Killer Coca-Cola - Legal, Ethical and Management Issues - Case Study Example

KILLER COCA-COLA CASE STUDY Student Name Institution Name Lecturer Course Title Date Executive Summary The report which analyzes the Killer Coca-Cola case study highlights the oppression that ranges from denial of being in any workers union, to threat, violence, and death in Columbia. Although this was being performed by paramilitaries as part of political crisis, there are some elements of paramilitary’s collaboration with part of the management team in ensuring that workers have no power to fight for their rights in the company. The analysis shows the manner in which Coca-Cola didn’t comply with the legal, ethical and management standards which thereby resulted in kidnapping and murder of union leaders having an impact on the brand equity and rising questions regarding the manner in which Coca-Cola works. The report also shows that Coca-Cola worked on the strategy of profit maximization where the exploited the cheap available resources through low wages, increased working hours and non adherence to the local labour laws. The policies also showed that Coca-Cola worked as a exploitive MNE where they looked to maximize the profits and developed strategies which would increase the profits despite the societal harm the decision would make. This requires ramification through the process of better code of conduct, moving from the exploitive MNE framework to transactional, responsive or transformative form of MNE. In addition to it better use of investigators and development of ethical code of conduct will help to control the entire scenario and prevent similar strategies from being adopted in the future. Table of Contents Executive Summary 2 Introduction 4 Legal, Ethical and Management Issues 4 Nike versus Coca-Cola 7 Reason for executive engagement 9 Critical Analysis 11 Recommendations 13 Conclusion 17 References 18 Introduction Killer Coca-Cola case study is based on Coca-Cola workers oppression that ranges from denial of being in any workers union, to threat, violence, and death in Columbia. Although this was being performed by paramilitaries as part of political crisis, there are some elements of paramilitary’s collaboration with part of the management team in ensuring that workers have no power to fight for their rights in the company. The situation gets completely out of hand, causing human right activities in America to chip in and use the empowered young students in United State Universities to campaign against Coca-cola products, and cancellation of Universities contracts with the company until the situation is resolved. The main reason for the campaign is the stop cases of extrajudicial killing, torture and threat mostly to workers unions’ leaders and workers who are protected by the union in Columbia Coca-Cola bottlers. The company defends its self by stating that it is not involved in paramilitary’s acts and the hateful campaigners have no base at all. To them, the paramilitary situation is beyond them, and it should only be handled by powerful governance such as government. The case illustrate incidences where the company is taken to the court of law to answer for some of the workers mistreatments, and where the company overall management is challenged by activists campaigning against the company. This paper reviews the case study and evaluates various aspects discussed in it, and how they influenced the company’s growth and performance. Legal, Ethical and Management Issues In the case study, the Coca-Cola Company refuses to be responsible for illegal activities taking place in the bottler plants at Columbia. In their website developed to counter the killer Coca-Cola campaign, the company claimed that it has very unionized multinational corporations in Columbia and in the entire world, and thus there are not violating any workers right regarding joining the workers union. The company also claimed to have signed a mutual statement with the international organization for food and beverages unions, IUF, confirming that the company’s workers are permitted to exercise rights to collective bargaining and union membership without interference or pressure. To the company, this was clear evidence that the Coca-Cola Company could not be ill-treating union leaders or workers in the union in any of its companies. In addition, the company allegation was said to be supported by two varying Columbian judicial inquires that found no evidence to back the claims that bottler management conspired to threaten or intimidate trade unions. In addition, another independent evaluation conducted by Cal-safety compliance corporation confirmed that the Columbia coca-cola plant workers enjoy an anti-union intimidation free atmosphere, collective bargain right and freedom of association. In the company’s view, the problem in Columbia was politically based, and all the legal claims were by foreigners who did not understand the political trend of Columbia. Regarding the ethical issue, the company denied all the illegal claims and cases associated to it. The company refused being responsible for intimidation of workers at Bebidas bottlers where workers in the union were forced to resign, and to go to the hiding for the fear of being executed by paramilitary empowered by the company’s management team. In their statement through a company’s spokesman, Coca-Cola claimed that it adhere to the highest ethical standards of conduct as well as conduct of business practices. The company added that, they have set requirements to all its companies, suppliers and operating units to abide by the regulations and laws in their founded countries. Therefore, irrespective of all the reported deaths of union leaders and resignation of workers, the company maintained that all the set ethical standards that govern their company in all corners of the world were being observed even in Columbia bottler plant. Regarding the company’s view on the management