Last Updated 04 Jul 2021

The Coca-Cola Company Struggles with Ethical Crisis Case Study

Essay type Case Study
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The ethical issues and dilemmas that the Coca-Cola Company has faced since within the last few decades have brought into question the responsibility that a company has to the consumers, financial stakeholders, employee’s and the environment. Companies throughout history have all dealt with ethical issues but Coca-Cola has used these incidents to understand and increase their ethical standards and compete in a morally conscious business environment (Ferrell, Ferrell & Fraedrich, 2011).

The types of dilemmas that The Coca-Cola Company has include a contamination scare, racial discrimination allegations, inflated earnings, trouble with distributors, and employees leaking of trade secrets. The company responded to these ethical issues differently in which they seem to never be resolved completely (Ferrell, Ferrell, & Fraedrich, 2011). During the 90’s Coca-Cola consumers were getting sick after drinking some Coca-Cola products. After the first incidents the Coca-Cola Company activated a regional recall where the sicknesses in the regions where it was happening, but that wasn’t enough for the area affected.

The government of Belgium ordered that all Coca-Cola products be recalled. The government recall escalated with other countries such as Luxembourg and the Netherlands following suite and recalling all the Coca-Cola products as well. It took days for the company to find the culprit of what was causing the sickness. Coca-Cola’s timeliness to formally respond to the sicknesses caused uproar with the media and the public. This ethical issue here is that consumers of their product are the most important part of the business (Ferrell, Ferrell, & Fraedrich, 2011).

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Coca-Cola has an obligation to their customers to keep them safe from harm and sickness. They have an obligation to keep them safe from harm at all costs. Anti-trust laws in Europe are strict and its governments do not allow companies to have large market dominance or monopolies of industries. Coke was interested in purchasing both an Italian and French drink company. They also were accused of un-lawful marketing and distribution policies by other companies producing a probe by the governent, which found wrong doing by Coke.

These actions led the governments to decline their purchase of the drink companies and reprimand Coke for their unlawful marketing practices. This is proof that Coke did not immerse themselves in the culture or learn the practices of the lawful business practices in Europe (Ferrell, Ferrell, & Fraedrich, 2011). Coke was negligent in their practices and abiding by the law. Financial documentation and accounting was questioned when the Security and Exchange Commission found they inflated their profits numbers and by using “Channel Stuffing” which inflated numbers and earnings (Ferrell, Ferrell, & Fraedrich, 2011).

This is not a good practice for any business, but it is still legal. The company needs to be more responsible with its record keeping and practice better accounting techniques with their customers. Unions have always been a topic of ethics. But for Coca-Cola, they were being blamed for union members deaths in Columbia when workers were becoming unionized. Coke was blamed for these deaths but deflected it stating that most of the deaths were because of the civil war raging there (Ferrell, Ferrell, & Fraedrich, 2011).

Coke could have done a better job to ensure that their workers were able to be productive in a safe environment. Racial discrimination and employee’s selling trade secrets are also ethical issues that have come in business practices. These are both very important issues that Coke has been unable to manage in the past but should be at the top of their agenda. Determine which of the issues/dilemmas you identified was the most significant. Explain your reasoning. The issues/dilemmas that are most significant are racial discrimination and employees selling trade secrets.

These two are significantly different than the other but have monumental effects when it comes to running an international business. An international company like Coca-Cola has an ethical responsibility to ensure that they treat everyone equally and hire the right employees to ensure there is not breach of security. Allegations of racial discrimination should not be taken lightly; Coca-Cola was accused of discriminating both with pay, promotions and performance evaluations. Even though many higher-level managers knew this type of discrimination was taking place they turned a blind eye to the matter.

Once the litigation had begun Coca-Cola decided to settle the case out of court and create a council that would preside over equal pay and diversity (Ferrell, Ferrell, & Fraedrich, 2011). It is the responsibility of a company to comply with federal regulations and not turn a blind eye to discrimination. The Civil Rights Act of 1964, implemented national laws that made it illegal to discriminate based on sex, race, color, religion or national origin (Deszouza, Paludi & Paludi, 2011).

Since the law was in effect at the time of the allegations Coke had a responsibility by law to ensure discrimination did not happen. Discrimination accusations can hinder the relationship of the customer and the business. It is unethical to treat people that work for a company differently that have the same or better work ethics of another employee, the same people that work for an organization reflect the community that it does business in. Another significant ethical incident that Coca-Cola could have managed better was the illegal dispersion of trade secrets.

Trade secrets are what determine the unique business merchandise or idea business model of the company; it gives it a competitive advantage (Hannah, 2005). An employee of Coke who had access to the classified information leaked the trade secrets. The employee who leaked the information has an ethical interest to keep the trade secrets a secret: therefore, broke ethical standards in the industry. Determine what steps Coca-Cola should have taken to prevent the issues you identified from arising in the first place.

In regards to racial discrimination Coca-Cola could have abided by the law and introduced policies that ensured that their hiring policies included ensuring diversity in the workplace, making sure that employees were paid equally for the same or similar job descriptions that other employees were doing. Performance reviews should be completed by panel and not just one individual. Salaries should be set and raises should be analyzed and reviewed by human resources in which they researched the job description and pay of the job in the geographic location and set it accordingly.

Company stakeholders should have ensured that the company was abiding by the Civil Rights Act. In regards to the dispersion of trade secrets, Coke should have implemented a safeguard against one person have access the trade secret. A safety system where it is stored in a lock box where two or more people must be present to have access to the box. Upon hiring the employee should sign a trade secret agreement where they will be held accountable and liable for damages if secrets were leaked. Analyze how Coca-Cola responded to the crisis and determine if this was the best possible response or not.

In both cases Coca-Cola could have responded better. Coke seemed to have waiting until the situations were escalated before actions were mitigated and got out of control. Discrimination should never be tolerated, ignored, or swept under the carpet. The trade secret dispersion could have been reported to the FBI as soon as Pepsi reported it to them. Therefore by following ethical guidelines and timely reporting and documentation of possible ethical conflicts Coke can eliminate the loss of money and productive time by thinking ahead and following ethical norms and educating their employees to identify and stay away from unethical behavior.

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