MODEL BASED ON THEORIES OF ETHICS:

Since the faith and devotion of customers is the essence of every organization's motives, the
ethical problem that arose in PepsiCo concerning the selling of filter water in the name of spring
water is a big threat to its foundational pillars!
Thus, PepsiCo Must take some measures to make an organizational plan and set some ethical
standards as per that model. In In the light of the “Virtue Theory of Ethics”, PepsiCo would
have been solved this problem more appropriately. Moreover, the virtue theory of ethics can
also lead PepsiCo among the Champions of customer satisfaction winning corporations, as the
theory says that there must be a mid-level of every action whether generosity, honesty,
patience, modesty, courage, etc. The same is the case was with PepsiCo, where its actions took
poorly managed form and lead its customers to misunderstand the intentions of PepsiCo’s
advertisement.
Regarding the second ethical issue that arose in PepsiCo, which was related to palm oil
extraction in Indonesia, PepsiCo should have the ethical standards made from the “Theory of
Ethics of Care” which had certainly guided the corporation about its future steps and the
company would have not been a sufferer of criticism.
Note: The above-formulated model is created in the light of theories of ethics discussed in the
class lecture.

MODEL BASED ON STEPS TO BE TAKEN TO REDUCE ETHICAL

PROBLEMS:

Your company’s good name and the trust of stakeholders are two of its most important
assets. You can protect your company’s reputation and increase employee engagement
by creating a workplace where ethical conduct is the norm. Reduce ethics risk by taking
these five key steps:

1. Honestly assess your needs and resources.

2. Establish a strong foundation.
3. Build a culture of integrity — from the top down.
4. Keep a “values focus” in moments big and small.
5. Re-evaluate and revise as needed.
  Honestly assess your needs and your resources.
This first step in making a plan to reduce ethical issues would have served quite amazingly if
PepsiCo had it in their code of conduct.

Your program will only make a difference if you begin by having an accurate picture of existing
strengths and areas of vulnerability. Risk assessment should be the starting point of your
internal efforts, followed by gap analysis and program assessment. Audit reports are also an
essential piece of the puzzle.

You can gather information in a variety of ways. Focus groups allow representative samples of
the larger population to share their opinions and experiences; they provide a deep, rich
“snapshot” of the state of ethics in your organization. Surveys (internal or conducted by a third
party) provide the opportunity to gather information from a much larger group of your
employees, to compare results and to analyze data by relevant subgroups (i.e., employee levels,
departments, units, etc.).

 Establish a strong foundation.

PepsiCo must include this step in their organizational plan in order to strengthen their future
steps.
Once you know your needs, you can put in place the resources to address them by establishing
a robust ethics and compliance program. The good news is that such a program makes a
difference. As part of the 2011 National Business Ethics Survey®, the Ethics Research Center
(ERC), the research arm of ECI demonstrated that an ethics and compliance program is a
powerful tool for reducing pressure to compromise standards and observations of misconduct;
increasing employee reporting of observations that occur, and decreasing retaliation against
whistleblowers. In essence, when a company commits resources to ethics, it makes a
difference. Fewer employees feel pressured to break the rules and fewer misdeeds take place.
When bad behavior does happen, employees tell management so the problem can be
addressed internally.

This strong foundation consists of several elements of key elements:

1. Written standards of ethical workplace conduct (for more information on this, see our
resources on writing a code).
2. Training on the standards.
3. Company resources that provide advice about ethics and compliance issues.
4. A means to report potential violations confidentially or anonymously.
5. Performance evaluations of ethical conduct.
6. Systems to discipline violators.
  Build a culture of integrity — from the top down.

People have an innate desire to get along and (long-past high school) want to fit in and conform
to the norms of those around them. It may not be pleasant to admit it, but most people’s ethics
standards are fairly malleable. Although most people retain a desire to “do the right thing,” the
definition of right is significantly influenced by the company they keep. Culture matters.
Fortunately, if your company has diligently built an ethics and compliance program and woven
it into the daily operations of the organization, a strong ethics culture is far more likely.
Research proves that an effective ethics and compliance program helps build a culture of
integrity in which everyone “walks the talk.” In a strong ethics culture, employees at all levels
are committed to doing what is right and upholding values and standards.

Leaders are powerful drivers of corporate culture; they set the tone in any organization. They
decide who gets attention, who gets promoted, what merits rewards and recognition. They set
the standard. They are an example. There are several things leaders should do to help promote
a strong ethics culture:

 Talk about the importance of ethics.

 Keep employees adequately informed about issues that impact them.
 Uphold promises and commitments to employees and stakeholders.
 Acknowledge and reward ethical conduct.
 Hold accountable those who violate standards, especially leaders.
 Model ethical conduct both professionally and personally.

 Keep a “values focus” in moments big and small.

On those occasions when crises occur, leaders should recognize not only the ethical dimension
of the moment at hand, but the “teachable moment” it represents. Edgar Schein, the father of
the study of organizational culture, noted that moments of crisis are particularly powerful
culture-builders because of the intensity of emotion involved. Our research shows that
employees learn a great deal about leaders’ priorities and character when they show their “true
colors.” If leaders make values their touchstone in times of crisis, employees learn that ethics
matters.

 Re-evaluate and revise as needed.

Situations and needs will change. You need to know what is working, what isn’t, what new
vulnerabilities have emerged, what progress you’ve made and where there’s work yet to be
done. Be disciplined about regularly revisiting the state of ethics and compliance in your
organization. Risk assessments, follow-up surveys and periodic or ongoing focus groups will
allow you to keep your program relevant and minimize risk. As an added bonus, regular
assessments will demonstrate internally,(and, if ever needed, externally) that the resources
you’ve invested in ethics and compliance have made aa bonus)

Reference: https://www.ethics.org/resources/free-toolkit/reducing-risk/

This 5 step model will inevitably help PepsiCo in its future notches and will make it an ethically dominant
organization.