The Coca-Cola Company Struggles with Ethical Crises

As one of the most valuable brand names worldwide, Coca-Cola has generally excelled as a business
over its long history. However, in recent decades the company has had difficulties meeting its
financial objectives and has been associated with a number of ethical crises. As a result, some
investors have lost faith in the company. For example, Warren Buffet (board member and strong
supporter of and investor in Coca-Cola) resigned from the board in 2006 after years of frustration over
Coca-Cola’s failure to overcome its challenges. Since the 1990s, Coca-Cola has been accused of
unethical behavior in a number of areas such as product safety, anti-competitiveness, racial
discrimination, channel stuffing, distributor conflicts, intimidation of union workers, pollution, and
depletion of natural resources. A number of these issues have been dealt with, some via private
settlements and some via court battles, while others still besmirch the Coca-Cola name. Although its
handling of different ethical situations has not always been lauded, Coca-Cola generally has
responded by seeking to improve its detection and compliance systems. However, it remains to be
seen whether the company can permanently rise above its ethical problems, learn from its mistakes,
make necessary changes, avoid further problems, and still emerge as the leader among beverage
companies

HISTORY OF THE COCA-COLA COMPANY

Founded in 1886, the Coca-Cola Company is the world’s largest beverage company. In addition to
Coca-Cola and Diet Coke, it also sells other profitable brands including Powerade, Minute Maid, and
Dasani water. To service global demand, the company has the world’s largest distribution system,
which reaches customers and businesses in nearly every country on the planet.

Until the mid-twentieth century, Coca-Cola focused on expanding market share within the United
States. After World War II, however, the company began to recognize the opportunities in global sales.
In the last part of the twentieth century, Coca-Cola extended this global push, taking advantage of
international revenue opportunities and fierce soft drink competition, in an effort to dominate the
global soft drink industry. By the late 1990s, Coca-Cola had gained more than 50 percent global
market share in the soft drink industry, while PepsiCo, Coke’s greatest rival, stood around 15 to 20
percent.

Coca-Cola remains largely focused on carbonated and sugary beverages, while PepsiCo has
diversified into snack foods and New Age drinks like waters, teas, and fruit juices. While Pepsi has
tended to focus more on American markets, the largest portion of Coca-Cola’s sales have come from
outside the United States. As the late Roberto Goizueta, former CEO of Coca-Cola, once said, “Coca-
Cola used to be an American company with a large international business. Now we are a large
international company with a sizable American business.”

In spite of international recognition and a strong brand, Coca-Cola has run into numerous difficulties.
The company’s problems began in the mid-1990s at the executive level. In 1997, Doug Ivester
became CEO. Ivester, heralded for his ability to handle the financial flows and details of the soft drink
giant, had been groomed for the position by former CEO Roberto Goizueta. However, Ivester’s tenure
as CEO did not last. He was not well equipped to handle the tough competition from Pepsi combined
with the many ethical disasters Coke faced throughout the 1990s. Some people even began to doubt
“Big Red’s” reputation and its future prospects. For a company with a history of successful marketing
and strong financial performance, Ivester’s departure in 1999 represented a high-profile aberration in
a relatively strong 100-year record.

In 2000, Doug Daft, the company’s former president and chief operating officer (COO), replaced
Ivester as CEO. Daft’s tenure too was rocky, and the company continued to have problems throughout
the early 2000s. For example, the company was allegedly involved in racial discrimination,
misrepresentations of market tests, manipulation of earnings, and the disruption of long-term
contractual arrangements with distributors.

By 2004, Neville Isdell was called out of retirement to improve Coca-Cola’s reputation; however, the
company continued to face ethical crises. Problems aside, Coca-Cola’s overall performance seemed to
improve under CEO and Chair Isdell’s tenure. In 2008, Isdell relinquished the roll of CEO to then
president and COO Muhtar Kent. Isdell also decided to step down as chair of the board in order to
return to retirement. In 2009, under Kent’s leadership, Coca-Cola is seeking to revise its strategy
through social responsibility initiatives and brand expansion.

