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EHM 1 TASK 3 – CODE OF ETHICS AND LEGAL RESPONSIBILITY ANALYSIS

Code of Ethics and Legal Responsibility Analysis Gary Redden Western Governors University

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EHM 1 TASK 3 – CODE OF ETHICS AND LEGAL RESPONSIBILITY ANALYSIS

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Table of Contents A.

Choose a company’s code of ethics and analyze it................................................................................3 A1. Analyze how well PepsiCo’s code of ethics covers the topic of corporate social responsibility (CSR)..3 1.

CSR - PepsiCo’s Environmental Impact:.......................................................................................4

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CSR - PepsiCo’s Big and Small Economic Picture:......................................................................4

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CSR – PepsiCo Ethical Concern on how they are Socially Viewed...............................................5

A2. Analyze how well PepsiCo’s code of ethics covers the topic of compliance with legal mandates.......5 A-2a. Describe the ramifications for an organization when it is noncompliant with legal mandates.....6 A-2b. Describe two legal or ethical safeguards the chosen company has in place or could put in place to prevent illegal or unethical acts.........................................................................................................6 A3. Analyze how well the chosen company’s code of ethics facilitates the development of an ethical culture.......................................................................................................................................................7 A4. Explain how an employee would raise an ethical concern in the chosen company and provide three resources available to employees to use when raising an ethical concern.........................8 1.

Raising Ethical Concern – PepsiCo Speak Up Program for Global Code of Conduct Violations:.8

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Raising Ethical Concern: PepsiCo Health and Safety Policy:........................................................8

3. Raising Ethical Concern: PepsiCo Immediate Manager, Next Level Manager, or Human Resources Manager...............................................................................................................................9 A-4a. Discuss which resource(s) you would most likely use to report an ethical concern.........................9 B. Develop a policy that instructs employees on how to address unethical conduct observed at work by doing the following:....................................................................................................................................10 Reporting Unethical Conduct Policy........................................................................................................10 B1. Discuss personal and organizational factors an employee would need to consider as a last resort before deciding to blow the whistle about unethical conduct seen at work...........................................12 B2. Describe the internal and external reporting steps an employee should follow if the employee decides to blow the whistle.....................................................................................................................13 C. Analyze the advantages and disadvantages of whistle-blowers receiving payment from the government based on one of the following laws:.......................................................................................13 D.

Analyze how the U.S. Sentencing Guidelines have changed the way organizations operate...............15 D1. Discuss three culpability factors that are used to determine fines under the U.S. Sentencing Guidelines...............................................................................................................................................16

E.

Reference............................................................................................................................................17

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Code of Ethics and Legal Responsibility Analysis For this paper, I am being asked to look at PepsiCo’s code of ethics through the lens of an experienced ethics officer. The scenario provided has tasked us with analyzing PepsiCo’s current code of ethics and finding areas in need of improvement. A. Choose a company’s code of ethics and analyze it.

I have chosen to analyze PepsiCo’s global code of conduct. The goal of PepsiCo’s code of conduct is to do business the right way. Below you will find my thoughts on how well PepsiCo meets their goal of doing business the right way and how the company’s code of conduct lacks or meets some of the common ethical topics we have learned about through the course of our ethical leadership studies. A1. Analyze how well PepsiCo’s code of ethics covers the topic of corporate social responsibility (CSR)

After reviewing PepsiCo’s global code of conduct I feel they have addressed CSR very well. In my earlier paper, I talked about CSR and how it was developed for a corporation to become socially accountable. The goal is for the business to be accountable to itself, the public, and its stakeholders. A company needs to be conscious of the impact that they have on their local environment, big and small economic picture, and how they are looked at socially in society. PepsiCo talks of its ethical values in each section of its manual that is addressed to its employees, culture in the workplace, in its marketing ventures, in all its business activities, to its Board of Directors, and its administrators. They clearly articulate that everyone involved with their corporation is socially accountable to PepsiCo. PepsiCo has a high code of conduct, they call the “Code”, that spells out how it is accountable locally, to its stakeholders, and in the global market. To break down how PepsiCo is conscious of the impact they have on the environment, their outlook on the big and small economic picture and how they are perceived socially you will have to dive into the Global Code of Conduct.

