Ethical Issues

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Ethical Issue at Coca-Cola

Ethics in Management – PHL/323

Derrek Choy

12/21/2009

Ethical Issue at Coca-Cola

The Coca-Cola Bottling Company is a well-recognized brand and they have a chance to do extremely well in different aspects of business performance. However, this drink giant has experienced thoughtless ethical troubles with its affiliation amid their stakeholders. Although they engage in philanthropic contributions to learning and neighborhood programs, several stakeholders began losing confidence in the legendary bottling company.

Europeans’ and government organizations’ confidence went astray with Coca-Cola once they observed the slow response to beverage pollution occurrences in 1999. Belgium even prohibited a marketing campaign for new products. Competitive problems, plus a harmful image following the contamination incidents, encouraged European’s distrustful mind-set. Countless business methods in France and Italy infringed on European’s regular business practices along with traditions, therefore supporting the patrons’ lack of enthusiasm in the company.

In 2002, the company defrauded the fast-food chain Burger King by hampering the marketing research results of a frozen drink dispensed through Burger King. Coca-cola had to repay damages in the millions to Burger King and this occurrence lowered shareholders’ outlook. They also committed accounting fraud through inflating sales figures by forcing more products through distribution channels, or channel stuffing.

Ethical change, Deficiency, or Conflict

The Coca-Cola Company made different errors in dealing with the problems that surfaced over the last decade. During the Belgium crisis, their lack of disclosure ultimately hurt the credibility of Coca-Cola. Coca-Cola was aware of the contamination a week before people began to complain of illness, and when confronted by the press, Coca-Cola denied resposiblity for the contamination. They also denied the actual problem, and denounced the severity of the problem (Coca-Cola- Ethical Issues :The recall, 2002).

At that same time, Coca-Cola was under scrutiny for an exclusive deal made with school districts around the country. The school distric would get up front money and residual payments; in return Coca-Cola would be allowed to add up to four vending machines in high schools, three in middle schools and at least one at the elementry level of the schools. Studies were done and proved that this was harmful to the students. When legislature was put into place, Coca-Cola removed the vending machines inspite of the harmful effects. When a decrease in sales was noticed, letters went out asking the principals of these schools to encourge the consuption of the products (Coca-Cola- Ethical Issues :The recall, 2002).

The incident with Burger King showed different levels of fraud and unethical behavior. Coca-Cola, in a marketing study, paid people to go in and buy the product they were studying (Maryanne Jennings JD, 2006). Padding the outcome of the research, Coca-Cola withheld this information from Burger King until they were forced to disclose it. An auditor that worked for the company for many years questioned the amount of money that was paid for the study. He recommended firing the empolyees that took part in this fraudulant study, but instead he was terminated. Although the company claims the termination was the result of restructuring the company, they later settled a lawsuit with the auditor for over $400,000 (Maryanne Jennings JD, 2006). Burger king was paid well over nine million dollars in fountain drink relief, and the person in charge of the marketing department was promoted.

Organizational Leadership

The Coca-Cola Company has overcome adversity by establishing a core of well-trained and well-rounded leadership throughout the organization. Leadership incorporated the Coca-Cola system, which consists of the company, the bottlers, and the customers....
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