Ethical Decision-Making Process at Coca-Cola Company - Case Study Example

How the ethical decision making process has helped Coca-Cola Company achieve its corporate objectives and fulfil its mission statement Introduction The current business environment is characterised by the need for corporations to adhere to ethical standards in all their business operations. This has resulted from increasing realisation that corporations have the obligation of addressing environmental and social concerns apart from their primary economic objectives. Making decisions on all these issues require a deep examination of moral and ethical issues. This is so because the decisions made by corporate leaders always have far-reaching consequences to all stakeholders (the employees of the organisation, the clients, the management, shareholders and the general society in which the business operates). Although laws and regulations embodied in the corporate policy statements of corporations are intended to guide individuals in making decisions that affect all stakeholders, particular issues and scenarios arise which are not addressed in the regulations. Solving such issues requires that individuals, who are acting as agents of the corporation, make sound moral and ethical judgements. The objective of this paper is to examine the role of the ethical decision making process in attaining overall management success in corporations. Using the Coca-Cola Company (Coca-Cola) as a case study, it explores how the company has achieved its business objectives as well as fulfilled its mission statement by following sound ethical decision making process. A detailed description of the ethical decision making process of the company and how this has contributed to its success is given. Also, the paper briefly examines the theoretical foundations of business ethics: definitions, reasons for use of ethical decision making processes in a business environment and the different levels of ethical and moral issues of businesses. Ethical decision making process: Definition, aspects and process Since the process of making ethical decisions in a corporate environment is based upon the foundation of business or corporate ethics, it is important to examine the basic definition of business ethics together with its basic principles and theoretical formulations. According to Nash (cited by Weiss, 2009, p. 9), business ethics can be defined as the study of how moral norms and values of individuals apply to the activities and goals of a corporate organisation. From this definition, it can be seen that the business environment poses a number of dilemmas to the individuals who are tasked with the responsibility of working as agents of the corporation. Individuals face dilemmas in three basic environments: the corporate environment, the legal or regulatory environment and the demographic and wider social environment. In essence, it is observed that business ethics attempts to face three main challenges which result from the basic environments mentioned before. These are, making choices about the nature of laws and whether to comply with them or not, choices about the priority of the interest of the corporation over those of the individuals and lastly, choices about social and economic issues which are not covered by the laws (Jennings, 2012, p. 92). The interaction between business ethics and management performance of an organization is a complex one. When making ethical choices, business leaders not only interact with a wide audience of diverse stakeholders but also affect different individuals and stakeholders in the choices they make for the corporation. Jennings (2012, p. 21) identified four levels of corporate ethics. First is the individual level, which covers the ethics of the person making decisions in a corporate environment; the second level is that of organisational relations; the third level covers ethical interactions between organisations at the societal and association levels while the last one covers interaction of the ethical system at international levels. These four levels of corporate ethics offer a complex interaction of moral and ethical issues in an organization and how these issues are related to the overall performance of an organisation. According to Weiss (2009, p.13), the ethical decision making process in corporations is necessitated by three key factors. The first one is that more often than not, existing laws and regulations do not cover every area of emerging problems faced in the business environment. Many of these areas not covered by the law thus require the use of sound ethical decision making process in order to be addressed. Secondly, certain complex issues in the business environment have far-reaching potential impacts that the existing market structures fail to indicate to the business stakeholders. Whether free or regulated, existing market structures may fail to indicate to business owners and managers the consequences of particular actions and events. A complete interpretation of such a scenario requires use of appropriate ethical decision making processes. The third factor is that the policies and regulations of corporations may fail to address complex moral problems existing in the business environment. Problems of how business processes affect the human, social and environmental aspects of all stakeholders can best be handled by making decisions that take into account ethical values of justice, social action, fairness and responsibility. Models for ethical decision making process Jackson et al. (2008, p. 36) present a basic model for making ethical decisions in a corporate environment. It is observed that such a process involves five basic steps which are described as follows. The first one involves