Corporate Governance and social responsibilities - Essay Example

? Corporate Governance and social responsibilities Table of Contents Executive Summery………………………………………………………………………2 Introduction………………………………………………………………………………3 Corporate governance…………………………………………………………………….3 Parties to corporate governance…………………………………………………..3 Endorsement of corporate governance in the company…………………………..5 Corporate governance guidelines…………………………………………………7 Corporate Social Responsibility…………………………………………………………..8 Employees’ relation……………………………………………………………….7 Water conservation………………………………………………………………..9 Environmental protection…………………………………………………………10 Customer relation…………………………………………………………………11 Community support……………………………………………………………….12 Conclusion…………………………………………………………………………………12 Bibliography………………………………………………………………………………13 Executive Summary The twin concepts of corporate social responsibility and corporate governance have evolved to take center stage for all businesses that seek to operate profitably. While corporate governance ensures accountability, trust, and faith in a company’s products/services, corporate social responsibility keeps the company in touch with its external environment, particularly its customers The Coca Cola, Inc. is an example of an organization that thrives on good governance and effective corporate social responsibility practices. Having realized that remaining transparent and remaining accountable to all stakeholders are as important as designing high quality products, Coca Cola adopted a system of sponsoring various community based activities to foster a positive relationship with the customers and establish a loyal customer base. This began in the 1980s when the company put in place structures to check the sources of its funds and how the funds are spent in a transparent and accountable manner. This paper will discuss the extent to which the Coca Cola Company has incorporated corporate governance principles and social responsibility practices into its operations and how effective these strategies have been in fostering the growth of the company in the highly competitive soft drinks industry. Introduction Corporate governance refers to laws, processes and guidelines that a business is controlled, regulated, and operated in. The directors of Coca Cola have laid out factors that have led to improved corporate governance. The Coca Cola Company has been committed that guide corporations in dealing with that govern corporate governance. Corporate governance has been enforced by the shifting attention to high and risky profiles that have shifted the debate on corporate governance. In many cases the coca cola company has been faced with lawsuits from both the customers and employees over their operation errors. Rubach and Picou (2004, p.24), the role of corporate governance has been linked to the economic and social elements arising from the company activities. The Coca Cola Company has adopted the balance theory that sates that the company must find a balance between its internal activities and the activities of external shareholders. The relevant stakeholders that the coca cola company takes in consideration include shareholders, employees, competitors, suppliers and customers. The most relevant stakeholders that determine corporate governance include the shareholders. The institutional theory states that it is that role of the directors to maximize shareholders value because they are the owners the corporation. Davis (2005,p.144) asserts that the most important corporate governance policies seek to put an institution on more non financial perspective as opposed to the traditional institutional governance. Traditionally, governance of corporations was based on the sole objectives of profit maximization and cost minimization. Since its foundation, Coca cola has practiced traditional governance in its management but the directors in the 1980s came to realize that an organization of Coca Cola’s caliber could not operate on finances alone but the ways in which the finances are generated and used. The diagram 1.0 below shows the objectives of corporate governance Key: = flow of information objectives (Source: cited in Davis, 2005, 144) The main areas that the directors of the Coca cola company have a focused on include endorsement of corporate governance in the company, parties to corporate governance , Corporate governance guidelines and ownership and structure in order to ensure good corporate governance. Parties to Corporate Governance The Coca Cola Company recognizes all the shareholders of corporate governance. The main parties of corporate governance include stock exchanges, authorities and government agencies, management of the company, employees, suppliers, customer, creditors and society at large. All the participants of corporate governance have an interest with the company and expect the company to meet their demands. The authorities and government agencies requires the company to provide employment and revenue for the management of the country. The management requires to be paid as well as the shareholders. The suppliers require a