Following on from the earlier study of The Empire Pub Company further evidence has now come to light that may change or alter our opinions of the company. Our evidence therefore needs to be re-evaluated in light of the new findings.
At the end of the last study, we made the following summary of the key points, these were;
- Empire seems profit orientated.
- Empire see alcohol related problems as a society problem, one they are not responsible for.
- Empire does not adhere to Schroders view that firms that deal in unethical products should gain redemption through ethical policies.
- Empire does not have effective corporate governance.
- Empire does not comply with the Combined Code of Corporate Governance.
- Various sections of the annual report both legally required and those that can be voluntarily added have been omitted.
- Basic accounts information and lack of detail regarding remuneration and committees add to lack of transparency and can cause distrust.
- Empire does not look after its whole stakeholder portfolio it concentrates on shareholders.
- Empire is not fully CSR aware and lack Corporate Social reporting and the advantages it could bring.
- Empire are a strong company in a competitive market and should be using this to their advantage in terms of being "ethically aware" in order to attract more stakeholders.
This report will first look at any new evidence that might affect the opinions as set out above and then draw conclusions and a new summary, including any new key points at the end.
Corporate Social Responsibility
As we discovered Corporate Social Responsibility (CSR) is a big part of any business and defined by Fisher and Lovell (2006:50) as "conducting the business of an organisation in a manner that meets high social and environmental standards." McWilliams and Siegel (2001), claim, "We define CSR as situations where the firm goes beyond compliance and engages in "actions that appear to further some social good, beyond the interests of the firm and that which is required by law."
More up to date figures from Fairtrade.org.uk show that sales of ethical products rose £86.4million in 2009 from £712.6millionup to £799.0million. Wine sales alone rose £6.4million from the previous year and have risen £14.9million since 2004 these are just UK sales figures and globally customer sales topped £1.6billion!
We discovered that there are academics like Milton Friedman who believe that the only social responsibility of a corporate official is to make as much money for the shareholders as possible but others, in this case, Fisher and Lovell believing that corporations should be run to benefit society as a whole. There is no proof or evidence to suggest that has the totally correct view, a company is in business to make money but to make money it needs to be aware of certain responsibilities. Friedman's view dates back to 1962 and views have changed greatly since then as consumers become more ethically aware. The Times reported in 2008 "nearly 70 per cent of ethically aware consumers said they would still try to buy the most ethical and environmentally friendly products even at a little extra cost."
Empire are aware of their responsibilities to society because the new information reminds managers of their expectations to assist customers who suggests that the pub helps out at community events and that the company and the pub must always be seen to be part of the community.
However, the sole purpose of Empire's CSR and community event drive appears to be to generate sales and publicity and attract customers. McWilliams and Siegel (2001) say, "There is some level of CSR that will maximize profits while satisfying the demand for CSR from multiple stakeholders." They therefore indicate that a balance has to be made between CSR for the different stakeholders in this case the community concerned solely with CSR and the shareholders concerned mainly with the profitability.
This appears to be the view of Empire that CSR needs to be done but also a profit made for example in the added information the indication to inform the local and company press offices so publicity can be gained and when asked to make financial contributions to be in the form of raffle prizes such as a free meal for two that may result in more meals being bought if the winners are a family and/or drinks being sold with the meals.
Aims and Policies
In the new information is stated, "It is clearly our aim to ensure that customers in all our pubs come to us for their first drink, and stay with us for the entire duration of their time out."
This aim is ethically acceptable at a first glance as it is ensuring that customers come to their pubs and spend money, making money for the business, which pays for the employees etc. However, in an attempt to target young people who tend to move from pub to pub they are proposing the following ideas;
- For those that charge an entrance fee to publicise it is free from young women, and may consider extending the invitation to men before a certain time because "where women are men will follow."
- Further attraction such as "two for the price of one" or "free shot with every pint"
By running these promotions Empire are leaving them selves open to all kinds of potential trouble and recriminations. For a pub company to be promoting binge drinking is not acceptable, we learnt from the previous case study that Empire see binge drinking as a societal problem and not theirs to fix. Again as per the first case study disagreeing with Schroders view that firms that deal in unethical products, like alcohol, should gain redemption through ethical policies.
