Ethical Problems That Coca-Cola Faced - Report Example

Name Tutor Course Date Ethic Report Case Study Introduction The coca cola company has been stated to be the company with the world’s leading brand name in terms of value. This company has had the opportunity to excel in every dimension of performance in business. The company has been faced by the challenge of meeting its financial objectives over the past couple of years and this has been attributed to a number of ethical issues that are in the company. In fact, the failure by the company to handle many of the challenges it faces in terms of ethical issues was one of the reasons as to why the Warren Buffet resigned as a member of the board of directors. This paper shall examine the ethical challenges faced by the Coca Cola Company. It will investigate why the company has had one ethical issue after another over the past ten years. Ferrell et al (2008) stated that the Coca Cola Company faces ethical issues that range from racial discrimination in the company, misrepresentation of market tests, manipulation of earnings and disrupting of long term agreements of contracts with distributors. In an article by Winter (2000), there were several cases that were reported of employees being discriminated against at Coca Cola Company. Most of the complaints were launched by black citizens who were discriminated based on their color. In fact, there was a report of one of the largest settlements in the case of racial discrimination and in this case, the Coca Cola Company paid over $156 million so as to settle a federal lawsuit that had been filed by black employees. In this suit, the blacks complained of having been placed at the low corporate hierarchy where they were placed at the bottom of the salary scale and earned less than their white counterparts. This implies that the company’s structure favored racial discrimination. The company has also been stated to have misrepresented some of the market tests. This is done with the aim of winning the confidence of stakeholders. In addition, the company aims to win the market; but this is not the best way to go about it. Cases of manipulations of earnings and disrupting of long term agreements with employees have also been reported. Such cases have greatly tainted the image of a company that has otherwise been perceived to be one of the best managed and one of the most successful companies in the world. The reasons for its involvement in these activities are subject to investigation. In addition, the company has had trouble with its distributors for breaching the contact it had when it wanted to expand delivery of Powerade sports drinks. The company also had international problems that were related to Unions. This was related to the threats that workers received when unions were streaming into the company. In fact, there are workers who died and this did not bond well with the international union community (Ferrel et al, 2012). The high turnover of Coca Cola top management is one of the key reasons for the high rates of ethical issues in the company. Over the years, there have been a number of departures in the company with key departures being the turnovers by top management. For instance, Warren Buffet who was one the members of the board of directors resigned due to the inability by the company to handle the issues that they were faced by. Another CEO, Doug Ivester, also resigned from the company after a short period in service. One of the weaknesses that Ivester had was noted to have been his inability to handle the ethical issues that were faced by the company. Former president, Doug Daft took over from Ivester and he had a rocky period during his management. It was during his time that the company was reported to have had issues of racial discrimination, manipulation of earnings, misrepresentation of market prices and disruption of the long agreements of contracts. He resigned and his seat was taken over by Neville Isdel. When he took over, he purposed to improve the reputation of the company. When a company is faced by such a high rate of top management turnovers, the ability of the company to handle the issues that are faced by it is reduced. This is because the top management is not given adequate time to handle the issues that the company faces. In addition, resignation of the top management is not a way of solving the issues faced by the company. According to Philips (2003), management of the ethical issues in an organization requires a deep understanding of the inadequacies in the company and the moral and political set up of the organization. Various organizations have different morals and ethical cultures. For the ethical issues to be handled, the company management has to have a deep understanding of the morals within the company. In cases where the company management keeps changing, it is difficult for the management to properly understand the deep moral and ethical issues in the company. The rate at which top management changed in the Coca Cola Company means that the company management could not effectively handle the ethical issues that they faced. In addition, the management did not have sufficient time to establish the desired moral culture that would be used in governing of the company. Furthermore, frequent changes in the top management of the company also spread some undesired signals to the junior management and the staff. The employees will not effectively develop the desired culture that would favor proper ethics in the company. Additionally, the employees will have to keep changing with the changes in top management and this means that they will not have a specific culture to follow. No sooner will they adapt to the culture set by the existing manager than they will be faced by the challenge of coping with a new management. In a way, this creates ethical confusion among the employees. The issues that they are faced by will continue to run inside the company since the management has not taken proper measures to handle them. Such effective measures require enough time for the company management to understand the issues that the company faces and to take time in handling them and establishing the proper culture that will be used to eliminate any future occurrences of the issues. In addition, the departure of key investors from the company has also contributed to recurrence of ethical issues over the years. Stakeholders form the core of the company. This implies that anyone connected to the