The Aims, Policies, Corporate Governance, Corporate Social Responsibility of the Empire Pub Company - Case Study Example

Executive Summary Ethical issues faced by the organizations is one of the leading causes of not performing well as consumers are becoming more and more aware of their expectations from the businesses. The ethical orientation of the firm is often reflected through various disclosures that it makes and as such all the disclosures made by the firm reflects a very poor attitude of the firm. Empire Pub Company Plc’s mission statement as well as operational strategy is poorly written and does not reflect its overall stance on the various corporate governance as well as other ethical issues. Similarly, corporate governance and corporate social responsibility statements are relatively short and present information which does not reflect whether the firm is actually taking steps to implement such initiatives or not. Introduction The Empire Pub Company Plc is one of the leading companies in UK offering quality food, local pubs as well as country pub services across UK. The Company is also the largest managed estate in the country serving eight regions across the UK. However, despite being one of the leading Estates in the country, the overall ethical position of the firm is questioned due to its different practices and strategic direction it has set for itself. Corporate governance and corporate social responsibility are two important issues which need to be addressed by the firms in this current environment of competition. With greater emphasis now being placed by the government as well as by consumers on the more responsible role of organizations, it therefore becomes imperative for the firms to respond to such challenges in more appropriate manner. The issues such as corporate social reporting, the alignment of strategy with the corporate social responsibility objectives therefore are important issues which need to be considered in order to evaluate the overall ethical position of any firm. Terms of Reference This report will attempt to present an evaluation of the aims& Policies, Corporate governance, corporate social responsibility as well as corporate social reporting of the Empire Pub Company. The overall aim of this report is to demonstrate the knowledge of various theories and practices on above issues and apply it to the real time analysis of the firms. This report will therefore after presenting a discussion on above issues will provide a recommendation as well as overall evaluation of these issues. Aims & Policies The mission statement as well as the operating strategy of the firm indicates a lot about the overall orientation as well as the existing practices of the firm. The Mission Statement of the firm clearly reflects the firm may not be entirely focused on customers i.e. it lacks customer orientation as well as the value proposition for the shareholders of the firm. Further, it lacks the clear vision and future direction set by the top management of the firm and as such provides no clue as to what are the existing direction of the firm as well as the future direction of the firm. Writing a good mission statement therefore is considered as essential because it sets the organizational goals as well as the behaviors and attitudes of the firm. (Kruke & Gregory, 1993). The existing mission statement of the firm however, does not provide a clear and definite strategic direction of the firm as well as to how the firm perceives its role in the future. Apart from this, some of the parts which are mentioned in the operational strategy of the firm shall have been discussed and mentioned in Mission Statement of the firm rather than the operational strategy. It is therefore critical that the both the Mission Statement as well as the operational strategy of the firm shall be re-designed to incorporate the future strategic direction of the firm and provide a clear guideline to all the stakeholders of the firm. UK is passing through a strong economic downturn and overall spending by the consumers is consistently decreasing. The economic growth of UK over the last three years is slowly and consistently declining1with forecasts for negative growth in 2009 and some recovery in 2010. These trends also indicate that almost every sector of the economy will be affected with the slow down in the consumer spending due to credit crunch. Job losses is another important reason as to why consumers are consistently reducing their spending on items which were considered as routine spending such as spending lavishly in pubs etc. this therefore can also result into the declining profitability for most of the firms in the economy and more focus will be on the development of efficient solutions to reduce cost as well as maintain profitability levels of the firms. This firm has also felt the impact of the same on its profitability and it seems to have understood the basic dynamics behind this phenomenon and as such there is a need to revise the strategy or develop new strategy to support itself during these troubling times. Apart from this, the issues like under-age drinking, keeping smoke free environment etc are the issues which also have some legal repercussions for the firms. Thus firms especially in this industry have to comply with such issues in order to keep themselves