Empire would need to stop these promotions within months regardless as direct.gov.uk reports from 3rd December 2008 that "A ban on 'all you can drink' promotions in pubs and bars is among a range of new measures announced today by Home Secretary Jacqui Smith and Health Secretary Alan Johnson, The government will shortly consult on a range of compulsory conditions including: banning offers like 'all you can drink for £10' outlawing pubs and bars offering promotions to certain groups, such as women only" then on 20th January 2010 The Independent reported that "From April, pubs, clubs and bars will be barred from offering "all you can drink for 10 pounds"-style promotions, as well as events like speed drinking competitions, said Home Secretary Alan Johnson."
The new material gives a memo/guidance by Empire regarding "Responsible Drink Service" in which it states that the licensed trade is receiving criticism over so-called "Binge Drinking" and they must ensure that sales are not affected.
Binge drinking is a costly business to services such as the NHS The Guardian, 2009 reported that excessive New Year's Eve revelry could inflict a £23m hangover on the NHS. Back in 2003 the BBC reported that binge drinking was costing £20billion a year and this figure is likely to have risen.
Unfortunately this is a very blasé attitude especially when pubs are now more accessible and appealing to all sectors of society now through changes implemented by the pub companies and no longer visited by middle aged men as was the stereotype. This change took place in the 1990's according to Knowles and Egan, (2002:69) "innovations in the pub environment such as the growth of pub catering, the development of theme pubs, etc." This led to a wide range of pubs becoming available and have been created to appeal to the majority and not the minority, the pub companies have only changed to market demand but by doing this have created pleasant places for drinkers to visit.
Pratten (2007) wrote that the managed estates, such as Empire, make many statements regarding responsible drinking, yet many offer their products at discounted prices and pay their managers bonuses for high sales. We will refer back to this later when we discuss the human resource and recruitment policy of Empire.
Empire says that all managers will join their local Pubwatch scheme. Pubwatch is when a group of pubs join together to form a network meeting to share and solve common problems and interests such as cutting drink related crime and violence. Pratten & Greig (2005) implied that Pubwatch can play a part in crime reduction but should not be seen as a solution to all problems but it is a valuable tool against anti-social behavour and active participation demonstrates your commitment to responsible drinking.
By getting the managers to join Empire is showing a commitment to responsible drinking but is undermining this with the promotions and underhand tactics of using these meetings to effectively spy, plot against rival companies and create a false image for Empire in leaders for a responsible alcohol service. Clearly by being willing to risk customer health and safety be implementing these schemes it would seem that our initial perception that Empire were profit-orientated was correct and that they are looking after the shareholders interests only as oppose to the entire stakeholder spectrum.
Only calling the police as a last resort to an incident to protect your image is both immoral and irresponsible, using door staff is good for a number or reasons, it cuts down on the potential for trouble but having your door staff "deal" with disturbances can be risky if they do not comply with the law. Brookman and Maguire (2003) say that violence is likely to be reduced if registered doorstaff are used and PubWatch is active in the area, among other measures.
Door staff have needed to be licensed since Jan 2005 as part of the The Security Industry Authority (SIA) an independent body, set up by the Government under the terms of the Private Security Industry Act 2001. Door staff have also needed to be over 18, pass an identity and criminal record check and have the right SIA approved qualification before being granted a licence (EastCambs.gov.uk)
Selling, Staffing and Training
We have received information in the form of a letter to Danny, a new manager at a public house called the White Lion. In this letter is is stated that his basic salary will be £15,000pa. SalaryTrack.co.uk suggests the average salary for this post is in the region of £25,000pa. in addition, for Danny to achieve this figure he would need to be collecting his weekly bonus of £250.00 for trading at £20,000 a week, currently the pub trades at £15,000 a week. For Danny to achieve this he is obviously going to have to increase sales, should he reach £25,000 in sales per week this bonus would double making his maximum salary £41,000pa.
Pratten (2007) has already suggested that companies pay their managers bonuses for high sales. It was also noted that in a study by the same author in 2005 revealed that in a study of 22 public houses in a town all were primarily concerned with profitability.
