Sample Solution: Code of Ethics Case Study (Business Ethics)

A worked example of the kind of case-study analysis our mentors help postgraduate business students develop: a formal code of ethics for a real Australian company, built from public reporting and properly referenced throughout.

Module: Business Ethics and Governance  |  Format: Company code of ethics, case-study based  |  Referencing: Harvard

Background

The mission of Noumi Limited, an Australian business, is to “Imagine a Better Future.” The company combines natural ingredients with scientific research to develop major brands that nourish customers, society and the world (IBIS World, 2022). Noumi started as a pioneer in plant and dairy beverages and has since built strength in nutritional products, developing solutions that maximise customer health benefits by combining high-quality ingredients with ongoing research (Noumi Limited, 2022). The company produces, distributes, markets and exports beverages and food products under its former name, Freedom Foods Group Limited, across brands including MILKLAB, Crankt, Vital Strength, Australia’s Own, UPROTEIN, Vitalife and So Natural, and is traded on the ASX under the symbol NOU (Wilkinson, 2020).

Noumi Limited has been implicated in numerous accounting irregularities and allegations of exploitation, dishonesty and other wrongdoing. In 2020, the company disclosed that it had disguised the expiry of $60 million worth of milk inventory. The scandal continued to grow, and the newly renamed company has since informed investors that a new auditor is required (Robin, 2022). After defending itself in a class action brought by shareholders, the company’s auditor, Deloitte, identified a conflict of interest in how its accounts had been handled. Adopting a formal code of ethics would help guarantee the business engages in best practice, complies with its legal obligations, and upholds industry standards of conduct across the areas set out below: discrimination, exploitation, dishonest and fraudulent behaviour, whistle-blower protection and enforcement. Deloitte identified the ongoing litigation as a major risk to the business, citing “substantial unpredictability that may raise significant doubt on the group’s ability to remain a going concern” (Supreme Court of Victoria, 2022).

Discrimination: Discussion

UNESCO’s 1960 Convention against Discrimination in Education defines discrimination as any distinction, exclusion, restriction or preference based on colour, religion, sex, ethnicity, language, political or other opinion, economic situation, or national or social origin, which has the effect of nullifying or impairing equal opportunity. In 2020, 13% of Australians reported having experienced some form of discrimination in the preceding twelve months (Cooks-Campbell, 2021), and the Australian Human Rights Commission received 12,554 enquiries in 2019–20. An example of discrimination at Noumi Limited would be managers treating disabled applicants as unsuitable for employment, or setting policies that disadvantage them. Under the Disability Discrimination Act 1992, it is unlawful to treat someone differently based on disability in employment, access to services, training or premises (Cooks-Campbell, 2021).

Discrimination: Code of Ethics

Management and employees of Noumi Limited are required to follow these rules to prevent discrimination within the organisation:

• Anyone who believes they have experienced discrimination should raise it with their manager, HR, or the company’s ethics office. Reports will remain confidential.
• Employees must cooperate fully with the ethics office during any investigation into a complaint.
• Employees may not be prohibited from lawful work-related activity without a specific, justified reason.
• Offensive or abusive language is not permitted.
• Management and staff must not create or share false, misleading or hateful material.
• Everyone is expected to represent the organisation’s culture positively.

Breaches of these rules are addressed through the disciplinary process outlined in the Enforcement section, which may include fines, suspension, demotion, termination or legal action.

Exploitation: Discussion

Labour exploitation, in its broadest sense, describes one party unfairly benefiting from another through an unequal power relationship or exchange of value. It persists partly because violations are not always identified or penalised. Exploitation can come directly from a company’s founders or staff, or indirectly through subcontractors that management fails to monitor properly (Berg, 2022). At its Shepperton Dairy site, Freedom Foods (now Noumi Limited) was accused of underpaying and mistreating migrant workers: the National Union of Workers reported that around 57 people hired as mechanical engineers in 2016 were paid roughly 25% less than local competitors for equivalent work (Dyer, 2022). The company stated it would review its compliance with employment law in response.

Exploitation: Code of Ethics

• Colleagues, clients, prospective employees and visitors must be treated with dignity and fairness by company management.
• Senior management must ensure policies exist to prohibit abuse, fraud and dishonest treatment of workers.
• Employee pay must never be unjustifiably delayed.
• Any form of abuse must be reported promptly to the appropriate authority, including law enforcement where relevant.
• Management and staff must represent facts honestly, without exaggeration or misrepresentation.
• Management must ensure employees receive adequate pay, at or above the minimum legal wage.