compliant of the various regulatory requirements. It is critical to note that under-age drinking ratio in UK is one of the worst in the world and binge drinking episodes are relatively more frequent in UK. According to some studies conducted by the World Health Organization, UK has relatively large ratio of the young children who drink at an early age as compared to other developed countries.2. Such trends therefore indicate that the firm has to be relatively more cautious when dealing with such issues as it has to reconcile its profitability goals with the issue of under-age drinking. Since UK’s population is unevenly distributed i.e. the age bracket in young adults is relatively larger therefore such large population can offer an attractive alternative market to tap in however, given the fact that the firm has to meet the strategic requirements such industry trends may not work in the favor of the firm. It is also critical to understand that the firm is in business which has relatively large impact on the society because its activities may create significant social and political issues. The issues such as under-age drinking, maintaining non-violent environment within the pubs etc are some of the issues which need to be addressed strategically and in the policy statements of the firm. This will therefore further crystallize the aims and objectives of the firm besides offering it an opportunity to narrow down its priorities in such a manner that it will be able to clearly identify its own niche besides understand its market in better way. This will, in return, therefore can be helpful in designing specific policies that can address different and diversified issues for undertaking any external changes that may take place as a result of regulatory efforts by the Government. Corporate Governance It is argued that the corporate values are derived from the corporate governance followed by the firms. The corporate governance therefore is of relatively more important because it shapes the overall corporate values and culture of the organization. (Thomsen, 2004). Corporate Governance therefore emphasizes on the overall ownership structure, composition of the board, executive compensation as well as the influence of the stakeholders on the firm. Executive Compensation and Benefits Executive compensation is one of the most important issues which have radically been changed over the period of last two decades. The emphasis is now on linking the pay with the performance of the employees including executives and as such firms are now continuously looking for devising their executive compensation policies in a manner which can provide an opportunity to link them with the performance. The trends of the shareholding patterns of the directors of the firm are: £1 Ordinary shares 2008 2007 Edward Parton 250,000 240,000 Chris Hamilton 75,000 70,000 David Draton 50,000 50,000 Andria Craven 40,000 35,000 Christine Craddock 25,000 25,000 Mrs. Diane MacGregor 35,000 32,000 Terry Potter 25,000 25,000 Barbara Rollins 15,000 - Brian Blake 17,500 17,000 Mr. B. Rolls 12,500 2,500 544,500 496,500 These trends also indicate the relative influence of the directors on the overall policy making of the firm because they also happen to be the largest shareholders in the firm and having stakes in the firm therefore may impair their ability to take actions which may not be entirely in the favor of the firm itself but rather same be directed towards achieving the own objectives. The relative agency cost therefore is of important consideration here and must be viewed from larger perspective. It is also critical to note that the corporate governance statements are relatively short and do not provide a clear analysis of the potential corporate governance issue which may either been faced by the firm or firm may face them in future. In absence of such clear information, it therefore may become difficult to asses the ethical position of the firm from corporate governance perspective. Corporate Social Responsibility Though the firm seems to be aware of the role of drinking and its subsequent impact on the society however, it still lacks a clear and definite corporate social responsibility stance on this issue. It is critical to note that there is a marked difference between the corporate social responsibility of the firm as well as improving the overall corporate image of the firm. Linking corporate social responsibility with the improvement of corporate image therefore is something which most of the companies attempt to achieve. (Moir, 2001). The firm basically has therefore attempted to limit itself just to its customers i.e. offering smoke free environment to the customers etc. corporate social responsibility therefore shall have to be relatively bigger in its scope as well as overall orientation and must focus on the firm’s attitude and response towards the society. Since firm is considered as an artificial entity and its activities have significant impact on the society therefore the corporate social responsibility statement of the firm shall clearly reflect as to how the firm is going to contribute towards the society and how its activities will support the society in achieving a fair and just status. It is also critical to note that the firm’s corporate social responsibility is focused on achieving