This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.
For businesses studies this year we have been given the task of choosing companies we are going to evaluate on their corporate social responsibility and ethical behavior. This secondary research project will analyse the corporate governance that the JSE (private) companies uphold. All companies are part of a larger holding group and abide by certain codes, rules and ethics. Our aim is to decide which company between the two we have chosen is better governed.
This task requires us to choose and consider the corporate governance that the JSE listed companies uphold. Research and evidence will be collected to prove our investigation. A conclusion will be made as to what extent and which of the two companies is better governed overall.
This project required a lot of research and therefore lots of time was spent on the internet looking up all the necessary information. My main information came from the internet sites of the two companies, Spur and Pick 'n Pay. Both website pages were very useful and provided me with their mission and vision. I also visited a Pick 'n Pay store and more information was collected there. I also used my own knowledge of the two companies as I have grown up being aware of both Spur and Pick 'n Pay and as a family we often shop at Pick 'n Pay stores.
Choice of Companies:
Pick 'n Pay:
Choosing Pick 'n Pay as the general retailer I would focus on for this project was very easy. Everyday families buy products from different retail stores namely Checkers, Spar, Woolworths and Pick 'n Pay. Because we are so involved in these shops and have such a limited choice of retail food stores I thought it would be interesting to see their contribution to corporate social responsibility. A lot of consumers are unaware of a businesses ' behind the scene' ethical practices and I think it is important one realises the significance of large groups like The Pick 'n Pay Holdings limited group to give back to the community and contribute to sustainable projects. Because of such a wide range of socio-economical issues in Africa businesses need to focus on them and be able to sustain that project. I have heard a lot about Pick 'n Pay contributions to society and often are exposed to it by visiting their shops (bandana's for sale for the sunflower fund). CSR has a huge impact on the businesses public image and I wanted to investigate why people would or would not want to support Pick 'n Pay as their grocery store.
Introduction into business's micro environment:
"A sound mission:
With our hearts we create a great place to be
With our minds we create an excellent place to shop
We nurture leadership and vision, and reward innovation
We are passionate about our customers and will fight for their rights
We care for, and respect each other
We take individual responsibility
We support and participate in our communities
We are all accountable
We live by honesty and integrity"
The Pick 'n Pay Store limited board runs on a flat organisational structure and has the overall responsibility of all the stores. The board consists of eight non-executive directors and five executive directors. Operational responsibility is divided up into three main groups: The Pick 'n Pay retail division, the Group enterprises division and the Franklin' division. Each division has its own management board and they, as the board members believe this structure allows local operations to make decisions, be accountable for their actions and grow personally.
Flat organisational structure:
Some people in the lower levels are given more responsibility and fewer managers are needed
The company also believes in decentralisation and this means each store is responsible for everything they do, including budgets, marketing and operations.
Each business is responsible for everything they do but run overall by the board of the Pick 'n Pay Holding limited group
The board is assisted by groups of specialised people, one of which is the "corporate governance" group which ensures all the correct structures are in line with both national and international standards and are "appropriate and effective"
Corporate Social Responsibility and Sustainability:
Definition: Corporate social responsibility: "CSR is about how companies manage the business processes to produce an overall positive impact on society". (Baker n.d.)
Since 2005 Pick 'n Pay have published an annual report to give to suppliers, customers and employees. This focuses and is dedicated solely to their Corporate Social responsibility and sustainability plans as well as the increasing attention customers are placing on companies to be socially responsibility. Pick 'n Pay has a dedicated General Manger, Tessa Chamberlin whose specific task is to ensure that their sustainable strategies reach their full potential. In conjunction with this Pick N Pay, in 1990 launched their green range of products AND completed its first environmental inspection. Not only do Pick 'n Pay focus on outreach and community involvement, they are concerned about the sustainability of where there food products and ingredients come from. Pick 'n Pay are also involved and are one of the main sponsors in the carbon disclosure project which is aimed at growing and processing organic products. In 2007 Pick 'n Pay contributed R47 million on social initiatives. Pick N Pay strive to be practical on there approach to there responsibility to their consumers and communities in which they operate.
Pick 'n Pay aims:
Formulating a vision and action plan that is sustainable
Appointing a General Manager that promotes sustainable development
R30 million over the next 3 years to encourage broad-based black economic empowerment
Investments in promoting staff training and development
Looking into some of there other CSR which includes (Broader social responsibility):
Activities to reduce our impact on the environment:
Projects to conserve energy and water consumption
A waste, energy and water assessment study .
Initiatives to decrease the impacts of transportation
All coolants containing CFCs have been stopped.