PEPSICO: SERIOUS COMPETITION

Coca-Cola has been a success for more than 120 years. In contrast, PepsiCo (founded at roughly the
same time) did not become a serious competitor until after World War II, when it came up with the
idea to sell its product in larger portions for the same price as Coke. The “cola wars” picked up more
speed by the mid 1960s and have not abated since. Today, the two American companies wage war
primarily on international fronts. While the fight occasionally grows ugly, with accusations of
anticompetitive behavior, generally the two companies remain civil.

By early 2006 PepsiCo enjoyed a market value greater than Coca-Cola for the first time. Pepsi’s
strategy of focusing on snack foods and innovative approaches in the non-cola beverage market has
helped the company gain market share and surpass Coca-Cola in overall performance. During the
2008–2009 recession, PepsiCo’s diversification strategy continued to pay off. Many analysts now see
greater long-term strength for PepsiCo. On the other hand, some investors fear for Coca Cola’s long-
term prospects because of how much the company depends on international sales and the fluctuating
values of the dollar Combined with the global recession in 2009, these are liabilities that may hurt
Coca-Cola’s long-term profitability. Because PepsiCo does 60 percent of its business in North
America, a strong dollar does not adversely affect the company as much as it does Coca-Cola. These
factors may give PepsiCo more of an upper-hand over Coca-Cola in the future.

COCA-COLA’S REPUTATION

Coca-Cola remains one of the most-recognized brand names in the world today, worth an estimated
$68.73 billion in 2009. The company has always demonstrated strong market orientation, making
strategic decisions and taking action to attract, satisfy, and retain customers. During World War II, for
example, then company president Robert Woodruff distributed Coke around the world to sell to
members of the armed services for a nickel a bottle. This strategy gave soldiers an affordable taste of
home, created lifelong loyal customers, and increased global brand recognition in one of the first steps
to creating a truly global brand. The presence of Coca-Cola products in almost every corner of the
globe today shows how successful the company’s international marketing strategy has been. Savvy
marketing and a reputation for quality have always been hallmarks of Coca-Cola and have helped to
make the product ubiquitous.

However, in the 1990s and 2000s, poor decisions, mismanagement, and alleged misconduct cast a
shadow over the company. In 2000, Coca-Cola failed to make the top ten of Fortune’s annual
“America’s Most Admired Companies” list for the first time in ten years, although it still ranked first
in the beverage industry. By 2010 Coca-Cola was in tenth place. Leadership issues, disappointing
economic performance, and other upheavals likely affected its standing on the Fortune list. In 2001,
the company disappeared from the top 100 in Business Ethics magazine’s annual list of “100 Best
Corporate Citizens.” For a company that had been on both lists for years, this was disappointing but
not unexpected, given its several ethical crises. In 2010, Coca-Cola ranked number eight in Corporate
Responsibility Magazine’s “100 Best Corporate Citizens” list, but PepsiCo was number 13.

CRISIS SITUATIONS

In 1996, Coca-Cola traded just below $50 a share. In 2010, it ranged between $46 and $59. This slow
growth may be attributed to various internal problems associated with top management turnover and
departure of key investors, as well as external problems that have led to a loss of reputation. The
following incidents exemplify some of the key crises Coca-Cola has faced in the last several years.