Dishonest and Fraudulent Behaviour: Discussion

Fraudulent and dishonest behaviour is a deliberate act or omission intended to secure an unlawful benefit (Goklas and Manurung, 2022). Examples include filing false financial reports, misusing funds, altering records without authorisation, and claiming payment for hours not worked. Freedom Foods, since renamed Noumi, supplied financial figures that did not fairly represent the company’s deteriorating position, according to claims made by Deloitte as part of a shareholder class action (Wootton, 2022).

Dishonest and Fraudulent Behaviour: Code of Ethics

All employees are required to:

• Regularly check that their actions are honest and free of deceit.
• Attend staff training sessions on ethical conduct wherever possible.
• Meet the minimum standard of conduct the organisation sets for the workplace.
• Ensure financial accounts give an accurate and fair representation of the company’s performance.
• Support fraud prevention by engaging audit committees, legal counsel or other independent advisors.
• Have financial documents reviewed by an impartial third party to identify any misleading representations.
• Never alter or fabricate company records or documents.
• Never make false, misleading or inappropriate claims.
• Report any suspected fraud to a direct supervisor without delay.

Whistle-blower Protection

A whistle-blower is an individual, whether an employee, vendor or board member, who reports misconduct, theft, corruption or other wrongdoing observed at work. Whistle-blower protections cover both criminal and civil consequences for anyone who harms, threatens or breaches the confidentiality of a whistle-blower, including during an investigation into their complaint. In Australia, whistle-blowers are protected under the Corporations Act 2001, and most companies maintain a formal process for filing a complaint. Reports may be raised internally, to figures such as a CEO or HR manager, or externally, to a regulator, the press or police (Ambler and Leger, 2021; OECD, 2022).

Whistle-blower Protection: Code of Ethics

Employees should:

• Report deceitful, corrupt or unlawful activity, along with any other form of unethical conduct such as discrimination.
• Expect management to report offences against people or property, such as theft or vandalism, to the relevant authorities as quickly as possible.
• Expect supervisors to act promptly on any complaint, investigating it and working towards a resolution.
• Have their identity and any related files protected and kept confidential throughout an investigation.
• Report immediately any unfair treatment, including termination, demotion, bullying or threats, that results from raising a genuine concern.

Enforcement

All employees and anyone conducting business with the company are subject to the rules set out in this code (Cotter, 2018). Enforcement means that when a rule is breached, defined consequences follow. Noumi Limited should maintain strong anti-discrimination policies covering national identity, disability, gender, colour, citizenship, sexual orientation and ethnicity, with breaches subject to internal or legal penalties up to and including termination. Disciplinary sanctions should be decided by a defined body and may include termination, criminal referral or summary dismissal. To protect the company’s integrity and its board, any whistle-blower report made in bad faith may itself be subject to disciplinary action, including termination of employment or board membership.

References

• Ambler, T. and Leger, S. (2021) Whistleblower protection: a comparative overview. OECD.
• Berg, L. (2022) ‘Australia is bringing migrant workers back, but exploitation is still rampant’, UNSW Newsroom.
• Cooks-Campbell, A. (2021) ‘Discrimination in the workplace: a complete overview and what to do about it’, BetterUp.
• Cotter, A.M.M. (2018) This Ability: An International Legal Analysis of Disability Discrimination. Routledge.
• Dyer, G. (2022) ‘A change in name only for Noumi’, ShareCafe, 28 February.
• Goklas, A. and Manurung, A.H. (2022) ‘The importance of the code of ethics in preventing fraud for the professional accountant’, Journal of Economic Resource, 5(1), pp. 51–56.
• IBIS World (2022) IBISWorld Industry Market Research, Reports and Statistics. Available at: www.ibisworld.com.
• Noumi Limited (2022) Noumi Limited: Imagining a Healthier Tomorrow. Available at: https://noumi.com.au/.
• OECD (2022) Whistleblower Protection. Available at: www.oecd.org.
• Robin, M. (2022) ‘Class action splits Noumi from its auditor’, Australian Financial Review, 27 March.
• Supreme Court of Victoria (2022) Noumi (Freedom Foods) Group Proceeding (Class Action).
• Wilkinson, Z. (2020) ‘NOU (ASX): some non-scandal news at last!’, HotCopper.

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