Issues and Ethics in International Business
BIB3074
School of Management & Business
Individual Assignment:
Ethical crisis in Coca-cola Company
Prepared for:
Ms. Lailatul Zuraidah
Prepared by:
Keertan subramaniam (1202191009)
No. Content Page Number
1.0 Introduction 3-4
2.0 Content 5-11
2.1 Systemic Issues
2.1.1 Coke and Racial Discrimination
2.1.2 ISSUES REGARDING WATER USAGE AND POLLUTION
2.2 Corporate Issues
2.2.1
Problems with the Burger King Market Test
2.2.2
Inflated Earnings Related to Channel Stuffing
2.3
Individual Issues
2.3.1
Problems with Labor Unions and Coke Trade Secrets
3.0 Recommendations 14-15
4.0 Conclusion 16
5.0 References 17
1.0) Introduction
Consumers and investors are more attracted to ethically conducted organisations and
firms. According to Le et al. (2017), ethical behaviours are crucial to an organization's
profitability and reputation. Organizations and enterprises engage in a variety of
unethical actions. Infractions of human rights, contamination of the environment, and
policy violations are among them. Since the 1990s, Coca-Cola has been accused of
engaging in unethical behaviour in a variety of sectors, including racial
discrimination, product protection, and significant violations of human rights (Le et
al., 2017). Coke's efficacy and global reputation have suffered as a result of these
methods. As a research consultant, I will detail Coke's unethical behaviours and
develop a long-term strategy to remedy the problems.
Coca-Cola has been accused of unethical activity in a number of sectors since the
1990s, including product safety, anti-competitiveness, racial discrimination, channel
stuffing, distributor conflicts, union worker intimidation, pollution, natural resource
depletion, and health problems. A number of these issues have been settled by the
corporation, some through private settlements and others through legal battles, while
others remain unsolved. Coca-Cola has generally responded by striving to strengthen
its detection and compliance procedures, despite its handling of various ethical
situations not always being praised. However, it remains to be seen whether the
corporation can overcome its ethical issues in the long run, learn from its mistakes,
make required changes, prevent similar issues, and continue to be a leader in the
beverage industry.
Coca-Cola is admired and well-known for its brand strength. It is the most well-
known emblem and brand in the planet. Coca-tremendous Cola's focus on reputation
has resulted in customer loyalty, trust, and the strongest brand recognition of all time.
Coca-Cola is committed to attracting, satisfying, and keeping customers for the long
term. The company has a reputation for having the industry's most devoted customers.
Coca-Cola has remained the beverage industry's market leader year after year for this
reason. Coca-Cola has won multiple honours in recent years, including Responsible
CEO of the Year (2010), Most Socially Responsible Company (2008), World's Most
Accountable Companies (2007), and Top 50 Most Admired Companies (2007).
(2010). Coca-Cola has worked to improve the quality of life in the communities it
serves in addition to becoming the world's largest beverage company. However, in the
1990s and 2000s, the corporation was dogged by poor judgments, mismanagement,
and allegations of misbehaviour. For the first time in 10 years, Coca-Cola did not
make the top ten of Fortune's annual "America's Most Admired Companies" list in
2000. The corporation dropped out of Business Ethics magazine's annual list of "100
Best Corporate Citizens" in 2001.
2.0) Content
However, not everything that glitters is gold, and Coca-Cola, like any other business
titan, was not immune to the perils of human flaws such as greed and unethical
behaviour. Coca-Cola has been accused of and found to be involved in a number of
important ethical issues. The first instance of racial discrimination occurred in 1999,
when fifteen hundred African American employees sued Coca-Cola for racial
discrimination due to disproportionate salaries and a high rate of turnover among that
racial population (Essay UK 2013). While some criticised this as an outlier, the case
revealed that an African American, regardless of job or credentials, would receive
$26,000 less than a Caucasian [Link] ethical chasm was widened when it
was discovered that upper management was aware of the discrepancy but did nothing
about it, thereby breaching various labour rules as well as anti-discrimination statutes
that any corporation must follow. While the Coca-Cola executives claimed they were
unaware of the situation, the lawsuit pushed the family-friendly corporation to
reevaluate itself, and as a form of atonement, Coca-Cola formed a diversity committee
and invested over 190 million dollars to resolve the lawsuit. Not only did the case
come at a high financial cost, but it also tarnished what had previously been regarded
as a good reputation.
