7-Eleven's Failure to Incorporate Global Corporate Governance

Global Corporate Governance
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Global Corporate Governance
Background
Corporate governance plays a significant role in balancing the interests of all stakeholders. Karpoff (2021) states good corporate governance requires a stakeholder rather than a shareholder focus. Firms that lack good corporate governance experience a tainted image and poor financial performance. 7-Eleven is a firm that failed to incorporate good corporate governance and, as a result, received a lot of scrutiny from the government and the public. The firm is an Australian convenience retailer aiming to be a one-stop shop for consumers (7-Eleven, n.d.). A few years back, the firm was involved in a wage scandal that led to an investigation by the Australian government. The investigation revealed that the firm falsified employee records to cover up the fact that it underpaid its employees (Commonwealth of Australia, 2016). These findings are an indication of poor corporate governance
Problems between 7-Eleven Operation Model and Franchisee
Principal-Agency Problem
It could be found that 7-Eleven has principal-agency problems because of a dispersed ownership structure. None of the shareholders of 7-Eleven had the power to control the franchisees, and in turn, the franchisees pursued self-interest at the expense of the company’s reputation. According to Magnanelli and Pirolo (2021), this presents a principal-agency problem whereby a separation of ownership and control exists. The franchisees had decision-making authority to act on behalf of the shareholders, yet they chose to pursue self-interests by underpaying employees and then covering up through record falsification.
Issue 1: Record falsification
A key issue was employment records falsification. According to the report by the Commonwealth of Australia (2016), 7-Eleven stores falsified records to comply with the firm's pay policy to hide that they were underpaying employees. Yet, the Fair worker act requires employees to keep accurate employee records. As Raghunandan (2021) reveals, falsifying records to cover employee underpayment constitutes wage theft, which presents a direct financial benefit to the firm and shareholders at the expense of other stakeholders. It is a poor corporate governance practice because it does not focus on the interests of all stakeholders, especially employees.
Stewardship Theory
Also, 7-Eleven has a stewardship problem because the franchisees failed to work in the best interest of the shareholders. According to Magnanelli and Pirolo (2021), managers can only be stewards if the organization empowers them and instils values of integrity and trust in them. 7-Eleven failed to promote stewardship because it did not empower its franchise with appropriate guidance on employment law and wage structures.
Issue 2: Lack of supervision and operational guidance
As mentioned in a report, 7-Eleven is facing lawsuits and fines related to the underpayment of workers, including violations of overtime pay and unpaid incentives (Commonwealth of Australia, 2016). These violations are related to the lack of strict supervision of the company and the weak legal awareness of fr...