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1. CSR - PepsiCo’s Environmental Impact:

a. To address PepsiCo’s environmental impact, I found that they are very vague on this issue. Under PepsiCo’s Respect in the Workplace section they address the Health and Safety of the workers. Asking for them to report concerns if they see it. You are than directed to see the Environment and Health and Safety policy to clearly see how PepsiCo is working with local and foreign distributors to ensure they are following all health and safety guideline. I feel they could address this better in their “Code” so that stakeholders could gain a brief understanding on PepsiCo’s environmental practices. 2. CSR - PepsiCo’s Big and Small Economic Picture:

a. I believe PepsiCo addresses how the big and small economic picture is important in the integrity in our marketplace section of their Global Code of Conduct. PepsiCo clearly address the importance of knowing they must produce quality products to keep a strong economic presence in the market. PepsiCo addresses that they must market their products responsibly to the public and always compete with integrity when dealing with their competitors to ensure they are being ethical in how they are standing for their products. PepsiCo also addresses that they acknowledge that ethically they want to treat all customers with respect and fairness. They also mention that they hold all their suppliers to the same high ethical standards they have set for their company. If you do not follow the laws and regulations, they PepsiCo will stop doing business with them. 3. CSR – PepsiCo Ethical Concern on how they are Socially Viewed.

a. In PepsiCo’s “Code” they address their concern on how they are socially viewed in the responsibility to our shareholders section. In this section PepsiCo talks about

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knowing they need to be transparent with all their shareholders. By doing this they are protecting the company’s image and each of its shareholder. PepsiCo realizes that keeping exact business records, properly using company resources, keeping company data and property safe will keep PepsiCo’s overall social image positive. PepsiCo also address proper ways for all stakeholders to address company image in policies such as media, public speaking, and publication policy and social media policies. A2. Analyze how well PepsiCo’s code of ethics covers the topic of compliance with legal mandates

PepsiCo’s “Code” covers topics of compliance with legal mandates. These can be found in the sections titled Ethics in Our Business Activities and Responsibilities to our Shareholders. In these sections, the “Code” addresses topics such as conflict of interest, Anti-Corruption, AntiBribery, International Trade control, correct business records, audits, and investigations. Though the PepsiCo “Code” touches on these subjects about mandated laws I found that they are very vague on what the laws are. The “Code” provides a highlighted text directing you to “See Our – Disclosure Policy”, for example, but it does not link you to the said policy. You would have to ask for added documentation to get a clear understanding of what the legal mandates PepsiCo must follow. I would need to see more information to ensure measures are being put into place to cover the topic of legal mandates and if PepsiCo is following those mandates ethically. A-2a. Describe the ramifications for an organization when it is noncompliant with legal mandates.

When a company compromises its ethical integrity, it can cause many consequences that are negative for the company. For example, the company could incur costly financial monetary penalties. These financial penalties could lead to your company going bankrupt and closing. Another consequence would be damaging the reputation of your company. We live in a society yearning to see the next mistake and if your company becomes that mistake your organization's

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reputation might never recover. With a tarnished reputation, again, your company could lose consumer and stock market loss jeopardizing your business. We have read that when a company is found to be uncompliant with legal mandates than it can be sanctioned with extensive and frequent audits. Audits are time-consuming and require extra effort to complete. Lastly, if noncompliance is a serious enough offense, people can be tried and imprisoned for illegal activity. A-2b. Describe two legal or ethical safeguards the chosen company has in place or could put in place to prevent illegal or unethical acts.

To manufacture, advertise, and sell PepsiCo food and beverage products the organization would be needed to remain up to date on many laws and regulations that a distribution company would have to follow to produce products safely and ethically. It would take a large legal, ethical business manager and human resource team to stay current on continued changes to regulations. After reading PepsiCo’s “Code” I saw two safeguards that the organization takes to ensure they prevent legal and unethical acts. The first safeguard that I see is that PepsiCo ensures all suppliers that they contract with follow PepsiCo’s standards of production. PepsiCo has created a Supplier Code of Conduct document that all suppliers must agree to before a contract to be in business together happens. Having this document can aid PepsiCo in breaking any contract if the company is not following legal requirements or have tarnished its reputation by doing unethical practices. The second safeguard that I see is that PepsiCo has a written policy for every category in its global code of conduct. These extensive policies were written to ensure everyone knows PepsiCo’s ethical standards and expectations. These policies range from Food and Safety Policy about dealing with product quality, trade policies that deal with how PepsiCo works and treats the customer they contract with, and antitrust or competition policies that deal with how to ethically

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deal with PepsiCo’s competitors. All of these policies were created based around PepsiCo’s CRS standard of doing business the right way. They spend a lot of time, with legal counsel, to create an ethical standard that is reflected in all its policies listed above. A3. Analyze how well the chosen company’s code of ethics facilitates the development of an ethical culture.

