Running head: ETHICAL CASE STUDY OF COCA-COLA 1

Ethical Case Study of Coca Cola

A. A. Dickson
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Abstract

This case study explores Coca-Cola, a Multinational Enterprise, to analyze a typical

MNE business ethical practices and how it maximizes shareholders’ wealth. In the 2000s, Coca-

Cola’s brand name deteriorated due to accusations about its unethical business practices. Since

then, the company ensures that it maintains a balance between ethics and maximization of

Shareholders' wealth. Environmental pollution, corruption, racism, murder, and poor

relationship, both internal and external, were unethical issues associated with Coca-Cola. The

company's shareholders, therefore, had to formulate ethical policy guidelines that would govern

its activities and harmonize divergent stakeholder’s interests. The Case study concludes that

although the company has tried a lot to adhere to its ethical practices, it still focuses much on

making profits rather than creating a healthier environment to its workers and being open to

customers.

Key Words: Coca-Cola, maximization of shareholders’ wealth, ethical practices, stakeholders

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Ethical Case Study of Coca-Cola

In the modern business environment, a company's prosperity is tied to its market share

and ethical business practices. Companies adhere to business ethics to fulfill shareholders’ needs

and preferences. Shareholders are the fractional owners of a company and are entitled to any

potential profit if it generates returns. Maximization of shareholders’ wealth is the concept that

holds that companies should increase their performance and reward their shareholders with the

maximum dividend possible. Today maximization of profit and utilization of business strategies

are not only focus paid to big companies. Sandor et al. (2018) argue that the attention has

recently gone to environmental and human rights, which are the key ethical determinants of a

company's progressiveness. Therefore, a company’s code of conduct is vital since it determines

its business operations' growth or failure.

Ethical Practices

Coca-Cola, a multinational beverage company whose headquarters are in Atlanta

Georgia, has been struggling with ethical issues over the years. According to Le et al. (2017),

since the 1990s Coca Cola Company has been accused of unethical corporate behavior in

different areas, including; product safety, anti-competitiveness, racial discrimination,

intimidation of union workers, pollution, depletion of natural resources, and health concerns. As

a result, the company incorporated better business ethics to create and maintain a good public

reputation for its customers.

The Coca-Cola company relies on its business network to implements ethical practices.

For instance, the company employs local ethics officers in each business unit to ensure that

ethical expectations are adhered to and conduct anti-bribery audits globally (Sawayda et al.,
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2017). Also, the company ensures that it utilizes its resources to the maximum level that

conserves natural resources. Through a partnership with the World Wildlife Federation, Coca-

Cola is working to conserve seven critical watersheds by improving the efficiency of how it uses

water, decreasing its carbon dioxide emissions and energy consumption and around the world

(Parker, 2020). Therefore, by replenishing water as a vital resource, these efforts have yielded

important economic and social environment.

Additionally, the company recycles and reuses 100% of its aluminum and plastic bottles.

According to Parker (2020), Coca Cola company has invested in recycling initiatives, including

curbside collection programs and the world’s largest bottle-to-bottle recycling plant in

Spartanburg, S.C. Thus the environment is free from pollution of plastic cans and papers

produced earlier by the company. This initiative has enabled product consumers to have

confident in the company and consume more of its products.

Programs aimed at improving ethical practices such as creating ethical office units,

conservation of watersheds, and recycling strategies have given Coca-Cola a competitive

advantage in the beverages sector. The company, therefore, realizes more profit margin and

increases shareholders’ wealth. Caplinger (2018) posits that Coca-Cola currently has about 4.32

billion shares outstanding with a share price $ 43.50 per share. Hence, Coca-Cola’s market

capitalization is $188 billion. Thus, the high market value reveals that the company meets the

shareholders’ wealth maximization.

Coca-Cola’s main Stakeholders their interests and Influence on the Company’s ethical

policy Formulations
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Coca Cola Company has over 500 brands that are sold in more than 200 countries.

Rahman (2020) categorizes the company’s stakeholders into two; these are the external

stakeholders and the internal stakeholders. The company's internal stakeholders include the board

of directors, Vice presidents, senior leaders, employees, and shareholders. The external lists

include; bottling partners, suppliers, industry partners, government, NGOs, and customers

(Rahman, 2020). Although all stakeholders are essential in the company, the senior directors and

senior leaders are the most powerful directors involved in formulating the Company’s ethical

policies. For instance, in 2006, when the company was sued for racial discrimination, the board

of directors had to make decisions to pay a certain amount of money to settle the case.

