DIAGEO --Ethical Issues Business - Essay Example

DIAGEO --Ethical Issues Business Diageo is one of the largest alcoholic drinks companies worldwide. It is active in branded beverage alcohol business on the global scale. It is operational in producing, distilling, brewing, bottling, packaging, distributing and marketing a number of popular brands in more than 180 countries. It has been a leader in flavoured alcoholic beverages like Smirnoff Ice and spirits. The company boasts of a corporate business behavior enshrined in the codes and policies followed by Diageo worldwide, showing strict adherence to its corporate social responsibility. It was the first global drinks company to sign up the nine principles of the United Nations Global Compact for dedicated efforts in social and environmental responsibility. Diageo has its own codes and policies, which are reviewed after certain gaps, and go beyond local and national governing laws. The company is fully dedicated and focused on the interests of all its stakeholders whether consumers, employees, or shareholders. Major ethical issue with Diageo is that it sells alcoholic drinks, which are not positively accepted in society norms as a healthy sign. Responsible drinking is a big ethical issue and challenge for the company to market its product and advertise drinking to inculcate the feeling among consumer to drink responsibly. Employee Volunteer Activities Diageo’s employees are its brand ambassadors. Their volunteer activities come and are covered under the company’s Employee Alcohol policy. Employees are expected to comply with company’s programs and policies. They have a responsibility to behave and assist line managers, complying with applicable laws, regulations and Diageo code of business conduct. They are supposed to comprehend all these and relevant policies of employment. Employees are given training to understand the governing laws. They are supposed to ask for guidance on any matter they think will pose risk to the code, law or regulation. They need to be always alert on potential violations or wrong practices and are supposed to report to the line manager or global compliance director, Diageo or contact Helpline. Employees, especially bar staff are trained in serving skills; only non-alcoholic drinks are served in bars. They are trained to control irresponsible drinking like drinking games, and help in arranging taxis for drunken employees going home. Employees take initiatives in volunteer activity by following human rights and society standards. Worth mentioning is the Diageo North America joining volunteers from Spirit of America ground zero to ground zero, when crucial humanitarian relief supplies were airlifted to the staff and children at the Alaoodin orphanage in Kabul, Afghanistan, by employees. Non-conformance by employees to the code can result in severe penalties to the extent of loosing their jobs. Diageo conformance to all its ethical business responsibilities and spirit to create that sense of sharing responsibility among employees and caring for consumers on humanitarian concerns is exemplary but such initiatives the like of taken in Afghanistan of distributing relief supplies in a Kabul orphanage should be taken more often. Advertising and Marketing Responsible drinking being the major ethical issue to Diageo, the company is committed to responsible marketing of its brands. Alcohol intake affects society and there is always risk of its negative impacts on the consumer’s health. Responsible marketing can change audience perception. Company’s marketing material not just adds to responsible marketing of its products but it is governed by Diageo’s marketing code, which is an add-on to industry codes and government regulations. Diageo follows standard practices for all marketing activities that include advertising, promotions, consumer PR and the websites’ content. Diageo marketing code was developed in 1998, outlining strict standards for marketing initiatives and outside agencies as well, including all marketing and promotional activities. Companies in specific countries can add additional clauses to global codes such as age bar to sell alcohol beverages to below 21 years of age in certain countries. Regular audit on provisions of the marketing code and compliance procedures takes place. A revised code of practice becomes applicable after clearing the issues raised by stakeholders’ reactions. Diageo boasts of a digital marketing code the need of which was felt due to changes in technology, creating new opportunities and challenges. Its digital marketing code helps marketers better understand new marketing channels. Regular reviews are conducted by Diageo’s internal Digital Governance Leadership team (DGLT) to benchmark digital marketing against best practice. Marketing teams get regular training by attending refresher courses on the application of the code. Breaches to the code are identified and their non-recurrence is ensured. All company seniors are supposed to get a compliance certificate on their adherence of global marketing code. Diageo has developed an online tool “SmartApprove’, which co-ordinates approval of marketing material before being issued. Although recommendations and follow-up actions are taken after annual reviews on selected markets but it is advisable where action is not taken annually and only after stakeholders’ criticism, precautionary