The Dark Side of Buyer Power: Supplier Exploitation and the Role of Ethical Climates
- 1k Downloads
Media increasingly accuse firms of exploiting suppliers, and these allegations often result in lurid headlines that threaten the reputations and therefore business successes of these firms. Neither has the phenomenon of supplier exploitation been investigated from a rigorous, ethical standpoint, nor have answers been provided regarding why some firms pursue exploitative approaches. By systemically contrasting economic liberalism and just prices as two divergent perspectives on supplier exploitation, we introduce a distinction of common business practice and unethical supplier exploitation. Since supplier exploitation is based on power, we elucidate several levels of power as antecedents and investigate the role of ethical climate as a moderator. This study extends Victor and Cullen’s (1988) ethical climate matrix according to a supply chain dimension and is summarized in an integrated, conceptual model of five propositions for future theory testing. Results provide a frame of reference for executives and scholars, who can now delineate unethical exploitation and understand important antecedents of the phenomenon better.
KeywordsEconomic liberalism Ethical climate Fairness Just prices Power Supplier exploitation Supply chain management
- Andre, C., & Velasquez, M. (1990). Justice and fairness. Issues in Ethics, 3(2). Accessed June 30, 2014, available at http://www.scu.edu/ethics/publications/iie/v3n2/.
- Aquinas, T. (1920). Summa theologica. London: Burns Oates & Washbourne.Google Scholar
- Bainbridge, A., McGrath, P., & Janda, M. (2014). Coles admits unconscionable conduct in dealing with suppliers; $10 million penalty agreed with ACCC. In: abc.net (December 15, 2014). Accessed January 29, 2015, available at: http://www.abc.net.au/news/2014-12-15/coles-accc-reach-settlement-on-supplier-conduct/5967476.
- Bowie, N. E. (1991). Challenging the egoistic paradigm. Business Ethics Quarterly, 1(1), 1–21.Google Scholar
- Bowman, A. (2013). UK appoints regulator to protect grocery suppliers. In: ft.com (June 10, 2013). Accessed June 30, 2014, available at: http://www.ft.com/cms/s/0/48e059ee-dda9-11e2-892b-00144feab7de.html#axzz368RECYjq.
- Burritt, C., Wolf, C., & Boyle, M. (2010). Why Wal-Mart wants to take the driver’s seat. Bloomberg Businessweek, 4181, 17–18.Google Scholar
- Butler, S. (2013). Tesco accused of squeezing suppliers to support its profits. In: The Guardian (November 28, 2013). Accessed January 13, 2015, available at: http://www.theguardian.com/business/2013/nov/28/tesco-accused-of-squeezing-suppliers.
- Carter, J. R., & Narasimhan, R. (1996). Is purchasing really strategic? Journal of Supply Chain Management, 32(1), 20–28.Google Scholar
- Casciaro, T., & Piskorski, M. J. (2005). Power imbalance, mutual dependence, and constraint absorption: A closer look at resource dependence theory. Administrative Science Quarterly, 50(2), 167–199.Google Scholar
- Cox, A., Sanderson, J., Watson, G., & Lonsdale, C. (2001b). Power regimes: A strategic perspective on the management of business-to-business relationships in supply networks. In: H. Håkansson, C. A. Solberg, L. Huemer, & L. Steigum (Eds.), Proceedings of the 17th Annual IMP Conference: Interactions, Relationships and Networks: Strategic Dimensions, 9–11 September, Norwegian School of Management BI, Oslo.Google Scholar
- Crane, A., & Matten, D. (2007). Business ethics. Oxford/New York: Oxford University Press.Google Scholar
- Crisp, R. (1995). Deontological ethics. In T. Honderich (Ed.), The Oxford companion to philosophy. Oxford: Oxford University Press.Google Scholar
- Dienhart, J. W. (2000). Business, institutions and ethics. A text with cases and readings. Oxford: Oxford University Press.Google Scholar
- Dyer, J. H., & Singh, H. (1998). The relational view: Cooperative strategy and sources of interorganizational competitive advantage. Academy of Management Review, 23(4), 660–679.Google Scholar
- Fearne, A., Duffy, R., & Hornibrook, S. (2004). Measuring distributive and procedural justice in buyer/supplier relationships: An empirical study of UK supermarket supply chains. In: Proceedings of 88th Seminar, European Association of Agricultural Economics, Paris, 5–6 May.Google Scholar
- Feinberg, J. (1988). Harmless wrongdoing: The moral limits of the criminal law. Oxford: Oxford University Press.Google Scholar
- Freemann, S. (2012). Original Position. In: E. N. Zalta (Ed.) The Stanford encyclopedia of philosophy. Accessed October 01, 2013, available at http://plato.stanford.edu/archives/spr2012/entries/original-position.