Investigating further packaging to decrease waste produced
Alternative locally produced, and more environmentally friendly "Green Bag" shopping bags are made available to shoppers.
Corporate social investment:
Total expenditure on CSI : R46 million
Focusing on "education and literacy; entrepreneurial development; access to primary health care; assistance to the disabled, street children, Aids sufferers; HIV/Aids prevention and support programmes; road safety; housing; feeding schemes; and sponsoring various sporting events". (Marketing division of Pick 'n Pay n.d.)
Campaigns like the Sunflower Fund for the bone marrow registry, the Kids in Parks initiative; and the Pick 'n Pay School Club programme.
The Board of directors, management and all employees are committed to a high standard of corporate governance. Pick 'n Pay take pride in moral and ethical business standards. The Pick 'n Pay Holdings Limited group is committed to transparent business practices. "The Board is committed to complying in all material respects with the principles contained in the King II report, as well as to the additional requirements for good corporate governance stipulated in the JSE SRI Index. " (Marketing division of Pick 'n Pay n.d.)
"King II Report on Corporate Governance
King II states:
"The Board is responsible for the total process of risk management, as well as for forming an opinion on the effectiveness of the process;
The Board should set the risk strategy policies in liaison with executive directors, and senior management;
The Board must decide the company's appetite or tolerance for risk;
The Board should make use of generally recognised risk management and internal control models and frameworks in order to maintain a sound system of risk management and internal control to provide reasonable assurance regarding the achievement of organisational objectives; and
The Board is responsible for ensuring a systematic, documented assessment of the processes and outcomes surrounding key risks is undertaken, at least annually, for the purpose of making its public statement." (Marketing division of Pick 'n Pay n.d.)
Is it Sustainable?
Although a lot of Pick 'n Pays CSR is contributing money towards various charities and organisations, I think they are also very involved in the community. They do many projects that run once in a year for example the kids in parks project mentioned above, the Sunflower Fund for the bone marrow registry, the Quadriplegic Association of South Africa (QASA) and the Pick 'n Pay School Club programme. However all these projects are with -standing and are all still functioning today in society.
Socio- Economic issues and strategies used:
Although Pick 'n Pay do a lot of CSR I have decided to focus on one specific project.
Pick 'n Pay are very involved in corporate social responsibility and address almost all socio-economic issues including education, poverty, the environment, sponsorship for sporting events and diseases like cancer (sunflower fund)
I have chosen a project called "Kids in Parks" which Pick 'n Pay has been involved in and a sponsor of for 5years. This project entails both environmental and local community social responsibility and therefore addresses both environmental and underprivileged children/poverty issues.
The Kids in Parks initiative uses money from plastic bag sales at Pick 'n Pay. R1 from every R5 bag sold is donated to a special environmental fund which is now the financial support for the "Kids in Parks" project. Because of the 2003 legislation put in place by government people now have to buy plastic bags. Consumers are more aware of the importance of keeping bags to re-use and therefore this has had a huge reduction in the number of plastic bags in circulation and litter in the environment.
The sale of over 9 million Pick 'n Pay Green Bags made it possible for them to make available resources for over 20 000 children to participate in this project. Sixteen national parks are used and Pick 'n Pay has purchased 3 60 seater buses to transport the underprivileged children from the local community to and from the parks. Pick 'n Pay also sponsor meals, T- Shirts, goodie bags and equipment needed for the fun day. The children stay overnight in dorms and are provided with all the necessary learning equipment.
"The Kids in Parks Programme provides a unique opportunity for learners and their educators to visit a national park and learn a lot about natural and cultural heritage. The three-day programme allows for loads of discovery, learning and fun for kids."(South African National Parks 2010)
The programme shows the importance of national parks to children from an underprivileged background. The children learn to identify, name and describe different fauna and flora. The children learn about biodiversity and how to sustain and look after our environment. Activities make learners aware of water conservation and also allow children to look into different environmental careers that are available.
"The Kids in Parks initiative is being phased in over a period of three years. Each year five different parks will welcome ten groups of 50 learners and 2 teachers. This means that eventually a total of 7 500 learners, 300 educators from 150 primary schools will have visited 15 parks."
"The programme is a partnership between SANParks, Pick 'n Pay and the departments of Environmental Affairs and Tourism (DEAT) and Education (DoE)" (South African National Parks 2010)
Code of Ethics
Pick 'n Pay ensures that all employees act with the top level of honesty and respect. Pick 'n Pay was one of the first companies to make a real commitment to corporate social responsibility and they do this by acting in a manner which portrays good corporate governance. They are unbending in their view of their code of Ethics and ensure that all employees follow these rules. New employees are trained and are sensitive to their CSR involvement. Pick 'n Pay take pride in having in depth knowledge of every aspect of their business, be it operations, interaction with society, environmental involvement and customer satisfaction. This knowledge is always communicated through their comprehensive training schemes in an ethical, honest and respectful manner, whether it is with employees or suppliers, customers and the general public at large. The maintenance and on going development of their code of ethics coupled with their CSR programs is constantly monitored by their board of directors. Any deviations from their code of ethics are addressed through their disciplinary review procedures.
