Collapse of MG Rover | NAME

UNIVERSIT
Y

CASE STUDY IN BUSINESS ETHICS

CONTENTS
Part A:.......................................................................................................................................................................3
Set out the main stakeholders in the MG Rover business at the time of its collapse. How would you determine
the relative importance of their stake?.................................................................................................................4
Part B:.......................................................................................................................................................................7
Think about MG Rovers actions in the case in terms of Carrolls pyramid of CSR which responsibilities
was it upholding, and how would you say it was ranking them? Do you think this is appropriate or
inappropriate in this situation? Could it have done more to treat its employees ethically?.................................7
Part C:.....................................................................................................................................................................11
Arguments for corporate accountability and citizenship emphasize the declining power of governments and
the increasing power of multinationals. How would you assess the relative power of the main actors in the
MG Rover case?.................................................................................................................................................11
Part D:....................................................................................................................................................................14
Who, if anyone, should take responsibility for preserving jobs at Longbridge the company, its directors, the
UK government, SAIC, the workers themselves? Or is unemployment such as this simply a bitter pill that
workers have to take in the face of industrial restructuring away from heavy industry in developed
economies?.........................................................................................................................................................14
References:.............................................................................................................................................................19

PART A:

SET OUT THE MAIN STAKEHOLDERS IN THE MG ROVER BUSINESS AT THE

TIME OF ITS COLLAPSE. HOW WOULD YOU DETERMINE THE RELATIVE
IMPORTANCE OF THEIR STAKE?

During the troubled times at MG Rover business, the main stakeholders were:

BMW
The UK Government
Shanghai Automotive Industrial Corporation ( SAIC)
Employees of MG Rover, both workers as well as employees part of the supply chain.
Phoenix Four and,
Nanjing Automobiles.

The importance of each of the stakeholders can only be a matter of ones opinion. The
Chartered Quality Institute (CQI) says that the meaning of Stakeholders normally varies and
is extremely contextual in nature. (CQI, n.d.). However, CQI (n.d) adds that in business
parlay, the term Stakeholder can be equated with any third party who has an interest in the
end result. (CQI, n.d.). The six main stakeholders at MG Rover are listed above, who had a
direct interest in the economic outcomes at the business.
Perhaps the most important stakeholder was the several employees at MG Rover. The
corporate battles and Government interventions first provided them hope of continued
employment and stability, then, squashed these very hopes. The employees did not have a
direct role in the fortunes of the company. They were not the people implementing the
strategies at MG Rover. However, their stake in the company was beyond any comparison.
Their livelihood, future and needs for basic requirements fluctuated with the fortunes of the
company. They were the biggest losers in the battles at MG Rover. The decisions by the
management had a direct bearing on the prospects of the employees. With an uncertain future
ahead of them, they would be hard pressed to find new opportunities to sustain themselves.

In my opinion, the second most important stakeholder was probably the UK Government.
Even though it did not have a direct influence on the activities that concerned MG Rover, the
end result at MG Rover would and did prove to impact the then Government in a major way.
Elections were round the corner at the time of the collapse at MG Rover, and the government
had to act in order to save its own face, as well as provide some relief to the other
stakeholders at MG Rover, especially the domestic ones, and most importantly the several
thousand employees at the Car Company. The efforts by the then administration fell flat on
their faces. They could not ensure BMWs stay at the Longbridge facility, and in the end,
despite several offers of subsidies, grants and loans, it could not persuade continuity of
production at the business, which resulted in several employees losing their job. Moreover,
the Government came into some serious criticism by the opposition, journalists and
management pundits alike for offering several benefits to external parties as a sort of
election bribe
The next important stakeholder in my opinion at MG Rover was Phoenix Four, led by ex
Rover CEO John Towers. They had been touted as the saviors of the company, as well as the
saviors of the automobile industry in the UK. With considerable financial investments as well
as reputation at stake, they set out the task of resurrection at the company. They managed to
control the growing losses at the company, bringing it down to 77 million in 2003 from
880 million in 1999. They were also hailed for bringing back the classic MG brand to the
business. However, the success was short lived, as with continuing losses, they found it hard
to keep the business afloat. They sold the business in parts. While they sold the Intellectual
Property Rights of two Rover models for 100 million to the Chinese State owned SAIC and
finally sold off the business to another Chinese company: Nanjing Automobiles.
Although BMW had exited MG Rover a while back, it still had stakes in the business, with a
credit line as well as benefits provided to the company worth almost 1 Billion. With the

