Legitimacy Theory In Brewing And Hotels Sector - Essay Example

LEGITIMACY There has been a discussion of legitimacy and especially in the context of the large body corporates in the globe. It is an issue that has been connected to the Corporate Social Responsibility issue and often the focus has had to do with the genuineness of its undertaking and the merits to the society at large. Also of interest has been the impact of a business’ undertakings on the environment. This paper is set out to discuss the issue of legitimacy in the ‘brewing and hotel sector. Thus, the main purpose of the study is, “To show to what extent the issue of legitimacy is evident in this sector, and the student’s critique going tandem.” This study is going to be an analytical one of the legitimacy theory in the context of the ‘Brewing and Hotel Sector’ of business in the U.K. The structure will be as follows: definition of legitimacy and its connectivity to Corporate Social Responsibility, the regulations, by the relevant authorities, of this sector are going to be analysed, the accounting system of the hospitality sector, findings of the legitimacy of the undertakings of the sector and the equivalent critique based on further research on the topic, And then, a conclusion, based on findings, will finalise the study. The arrangement of social contracts are made firm by the legitimacy theory. These social contracts may be three-fold; between the society and the state, the society and the businesses and between the state and the businesses. Suchman says that legitimacy is the general view that an entity’s actions are desirable, appropriate as well as proper in the light of values, norms and beliefs within a system that’s socially constructed. Suchman further highlights three kinds of legitimacy in organisations. These are; cognitive, moral and pragmatic. Management of legitimacy according to him also faces various challenges like maintenance, gaining and the repairing of it. He also writes that communication is where the management of legitimacy rests. Therefore, while the function of legitimacy is being examined it’s not possible to sideline the corporate communications’ essentiality. It attributes to goals or purposes that a business entity has. (Habisch, et al, 2005) It’s an issue that’s widely linked with issues of corporate governance. Corporate governance is defined as the power exercise over business entities with the aim of increasing the value toward its stakeholders. These stakeholders should be accountable for their actions to the society at large to make sure that they achieve these objectives. That’s, both to the internal and the external societies. The internal society may refer to issues like workers’ protection like adherence to industrial and factory safety measures while the external society is the entire society not involved in the business actions first- hand. (William, 2009) The main objective in the activities of Corporate Social Responsibility is to get public acceptance in the existence of the business. The real principle of the CSR is contained in legitimacy. However, legitimacy is a complex issue due to the inequality in wealth distribution. (Kent, et al, 2007, p 178). Predicaments of legitimacy arise due to the general view that body corporates are powerful and thus this power should be utilised responsibly. (Parkinson, 1995, p 300) Jill Solomon wrote in his book that the aspect of Corporate Social Responsibility (CSR) is increasingly becoming of fundamental concern among businesses. This, he writes, is through the belief or desire to be ethically right. The belief is centered on the fact that the business entity aims at increasing its profits through this function of legitimacy. Also management and accountability is increasingly becoming important to most stakeholders in the business. (Solomon, 2007, p 227) Before concentrating on the main purpose of the study it’s essential to cover the factors like regulation framework and the accounting system of this sector. The sector is not without regulations. For instance, there are the regulations put across by the Organisation of Business of Europe. Guidelines have been published by this organisation and which are in line with EASA (European Advertising standards Alliance). These guidelines especially call for self-regulation as a way of approach. (The Brewers of Europe, org, 2009). The department of Environmental Food and Rural Affairs is the one responsible for the regulation of the hotel industry. Among its recent publications is the government response to the 2007 foot and mouth disease outbreak review, the proposal of the EU for animal protection during slaughter, plans on welfare concerning chicken-meat standards. It has the power to sanction the law breakers in the hospitality industry. (Department for Environment, Food and Rural affairs, 2009). The U.K brewing sector is divided into three major categories; National Brewers, Regional and Independent brewer. Most of these independent and Regional brewers were leased as per the 2004 parliamentary report. Both national and private breweries were almost entirely practiced on leased premises under the category of national brewers in the year 1986’s report. In 1986, there was a concern raised by the Fair Trading Director General