Choice of companies:
I chose Spur because it is a well known, well established brand and therefore should be doing corporate social responsibility. Spur has international outlets and are aware of international standards of corporate governance. Spur South Africa has achieved huge growth this year with turnover increasing to over R2.2 billion, is an increase in corporate social responsibility and governance programs responsible for this growth?
Spur targets the fast growing middle class population group in South Africa in the family sit down restaurant market. They are in an ideal position to capatalise on this market although there is huge competition in this sector. They should therefore execute social responsibility programs and show good corporate governance to keep their market share.
Introduction into business's micro environment:
The Spur Corporation listed on the JSE in 1986 and currently has 240 franchised spur steak ranches
The Spur Corporation assists all their franchisees both before and after opening. The well-trained operations team provides consistent back up and support to all franchises. The Spur corporation are very involved in all there franchise companies. This team ensures Spur upholds the brand name and quality food they are expected to provide.
The board comprises of one independent non-executive director, three non-executive directors and six executive directors. The board meets twice annually, the non-executive directors can have direct access to management without the directors being present. This allows problems, if they do occur to be sorted out.
Spur corporation is centralised as:
Marketing- dedicated marketing team that come up with new ideas for all franchises to use such as promotions and flyers
Procurement and manufacturing- there is a manufacturing facility which is responsible for the testing of products
Training- dedicated team of trainers who ensure that the franchisees and employees have the necessary skills
These divisions are headed up at the head office. Because Spur steak ranches is a franchise the board requires all franchisees to remain at the same standard, these operations named above are headed-up at the head office to ensure this does happen. This structure will minimize duplication of effort and documents.
Vision and Mission
"Our vision is to be the best family sit-down restaurant in the markets in which we trade.
Our mission is to be dedicated at all times to our customers andÂ employees - to provide a "taste for life" for our customers and be a "great place to work" for our employees." (Spur Corporation,2003)
Other micro- environment challenges which Spur has faced in the current year are high rentals, increased costs of electricity rates and taxes, reduced disposable income of customers, high food price inflation and increased wage demands.
Corporate Social Responsibility and Sustainability:
"Spur Corporation is committed to achieving high standards of corporate governance to protect the interests of the company and its shareholders"
" The group endorses the Code of Corporate Practices and Conduct as exemplified in the King Committee report on Corporate Governance( King 2) "
"Governance structures are continually enhanced to take account of changes within the group and ongoing developments within corporate governance" (Spur Corporation,2003)
Spur is very conscious and committed to improving the lives of disadvantaged people in South African through the use of there brand. The Spur Corporation assists in the upliftment of the communities focusing mainly on people development through sport.
Corporate social responsibility is an essential part of Spur. Spur has established many community-focused events for disadvantaged children. Funds generated from these events are used for a feeding initiative in rural schools. The Spur Corporation in conjunction with Joint Aid Management (Non profit organisation) provides meals to 350000 throughout SA daily.
Sport and recreational events:
Spur soccer Masidlale (let's play) is a series of one-day soccer learning clinics.
National Schools Mountain Biking league receive continued support for the development of young cyclists
Spur adventure provides a fun day for the family
Rugby development- Spur is committed to transformation at a schools level partnering with FNB to present classic clashes on TV. Spur also sponsor disadvantaged rugby playing schools
Annual charity golf tour- " raised over R300 000 for the development of underprivileged potential players' and food for many schemes
HIV/AIDS: an AIDS awareness campaign has been established for the past seven years
Spur, because of their adventure image have used sport as their corporate social responsibility outlet.
Is it sustainable?
These projects are definitely sustainable as they have long term aims of continuing the projects established. . Through sport disadvantaged children are being taught valuable life skills including team work and personal gain. Children will be able to use the skills they learn throughout their lives and will get much enjoyment out of playing sport. Often disadvantaged children are depressed and unhappy and sport can be a recreational outlet for them to enjoy.
Socio- Economic issues and strategies used:
Spur is very limited in the socio-economic issues they address however I decided to focus on the Spur Soccer Masidlale initiative which uses soccer as a bases to integrate children from all walks of life. This initiative is part of Spur Corporations corporate social investment (CSI) This experience is a fun and interactive. Properly qualified coaches conduct the standardised drill sessions which are followed by a mini-tournament.