2.1 Systemic issue
Systemic issues are ethical concerns concerning the social, political, legal, or
economic environments in which businesses operate. The issues in the system are
listed below.
2.1.1) Coke and Racial Discrimination
Employees at the Coca-Cola Company have been subjected to racial discrimination
on a global scale. Raman (2018), for example, stated in his piece that in 1999, Coke's
reputation was shattered when around 1,490 African American workers sued for
severe racial discrimination. A complaint filed on behalf of nearly 2,000 current and
former Coca-Cola employees accused the company of discriminating in areas such as
performance evaluation, promotion, and salary. In response, the corporation
announced that it would spend $1.2 billion on services and commodities from all
minority vendors (Renz and Vogel, 2016). As a result, the company paid $ 192
million to satisfactorily settle the claims (Coca-Cola 2018). In 2000, black workers
held empty Coca-Cola cans aloft outside an Atlanta church to protest Coke's treatment
of black employees. In comparison to their white counterparts, the workers
complained of low pay, harassment, and terrible working conditions. Increased
national boycotts of Coke's products and services occurred from the protests, affecting
the company's earnings. Similarly, Coke has been accused in Colombia of bullying
employees and using abusive tactics against them. Jenkins (2018) mentioned in his
piece that Coke and their bottling partner were suspected of murdering union leaders
in Colombia who were protesting the company's environmental degradation.
Americans have characterised the company's senior leadership, raising worries about
racial discrimination against leaders from other continents.
Reasons for racial discrimination in the workplace- Coke continues to discriminate
against consumers and other employees who consume products from competitors such
as Heineken and Pepsi. As a result, the corporation considers employees of American
ancestry to be more capable of managing the company's operations than workers from
other parts of the world. Coke is currently focusing on the younger generation to
boost sales and marketing while ignoring the elder age. Coke utilises a large number
of female employees to boost its sales and global anti-pollution programmes, thereby
discriminating against male employees (Avery, Volpone, and Holmes, 2018).
The Coca-Cola Company should ensure that all workplaces are racially and ethnically
diverse to prevent racial discrimination. As a result, the company's leadership should
mirror the current community's diversity in order to better serve their customers and
stakeholders. Employees at Coke should receive training in inclusion and diversity.
Long-term racial discrimination strategy—The company should develop an anti-
discriminatory strategy that establishes the essential behavioural norms. Workers
should be aware of this policy to ensure that racial discrimination is not tolerated at
the workplace. Coke should enact global anti-discrimination legislation to protect
employees from discrimination based on nationality, religion, sex, gender, or
disability.
2.1.2) ISSUES REGARDING WATER USAGE AND POLLUTION
Coca-Cola has also faced problems at its bottling plants in India, with allegations of
contamination and groundwater depletion. The Centre for Science and Environment
(CSE) tested soft drinks made in India by Coca-Cola and other corporations in 2003,
and the results revealed high amounts of pesticides due to the use of contaminated
groundwater. The first set of pesticide regulations for soft drinks was produced in
2004, with the help of an Indian parliamentary committee. Despite the fact that Coca-
Cola refused the allegations, claiming that its water is filtered and that its final
products are thoroughly tested before being distributed, sales momentarily decreased
by 15%. Coca-Cola was also accused of poisoning groundwater in the Indian city of
Varanasi with wastewater. Officials at the company acknowledged that the factory
had a wastewater problem, but insisted that the problem had been solved with the
construction of a new pipeline. However, in the early 2000s, a number of tests on
"sludge" produced at Coca-Indian Cola's plants were carried out. The Central
Pollution Control Board of India and the British Broadcasting Corporation conducted
these experiments, which yielded harmful results. The business operates bottling
plants in a few drought-stricken locations around India, and regulators blame the
factories for a sharp drop in accessible water. Local officials in Kerala, India, closed a
Coca-Cola facility in 2004 the closure was restored by Kerala's court. Although the
court acknowledged that Coca-presence Cola's contributed to water scarcity, it also
stated that the firm was not completely responsible. Farmers and local inhabitants,
meanwhile, who are forced to compete with Coca-Cola for water, have condemned
the company's presence there and throughout India. The University of Michigan
requested that the Energy and Resources Institute in New Delhi investigate the
allegations as a result of these allegations. Coca-cola contracts had been stopped until
the firm engaged outside investigators to look into the allegations. Coca-drink Cola's
did not contain higher-than-normal quantities of pesticides, according to the findings
of the Energy and Resources Institute. The assessment did, however, warn that the
firm's bottling plants were putting a strain on water supplies, and it recommended that
the corporation do a better job of addressing a long-term solution.