Contamination Scare
Perhaps the most damaging of Coca-Cola’s crises—and a situation dreaded by every company—
began in June 1999 when about thirty Belgian children became ill after consuming Coke products.
Although the company issued an isolated product recall, the problem escalated. The Belgian
government eventually ordered the recall of all Coca-Cola products, which prompted officials in
Luxembourg and the Netherlands to recall Coke products as well. Coca-Cola finally determined that
the illnesses were the result of an improperly processed batch of carbon dioxide. Coca-Cola was slow
to issue a response to the problem, taking several days to address the media. Initially, Coca-Cola had
not wanted to overreact over what it at first judged to be a minor problem and did not immediately
investigate the extent of the issue. The slow response time led to a public relations nightmare. France
soon reported more than 100 people sick from bad Coke and temporarily banned all Coca-Cola
products as well. Soon thereafter, a shipment of Bonaqua, a new Coca-Cola water product, arrived in
Poland contaminated with mold. In each of these instances, the company’s slow responses and failure
to acknowledge the severity of the situation harmed its reputation and cast doubt on then CEO
Ivester’s ability to successfully lead.

The contamination crisis was exacerbated in December 1999 when Belgium ordered Coca-Cola to
halt the “Restore” marketing campaign it had launched in order to regain consumer trust and sales in
Belgium. A rival firm claimed the campaign strategy—which included free cases of the product,
discounts to wholesalers and retailers, and extra promotion personnel—was unlawful. Under
Belgium’s strict antitrust laws, the claim was upheld; Coca-Cola abandoned the campaign to avoid
further problems. This decision, following the previous crisis, further reduced Coca-Cola’s market
standing in Europe.

Competitive Issues

Questions concerning Coca-Cola’s market dominance and government inquiries into its marketing
tactics plagued the company throughout Europe. Because the European Union countries have strict
antitrust laws, all firms must pay close attention to market share and position when considering joint
ventures, mergers, and acquisitions. During the summer of 1999, when Coca-Cola began an
aggressive expansion push in France, the French government responded by refusing Coca-Cola’s bid
to purchase Orangina, a French beverage company. French authorities also forced Coca-Cola to scale
back its acquisition of Cadbury Schweppes, maker of Dr. Pepper.

Moreover, in late 1999 Italy successfully won a court case against Coca-Cola over anticompetitive
prices, prompting the European Commission to launch a full-scale probe into the company’s
competitive practices. In addition, PepsiCo and Virgin Cola accused Coca-Cola of using rebates and
discounts to crowd their products off the shelves. Coca Cola’s strong-arm tactics were again found to
be in violation of European laws, once again demonstrating the company’s lack of awareness of
European culture and laws.
Despite these legal tangles, Coca-Cola products, along with many other U.S. products, dominate
foreign markets worldwide. The growing omnipresence of U.S. products, especially in highly
competitive markets, makes corporate reputation, both perceived and actual, essential to building
relationships with business partners, government officials, and other stakeholders.

Allegations of Racial Discrimination

In 1999, Coca-Cola’s reputation was dealt another blow when 1,500 African American employees
sued for racial discrimination. The lawsuit, which eventually grew to include 2,000 current and former
employees, accused the company of discriminating in areas of pay, promotion, and performance
evaluation. Plaintiffs charged that the company grouped African American workers at the bottom of
the pay scale and that they earned around $26,000 a year less than Caucasian employees in
comparable jobs. The suit also alleged that top management had known about companywide
discrimination since 1995 but had done nothing about it. In 1992, Coca-Cola had pledged to spend $1
billion on goods and services from minority vendors, an action designed to show the public that Coca-
Cola did not discriminate, but the lawsuit from its own employees painted a different picture.
Although Coca-Cola strongly denied the allegations, the lawsuit provoked unrest within the company.
In response, Coca-Cola created a diversity council and the company paid $193 million to settle the
racial discrimination lawsuit.

Inflated Earnings Related to Channel Stuffing

Coca-Cola was also accused of channel stuffing during the early 2000s. Channel stuffing is the
practice of shipping extra, nonrequested inventory to wholesalers and retailers before the end of a
quarter. A company counts the shipments as sales although the product often remains in warehouses or
is later returned. Because the goods have been shipped, the company counts them as revenue at the
end of the quarter. Channel stuffing creates the appearance of strong demand (or conceals declining
demand), and results in inflated financial statement earnings and the subsequent misleading of
investors.