collapse of the business and no sustainable future, the investments by the German
Automobile giant too looked at risk.
Nanjing Automobiles and SAIC were probably two beneficiaries when we compare the
turmoil at MG Rover. The State owned SAIC got the intellectual property rights to two Rover
models, which could be marketed in China. With another Chinese company buying out MG
Rover, it proved to be beneficial for them. Moreover, Nanjing Automobile soon started to
ship out the machinery at Longbridge to its low cost production facilities in China. Nanjing
Automobiles benefitted by acquiring the MG Rover brand, its machinery, and without the
headache of dealing with its high cost labor problems in the UK, as they started the
production at China. With the State owned SAIC ready to market two Rover models in the
country, it proved to be a major win-win scenario for the State Owned SAIC as well the
Chinese manufacturer Nanjing Automobiles.

PART B:

THINK ABOUT MG ROVERS ACTIONS IN THE CASE IN TERMS OF

CARROLLS PYRAMID OF CSR WHICH RESPONSIBILITIES WAS IT
UPHOLDING, AND HOW WOULD YOU SAY IT WAS RANKING THEM? DO
YOU THINK THIS IS APPROPRIATE OR INAPPROPRIATE IN THIS
SITUATION? COULD IT HAVE DONE MORE TO TREAT ITS EMPLOYEES
ETHICALLY?

As indicated by Carroll corporate social obligation includes the behavior of a business with
the goal that it is financially beneficial, well behaved, moral and socially steady. (Dudovskiy,
2012)To be socially dependable then implies that productivity and dutifulness to the law are
preeminent conditions when talking about the company's morals and the degree to which it
backs the general public in which it exists with commitments of cash, time and ability.
(Dudovskiy, 2012)Moreover, the distinctive layers in the pyramid help administrators see the
diverse sorts of commitments that society expects of organizations. (Dudovskiy, 2012)

[Adapted from: (Dudovskiy, 2012)]

At the point when things happen, it is consoling to stick the blame on a few terrible men. To
do so suggests that the world is a kind, tender spot and that if not for a couple of terrible,
narrow minded sorts we would all be content. That is the way the disappointment of MG
Rover, which was once an excellent auto organization which has gone into receivership
following four years of decay, is generally seen in Britain. (The Economist, 2005)The last
part of this sorry story included its buy in 2000 for 10 ($15) from BMW by a gathering
called Phoenix which neglected to reignite a sparkle from the titan's fiery debris. The four
men behind Phoenix did rather pleasantly, providing for themselves 10m advance note and
16.5m annuity store, and their "avarice" has consequently turned into the center of open
resentment at the organization's end. Gordon Brown, the chancellor, has guaranteed "request"
into what went ahead in the organization. (The Economist, 2005) The thought that these
underhanded people are in charge of what's happened may be encouraging, however, it is

likewise perilous. It permits individuals to abstain from sticking the accused where it truly
has a place on the laws of financial matters, which direct that medium-sized auto
organizations are damned, and on the administration, whose defeatist mediation five years
back harmed the investments of the specialists it said it was attempting to ensure. (The
Economist, 2005)
Examining Carrolls Corporate Social responsibility on MG Rover, we can find that
economically it has huge liabilities to various banks and BMW. Moreover, there may be
unpaid wages to its employees which needs to be cleared. Moreover, it could be the
companys job to provide its employees with a suitable leave package or ensure they found
work somewhere else.
As far as Legal responsibilities go, it may have to clear pensions and other funds of the
employees. Moreover, there may be unpaid taxes to the government which it will need to
clear.
Ethically, MG Rover is in a paradoxical situation. The Financial Reporting Council's report
which recently seriously censured Deloitte and imposed a fine of 14 million over its part as
consultant to MG Rover Group cannot be described as shocking. (Economia, 2013)The
claims against the firm had as of now been discovered demonstrated and prattle in the city
had proposed that the measure of the fine may wind up some place in the middle of 7.5m
and 20m (Economia, 2013)
What has surprised the calling however is the obvious augmentation of the commitment to
consider general society enthusiasm for the tribunal's report and the effect it may have on the
way that sanctioned bookkeepers are relied upon to carry on with non-review customers.
(Economia, 2013)