2.2) Corporate issues
According to Valasquez (2014) corporate issues are “ethical questions raised about a
particular organization.” These include questions about the morality of an individual
company's operations, policies, practices, or organizational structure as a whole
2.2.1) Problems with the Burger King Market Test
Coca-Cola was hit with another lawsuit just three years after the racial discrimination
complaint. A whistleblower lawsuit was filed by Matthew Whitley, a mid-level Coca-
Cola official. Whitley exposed fraud in a market survey conducted on behalf of
Burger King by Coca-Cola. Coca-Cola wanted to boost sales, so they teamed up with
Burger King to introduce a frozen Coke as a kid's snack in 2002. Burger King
intended to test the product in the market before going national. Burger King began a
three-week trial run in Richmond, Virginia to test if the investment was worthwhile.
When customers purchased a Value Meal, they received a coupon for a free frozen
Coke. Sales of the frozen Coke were not looking good when the trial began. As a
result, Coca-Cola agreed to pay at least one person $10,000 to accompany hundreds
of youngsters to Burger King and buy Value Meals that included frozen Coke. The
fraud was uncovered and investigated by the United States Attorney for the North
District of Georgia. Burger King had to pay $21 million, the whistle-blower $540,000,
and Coca-Cola had to take a $9 million pretax write-off. Coca-Cola denied the claim,
but it came at a high cost to the firm. They not only lost millions of dollars, but the
case also received a lot of bad press. Furthermore, it shattered any relationship they
had with Burger King.
2.2.2) Inflated Earnings Related to Channel Stuffing
Coca-Cola was accused of channel stuffing, in addition to the other ethical issues it
was dealing with. The practise of shipping excess inventory to wholesalers and
retailers at an excessive rate, usually at the conclusion of a quarter, is known as
channel stuffing. Channel stuffing is a fraudulent practise in which a corporation
inflates its sales and earnings data. It is considered a sale when a corporation
distributes their product to a distributor. When a corporation participates in channel
stuffing, however, the sale is counted, and the merchandise is frequently returned or
stored in a warehouse. The corporation sends more stuff to their retailers than they
can sell, thus proving a significant demand for the product.
The corporation would gain higher earnings on their financial accounts as a result of
channel stuffing, as well as misinforming their investors. Coca-Cola was accused of
dishonestly inflating revenues by delivering additional concentrate to Japanese
bottlers between 1997 and 1999. Despite the fact that Coca-Cola settled the case, the
Securities and Exchange Commission found that channel stuffing did take place. The
business then pressed bottlers to buy more concentrate in exchange for a longer credit
period.
Coca-Cola promised the SEC that it would no longer engage in channel stuffing. The
corporation established an ethical and compliance office at this time, which certifies
each financial quarter that no payment terms have been changed or special credit
granted. Coca-Cola promised to work with overseas bottlers to lower the quantity of
concentrate they hold. Even though the SEC case was settled, Coca-Cola is still being
sued by shareholders in Japan, North America, Europe, and South Africa for channel
stuffing.
2.3 Individual Issues
Individual issues are ethical concerns regarding a specific individual's actions,
conduct, or character. Therefore, individual issues mean issues relating to an
individual. In this case, individuals are parties who uses plastics and contribute to
plastic usage and disposal. Hence, the individual issues are further explained as below
(Chen et al., 2021).
