Legal and Regulatory Requirements: PepsiCo Corporation

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Introduction

Compliance with legal standards of doing business in the context of globalization and constant capital growth is an essential aspect of work for many companies. One of the mechanisms to track illegal business practices is to encourage whistle-blowers to report violations and receive legal remedies under existing laws. By using the example of the global PepsiCo corporation, an algorithm for building ethically credible work will be considered, and modern methods of combating illegal activities will be reviewed.

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PepsiCo’s Code of Ethics

PepsiCo is a large corporation that operates in the food industry and specializes in the production and sale of soft drinks worldwide. With subsidiaries in many countries, the company has to monitor compliance with both legal and ethical business practices carefully. Otherwise, the corporation runs the risk of being punished by the regulatory authorities since non-compliance with modern market standards is fraught with lawsuits and large financial penalties, which also affects the brand’s reputation.

PepsiCo’s Corporate Social Responsibility

The topic of corporate social responsibility (CSR) is relevant to many large organizations, and PepsiCo is no exception. The company’s current code of ethics concerns not only the corporation’s own activities but also other industries that deserve attention. In PepsiCo’s white paper, “sustained nutrition, water stewardship, effective waste management and women’s empowerment” are referred to as investment fields (“Act with integrity,” 2020, p. 40). This means that the company is concerned about pressing social problems and is ready to provide all possible assistance, which is natural today for such large market participants.

Compliance with Legal Mandates

In view of the importance of complying with legal business conditions, the company’s code of ethics covers the topic of following legal mandates. In particular, in its official document, the management provides a list of issues and reasons that may lead to an appeal to the appropriate authorities (“Act with integrity,” 2020). In addition, PepsiCo has dedicated departments that anyone can contact and report a possible violation of a legal or ethical working environment (“Act with integrity,” 2020). The company’s code of ethics also prescribes the assessment of each case individually and provides explanations of which cases deserve detailed analyses and why (“Act with integrity,” 2020). This approach makes PepsiCo the corporation that cares about its reputation and strives to follow the existing legal mandates.

Ramifications for non-compliance with legal mandates

Despite a detailed list of possible violations and ways of reporting them, the company’s code of ethics does not provide the consequences for the organization for the failure to comply with legal mandates. PepsiCo follows international standards for conducting ethically and legally sound business, but there is no public information on the ramifications of violations. According to Nerantzidis (2015), the current principle of “comply or explain” is a universal practice that applies to most organizations conducting public business (p. 381).

This means that PepsiCo, like other major players in the market, will be held accountable in case of non-compliance with regulations and will report the reasons for the violations committed. As possible consequences, one can cite lawsuits, financial fines, restrictions on trading activities, and some other penalties that will affect both the reputation of the corporation and its budget.

Ethical safeguards

To prevent unethical acts and protect its intellectual property, PepsiCo promotes specific safeguards. In its white paper, the company’s management addresses employees and informs them of the importance of preventing insider activity and corporate data leakage (“Act with integrity,” 2020). In this regard, PepsiCo pays particular attention to information security. The company ensures that employees adhere to ethical principles when working with electronic devices and comply with safe conditions for accessing online accounts. Another ethical measure is to ensure anonymity for subordinates reporting the acts that contradict the company’s code of ethics.

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The corporation provides any employee with guaranteed legal protection in case specific violations are reported reasonably and impartially (“Act with integrity,” 2020). These decisions highlight the importance of ethical business conduct at PepsiCo and indicate the concern of the company’s management about the status in the market.

Development of an Ethical Culture

PepsiCo facilitates the development of and ethical culture through the initiatives to establish the rules for the employees. In its code of ethics, “Acting with Integrity” is referred to as a key behavioral strategy that forms the basis for professional interaction of personnel in the corporation (“Act with integrity,” 2020, p. 3).