because of the vertical integration and beer consolidation levels. This led to his asking for an investigation by MMC (Monopolies and Mergers Commission). To avoid monopolistic deals and ease in reporting of accounts as well as regulations MMC put a ceiling on the number of onlicensed outlets that a group or brewing company could own at 2000. (Select committee on Trade and industry, 2004). The brewery and the hotel sector often involves itself in business across boundaries. It usually calls for the reporting of accounts in a consolidated format and also present group accounts. This calls for an up-to-date maintainance of their accounts following the guidelines, as stated by Alexander, of International Accounting Standards. IAS is today referred to as the International Financial Reporting Standards. (Alexander, 2007 Pp 167,169) Changes have been witnessed over the last one and a half decades on the accounting system of this sector. The findings are that there has been a shift to a focus on business from the operational approach. It has also been witnessed that there has been an increasingly closer relationship of this industry with the other service sector players. (David Gilbert and Yvonne Guerrier). Recently there was a new guide released for making easy the international Hotel Accounting. This was launched at a yearly conference held by BAHA British Association of Hospitality Accountants. This guide was to increase the value of the management of hotel accounting by a significant magnitude. It would also enhance the implementation of CPA (Customer Profitability Analysis) in the worldwide hotel sector. The annual event which was also courtesy (BAHA) was held at Sofitel London. It was to help sustain the future profitability of the hotel business. Two remarkable people officially put across the guide at the annual conference, and who were also responsible for its publication. The two men are Doctor Vira Krakhmal and Prof. Peter H, from the school of Business of Oxford Brookes University. The benefits of this model of CPA to the world wide hotel sector were explained by Professor Peter. It would escalate the value of the decision-making process at the business. The information to the maker of the decisions would derive from the model several functions. These may include, responsibilities bestowed to him/her the nature of the service or product related to in the information. According to him the observers should take the model as consumer oriented rather than producers oriented. Dr. Krahmal’s aim was at removing the complexity involved in the implementation of Activity-Based costing to ensure customer profitability. To achieve the evaluation and the development of the model constructive case study would be utilised. He also said that the direct benefit is realised when even distribution of profits and costs in the entire customer group. The final model of this model was recently approved by a specialist Technical Committee of BAHA CPA. This collaboration shows the good results of the industry and the academic contributions. (BAHA Press releases, 2009) Going back to the main purpose of the study, the British beer and pub association believes that its part of Corporate Social Responsibility to have publicised the challenge 21 scheme which was designed to curb underage drinking. Hayward was especially happy citing the great levels of being aware among the groups targeted (About 91% know about the challenge 21). The aim of this scheme was to prevent those under the age of 21 years from drinking beer. Therefore, the population of people under the age of 21years was the target population of this scheme. They argued that if a person is suspected to be under 21years of age, such a person will be asked for an identity card and if she/he doesn’t produce the same there will be no service. On matters to do with health, the association quotes that it uses responsibility messaging and labeling of units on beer bottles in 90% of cases. This is also done on beer cans, according to them. Around £60 million are committed on community programmes and projects per annum. Further, £120 million each year are raised for purposes of charity. There is also the amount set aside for funding the Drink aware Trusts. (British beer and Pub Associations, 2008). Another report quoted that the beverage and food suppliers are meeting the hospitality industry’s demands of supplying sustainable commodities. Also a study conducted by partners in purchasing (PIP) revealed that of 150 players in the food and beverage industry had a good number of them producing products which were sustainable so as to meet the Corporate Social Responsibility (CSR) regulations. The products in consideration were the organic produce, Fair-trade items and also food which were sourced locally. (Endless Wire Corporate Event Management, 2009). Critically analysing the findings from the brewing and the other businesses in the hotel sector, it shows that a lot needs to be rectified. For example, the membership of the British beer and pub association is made up of 98% of the pubs U.K.’s brewed beer and also these brewers own about 58,000 pubs in the U.K. They continue to argue (when criticised by government sources) that they cannot control the amount of consumption of beer individuals