Quickly, the tribunal also found that Deloitte which evaluated MG Rover was liable of
critical offense in its dealings with the "Phoenix Four" who had obtained the falling flat auto
firm for 10 in 2000 with a perspective to resuscitating its fortunes. MGR caved in after five
years, with a debt of 1.3bn, and over 6000 people jobless. (Economia, 2013)
The bookkeepers, the tribunal said had been more conscious of their personal interests in
front of that of general society and bargained their own particular objectivity when going
about as MGR's corporate account consultants. It is this inquiry of general society engage that
has put the calling in a bind. The tribunal further pulled up Deloitte by saying it should have
"sufficiently to consider people in general enthusiasm before tolerating or proceeding with
their engagement". Yet, notwithstanding continuous references to people in general
investment, it doesn't go ahead to clarify what it implies by the expression or what Deloitte
could or ought to have done to think of it as. It may well be that the tribunal essentially
chosen the firm had neglected to consider the general population interest on the grounds that
there was no documentation specifying any exchanges (these occasions occurred 12 years
prior). (Economia, 2013) Provided that this is true, this would be the first occasion when that
the thought of disappointment to archive suggesting disappointment to consider has been
connected external auditors.
There are no philanthropic responsibilities at MG Rover.

PART C:

ARGUMENTS FOR CORPORATE ACCOUNTABILITY AND CITIZENSHIP

EMPHASIZE THE DECLINING POWER OF GOVERNMENTS AND THE
INCREASING POWER OF MULTINATIONALS. HOW WOULD YOU ASSESS
THE RELATIVE POWER OF THE MAIN ACTORS IN THE MG ROVER CASE?

The ideas of business morals and social obligation are regularly utilized conversely, albeit
each has a different significance. The term business morals speak to a blend of two extremely
well-known words, to be specific "business" and "morals". The saying business is typically
used to signify "any association whose target is to give products or administrations to
benefit", though associations are characterized as "(1) social elements that (2) are objective
arranged, (3) are planned as deliberately organized and composed action frameworks and (4)
are connected to the outside environment" (Daft, 2001). A standout amongst the most
essential authoritative components highlighted by this definition is that associations are in
reality open frameworks, i.e. they must connect with the earth keeping in mind the end goal
to survive. The association needs to discover and get required assets, decipher and follow up
on ecological changes, discard yields, and control and direction inward exercises
notwithstanding natural unsettling influences and instability. The way that business
associations are open frameworks implies that despite the fact that organizations must make a
benefit by a specific end goal to survive; they must adjust their craving for profits against the
needs and demands of the general public inside which they work. Henceforth, in spite of the

way that in business economies business associations are customarily permitted some level of
prudence being "apparently allowed to pick what products and administrations they
deliver, the businesses they mean to serve and the methodologies by which they create",
sorted out social orders around the globe did in fact create standards and created principles or
guidelines of behavior - both lawful and verifiable - with a specific end goal to guide
organizations in their endeavors to gain benefits in ways that don't hurt society overall.
The statement morals in the term business morals originate from the Greek word ethos
signifying "character or custom". Morals has been characterized in a mixture of ways, entomb
alia, as: the investigation of profound quality; investigation into the nature and grounds of
ethical quality where the term profound quality is taken to mean good judgments, principles
and tenets of behavior; and/or as the code of good standards and values that represents the
practices of an individual or gathering concerning what is correct or wrong (Daft, 2001).
Taking into account these conceptualizations, the meaning of business morals embraced here
embodies the ethical standards and norms that guide conduct in the realm of business while
an association's commitment to augment its certain effect, and minimize its negative effect,
on society" is being termed corporate social obligation
Corporate social obligation is a multidimensional build involving four subsets of (1)
financial; (2) legitimate; (3) moral; and (4) deliberate magnanimous obligations. The
monetary obligations of a business are to deliver merchandise and administrations that
society needs and needs at a value that can propagate the business and fulfill its commitments
to financial specialists. Subsequently social obligation, as it identifies with the economy,
includes various particular issues including how organizations identify with rivalry,
shareholders, buyers, representatives, the neighborhood group and the physical environment.
The lawful obligations of organizations are basically the laws and regulations they must
comply. It is the absolute minimum needed of business associations by society as an

exchange for permitting them to acquire the inputs they require from nature, change inputs
into yields and discard yields - as merchandise and administrations procured by purchasers
with a specific end goal to fulfill their individual needs and needs. The legitimate
measurement of corporate social obligation in this way alludes to obeying neighborhood,
national and worldwide law directing rivalry (procompetitive enactment) and securing:
specialists' human rights (value and security enactment); the (customer insurance enactment);
and the indigenous habitat (natural assurance laws). Moral obligations are those practices or
exercises expected of business by society - yet not classified in law. This subset of corporate
social obligations may be deciphered as communicating the 'soul of the law' opposite the
'letter of the law' in the past case. In conclusion intentional charitable obligations are those
practices and/or exercises wanted of business by society and alluding to business
commitments to society regarding personal satisfaction and society's welfare - for instance,
providing for magnanimous associations and/or supporting group ventures.