accurate description of the problem that needs to be addressed. Sound judgement and consultation enables corporate leaders to accurately define the problem that needs to be solved. The second step involves identifying the objectives available in finding a solution to the problem that has already been defined in the first step. The objectives required may either be quantitative or qualitative (Jackson et al. 2008, p. 38). The third step involves identifying and analysing other viable options to achieving the objectives that have been developed. An extensive examination of all available options and the interaction of other factors of relevance to the problem enable corporate leaders to examine all viable options and settle on the most appropriate one. The fourth step involves considering the ethical consequences of the option that has been settled on. Corporate leaders perform an analysis of how different stakeholders such as clients, employees, shareholders and the entire society shall be affected by the options chosen (Jennings, 2012, p. 84). The last step involves selecting the best option to be implemented. The process of selection is often made under conditions of uncertainty. The option that best fulfils the objectives that have been identified is selected. How the ethical decision making process has contributed to the success of the Coca-Cola Coca-Cola was started back in 1886 after the discovery and patenting of a secret syrup by John Stith Pemberton, a Georgia based pharmacist. It was incorporated later in 1889 after the purchase of the patent and branding by Asa Griggs Candler (Fernando 2009, p. 155). Through a series of acquisitions and expansion programmes, the company is currently the leading global player in the soft drinks and refreshments market. It manufactures and sells non-alcoholic beverages and syrups all over the world (Kapferer 2008, p. 60). With sales of nearly 12,500 drinks every second and operating in almost every country in the world (Fernando 2010, p. 5.15), Coca-Cola is a leading multinational corporation whose success has been a result of sound management decisions. That the company has managed to achieve its corporate objectives as well as fulfil its mission statement has been a result of a long series of making ethical decisions in managing all issues that arise in the course of its business operations. Since it embarked on a global expansion programme after the Second World War, the company has been faced with various ethical issues in different countries in which it operates. Fernando (2009, p. 167) states that the company has managed its ethical decision making process by learning from its mistakes, making the necessary changes and improving its detection and compliance systems. These measures have enabled the company to retain its position as the leading player in the global market for non-alcoholic beverages. According to the Coca-Cola code of business conduct, the company emphasises on the importance of the values of integrity, honesty, accountability and compliance with the law (Coca-Cola Company 2012, p. 5). This code of business conduct is binding to all associates, directors and employees of the company in all the 200 countries in which it operates. The code of business conduct guides the actions of all these members of the wider Coca-Cola community worldwide. In making decisions, members are advised to consider the following guidelines: whether the action is in compliance with the code of business conduct, whether the action is ethical, whether the action complies with the law or contravenes any of the laws, the impact f the action on the reputation of the company, and finally, the likely response of the public to the action. Throughout its history of operation, the company has faced a number of ethical crises. Its response to these crises and the measures put in place as a result of learning from these crises is what has defined its success as a company. Ferrell, Fraedrich and Ferrell (2013, p. 460) state that the company has faced crises such as allegations of racial discrimination by a section of its employees; allegations of anti-competitive practices in a number of European countries – most notably France and Italy; issues about the use of water and general pollution (contamination of groundwater by sludge from its Indian plants in Varanasi); and finally, controversies surrounding the effects of its products on the health of consumers. Of all these concerns about the company and its products, allegations surrounding the effect of the company’s products on the health of the consumers have been of much concern to the global audience. For instance, the general consumer perception that Coca-Cola products contribute to cases of obesity have been rampant in the recent past. The situation was made more severe by the ruling in 2008 by the US Food and Drugs Administration that the company had violated the Federal, Food, Drug and Cosmetics Act by failing to substantiate the nutritional claims in naming one of its products (Fernando 2009, p. 165). Also, the company is currently facing an ethical issue arising from concerns raised by the Centre for Science in the Public Interest that the caramel colouring contained in soda drinks contains carcinogens (Centre for Science in the Public Interest 2012). Since states such as California have labelled soda, increased realisation of this claim by other states and countries could threaten the company’s sales. Coca-Cola has fully responded to a number of these ethical crises. For instance, Asongu (2007, p. 89) states that the use of ethical decision making processes by the management of the company has enabled it to fully address the issues of racial discrimination by a section of its employees. This was addressed