CSR Activities on Kraft Acquisition of Cadbury

Question: Discuss about the CSR Activities on Kraft Acquisition of Cadbury. Answer: Introduction: In the present era, CSR is deemed as an important measure for the global organisations to discharge their obligations to the society, customers, environment and the associated stakeholders. The current essay aims to evaluate the statement that some critics of CSR claim that CSR is little more than green washing. Therefore, the topic selected to fit the purpose of this essay is the acquisition of Cadbury on the part of Kraft. In other words, it aims to concentrate the role of the acquisition in ending the dynasty of a CSR luminary. Hence, the decision regarding whether to engage in socially responsible activities and correct the externalities has been the topic of debate for this essay. Role of Krafts acquisition of Cadbury in ending the dynasty of a CSR Luminary: According to Tsagas (2012), the European Commission has initiated a new strategy associated with CSR on 25th October 2011 to promote the CSR activities in light of the social consequences preceded by the financial crisis of 2008. Kraft has acquired Cadbury on 2nd February 2010 for increasing its global presence and sales. At the time of the acquisition process, the media has identified Cadbury as an ethical firm, since it has high CSR values and principles. This is because it has discharged its obligations successfully to the customers, staffs and the producers of the economically backward nations with the application of fair trade cocoa. However, the acquisition of Cadbury on the part of Kraft has resulted in resentment amongst the British community. This is because Krafts bid has raised concerns in the community regarding whether it could be able to maintain the commitments of Cadbury, since it might adopt less ethical approach in carrying out the business operations. In the initial stage, Kraft has attempted to maintain the commitments of Cadbury probably due to the resentment prevailing at that time in the British community. Ackerman (2016) argued that the acquiring firms often comply with the CSR practices in the initial stage; however, they become less ethical in the later stage for increasing the business profitability. However, after almost a year, one of the most popular brands of Cadbury, which is Green Blacks, has been struggling to maintain its fundamental CSR after becoming a part of Kraft. Therefore, the brand has been looking for management buyout to discharge its CSR-friendly business during that time. However, Kraft has managed to retain Green Blacks by declaring its commitment The most notable failure in maintaining its CSR practices is the non-compliance to keep the Somerdale factory of Cadbury open. Before acquisition, Kraft has committed to keep the factory open; however, after takeover, it has failed to keep its promises. As a result, it has lead to 400 job losses to the staffs involved in maintaining the Somerdale factory operations. In addition, such failure to keep the commitment has resulted in distrust towards Kraft in relation to acquisitions and their overall social implications. In this context, Krishnan et al. (2013) stated that such non-compliance would result in loss of brand reputation in the operating market and relationships with staffs for the organisation. The scenario is identical in case of Kraft, as it has lost its brand image in the UK market and relationships with the staffs of Cadbury. This depicts that the backing out of Kraft in maintaining its commitment is the lack of efficiency and information delivered to its stakeholders about the prospective business plans for Cadbury. As a result, Kraft has violated the Rule 19.1 of the Takeover Code of UK. This has necessitated the revision of the takeover rules in UK. In addition, Section 3 of the takeover code of UK states that there is need to protect the corporate social responsibilities of an organisation; however, the actions needed to protect the same are not described adequately. As commented by Lambooy and Olup (2013), the market failures raise concerns to the policy makers regarding the reliability of the existing policies in relation to long-term growth. The share prices could be adjudged as the managerial efficacy, which might be the cause for the dysfunctional market. Therefore, corporate social responsibility could be used as an alternative for eliminating such market dysfunction (Rothaermel 2015). The European Commission has conducted a study associated with the takeover directive to a French law firm of Marcuus Partner. The addressed issues include the obligations of the legislations, revelation of the different bidding information and corporate social responsibilities. In the initial stage of the study, the law firm has pointed out the gap associated with community control. This is because such control gap escalates the risk of negative externalities (Nieters 2015). Hence, Marcuus Partners has suggested the restriction of the free market for raising the protection of the community. Along with this, the management of an organisation is required to play a significant role to ensure the organisational interest. Hence, this particular suggestion could be included in the provision for ensuring the best and sustainable practices associated with corporate social responsibility. Krafts acquisition of Cadbury has enabled the UK policymakers in revising its takeover code policies beca use of the non-compliance. Therefore, the policymakers have published the tenth edition of the takeover code after the above-stated acquisition. The major provision included in the takeover code of UK is the restriction to the directors of one organisation in providing advice to the directors of the target company. Based on the above discussion, it has been assessed that the policies associated with the takeover directive of the European Commission need to be revised immediately. The above essay critically reflects the ways through which Kraft has non-complied with the prevailing CSR practices after the acquisition of Cadbury in 2010. Therefore, there are some complexities involved with the existing policies, since they fail to address the issues in the corporate social responsibilities of the organisations. Therefore, it has been presented in the essay that the policymakers need to describe some important concepts during the period of acquisition like shareholders opinion during budding time, CSR of the acquired form and revelation of necessary information. References: Ackerman, M., 2016. The impact of Corporate Social Responsibility and Mergers and Acquisitions on a Multinational Corporation. A case study in the Elevator Undustry. Krishnan, V., Sullivan, U.Y., Groza, M.D. and Aurand, T.W., 2013. The Brand Recall Index: a metric for assessing value.Journal of Consumer Marketing,30(5), pp.415-426. Lambooy, T. and Olup, L., 2013. A Dutch Perspective on the Takeover Bid Directive in the Context of Corporate Social Responsibility.University of Oslo Faculty of Law Research Paper, (2013-21). Nieters, R.V., 2015.Corporate Social Responsibility: Do companies have consciences?(Doctoral dissertation, The University of Mississippi). Rothaermel, F.T., 2015.Strategic management. McGraw-Hill. Tsagas, G., 2012. Reflecting on the value of socially responsible practices post takeover of Cadburys PLC by Kraft foods inc: implications for the revision of the EU takeover directive.European Company Law, Kluwer Law International, Special Issue on CSR and SRI,9(2), pp.70-80.