The Importance of Corporate Governance Became Dramatically Clear - Case Study Example

Corporate governance of Coca-Cola Company Student’s Name Course Institution Date Introduction In a bid to have the exploration of the origins of the contrasting conceptualizations with respect to the role of the board of the directors of Coca-Cola Company, there is need to start with the review of some of the primary ideas of that today results into the shaping of the contemporary thinking of the board’s role. On the same note, it will also be important to factor in the influence that result due to the issue of the USA’s corporate government practices (Lawrence, and Beamish, 2013). Mostly, the role of the board of the board is what lead to the quality of work needed being put in any company added with the experience that each of the employees have all together with respect to the laid down rules that governs the company altogether. On the same note, the potential investors will also chiefly depend on the outcome that results from the effective management that board in place excerpts in the running of the company Literature Review Corporate governance theories In many of the occasions, the corporate governance of any company such as the Coca-Cola in this case may sometimes face problems due to lack of clearly defined set of management ideologies. In this regard, there are four theories that plays a major factor in the shaping thegovernance any company in any country (Groot, 2009). The theories in question are the agency theory, resource dependence theory, stewardship theory and the stakeholder theory. Based on these theories, many individuals do take into application of that kind of theory with respect to corporate governance in terms of what makes sense during such times. For instance, by factoring in the application of any these corporate governance theories, there are times to consider in the economic implications and also possible challenges that comes with it all together (Tourani-Rad and Ingley, 2011). However, the most so influential theory is the Agency theory that indeed what result into the shaping of many corporate governance systems of many companies in the world such as the Coca-Cola Company in this case in the United States. The corporate governance system of USA Today, the USA corporate governance system faces the most criticism primarily due to the failures of most the major companies such as Enron, WorldCom and some other prominent companies in the country. The observed failures and the criticisms are also what serves as the legislative changes such as the Sarbanes-Oxley Act of 2002 and also the regulatory changes concerning the issue of the corporate governance in terms of its guidelines based in the NYSE and NASDAQ. Sometimes with respect to the issue of the corporate governance in the USA, there are some questions that their answers are yet to come out with respect to the vice. For instance, as it stands, the systems of corporate governance are poor but are the same corporate governance is bad really? The otherquestion that also comesin whether the changes being sought to inject on the USA’s corporate willresult in the desired improvement (Groot, 2009). Based on the evidence found, it may not be sincerely put it that they are indeed the cause of the failed USA system of corporate governance (Foster, 2014). For instance, the economy and the stock of the country’s market areat timesbeingon the good side of the performance in comparison to other countries in the past few decades. Similarly, the country’s stock market also experiences the continuity in the outshining of other wider indices in terms of performance because the scandals in most of the occasions broke. From the interpretation of the evidence, some components of the USA’s corporate governance system had some failures during the period of the 1990s, the overall system that has the inclusion the public and the government in this case created the reaction in terms of addressing the problems (Webb, 2006). Hence, it is relevant to consider the effects of the legislative, the regulatory and the responses from the market that may occur in the coming future. With this notion, there is likelihood of a much better as much as itmay appear that dangerous in terms reaction to the extreme events. How corporate governance features are exercised in the Coca-Cola Company As accompany, the Coca-Cola company remains committed to ensuring good corporate governance that in this case results in the promotion of the long term interests of the shareowners and even the strengthening of the Board and the management with respect to the issue of the accountability and trust building in the company. Board diversity Election of the members of the Coca-Cola Company’s Board members takes place through the participation or the inclusion of the shareowners. In this regard, the shareowners exercise their interest in terms of long term health and even the overall success of the company itself coupled with its financial power (Gupta, 2011). At the same time, the board also plays a role in the decision making process of the company with the exceptions of those issues that remains under the reservation of the shareowners themselves. On top of this, the Board also participates in the selection and overseeing of the senior management members that have the responsibility in operating the business related or associated to the company. With respect to the aspect of the corporate governance, the Board of management