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  • Subject Name : Corporate Governance

Introduction to Corporate Governance and Efficient Business Ethics

Corporate governance and efficient business ethics play a crucial role in ensuring that an organization operates smoothly with no probability of errors. With emerging rivalry and changing customer needs, it is important to focus on the sustainability side to make sure the organization does not have to face any negative consequences. Ethical considerations in business help to create an optimistic image within the society, it help ensure organizational efficacy. Understanding corporate governance and social responsibility will be helpful for organizations to know how it affects businesses and what consequences it may face by not applying such in business proceedings. This report will emphasize on the struggles and challenges that Chipotle has faced within their business operations and identify the key factors that would have helped them overcome the degrading crisis. Managing ethics and crisis is also a significant factor that companies overlook as found within the selected case study. Overlooking strategic issues will lead to the business downfall and massive loss of revenue. Thus, this report will critically analyze the key strategic issues of Chipotle concerning business ethics and inefficiency in managing a crisis to develop a conclusion about the identified issues and strategies to resolve. 

Discussion on Corporate Governance and Efficient Business Ethics

As identified from the case study, Chipotle was involved in several issues that have hampered their business operations drastically. There are several challenges that the company was facing such as food safety negligence, non-compliance of state laws, federal laws, lawful mandates, and ineffectiveness in managing a critical crisis. It has been noted that their employees and customers are the ones who were majorly affected by the unethical practices of working in poor working condition and catering unsafe foods. Besides that, the company has also to face ethical issues in compensating fairly to those who were affected by the food safety breach. With no safe working condition for employees, it has led them to be vulnerable to contagious diseases. Also, there was no transparency among the business operations; essential for any food business to conduct. All this can be resolved and there shall be no possibility of occurrence of such problems if effective and strategic decision are been made concerning ethics, corporate governance, and a committed team to manage the crisis well. These factors would have played an important role in ensuring the smooth functioning of business and creating a positive reputation within the community as before.

There is a close relationship between strategic issues and the identified issues of Chipotle. First, if Chipotle has had an effective and smooth working corporate governance to follow, the unethical practice of foot safety breach would not have taken place. Second, the lack of effective strategy or policy within the corporate governance to have a structured and fair compensation policy would help prevent its employees and customers from going through difficulties. Third, strict adherence to federal laws concerning food safety while serving foods to the customer and within their kitchen operations would have ensured no obligations or occurrence of such critical events. It is of obvious fact, hygiene is a tier-one priority for food commerce, but as stated in the case study, Chipotle was negligent towards ensuring cleanliness. When the students of Boston College fell sick after eating a meal from a Chipotle restaurant, because of a contagious norovirus spread from its kitchen staff, it has caused massive damage to their customers. Subsequently, after the company faced several lawsuits, the company struggled to manage the ongoing crisis by applying strategic decisions. This shows that there is a close link between following business ethics, crisis management, and corporate governance. 

According to a study by Bhatt & Bhatt, (2017), corporate governance is a system by which it directs organizations to operate and manage significantly (Bhatt & Bhatt, 2017). The study reveals that involving effective corporate governance within the company has shown considerable improvement in the firm and employees remarkably (Bhatt & Bhatt, 2017). Thus, this indicates that applying effectual corporate governance in Chipotle would have prevented the crisis to arise and regain the fame it had earlier. 

Absence of effective business ethics was another issue by which the company fell short. Werhane, (2019), acknowledges that the concept of corporate social responsibility is essential and has the potential to manage a crisis effectively (Werhane, 2019). Identifying strategic issues of the company and planning proficiently to resolve such issues is the key. Therefore, implementing proficient corporate governance would have ensured organizational effectiveness, and applying effective CSR activity with a dedicated team would have helped recover the company's damaged image significantly.

References for Corporate Governance and Efficient Business Ethics

Bhatt, P., & Bhatt, R. (2017). Corporate governance and firm performance in Malaysia. Corporate Governance: The International Journal Of Business In Society, 17(5), 896-912. https://doi.org/10.1108/cg-03-2016-0054

Werhane, P. (2019). The Normative/Descriptive Distinction in Methodologies of Business Ethics. Issues in Business Ethics, 21-25. https://doi.org/10.1007/978-3-319-89797-4_2

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