Company Background

Describe about the Business Corporate Governance for Coca Cola?

Coca Cola is providing its customer varieties of flavours with the position of number one and Fanta, sprite and Diet Coke at number three. Coca Cola also operates world’s most pervading distribution systems. More than 200 countries across the globe it offers nearly 400 products on beverage.

Corporate governance refers to the method, processes and relation through which the corporate control their functions. It aims at identifying the allotment of rights and responsibilities amongst the different stature of the corporate level. They include the managers, creditors, shareholders, auditors etc. It includes objectives and plans through which the set goals are achieved. Governance includes policy making, taking actions and then evaluating the decisions and actions. Corporate governance practices are influenced when a need to align with the interest of the stakeholder arises.

The well-known Company Coca Cola is world’s most renowned and number one company for making soft drinks. Every dayCoca Cola sells 1.3 billion beverages. The red-white trade mark is the well-known brand symbol all over the world. Since the foundation of Coca Cola, its head quarter is in Atlanta. Coca Cola is providing its customer varieties of flavours with the position of number one and Fanta, sprite and Diet Coke at number three. Coca Cola also operates world’s most pervading distribution systems. More than 200 countries across the globe it offers nearly 400 products on beverage. There are sales about 70 percent, which are produced outside North-America. Revenues broke down as the under mentioned manner(Baye, 2000):

There are various products, such as carbonated beverage (Baraq’s, Fresca, Cherry and vanilla cock); Sports drinks (Aquarius), juice drinks and Juices (e.g. Maaza, Bibo etc.); bottled waters , Teas, andCoffees. Even the company have the rights Dr. Pepper, crush brands and Canada dry outside the North America, Australia and Europe. Development of Coca Cola’s is credited to adeptness in four areas- Infrastructure, consumer marketing, Customer or vendor marketing and product packaging.

Coca Cola did not become suddenly successful. During the first year existence of product, it made only $50 in sales. By 1891, Asa G. Candler, a successful druggistowned the whole enterprise. Candlerinfused the enterprise with an excellent business sense. Under Candler’s valuable leadership, which lasted 26 year period, the coca cola brought up quickly. By 1905, the syrup was totally free form cocaine(Brownsell, 2011).

There was a deal to conquest the Quaker Oats company for $15.75 billion, in November 2000.

The shareholders of the company elect the Board and this election aims at the overall success and strengthening the financial growth of the company. All the decision related to the company are taken by the board. The board of directors have framed the guideline to effective governance.

The Coca Cola is having it board, where it is having seven committees; they are known as- Compensation, audit, corporate governance and directors, finance, executive, management development, diversity review and public issues. The board can establish committees in additional according to the necessity(Colley, 2003).

Corporate Governance at Coca Cola

The board of directors elects one of board’s members annually to serve as t board’s chairman. The chairman should supervise all the meetings of the share owners and of the board. Chairman will perform other duties do some exercise of his powers, as prescribed in laws prescribed by the board in timely manner.  

Its corporate governance includes objectives and plans through which the set goals are achieved. Governance includes policy making, taking actions and then evaluating the decisions and actions. Corporate governance practices are influenced when a need to align with the interest of the stakeholder arises (Collier, 2014).

The Coca Cola Company is perpetrated to very good corporate governance. It promotes long-term interests of its shareholders; it braces board and management accountability and constructs the trust of the public on the company. The shareholders of the company elect the Board and this election aims at the overall success and strengthening the financial growth of the company. Board takes all the decisions related to the company. The board of directors have framed the guideline to effective governance(Daver and Demirel, 2012).

