Account theory:The Coca-Cola Company - Essay Example

?Running Head: Account Theory Account Theory [Institute’s TABLE OF CONTENTS TABLE OF CONTENTS 2 INTRODUCTION 3 The Coca-Cola Company 3 CASE STUDY 4 RESPONSE 5 ANALYSIS 6 CONCLUSION 7 REFERENCES 9 INTRODUCTION For several decades, human societies have always considered ethics and accountability important components of processes that result in the creation of ethical values, and in the theories that allowed humans to acquire an understanding of the whole process. Unfortunately, despite efforts by philosophers and theorists, one can see that individuals and businesses have not been able to fulfill the ethical requirements that often result in unethical practices, disasters, public controversies, scandals, etc (Crane, 2007, pp. 19-24). In other words, business ethics seems a theoretical world, as such principles rarely exist in the real world. In response, theorists have played a critical role in explaining the reasons and processes at play in disasters and controversies; it will be the major focus of this paper as well. For instance, a range of accounting and ethical principles exists in business organisations but it has been observed that owners and decision-makers are always busy giving profitability the highest priority; this subsequently creates problems. Discussion in this paper will include the endeavour of the researcher to scrutinise a case study of Coca-Cola (2011), one of the leading organisations. This will allow an understanding of how disasters or controversies occur and how such companies deal with them by looking into the scenario through the lens of accounting theories. The Coca-Cola Company Before analysing the controversy, it is essential to acquire basic information about the company that will make it easier for the reader to understand rest of the process. Coca-Cola (2011) was not born as a leading global company during late 1880s, but it went on to a unending journey where now it is a leading company in different parts of the world with roughly 450 brands and 2750 drinking products alone in different parts of the world. Although drinking brands of Coca-Cola, Sprite, and Fanta (Coca-Cola, 2011) have become the major symbols of the company, the company is running its operations in various countries with a rough count of around a hundred thousand employees. This indicates the number of stakeholders it has and the possible seriousness of outcomes of any controversy. In particular, some of the major stakeholders associated with the Coca-Cola Company are their “investors, shareholders, bottling partners, governments, NGOs, suppliers, local communities, employees, customers, and most importantly, consumers” (Coca-Cola, 2011). CASE STUDY The discussion will now focus on the controversy of the Kala Dera Bottling Plant division (Srivastava, 2007) of the Coca-Cola Company that forced the company to face remonstrations from villagers and consequently led media and social organisations to become a part of the controversy during 2005. Analysis (Srivastava, 2006) has indicated that the Coca-Cola Company confronted the same protests in other rural parts of India; however, it did not give it importance and continued its business functions caused a huge controversy, which damaged image of the company globally. Critics (Srivastava, 2006) have pointed out that the company was relying on agricultural lands to set up its bottling plants in India, in order to have a continuous supply of water and thus, Kala Dera village was one of the selections of the company. The controversy and protests began when it was observed that there was a radical lessening in the levels of groundwater after twelve months of the bottling plant opening (Drew, 2008, pp. 32-40) that a disaster for the villagers who were farmers, as their family income was at stake. In addition, reports showed that after opening of the plant, women faced difficulty in getting water due to scarcity and the water was only available kilometres away from the village (Hoffman, 2006). Moreover, as women did not travel alone, children had to compromise their education in order to accompany their mothers on a walk of roughly five kilometres everyday to get the water. This caused a number of hurdles and issues for the villagers. The company ended up confronting protests and arguments regarding over-extraction of the groundwater that was harmful for the farmers and their families in the village (Hoffman, 2006). The bottling plant was the major contributor to the worsening of environmental sustainability in the village and its adjoining areas (Basu, 2006). RESPONSE The company did not place importance on the protests and the bottling plant continued functioning while rejecting the arguments (Flex News, 2008). This could have been the end of the scandal as there was an international leading company on one side and poor villagers on the other side. However, through the collaboration of international agencies and by receiving support from educational institutions, the Coca-Cola Company faced huge criticisms that forced the company to permit an assessment of its bottling plants in not only Kala Dera, but in various other rural regions of India (Srivastava, 2006). After two years, the TERI organisation released its reports; it was a blow to the Coca-Cola Company as authorities insisted on shutting down of the bottling plant (Srivastava, 2009). In response to these reports, approximately fifty educational institutions in the United States, the United Kingdom, and Canada filed for termination of agreements with the Coca-Cola Company (2011). This was a shock for the company as it reduced sales drastically. Although the company kept denying the allegations, it agreed to look into the issue further and carry out more assessments in order to repair its image in the global market. In addition, executives of the company claimed that the reports were the outcome of incomplete information and that the scarcity was a cause of lack of rainfall in India rather than the company’s bottling plant (MarketLine, 2005). Furthermore, the company rejected the demand to close the bottling plant by saying, “Walking