its own objectives rather than blending it with the overall strategy of the firm. Corporate social responsibility without a strategic focus therefore may not yield any concrete results for the firm until and unless it is backed up strong policy focus and is considered as part of the strategy of the firm. (Galbreath, 2009). Human Resource Management Company’s policy about being the equal opportunity employer reflects its compliance with the various laws which necessitate for the firms not to discriminate against anyone on the basis of their race, religion etc at the time of hiring new employees. Organizations therefore have to respond to such legislative requirements to promote the equal employment opportunities for everyone. (Strachan, Burgess & Henderson, 2007). It is however, critical to note whether the firm actually follows such policies in practice or not is another issue which needs to be considered in order to actually ascertain whether the overall human resource management policies of the firm support its overall strategy or not. Corporate Social Reporting The increasing awareness among the consumers as well as resulting changes that are taking place in business world, modern firms are now required to focus not only on their profits but also on people as well as planet also. The overall focus therefore is on the development and reporting of business practices which result into the sustainability of the business which support the environment besides allowing firm to show its care for conservation of the resources of earth. Companies are therefore required to report the impact of their activities on the environment and what actions and efforts are being undertaken by the firm for environment. The information presented in the case study indicates that the firm is aware of the different challenges that its activities may pose to the environment and society itself. As discussed in the preceding sections, issues like maintaining non-smoking areas, non-admittance of the intoxicated into the pubs, the under-age selling of the drinks etc are some of the key areas which are being discussed in the report. However, it is critical to note that the firm fails to comprehensively present a policy framework which can be utilized in order to address such issues on more permanent basis besides offering a long term solution to such environmental challenges. All what companies is reporting is out of its statutory requirements to report such issues and as such there is a general lack of strategic stance on such issues i.e. Directors’ report does not mention any policy initiative that may be planned or already undertaken to tackle this issue. Apart from this, the reporting that has been made is not adequate and lacks the comprehensive information about the overall position of the firm on most emerging issues. Conclusion Aims and objectives of the firm are relatively not clear and as such Mission Statement as well as operational strategy of the firm does not indicate any strategic direction of the firm. Apart from this, the issue such as corporate governance needs to be addressed in more proper manner because the directors are also the major shareholders of the firm and as such the check and balance that can be placed over the directors through an independent board may not be achieved in such circumstances. The efforts of the firm regarding corporate social responsibility as well as corporate social reporting are not up to the mark too because it seems that such statements in the report are merely included to fulfill the regulatory requirement rather than showing the overall strategic stance of the firm on such issues. Recommendations & Evaluation The overall corporate governance structure therefore needs to be re-modeled in such a manner that an independent check and balance system is effectively created. Apart from this, it is also critical to note that the firm’s overall strategy as well as aims need to be revised and corrected in a manner that reflect the long term vision of the firm need to be inculcated into the very fabric of the firm which is presently missing. In order to achieve this, it is therefore important that the firm must re-evaluate its strategy as the current strategy does not seem to be reconciling with the operational strategy and existing practices of the firm. Apart from this, firm shall also improve upon its reporting of corporate governance and corporate social responsibility issues. This can be achieved by re-designing its mission and vision statements as well as by taking steps which can reflect its overall commitment to all stakeholders involved. References 1. Kurke, Lance B., & Gregory, Barb. (1993). Mission Impossible? Designing a Great Mission Statement to Ignite Your Plans. Management Decision, 31(4) 2. Moir, Lance. (2001). What do we mean by corporate social responsibility?. Corporate Governance, 1(2), 16 - 22. 3. Galbreath, Jeremy . (2009). Building corporate social responsibility into strategy. European Business Review, 21(2), 109 - 127. 4. Strachan, Glenda, Burgess, John , & Henderson, Lindy. (2007). Equal employment opportunity legislation and policies: the Australian experience. Equal Opportunities International, 26(6), 525 - 540. 5. Thomsen, Steen. (2004). Corporate values and corporate governance. Corporate Governance, 4(4), 29-46. Read More