Corporate Governance and Social Responsibility - Assignment Example

Corporate Governance and Social Responsibility Introduction Corporate governance is a system of rules, processes and practices that helps a company to be controlled and directed. Corporate governance generally involves an establishment of balance of interest among the different stakeholders of a company. Corporate social responsibility is a management concept that helps organizations to integrate the environmental and social concerns by making some investment for the betterment of the society as well as for the stakeholders. Efficient corporate governance and social responsibility practices enhances the brand value of organizations. It has been observed that most of the companies in the contemporary era have initiated extensive practices towards corporate governance and social responsibility practices. Despite the attempts made by organizations, there are some issues that companies have been facing drastically. This essay outlines the profile of PepsiCo and illustrates the issues the company has been facing with respect to corporate governance system and corporate social responsibilities. Company profile PepsiCo is a multinational food and beverage company, headquartered in United States of America. PepsiCo is majorly known for its wide variety of production in the food and beverage sector. The company supplies food and beverage products in almost every country in the world. PepsiCo has more than eighteen different brands and the brands produce and distribute wide variety of products in entire United States. According to statistical reports it has been recorded that PepsiCo comprises 37 percent of the total food and beverage supplies in United States of America. The company has been in existence for more than 55 years and its products are very well known in the market and by the consumers. PepsiCo, being a multinational organization has maintained several philanthropic programs since 1962 (Aras, 2012, p.82). Some of the major charitable programs include, efficient water usage, providing educational opportunities for women and children, resource management etc. According to the annual report of 2009, it has been observed that PepsiCo has initiated several programs in order to deliver sustainable growth by making investment for a healthier future (Mullerat, 2011, p.17). Despite the attempts made by PepsiCo to develop an ethical image in front of the consumers, some issues have encountered the company based on corporate governance and social responsibility. The issues following PepsiCo are discussed below. Issue One PepsiCo has been criticized multiple times for its high pesticide content in the beverages. It has been observed that the aerated drinks manufactured by PepsiCo contain high amount of carbon and pesticides, due to the ingredients that are used. The manufacturing of soft drinks in economically developing countries, such as India and China has been found to be unfit for consumption purposes. PepsiCo has been in the beverage business from a prolonged period of time and the major consumer market of PepsiCo belongs from the Asian and the Western countries. The drinks available in USA and UK have controlled amount of pesticide in them; however the drinks increase the chances of obesity and other health problems. Medical providers have strictly warned obese patients from consuming soft drinks, such as the product Pepsi. In the Asian countries there are majority of people, who belong from the low earning group. This factor has resulted in the implementation of cost-cutting strategies (Simpson, 2013, p.68). The ingredients used to manufacture the products of PepsiCo in India are generally of very low quality. The pesticide content in the drinks is also very high due to which the chances of obesity and cancer has been extensive after the consumption of the products obtained from PepsiCo. These factors have resulted in depreciation of the brand value of PepsiCo. The ethical factors that are required to be met by the companies are not taken care of by the company appropriately (Rosam, 2004, p.54). The consequentiality ethical theory explains that the moral judgment on the outcomes of an organization depends on the action. The theory explains that the morally right action is one of the best overall consequences against every other action initiated. With respect to PepsiCo, the consequentiality ethical theory is highly applicable because it provides the company the opportunity to implement required strategies in order to overcome the challenges associated with the ethical production of the company (Crowther, 2012, p.45). PepsiCo has already implemented some strategies in order to manufacture quality products, however some essential initiatives related to extending brands and producing healthy products can be incorporated because it would enhance the corporate image of the organization. PepsiCo has been under controversies currently due to its low social responsibility initiatives in its parent country. PepsiCo has been continuously working for extensive supplies in the Asian countries because of the high demand. The company has also been able to gather huge profit due to high sale percentages. This factor has resulted in negligence of social activities in the parent country, i.e. United States of America. According to I. Kant, the deontological philosophy involves human action based on motivation either by happiness or by reason. PepsiCo is a corporate multinational organization and the prime objective of the company is to enhance the sales percentage by extensive production (Gottschalk, 2011, p.141). The company should also look