1. Assignment #3
1. Is Fleming engaging in anything unethical here? If you were a Fleming executive, on what
grounds would you defend the company's actions?
Fleming’s activities were very unethical, and they were deceitful. Their pricing was not well
defined and their clientele did not understand what they were being charged for. They exploited their
position in the market and customer trust. “While the use of convention wisdom allows Fleming’s to try
to place all the blame on their ties to Kmart according to former employees, accounting managers and
industry observers, the pressure to make sales under an ambitious turnaround plan by former Chief
Executive Officer Mark Hansen caused an extraordinary series of events that led to the company's
implosion” (Monies, 2004, ¶ 2-3). After attempting to realign and reconfigure the company was unable to
secure the funding that they needed. “Some practices, such as the large deductions from vendor invoices,
caught the eye of the SEC in November 2002, when it began an informal inquiry into Fleming's
accounting” (Monies, 2004, ¶ 19). The only grounds for defense rest on the response to the large
deductions in that “the companies artificially inflated the vendor rebates because they anticipated sales
that never materialized” (Monies, 2004, ¶ 21).
2. Is the company unfairly using its muscle of serving some 50,000 retail accounts to take advantage
of its suppliers?
Yes, Flemings did unfairly bully their suppliers. “[Gary Giblen, director of research at C.L. King
& Associates, a New York investment firm,] says Fleming has likely used strong-arm tactics with its
vendors as one source of cash. The common practice in food retailing of partially withholding payment on
deliveries from manufacturers has historically been pursued aggressively by Fleming, Giblen says” (U.S.
District Court, 2003, p. 58). Manufacturers that sold through Fleming were hesitant to cut off deliveries to
Fleming or protest too much because they didn't have alternatives to getting their products to Fleming’s
50,000 customers. “Former Fleming executives say smaller suppliers with less clout paid these Kmart

2. Buyer-Supplier
Information
Exchange
H3
+
Supplier
Satisfaction
H2
+
(–) H1
H7
+
Perceived Buying
Firm Commitment
H5
Supplier-Supplier
Networking
H4
(–)
Perceived Buying
Firm Unethical
Behavior
(–) H6
(–)
related deductions for fear of losing business. Most supermarkets use only one distributor, so a supplier is
excluded from them if it can't get along with the distributor” (U.S. District Court, 2003, p. 31). This gave
Flemings a powerful gatekeeper status since many grocery products manufacturers use a third- party
distributor to access small independent grocery chains through a grocery distributor such as Flemings.
“When a buying firm is perceived by the supplier to have undertaken some unethical behavior, the norms
of the buyer-supplier social contract are violated” (Eckerd & Hill, 2012, p. 243).
Relational Model
(Eckerd & Hill, 2012, p. 241).
This chart shows the relationship between buyer-suppliers, supplier-suppliers, and what happens
when unethical behavior is perceived.
3. If you were a manufacturer that sold through Fleming, would you be looking for other
distributors to handle your products?
As a manufacturer it would be optimal to find a substitute distributor or to develop a self-reliant
supply chain for distribution. The only problem with this is that it could be cost prohibitive to find a
substitute distributor. To develop a self-reliant supply chain could cause issues with not having the
necessary skills to build such a network within the organization. This is why despite the problems the
distributors still stayed with Flemings for a lengthy period of time. “Vendors who asked to not be

3. identified, citing fear of retaliation from Fleming, disagreed, and a few said they have either stopped
shipping to Fleming or are demanding cash in advance for deliveries. One such small-to-medium-sized
vendor said Fleming typically alleges damaged or improperly delivered goods, or cites the costs of
promoting items at retail outlets” (U.S. District Court, 2003, p. 58).
4. If you were a Fleming shareholder, would you be pleased with the manner in which the company
is being managed and the reputation that such practices are giving the company? Is what is going
on here sufficient grounds for selling the shares you owns?
With all the easiness of both their suppliers and the unethical behavior that is evident, “Fleming
and Hansen [had] told shareholders that the conversion to price-impact stores would enhance shareholder
returns” (U.S. District Court, 2003, p. 14). While as a shareholder this would be a good thing since if
successful it would increase shareholders wealth. “Leaders of for-profit corporations have a fiduciary
obligation to increase the value of the money invested in the corporation by its shareholders” (Cragg,
2002, p. 125).
As time went on and reports were made “exposing Fleming’s practice of taking unauthorized,
improper, and unsustainable deductions from vendors” and on July 30, 2012 during a press release it was
revealed that “earnings per share guidance for the second half of the year is, dependent on retail operating
earnings returning to prior year levels, [has] not yet seen evidence of recovery” (U.S. District Court, 2003,
p. 59). As a shareholder this would cause uneasiness and would be realistic grounds in selling the shares
owned. In the Class Action Suit against Flemings it was stated that “had plaintiff and the other members
of the Class known of the material adverse information which defendants did not disclose, they would not
have purchased Fleming common stock at the artificially inflated prices that they did” ” (U.S. District
Court, 2003, p. 72). With this being said it would have been advisable to sell the shares of the stock after
the first few reports of trouble with Flemings.

4. “Corporations have collapsed and filed for bankruptcy as a result of unethical actions and self-
severing leadership practices. These leaders who have reaped more harm than good in their actions have
directly affected our nation’s economy and quality of life” (Sauser, 2005, p. 356). Flemings filed Chapter
11 bankruptcy protection and disposed of its assets in order to pay off creditors. This was the end
Fleming’s Company. The events leading to end of the company did affect the economy with the suppliers
and shareholders being greatly affected because of Fleming’s actions.

5. References
U.S. District Court: Class Action Lawsuit IN RE FLEMING COMPANIES SECURITIES LITIGATION.
(FEIJ 1.3. 2003). Retrieved from
http://securities.stanford.edu/filings-documents/1025/FLM02-01/2003213_f01c_020178.pdf
Cragg, W. (2002). Business Ethics and Stakeholder Theory. Business Ethics Quarterly, 12(2), 113-142.
Retrieved from
http://web.a.ebscohost.com.ezproxy.nu.edu/ehost/pdfviewer/pdfviewer?sid=f8ccbffe-9b04-4f45-
ae94-d563ff93ba69%40sessionmgr4002&vid=1&hid=4112
Eckerd, S., & Hill, J. A. (2012). The buyer-supplier social contract: Information sharing as a
deterrent to unethical behaviors. International Journal of Operations & Production
Management, 32(2), 238-255. doi: http://dx.doi.org/10.1108/01443571211208641
Monies, P. (2004, August 1). Fleming’s fall: Vigorous turnaround plan blamed. The Oklahoman.
Retrieved from
http://newsok.com/flemings-fall-vigorous-turnaround-plan-blamed/article/1285881/?page=1

6. Sauser, William I., Jr. (2005). Ethics in Business: Answering the Call. Journal of Business Ethics, 58(4),
345-357. doi: http://dx.doi.org/10.1007/s10551-004-5715-z

7. Sauser, William I., Jr. (2005). Ethics in Business: Answering the Call. Journal of Business Ethics, 58(4),
345-357. doi: http://dx.doi.org/10.1007/s10551-004-5715-z