1 The Coca-Cola Company Struggles with Ethical Cases 1.

Why do you think Coca-Cola has had one ethical issue to resolve after another over the last decade or so? Over the past decade or so, Coca-Cola has gone through many hardships. They have had one CEO after another, several detrimental ethical and health problems that have become known, and have been caught in a few instances of tricking their stakeholders to make themselves look better financially. It seems that once a large company is on the radar for any issue, and the media makes sure the public is aware of the issues taking place, it is very hard to get back to neutral. When Doug Ivester took over in 1997, he had many issues on his plate, and was expected to have the ability to handle and overcome them. This seems to be the first challenge presented to Coca-Cola in front of the public. Unfortunately, Ivester did not have the skills to overcome all of the problems, because a lack of leadership and other reasons, which put the company on the radar. This was the beginning of what became a slow downfall for Coca-Cola. This company encountered one ethical problem after the other, including being involved in racial discrimination cases, misrepresenting market tests, manipulating earnings, and disrupting long term contractual agreements with distributors (Ferrell, Fraedrich, Ferrell, 2008, p.308). It seems like they just havent been able to get a handle on their issues, and they have had a sort of snowball effect. Once there is some negative publicity, especially from the #1 beverage company in the world, every little thing that happens is going to be looked at as a huge issue. I have noticed this to be true even on a local level, with Colorado based companies. Look at Denver Health. For years, they were viewed as the premier ambulance company, with the best publicity, best ambulances, best education, best employees, etc. They had one negative issue several years ago when a paramedic was involved in an altercation with a patient, and now, whenever something negative happens to them, it is a huge media field day.

2 I also think Coca-Cola has had several issues they are trying to fix, but havent had management with the experience to fix them. It seems that Coca-Colas major problems started in 1999 with the contamination scare. After that, the really had a hard time getting back on their feet, so they did what they thought was right to compensate for this catastrophic situation. As stated in the case study, CocaColas executives were not prompt when responding to this situation, which cased even more of an issue in the eye of the public. This is probably the worst way to handle a situation like this. It shows that the company is guilty, and is trying to find a way, or a lie to get out of it. In my opinion, the best way to handle a negative situation is to address the public right away, and give them some information as to what is going on, and not avoid it. Once this contamination scare occurred, the company encountered cash flow issues, ethical issues which were made public, discrimination issues, etc. Covering up issues, instead of being ethical, or being upfront and honest about them, creates doubt for the public, and for the stakeholders of the company, which, in the end, results in the company spending millions of dollars to correct these issues publicly. If they would have been honest to being with, they would have been viewed in a much more favorable way. Look at the Peanut Butter scare last year in the United States. This was received very well by the public because all of the facts were laid out on the table, and the local grocery stores stepped up and stated exactly which products had the possibility of contamination. Even though it created a financial burden on them, it was only for the short term, rather than having hundreds of lawsuits because the information was not provided. 2. A news analyst said that Coca-Cola could be the next Enron. Do you think this is possible and defend your answer? According to the case study on Coca-Cola in Business Ethics, Coca-Cola has had several crises over the past 10 years or so, including a contamination scare, competitive issues, racial discrimination allegation, problems with the Burger King market test, inflated earnings relation to channel stuffing, trouble with distributors, and many more. If you look at the trend, it seems to have gone from

3 healthcare issues, to now financial dishonesty. Enron was known for its accounting scandal, which turned into bankruptcy and a huge decline for the company. If Coca-Cola continues in the direction they are going, it is possible for them to go down the same road as Enron. When Coca-Cola had their huge recall in Belgium because of sick children, their failure to respond in a timely manner violated their huge claim to social responsibility. Because of this, they had to spend millions of dollars in legal fees, medical bills, loss of profit due to the country banning Coca-Cola products, etc. When a company is having to spend millions of dollars to regain the respect of the public, they are going to spiral downward, and possibly follow the footsteps of Enron. 3. What should Coca-Cola do to restore its reputation and eliminate future ethical dilemmas with stakeholders? Coca-Cola, being the #1 beverage company in the world does have some money to play with. Making social responsibility a top priority is a great step in the right direction. By investing several millions of dollars a year to scholarships, education on HIV/AIDS, public awareness, and community improvement, this is showing its stakeholders that they are trying to recover by being involved in the community. Now that all of these issues are out in the public now, it will hopefully deter the Coca-Cola executives from going down these roads again. With the current state of the economy, every little bit helps and is appreciated. Even when a local company steps up to help out in the community, whether it be community service, donations, helping clean up the city, education on certain topics, etc., it is well received and gives the company positive press. I think this is very important for Coca-Cola, no matter what they are doing to help. Once Coca-Cola settled their racial discrimination case, the agreement stipulated that the company (1) donate $50 million to a foundation to support programs in minority communities, (2) hire an ombudsman who would report directly to CEO Daft, (3) investigate complaints of discrimination and harassment, and (4) set aside $36 million for a seven-person task force and

4 authorize it to oversee the companys employment practices (Ferrell, Fraedrich, Ferrell, 2008, p.315). The last part of the agreement will be the most beneficial for the company in my opinion. I think this is an aspect of the company that has been hugely overlooked, and needs some attention. Even though the case study states this is an unusual provision to grant the power to an outside panel, they will show the public, and their stakeholders, that not everything is in the hands of the inside executives of the company anymore, but there will be an outside view as well. I think this will really help with future ethical dilemmas.

Reference Page

5 Ferrell , O.C., Fraedrich, J., Ferrell, L. (2008). The Coca-Cola Company Struggle with Ethical Crises: Business Ethics, Ethical Decision Making and Cases.