issue, the company agrees that the contract between the Coca-Cola and Bebidas bottlers granted the Coca-cola main company in U.S.A. the right to control and supervise the marketing, distribution and quality of its products, including the right to suspend or terminate operations of a bottler for nonconformity with terms and conditions. However, it did not provide Coca-Cola direct plant operations control. Therefore, the plant operations in Columbia were in the hand of Panamerican and Bebidas Beverages and thus, these are the companies which have been acting under the bracket of Coca-Cola Company to interfere with workers right to the union. Therefore, the Coca-Cola Company has no rights, based on the contract management structure, to control the workers condition or treatment, but the right to supervise on their product quality, marketing and distribution and therefore, it was never responsible for the illegal business with paramilitary. Regarding the legal issues suits have been filed against Coca-Cola under the Alien Torts Claim Act where lawyers filed petition that Coca-Cola directed the paramilitary security forces to carry out violence, murder against senior union leaders. The suit was also named Panamerican Beverages as the defendant was held responsible for the kidnapping of union members and leaders in Columbia. The entire act was violation of human rights and required actions so that that the guilty can be punished as it was against the legal requirements. This also creates doubt regarding the ethical standards and the mechanism through which the legal needs were abided. The clear violation of Alien Torts Claim Act makes the entire scenario to be one where the person was responsible for the actions and required remedial actions which can be done through the process of a law suit and holding the person responsible for this act to be guilty. Nike versus Coca-Cola Just like Coca-Cola Company, Nike was faced by the same allegation of mistreating its workers and violating their human rights especially in companies located around Asia. Similar to Coca-Cola, Nike denied all the claims and to clear their image, they hired an Atlanta-based non-profit organization known as Good-works international to audit its contractors in Asia. This company reported that Nike was doing a good job in Asia and thus, the allegations were incorrect. Another audit was performed by Ernst & Young audits for particular plants in Asia. In their public report, the company claimed that there was no identified violation of human right or the code of conduct that governs the Nike Company. Unlike in Coca-Cola case,this led to the cleaning of the company’s image by the media, wiping the first image that was tarnishing the company’s Name; Coca-Cola never got a chance of clearing its name via the media. However, things changed a few months after when a distinguished employee of Nike handed CorpWatch a copy of one of the Ernst & Young audits that cited gross violations of human rights at Vietnam company plants. Unlike Coca-Cola, it was truly established that there was violation of human rights in the company that could not be blamed on any political force, but to the company management and governance only. In addition, the company was caught trying to safeguard its image by employing audit firms that they would be able to buy, so as not to give the real picture to the public for the sake of its marketability, publicity and products preference (). However, this did not last forever. The reported showed poor working condition that endangered workers health, workers being forced to work more hours than required without compensation, and low wages. This situation was also reported in many parts of Asia and Latin America. This was very different situation to that of Coca-Cola since, beside a number of lawsuit filed against Coca-Cola, there was no any audit company that justified the claims. In addition, the Coca-Cola Company was able to hide in political forces that were beyond its control, since the situation was only reported in Columbia and not in any other part of the world. Nike in this case was defenceless and thus, it was forced by human right and associated forces to change the situation. Another difference in Nike case is that, after the formation of a department to monitor less-developed nations’ suppliers, the company through the newly appointed Corporate Responsibility Compliance Director realized that, some of its factories were actually violating human rights and thus, the allegation was true and the company had to better its strategies of monitoring working condition in all its factories. The company started employing measures to hand the situation in the company. The measures included hiring independent agencies that include Fair Labour Association to monitor its seven-hundred contract factories regularly. The factories identified to practice any form of abuse were forced to employ changes or risk losing their agreement. This way, the company was able to clear its image and to win the customers trust again. On the contrary, Coca-Cola audit did not reveal any form of workers abuse. However, having been convinced that employee’s rights were violated in Columbia, and having witnessed real killing and legal proceedings regarding deaths of union leaders in the Coca-Cola bottlers, the public continued to spread ill-words against the company irrespective of the lack of audit proof. As the company tried to clear its name even by development of a new website to counter killer Coca-Cola website, the activists stilled managed to affect a great portion of the company performance making them lose contracts, especially from universities in United States, United Kingdom, Canada and Europe. Unlike Nike, Coca-Cola did not get a chance of convincing the public that it is innocent, or that it has accepted its mistake and it is rectifying. Even after having known that Panamerican and Bebidas beverages were exercising