2.3.1) Problems with Labor Unions
Coca-Cola ran into labour union issues in addition to other foreign issues. The
principal source of these issues was a tragic death of Coca-Cola employees in
Columbia, as well as forty-eight people who went into hiding and another sixty-five
who got death threats. Coca-Cola allegedly chose to be involved in criminal activities
involving these fatalities, death threats, and disappearances, according to labour
unions. Coca-Cola refuted all of the claims, claiming that just one of the deaths
occurred on the premises of the bottling factory with whom Coke collaborated, and
that the others occurred off-site, where Coke had no participation. Rather than acting
quickly, Coca-Cola produced a terrible impression by refusing to assist any of the
workers or their families. The company's continued denial, as well as its refusal to
provide any assistance or action, enraged labour unions and added to Coca-already
Cola's tarnished ethical reputation. Although other factors may have contributed to the
troubles in Columbia, Coca-Cola did nothing to assist anyone else or themselves in
the situation.
2.3.2) Poor leadership and system
Coca-Cola also had to deal with a situation that was a little closer to home. In 2006,
three Coca-Cola employees were arrested for fraudulently and unlawfully stealing and
selling trade secrets from the company. One of the defendants in the case phoned
Pepsi and claimed to be a high-ranking Coca-Cola executive. He then gave them
extremely sensitive and detailed information on the Coca-Cola Company. After
receiving a letter from Pepsi regarding the offer, Coca-Cola called the FBI. Ibrahim
Dimson of the Bronx, New York, was identified as the informant by the FBI. He
handed over fourteen pages of sensitive information to the FBI, as well as top-secret
Coca-Cola goods. Joya Williams, an executive administrative assistant, provided
Ibrahim with the information he needed. She had access to all of the information
provided to the FBI by Dimson, also known as "Dirk" in the case. This is a major
issue for Coca-Cola since not only are employees' behaviours directly responsible for
the corporation, but they also reflect poorly on the firm if there are internal issues.
Any company that has employees willing to offer trade secrets to direct competitors
should assess the individuals in control and make changes if the employees feel that
way about a company that is well-known and successful around the [Link]
corporation should have a structure in place to secure its trade secrets, because
otherwise, anyone on the street may steal Coke's syrup formula and sell it to its
competitors. This is another ethical circumstance where the correct leadership and
structure may have prevented the problem from arising in the first place. Coca-
reputation Cola's has been harmed once again due to bad leadership, and three
business workers have been charged with major offences.
3.0) Recommendation
The problems faced by Coca-Cola Company are Problems with Labor Unions and
Coke Trade Secrets, channel stuffing, plastic bottle waste, water scarcity and racial
disricimination. These problems will have several detrimental consequences for the
social and natural environment. Consumption of high-sugar beverages and plastic
bottles is bad for people's health and bad for the environment. As the number of
competitors grows, the Coca-Cola Company's sales and market share will decline.
Coca-Cola Company must take steps to maintain and improve its revenue and
reputation. Following are a few suggestions for overcoming Coca-problems.
3.1 Emphasize on research and development ()
Burger king
Research and development of innovative packaging for the Coca-Cola Corporation's
product line and product range is one of the ways the company may compete with its
competitors and appeal to its target market. It will also aid in the development of
brand value and consumer satisfaction. Coke's image may be changed from bad to
positive in terms of health by investing in research and development of products that
are good for customers' health and created from healthy ingredients. Packaging could
be improved with a creative and attractive design that may be used to produce a fresh
feeling and attract customers.
3.2 Increase the usage of modern technology (corporate)
Water scarcity issues in india
To begin, the Coca-Cola Company should refresh its technology on a regular basis to
address the issues. To ensure increased efficiency and improve productivity, the
organisation must replace old technology with new technology. Because technology
advances at such a quick pace, the Coca-Cola Company must stay ahead of
technological advancements in order to ensure that concerns such as plastic bottle
waste and water scarcity are addressed in the most efficient and effective manner
possible. For example ,they can use The WaterSeer which is a machine can pull
moisture from the air and produce up to 11 gallons of clean drinking water. It blows
wind into an underground chamber that condenses and forms water. This machine can
help produce clean drinking water for countries that have limited access to it.