market for their goods and compensation. Customers require quality goods from the company. The community requires the company not to pollute the environment and give back the benefits the company derives from the environment. Diagram 1.1 showing the relationship between participants of corporate governance. Key: Flow of stakeholders interests. (Source: cited inFlemming 2003, 196) Endorsement of Corporate Governance in the Company According to the company website, the Coca Cola Company has been listed been listed on the New York Stock Exchange for several years. As a requirement by the New York Stock Exchange, the company must ensure that it has endorsed all necessary aspects of corporate governance. The New York Stock Exchange acts as an agent of the government to enforce that all corporate have endorsed the corporate governance in their organization. According to the Gibeaut (2003, 53),all companies that were listed in the New York Stock exchange had to comply with the new rules and laws laid down by the stock exchange or face delisting. Coca Cola was among the top companies to comply with this regulation. Good corporate governance starts with directors going down to the casual employees. Good governance must be incorporated thought the organization by efficient communication methods. The coca cola company has endorsed corporate governance as a legal entity that is capable of being sued and suing others. The corporate governance in a legal form has been regulated by the legal fact that Coca Cola Company can hold properties in its name and every activity done in the name of the company it is the responsibility of the company. In its bid to endorse corporate responsibility in whole company has been based on the law and regulation of each country that the company conducts business in. Coca Cola has a set of it governance rules that are contained in the company’s constitution. Every employee who is employed by the company must study and comply with the rules and regulations set in the constitution. The coca cola company has also endorsed a code of ethics that every employee including the board of directors should comply with. According to Fernando (2009, 1.21) states that a code of ethics and conduct enables the company to comply with legal issues and requirements and standards of conducting business. With the code of ethics and conduct, Coca Cola has been able to disclose its finances through presentations of audited reports, corporate compliance, and responsibility, management and board process and structure, ownership exercise and structure of the power of controlling rights as state d in the company’s website profile. Corporate Governance Guidelines The company has complied with the principles of corporate governance when endorsing corporate governance in the organization. These principles include equal treatment of all shareholders, taking into consideration of the interests of stakeholders other than shareholders. The company has a qualified board of directors who oversee the endorsement of corporate governance in which they ensure all board members and corporate officers act in an ethical and integrity behavior. The board of directors is required to act in a transparent and ethical manner (Clarke, 2007, 244). Clarke (2007, 248) lays down the first rule of corporate governance as the duties and responsibilities of the board of directors. The board of coca cola is has been well selected by the companies shareholders. The responsibilities of board of directors in the company include the exercise of judgment on the activities and acts that represent the interests of the shareholders and the company. The agency theory says that the directors of a company are act as the agents for the shareholders an have a fiduciary duty to take care of the shareholders’ interests (Goldfinch, 2004, 492). The board of directors cannot act alone therefore it appoints senior corporate officer known chief executive that represents the board of directors to the public. The chief executive officers oversee the appointment of senior executives who work in hand with to fulfill the duties laid down by the directors. All directors in the coca cola company have relevant experience and the highest skills to mange the company. The board of directors in the company only serves for one year in accordance with the company by laws as stated by the company website. The board holds meetings at least five times in the year they are serving. The board members are independent and therefore they are effective in making a non bias decision in decision making. According to the company website, the board has a total of seven committees standing. The committees include compensation, auditing, corporate governance and directors, finance, executive, diversity review and public issues, executive, and management committee. All the directors and chief executive officers as well as senor mangers are evaluated annually by the shareholders in annual general meeting. Corporate Social Responsibility Practices at Coca-Cola Company Employee Relations Coca-Cola Company is an international beverage company