the operation control left to them to mistreat workers, the company did not consider terminating its contract with the two companies. Therefore, the company is currently running a risk of losing its customers, making low sales and tarnishing its long built company’s image in the entire world, to maintain two of its contracting factories that do not respect the workers and human rights (Panagiotakopoulus, 2013). Reason for executive engagement The move had already started bearing negative results to organization. Some University had already started withdrawing their contracts with the company, sweetshops were being eliminated in their compounds, and students were learning to survive with Coca-Cola products substitutes. This shows that the company was losing its market power. It was losing its market shares to its competitors especially in the United States, United Kingdom, Europe, and Canada (Feldman, 1986.). Coca-Cola was losing its competitive advantage that it had built for many years, not because of interfering with its products quality or price, but because the public was convinced that the company was violating human right. The acts of the two Columbians contractors made people to loss trust to a company that has been respected in almost all corners of the world. However, the most shocking thing is the fact that the company executive seemed to disregard the issue irrespective of being aware of public influence on Nike case and others (Tattersall, 2013). This was primarily due to the high profits which the business was garnering despite a decrease in market share. Coca-Cola was able to ensure that the theory of profit maximization fits their requirements as the entire focus of operations was based and surrounded towards identifying a mechanism which would multiply profits. The over exploitation of the resources through low wages, high working hours, not adhering to the local union needs and working on the global environments helped them. Coca-Cola with this regard also followed the I-R framework where the mixed the local responsiveness with the global responsiveness. Coca-Cola to ensure that they could ensure maximum profits used the local factors to their advantage and tried to exploit the cheap resources so that better profits and opportunities of better business could be identified. This helped them to integrate the local needs with the global needs and develop business strategy which focused on profit maximization making it difficult for the executives to move away from it. The management further didn’t learn from other mistakes as what happened to Nike, it is evident that the public through the world human right activist were going to win at the long run. This is because, even without any official evidence that would take the company to the court, the activist had taken the few reported cases as their evidence and they were not going to stop at whatever cost. Irrespective of who was responsible, the public was convinced that the Coca-Cola Company was capable of rectifying the situation. However, instead, the company opted just like Nike to buy the auditors so as to ensure that there is no evidence behind the claim and thus, protecting their company’s publicity. The main aim of repeating the very mistake committed by Nike is to protect their market share and ensure that they continue to work on the strategy f profit maximization through the exploitation of the cheap resources. Going public and admitting their mistake would mean that, the management has not been employing all possible measures to ensure that the define Company’s code of conduct, and code of doing business is strictly followed by all its contractors (Yeo and Li, 2011). The company executive find it more risky to publicly admit that there are cases of workers intimidation and even murder in some of their bottlers plant in Columbia, than denying it and maintaining that the allegations are not justifiable. Admitting would put their company on the sport, an aspect that may make other forms of injustices to be uncovered from some of its other companies that have not been sported. Admitting would also make workers from other companies whose situation is under control to get the courage to admit of their injustices to the public, a situation that the company may never be able to explain, since there are no political forces to hide into. In addition, admitting would attract more independent audit bodies to review the situation in various bottlers, a situation that would completely tarnish the image of the company. This could completely destroy the company image beyond repair (Tattersall, 2013). Therefore, instead of admitting and facing the consequences, the company’s executives opted to fight to clear the company’s image before it completely affects its performance in the market. Critical Analysis Company’s publicity is one of the most important aspects that determine the market trend of company’s products (Neumann et al., 2012). When a company is famous for its higher quality products, and fair prices, the company experiences great growth and expansion of its market share, winning more customers from its competitors (Sisaye, 2012). However, when company is associated with low quality products, harmful products, higher prices and other forms of customers’ exploitation, the company loses it publicity and experiences decline in the number of sales (Sirgy et al., 2001). This influences its overall revenue and hence its overall net profit. Beside this, company’s association with any form of unethical practices can easily destroy the company’s publicity. These practices range from pollution, manufacturing of harmful products, marketing deceptions where a product is given false quality and description, to workers discrimination (Loorbach and Wijsman, 2013). Good quality products should go hand in hand with good workers treat, quality production processes that cater for the surrounding community health, and the good urge