Business of producing and marketing fruit juices

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Reference no: EM131055391

Corporate Governance
Caselet 1
Real Juice Company

The company is in the business of producing and marketing fruit juices. Ritujoshi and Rohit Jain were looking at the ad copy and turning it over and over again in their mind. The copy read, "The best fitness plan for you real fruit, honest juice and no sugar. This was the main copy line. The more Ritujoshi repeated this line in her mind the uneasier she became. Something is wrong in the copy, she said to Rohitjain, the marketing head. We cannot say best for health when we know for sure that the juice contain preservatives and food color.Rohitjain said, I don?t see if anything is wrong in this (ethical concern). With food colors and preservatives added we couldn?t say it is best. This is what is wrong m replied Ritu.Rohit said, but this is hyperbole and permitted by law. There is nothing wrong in saying this. Have you not almost noticed all detergent brands say for best wash or whitest wash? This is simply a way of putting your claim of brand?s superiority. We are not talking about detergent washes and fabrics it is a health and fitness fruit juice. We could not say something like?, a great way to plan your fitness programme? or something like that. We are saying real fruit, honest juice, and no sugar? ... not a word about food color and preservatives?. Any consumer can contest our claim." Rohit Jain though for a moment then said, "let us get the legal opinion from our lawyer, Amitsoni, to be on the safe guard.

Amit listened to what Ritu had to say then said, "Companies use advertising to provide information toconsumers and offer alternatives in a competitive market situation. Advertising is false when it says A=Band that is not true. But the ad is misleading; it falls under the category of unfair trade practice." Loudlyreading the ad copy, Amit said?" hyperbole such as best, newest most effective way, are permissible andconsumers are unlikely to take such claims with ant seriousness. When a brand says its air-conditioner is best or most efficient, consumers know that this is just a manner of speech and do not truly believe and put their money on such claims."Yes, Real juice passes the legal test fine, but ethically it won?t be correct," said Ritujoshi. "Pleaseunderstand. Here you are not making a claim," said Amitsoni.Amitsoni said," comparative advertising is healthy but the advertiser must be clear about the claims to bemade. In this case, you are saying that Teal juice is good because it comes in cans and bottled drinks are not as good. This is a direct attack on bottled drinks. Advertiser does not disclose all the parameters they have considered in their conclusion of „best?. They may select some major ones or may cheese to highlight the trivial ones and ignore the major ones. These things happen every day and are not strictly provided under the law. There must be prima facie evidence of damage or misrepresentation to establish a case of unfair trade practice." "so, we are legally safe," said Rohitjain. "We will reword this campaign, but our other campaigns have passed to muster."Ritujoshi felt differently, she said, "legally we may safe, but we have to also take an ethical view."We must not forget that our primary platform is health and fitness. This convenience angle is also cratingand impression of „good for health?. I believe that as responsible advertisers, we have to be more concerned about the ethical aspects than merely the legal angle. This is where we come to the line between what is legal and what is ethical. We may be legally right but our act could be unethical if the word or pictures in the ad could lead the consumer to believe something that is not true. The aura of the fitness instructor used as endorser creates an impression that the information is coming to consumers from an environment where there are people whose opinion consumer?s view as being correct. Otherwise why use the instructor asendorser."

Question 1

The issue in the case is responsible advertising; the copy line used in the advertisement does not reveal the actual content of the juice. The juice contains food color and preservatives, yet the advertisement claims that it is made up of fruit. Ritu questions the ethical nature of their decision but Rohit is for the decision. On contacting AmitSoni, it turns out they meet the legal aspect but it does not measure up to the ethical standards. Ritu and Rohit need to observe the ethical standards and ensure that it measures up with the standards of the food industry.

Question 2

The advertiser needs to bother about the ethical standards because they are likely to be sued in the event that a consumer develops side effects towards the product they avail in the market. Moreover, the ingredients need to be stated clearly in order to ensure consumers only consume products that cannot cause allergy.

Caselet 2

Over the course of Microsoft?s history, the board has developed corporate governance practices to help it fulfill its responsibilities to shareholders to oversee the work of management and the company?s business results. The governance practices are memorialized in these guidelines to assure that the board will have the necessary authority and practices in place to review and evaluate the company?s business operation as needed and to make decision that are independent of the company?s management. The guidelines are also intended to align the interests of directors and management with those of Microsoft?s shareholders.

