managers were encouraged to do so. In response, the company developed a professional personnel department to create a more systematic set of provisions and policies. These included a non-union, representative company council that operated monthly at store level, and biannually across the whole company. Representatives were elected from every work group, and both negotiated with management over wages and consulted over any issues affecting the welfare of the workforce.
There was also a welfare and sports society, which was heavily subsidized by the company and provided local A&B social clubs – initially on a strict temperance basis.
These organized competitions for football, cricket, ballroom dancing and so on. Company developments and these social activities were reported in Voice of A&B, a monthly company newspaper produced by the personnel department. The firm also pioneered a number of other welfare benefits, including a contributory pension scheme for all employees, and a seniority and promotion system called ‘Growing our own’, which meant that nearly all middle and senior managers were recruited from the shop floor. Following one year’s service, all employees joined the company profit-sharing scheme, which, in most years, added a further 10 per cent to their income........

Question

1 How far was A&B’s original employment policy ‘ethical’ in modern terms? What sort of ethical principles did it draw upon? Which elements would be acceptable today, and which would not?
2 How justified was the decision to prevent trade union organisation and is it still appropriate today? Consider the arguments for and against and the principles involved.
3 Construct an ethical case in favour of the flexible firm solution proposed by the director of marketing, explaining which principles you draw on.
4 Devise an alternative, HRM-driven business and ethical case for maintaining the existing long-term relationship with employees, customers and subcontractors.
5 Which stakeholder groups should take priority when push comes to shove? What duty, if any, does the company owe to its employees and shareholders in a modern free-market society?
6 Design an up-to-date and realistic, ethical employment code of practice, consistent with your answers to the above questions, which can be issued by the personnel department to all employees and used for external public relations purposes. Begin with some general principles and then identify key areas of business and employee rights and responsibilities.