The company’s management emphasizes that PepsiCo is committed to ensuring equality as a mandatory aspect of work, providing employees with career opportunities, and maintaining a high reputation for all stakeholders (“Act with integrity,” 2020). Building trust with target audiences is another important component of an ethical culture that is shaped across communities globally. Integrity is one of the key factors that explain the company’s current policy of maintaining business ethics. Therefore, this field is of great importance for PepsiCo and can be regarded as its strength.

Resources to Raise an Ethical Concern

In case a PepsiCo employee has reason to raise an ethical concern and express one’s position regarding the observed violation in the company, they can do it in several ways. One of them is to reach out to management, including both an immediate manager and the representative of the Human Resources department (“Act with integrity,” 2020). If a specific claim is objective, the anonymity of the report is guaranteed, and a representative of the management apparatus is obliged to respond in accordance with the job descriptions.

Another resource is the Global Compliance & Ethics platform that provides an opportunity to raise awareness of ethical issues and involve the responsible authorities to review the issue (“Act with integrity,” 2020). This mechanism does not contradict PepsiCo’s code of ethics and is spelled out in its official document. Finally, the Law Department can also review an ethical background complaint and take appropriate actions to resolve it (“Act with integrity,” 2020). In all three cases, an employee is guaranteed anonymity and legal protection.

While considering all three resources reviewed to raise an ethical concern, contacting the Law Department seems to be the most appropriate and safest measure to take. Employees of this service are not interested parties, which eliminates potential bias on the part of managers who, with a small degree of probability, can be the initiators of a certain violation. The Global Compliance & Ethics platform is also a handy resource, but in the Law Department, the response to an appeal may be the most objective in terms of the existing regulations. The evidence of violation or complaint cannot be ignored, and all the necessary measures will be taken to find out the causes and consequences of the reported problem. Therefore, this resource is optimal for raising an ethical concern at PepsiCo and may be addressed in the case of a clear discrepancy between specific labor conditions and the company’s code of ethics.

Policy to Address Unethical Conduct

To blow the whistle and draw the attention of the relevant authorities to the issue of unethical behavior in the workplace, an employee needs to be guided by specific factors. They include personal and organizational aspects, as well as internal and external reporting steps to take into account. With regard to PepsiCo, an action plan will be drawn up to compile an efficient whistle-blowing policy.

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Personal and Organizational Factors

Personal factors that influence the addressing of unethical conduct include ethical responsibility to colleagues and individual legal liability. If a PepsiCo employee witnesses a violation of the code of ethics, he or she is to be confident that the act of whistle-blowing is for the good of the team. As Baird and Calvard (2018) argue, when notifying the responsible authorities, an employee should be guided by the collective good and disregard individual beliefs.

Another personal factor to consider is the position in the company. A concern reported by a supervisor can be dealt with more quickly than that of an ordinary employee. With regard to organizational factors, the company’s reputation is the main aspect to take into account. PepsiCo is one of the world leaders in its market niche, and the release of information about its employees’ unethical conduct may cause a negative public outcry and, as a result, the loss of the competitive position.

Internal and External Reporting Steps

The reporting of incidents of violation can be external with the involvement of third parties and internal when only company representatives are notified. According to Jeon (2017), the internal type is preferred over the external one since less information is leaked about problems within organizations. For PepsiCo, internal reporting involves interacting with management and, as the whitepaper says, “in most cases, your immediate manager should be your first point of contact” (“Act with integrity,” 2020, p. 9).

External reporting is the engagement of third parties, such as audit services and other boards that control the organizational activities of business companies. This type of whistle-blowing is a last resort, but it is permissible at PepsiCo, although the consequences for the corporation’s status can be negative.

The internal whistle-blowing algorithm can take several steps sequentially. The whole process may be faster if a whistle-blower’s problem is solved immediately. However, if no relevant measures are taken to resolve the issue, a PepsiCo employee can use the scheme below, and at each stage, the issue can be resolved. Unlike external reports, when special responsible authorities or legal representatives are involved, the whole structure of internal whistle-blowing is more complex:

  • Contacting an immediate manager.
  • Discussing the issue with the family.
  • Referring to senior management.
  • Discussing the issue with the ethics officer or anther advocate.