company plays a part in enhancing the company’s growth. When key investors withdraw from a company, various negative signals could be read from such a move. For instance, some individuals could sense some negative growth in the company. Such assumptions could be wrong in the initial stages; however, they already send the wrong signal to other stakeholders. Therefore, the ethical issues in the company will not be handled with the required attention. This is because the general mood outside the company will indicate some negativity based on the withdrawal of the key stakeholders. The withdrawal will be a signal to other stakeholders that the company could be headed for some torrid times. This sends some ‘don’t care’ attitude within some of the company employees. To some, they may take this as an excuse not to care about the welfare of others. This is the reason as to why the company continues to face ethical issues over the years. Investors form a key part in providing information on how the company will grow. When key investors withdraw from the company, the insinuation that is obtained by other stakeholders including employees is that the company is not doing fine. In addition, the investors can be used in pushing for the adherence to ethics in the organization. Their absence from the ethical issues faced by the company is a loophole for further problems in ethics. Their withdrawal also negatively the ethical issues that are already facing the company since these issues will be enhanced rather than be minimized (Lewis and Erik, 1994). It is also worth noting that the Coca Cola Company lost its reputation at some point. In 1999, the company had some problems in its production. This affected its reputation since it was considered to be producing products that were not very fit for human consumption. The ethical issues that have faced the company have further tainted the reputation of the company (Johnson and Peppas, 2003, pp. 20). This has affected the way in which individuals perceive the company. Such issues are happening in an age where communication is very efficient and this implies that the effects of the tainted reputation spread very fast across the globe. When the reputation of the company is tainted, a strong strategy is required for the employees and management to get this reputation back on track. This even calls for a crisis management so as to restore the reputation of the company back to where it belonged. Such a meeting was attempted by Ivester on a crisis in Belgium. The purpose was to restore the reputation of the company in the market (Johnson and Peppas, 2003, pp. 19). Besides restoring the reputation of the company, the meeting is meant to re-channel the efforts of the company so as to focus on the key causes of the company issues and the solutions to the problems faced. The pace at which the Coca Cola management has tried to solve he issues it is faced with is a contributing factor to the aggravation of the issues. Another reason for the inability of the company to tackle the challenge of ethical issues over the years is based around leadership issues in the company. According to Buell (2009), leaders should be the first people to set the tone of ethics in any organization. It is the leaders who should initiate a systematic approach to handling ethical issues in an organization. In Coca Cola, there seems to be a lack of proper way of handling the ethical issues that arise in the company. The response shown by leaders when there is an issue on ethics seems to be slow. This means that the company will continue to face cases of complaints based on ethical issues from employees. The leaders are tasked with identifying any issues arising due to ethics. The Coca Cola leadership is slow to respond to these issues because they have been faced by many law suits on discrimination cases; despite this, the leadership has not taken a quick step to tackle the issue and minimize the complaints. In addition, the management has not proposed ways that can be used in handling the issues that arise as reported by the employees. The setup of the company did not predict the occurrence such as that of ethical issues. Had they foreseen such incidences, the company would have setup an ethical compliance committee that would be used to monitor the ethical compliance in the company. This committee would also be tasked with handling the ethical cases within the company internally. However, the company waits for the incidences to occur before responding to the issues. The main focus of the Coca Cola leadership was to be dominant as the leading beverage company in the market. While this has been successful, the internal issues that arise from ethical issues taint the image of the company and display the company as one that is only focused on attaining external glory yet does not care about the welfare of all of its employees. Another reason as to why the Coca Cola Company has been faced by ethical issues time and again is its one dimensional focus. The company has a well respected legacy in marketing. In fact, it has the world’s best known brand. The company has been focused on expanding its market and making its brand name known to the wider market across the world. This one dimensional approach has had dire consequences within the company. For instance, there are the ethical issues that arise without the knowledge of management. Such issues are discovered in their later stages; when the company faces a law suit. The company does not focus on handling other issues of people management in the company. The strategies set by the company management do not have a multi-dimensional approach to provision of service. While the service offered to customers is effective in terms of the quality of products they get, the service the company provides to some of its employees is not up to the standards they deserve. Would Coca Cola become the next Enron? Enron is used as one of the examples of fraud in the corporate sector and corruption. Due to these malpractices and ethical issues, the company was closed down after it became bankrupt (Barrionuevo, 2006). The remarks by the news analyst that Coca Cola could become the next Enron were remarks that were aimed at alerting the company of what could be the worst case scenario if the ethical issues it faced were not addressed. I do not think that Coca Cola will become the next Enron because it has taken all the measures so as to restore the reputation back to the norm. In