to promote people’s health, society growth and community development (Panagiotakopoulus, 2013). A company producing good products, but compromising with any or some of the stated factors, may risk being crucified by the public, an aspect that can affect its marketability. Therefore, a company should consider having good overall performance to ensure that there are no loopholes that would compromise their growth and expansions in the market (Neumann et al., 2012). This can be done by ensuring an ethical leadership which translate to a good corporate governance where all the corporate stakeholders feel comfortable to work in the environment and responsible to ensure the organization success (n.a., 2004b). Coca-Cola while looking to carry out its operations needs to be analyzed from the perspective of four MNE’s which will determine the rate of success and positioning strategy which has been adopted. The four MNE’s are exploitive, transactional, responsive and transformative. Exploitive MNE’s are those which are single minded and look at exploiting the situation for profit maximization irrespective of the social impact the decision will create. This type of MNE’s looked at exploiting the cheap resources like employees through low wages, working hours and so on. Transactional MNE’s on the other hand look at maximizing the return for the stakeholders but at the same time ensuring that the interest of other parties don’t conflict with one another and ensure that no societal harm takes place. Responsive MNE’s look at taking decision based on moral code of conduct and ensure that the ethical principles are abided. The principle of working is different and looks at long term strategies so that the shareholders and the stakeholders interest can be protected. Lastly the transformative MNE’s ensures the highest ethical standards within the organization and are willing to reduce the profits so that the society on the whole gains. This thereby looks at working for the society and creating a parameter through which social gains are made. Coca-Cola looks to perform as an exploitive MNE’s where they look at profit maximization even at the cost of the society. However, with the current unethical claim regarding mistreatment of workers in some of its bottler’s companies in Columbia, the company is highly risking to loss all or most of what it had laboured for since its creation (n.a., 2004a). The over exploitation of the resources through low wages, high working hours, not adhering to the local union needs and having incidents of kidnapping and murders clearly brings forward the manner in which the motive of profits dominates the culture of Coca-Cola. Coca-Cola to ensure that they could ensure maximum profits used the local factors to their advantage and tried to exploit the cheap resources so that better profits and opportunities of better business could be identified. This has showed their exploitive sense of carrying and conducting business and highlights the manner in which different aspect of legal and ethical needs which is completely ignored by the organization. The overall steps and directions which Coca-Cola has adopted and the different incidents clearly brings forward the manner in which exploitive strategies has been used by the organization and is aimed towards profit maximization and exploitation of the resources so that the different needs of the business can be easily fulfilled through additional and high profits. Recommendation Coca-Cola Company is facing a delicate moment that can completely ruin all its past effort to win a large market share in the soft drinks industry. The company has managed to establish a good publicity in the world with its quality products, since it have maintained the original quality since its establishment to date, and in the entire world. However, with the current unethical claim regarding mistreatment of workers in some of its bottler’s companies in Columbia, the company is highly risking to loss all or most of what it had laboured for since its creation (n.a., 2004a). It is therefore important for the company to consider taking a formative action to safe the situation. As one of the senior management team reviewing the issue, I would consider investigating this matter in depth. It is evident based on the legal proceeding that something is amiss in the Panamerican and Bebidas bottlers. Although protecting the company’s public image is important, it should go hand in hand with rectifying the situation (Dunphy, 2011.). With this respect, I would demand a thorough investigation to be conducted on the working situation of the workers in the two companies. This can be done by employing a strongly independent audit company which cannot be easily intimidated or bought by the operation management of the two companies. The company should be instructed not to depend on simple interviews with the workers and union leaders, since they may be under watch regarding what they report on. However, they should employ all possible means to uncover the real situation (Longenecker and Fink, 2013). In addition to it I would also look towards ensuring that Coca-Cola looks to move away from the exploitive marketing phenomenon to other forms of working MNE’s like transactional, responsive and transformative so that it will formulate a culture which is different. This will make the organization move from the motive of profit maximization to shareholder and stakeholder value maximization and also ensuring that the society is not impacted. The process will also help to create a culture where better ethical standards and code of conduct will be developed through which the proceedings and working of the organization will be better controlled. Beside this, I would employ private investigators to evaluate the relationship between the two companies and its workers, and also between the companies’ management and paramilitary. Based on the union leaders claim, the companies’ management