The key competitive advantage of CA is the Coca Cola brand. Other competitive advantages are incentives to innovate new products and packaging, strong distribution network, and especially the way it governance its corporation. These factors help the company to reach the first place in beverage industry and remain the leadership not only in local but also in the global market. This report will indicate the corporate governance framework of CA by identifying and analyzing three features which engage local as well as global stakeholders in terms of social responsibility, regulatory climate, and board diversity.
Then it will discuss about the ethical challenges that the company may deal with. The report will be organized into four main parts. Firstly, it will introduce about the Coca Cola Amatol Limited. Secondly, three features will be described and evaluated. Thirdly, the report will mention the ethical challenges which may appear in the future and finally comes to a conclusion. II. Corporate governance framework 1. Board diversity Board diversity is described as the differences among members in the board. These distinctions come from age, gender, culture, educational background, and experience.
Board diversity has both positive and negative impacts on decision making and company performance. There are nine members in CA board of directors. They differ in age, gender, educational background, qualification, culture, and experience in different industries. On the positive side, a research points out that diversity stimulates a greater understanding of the market; it raises more creativity and innovation, and yields more effective problem-solving (Carter et al. , 2003). The presence of female in top management is essential.
There are three women out of nine members presenting in CA board of directions. This claims that female is equal to male in being respected, acknowledged capacity and promoted. In working environment, female representation in the board of directors “brings informational and social diversity benefits to the top management team, enriches the behaviors exhibited by managers throughout the firm, and motivates women in middle management’ (Deeds & Ross, 2012). Recognize the benefits of gender diversity, CA identified this aspect as the main priority and has followed diversity policy since August 2010.
This policy “articulates the company’s commitments, expectations and susceptibilities and aims to create a fair and respectful workplace where equality of opportunity exists throughout all phases of the employment lifestyle” (sustainability Report’, 2013). As CA presents in six countries, board diversity may benefit in understanding different cultures. It is quite important because in each market directors have to make appropriate policies and identify country specific short and long term targets which closely reflect the consumers, customers and cultures of the communities in which the company operates (“Sustainability Report”, 2013).
On the active side, diversity may lead to difficulties in growing consensus on making decision. As each member comes from different culture, they are experts in different industries so they consider a same problem from different perspectives. Although the company has its code of business conduct, everybody shares the same values and complies with the code; people cannot completely change their working styles. Therefore, when the managers or employees work with members of the board or even the director works with each other, they have to accept the distinction, sympathize and attempt to reach a consensus of opinion. Corporate social responsibility The concept of corporate social responsibility is considered under different perspectives. In the view of the society, business practices of a firm associate with society and have a great impact on society. In the view of stakeholders, this concept is the adjustment between benefits and the needs of stakeholders (Thicker, 2012). Although it is seen from various views, corporate social responsibility is significant and affects business practices. Understanding this, CA established the Compliance & Social Responsibility Committee.
The Committee functions as an assistant in engendering whether “the systems of control which management has established effectively safeguard against contraventions of the Company’s statutory responsibilities” and “there are policies and controls to protect the Company’s reputation as a responsible corporate citizen” (“Compliance & social responsibility Committee Charter”, 2012:1). The Committee has dealt with water stewardship, packaging and recycling, energy and carbon reduction, consumer health, employee development and health, and engagement and project development with customers, suppliers and communities.
All the strategies and policies the company reviews aim o create value not only for the business but also for the community. Environment and health are the most concern. CA has continually reducing the amount of water used. Total water utilized has dropped 15% since 2009 while production has grown 7. 5%. Source: Coca Cola Amatol, Sustainability Report, 2013 Water efficiency is one of successful strategies which helps cut costs (purchase, treatment and disposal costs), and reducing natural resource consumption; more importantly it helps maintain environmental sustainability.