addition, the company has struggled to make the issues it has faced solved. The company has worked to be in compliance with the ethics at work. For instance, CEO Daft set up a plan that would counter the ethical issues faced by the company. This plan was meant to improve employment opportunities for minorities. The company also complied with the settlements made by the lawsuits it faced by among other things, agreeing to donate $50 million so as to support minority community programs. The company also hired an ombudsman that would report to the CEO directly. The company also decided to investigate the cases of harassment and discrimination that had been reported within its setup. The efforts made by the company went further to the establishment of a team of seven people who would oversee the employment practices that were done by the company. This move was meant to limit the cases of discrimination as reported to have been hampering the company among other ethical issues. This shows that the company is determined to handle the issues that it faces so as to restore its reputation. The company’s way of handling matters is different from the ones that were used by Enron. The company handles its issues through court battles. This implies that the company is ready to follow the legitimate decision made by the courts with respect to the cases it faces. For Enron, the manner in which it handled its issues was based on selfishness and the individuals were out to reap benefits on their own. For the Coca Cola Company, the manner in which it handles the issues it faces demonstrates that the company’s perspective is that of the bigger picture and not the selfish one that was used by the Enron Company. It is this kind of selfishness that led to the death of Enron. The individuals behind the collapse of Enron were in pursuit of their own selfish agendas. This is the reason as to why they got involved in a fraud scandal that led to the bankruptcy of the company. Had they been in pursuit of the interests of the company, they would consider the sustainability of the company together with the corporate social responsibility that the company was tasked with. They would therefore not collude to lead the company to bankruptcy out of their own selfishness. For the Coca Cola case, it is an internal problem that the management has raised concern about and is trying to handle in the best way possible. Therefore, the Coca Cola Company will not go the Enron way. What Coca Cola should do to restore its reputation and eliminate future ethical dilemmas with stakeholders To restore it reputation, the company should continue enhancing the leadership strategies that are meant to handle the problems faced. So far, the company is doing right by channeling its focus on handling the ethical issues it is faced with. It is the leadership of the company that can turn matters around and help the company in restoring its reputation. Employment should be done by the company on an equal opportunity for all (Wicks, 2010). This would restore the company’s reputation on racial discrimination. The company should also establish rules and regulations that will enable all employees to act in a manner that will ensure the company’s reputation is restored. These include guarding against any internal malpractices. In addition, the company should allow its employees to be free to join any union. This means that the company should provide the workers with their rights. This move will enable the company to be considered as a company that values the rights of the stakeholders. Company management should establish an ethical competitive strategy that will ensure the company strives to have the best ethical standards. Further the company should participate in more charitable events through donations and fulfillment of its corporate social responsibility. This will portray a different picture of the company to the society and to the stakeholders. As a result, the company will have its reputation gradually restored. Recommendations to Companies Companies should establish a compliance committee that will be used in monitoring the companies’ operations to ensure that they operate in tandem with the ethical requirements (Fernando, 2010). The companies should also enhance their participation in corporate social responsibility so as to have a strong reputation among their stakeholders. Leaders in the companies should be on the forefront in handling the ethical issues and pushing for adherence to moral standards in the corporate sector. The management should be fast in handling any issues that arise before they get out of hand. Further, organizations should seek more neutral bodies like the courts in handling their matters. The decision reached at by the courts will be seen to be legitimate and will make the company be more careful in handling its ethical matters. Ethical standards should also be set by the companies and they should adhere to the set standards. Works Cited Barrionuevo, Alex, 2006, Two Enron Chiefs Are Convicted in Fraud and Conspiracy Trial, retrieved on May 25th 2013 from: http://www.nytimes.com/2006/05/26/business/businessspecial3/26enron.html?_r=0&adx nnl=1&ref=enron&adxnnlx=1369494043-x0AizwytOMD9CYhicvvpag. Buell, J. 2009, Ethics and Leadership, Healthcare Management Ethics, Healthcare Executive, USA. Ferrell, O. Fraedrich, J. & Ferrell, L., 2008, Business Ethics: Ethical Decision Making and Cases, Cengage Learning, USA. Fernando, A, 2010, Business Ethics and Corporate Governance, 5th Ed. Pearson Education India, India. Ferrell, Odies, Fraedrich, John & Linda Ferrell, 2012, Business Ethics: Ethical Decision Making & Cases, Cengage Learning, Canada. Gangone, Andrea, 2010, Ethical Issues in International Business, The Annals of The "Ştefan cel Mare" University of Suceava: Fascicle of The Faculty of Economics and Public Administration Vol. 10, Special Number. Johnson, Victoria and Peppas, Spero, 2003, Belgium: The Case of Coca Cola, Corporate Communications: An International Journal, Volume 8, Number 1, pp. 18-22. Lewis, Allan. & Erik, Karl, 1994, Ethics and economic affairs, Routlege, London. Philips, Robert, 2003, Stakeholder Theory and Organizational Ethics, Berret-Koehler Publishers, USA. Wicks, Andrew, 2010, Business Ethics, Prentice Hall, University of Virginia. Winter, G. 2000, Coca-Cola Settles Racial Bias Case, retrieved from: http://www.nytimes.com/2000/11/17/business/coca-cola-settles-racial-bias- case.html?pagewanted=all&src=pm. Read More