In 2004, Coca-Cola was accused of sending extra concentrate to Japanese bottlers between 1997 and
1999 in an effort to inflate its profits. The company was already under investigation; in 2000, a former
employee filed a lawsuit accusing the company of fraud and improper business practices. The
company settled the allegations, but the Securities and Exchange Commission (SEC) did find that
channel stuffing had occurred. Coca-Cola had pressured bottlers into buying additional concentrate in
exchange for extended credit.

Trouble with Distributors

In early 2006, Coca-Cola once again faced problems—this time on its home front. Fifty-four of its
U.S. bottlers filed lawsuits against Coke and the company’s largest bottler Coca-Cola Enterprises
(CCE). The suit sought to block Coke and CCE, both based in Atlanta, from expanding delivery of
Powerade sports drinks directly to Wal-Mart warehouses instead of to individual stores. Bottlers
alleged that the Powerade bottler contract did not permit warehouse delivery to large retailers. They
claimed that Coke breached the agreement by committing to provide warehouse delivery of Powerade
to Wal-Mart and by proposing to use CCE as its agent for delivery. The main problem was that Coke
was attempting to step away from the century-old tradition of direct-store delivery (DSD), in which
bottlers deposit drinks at individual stores, stock shelves, and build merchandising displays. Bottlers
claimed that if Coke and CCE went forward, it would greatly diminish the value of their businesses.

In their defense, Coke and CCE asserted they were simply trying to accommodate a request from Wal-
Mart for warehouse delivery (how PepsiCo distributes its Gatorade brand). CCE had also proposed
making payments to other bottlers in return for taking over Powerade distribution in their territories.
However, bottlers feared such an arrangement violated antitrust laws. An undisclosed agreement
between the bottlers and Coca-Cola was reached in 2007. Reports suggest warehouse deliveries were
considered acceptable in some situations, and guidelines were developed for assessing those
situations.

When addressing problems faced by Coca-Cola, the media tends to focus primarily on its reputation
rather than on its relations with bottlers, distributors, suppliers, and other partners. Without these
strategic partnerships, Coca-Cola would not be where it is today. Such partnerships involve sharing in
risks and rewards. Issues such as the contamination scare and racial discrimination allegations,
especially when handled poorly, can reflect on business relationships beyond the key company’s
business. When the reputation of one company suffers, all those within the supply chain suffer in
some way. This is especially true because Coca-Cola adopted an enterprise-resource system that
linked Coca-Cola’s once highly secret information to a host of partners. Thus, the company’s less-
than-stellar handling of ethical crises may have introduced lax integrity standards to its partnerships.
The interdependence between Coca Cola and its partners requires a diplomatic and considerate view
of the business and its effects on various stakeholders. Therefore, these crises harmed Coke’s partner
companies, their stakeholders, and eventually their bottom lines.

International Problems Related to Unions

Between 2001 and 2004, a more sinister accusation against Coke surfaced in Colombia. Since 1989
eight union Coca-Cola workers had died there, 48 were forced into hiding, and 65 had received death
threats. Many believe the deaths and threats were the results of intimidation against union workers
employed at the Coca-Cola bottling plant in Colombia. The union, which alleged that Coke and its
local bottler were complicit in the intimidation and the deaths, is seeking reparations for the families
of the slain and displaced Colombian workers. However, Coke completely denies the allegations and
notes that only one of the eight workers was killed on the bottling plant premises. Also, the company
maintains that the other deaths were by-products of Colombia’s four-decade-long civil war. In 2007, a
group of hundreds of people made up of Teamsters, environmentalists, human rights proponents, and
student activists gathered in New York City to protest against Coca-Cola in regard to the problems in
Colombia, among other concerns, in 2007 a group of hundreds of people including Teamsters,
environmentalists, human rights, proponents, and student activists gathered in Ney York City to
protest Coca-Cola.