As the number one food and beverage brand, the company is also responsible for community health. CA has attempted to advocate many physical activities and healthy lifestyles in rural areas. Strict policy is passed to ensure advertisements are not broadcast during television programs for children under 12 (2013: 157). In the concern of consumers’ health, transparent nutrition information is widely presented. The company is continually attempting to provide greater choice in various products, especially low-kilojoules and non-alcohol drinks for customers with special diet. . Regulatory climate Climate change is not a new issue and now getting increasing acknowledgement not only from individuals but also from organizations around the world. This issue has direct impact on every living activities as well as business practices. Coca Cola Amatol has long been aware of the effect of climate change on the business, and recognize its accountability to react to this problem. CA has adopted many strategies to minimize the energy utility and carbon emissions. Since 2006, CA has set targets for each member in the group.
The company complies with regulatory and report under Energy Efficiency Opportunities and National Greenhouse and Energy Reporting. At workplace, CA stimulates its employees and staffs to involve in sustainable activities. Besides that, CA continually co-invest in energy efficiency and low emission products and processes. Along with minimizing energy utility and carbon emissions, CA has attempted to conduct cost savings for the customers. The company has been co-invested with refrigeration suppliers to deliver the most efficient cold drink equipment in the global market.
One out of many remarkable achievements of ecosystem sustainability CA has gained is the clean water projects in Indonesia. The many tackled the most serious environmental issue in this country, litter and pollution, by cooperating closely with local communities, combining investing in technologies, facilities and raising community awareness. Since 2008, CA has carried out the Bali Beach Coastal Cleanup Day and expanded to the point where CA in Indonesia cleans five Bali beaches every day. The company assists locals to set up organic farm in West Java and treat polluted Jakarta waterways.
In addition, CA also encourages schoolchildren in Fabian, and Central Sumatra plant 1000 mangrove trees along the Osborne River. All the strategies CA is chasing aim to create an environmentally friendly market. The company has always attached itself to environmental responsibility and contributed to improve the global issue. The accountability of Coca’s policy does not limit to comply with corporate regulatory. The company has also raised community consciousness and encouraged community to contribute their effort to environmental sustainability.
Ill. Ethical challenges People usually share the common thought that business and ethic are two separate concepts. However, Dry. Gave (2010) argued that as business is a part of the society o ethic is obviously relevant in the context of business. Business ethic is defined in various ways. In general, this concept mentions the moral behaviors in relation to conducting business. According to Harboring et al. (2011) managers of firms have moral obligation to all those affected by corporate practices. Those people are shareholders and stakeholders.
Being an ethical business is not simple that firm Just obeys the law. Firm is expected to involve in activities that raise the welfare of stakeholders as well as community. However, while running a business, keeping lance between corporate self-interest and benefits of stakeholders is not easy. Firm sometimes faces with choices between profit and morality. CA is not an exception. According to CA, the company experienced a difficult year. The net profit after tax fell by 82. 5 percent for the twelve months ended 2013.
The company is attempting to reduce the cost of production and distribution. If CA does not stick to its code of business conduct and not consider integrity as main priority, the company could face ethical challenges. In order to cut the cost of production, CA may exploit child labor. Employees will not be treated fairly, they may experience in sweatshop with low wage. Social responsibility will be disregarded. CA may reduce money invested in environmental sustainability. Energy efficiency technologies and processes will not be utilized as they are costly.
In turn, industrial waste will be discharged directly into the environment. Another ethical problem may challenge CA is transparency. “Transparency expects a free flow and free exchange of information” (Gave, 2010). Gave (2010) also argued that the dissemination of right information to the right people (employees) helps build up awareness among them ND enhances their morals and productivity. Therefore, if the board of directors fails to inform or gives inadequate information to stakeholders, integrity will be misunderstood or not be followed.
This makes the company go against the code of business conduct and causes negative impacts on stakeholders. ‘V. Conclusion The success of Coca Cola Amatol thanks significantly to corporate governance. These features analyzed above are three out of many factors which position the company’s management capacity and have great impact on local and global stakeholders. Board perversity influences positively and negatively on stakeholders. Encouraging the variety will stimulate creativity, innovation for business practices.
Especially, gender diversity helps balance gender and value equality at workplace. In contrast, board diversity may affect the unity of decision making. Social responsibility and regulatory climate also affect local and global stakeholders. Chasing all strategies about water efficiency, health care, and reaction to climate change helps CA contribute to benefiting the community and sustain ecosystem. Besides, business ethic must be noninsured strictly as not only does it affect the firm reputation but it also has influence on stakeholders.