In spite of the fact that there would seem, by all accounts, to be little contradiction about the
requirement for associations to act capably at the more extensive society and the common
habitat in which they work, associations themselves have received an extensive variety of
positions with respect to corporate social obligation. The different hierarchical stances versus
social obligation in free-showcase economies fall along a continuum, going from a low to
high level of socially mindful authoritative practices (Barney and Griffin, 1992, pp. 734-735).
The few associations that take a social check methodology to social obligation generally do
as meager as would be prudent to understand social and/or natural issues. In such a case ..
"the association does stand separated from society and capacities best when it returns to
essentials, when it is liberated of government regulation and stipulations and disposes of
social designing for outright building" (Schwartz and Gibb, 1999, p.96). One stage expelled

from social hindrance is social commitment, whereby the association does everything that is
needed of

PART D:

WHO, IF ANYONE, SHOULD TAKE RESPONSIBILITY FOR PRESERVING JOBS

AT LONGBRIDGE THE COMPANY, ITS DIRECTORS, THE UK GOVERNMENT,
SAIC, THE WORKERS THEMSELVES? OR IS UNEMPLOYMENT SUCH AS THIS
SIMPLY A BITTER PILL THAT WORKERS HAVE TO TAKE IN THE FACE OF
INDUSTRIAL RESTRUCTURING AWAY FROM HEAVY INDUSTRY IN
DEVELOPED ECONOMIES?

MG Rover's directors, Pricewaterhousecoopers, advertised on April 15 that the last Britishclaimed volume auto producer would close with prompt impact.
It implies a loss of 5,000 employments at Rover's Longbridge plant, and 25,000 more at
suppliers and merchants, for the most part in the West Midlands. Laborers will get a most
extreme result of about 3,000. Once the 1,000 autos stranded on the generation lines are
finished, the staying 1,000 laborers will be laid off and the plant mothballed. Merchants are
now sacking deals and showroom staff here and there the nation.
The specialists' annuities have gone. There is a 67 million deficit starting 2003, the most
recent date for which figures are accessible in Rover's benefits reserve. Yet BMW

exchanged a completely loaded benefits support in 2001, when they sold MG Rover to
Phoenix Venture Holdings.
Huge numbers of the repetitive laborers now confront individual liquidation, as the outlets
look to gather obligations of up to 10,000 each from the individuals who had bought Rover
autos on a postponed installment plan.
Managers of 300,000 Rover and MG autos sold inside the most recent three years likewise
confront instability about the estimation of their new-auto guarantees.
The media has depicted the end of MG Rover as the passing of the British auto industry. In
truth, the organization sold to Phoenix Venture Holdings in 2000 for the ostensible aggregate
of 10 was all that stayed after the disappointment of the administration's decades-long
endeavor to keep up such a broadly based industry. A mass national auto industry had stopped
to exist in any genuine sense in the 1980s, as the Conservative administration of Margaret
Thatcher surrendered past endeavors to safeguard a "national champion" through government
sponsorships.
While British auto organizations were previously one of the nation's real superintendents in
1973 a workforce of 210,000 created more than a million autos a year by 2005, MG Rover
utilized only 6,100 specialists and was turning out around 100,000 autos a year, with deals
declining year on year.
For autoworkers, it has been demise by a thousand cuts. At the same time the issues
confronted go a long ways past the quick destiny of MG Rover or even the automobile
business. The central inquiry is to see how this disaster has come to pass for MG Rover to
form a free political reaction to the patriot and star entrepreneur point of view of the