Furthermore, the board had also to formulate ethical policies to allow inclusive recruitment.

Thus, the company's directors and senior stakeholders get involved in the final formulation of the

company's ethical guidelines.

Harmonizing Divergent Stakeholders Interests

Multinational enterprises aim at achieving prosperity through inclusion of divergent

stakeholders’ interests. Coca-Cola’s divergent stakeholders include employees, investors,

customers, suppliers, governments, and local communities. The company considers the interests

of all its stakeholders in its ethical operations strategy. Divergent stakeholders are interested in a

business doing well to benefit from better products, higher returns, and improved working

conditions. Notably, employee’s involvement is crucial in the current business environment

(Anand, 2017). Considering divergent stakeholders' interests would build better communication

in the company, healthy co-workers relationship, higher product quality, and increased

productivity, increasing the company's returns and shareholders’ dividend.

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Coca-Cola Alternative Ethical Management Decisions and Their Consequences on The

Company’s Image and Perception by Stakeholders

Apart from its current ethical practices, the Coca-Cola Company can adapt other

alternative management decisions. The company can create a better work environment for its

employees. For instance, according to the Business and Human rights resource Center (2016),

Coca-Cola’s Colombian workers face intimidation and death threats from outsiders and gangs.

Besides creating a safe environment for its workers, the company should nurture strong bonds

between its employees and the management. Proper job relations will improve workers’

satisfaction, corporate image, and transparency (Zhang et al., 2018). For example, Coca-Cola US

and Coca-Cola Colombia should collaborate to protect workers’ rights.

Recommendations

The concerns raised by governments and NGOs about Coca-Cola’s ethical practices pose

a significant challenge to its reputation and investor relations. As the largest bottling company

worldwide, Coca-Cola should conserve the environment by manufacturing non-hazardous

products. The company should embrace corporate transparency about its ingredients and its

manufacturing process. Notably, the company has failed to disclose its sugary ingredients that

cause of diabetes to some of their consumers (Sawayda et al., 2014). Thus, it must act with the

satisfaction of its shareholders and customers as the main objective of its business.

The company has resources that can allow complete worldwide expansion. However, due

to a lack of confidence in the firm, it cannot avail its products in reserved countries such as Cuba

and North Korea. The company’s monopolistic nature has led to stiff competition from other
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diversified brands such as Pepsi Co. (Parker, 2020). In conclusion, it is crucial for a company to

have proper strategies to adhere to shareholders' wealth maximization principles.

Conclusion

The maximization of shareholders’ wealth can be achieved by enacting ethical business

issues regarding environment and human rights. MNEs that conserve the environment attract

shareholders and builds confidence in customers. The current business regulations ensure that

MNEs observe environmental conservation practices and human rights without failure. Overall

companies need to consider having ethical practices to achieve the maximization of shareholders'

wealth.
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References

Anand, G. (2017). Corporate Excellence through Governance and Employee Engagement: A

brief analysis. Journal of Commerce and Management Thought, 8(3), 554.

Business and Human Rights Resource Centre. (2013). Colombian union suing Coca-Cola in

death squad Case. Retrieved from https://www.business-humanrights.org/en/latest-

news/colombian-union-suing-coca-cola-in-death-squad-case/

Caplinger, D. 2018, How Much is The Coca-Cola Company Worth? Retrieved from

https://www.google.com/amp/s/www.fool.com/amp/investing/2016/09/06/how-much-is-

the-coca-cola-company-worth.aspx

Le, A., Jiang, J., Sandor, M., Stashick, M., & Zhang, L. (2017). Business Ethics: The Coca-Cola

Company. Simon Fraser University Undergraduate Journal of Philosophy, 1(1), 35-45.

Parker, B (2020). Coca Cola SWOT analysis 2020 | SWOT Analysis of Coca Cola. Retrieved

from https://bstrategyhub.com/swot-analysis-of-coca-cola-2019-coca-cola-swot-analysis/

Rahman, M. (2020). Stakeholders of Coca-Cola. Retrieved from

https://howandwhat.net/stakeholders-coca-cola/

Sawayda, J., Sample, K. & Boostrum, R. (2014). The Coca-Cola company struggle with Ethical

Crisis. Centre for Ethical Organizational Cultures. Retrieved from

https://dev.harbert.auburn.edu/binaries/documents/center-for-ethical-organizational-

cultures/cases/coca-cola.pdf