The Coca Cola Company Struggles with Ethical Issues

1). What role does corporation 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?

Corporate reputation plays a very integral part within organizational performance and social responsibility. Either one significant incident or several incidents can influence the perception of a company’s image and reputation held by its stakeholders and customers. This may have a lasting effect for many, many years.

Coca-Cola’s (Coke) reputation has been tarnished because of the numerous allegations of unethical behavior and lack of social responsibility mainly in the international market. In 2000, Coke failed to place in Fortune’s top ten “America’s Most Admired Companies”. The following year it vanished from the “100 Best Corporate Citizens” as honored by Business Ethics magazine (p. 409).

How Coke's Reputation Influenced Its Financial Stability

Along with losing its good standing in the corporate world, Coke has also experienced some instability in its financial performance.

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While in the early part of 2000 Coke maintained a sound balance sheet (p. 416), its growth proved to be a little more stagnant by 2009 with shares fluctuating between $59 and $37 per share (p. 410). This slow growth was speculated as a result of the various allegations of unethical behavior and illegal practices. The increased turnover in management and the departure of key investors (p. 410) may also have contributed to the problem. Until the company rebuilds its reputation, Coke may continue to experience stagnant growth.

Various factors are involved when measuring corporate reputation. These factors are based on an individual’s level of involvement. A customer’s primary concerns may include product safety and quality, level of customer service, and the marketing strategies used to motivate them to buy. Customers may no longer respect a company known to consistently mistreat its employees, fails to follow up on customer service issues, or is involved
with unethical marketing practices.

A company’s treatment of its employees is observed at all levels including level of training, safety in the work place, age discrimination, racial discrimination, sex discrimination, as well as wages and benefits that are offered. Investors are primarily concerned with a company’s reputation, financial status, level of profitability, as well as its level of social responsibility and business ethics. Whether the investor agrees or disagrees with the company’s business practices concerning employees, customers, and stakeholders, it will affect the investor’s decision to initially invest or remain invested in a company.

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?

The first step would be to establish an ethics committee in each branch location. Based on the information given, it is unclear if the allegations of misconduct resulted from everyday business practices or if certain employees chose to disregard the company’s mission statement. Next, completing a social and ethics audit to develop a priority list of actions to be action. The third step would be to terminate and prosecute any employee who knowing violated Coke’s policies and terminate anyone who refuses or fails to honor company policies going forward. Another step includes continuous training on ethics and cultural awareness training. This education will greatly improve Coke’s position with the international market. And finally, creating a committee devoted to social responsibility and discovery of new and innovative ways for Coke to progress in this area and prove to the critics its level of commitment towards social responsibility.

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?

As presented in this case study, it is evident that Coke has made great strides in its efforts towards social responsibility both internally and externally. While the company critics believe it has not done enough and that the efforts made are a means of hiding the corruption (p.416), I partially agree with the critics. I am troubled with the lack of taking responsibility for any wrong doing. This leads me to believe Coke is concerned with covering up the corruption instead of taking ownership of the mistakes made.

As far as has Coke done enough, I firmly believe the company is on the right track. The company has been accused of depleting and contaminating the groundwater in India. In response, 320 rainwater-harvesting facilities were built to renew and return all groundwater (p. 414). Recycling and climatic change are other initiatives Coca-Cola has embraced. The PlantBottle developed by Coca-Cola truly has a positive impact on the environment. Not only is it partially made from plant-based material, it is fully recyclable and reduces the use of nonrenewable resources and carbon emissions (p. 415). However, I feel the company’s resources can be better spent other ways to reduce emissions, nonrenewable resources, energy consumption, etc. instead of launching a clothing line made from recycled plastic bottles that eventually will end up in the landfills. Based on the information provided in the case study, I believe Coca-Cola is sincere in its effort to broaden its social responsibility. I also feel that some of its decisions are not in the company’s or the environment’s best interest.

4). In what other ways does this case relate to the concepts that we have learned in the chapters so far?

The case study reveals allegations of corruption, unethical behavior, and lack of social responsibility that have plagued Coca-Cola for the past two decades. This case study also reveals some of the unethical marketing tactics used by the company. The most unethical tactics were its misleading advertising that soda was healthy for children and that its Vitamin Water was also healthy when in fact it contained high levels of sugar (p. 413). The case study also discusses occurrences of accounting fraud by channel stuffing which resulted in increased revenues and essentially inflated its financial statement earnings (p. 411). The case study exposes violations of antitrust laws with the most notable being Coca-Cola offering rebates and coupons to reduce shelf space available to the competition (p. 410). Finally, the case study uncovers several incidents of unethical employment practices including unequal pay and racial discrimination.