The board of the Coca Cola Company have adopted many guiding principles to make successful corporate governance these are(Investors et al., 2015):

Mission of the board and the responsibilities lie upon the Directors:

The shareholders elect board of directors and this election aims at the overall success and encouraging the financial strength of the organization. The board is responsible for taking all the strategic decisions of the company. The board do the selection of members of the senior management team who are responsible for carrying out the business of the company. The interest of the shareholders lies in the active judgement of the business activities, which would best serve all the functions of the company. The board give advices and guides the senior management and Chief Executive Officer. It safeguards the company assets; the sustainability of the internal and financial controls of the company is the prime focus of the board. In this regard the compliance to rules and regulation is mandatory. The directors of the company may seek help from the senior managers, advisors and auditors from outside. The selection of auditors and advisors from outside requires integrity and skills. The board has the right to select financial and legal advisors from outside as per the need of the Coca Cola Company. The directors need to attend all the meetings held by committees. The directors are mandated to devote their time and efforts for the fulfilment of their duties. The board is directed to hold 5 meeting in a year without fail. The chairperson of the board sets the agenda. The directors can contribute the inclusion of topics to be discussed. Such meetings are deemed to take place every year. In executive sessions of the board, non-management directors need to meet (Fritz, Kaestner and Bergmann, 2010).

Leadership of the board:

The board may alter the position of the executives after every financial year as per the needs of the business. The board considers relevant factors before doing so. A description of the board`s view for choosing its leadership structure is shown in the annual meeting of its share holders.

Guiding Principles for Corporate Governance at Coca Cola

At least there will be one executive session in order include a review of the board’s leadership structure among the non-management directors to determine the post of the chairman of the board. chief executive officer elects the chair man of the board.

The board of directors elects one of its members annually to serve as the chairman of the board. The chairman of the board needs supervise all the meetings of the share owners and of the board. Chairman will perform other duties do some exercise of his powers, as prescribed in laws prescribed by the board in timely manner(Fritz, Kaestner and Bergmann, 2010).  

There comes a belief that an independent directors needs to elect a independent lead director for one year. Though the lead director is annually elected in order to serve for one year, it may be expected to serve more than one year(Kaen, 2003).

Qualificationsof Director:

Directors can be nominatedby the share owners or by the boardas per the agreement by laws. The committee of corporate government and directors will make review over all nominees for board. They also include proposed nominees of share owners, in agreement with its charter. Assessment includes review of nominee’s independence, experience and understanding about the other industries and company and other such factors which are concluded by the committee are applicable as per the current needs of the board. There is a belief raised within the board, which allows determining to nominees are given invitation to join the board. Board’s chairman may expand board’s invitation to join the board (Kim and Nofsinger, 2007).

Director tenure and term:

In agreement with the laws, directors are chosen for one year. The board never believes about any limits established on the number of terms served by the director. The terms may impose the limitation, which causes the loss of expertise and experience vital for the board operation. Directors, who served on board for an expanded period of time can provide valuable deep view into the future and the operations related to the company based on their understanding and experience of the company’s objections and history.

Determination of independence:

The board should consist of independent directors. To make the independent determination, the board will observe all the requirements which are applicable, the requirements include standards for the corporate governance listening, which is recognized by the NYSE (New York Stock Exchange). The board will consider all the related circumstances and facts to determine the independence carefully.

Having consideration of the “independent” is the purpose of imposing standards on the director qualification, 1) it is needed to meet the standards of the bright-line independence under NYSE listening standards. 2) The board should positively determine that the director does not have other kind of material relationship with anything related to company, directly or being an officer, partner or as a share owner of an organization that have close attachment with the company(Lyu and Pae, 2003).

Board committees:

The board is having seven committees; they are known as- Compensation, audit, corporate governance and directors, finance, executive, management development, diversity review and public issues. The board can establish committees in additional according to the necessity.

The Committee of corporate governance and directors annually reviews the present recommendation and composition of each of the standing committee for committee membership to the board as per the need. There are no existence of strict changes and committee rotation policy in committee assignments. The committee assignments are made upon the basic needs of the committee, experience, availability, director interest and applicable legal consideration and regulatory. There are the independent directors, who are solely responsible to serve the audit committee o corporate governance and directors(Mallath, 2006).

Each one of the standing committees has a its own charter, which sets forward the committee responsibilities, the procedures and qualification and every time committee will report to board. Each of the community will evaluate itself annually.

The chairman of those committees will settle on the frequency of the committee meetings, maintenance of the consistency with the need of the company and with the committee’s charter.

Director can have access to the information, Employees and officers: Directors have free and full right to use details about employees, officers and the related files, books and the all individual records related to company. Any contact or meetings that the director wants to initialize may get arrangement through the secretary, director or by the chief executive officer. The directors need to use their judgement to ensure that there may not have any such contact troublemaking for company’s operations.