that operates towards the goals of being a leader of positive change, fulfilling visions and obligations set forth by the international standards. The operations of Coca-Cola Company in Turkey are governed by the principles of democracy that leads the managers to involve other stakeholders in the decision making process (Rendtorff, 44). The Coca-Cola Company in Turkey involves the stakeholders in the dialogue tables under specific doctrines that include completeness, responsiveness, materiality and inclusivity (Hatay, 2009, 18). Under the doctrine of completeness, Coca-Cola Company shows great care of the stakeholders to be included in the dialogue process and ensures active participation of the selected stakeholders in the dialogue. The tenet of responsiveness witnesses the Coca-Cola management in Turkey considers and answered the questions of the stakeholders (Hatay, 2009, 22). The company also particular goals designed for improving fair and safe working environment for its employees and providing support for individual professional developments. Coca-Cola Company has been carrying speculation of its suppliers and offers training to the suppliers ought not to have complied or coincide with the company’s strategies. The Coca-Cola Company Turkey branch has well configured TKI document that requires all the suppliers and business partners of the company comply with the international trade and environmental laws. In the TKI, the company defines the need to respect union rights and the collective bargaining principles. The company also refutes any move by its business partner to engage in forced labor and abuse of employees (Hatay, 2009, 31). In addition, the Coca-Cola Company Turkey branch reprimands child labor and any nature of discrimination within its operations as well as those of its partners. The company also advocates for fair working hours and reasonable wages to all workers in its premises as well as those of its trade partners. Furthermore, the Coca-Cola Company branch of Turkey campaigns for safe working environment and requires all of its business partners involves efforts in the protection of the environment. Water Conservation Coca-Cola company has elaborate strategies of controlling and reducing the use if water within its premises. In Europe, Coca-Cola Company has been ensuring a consistent reduction in the volume of water it used. In 2008, Coca-Cola European branch recorded a reduction of water use at an average of 211 liter of water per liter of beverages produced. This marked an improvement of 15% as compared to the statics of 2004. The reports released by Coca-Cola Corporation indicate consumption of 44.5 million cubic meters in 2008. Coca-Cola Company in Europe has established an elaborate toolkit designed to help the plant managers operate towards ensuring minimum consumption of water. The Coca-Company in Europe has made substantial investment in water recycling to ensure that used water is purified and channeled back into water reservoirs (Coca-Cola Europe, 2010, 12). Coca-Cola Company in Europe has well structure goals intended to conserve seven rivers flowing across the continent. The company also has established goals intended to reduce water usage by 20% in its operations and households within Europe. The company further dreams of carbon dioxide emissions by 5% in order to reduce contamination of rainy water. Coca-Cola has also expressed special concerns on the Iberian Peninsula watershed by collaborating WWF to replenish the watershed and helping the local communities understand the significance of conserving water and environment (Coca-Cola Europe, 2010, 14). Coca-Cola Hellenic bottlers in Europe embarked on serious strategy and collaboration with Global Water Partnership to encourage harvesting of rain water from municipal building (Coca-Cola Europe, 2010, 14). The company has also initiated training programs in schools that concerns conservation and protection of water reservoirs. Environmental protection Coca-Cola European branch showed immense concern on environmental protection by declaring its plans to convince its suppliers and customers on the need to reduce emission of gases into the atmosphere so as to reduce global warming. The company has expressed intentions of barricading for the use of energy renewable energy to in households and other companies. The Coca-Cola company European branch has opened an estimated 50 recycling zones in Southampton to help reduce the rate of environmental degradation (Coca-Cola Europe, 2010, 34). The company has also set measure to encourage citizens to make use of the recycling plants by taking every household wastes to the recycling centers. In addition, the company has strategized measures to help in collection of waste bottles from the consumers and do recycling and reuse of the bottles in packaging drinks. Due to the intense need to conserve the environment, Coca-Cola Europe embarked on diverse packaging styles to reduce overdependence on plastic containers. Courtesy of Coca-Cola Europe, 2010 Customer relation Coca-Cola Company Turkey branch has shown great treasure of customers