Tesco and The Horsemeat Scandal

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Introduction This essay attempts to critically evaluate Tesco with regards to the Horsemeat Scandal. The aim is to critically asses this event through the application of theories and readings. A brief background on how the scandal arose will be provided. Key question that must be asked are did Tesco misbehave at all? And if they did, how could they have been able to justify their actions to themselves? According to Cooper and Owen (2007) accountability is a somewhat unclear term. This is not because the exact definition of being accountable ‘required or expected to justify actions or decisions; responsible’ (Oxforddictionaries.com, 2014) is hard to understand, it is because the question still remains as to whom is the accountable person…show more content…
This is evident as if people had known there was horse in their beef products the whole scandal would not have occurred. Information asymmetries can arise in three ways through hidden characteristics, hidden intentions and hidden actions (Mishra, Heide and Cort, 1998) (Wiese and Toporowski, 2013). Hidden characteristics (otherwise known as adverse selection) and hidden intentions (otherwise known as moral hazard) are the two most problematic to customers, as they cannot easily evaluate the object that is being exchanged. Hidden characteristics can be managed through signalling, screening and self-selection (Mishra, Heide and Cort, 1998) (Wiese and Toporowski, 2013). Tesco used signalling through the Bord Bia quality assurance scheme (Tesco.ie, 2014). Screening by offering food samples in store as testers and self-selection was not clearly identifiable as being used by Tesco. Hidden intentions are harder to identify from a third party perspective. In Tesco’s annual report you can see that they incentivise their managers by requiring senior managers to hold shares with a value of one times their salary (Tesco Annual Report, 2013, p49). This works to align the management with shareholders wants and needs but not necessarily with stakeholders’ as managers may cut corners with quality to decrease costs and increase profits. So when an agency
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