Coca-Cola was later sued by Guatemalan workers alleging that they and their families at Coke-owned
bottling plant Incasa had been victims of violence after the workers decided to join unions. The
plaintiffs accuse Coke of knowing about the retaliation that unionized workers face in Guatemala but
doing little to prevent it. A Coca-Cola spokeswoman has stated that although the company has a
minority stake in Incasa, the Guatemalan plant is independently owned.

Issues Regarding Water Usage and Pollution

Coca-Cola has also encountered trouble at its bottling plants in India, fielding accusations of both
groundwater depletion and contamination. In 2003, the Centre for Science and Environment (CSE)
tested soft drinks produced in India by Coca-Cola and other companies; findings indicated extreme
levels of pesticides from using contaminated groundwater. Supported in 2004 by an Indian
parliamentary committee, the first set of standards for pesticides in soft drinks was developed.
Although Coca-Cola denied allegations, stating that its water is filtered and its final products are
tested before being released, sales dropped temporarily by 15 percent.

In the Indian city of Varanasi, Coca-Cola was also accused of contaminating the groundwater with
wastewater. Officials at the company admitted that the plant did have a wastewater issue but insisted
that a new pipeline had been built to eliminate the problem. However, during the early 2000s, a
number of tests were conducted regarding “sludge” produced at Coca-Cola’s Indian plants. These
tests, conducted by the Central Pollution Control Board of India and the British Broadcasting
Corporation, came up with toxic results.

The company runs bottling plants in a handful of drought-plagued areas around India, and groups of
officials blame the plants for a dramatic decline in available water. In 2004, local officials closed a
Coca-Cola plant in Kerala; however, the closure was overturned by Kerala’s court. Although the court
agreed that Coca-Cola’s presence contributed to water depletion, the company was not solely to
blame. Farmers and local residents, forced to vie with Coca Cola for water, have protested Coca-
Cola’s presence there and throughout India.
In 2005, students at the University of Michigan asked the university to cancel its contracts with Coca-
Cola based on these issues in India. In response, the university requested that the Energy and
Resources Institute out of New Delhi research the issue. Findings indicated that Coca-Cola’s soda did
not contain higher-than-normal levels of pesticides. However, the report did indicate that the
company’s bottling plants were stressing water resources and suggested that the company do a better
job of considering a plant’s location based on resources and future impact.

Coca-Cola’s Impact on Health

In 2008, Coca-Cola launched a “Motherhood and Myth-Busting” campaign in Australia, attempting to

convince the public that a diet including soda was healthy for children. The Australian Competition
and Consumer Commission promptly took Coca-Cola to court after the Obesity Policy Coalition, the
Parents’ Jury, and the Australian Dental Association all filed complaints. As a result, in 2009 the
company was forced to release new advertisements in a number of Australian newspapers correcting
information such as the amount of caffeine found in Diet Coke. In response, Coca-Cola admits that it
did not supply consumers with detailed information during its campaign. Also in 2008, the FDA
declared the company had violated the Federal Food, Drug, and Cosmetic Act when naming the Coca-
Cola Diet Plus beverage. Using “plus” in the name indicated an unsubstantiated nutritional claim.

The next year, Coca-Cola was sued by the Center for Science in the Public Interest regarding
misleading marketing that concerned the contents of its Vitamin Water. Although the beverage is
marketed as healthy, it contains a high quantity of sugar. However, attacks on Coca-Cola for the
health impacts of its products are nothing new. The company has been under fire since the 1940s
regarding its products’ impacts on human health.

As concerns over obesity escalate, the U.S. government is considering imposing a tax on soft drinks.
The massive national deficit has added fuel to the fire, with some lawmakers recommending a soda
tax as a way to reduce the deficit. Coca-Cola and similar companies vehemently oppose such a tax
and accuse the government of unfairly targeting its industry. CEO Muhtar Kent believes the problem
of obesity stems more from a "sedentary lifestyle" than from sugary beverages. He also points to the
fact that the average caloric content in soft drinks has dropped 25 percent over the last two decades
through the adoption of diet beverages. The trade group for Coca-Cola and other soft-drink makers is
spending millions of dollars in lobbying efforts and has run advertisements encouraging consumers to
oppose the tax.