exchange unions, which has demonstrated unequipped for shielding the occupations of
specialists.
clearance room deal did not imply that MG Rover was a going concern. While the unions
guaranteed Longbridge had been "spared", MG Rover under Phoenix was never reasonable.
None of the fundamental issues had been determined.
In a far-reaching way, Rover still expected to wind up some piece of a bigger global concern.
Dwindle Cooke, engine industry educator at Nottingham Business School, said of the
Phoenix administration, In the first place, they went out and stomped the world conversing
with everybody, looking for an accomplice. With a three- or four-product offering up, you
have to amortize improvement costs over a million units. Phoenix, interestingly, was talking
by most accounts 250,000 business a year.
Meanderer required a base offer of 180,000 autos a year just to make back the initial
investment. Rather, deals drooped to 145,000 in 2002, 116,000 in 2003 and 110,000 in 2004,
by which time its impart of the auto business sector had tumbled to short of what four
percent, down from 13.4 percent in 1990.
Far more terrible, Rover was basically repeating old models under another body shell. New
models are massively costly to create costing around $2 billion.
Phoenix's quest for worldwide speculation accomplices demonstrated to a great extent
unsuccessful. John Towers, Phoenix CEO, attempted to tie up joint wanders abroad, firstly
with Tata in India and afterward with Brilliance in China. Not one or the other took off.
In 2004, Towers attempted to structure a "key partnership" with Shanghai Automotive
Industry Corporation (SAIC) to create and construct another set of models. SAIC is China's
biggest auto producer, making autos under permit in joint wanders with GM and Volkswagen.

It was the disappointment of this last-jettison endeavor that instantly encouraged MG Rover's
breakdown.
In any case, the extent that the four chiefs of Phoenix gathering were actually concerned,
their interest in MG Rover was lucrative. As the Financial Times noted, on the very day
managers were sent to Longbridge, the Phoenix executives did "what any merciless business
person would have done in their circumstance: incentivize, strip resources, take money out
ahead of schedule". The Financial Times portrayed this as "copying through another person's
cash".
From a beginning total of 60,000 to structure Phoenix, the four holders of the gathering,
Towers, Peter Beale, Nick Stephenson and John Edwards, soon turned into tycoons. They lost
no chance to plume their own particular homes, paying themselves liberal compensations and
building their own 13.5 million annuity finance that together has made them 40 million
wealthier.
The executives part MG Rover into 28 separate organizations, hiving off Rover's productive
property portfolio, motor and auto renting organizations into Techtronic, one of the
organizations under their immediate control, and offering them on at a benefit. They cleared
out MG Rover an unfilled shell, owning only obligations, with some of these owed to their
different organizations, making them Rover's fundamental, and now and again sole, loan
boss.
BMW had sold Rover's auto fund firm, MGR Capital, straightforwardly to the executives,
who set up a joint wander with the HBOS bank to purchase a 313 million load of auto
advances and rents in 2001 from BMW. As per the Financial Times, the chiefs are to
experience a bonus benefit of 6.1 million from MGR Capital when the last regularly

scheduled installments are made on the credits in the not so distant future or right on time
next.
No one sensible at the time thought Phoenix had a shot of sparing the organization. Since the
certain has happened, the main gatherings to have benefitted from the legislature's
intercession are the men behind Phoenix and the Chinese organizations to whom they sold the
bits of the organization that were justified even despite anything. (The Economist, 2005)
Given what a wreck the legislature has made of MG Rover as such, it may have the beauty to
quit imagining it can spare the firm. Anyhow, regardless of a large portion of a century of
fizzled mechanical arrangement, the conviction that it ought to have the capacity to do
something perseveres; and, with a race three weeks away, it is unrealistic to attempt to clarify
voters of this thought. So the specialists' families walk on Downing Street, and the legislature
hacks up 6.5m a week to stay with them, and the hazardous thought that mediation is liable
to be useful as opposed to destructive, alive. (The Economist, 2005)
We can conclude by saying that while a lot of mistakes have been made at MG Rover, no one
can be put to blame in any definite way. The directors did look out for themselves, but they
also tried to save the company. The government tried its best to secure the situation at
Longbridge and failed. BMW too came, saw and dropped out. The future is in the hands of
SAIC and Nanjing Corporation to take MG Rover to past glory or let it die.

REFERENCES:
CQI Stakeholders:, [Online], Available: http://www.thecqi.org/Knowledge-Hub/Knowledge-portal/Customersand-stake-holders/Stakeholders/ [17 January 2015].
Daft, R. (2001) Organization Theory and Design, Cincinnati, Ohio: South Western.

Dudovskiy, J. (2012) Carrolls CSR Pyramid and its applications to small and medium sized businesses, 25
October, [Online], Available: http://research-methodology.net/carrolls-csr-pyramid-and-its-applications-tosmall-and-medium-sized-businesses/ [17 January 2015].
Economia (2013) Unintended consequences of MG Rover , 13 September, [Online], Available:
http://economia.icaew.com/opinion/september-2013/unintended-consequences-of-mg [17 January 2015].
The Economist (2005) Greed and cowardice, 14 April, [Online], Available:
http://www.economist.com/node/3861248 [17 January 2015].