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Home > Governance

Good governance

A roadmap to responsibility

Corporate governance is all over the news these days as everyone from investors and regulators to the media and employees scrutinizes the way companies operate. Accountability and transparency have never been more important–not only to practice, but also to communicate. PBG credits much of its strength and success to the way its governance structure puts accountability into every corner of the company whether it’s the warehouse break room, the facility manager’s office or the executive suite.

For Steve Rapp, PBG’s Senior Vice President, General Counsel and Secretary, “Corporate governance provides the guardrails of transparency and accountability along the road toward sustainability.” Rapp also serves as PBG’s Chief Compliance Officer.

Laying out these guardrails are PBG shareholders who elect the company’s Board of Directors. This is significant because the board oversees the exercise of corporate powers, elects the chairman, the CEO and other executive officers of the company, determines executive financial and operational targets and compensation levels and ensures that the company is on track to meet its goals. Shareholders also vote on board proposals presented at PBG annual meetings and are invited to share comments, suggestions or even other proposals for an open discussion. Any stakeholder can–anonymously or not–provide PBG with feedback by simply writing a note to one or more board members.

Choosing the best

PBG works hard to maintain a predominantly independent board with selective representation from the company and PepsiCo, as called for in the company’s Director Independence Policy. Accordingly, seven of PBG’s 10 current directors are independent, including Barry H. Beracha, the board’s Non-Executive Chairman. Careful screening is done to make sure there aren’t any conflicts of interest between an independent director’s responsibilities and his or her outside interests and commitments.

Intent on maintaining the highest quality members, candidates for PBG’s board must have a level of education, experience, sophistication and expertise to understand the issues facing a company of PBG’s size and scope. The board’s Nominating and Corporate Governance Committee also looks for a proven record of accomplishments that demonstrates the candidate’s business acumen. A third consideration is diversity, because, as Rapp notes, “We know that the diversity of our board makes our organization stronger and more competitive by providing a variety of perspectives and skills.”

One important role of PBG’s independent board members is serving on the three standing committees–Audit and Affiliated Transactions, Nominating and Corporate Governance, and Compensation and Management Development. Each consists entirely of independent board members. The Audit and Affiliated Transactions Committee is specifically charged with providing oversight of the company’s compliance with legal and regulatory requirements.

Beyond the board

The concept of personal excellence and accountability extends throughout the company and into PBG’s high aspirations for its leaders, as set forth in a formal Leadership Model that guides managers to success.

PBG salaried employees receive training in the Leadership Model and understand that their performance will be evaluated against its tenets. While the structure revolves around four phases of leadership development, the model is grounded in three company values that managers must demonstrate and promote at all times:

• Acts with Integrity–Delivers on commitments without sacrificing personal or business ethics.
• Respects & Values Differences–Strives to be inclusive and shows sincere interest in others.
• Operates with Justice–Consistently “does what is right” both in good times and bad.

PBG also has a Worldwide Code of Conduct that defines the company’s ethical standards and explains the expectations for every employee. The document covers policies and positions related to workplace conduct, human rights, environmental protection, product quality, conflicts of interest, workplace safety, fair-trade practices and beyond.

In 2008, all PBG employees worldwide will receive Code of Conduct training. All salaried employees are required to certify that they have read and understood the Code of Conduct. In addition, PBG requires executives, managers and certain other employees to participate in a special compliance-training program. The courses in the program cover antitrust issues, financial integrity, conflicts of interest and other topics particularly relevant to participants and their job functions.

Recognizing the inherent risks of being a multinational company, PBG has developed and communicated an International Anti-Bribery Compliance Policy, which outlines PBG’s commitment to comply with U.S. and local anti-bribery laws and details the provisions of the U.S. Foreign Corrupt Practices Act (FCPA). PBG provides employee training on FCPA regulations and local anti-bribery laws. To ensure it is relevant and effective, each training curriculum is tailored to the local market’s culture and customs.

Eyes and ears

As spelled out in PBG’s Code of Conduct training, every employee has an obligation to report what they know about potential violations of the Code, company policy or the law. Employees can express concerns by writing to the Board of Directors as outlined above or by speaking directly to their supervisor or Human Resources manager. They can also express concerns–anonymously or not–by calling the PBG Business Ethics Line or contacting PBG’s Office of Compliance, which provides oversight to the investigation of all reported concerns. PBG will not tolerate retaliation against any employee who reports a concern in good faith. Contact information for the PBG Business Ethics Line and Office of Compliance is provided in the Code of Conduct.

PBG’s Internal Audit group conducts regular audits of the company’s operations and accounting processes to ensure compliance with company policies and generally accepted accounting principles. The Audit and Affiliated Transactions Committee of the Board of Directors provides oversight to the Internal Audit group to ensure its independence and objectivity.

More information

PBG’s Internet site provides contact information for the board and details the company’s corporate governance policies and procedures at www.pbg.com, under Investor Relations– Company Information–Corporate Governance. Details of these policies and procedures will continue to evolve; the central focus on leadership and accountability will never change.

The company’s radar

Preparing for problems is an essential component of any sustainable business strategy. Understanding the importance of contingency planning, PBG assembled a team of senior executives to oversee the company’s Enterprise Risk Management (ERM) process. With oversight provided by the Audit and Affiliated Transactions Committee of the company’s Board of Directors, the ERM process involves functional and international leaders ensuring that risk identification and assessments are periodically updated and considered in strategy development. This comprehensive approach requires a significant investment of people, time and resources with the objective being to avoid the biggest risk of all–not being prepared.