Another possible challenge for Coca-Cola involves claims that certain ingredients in its products
could contribute to cancer. In 2011 the Center for Science in the Public Inter est (CSPI) wrote a letter
to the Food and Drug Administration urging the agency to institute a ban against caramel colouring in
soda drinks and other products. CSPI maintains that the caramel colouring contains two cancer-
causing ingredients. The American Beverage Association has denied this view, claiming that there is
no evidence that shows caramel colouring causes cancer in humans. However, California
subsequently made plans to consider labelling products that contain caramel colouring. If other states
follow California's lead, this could negatively impact sales of Coca-Cola and other soft drinks.

RECOVERY FROM ETHICAL CRISES

Arguments abound on both sides as to whether Coca-Cola has recovered from its ethical crises. The
following information indicates that the company has addressed the majority of its issues; however,
some believe Coca-Cola is still not doing enough.

Regarding the health scare, Belgian officials closed their investigation involving Coca Cola and
announced that no charges would be filed. A Belgian health report indicated that no toxic
contamination had been found inside Coke bottles. The bottles did contain tiny traces of carbonyl
sulfide, producing a rotten-egg smell, but to be toxic the amount of carbonyl sulfide would have to
have been a thousand times higher. Officials also reported no structural problems within Coca-Cola’s
production plant and said that the company had cooperated fully throughout the investigation.

Coca-Cola has taken strides toward countering diversity protests. The racial discrimination lawsuit,
along with the threat of a boycott by the National Association for the Advancement of Colored People
(NAACP), led to this correction. When Coca-Cola settled the racial discrimination lawsuit, the
agreement stipulated that Coke would donate $50 million to a foundation supporting programs in
minority communities, hire an ombudsman reporting directly to the CEO to investigate complaints of
discrimination and harassment, and set aside $36 million to form a seven-person task force with
authority to oversee the company’s employment practices. The task force, which includes business
and civil rights experts, has unprecedented power to dictate company policy regarding hiring,
compensating, and promoting women and minorities. Despite the unusual provision granting such
power, then-CEO Daft defended his company’s measures to increase diversity, saying, “We need to
have outside people helping us. We would be foolish to cut ourselves off from the outside world.” It is
worth noting that, as of May 2009, the task force had not issued a report since 2006.

In response to the SEC’s findings regarding channel stuffing, the company created an ethics and
compliance office and is required to verify quarterly that it has not altered the terms of payment or
extended special credit. Additionally, the company agreed to work to reduce the amount of
concentrate held by international bottlers.

Coca-Cola has defended itself against allegations of violence in Colombia, and the Colombian court
and the Colombian attorney general support the company. In 2004, the company was dismissed as a
defendant in the 2001 lawsuit; the case was dismissed two years later due to insufficient evidence. An
appeal has been filed. According to Coca-Cola’s company website, it does everything it can to protect
its employees and works to aid Colombian children and families.

Although Coca-Cola’s issues in India did cause a temporary dip in sales and ongoing protests, the
company insists that it has taken measures to ensure safety and quality. Coca Cola has partnered with
local governments, NGOs, schools, and communities to establish 320 rainwater-harvesting facilities.
The goal is to work toward renewing and returning all groundwater. In addition, as recommended by
the University of Michigan study, the company is strengthening its plant requirements and working
with local communities to ensure sustainability of local water resources. The company recently
launched the Coca Cola India Foundation for Sustainable Development and Inclusive Growth. In
2008, Coca Cola received the Golden Peacock Global Award for corporate social responsibility in
water conservation, management, and community development initiatives.