away is the easiest thing we can do. That's not going to help that community gain sustainability” (Wa, 2012). The company then released several press releases along with its sustainability review (Coca-Cola, 2008) in an attempt to disengage publicly from the controversy. This subsequently increased Coca-Cola Company’s sales in India. ANALYSIS Accounting theories are efficient in allowing the analysis of controversies. This paper will now move towards positive accounting theory that will provide an understanding by considering facts of the events that held in the abovementioned case study in order to assess the responses of the Coca-Cola Company. In particular, legitimacy theory will work best in the controversy as it relates the values of society with the organizational objectives and that is obvious in the discussed controversy. In the year 1975, Dowling and Pfeffer gave the legitimacy concept by defining it as “the relationship between an enterprise’ social ethics and those of society in general” (Eade & O’Byrne, pp. 111, 2005). According to this theory, a business cannot survive if it allows the gap to increase in this relationship. In other words, this relationship plays a significant role in aligning a company’s profitability objective and society’s ethical view. By applying legitimacy theory to the case study, it is an understanding that the controversy brought company’s legitimacy at stake. One of the major reasons of such effect was the disparity between company’s publicised objectives and its practices that existed in the society. According to legitimacy theory, terms of acceptance can be altered; therefore, it was the company’s responsibility to ensure constant review of its policies and operations; however, case study indicates that the Coca-Cola Company (2011) ignored the protests and continued with its bottling plant, this was the step that affected its own legitimacy. Analysis has indicated that one can repair legitimacy by carrying out four steps that are “normalizing the accounts, demonstration of company values, reformation of strategies, and lastly, maintenance of quality and confidence” (Eade & O’Byrne, 2005, pp. 115-123). In Coca Cola’s case study, the company normalised the accounts by first denying the allegations and putting all the blame on lack of rainfall rather than its operations. Secondly, the company released different press releases and reviews (Coca-Cola, 2008) to emphasise that the company was following all procedures according to quality and environmental standards, in order to counteract the claims of villagers and their supporters. However, after several protests and international pressure, the company tried to repair its legitimacy by reforming its strategy and allowing the TERA to assess its bottling plants. The reports were astonishing and unfortunate for Coca-Cola (Coke Justice, 2011). However, this move was an attempt to repair company’s legitimacy and by showing that the company was concerned about the issue. Coca-Cola played an impressive role by remaining quiet and relaxed during the whole crisis and responding to the protests with its campaign of ‘The drops of joy.” In its advertisements and press releases, it indicated its environmental awareness and showed that the company’s bottling plants were not a cause of scarcity of water in Indian villages. CONCLUSION Conclusively, the legitimacy theory provided a basis to analyse the controversy that the Coca-Cola Company confronted. During the discussion, the researcher made efforts to scrutinise the issue based on the unstated contract that always exists between organisation and society according to the legitimacy theory. In this regard, the Coca Cola Company is now responsible for maintaining its legitimacy by ensuring constant assessment of its relationship with society, in order to guarantee its survival and success in the future. The company has done this by introducing rain-harvesting programs (Coca-Cola, 2008) in various rural regions of India that have helped the company to re-emerge as an environmental friendly organisation globally. REFERENCES Basu, Indrajit, 2006, “Coke still floundering in India”, Asia Times. Viewed on 31 December, 2011, http://www.atimes.com/atimes/South_Asia/HF23Df03.html Coca-Cola, 2008, “Sustainability Review”, The Coca-Cola Company. Viewed on 31 December, 2011, http://www.thecoca-colacompany.com/citizenship/pdf/2007-2008_sustainability_review.pdf Coca-Cola, 2011, Official Website of the Coca-Cola Company. Viewed on 31 December, 2011, http://www.thecoca-colacompany.com/ Coke Justice, 2011, Coke Justice. Viewed on 31 December, 2011, http://www.cokejustice.org/ Crane, Andrew, 2007, Business Ethics. Oxford University Press, USA. Drew, Georgina, 2008, “From the Groundwater Up”, Development. Volume 51, pp. 37-41. Eade, John & O’Byrne, Darren J., 2005, Global Ethics and Civil Society. Ashgate Publishing Limited. Flex News, 2008, “Study: Coca-Cola's India Water Usage Good, Could Improve”, Flex News. Viewed on 31 December, 2011, http://www.flex-news-food.com/pages/13504/Coca/India/studycoca-colas-india-water-usage-good-improve-dj.html Hoffman, Andrew, 2006, “Coca-Cola learns a tough lesson about corporate sustainability”, Grist. Viewed on 31 December, 2011, http://www.grist.org/article/hoffman1/ MarketLine, 2005, “Coca-Cola: international ethics could mean reputation rescue”, MarketLine. Issue of June 21, 2005. Srivastava, Amit, 2006, “Coca-Cola and Water - An Unsustainable Relationship”, Indian Resource Center. Viewed on 31 December, 2011, http://www.indiaresource.org/campaigns/coke/2006/cokewwf.html Srivastava, Amit, 2007, “New Report Highlights Coca-Cola's Shortcomings in India”, Indian Resource Center. Viewed on 31 December, 2011, http://www.indiaresource.org/news/2008/1001.html Srivastava, Amit, 2009, “Coca-Cola Destroys Indian Villages, Despite Warning by Coca-Cola Study”, Indian Resource Center. Viewed on 31 December, 2011, http://www.indiaresource.org/campaigns/coke/2009/cokedestroysvillages.html Wa, Jen, 2012, “Coca Cola Company’s Abuses in India”, HubPages. Viewed on 31 December, 2011, http://jen-wa.hubpages.com/hub/Coca-Cola-Companys-Abuses-in-India Read More