The guidelines are subject to future refinement or changes as the board may find necessary or advisable for Microsoft in order to achieve these objectives.

Board composition and selection: independent Directors

1. Board Size: The board believes 8 to 10 is an appropriate size based on the company?s presentcircumstances. The board periodically evaluates whether a larger or smaller slate of directors wouldbe preferable

2. Selection of Board members: All members are elected annually by the company?s shareholders,except as noted below with respect to vacancies.

The board may fill vacancies in existing or new directors? positions.

3) Board membership criteria: The governance and nominating committee works with the board onthe annual basis to determine the appropriate characteristics, skills and experience for the board as awhole and its individual board members, the board takes into accounts many factor including generalunderstanding of marketing, finance and other discipline relevant to the success of a large publicity -traded company in today?s business environment; understanding of Microsoft?s business on atechnical level.

4) Board Composition: Mix of management and independent directors. The board believes that,except during periods of temporary vacancies, a majority of its directors must be independents.

5) Term Limits: Director who have served on the board for an extended period of time are able toprovide valuable insight into the operation and future of the company based on their experience withan understanding of the company?s history, policies and objectives.

6) Retirement Policy: The board believes that 75 is an appropriate retirement age for outside directors.

7) Directors with significant job changes: The board believes that any director who retires from hisor her present employment, or who materially changes his or her position, should tender resignationto the board.

8) Selection of CEO and Chairman: The board selects the company?s CEO and Chairman in the
manner that it determines to be in the best interests of the company?s shareholders.
Board meetings: involvement of Senior Management

9) Board meeting-agenda: The Chairman of the board and CEO, taking into account suggestions fromother members of the board, will set the agenda for each board meeting, and will distribute theagenda in advance to each director.

10) Advance distribution of material: All information relevant to board?s understanding of matters tobe discussed at an upcoming board meeting should be distributed in writing or electronically to allmembers in advance.

11) Access to employees: The board should have access to company employees in order to ensure thatdirectors can ask all questions and glean all information necessary to fulfill their duties.

12) Executive session of independent directors: The independent directors of the company will meetregularly o executive session, i.e., with no management directors or management present, at leastthree times each fiscal year.
Performance Evaluation: Succession Planning

13) Annual CEO Evaluation: The chair of the governance and nominating committee leads the
independent directors in conducting a review at least annually of the performance of the CEO andcommunicates the result of the review to the CEO.

14) Succession Planning: As part of the annual officer evaluation process, the compensation committeeworks with the CEO to plan for CEO succession, as well as to develop plan for interim successionfor the CEO in the event of an unexpected occurrences.

15) Board self-evaluation: The governance and nominating committee is responsible for conducting anannual evaluation of the performance of the full board and reports its conclusion to the board.

Compensation

16) Board compensation review: Company management should report to the board on an annual basisas to how the company?s director compensation practices compare with those of other large publiccorporations.

17) Directors' stock ownership: The board believes that, in order to align the interests of directors andshareholders, directors should have a significant financial stake in the company.
Committees

18) Number and types of committees: The board has 5 committees- an Audit committee, a
compensation committee, governance and nominating committee, a finance committee, and anantitrust compliance committee. The board may add new committees or remove existing committeesas it deems advisable in the fulfillment of its primary responsibilities.
a. Audit committee
b. Compensation committee
c. Governance and Nominating committee
d. Finance committee

19) Composition of committee: Committee chairperson. The audit, compensation, governance andnominating and antitrust compliance committees consist solely of independent directors.

20) Committee Meetings and Agenda: The chairperson of each committee is responsible for developing, together with relevant company managers, the committee's general agenda and objectives and for setting the specific agenda for committee meeting.
Miscellaneous

21) Review of governance guidelines: The practices memorialized in these guidelines have developed over a period of years. The board expects to review these guidelines at least every two years as appropriate.
Questions:
There are four committees that include:
a. Audit committee
b. Compensation committee
c. Governance and Nominating committee
d. Finance committee

2. Discuss the Performance evaluation planning in brief.
The Performance evaluationplanning involves a review of the performance of the CEO in a year by the nominating committee and an individual chairing the governance. The weak and strong areas are looked at and a number of proposals come up with that the CEO will look at in order to improve their performance.

Reference no: EM131055391

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