take and thus, this should be the government responsibility. Further, the waste management that’s usually portrayed by the U.K beer sector is not at all focused on the society. Contrary to the belief of the presence of Corporate Social Responsibility, the operational costs’ control is done as a major key to profit maximisation. As per the Heriot Wall University’s report, the effective approach to waste management is for the purpose of controlling processing costs. Therefore, the incentive to recycling of industrial waste in this sector is the financial reasons. Organic waste recycling is strong in the industry at around 90%, but is due to the fact that this is seen as a by-product that can generate sales revenue. Recycling of glass is also seen to reduce costs. For instance, due to the recycling wastes would be cut by 0.1 pence in every bottle. These findings are lifted from maltsters, companies of whisky as well as brewers in the U.K. (Biffa limited, 2009). The information given by the British beer and Pub association is also contrary to the requirements by the Brewers of Europe regulations. For example, it’s stated that the nature as well as the strength of beer should be well communicated in commercial advertisements; these communications should also not portray beers having the largest alcoholic content to be the best. They should also encourage low levels of beer consumption. Still, the organisation’s regulations state that the advertisements should not portray beer as an enhancing factor toward sexual performance and also enhancement of high mental capability or performance. Promotions should discourage irresponsibility in beer consumption. (Brewers of Europe guidelines, 2007) On the part of beverages and food, still much needs to be done since the mentioned environmentally sound goods cater for only a meager ten percent of their total products’ revenue realised. (Endless wire Corporate Event Management, 2008) While concluding, due to the laxity in the brewing and hotels sector, a proposal was recently put across of a mandatory code. This regards the revenues from liquor sales and also pubs. The regulations here mentioned are stated the British Hospitality Association. (BHA, 2009) These regulations are the ones that the sector should face to ensure that in fact there is consumer protection and also the society at large. Yet still, though there is the claim by the British Beer and Pub association that they have labeled cans and beer bottles on the units of alcohol and responsibility messaging in about 90% of the cases, this should not be an excuse. Why should they get away with the rest 10%? This shows that the hospitality industry should do better in the quest for ensuring that consumers and the entire society is protected. Responsible drinking should also not be left out as an obligation of the government. The producers of the alcoholic drinks should be the ones to sensitise the consumers of their products. Reference: Alexander, D,Britton, A and Jorissen, A. (2007). International Financial Reporting and Analysis. Cengage Learning EMEA. Edition 3, Illustrated Pp 167,169. BAHA press releases, (2008). International Hotel Accounting: A Guide. Retrieved on February 5, 2009 http://www.baha-uk.org/pressreleases.asp Biffa ltd, (2009). Corporate Social Resposibility. Retrieved on February 5, 2009 http://www.biffa.co.uk/content/publications/snakes British beer and pub association. (2008). Regulations. Retrieved on February 4, 2009 http://www.beerandpub.com/newsList_detail.aspx?newsId=251 British hospitality association. (2009). Legitimacy of Hotels. Retrieved on February 4, 2009 http://www.bha.org.uk/index.php?searchword=legitimacy+of+hotels&option=co m_search&Itemid= Department for Environment, Food and Rural Affairs, (2009). Regulations. Retrieved on February 5, 2009 http://www.defra.gov.uk/ Endless Wire Corporate Event Management, (2008). Hospitality Industry Increases Corporate Social Responsibility. Retrieved on February 5, 2009 http://www.partyoffers.co.uk/news/event_corporate_news/hospitality_industry_in creases_corporate_social_responsibility-18317821.html Gilbert, D and Guerrier, Y. (1997). UK Hospitality Managers Past and Present. Retrieved on February 5, 2009 http://www.informaworld.com/smpp/content~content=a739242972~db=all Habisch, A, et al. (2005). Corporate Social Responsibility across Europe: Discovering National Perspectives of Corporate Citizenship. Springer. P 359. May, S. K, Cheney, G, and Roper, J. (2007). The Debate over Corporate Social Responsibility. Oxford University Press US. p 178. Parkinson, J. E. (1995). Corporate Power and Responsibility: Issues in the Theory of Company Law. Oxford University Press. P 300. Select Committee on Trade and Industry. (2004). Parliamentary Publications. Retrieved on February 5, 2009 http://www.publications.parliament.uk/pa/cm200405/cmselect/cmtrdind/128/1280 5.htm Solomon, J. (2007). Corporate Governance and Accountability. John Wiley and Sons. P 227. The brewers of Europe guidelines. (2007). Publications: Guidelines. Retrieved on February 5, 2009 http://www.brewersofeurope.org/docs/publications/guidelines.pdf William, (2009). Corporate Governance an International Review. Retrieved on February 5, 2009 http://www.wiley.com/bw/submit.asp?ref=0964-8410&site=1 Read More