Despite its global work in water sustainability, groundwater- depletion issues continue to plague
Coca-Cola in India. The state of Kerala has passed a law that allows individuals to seek compensation
from the company. The government claims that Coca-Cola "over-extracted" groundwater and
improperly disposed of sludge. causing damages to the environment and local populations. Coca-Cola
has countered that the decision was not based on facts and claims that studies have failed to find a link
between Coca-Cola's bottling operations and environmental damage. This situation could partially
undermine Coca-Cola's sustainability image in India.

Responding to health issues related to Coca-Cola's products is a more complex process. The company
itself cannot be held responsible for how many sugary or artificially sweetened beverages the public
consumes. Ultimately, Coca-Cola's responsibility is to disclose honest, detailed information regarding
its products so that consumers may make educated beverage choices. Coca-Cola has also begun
researching healthier products, both as a way to enhance its reputation and increase profits. To make
its soft drinks healthier, Coca- Cola is investigating no-calorie sweeteners like stevia as future product
ingredients. Coca- Cola is also creating smaller-sized soft drinks. The new "Coke Mini" product is
only 7.5 ounces and contains 90 calories. Additionally, Coca-Cola is making an effort to encourage
consumers to exercise and embrace a healthy lifestyle through nutritional education and partnerships
with governments, NGOs, and public health representatives. For instance, the company awarded a
grant to the American Academy of Family Physicians to create educational content regarding soft
drinks and sweeteners on AAFP's health and wellness website. Although critics accuse AAFP of
selling out, the AAFP has assured the public that it will not endorse the brands or products of any of
its partners.

SOCIAL RESPONSIBILITIES FOCUS

Because Coca-Cola is a globally recognized brand and has a strong history of market orientation, the
company has developed a number of social responsibility initiatives to further enhance its business.
These initiatives are guided by the company's core beliefs in market place, workplace, community,
and environment. As stated in its Mission and Vision & Values statements, Coca-Cola wants to
"Inspire Moments of Optimism" through brands and actions as well as to create value and to make a
positive difference in the countries in which it does business. For instance, Coca-Cola is joining
former U.S. Secretary of State Madeleine Albright and The Aspen Institute President and CEO Walter
Isaacson on an initiative to provide assistance to entrepreneurs in Muslim-majority countries. The
organization Partners for a New Beginning (PNB), with Albright as chair and Muhtar Kent and
Issacson as vice chairs, is working to encourage businesses, universities, NGOs, and other
organizations to help Muslim entrepreneurs through investments and/or contributions of organology
and equipment. PNB also vowed to increase access to finance, education, ns of technology of business
for Muslim entrepreneurs. According to CEO Muhtar Kent, Coca -Cola’s participation in this
initiative will help to “build a strong bridge of understanding and respect between the U.S. and the
Muslim world.”

Coca-Cola also offers grants to various colleges and universities, both nationally and internationally.
In addition to grants, Coca-Cola provides scholarships to hundreds of colleges including thirty tribal
colleges belonging to the American Indian College Fund. Such Initiatives enhance the Coca-Cola
name, and ultimately benefit sharefolders. Through the Coca-Cola Scholars Foundation, 250 new
Coca-Cola Scholars are named each year and brought to Atlanta for interviews. Fifty students are then
designated National Scholars and Receiving awards of $20,000 for college; the remaining 200 are
designated Regional Scholars, receiving $10,000 awards.

Like many other companies, Coca-Cola is addressing the issues of recycling and cli- mate change. In
2007 Coca-Cola signed the UN Global Compact's "Caring for Climate: The Business Leadership
Platform." In doing so, the company pledged to increase energy efficiency and reduce emissions. In
2009 Coca-Cola released the Plant Bottle". This new bottle, made from 30 percent plant-based
material, is fully recyclable and reduces use of non-renewable resources and production of carbon
emissions. Coca-Cola has partnered with the Heinz Co. to extend Coke's Plant Bottle packaging to
Heinz ketchup bottles. Coca-Cola also used the Plant Bottle when it sponsored the 2010 Olympics in
Vancouver. In fact, Coca-Cola vowed to produce zero waste during the games, one of the first times
such a major marketer has embarked on this initiative. Some of the other ways that Coca- Cola went
"green" during the Olympics included its use of diesel-electric hybrid delivery trucks, staff uniforms
made out of recycled bottles, and carbon offsets for air travel.

