India: Carlsberg finds evidence of potential unethical practices in breach of its group policies in the past

Carlsberg said it found evidence of potential unethical practices in breach of its group policies in India after an investigation conducted during 2019 and 2020, forcing them to strengthen their compliance practices. In its latest global annual report, Carlsberg said the breach was in the period up to 2018. The investigations was done by Shardul Amarchand Mangaldas and and Ernst and Young, the Economic Times reported on February 23.

"Actions taken included disciplinary measures for implicated employees still at the company, and strengthening of compliance and internal controls," the Danish brewer said, adding that the audit was being conducted under the supervision of Carlsberg Group’s global integrity committee.

"In addition, we conducted an India wide internal audit of the process for obtaining permits and licences. This showed a clear improvement in behaviour over time, as well as identifying opportunities to further strengthen controls."

The maker of Tuborg also clarified it had also identified a case involving underage labourers and non-compliant working conditions in a warehouse operated by a third party and terminated their contract in 2018.

Carlsberg, which entered the Indian market in 2006 through a joint venture with Nepal-based Khetan Group, is engaged in a commercial conflict with the partner. Last year, ET reported that Carlsberg has been fighting with its partner about the repayment of a $43 million loan and their JV exit price. This is also reflected in their annual filings of the last two financials.

According to its latest Registrar of filings, its auditor PwC noted that directors have such divergent views and also raised allegations against past and current employees pertaining to certain potential unlawful or unethical practices. "The matters include allegations of promoting sale of company products in prohibited areas, potential improper payments, kickbacks from its customers and vendors, misappropriation of sales promotion schemes payments and bribery etc," it said in the regulatory filings.

Three board members of Carlsberg’s Indian unit voted not to approve the latest accounts of FY20, citing lack of clarity on these matters. This is the second financial year where directors have refused to approve the results. Carlsberg declined to comment on the issue.

"The auditor has not issued an opinion primarily because there is a divergence of opinion of the board of directors concerning the financials. Despite, the vigilance mechanism put in place, there exist dissenting directors who question the veracity of the financials put before them," said Mohit Yadav, founder of business intelligence firm AltInfo, which analysed the RoC filings.

"There have been other non-compliances as well, such as those relating to provident fund, which in usual circumstances would not have prevented the auditor from issuing an opinion albeit with adverse remarks."

22 February, 2021