steps should be initiated without waiting for issues to surface. Gifts and Gratuities At Diageo, there is a customer policy in place regarding the acceptance of gifts. Only courtesy-wise offered gifts can be accepted to strengthen business relations. There should be no scope for conflict of interests. Gifts of reasonable value can only be offered without any element of over entertainment. The customer policy for gifting government officials requires proper record of gifts presented. Diageo policy on offering and acceptance of gifts for business interests is same. Dining outside with customers for better relationships should not as a policy affect your decision. A department should consult the global compliance director to follow gift acceptance policies relevant with law and local business needs. A gift of £250 value should be disclosed to line manager with circumstances in which it was taken, for audit purpose. Gratuities can be made with the permission from business unit leader. A criterion must be presented to the senior manager why charity is being made; reporting of charity is compulsory for accounting and tax compliance. Diageo has a policy to give in charity 1% of its pre-tax trading profit in communities where it works. Being a MNC, Diageo is doing good work in communities around the globe and it is recommended that the company increases its pre-tax trading profit from 1% to 2% in poor countries and balance the act by reducing it in rich countries. Employee Health & safety Diageo complies with all health and safety laws and regulations, applicable policies and best practices related to work place safety. Health and safety of Diageo employees in performing all types of duties is a primary concern. There is no scope of compromising with the responsibility. Diageo management expects its managers to ensure quality and safety of the working environment. They are supposed to follow a proactive and always helping hand, ensuring the health and safety of all employees. It is the responsibility of managers to examine the safety parameters at the work premises. By policy any risk to their safety because of violent behavior is strictly dealt with at work place. Employees’ health status is kept in mind while assigning tasks according to changes in health conditions of an employee. It is recommended that instead of leaving all matters relating to employee health & safety to the management, a committee should be formed, including a definite number of employees, suggesting measures to their health and safety. Maintaining Records & Information Diageo maintains all records and business information of share trading and business activity as required by law and stock exchange rules. It publishes correct financial information for all stakeholders including Diageo shareholders. All financial records are attested by the company’s Chief Executive Officer and Chief Finance Officer. Records include contracts and documents to a business area in paper and electronic form. Such information is given to company auditors, regulatory agencies, and government organizations by each of Diageo companies. They are strictly bound to give correct facts and figures, without any ulterior motive to affect the accounting process. All records are preserved, particularly related to financial, tax, employee, health & safety, contracts and corporate for a definite period. Records related to litigation, audit and government inquiry are properly maintained. Diageo has in place relevant policies that are apart of Diageo’s information and records management programs. Policies include record creation and record keeping. Information is destroyed by following set procedures as per legal application. Putting any obstacle to free flow of crucial information or stating false information is a criminal offence for the committing employee or Diageo to bear harsh penalties. All departments and employees are informed in advance to present the records in case there is a legal follow up taken against them. Overall, Diageo has been tackling ethical issues in a number of ways. Effective programs on a dedicated site DRINKiQ offer a pool of information on ethics of responsible drinking. Resources from varied sources cater to the knowledge buds of responsible drinkers. The company has selected four key areas to focus attention on misuse of alcohol, which are: * under-age drinking * drink driving * behavior of young adults * promoting responsibility Diageo has initiated a consumer information policy that provides complete product information on allergens, nutrition & ingredients, alcohol content & server size and promotes responsible drinking. Advertisements of popular brands carry reminders on responsible drinking. All marketing material in print and online media provide factual knowledge as it is, not like a dietary or health benefit. Campaigns include information on when not to drink such as in pregnancy, while driving, taking medicine and working on a machine. Hints and tips are provided on the DRINKiQ website through campaigns like “Captain says: Don’t Go Overboard”, “Winners always stay in control”, The Choice is Yours Campaign”, and “Starting a responsible Party”. Full score to the company on waging a war on all fronts possible to create consciousness among drinkers to drink responsibly – the most critical ethical issue. Reference http://www.diageo.com Read More