- French, J. R. P, Jr, & Raven, B. (1959). The bases of social power. In D. Cartwright (Ed.), Studies in social power (pp. 150–167). Ann Arbor: University of Michigan Press.Google Scholar
- Friedman, M. (1962). Capitalism and freedom. Chicago: University of Chicago Press.Google Scholar
- Friedman, M. (1970). The social responsibility of business is to increase its profits. New York Times Magazine, 13, 32–33.Google Scholar
- Gates, D. (2013). McNerney: Boeing will squeeze suppliers and cut jobs. In: The Seattle Times (May 22, 2013). Accessed: July 15, 2014, available at: http://seattletimes.com/html/ .
- Greenblat, E. (2014a). Coles’ ARC rebate program: Creating unfair pressure. In: The Sydney Morning Herald (May 5, 2014). Accessed: June 30, 2014, available at: http://www.smh.com.au/business/retail/accc-takes-action-against-coles-over-alleged-treatment-of-suppliers-20140505-37rei.html.
- Greenblat, E. (2014b). How Coles squeezed suppliers. In: Financial Review (May 5, 2014). Accessed: July 15, 2014, available at: http://www.farmweekly.com.au/news/agriculture/.
- Gulati, R., & Sytch, M. (2007). Dependence asymmetry and joint dependence in interorganizational relationships: Effects of embeddedness on a manufacturer’s performance in procurement relationships. Administrative Science Quarterly, 52(1), 32–69.Google Scholar
- Levin, D. P. (1993). G.M. cites requests by Lopez. In: New York Times (May 24, 1993). Accessed May 04, 2013, available at www.nytimes.com/1993/05/24/business/gm-cites-requests-by-lopez.html.
- Maloni, M., & Benton, W. (2000). Power influences in the supply chain. Journal of Business Logistics, 21(1), 49–74.Google Scholar
- Mill, J. S. (2007). Utilitarianism, liberty and representative government. Rockville, MD: Wildside Press.Google Scholar
- Nozick, R. (1974). Anarchy, state and utopia. New York: Basic Books.Google Scholar
- Parsons, W. (2009). Wilkinson squeezes suppliers. DIY Week (18 September, 2009), 1-1.Google Scholar
- Quinn, F. J. (1997). What’s the buzz. Logistics Management, 36(2), 43–47.Google Scholar
- Quinn, J. B. (2000). Outsourcing innovation: The new engine of growth. Sloan Management Review, 41(4), 13–28.Google Scholar
- Rachels, J. (2002). The elements of moral philosophy. New York: McGra-Hill.Google Scholar
- Rawls, J. (1999). A theory of justice. Cambridge, MA: Harvard University Press.Google Scholar
- Ruddick, G., & Roland, D. (2015). Tesco under investigation over suspected supplier mistreatment. In: The Telegraph (February 5, 2015). Accessed April 17, 2015, available at: http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/11391700/Tesco-under-investigation-over-suspected-supplier-mistreatment.html.
- Russell, B. (1938). Power: A new analysis. London: George Allen & Unwin.Google Scholar
- Shaver, R. (2010). Egoism. In: E. N. Zalta (ed.) The Stanford encyclopedia of philosophy. Accessed 1 July, 2014, available at: http://plato.stanford.edu/archives/win2010/entries/ egoism.
- Singer, P. (1972). Famine, affluence, and morality. Philosophy & Public Affairs, 1(3), 229–243.Google Scholar
- Smith, C., & Cripps, P. (2009). Suppliers threaten revolt as Aldi calls for 5 % price cut. In: The Grocer (11 July 2009). Accessed October 1, 2013, available at http://www.thegrocer.co.uk/companies/suppliers-threaten-revolt-as-aldi-calls-for-5-price-cut/201410.article.
- Tedischi, J. T., Schlenker, B. R., & Lindskold, S. (1972). The exercise of power and influence: The source of influence. In J. T. Tedischi (Ed.), The social influence processes. Chicago: Aldine/Atherton.Google Scholar
- The Economist. (1998). The decline and fall of General Motors. In: The Economist (October 08, 1998). Accessed October 01, 2013, available at www.economist.com/node/167984.
- Weber, M. (1947). The theory of social and economic organization. New York: Oxford University Press.Google Scholar
- Wertheimer, A., & Zwolinski, M. (2013). Exploitation. In: E. N. Zalta (Ed.) The Stanford encyclopedia of philosophy. Accessed October 2, 2013, avalable at: http://plato.stanford.edu/entries/exploitation/.