Ethics Case study - Coca Cola Final Draft PDF

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This was an ethics assignment about Coca Cola and how those ethics or lack thereof effected its ability to do business....

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1 Rama Toulon BUS-340 November 3, 2018 Professor Gene Knorr

Coca Cola and ethics

The history of Coca Cola began in 1886 when the curiosity of an Atlanta pharmacist, Dr. John S. Pemberton, led him to create a distinctive tasting soft drink (World of Coca Cola n.d). Like many inventors of the time, Dr. Pemberton crafted a flavored syrup at home and took it to his pharmacy, where it was mixed with carbonated – soda - water served to friends and customers alike. From every patron that tasted this bold new beverage, it was deemed to be “excellent”. It would be Dr. Pemberton’s partner and bookkeeper, Frank M. Robinson, who is credited with naming the beverage “Coca-Cola” as well as designing the trademarked, with its distinct script, which still stands the test of time today (World of Coca Cola nd.). Coca Cola was derived from one man’s drive to offer something new and tasty to the world and would begin laying the foundation for a soft drink of humble beginnings to become a titan on the world stage for over one hundred and thirty-two years. Seen as a symbol world-wide as the gold standard of soft drinks world, Coca Cola has a world renowned reputation. It was credited as one of the greatest achievements of man-kind and American business since Thomas Edison perfected the light bulb. Yet, all that glitters is not gold and like any titan of industry, Coca Cola was not immune to the pitfalls of human failings such as greed and unethical behavior. There are several significant ethical issues Coca Cola has been accused of and was found to be active in. The first flair up of discrimination came in 1999

2 because fifteen hundred African American employees sued Coca-Cola for racial discrimination regarding disproportionate wages as well as a high level of turn over within that racial demographic (Essay UK 2013). While some critics dismissed this as anomaly, the lawsuit uncovered that an African American no matter his position or qualifications would earn twentysix thousand less than his Caucasian counterpart. What furthered the ethical gulf was that it was discovered the upper management was aware of this discrepancy and took no action; thus, violating several labor laws as well as anti-discrimination statues upheld by any business. While the heads of the Coca Cola claimed ignorance of the situation, the lawsuit had forced the family friendly company to revaluate itself and as a form of restitution Coca Cola formed a diversity council investing and pay out over a 190 million dollars to settle the lawsuit. Not only was the lawsuit a hefty cost in money, it was also a tarnish on what was once seen as a sterling reputation. It could be argued some of the greatest influences of Coca Cola’s ethical dilemmas stemmed from unbridled capitalism and nepotism. Coca Cola may have been an international brand and name, but depending on the location, nepotism was chronic. Countries like Guatemala were notorious for giving their execs free reign and larger pay cuts, while the laborers where driven into the ground. In 2010, the workers at the Guatemala bottling plant sued Coca Cola over accusations of violence being used to stomp out unions and silence dissent while not even meeting the basic needs of the laborers (Ethical Footprint, 2018). The failure to address endemic issues in its licensed partners where Unions are brutally stomped out is another issue laid at the feet of Coca Cola. While no evidence has ever come to light that the company Coca Cola has given the order to any of its licensed partners to use strong arm tactics on unions which is not tolerated in the continental united states or most first world countries; Coca Cola has shown to

3 have often pleaded ignorance or turned a blind eye to such practices of terror that places like Columbia and Guatemala has employed against its own labor force. Every time an incident like this occurs, Coca Cola in the mind of the laborers and the consumers is held responsible. Coca Cola’s inaction or slow reaction is damaging to its reputation and gives the impression that Coca Cola advocates anti-union movements. Coca Cola used its influence and lobbying to down play the role of its beverages in the leading cause of childhood obesity and onset of juvenile diabetes. By shelling out the large amount of cash towards sympathetic lobbyist, Coca Cola was doing the equivalent of paying for silence or better results in their favor instead of seeking an impartial third party that had no financial or political ties. It’s a pattern of a conflict of interest. While this is not criminal per-se, it is another moment of Coca Cola’s conflict of interest. Coca Cola is well known for its philanthropy and contributions to education. An example would be The American Academy of Family Physicians (AAFP) had recently been criticized for accepting large donations from CocaCola to fund patient education on obesity prevention (Brody 2010). This happened around the time Coca Cola was being criticized as promoting unhealthy habits by allowing its soft drinkers cheaper and in schools while in the same breath saying people had to be more active. The AAFP initially was reluctant to critique the Soda Company just after they received their findings. Large industries have never had good relations with unions. When it comes to profit, companies like Coca Cola have tended to opt for profit over large liberties. While that persona has gotten better over the decades, in countries outside of the United States that are licensed producers of Coca Cola such as the majority of Latin America, Columbia’s branch of Coca Cola had come down hard on workers, especially after the company was liable for quite a few injuries and deaths (Essay Uk, 2013). Under death threats, many workers went into hiding as the