of the Coca-Cola Company has its set guidelines that provides the framework applicable in the effective governance of the company (Wardlaw, 2009). For instance, the guidelines tackles on the matters such as the mission of the board, the qualifications of the senior management officers such as the directors and even the independence or the freedom of the members of the board. On top of this, it also covers on the structure of the committee, the performance evaluation of the chief executive officers and their suggestions with respect to management (Fernando, 2010). Also, it is also worth not to forget the regular reviews of the board in terms of the developments in the corporate governance together with the updates concerning the corporate governance guidelines together with the materials that may appear appropriate and also applicable.Other components of the corporate governance materials are corporate governance guidelines, the certificate of incorporation andeven the bylaws, the charters from every committee (Wen, 2013). The instance also does not forget the code of ethics or conduct, information reporting and the general public relation to the company as a whole. ANALYSIS Key features of the Coca-Cola Company’s corporate governance framework/ Company overview Thefeatures of the corporate governance of theCocoa cola Company are as follows as issued from the Board of Management. Besides, there are yet to be found conflicts that arises due to the same from the identified principles that follow below; Remuneration practices As stated in the article 3.1.2 of the corporate governance principles, the company will ensure that the process of remuneration of the employees all the time will remain free and public (Elmore, 2013). In this regard, the company seeks to enhance the issue of transparency and integrity at all costs so as to win the confidence of the public at large. Committee composition Since the present constituents of the board members has no any woman and also with the objectivity ensuring gender equity in terms of representation in the company’s structure or management, the recommendation’s from the principle of the corporate governance states for ‘the need of the inclusion of at least a woman in the board of the management. Shareholder rights In termsof theshare transfer, from the company’s article of association, there is no restriction on the transfer of shares such as the class C types. However, there are a given laid down procedures involved in the transfer of the class A and B types of shares (Du Plessis, McConvill and Bagaric 2005). On the same note, the classes B and A types of shares have their rights or privileges in regard to the management authority of the company. For instance, as contained in the CCI, there are board of directors who are twelve in number of which seven of them are from class A shareholders while only one come from the class B share holders. The other four members are from independent directors. Despite the fact that the company is under the insurance cover on the damages that may result from the faults brought by the Board team as they execute their mandate, indeed, the overall yearly responsibility of the threshold of the applicable insurance is just below the amount that corporate governance of the company states in its principles. For instance, the gross annual responsibility limitation is under the determination of the management’s decision and at the same time the limit is within the expectation of being within the current levels (Drenowatz, Jakicic, Blair and Hand, 2015).On the other hand, as much as the financial statements announcements with the exception of the materials events plus the footnotes are that mandatory for disclosure to the public with respect to the regulations found in the capital markets, it is indeed not necessary for conducting their simultaneous disclosure in the public arena The impact of the USA’s corporate governance system on the Coca-Cola Company As at present, the USA corporate governance system faces the most criticism primarily due to the failures of most the major companies such as Enron, WorldCom and some other prominent companies in the country (Collier, 2014). Some of the failures and the criticisms are also what serves as the legislative changes such as the Sarbanes-Oxley Act of 2002 and also the regulatory changes concerning the issue of the corporate governance in terms of its guidelines based in the NYSE and NASDAQ. In most of the occasions, respect to the issue of the corporate governance in the USA, there are some questions that their answers are yet to come out with respect to the vice (Chew and Gillan, 2009). For instance, as it stands, the systems of corporate governance are poor but are the same corporate governance is bad really? Another question that also comes in whether the changes being sought to inject on the USA’s corporate will result in the desired improvement. Based on the evidence found, it may not be sincerely put it that they are indeed the cause of the failed USA system of corporate governance. That said the economy and the stock of the country’s market are at times being on the good side of the performance in comparison to other countries in the past few decades. Also, the country’s stock market also experiences the continuity in the outshining of other wider indices in terms of performance because the scandals in most of the occasions broke (Burgess, Karvan, Johnson, Kriegel, and Koros, 2014). Based on the available evidence, some