in the following ways; first, the company settled the discrimination lawsuit by agreeing to donate over $50 million to an organisation supporting minority issues (Ferrell, Fraedrich & Ferrell 2013, p. 463). Second, the company hired an ombudsman to investigate any complaints of discrimination and harassment by the workers. Also, the company established a special task force which has the sole responsibility of managing the policy of the company regarding hiring, promotion and compensation of employees from minority groups including women (Fernando 2009, p. 159). All these steps have been reflected in the company’s code of business conduct which protects the rights and privileges of employees of the company at all levels against any form of discrimination. Concerning the issues about pollution of groundwater sources in India, the company has responded by putting in place a raft of measures to address the situation. For instance, the company has established partnerships with non-governmental organisations, schools and the government to build facilities for collecting rain water in various states across the country. The objective of this initiative is to replenish groundwater sources within these states (Blanco & Razzaque 2011, p. 317). The company has also embarked on a long term project of strengthening its plants in order to ensure efficient use of water resources and avoid pollution of water resources in its areas of operation. It is stated that these measures have enabled the company to not only reverse the negative impact the crisis had on its sales in India but also enabled it to win corporate social responsibility awards in areas such as water conservation and community-based initiatives (Fernando 2009, p. 187). This has enabled the company to achieve its business objectives as well as fulfil its mission statement of striving to lead by example and setting high standards in all its operations and consistently striving to achieve them (Coca-Cola Company, 2012, p. 6). Coca-Cola’s mission, vision and value statements state that the company seeks to inspire optimism by use of its brands and actions. The company also seeks to create value and have a positive impact in all areas in which it operates. To fulfil this mission, Asongu (2007, p. 91) observes that the company has implemented a number of corporate social responsibility programmes around the world. For instance, it runs the Coca-Cola scholars fund, an initiative that provides scholarships to hundreds of colleges and students from different communities. This initiative benefits not only the community but also other stakeholders of the company such as shareholders, who benefit from enhanced business and corporate image of the company (Cramer & Bergmans 2003, p. 32). Additionally, the company has been at the forefront in tackling the global challenge of climate change. In doing this, the company seeks to develop the efficiency of its systems in order to minimise production of waste material. Further, the company seeks to recycle its waste by introducing packaging bottles that are made from wholly recycled materials (Kapferer 2008, p. 54). All these steps are in compliance with the United Nations' Global Compact convention that seeks to care for the environment and address the effects of climate change. As part of the convention, the Coca-Cola has pledged to adopt measures that allow it to reduce emissions of greenhouse gases in its plants and increase energy efficiency in its business processes. Conclusion Coca-Cola successfully achieved its business objectives as well as fulfilled its mission statements. This has been the result of following sound ethical decision making processes in all its operations. Sound decision making processes by the management of the company have enabled it to attain a leadership role as a maker and marketer of non-alcoholic beverages globally. The company has managed to maintain this position in spite of having to tackle a number of issues of ethical concern that have arisen in different countries in which it operates. Ethical crises such as claims of racial discrimination by its employees, pollution of underground water sources in India and claims that consumption of its products may lead to obesity and cancer have threatened to reduce sales and shareholder value of the company. However, through developing and implementing a sound code of business conduct, the company has successfully managed to fully address the concerns. Also, it has managed to implement measures to safeguard against any future occurrence of similar ethical crises. All these have been achieved through ethical decision making processes that carefully identify a particular issue of concern, and enable a thorough examination of possible alternatives and selection of the best option as a viable course of action. Further, the company has managed to fulfil its mission statement of creating a positive impact in local populations in its areas of operations. This has been achieved by developing a number of community-based initiatives as part of its corporate social responsibility programmes. This approach has not only enhanced its business but also guarantees the sustainability of the business in corporate, social and environmental terms. References Asongu, J J 2007, Strategic corporate social responsibility in practice, Greenview Publishing Company, Lawrenceville. Blanco, E & Razzaque, J 2011, Globalization and natural resources law: Challenges, key issues and perspectives, Edward Elgar Publishing, Cheltenham. Centre for Science in the Public Interest 2012, ‘Tests show carcinogen levels in Coca-Cola vary worldwide’, viewed on 21 May 2013, Coca-Cola Company 2012, ‘The Coca-Cola company code of businesses conduct’, viewed on 21 May 2013, Read More