3.3 Increasing commitment to social, community and environment (corporate)
Poor leadership and problem with labor union and water pollution
When these concepts are implemented, the Coca-Cola Company's commitment to
social, community, and environmental issues will grow. By increading the
commitment in the Coca-Cola Company it has the potential to improve the company's
reputation and acquire respect from society such as the indians and other races who
are affected. As a result, the Coca-Cola Company has a competitive advantage over
its competitors. Keeping up with current events is critical since it allows customers to
express themselves. By minimising plastic bottle waste, water shortages, and the high
sugar problem, the Coca-Cola Company must pay attention to environmental
degradation and lifestyle changes. Lack of communication within the workplace can
result in the dissolution of workplace productivity, working relationships and the
overall level of happiness within the company. They can encourage team bonding
which brings great communication within the workplace to minimise
misunderstandings from happening and will ensure your employees are happy at
work. Other than that ,Strong bonds can encourage the development of a more
positive work environment, this enhances productivity and the overall well-being
within the company, to benefit both business and the employees.
3.4 Protect the workers and their rights. (individual)
Coca-Cola, as a leader, is expected to look after its stakeholders and their benefits.
Coca-Cola should take responsibility and investigate the accusations that are used
against Coca-Cola Colombia. If the accusations are true, Coca-Cola should step in and
help fix the issues (and the company needs to be clear that they support their bottlers
and not the accusations). Coca-Cola should also promote human rights protection,
denounce antiunion violence, and compensate victims iTo prevent violence from
happening again in the future, an independent human rights commission should be
hired to evaluate all allegations and plant conditions to determine credible threats and
identify potential means to protect both workers’ rights and verify Coca-Cola’s
standing as a good global citizen.n Colombia.
3.5 Build ethical relationship with employees
Besides creating a safe work environment, it is important for Coca-Cola to build a fair
and ethical relationship between employers and employees. This will improve
workers’ satisfaction and the corporate image, and it can also highlight the concerns
of workers. This is especially true when operating in international locations with labor
laws that differ from those in the U.S. – like Colombia. For instance, Coca-Cola
Colombia should strictly follow the Alien Tort Claim Act (ATCA) and Torture
Victims Protection Act (TVPA). 14 As, workers are sensitive about possibilities of
excessive force, and paramilitary activities including assassinations, and
blackmailing. Therefore, Coca-Cola U.S. headquarters and Coca-Cola Colombia
should work together to protect workers’ rights including their bargaining powers.
Union should also be treated fairly and zero violence should be tolerated
4.0) Conclusion
Coca-Cola has been fighting allegations of product health and safety, illegal
competitive practises, racial discrimination and employee intimidation, channel
stuffing, unfair distributor treatment, pollution, and natural resource pillaging for
more than a decade, but under the leadership of Neville Isdell and Muhtar Kent, the
company appears to have rebounded and is making strides toward improving its
image. For example, the corporation is putting a greater emphasis on environmental
sustainability. Critics, on the other hand, argue that Coca-Cola isn't doing enough, and
that its efforts are only a smokescreen for the company's criminality. Because of the
enlarged workforce and higher production, managers, leaders, employees, and
consumers value stronger ethical behaviours. Nonetheless, unethical actions are seen
as a roadblock to the organization's mission, vision, and goals. Organizations and
enterprises engage in a variety of unethical practises, including violations of human
rights, pollution, and violations of company policies. The Coca-Cola Company's
unethical actions include human rights violations and increased environmental
degradation owing to improper plastics disposal. As a result, the corporation engages
in channel stuffing in order to increase profits. The long-term strategy for addressing
these unethical behaviours is adhering to WTO, NEMA, and UN human rights rules.
As a result, to avoid workplace discrimination, Coke should hire people based on their
talents, experience, and performance.
Recommendation
(systemic)
Coca cola has to understand management style in general. Every country has got its
own style of [Link] it is important that they should have a correct view about
the management style of particular [Link] is very important to understand the task
and the business at the most and then decide the appropriate method of
[Link] is the country where people give more importance to culture.
Another important factor which should be taken into consideration is Long- Term
Orientation. India is the place where this is followed more because Indians are more
towards tradition and their [Link] is not easy to make them accept the sudden
changes. So there should properly take consideration of long – term orientation.
Protecting Employee Health and Well-being
Around the world, local teams have closely followed guidance from health authorities
to protect the health and safety of employees across offices, production, distribution
and retail facilities.
Prioritizing Safety in Production and Distribution Facilities
implemented additional cleaning and sanitization routines, focusing on high-touch
surfaces, and have taken steps to restrict visitors to our facilities.