components of the USA’s corporate governance system had some failures during the period of the 1990s, the overall system that has the inclusion the public and the government in this case created the reaction in terms of addressing the problems. In this regard, it is relevant to consider the effects of the legislative, the regulatory and the responses from the market that may occur in the coming future. With this notion, there is likelihood of a much better as much as it may appear that dangerous in terms reaction to the extreme events. How corporate governance system affects the way the Coca-Cola Company engages with shareholders and other stakeholders. Transparency and disclosure From the disclosure policy, there is the equal treatment of all the stakeholders and again it provides for the accuracy in the disclosure of such aspects with the same contents so as to reach every recipient at the same time. Besides, the information that the shareholders may request concerning the matters that are beyond the public sphere also have their evaluation with regards to the same policy. Hence, there is no permission for selective disclosure based on thisnotion whatsoever (Brink, 2011). The disclosure of the information normally takes place to the public through press or the public disclosure platform. However, there is no such identified condition necessary in the list that the investors or the analysts may need in relation to the parties for acceptance or even encouragement. Finally, there is no provision that allows for the request to assign that special auditor as an individual right contained in the articles of Association. Hence in this regard, the company only acts with respect to relevant articles of the Turkish Commercial Code that stipulates the right to make a request for conducting special audits. Ethical challenges the Coca-Cola Company that may or may not be addressed with its current governance arrangements Social responsibility/ Ethical challenges Some of the ethical challenges that the company faces are the issues of the social, environmental and economic impacts in its area of operation altogether. Definitely, every company just as Coca-Cola in this case, will always strive to operate as much as possible by incorporation the aspect of sustainability in each and every part of these identified ethical challenges (Argüden, 2011). Hence, if tackled well, the company foresees a brighter future with the handling of the ethical challenges it faces through ensuring that it takes care of its social responsibility to the public and the environment as a whole. Conclusion Coca-Cola Company as it stands conducts all its operations according to the framework found on the present regulations and the principles concerning the corporate governance (Ferrell, Fraedrich and Ferrell, 2011). However, there are some instances where the application of the corporate governance principles may not come into application due to such instances that entail the conflict of interests and as such calls for the change of the company’s management strategies with regards to the framework of the laid down principles. Bibliographies Argüden, R. 2011. Keys to governance. Basingstoke: Palgrave Macmillan. Brink, A. 2011.Corporate governance and business ethics. Dordrecht: Springer. Burgess, S., Karvan, O., Johnson, J., Kriegel, R. and Koros, W. 2014. Oxygen sorption and transport in amorphous poly(ethylene furanoate). Polymer, 55(18), pp.4748-4756. Chew, D. and Gillan, S. 2009. U.S. corporate governance. New York, N.Y.: Columbia University Press. Collier, K. 2014. A Case Study on Corporate Peace: The Coca-Cola Company: Coke Studio Pakistan. Business, Peace and Sustainable Development, 2014(2), pp.75-94. Drenowatz, C., Jakicic, J., Blair, S. and Hand, G. 2015. Differences in correlates of energy balance in normal weight, overweight and obese adults. Obesity Research & Clinical Practice. Du Plessis, J.,McConvill, J. and Bagaric, M. 2005. Principles of contemporary corporate governance. Cambridge [England]: Cambridge University Press. Elmore, B. 2013. Citizen Coke: An Environmental and Political History of the Coca-Cola Company. Enterprise and Society, 14(4), pp.717-731. Fernando, A. 2010.Business ethics and corporate governance. Delhi: Dorling Kindersley (India), licensees of Pearson Education in South Asia. Ferrell, O.,Fraedrich, J. and Ferrell, L. 2011. Business ethics. Mason, OH: South-Western Cengage Learning. Firestein, P. 2009. Crisis of character. New York, NY: Sterling. Foster, R. 2014. Corporations as Partners: “ConnectedCapitalism” and The Coca-Cola Company. PoLAR, 37(2), pp.246-258. Groot, C. 2009. Corporate governance as a limited legal concept. Alphen aan den Rijn: Kluwer Law International. Gupta, S. 2011. MIR talks to Stan Sthanunathan, Vice President of Marketing Strategy and Insights, Coca-Cola Company. GfK Marketing Intelligence Review, 3(1). Lawrence, J. and Beamish, P. 2013.Globally responsible leadership. Thousand Oaks, Calif.: SAGE Publications. Tourani-Rad, A. and Ingley, C. 2011.Handbook on emerging issues in corporate governance. Singapore: World Scientific. Wardlaw, B. 2009. Got Gas? Mark Thomas Belches Out the Coca-Cola Company. Monthly Review, 61(7), p.57. Webb, C. 2006. Avoiding ageism at Coca‐Cola. Human Resource Management International Digest, 14(7), pp.9-11. Wen, S. 2013. Shareholder Primacy and Corporate Governance. Hoboken: Taylor and Francis. Zinkin, J. 2010. Challenges in implementing corporate governance. Singapore: Wiley. Read More