4 Columbian based company. The accident was due to that Coca Cola concern dealing under the table and utilizing illegal and unsafe practices to maximize profit. Coca Cola down played the incident and gained a further black eye by not even offering to help or compensate the families. Had that happened in the United States there would have been an investigation and lawsuits. The further denial also alienated Coca Cola with unions. This would add further to current sliding down of Coca Cola’s already shaky, ethical reputation both abroad and domestically. The greatest scandal that has perhaps tarnished Coca Cola’s reputation was when top level management were accused of selling the formula to the competition at Pepsi. Corporate espionage is a felony under the statue of frauds. An informant had claimed Joya Williams who was an executive administrative assistant for Coca-Cola’s global brand in Atlanta had passed him the sensitive information (Essay UK 2013). This proved to be problem for the company as it had top level executives leaking company secrets for profit. Coca has had many opportunities to avoid crisis. True, they have set up fact finding boards, and contributed millions of dollars to public health programs and environmental initiatives. The problem is, Coca Cola is always doing these good deeds after the fact, after it has been accused of some misdeed. Coca Cola did not take a hard look at its licensed partners hard tactics against unions till students at Rutgers University and some other institutions boycotted Coca Cola citing its hands were red with the blood of hard working third world peoples and so did business with its chief competitor – Pepsi (Ethical Press, 2010). The boycott was successful, and Coca Cola lost many contracts because of the perceived lapses in ethics. The soda giant must look ahead and decide that human dignity goes a long way in preserving a franchise. Leadership should invest times and energy in looking at repairing that image by actively taking care of its internal issues. It should come forward on the issues of anti-unionism and show it supports the

5 worker and not just the bottom dollar. Stakeholders within and from outside must demand that Coca Cola be honest with its internal strife in order to formulate methods to correct them. While honesty is not favored it is perhaps the best way to reassure Coca Cola stakeholders that the company is heading in the right direction, because things may reach a point where no amount of well wishing or providing a new flavor will solve things. Practicing fair business practices and more transparency will stair the soda company in the right direction. While Coca Cola is still a world leader in beverages and other social engaging products, its myriad of ethical issues has led it down many dark and daunting roads. Ethics not only affect the legal aspect of a company, but may also harm its profitability. The greatest problem lies in the leadership which has been both inept and toxic, considering that the formula was leaked by the head of the branding department is enough of an indictment that for Coca Cola to stay viable it needs to fix the leadership. First and foremost, Coca Cola must not lead just in the US but with all its partners abroad and avoid as well as censure incidents like that in Columbia. So far, it has climbed out of the racial mire and by appointing an ombudsman who reports to the head of the company, Coca Cola has come very close to eradicating racial discrimination within its ranks. In the long run, ethical business practices save an organization million and even billions of dollars in assets. Coca Cola has spent just as much time pioneering new flavors and beverages as it has dealing with ethical issues that cost it millions in lawsuits. A decade ago, it would have been chalked up to ‘business-as-usual.’ Yet the world is far more socially conscious and quick to boycott anything that has a whiff of impropriety. When documentaries like Super-Size me came out, it put companies like McDonald’s on notice as they lost revenue and gained a reputation for contributing to obesity. Coca Cola got a similar scare when a documentary was released in 2009 called “The Coca-Cola Case.” (Ethical Press, 2010) It was filmed by German Gutierezz and

6 Carmen Garcia to highlight “the reality of union busting at Coca-Cola bottling plants in South America and Turkey. The testimonies and the contrasting of Coca Cola executives’ responses tarnished the reputation of Coca Cola and now schools are boycotting Coca Cola and giving up decade old contracts for Pepsi. Any business observing these trends should note that the price on human dignity is high and no matter how powerful or influential a company is, it will pay, and it will pay in millions. Coca Cola could become like Enron if it does not clean up its act and assure its stake holders, if there is any take away a business can get, it would be that. Enron like Coca Cola was a colossus of industry, but in the end. What history remembers is that Enron was not too big to fail and is now the black mark on the world of business. Any growing business can learn that their trade mark logo will not save them from scrutiny nor soften their fall if they push the limits of ethical behavior. Ethics may not seem fun, but good ethical behavior motivates and empowers employees. Working in an environment of professionalism and merit improves production and provides a superior product. Setting a foundation of strict rules and zero tolerance for nepotism would be great ways to improve the company as well as focusing and providing quality products before, not after some ethical issue has been breached. Coca Cola had to learn a lot from mistakes and lawsuits, when all it needed to do was be proactive and research those issues before hand, instead of cutting corners for the sake of profit.

7 References

Brody, H. (2010). Professional Medical Organizations and Commercial Conflicts of Interest: Ethical Issues. Annals of Family Medicine, 8(4), 354–358. https://doiorg.lopes.idm.oclc.org/10.1370/afm.114

Essays, UK. (November 2013). Business Ethics Of Coca Cola Company. Retrieved from https://www.ukessays.com/essays/business/business-ethics-of-coca-cola-companybusiness-essay.php?vref=1

Ethical Footprint (April 2010) Word Press

https://ethicalfootprint.wordpress.com/2010/04/28/unethical-companies-coca-cola/

Raman, K. R. (2007). Community-Coca-Cola Interface: Political-Anthropological Concerns on Corporate Social Responsibility. Social Analysis, 51(3), 103–120. https://doi-org.lopes.idm.oclc.org/10.3167/sa.2007.510305

World of Coca Cola (n.d), Coca Cola Bottling Company LLC. https://www.worldofcocacola.com/about-us/coca-cola-history/

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