Whistle-Blowing Laws

Whistle-blowing activity is an aspect that is regulated by the current legislation and, in particular, individual legal documents. One of them is the False Claims Act, which came into force in 1863 and is still the guarantor of safe whistle-blowing (“The False Claims Act,” 2020). According to the law, individuals who provide evidence of workplace violations and fraud against the government may receive payment from the authorities. These rewards can be viewed from both a positive and a negative perspective for several reasons.

One of the advantages of the False Claims Act provisions is to combat unethical practices in companies. As Givati ​​(2016) argues, on the basis of this law, fraudulent schemes are exposed, and complainants are motivated to report timely. In addition, this act compensates for the legal costs of whistle-blowers who act as plaintiffs, which also helps to maintain employee incentives to punish dishonest employers justly (Givati, 2016).

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However, one can highlight some of the disadvantages of this financial incentive practice. For instance, the False Claims Act provides for the prosecution of a claimant for a biased or harassing complaint, but the document itself does not include a list of measures to detect claims (Givati, 2016). Moreover, by focusing on the financial profit assumed on the basis of the act, employees are distracted from their immediate duties, which affects the quality of work negatively. Therefore, rewards for whistle-blowing activities can be viewed both positively and negatively.

US Sentencing Guidelines

The United States Sentencing Guidelines (USSG) are a set of norms that dictate the rules for sentencing. For the business environment, according to Homer and Higgins (2019), chapter eight of this document defines the principles for holding organizations involved in unethical or criminal conflicts to account. As the authors state, “the organization’s sentence is meant to serve the functions of punishment, rehabilitation, and deterrence” (Homer & Higgins, 2019, p. 2).

This set of rules has greatly influenced the way many companies operate and become an essential brake on unethical work practices due to clearly defined measures to curb them. Due to the USSG, most organizations have implemented reporting systems in their activities. Publicity in the media has become another factor that intensified after the adoption of this document, which also changed the procedure for coordinating ethical issues in companies and became a reason to report violations timely. The internal control incentive regime is a significant aspect of management, and penalties in the form of fines and other sanctions have changed the attitude of many organizations to the ethical nuances of work.

To determine fines under the USSG, one can highlight three culpability factors used for this purpose. Firstly, if the company’s management is involved in criminal activities or demonstrates tolerance for them, this increases culpability (Homer & Higgins, 2019). Secondly, prior criminal history is an aggravating factor (Homer & Higgins, 2019). Finally, Homer and Higgins (2019) mention “the obstruction of justice” as a reason for increasing culpability (p. 5). These factors are crucial to take into account when operating in the business sphere and controlling compliance with ethical and legal working conditions in organizations.

Conclusion

The struggle with unethical workplace practices is an essential aspect of the business industry, and the case of PepsiCo illustrates large corporations’ concern with these issues. The company’s code of ethics defines liability for related violations, sets out reporting procedures, and dictates the conditions for whistle-blowing. Specific legislative initiatives are intended to coordinate the working environment of organizations, and as an example, the False Claims Act and the USSG can be cited as documents defining penalties and fines.

References

Act with integrity: The PepsiCo way. (2020). Web.

Baird, C., & Calvard, T. S. (2018). Epistemic vices in organizations: Knowledge, truth, and unethical conduct. Journal of Business Ethics, 160(1), 263-276. Web.

The False Claims Act. (2020). Web.

Givati, Y. (2016). A theory of whistleblower rewards. The Journal of Legal Studies, 45(1), 43-72. Web.

Homer, E. M., & Higgins, G. E. (2019). An examination of blameworthiness on the federal sentencing of organizations to implement corporate compliance programs. The Social Science Journal, 1-19. Web.

Jeon, S. H. (2017). Where to report wrongdoings? Exploring the determinants of internal versus external whistleblowing. International Review of Public Administration, 22(2), 153-171. Web.

Nerantzidis, M. (2015). Measuring the quality of the “comply or explain” approach. Managerial Auditing Journal, 30(4/5), 373-412. Web.

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