The agency theory states that managers are employed by principals or business owners to executive duties on their behalf and it is upon the managers to grow or move a business. In contrast, the stewardship theory states that managers assume both responsibility and accountability. The agency theory applies best to PepsiCo as the management of the company takes up the role of moving the company forward on behalf of the shareholders.
The roles of the board of directors are to appoint or hire a CEO or the management that will oversee the day to day operations and to set the strategic direction that the management will follow. The Board of Directors at PepsiCo has no involvement at all in the daily running of the business as they are all independent directors.
The Sarbanes-Oxley Act requires American companies to establish internal and external controls to make the senior management liable and accountable when it comes to disclosing accurate financial information. The impact of the act is that audit companies now have power over the executive management’s accounting decisions (Wheelen & Hunger, 2012).
The three basic approaches to ethical behavior are:
- The utilitarian approach that involves attaining collective good for every stakeholder involved
- Individual rights approach that involves acting based on fundamental rights
- Justice approach that involves taking actions that are just and fair
Friedman’s view on the responsibilities of business is that they should not demonstrate social responsibility but only focus on making money. I disagree with this view as I believe that every business has a role to play in improving and protecting the community.
Carroll’s two responsibilities are ethical responsibility because the community expects an entity to be ethical and economic responsibility whereby an entity has to maximize sales and minimize costs. I believe that these responsibilities are being supported by corporations and they both influence their profitability.