PepsiCo has put a lot of thought and time into its 38-page global code of conduct. PepsiCo's global code of conduct states that “This vision is anchored by our strong ethical culture: what we call The PepsiCo Way. One of the key behaviors of The PepsiCo Way is acting with integrity in everything we do. That's because integrity is among PepsiCo's most valuable assets. It is key to keeping the trust of our stakeholders, sharpening our competitive advantage, and driving long-term growth. Just as we hold ourselves to the highest levels of excellence, we must also hold ourselves to the highest standards of integrity.” (Global Code of Conduct. (2012). With the well written and thought out example of PepsiCo’s global code of conduct I believe they are taking every step to promote and lead a company that has strong ethical values and culture. Just on PepsiCo’s 38-page global code of conduct, I counted 38 policies that PepsiCo has created to ensure that they are running an ethical business for all its stakeholders. Again, I was unable to read these policies. But I feel that if a company takes the time and energy to develop clear and thought out policies to hold all stakeholders accountable than they seem like a company that truly understands the importance of having a strong ethical culture. A4. Explain how an employee would raise an ethical concern in the chosen company and provide three resources available to employees to use when raising an ethical concern. 1. Raising Ethical Concern – PepsiCo Speak Up Program for Global Code of Conduct Violations:

a. On page 9 of PepsiCo’s “Code” manual, it discusses a program called Speak Up. “Speak Up is a 24-hour, toll-free ethics hotline available to all PepsiCo

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employees, suppliers, consumers, contractors, subcontractors, and agents to report suspected violations of our Code.” (Global Code of Conduct. (2012). 2. Raising Ethical Concern: PepsiCo Health and Safety Policy:

a. PepsiCo also puts some of the responsibility of the employee when it comes to reporting health and safety concerns. In the “Respect in our Workplace” section PepsiCo states that safety is everyone’s responsibility and that if you see an issue you should always speak up and raise your concern. They have a clear list of questions you should consider before you raise your concern and the Global Code of Conduct directs the employees to visit the full Health and Safety Policy to know who to report to. The “Code” does not specifically point our who you need to report to. Assumptions would be to report to your supervisor to address health and safety concerns. 3. Raising Ethical Concern: PepsiCo Immediate Manager, Next Level Manager, or Human Resources Manager.

a. In the PepsiCo “Your Personal Responsibilities” section it addresses ways to follow the PepsiCo “Code”, how to lead by example, and ways to seek guidance and report violations separate from the Speak Up program and Health and Safety policy. It again has questions that you should ask yourself on where can I find policies regarding my job? What should I do if I am asked to do a task, I believe violates safety laws? And lastly, how do I know if I should seek guidance? All these questions can be directed to your immediate manager, next level manager, or Human Resources manager. The Global Code of Conduct informs the stakeholder that all management is trained to help mediate any

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“Code” issues, a co-worker issue, or if the legal department needs to get brought in to address any legal violations that have been made. A-4a. Discuss which resource(s) you would most likely use to report an ethical concern.

I feel that if you have developed an ethical culture where you can openly communicate the best choice to report ethical concerns would be option number three, I listed above. This option was reporting directly to your PepsiCo immediate manager, next level manager, or human resource manager. The Global Code of Conduct informs us that they are trained to deal with ethical issues that are presented to them as well as gives the stakeholder options to look at policies and ask investigative questions of yourself to fully understand if what you are reporting is valid. Our text book also states that “An organization with a strong ethical culture is one where employees feel free to speak openly about ethical issues, question authority figures, and report concerns, and where managers are approachable and listen to their people. This may be the most important thing an organization can do to open up the communication lines and set up an environment of candor: make sure people feel they can discuss their opinions, their ideas, and their thoughts openly. Most important, set up an environment where people feel they can sincerely bring up and resolve problems without being embarrassed or fearing retribution.” (Trevino, L. K., Nelson, K. A. (N.D). If you have developed an ethical culture that open this is the best choice to report issues. This concept can quickly fail however, if the employee ends up having a poor experience. Word spread fasts and can ruin a culture overnight if a company is not careful. B. Develop a policy that instructs employees on how to address unethical conduct observed at work by doing the following: Reporting Unethical Conduct Policy

Our organization prides itself on being a leader in creating a strong ethical culture for all our stakeholders. This culture includes you! Below you will see our policy on how to report unethical conduct or practices you see in the workplace. We are aware that there is a common

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fear of losing your job or retaliation against you for reporting unethical behavior. We want you to know that this is not the case with our organization. Being one of the worldwide leaders in practicing ethical business we would rather hear of suspected unethical behavior so we can investigate the issue, rather than allowing an unethical practice to continue to be tolerated and go unpunished. In this policy, you will find what you should do to start your report and three options that our organization would like you to choose from to report suspected unethical behavior or work practices. You can choose what you are most comfortable with. 1. Please document the behavior or action that you perceive unethical. a. Be descriptive and include the names of people who may have seen unethical behavior or action. b. Save any voicemails, emails, or documents that might pertain to the unethical issue being reported. c. Make sure that you consult with your policy and procedures and employee manual to ensure you are confident that the behavior or action you see is unethical. 2. Report the unethical behavior to your supervisor a. All our management has been trained to handle unethical concerns and should be able to direct you to what your next steps should be. 3. Report the unethical Behavior to your Human Resource representative. a. Our Human Resources management team helps investigate uneth...