Ethics and Governance

1 January 2017

The Coca-Cola Company did not take into account the stakeholders’ interest, upon the launch of their new product- VitaminWater. First off, the consumers were being misled that the VitaminWater was a healthier alternative, but in real, due to the ingredients contained in the drink, it is not. Upon investigation, the truth in the content of the VitaminWater would be released, and hence consumers worldwide would know the truth of contents. With the act of misleading consumers, there would be extreme negative effects on trustworthiness towards the source of information and the future willingness to buy their products.

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When this happens, it would be very tough job to gain the consumers’ trust again, in order to have the major market control in the drinks industry. Further to this issue, the label was not clearly communicative due to the fact that the content or ingredients of the drink were not fully stated. Although VitaminWater offered more vitamins for the human body, it was unhealthy due to the fact that the amount of sugar in the water will result in the consumer having a higher chance of getting sugar related health problems.

The sugar content, which could be easily and clearly labeled on the drinks, could well be printed on the label of VitaminWater to let known the amount of sugar used to make the drink. Upon probed on whether the sugar content of VitaminWater will contribute more to obesity, the company became defensive, stating that the allegations made were ridiculous and wanted to defend the lawsuit. Another issue that is very unethical would be the over-pricing for VitaminWater. It costs USD 1. 50 for 590ml, which is a very high price compared to the average price of the other drinks that Coca-Cola produces.

The fact that not only the drink is costly, but it also harms the body more than it helps the body; it has greatly shown that the Coca-Cola Company overlooked the ethical issues in the company. 3. ) Ethics Policy and its Development 3. 1) Proposed Ethics Policy -The Coca-Cola Company will act with integrity and accountability. -By practicing integrity, we will ensure that all information provided of the products is truthful and genuine to all our consumers. We shall neither engage in any deceptive nor misleading practices. By practicing accountability, we are responsible for our actions and ensure transparency in our processes. All the product components used in the development of our beverages are to meet the right criterion, having the contents of the beverages clearly labeled and communicated clearly to our consumers. -We will have the commitment to take into consideration our stakeholders’ interests, and to make sure that we provide them the products with fairness and equality. -We will constantly maintain the highest quality of our products, so as to offer our consumers the excellence quality at a reasonable price.

Keep in mind to ensure that the materials used in the manufacturing process are keep to the minimal waste. -We will uphold the ethical standards and corporate social responsibility to portray a positive image, credibility and reputation. 3. 2) Rationale of Ethics Policy The ethics policy has been developed based on the main issues identified from the case study. In order to portray a positive image, trustworthiness, and reputation, it is very essential for company to be accountable for all the negative issues.

Further to that, negative issues must be solved and rectified the issues promptly, the soonest possible. This assists to build the company’s credibility and this will attract potential and retain existing consumers to the company. 3. 3) Policy Development Ethics is a set of moral principles and values that individual possesses (Trevino & Nelson 2004, p. 13). Ethics, which also refers to a well-developed norms and standards of conduct, is essential to an organization, due to the fact that the employees of the company would have to follow the acceptable ethics to perform their job more effectively.

Our group developed the ethics policy by focusing on the following theories: 3. 3. 1) Virtue Ethic Virtue ethic focuses on the individual motivations, character and intentions (Trevino & Nelson 2004, p. 93). It is about individual integrity to carry out tasks ethically that aligns with the organisation’s code of ethics. For example, the representative of Coke is supposed to inform the public the right content of the “healthy drink”. 3. 3. 2) Utilitarianism Ethic Utilitarianism ethic focuses on the consequences of the action on all the people affected by it (Collins 2009).

Under utilitarianism, everybody is treated equally and there can be no favouritism based on power or status (Collins 2009). According to Parsons (2004), John Staurt Mill augmented the utilitarianism ethics. She mentioned that ‘neither the intent behind the action nor the fundamental rightness or wrongness of the action is at issue, only the consequences. ’ (Parsons 2004, p. 44). Based on the Coca-Cola case study, Coca-Cola should begin with understanding the consequences on the public reactions towards the introduction of the drink, rather than waiting till consumers complain about it after the fact has been found out. . 3. 3) Kantianism Ethic Kantianism ethic is based on the moral principle that requires everyone to be treated as a free individual equal to everyone else (Velasquez 2002). Velasquez (2002, p. 98) mentioned that ‘Kant’s categorical imperative focuses on a person’s interior motivations and not on the consequences of one’s external actions. ’ According to Kantian theory, moral right or wrong are identified by the reasons the person has for what he tries to do and not measured by the end result (Velasquez 2002).

Therefore, a person’s or corporate action that is motivated by a sense of duty is considered as right moral. Based on the Coca-Cola case study, the intention is morally right. 3. 4) Corporate Social Responsibility Corporate Social Responsibility (CSR) is defined as the responsibility and commitments of the company that contribute towards the social, such as community, environment and the general public (De George 1999). It also states that the corporate social responsibility must be able to fulfill both legal and social obligation.

Legal obligation refers to obeying the “lawful” rules and regulations set by the government. Social obligation refers to the action done by the company that impacts make on the society (De George 1999). CSR comprises of four factors and they are law, ethics, economics and philanthropy. This factor allows the company to act as a good citizen while obeying the laws, and is ethical, thus profiting from the business (Gupta & Prisch 2008). By adopting a good CSR will enhance the corporation’s image and its reputation thus creating more business demands in the long run (De George 1999).

Based on the case study of Coca-Cola, they should adopt CSR so that they would be able to gain back the trust that they have lost from the general public, so in order to improve the sales figures of their products. 4) Implementation, Effectiveness and Limitations 4. 1) Implementation of Ethics Policy To implement the ethics policy successfully, the Coca-Cola Company needs to communicate the policy to all the stakeholders clearly and effectively. It would mean that the employees of the company must understand and practice the ethical standards that they are required to follow.

