Corporate and Social Responsibilities Coca Cola - Assignment Example

 Corporate and Social Responsibilities: Coca Cola Task A Water neutrality is a significant CSR issue for Coca Cola. Over the years the organization has gone all out to develop an image of world leader in the field of the water conservation. The company was campaigning hard in their websites about their initiatives related with the water conservation (Karpagam & Jaikumar, 2010, pp. 23-25). According to the planning of the organization the company was aiming to complete its water neutrality program by 2009 in India and in other global operations. But unfortunately this CSR initiative was a serious problem for the company. Communities living by the side of the Coca Cola plants in India were facing serious problems of water shortages. Bottling plants of the company were not only creating water shortages but also were harming the quality of the water nearby the plants. Over the years the organization has given significant importance towards their corporate governance. But recently the organization has announced a new equity compensation plan for their executives. Lots of experts around the business world has raised their concerns regarding the newly created over reaching plan of the organization. Eminent investor David Winter has articulated his concern regarding this corporate governance step of the company (Pendergrast, 2013, pp. 45-46). According to Warren Buffet, it is a significant concern for the share holders of the company. This is a serious issue for the company as far as their corporate governance is concerned. Accountability and responsibility towards the society and the stakeholders are the inseparable objectives of the company. “ME, WE and WORLD” is the main mantra of the company’s sustainability framework (Keasey, Thompson & Wright, 2005, pp. 67-68). (Source: Coca Cola Inc, 2013) Sustainability Framework The organization has shown its accountability towards the society by introducing the low calorie or zero calorie beverages in to the global market. The organization has decided not advertise their products for the below 12 years children (Bodden, 2008, pp. 10-12). This example is indicating the sense of responsibility from the side of the company towards the society. The organization has shown its accountability towards the global environment and it is trying to reduce its Carbon foot print by 25%. The organization is significantly accountable to the society and it is evident from their decision of contributing 1% of their total operating income annually for the charitable purposes. Task B The CSR activity of water neutrality totally went wrong for Coca Cola. Communities living by the side of the bottling plants in India were significantly against the activity as they were facing severe crisis of water shortages. It is being observed that for the manufacturing purposes of the product the organization needs significant amount of water. Due to that bottling plants of the company were use to extract high volume of ground water. Water levels of those areas lowered drastically. People of the villages and the farmers were facing severe problems and the agricultural environment across those areas was severely affected. Production of crops was impacted badly. As the quality of water was affected by the bottling plants lots of water born diseases were spreading into those areas. According to a study conducted by the organization, reported that Coca Cola is a significant contributor for the water crisis. The local community of Kala Dera area in Rjasthan was aggressively campaigning against the company. The whole CSR activity went wrong because it was a half hearted attempt from the company their original intention was to make business profit at anyhow. The above written corporate governance activity of Coca Cola has raised questions in the minds of investors. They are not at all convinced with the recent decision of compensation plan for the executives. This corporate governance decision is significantly controversial and all the stakeholders of the company including Warren Buffet are watching it through suspicious lenses. The excessive nature of this corporate governance decision is dilutive to shareholders (News.com.au, 2014). The level of secrecy maintained related with this huge decision has raised lots of questions in the minds of the shareholders. The decision was so abrupt that it did not even considered the advice of its great investor i.e. Warren Buffet. Buffet owns 9.1% stake in Coca Cola. His voice was ignored and the decision was approved by the board. According to the views of several experts this plan is totally against the interests of the shareholders and this plan should be scraped immediately. As the expert like Warren Buffet abstained from the meeting it was a great shock for the company. Wall Street did not take the decision of the new compensation plan in right spirit. Task C Here in this section of the study evaluation of the conduct of significant players like board of directors, jurisdiction and competition will be discussed. According to the annual report 2013 of the company, the board of director has increased the dividend rate by 25% for the year 2014. The organization has 12 directors. According to the annual report of the company, the board of directors are significantly focused towards the interests of the shareholders. They have approved an increase in the quarterly share dividend (Davies, 2012, pp. 90-91). Previously it was $0.16 