Such cases have greatly tainted the image of a company that has otherwise been perceived to be one of the best managed and one of the most successful companies in the world. The reasons for its involvement in these activities are subject to investigation. In addition, the company has had trouble with its distributors for breaching the contact it had when it wanted to expand delivery of Powerade sports drinks. The company also had international problems that were related to Unions. This was related to the threats that workers received when unions were streaming into the company.

In fact, there are workers who died and this did not bond well with the international union community (Ferrel et al, 2012). The high turnover of Coca Cola top management is one of the key reasons for the high rates of ethical issues in the company. Over the years, there have been a number of departures in the company with key departures being the turnovers by top management. For instance, Warren Buffet who was one the members of the board of directors resigned due to the inability by the company to handle the issues that they were faced by.

Another CEO, Doug Ivester, also resigned from the company after a short period in service. One of the weaknesses that Ivester had was noted to have been his inability to handle the ethical issues that were faced by the company. Former president, Doug Daft took over from Ivester and he had a rocky period during his management. It was during his time that the company was reported to have had issues of racial discrimination, manipulation of earnings, misrepresentation of market prices and disruption of the long agreements of contracts.

He resigned and his seat was taken over by Neville Isdel. When he took over, he purposed to improve the reputation of the company. When a company is faced by such a high rate of top management turnovers, the ability of the company to handle the issues that are faced by it is reduced. This is because the top management is not given adequate time to handle the issues that the company faces. In addition, resignation of the top management is not a way of solving the issues faced by the company.

According to Philips (2003), management of the ethical issues in an organization requires a deep understanding of the inadequacies in the company and the moral and political set up of the organization. Various organizations have different morals and ethical cultures. For the ethical issues to be handled, the company management has to have a deep understanding of the morals within the company. In cases where the company management keeps changing, it is difficult for the management to properly understand the deep moral and ethical issues in the company.

The rate at which top management changed in the Coca Cola Company means that the company management could not effectively handle the ethical issues that they faced. In addition, the management did not have sufficient time to establish the desired moral culture that would be used in governing of the company. Furthermore, frequent changes in the top management of the company also spread some undesired signals to the junior management and the staff. The employees will not effectively develop the desired culture that would favor proper ethics in the company.

Additionally, the employees will have to keep changing with the changes in top management and this means that they will not have a specific culture to follow. No sooner will they adapt to the culture set by the existing manager than they will be faced by the challenge of coping with a new management. In a way, this creates ethical confusion among the employees. The issues that they are faced by will continue to run inside the company since the management has not taken proper measures to handle them.

Such effective measures require enough time for the company management to understand the issues that the company faces and to take time in handling them and establishing the proper culture that will be used to eliminate any future occurrences of the issues.

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