for profit based on corporate social responsibility activities because they help to attract the major stakeholders, such as employees, consumers and shareholders. The deontological philosophy is applicable in terms of PepsiCo because it illustrates about the good will associated with the action. Corporate social responsibility is an essential action for organizations. Therefore, it must be given attention because the marketing and sales also involves CSR activities (Akerstrom, 2009, p.98). Issue Two PepsiCo has been through some severe technical challenges recently, due to high production of soda. PepsiCo had increased the soda pricing due to rise of the raw materials along with its rival company Coca Cola. It has been observed that the increase in the pricing of soda let the company’s brand value to decrease. PepsiCo has been able to make up the loss of the soda pricing by enhancing the sales of the energy drink i.e. Gatorade. PepsiCo is also facing some technical issues in the world due to lack of efficient implementations towards recycling of raw materials. The Coca Cola Company has proved its eco-centrism by incorporating new methodologies that would reduce the consumption of resources and use modern recycling methods. PepsiCo, on the other hand has lack of modern implementations and it has reduced the brand value of the products. The stakeholders of the company have also demanded for safe working environments because in the last decade several mishaps occurred in the factories (Sacconi, 2011, p.23). Several road accidents have also taken place while transporting the products from the factories to the distributors and the market. PepsiCo has been under great turbulence due to the technical issues and it has affected the employee’s trust towards the organization. The contemporary theories developed in the 20th century states that new approaches are required to be implemented in order to make minor changes for enhancing relationships and gaining intellectual achievements. It has been observed that PepsiCo has been facing some severe challenges due to lack of efficient applications (Fernando, 2009, p.71). In order to maintain sustainability, PepsiCo should incorporate new methodologies in the organizations work culture. First of all, issues related to the pricing of products should be minimized because it would allow the company to make optimum profit. The pricing of the products should be determined after doing thorough analysis of the consumer market. Secondly, the issues related to recycling of resources should be taken into consideration. The usage of the natural resources should be reduced and made based on the exact requirement (Horrigan, 2010, p.33). Thirdly, the issues related to employees working in hazardous conditions should be avoided because it affects the brand value of an organization. In the contemporary era most of the organizations have initiated to reduce the chances of industrial accidents. The contemporary theory of ethics can be an important implication in the workability of PepsiCo because the current position of the company demands profitability (Hopt, 2005, p.12). The essential changes can be incorporated in PepsiCo after the company covers the debts that have occurred from the high production of soda drinks. In order to enhance the CSR values PepsiCo can also make small investments on social functions, such as charity and educational promotions because it would finally enhance the ethical value of the company and increase the sales of the products (Boubaker, 2012, p.8). Conclusion Based on the above discussions, it is possible to state that corporate governance and corporate social responsibility are the two essential ingredients of business. From the evidences obtained from PepsiCo it has been clear that the social, economic and technological issues have surrounded the working and sustainability of the organization. PepsiCo has been under great pressure due to the social factors and new strategies based on deontological theories can be implemented in the workability of the organization. On the other hand the technological issues related to industrial disasters should be checked properly because it can enhance the brand value of the organizations and build trust among the essential stakeholders. The governance policies have been efficient so far for4 the company; however modern interventions can have significant effects on the development of the organization. Therefore, it is clear that corporate social responsibility and corporate governance are very essential for maintaining sustainability of organizations. References Akerstrom, A. (2009). Corporate governance and social responsibility. London: Cambridge University Press. Aras, G. (2012). Corporate governance and social responsibility. New York: Springer. Boubaker, S. (2012). Board Directors and Corporate social responsibility. London: Sage. Crowther, D. (2012). Global perspectives on Corporate governance and CSR. New Jersey: Pearson. Fernando, A. (2009). Corporate social responsibility and corporate governance. New York: Harvard University Press. Gottschalk, P. (2011). Corporate governance and social responsibility. London: Rowman and Littlefield. Hopt, K. (2005). Corporate governance and business ethics. London: Sage. Horrigan, B. (2010). Corporate social responsibility in the 21st Century. London: Sage. Mullerat, R. (2011). Corporate social responsibility. London: Routledge. Rosam, I. (2004). Implementing effective CSR. London: Kogan Page. Sacconi, L. (2011). Corporate ethics, governance and social responsibility. London: Routledge. Simpson, J. (2013). Corporate governance ethics and CSR. London: Sage. Read More