The Board wants regular attendance of the non-board members at board meetings, who are there in company’s most senior management position. The chairman of the board can make extension on such invitations(Monks and Minow, 2004).

Counting Education and director orientation:

All the new directors need to participate in company’s orientation program, which must be accomplished as soon as possible after the meeting, where election to chose new director takes place. This orientation includes presentation by senior management, so that he can do familiarization of company’s strategic and business plans to newly appointed directors.

Chairman and chief executive officer’s annual performance evaluation:

The board will evaluate annually to make sure about the chief executive officer and chairman of the board is able toprovide the a good leadership to the company . The board will evaluate performance of the chair man and chief executive officer of the board in an executive session among the non-management directors. The lead independent director led all program.  The compensation committee will do the measurement of the performances of the chairman and the chief executive officer according to their determined objective and goals to be achieved and also considers the evaluation of the board as a whole(Roberts, 2008).

Successful outcome within Management:

The board will determine the principles and policies to perform the chief executive officer selection and the policies regarding progression in the result of a retirement of a chief executive officer or of an emergency. The board will oversee the development of the senior management and progression planning for the senior positions, using the given input from the management development committee(SØRENSEN and PETERSEN, 2012).

Director compensation:

The committee determines director compensation amount on the director and then recommendation is donewith the committee charter to the board as a whole. Thecorporate governancecommittee and the fees and the responsibilities of the director should take into consideration compared to the other corporation or to the company. Stock of the company is an key portion of director compensation.

Board relations and interactions with the outside interested parties:

There is a belief in the board that the management act as a speaker for the company. with the request of the management, board members can come for a meeting individually or communicate with various constituencies, which have kept involvement with the company. Where board’s comments are appropriate, are normally come from the chairman(Tollison et al., 1993).

In this section an identification of those future challenges faced by Coca-Cola are explored. These challenges may impose negative impression on the market share and Coca-Cola’s long term profitability. Hence recommendations are here to turn the challenges into opportunities.

Declination of sales volume in the sector of soft drink:

William Pecoriello, who is analyst of beverage industry from Morgan Stanley and co., predicted the category of CSD (carbonated soft drink).

Due to the CSD category, the present amount of teens are tends become the lost generation. According to his latest survey of 1, 550 consumers, consumer’s index lie between the ages of 16-35. According to his view the US Carbonated Soft Drink segment is more likely to stay under pressure. He mentioned a forecast for a declination of 1.5 % volume for the Carbonated Soft Drink segmentannually.

In theCoca-Cola’s major market of US, CSD’s volume sale of (Carbonated Soft Drink) dropped more than 8 percent in 5 subsequent years, from 2005- 2009, with 0.2 percent in 2005, 0.6 percent in 2006, 2.3 percent in 2007 and 2008 with 3 percent and 2009 with 2.1 percent. It is more likely the decreasingscenario of volume (Why Cocaâ€ÂCola has lost its fizz, 2006).

If Coca-Cola keeps focusing on CSD sector competitively, it will deteriorate or Coca-Cola will lose the leader in market of beverage industry. Coca-Cola can bring its focus more on the noncarbonated drinks, bottled water (which are coming as product under coca cola now a day) and more especially the energy drinks. In the year of 2006, energy drinks increased its sell at rate of 50%. In the year of 2010, there was a growth of 10 percent on energy drinks. Healthy drinks and energy drinks will be the most popular beverage for the new generation of health conscious customer and young consumers(Yuvaraju, Subramanyam and Rao, 2014).

Conclusion:

Coca Cola did not become suddenly successful. During the first year existence of product, it made only $50 in sales. By 1891, Asa G. Candler, a successful druggist owned the whole enterprise. Candler infused the enterprise with an excellent business sense. Under Candler’s valuable leadership, which lasted 26 year period, the coca cola brought up quickly. By 1905, the syrup was totally free form cocaine (Brownsell, 2011).

The shareholders of the company elect the Board and this election aims at the overall success and strengthening the financial growth of the company. All the decision related to the company are taken by the board. The board of directors have framed the guideline to effective governance.

References:

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