per share and it has increased up to $0.20 per share. The board of director over the years have managed share repurchase program significantly. From the year 2010 till 2013 the board of directors have repurchased almost $2.8 billion outstanding share. The organization has a specific Code of business conduct. The whole jurisdiction of the company is guided by that Code of business conduct. The codes of the jurisdiction are managed by the Ethics and the Compliance committee of the organization (Brink, 2011, pp. 34-35). This Ethics and Compliance committee has seven members and they ensure the consistency of the corporate administration by implementing the Code of Ethics across the length and breadth of the organization. Non employ director or outside directors of the company also come under the jurisdiction of the company’s code of ethics (Zinkin, 2011, pp. 23-26). Anti Bribery Policy is also an important part as far the jurisdiction of the company is concerned (Calder, 2008. pp. 12-17). Competition in the food and beverages market is getting tougher everyday as the technology is evolving in fast pace. The organization faces main competitions from PepsiCo and the Nestle. PepsiCo has recently featured at 43rd rank among the Fortune 500. Nestle S. A. has secured 11th position in the list of FT Global 500. Coca Cola is the undisputed market leader of the world’s soft drinks industry. The organization has significant portfolio strength of 17 brands. Each of the brands is making revenue excess of $1 billion. It is significant competitive advantage of the company. In 2013 revenue of the organization was US$ 46.854 billion. Revenue of the PepsiCo was higher than the Coca Cola. In 2013 it was US$ 66.415 billion. Although in terms of revenues PepsiCo is ahead of the Coca Cola but in terms existing brands and the pipeline brands the organization is ahead of the other competitors. Task D The modern business world is changing very fast. It is significantly important for Coca Cola to change according to the changing trends of the global businesses. Over the years all the reputed organizations across the world have identified the requirements f the sound CSR policy and the Corporate Governance (Hopkins, 2012, pp. 57-58). The organization also should come up with sounder CSR and corporate governance policy. The organization must understand the importance of CSR activities. In order to do so the company must not compromise with any factor related with their CSR activities. The company uses significant amount of water for manufacturing their products. Due to that in case of water conservation the organization should focus significantly (Morsing & Schultz, 2006, pp. 25-27). The efforts from the side of the organization should be real related with the water conservation. It should not be a fake activity to gain cheap popularity. The organization has significant scope of improvement in the field of corporate governance policy. The company has to be more stakeholders centric. It must listen to the voices of its stakeholders. The recent announcement of the compensation plan has created doubts in the minds of the stakeholders. In future the organization has to very selective regarding their corporate governance decisions (Fernando, 2010, pp. 56-57). The organization should avoid any kind of decision which can create confusions in the minds of the shareholders. Being a global business player the organization has a vast diverse workforce. It is a very important part of the governance to manage the diverse workforce. The organization has to provide equal opportunities to its employees across the world (Tricker & Tricker, 2012, pp. 71-72). The organization is aiming to reduce the carbon foot print. To achieve this, Coca Cola has to come out with more environment friendly products. Transparency is a key aspect as far as the governance is concerned (Keinert, 2008, pp. 12-15). It will help the company to attract more and more investors. The organization has to fulfil its social duties by using less harmful ingredients in to their products. All the above recommendations can help the organization to prevent any kind issue related with the CSR and the governance. References Bodden, V., (2008). The story of Coca-Cola. New York: The Creative Company. Brink, B., (2011). Corporate governance and business ethics. Berlin: Springer Science & Business Media. Calder, A., (2008). Corporate Governance: a practical guide to the legal frameworks and international codes of practice. New York: Kogan Page Publishers. Coca Cola Inc. (2013). Sustainability. Retrieved from: http://www.coca-colacompany.com/sustainability/. Coca Cola Inc., (2013). Annual Report. Retrieved from: http://ir.cokecce.com/phoenix.zhtml?c=117435&p=irol-reportsannual. Davies, A., (2012). Best practice in corporate governance: building reputation and sustainable success. London: Gower Publishing, Ltd. Fernando A.C., (2010). Business ethics and corporate governance. 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Retrieved from: http://www.news.com.au/finance/business/warren-buffett-slams-cocacolas-executive-pay-plan-as-excessive/story-fnkgdftz-1226895014348. Pendergrast, M., (2013). For God, country, and Coca-Cola. New York: Perseus Books Group. Tricker, B., & Tricker, R. I., (2012). Corporate Governance: Principles, Policies and Practices. London: Oxford University Press. Zinkin, J., (2011). Challenges in implementing corporate governance: whose business is it anyway. New York: John Wiley & Sons. Read More