To practice transparency, the company could engage a third party to be involved in the process of manufacturing the products. The third party will verify the product’s components used and ensure that the company follows the ethical standards. Alternatively, the company can allow and arrange for viewing of the manufacturing plant with the media and the public to build the trust in their product development. According to the article, the Hong Kong’s regulators encourage companies to initiate the practice of transparency.

Being transparent, it allows the company to be more effective and be committed to uphold the good ethical standards (Mar & Young 2001). The company needs to engage internal and external audit to conduct audit checks on the process of manufacturing quarterly or yearly to ensure the manufacturing process is maintained in high standards. With the implementation of the audit checks, the company could also ensure that the prices of the materials used are of reasonable costs to provide the consumers’ the worth value of the products and the shareholders’ the achievable profit.

To align with the corporate social responsibility, the company needs to do regular checks, practicing quality control, on the equipments and materials used in the development of product to ensure that all materials are eco-friendly and the products are of excellence quality. One article mentioned that some companies encourage their employees to adopt the environmental initiatives. To take on the environmental initiatives, the company would have to support the idea. This would enhance the company’s overall performance and may increase the efficiency and profitability (Ramus 2002). 4. ) Effectiveness of Ethics Policy The policy is effective with clear communication, audit checks and the practice of transparency. With the clear communication of the policy to the stakeholders, they are aware of the contents of the products. This ensures them the credibility that the company is building; hence they would feel the fairness and the price worthiness of the products. One article indicates that effective communication is important for business success. It allows companies to exchange information and build good rapport and strong relationships while minimizing the communication barriers (Griffith 2002).

The audit checks conducted, will certify the minimum requirements that the company is required to fulfill in order to produce excellence products’ quality. This would also make sure that the material costs are acceptable to achieve consumers’ satisfaction and shareholders’ profit. By practicing transparency, this builds up the trust and confidence level of the stakeholders by educating them with the trips to visit the manufacturing plant. This creates awareness of the methods used and how the products are developed.

It has indirectly enhances the credibility of the company. And by arranging such trip visits to the manufacturing plant, the company fosters rapport with the stakeholders and ensuring them that the company encourages corporate social responsibility. From the article, a study was conducted among 460 consumers which results that corporate social responsibility is essential in affecting company’s image and performance. Consumers are more willing to purchase items from those companies that practice CSR.

Their perceptions are of the company’s positive ethical practices that lead to increased consumers’ satisfaction, support and reliability (Gupta & Prisch 2008). 4. 3) Limitations of Ethics Policy According to the article, Bandura (1999) mentioned that most people used their personal judgments and thinking, to deduce whether or not to accept and follow suit the set of ethical standards set by the company. Employees will usually react with their own behaviours which might not align with those ethical standards of the company (Trevino, Weaver & Reynolds 2006).

The culture in the company that has been already in long run since the company begins also plays an important role for the employees’ decisions on whether to follow the ethical policies in the company. Regardless to the fact that there is clear communication, with indications of the contents labeled clearly on the products, a limitation would be that consumers, might not be bothered by the sugar level. The main reason to this would be that as some of them are not really health conscious, although given understood the contents of the drinks.

Due to these, Coca-Cola must also understand that there would be doubts and questions to be resolved from the media and consumers. Audit checks could well be implemented used to express and show fairness, with the presence of financial statements, in all material respects, Coca-Cola’s financial position and cash flows, including the end results of operations. However, there might be loopholes or situations whereby they are not able to identify the problems even after auditors examine the financial statements and supporting records. . Conclusion From the case study, we learnt that the lack of transparency caused great friction between the Coca-Cola Company and the stakeholders, hence causing disputes over the main issues identified in this report. To salvage the situation, in order to regain the trust and confidence of the stakeholders, the ethics policies in this report are to remedy these issues. The implementations proposed would greatly improve the company’s image and reputation as there will be transparency in their operation processes.

The products’ prices are also justifiable based on the quality. Furthermore, being corporate social responsible, there will be a minimal wastage of materials and environmentally friendly. Despite the limitations of the policy, we believe that based on the findings on the ethical standards, Coca-Cola could take into considerations of such limitations and make improvements to minimize the undesirable outcomes. All employees of Coca-Cola will use this set of ethics as a guideline to maintain and uphold the ethical standards and be responsible towards our society.

In the real world, no ethic policy nor governance system is able to fully prevent any mis-happenings in the company, including employees putting their personal interests ahead of the interests of the companies they manage. But many steps can be taken to improve the ethics and governance, and thereby reduce opportunities for getting the wrong things done. The management of the company has an important role to play to make sure that the ethics policy are well written out and let know to the employees of the company.

It would also be essential for the management of the company to make sure that employees follow the ethics, rules and regulations promptly to as to achieve a greater milestone, gaining better revenue and achievements, and heading towards the long term goals and targets. 6) Reference List Collins, D 2009, ‘Essentials of business ethics’, John Wiley & Sons, New Jersey. De George , RT 1999, ‘Business Ethics’, 5th edn, Prentice Hall, New Jersey Donaldson T, Werhane, P & Cording, M (eds) 2002, Ethical Issues in Business: A Philosophical Approach, 7th edn, Prentice Hall, New Jersey

Griffith, DA 2002, ‘The role of communication competencies in international business relationship development’, Journal of World Business, vol. 37, issue 4, pp. 256-265, viewed 2 August 2009, ScienceDirect database Gupta, S & Pirsch, J 2008, ‘The influence of a retailer’s corporate social responsibility program on re-conceptualizing store image’, Journal of Retailing and Consumer Services, vol. 15, issue 6, pp. 516-526, viewed 2 August 2009, ScienceDirect database

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