by making prompt response to the customers’ expectations. Coca-Cola Turkey branch has immeasurable respect to its customers by paying attention to the concerns and recommendations of the customers. The company also produces 14 brands of drinks in over 300 packaging styles and ensures high quality, fast and responsible supply of the products (Hatay, 2009, 32). The company indicates information concerning energy and nutritional elements in order to enable customers make rightful decisions that cannot ruin their choices. In addition, the company expresses great sensitive to the environment and indicates recycling symbol to all of its products. Community support The operation of Coca-Cola company in Turkey takes place under the policies of encouraging employment opportunities for the local communities (Hatay, 2009, 27). The company also has specific visions of supporting expanse public infrastructure and investments in different sectors of the economy. The company also eye on establishing clear policies that allow continuous training and observation oaf the production activities. In the views of Schneider (2010, 15), Coca-Coal Company has got elaborate strategies focused on empowering various groups of the community in the lines of economic independence. For instance, Coca- Cola collaborates with farmers for the purpose of supplying agricultural ingredients for manufacturing of beverages. According to Coca-Cola Company (2010), the beverage company released $7.5 million to support about 25000 mango farmers in Haiti. The Coca-Cola Company also helps small businesses to grow and partners with retailers at local levels who in turn employ local members of the society. The Coca-Cola company operations in Turkey have been of great benefits to the regional societies considering that the company raised $100000 in 2008 to construct classrooms in Mardin. The company also donated 3% of its total profit of 2008 to Anadolu Foundation to support community projects. The company’s 2009 plan unveiled superb intentions of building corporation with local communities to provide appropriate avenues for presentation of questions to the company and subsequent answers (Hatay, 2009, 23). The company also eyed at constructing strong corporation with nongovernmental bodies to help educate citizens on issues of importance to the environment and societies (Rendtoff, 2009, 44). Filho and Idowu (2009, 366) confirm that Coca-Cola Company in Turkey has been playing great role in promoting education in among the various communities of Turkey. According to Filho and Idowu (2009, 366), in 2003 the Coca-Cola Company in Turkey made donations worth $250000 for the purchase of materials to support girls’ school attendance in 10 provinces. Coca-Cola Company also had been coined conducting strategic campaigns and shows to gather financial support for sponsoring girl child education in Turkey. Inn addition, Coca-Cola Turkey made donations worth 80000 books to 400 schools in the republic of Turkey. Conclusion Coca-Cola Company has well organized workforce structure that enable the corporate perform beyond the expectations of many competitors. Coca-Cola Beverage Company has got proper corporate governance that helps the company to grow and survive in a highly hostile global market. It is worth stating that the corporate governance adopted by the Coca-Cola Company has helped the company in enjoying sustainable environment of business operation. It is with great importance to recognize the corporate social responsibilities accomplished by Coca-Cola Company. The social responsibilities of Coca-Cola have enabled the company develop uncompromised relations in different fields of the economy. Appropriate social responsibilities adopted by the Coca-Cola Company have led to conservation and rehabilitation of the environment. Coca-Cola has also worked towards developing and empowering development of various communities within which it operates. Bibliography Clarke, T, .2007, International Corporate Governance: A Comparative Approach, 2 Ed .Routledge publishers Abingdon, Oxon. Coca-Cola Company, 2008, By-Laws of the Coca-Cola Company, Retrieved November 6, 2011 from http://www.thecoca-colacompany.com/investors/bylaws.html Coca-Cola Company, 2010, The Coca-Cola Company Announces $7.5 Million Haiti Hope Project to Boost Incomes of 25,000 Mango Farmers in Haiti, Retrieved November 5, 2011 from http://www.csrwire.com/press_releases/29238-The-Coca-Cola-Company-Announces-7-5-Million-Haiti-Hope-Project-to-Boost-Incomes-of-25-000-Mango-Farmers-in-Haiti Coca-Cola Europe, 2010, Environment review, Retrieved November 5, 2011 from http://www.cocacolabelgium.be/doc/environment.pdf Davis, G. 2005. New directions in corporate governance. Annual Review of Sociology. Volume 31, No. 1, pp143-162. Fernando A.C., 2007, Business Ethics And Corporate Governance, 3rd Ed, Dorling, Kindersley pvt ltd. New Delhi Filho, W., & Idowu, S., 2009, Global practices of corporate social responsibility, Heidelberg, Springer Publishing. Fleming, G., 2003. Corporate Governance in Australia. 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