In 2005, Stretton said that the setting of targets for staff and managers might achieve the required outcome but with bonuses for sales may lead to accusations that managers will respond by irresponsible sales behaviour. This was backed up by Holmes in 2004 (Reported by Halstead, 2006) when he revealed that managers of some chains are under pressure to maximise profits, leading to serving underage sales and serving already intoxicated customers. The desire to reach the target may mean that Danny and his staff may act unethically, if he offers the staff added bonuses and incentives for sales. Honeycutt et al (2001) found that reward schemes can significantly changes the behaviour of sales people and Kurland (1999) agreed that sales people might act unethically to gain a sale that will lead to commission.
Danny would be under pressure to achieve his targets the letter states "failure to achieve these targets could result in alterations to our staffing position" the reasonable man would take this to mean people, including Danny, are liable to be fired adding even more pressure to meet those sales targets. Empire then goes on to say it will proved information on support and as we have seen the information provided does little more then encourage irresponsible and dangerous selling and operating practices in order to maximise profits again reaffirming our original ideas that Empire were profit orientated and have a main objective of making as bigger profit as possible.
Later in the new information is a letter to another manger, in this case David, of the Yellow Lion who have received some complaints and following a "mystery visit" by the training division have been allocated further training. It is good to see that Empire take the training seriously and that they act upon customer complaints. After all, as Roman and Munuera (2005:473) said "Sales staff exercise a key role in the organisation, as they are primarily responsible for generating the firm's revenue." Empire acknowledge this. Training is a big issue for firms and had become far more intensive in recent years in 1999, The Hospitality Training Foundation found that 70% of pubs had a training budget; this has likely increased to a near 100% level today.
The letter does however raise a couple of points about Empire, it reminds David to tell his staff their responsibilities and reminds him of his so that customers are satisfied and are retained, again looking at profit. Also, the training is to be held between the hours of 8.00am and 11.00am, while it is recognised that a pub is open at lunchtimes and in the evening, it seems a bit harsh to insist on training so early in the day. Empire suggest that David seek re-training if he has any doubts and it is good to see that Empire are taking staff development and training seriously, this is of course in their interests to both retain customers to make a profit and for the long term stability and possible promotion prospects to management roles of its workforce.
We know that Empire is an excellent training provider as it as been awarded the annual Institute of Directors Employer Award. This award is given to the company believed to offer the best training to its diverse workforce, which goes to prove that Empire does believe in and provide excellent training. It can be argued that Empire only trains its staff so well to meet its own objectives of profit but as is discussed in the conclusion is it not the sole objective of any form to make a profit and stay in business?
Within the information an article in Investors Times reveals its opinion that Empire Pub Company has a strong board and Edward Parton is commonly regarded as one of the most experienced and knowledgeable operators in the hospitality sector. This report is in huge contrast to the annual report we analysed, which was full of omissions and details required by law for an annual report. We know that is fails on certain aspects of the Turnbull code and that there is no sign of a remuneration committee. It does comment on the excellent training provided by Empire further strengthens that argument, however on the evidence we have seen its strong emphasis on financial management and effective corporate governance is not what we know. It maybe that Empire has improved these areas but with a lack of new information regarding corporate governance it would be difficult to draw a new substantiated and evidenced conclusion.
Summary and Conclusion
Firstly, we will look at any new points;
- By paying staff poorly but with big bonuses Empire are trying to drive up and increase sales, which may result in unethical trading practices taking place.
- Empire is being unethical and would be breaking the new code by promoting drinking promotions and free entry.
- Using PubWatch to its own advantage is wrong and not the purpose it was designed to achieve.
- The Investor Times report appears to suggest that corporate governance is improving.
- Empire is committed to the community but only to satisfy its own objectives.
The Empire Pub Company is not 100% ethically operated, it appears to be aware of its ethical responsibilities but is intent on playing these to the objectives of the firm. In fact, it is willing to appear to operate ethically but not do so in a bid to maximise profits such as its drink promotions and plans for PubWatch. Empire do appear to be getting better in some areas but could do a lot more to operate more ethically. However this, idealistic view, has to be viewed against this companies main objective, to make a profit.
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