are fond of employing paramilitary to harass workers and even to execute extrajudicial killing. These are serious allegation that can possibly harm Coca-Cola Company’s reputation irrespective of not being directly involved in the exercise. If the two reports; the audit and private investigators reports, will show some truth in the matter, the company may be given a chance for change or the two companies’ contract be terminated prematurely based on the severity of the matter. If a second chance will be the best option, the company will be required to advances terms and condition for the contract, demanding that the contractors companies’ workers should be treated based on the code of conduct governing the Coca-Cola Company. The companies may consider accommodating the new measures or risk termination of their contract (Gray, 2006). The management executive should also consider reviewing its terms and condition given to all contracting companies. Based on the current situation, it is evident that the company has left some open loopholes in its current terms and conditions governing their relation with its contractors (Longeneckerand Fink, 2011). Initially the company only considered the product as the only most important aspect that should be safeguard when working with contractors. However, the current case clearly shows that misconducts of contractor trading with Coca-Cola’s company’s name can equally destroy the entire company. In this regard, the company should consider supervising all the operations taking place in the contractors company (Hopwood et al., 2010). Although it may still leave some operation mandates to the contractors, it should be clear to the contractors that they are prohibited from embracing any form of practice that can directly or indirectly affect the marketability of the company. The new terms and conditions for maintaining or wining a contract with the company should include a clear defined code of conduct governing workers treatment at the contracting company. This would ensure that the Coca-Cola safeguards its self from contractors’ malpractices that may affect the company’s reputation and hence its publicity (Grayson, 2011). The two companies Panamerican and Bebidas should also be warned against their association with paramilitary for whatever reason. Being an illegal group, the companies should not be working with them at whatever cost. The U.S.A and Columbia Coca-Cola should therefore summon the management of the two companies and belief them on the investigation results, and the company’s new terms to maintain its contract with it. If the company agrees to keep the contract then it would be expected to follow the new terms word by word. Otherwise, their contract would be terminated. One of the conditions that should be imposed would be a complete disintegration of the companies operation and paramilitary operations (Luecke, 2003). After handling and settling the situation based on the audit and investigators finding, the company will employ an independent audit team to keep a close watch on its contractors, especially those from Columbia where malpractices can easily beblamed on the current political situation. Contract should be terminated for any contractor who would disregard the new terms and condition. The company should then consider going public to announce its measures regarding the situation in the two Columbia bottler companies (Bartlett. and Beamish, 2011). To cut on the wide spread campaign against its products, based on the case study allegations, the company should consider employing the most popular media in the involved nations to publically declare the company’s reaction in regard to previous claims. The company should apologize on behalf of its contracts just to ensure that it regains the public trust and respect as it has always been. After ensuring that the situation is cleared, the company should request its critics to conduct a survey or an audit to ascertain that the company has employed the right measures in ensuring a good working condition, so as to clear the air regarding the Issue (Harrington and Ladge, 2009). Conclusion The marketability of a company can highly be influenced by true or false claims of misconduct, especially while handling human resources. Human rights are expected to be respected and honoured in any institution. Based on the case study, human rights are protected by a number of bodies that include human right activists and university students. These bodies can easily use their influence to affect the marketability of the company’s product as a way of forcing the company to adhere to the human rights (Yeo and Li, 2011). Workers execution for whatever reason is against the law, worse execution of workers as a way of forcing them not to fight for their corporate rights creates a bad image of the corporate governance and leadership (Kpmg.com, 2011). Therefore, such companies deserve public punishment as a way of streamlining its operations. In this regard, Coca-Cola Company should consider taking serious measures to ensure that neither its main companies nor its contractors are related with violation of human right This would ensure that the company retains its customers’ trust and respect and thus, maintaining its competitive advantage in the market. This would ensure a good relation among all stake holders for the benefit of the company. References Bartlett, C. A. and Beamish, P. W., 2011. Transnational Management: Text, Cases, and Readings in Cross-Border Management (Sixth Edition). McGraw-Hill. Dunphy, D, 2011. Chapter 1 conceptualizing sustainability: the business opportunity. Critical Studies on Corporate Responsibility, Governance and Sustainability, 3, p. 3-34. Feldman, S., 1986. Management in context: an essay on the relevance of culture to the understanding of organizational change. Journal of Management Studies, 23(6), p. 587-607. Gray, R., 2006. 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