In addition, Coca-Cola has taken action to improve communities, both nationally and on a global
scale. For instance, Coca-Cola's Sprite business partnered with Miami Heat for- ward LeBron James
on the Sprite Spark Parks Project. Sprite announced plans to contribute $2 million into the building
restoration of over 150 basketball courts, athletic fields, and playgrounds in a minimum of 40 cities.
In terms of its global re the company remains proactive on issues such as the HIV/AIDS epidemic in
Africa, Coca-Cola has partnered with UNAIDS and other NGOs to put in place important , initiatives
and programs to help combat the threat of HIV/AIDS .

Because consumers generally respect Coca-Cola, trust its products, and have strong attachments
through brand recognition and product loyalty, Coca-Cola’s actions foster relationship marketing.
Because of this sense of n at the company can stir the emotions relationship with the Coca-Cola
brand. Problems at the company can stir the emotions of stakeholders.

THE CURRENT SITUATION AT COCA-COLA

In the early part of the twenty-first century, Coca-Cola's financial performance was positive, with the
company maintaining a sound balance sheet. However, earnings across the soft drink industry have
been on a slow decline because of decreased consumption, increased 2009 global recession.
Nevertheless, Coca-Cola is confident of competition, and the 2008- its long-term viability and
remains strong in the belief that the company is well positioned to succeed.

In an attempt to regain growth, Coca-Cola is expanding globally. With Coke reaching market
saturation in developed countries, the company is looking to economies. In 2010 the company
announced plans to undergo a gain a foothold in emerging major expansion in Africa, with plans to
invest $12 billion into continent within the next 10 years. Such a plan has both positive and negative
aspects. On the negative side, organizations like the World Health Organization are criticizing such an
expansion as they believe it is unethical to introduce a product with no nutritional benefits into
impoverished countries. On the other hand Coke employees approximately 65,000 Africans and
encourages entrepreneurship Success in emerging economies may be the push that Coca-Cola needs
to jumpstart growth.

Conclusion

For more than a decade Coca-Cola has been fighting allegations of a lack of health and safety of its
products, unlawful competitive practices, racial discrimination and intimidation, channel stuffing,
unfair distributor treatment, and the pollution and pillaging of natural resources, but under Neville
Isdell and Muhtar Kent's leadership, the company appears to have rebounded and begun to take strides
toward improving its image. The company is focusing more on environmental stewardship, for
example. However, the company's critics say that Coca-Cola is not doing enough-that its efforts are
merely window dressing to hide its corruption. Case in point: Although the company claims to have
addressed all its issues in India and says it is making an effort to aid the country's population, both the
government and the citizens of Kerala maintain that the company has decreased the area's
groundwater. Shareholder reactions have altered many times over the company's history, but the
company has retained a large loyal base. The company hopes that its current leadership is strong
enough to move Coca-Cola past this focus on the ethics and into a profitable start to the twenty-first
century.

Questions

1. What role does corporate reputation play within organizational performance and social
responsibility? Develop a list of factors or characteristics that different stakeholders may use
in assessing corporate reputation. Are these factors consistent across stakeholders? Why or
why not?
2. Assume you have just become CEO at Coca-Cola. Outline the strategic steps you would take
to remedy the concerns emanating from the company’s board of directors, consumers,
employees, and business partners; governments; and the media. What elements of social
responsibility would you draw from in responding to these stakeholder issues?
3. What do you think of Coca-Cola’s environmental initiatives? Are they just window dressing,
or does the company seem to be sincere in its efforts?