The Spur Corporation sponsors lunch for all players, soccer kit, equipment as well as the coaches. Every child involved will receive their own soccer ball. Last year the theme of the initiative was "Self discipline" which is being followed up this year with the theme of " Follow your leader" This programme ensures the coaches revisit the schools regularly, enforcing the learning experience. Spur has collaborated once again with Joint Aid Management to feed less fortunate children which will also experience the Spur Soccer Masidlale clinics.
The aim: To ensure the youth of South Africa maintain a healthy, active lifestyle. This is why Spur has partnered with the Supersport initiative, Lets Play which aims to get children into the outdoors and enjoying the fresh air. Together, with the same direction in mind they want to get children off the streets and playing sport.
This project can contribute towards decreasing crime to self esteem issues. Children need a good basis of moral education and programmes like this one can provide this. Sport is fun and one has to work in a team to achieve a common goal. This program encourages children to follow their dream and introduces them to soccer at a young age. This will help them to find their own identity and promote a life free of alcohol and drugs.
A participant enjoying a Spur hamburger
A team wearing the sponsored soccer kit
Eating a Spur hamburger
Eating a Spur hamburgerCode of Ethics
Spur requires all their employees to maintain the highest moral and ethical standards with all stakeholders including 1) relationships with other collegues 2) interaction with suppliers in order to meet stringent supply and food safety requirements 3) Bond with customers 4) enhanced interaction with corporate governance structures and NGO groups 5) establishment of remuneration committees as part of their corporate governance program 6) interaction with employee groups for example labour unions, environmental interest groups and disadvantaged
In dealing with all stakeholders Spur adheres to the principles contained in their code of Ethics, these principles are : " integrity, honesty and good faith, impartiality, transparency and openness, accountability and responsibility"(Spur Corporation,2003) This code of Ethics does not mention CSR but does detail how they go about dealing with society in an ethical, moral manner.
Analysis of information, comparison and opinion
Pick 'n Pay and Spur:
The outlook for Spur is very positive. There financial performance is underpinned by a sound, well thought out corporate governance program, which includes: an audit committee, remuneration committee, risk committee, nominations committee and operational committee. These groups ensure the running of the company is smooth and the public can then be reassured the company is practicing ethical behavior and good governance.
This linked with there proposed restaurant growth in South Africa coupled with the 2010 Fifa world Cup will mean that the potential for Spur to become more involved in CSR is there (more money to contribute and make use of)
I think Spur need to make the public more aware of their CSR to boost their public image and therefore, becoming more involved will be an advantage and not seen as money spent without return on investment (ROI)
However, the spur corporation as a hole focuses on growth and customers and needs to become aware of the need for the businesses to get more involved in CSR.
Pick 'n Pay are very involved in CSR and show a real interest in giving back and doing good in the community. They show this by doing a broad range of CSR that help many different socio-economic problems. Pick 'n Pay are involved in projects that are not just once off and require a commitment form the business to be sustainable. The Pick 'n Pay holdings limited group are encouraging good corporate governance across all stores and this is proven in their code of ethics and CSR programmes.
Discussion and Conclusion
Definition: "Corporate governance is the set of processes, customs, laws and institutions affecting the way a corporation (or company) is directed, administrated or controlled. Corporate governance also includes the relationships among the many stakeholders involved and the goals for which the corporation is governed. The principle stakeholders are the shareholders, management, and the board of directors. Other stakeholders include employees, customers, creditors, suppliers, and the community at large".
Looking at the evidence presented above Pick 'n Pay is better governed. Although both companies have corporate governance programs in place one can see that Pick 'n Pay are more committed to their ethical behavior/ corporate governance and CSR. Spur corporations only uses sport to promote CSR where as Pick 'n Pay has a comprehensive list of different CSR programs they are involved in. Pick 'n Pay addresses a range of socio-economic issues like education, poverty, the environment and diseases, Spur focuses on the upliftment of children in South Africa. Pick 'n pay uses there involvement in so many CSR programmes to promote their positive image to the public and therefore having a good effect on sales. Pick 'n Pay have an extensive view and plan on promoting both broad based and primary bases social responsibility. They have put together a 'code' to develop the Pick 'n Pay employees (as seen under the corporate social responsibility and sustainability heading). By being corporate social responsible Pick 'n Pay are giving back to the society and the environment and at the same time promoting there good corporate governance. Looking at Pick 'n Pay's social involvement and promoting the well being of their own employees who are encouraged to be ethical and work with integrity Pick 'n Pay does uphold corporate governance.