Ethical conduct becomes central to business success in the 21st century. Consumers are investing in ethical funds, buying from responsible corporations, supporting local producers, and engaging in environmental or anti-globalization activism. Ethics is closely connected to the battle against corruption and for good business practices. The scandals at Enron, WorldCom and Parmalat illustrate the importance of ethical judgment for managers and accountants. Implementation of ethical values, such as honesty, responsibility, fairness, respect, openness, and citizenship are the prerequisite to a company’s success in the contemporary marketplace.
Fulfilling the economic, legal, philanthropic and societal responsibilities serve stakeholders in a strategic manner. Giving back to the community through volunteerism and charitable donations is a way of promotion a positive image and enhancing public relations. A company’s commitment to an inclusive work environment allows it attract and retain a talented workforce. Ethical conduct with employees, shareholders, vendors, customers, financial analysts and the news media are all integral elements of a strategy for business success.
While the concepts of business ethics and corporate citizenship have been around for many decades, it is only recently that they have risen to unprecedented prominence. The two reasons for this phenomenon are globalization and increased competition. Globalization has made diversity an urgent concern, both within organization and in external relations. Global migration of labor has made workforce truly multicultural, while outsourcing has highlighted ethical concern about employing citizens of the third world countries. Increased competition attaches greater importance to public image and opinion. Consumer trust takes years to win and mere hours to loose. For all these reasons, companies should pay greater attention to ethical conduct.
An example of a global company that faces problems related to ethical conduct is Coca Cola. The company’s image has been spoiled by several labor rights disputes. Ever since the Word War II, the company regarded profitability as its ultimate goal. Coca Cola was selling its product to both sides of the conflict and used the momentum to establish its global presence. More recently, Coca Cola was criticized for being the major sponsor of Beijing Olympic Games ignoring China’s poor human rights record (The Economist, 2008).
In Colombia, the Coca Cola company was accused of murdering a local union leader and failing to investigate the case. A lawsuit was filed in the U.S. accusing the Coca Cola Company, its Colombian subsidiary and business affiliates of using paramilitary death squads to murder, torture, kidnap and threaten union leaders (Brodzinsky, 2003). Additionally, local council of Bogota fined the local unit of Mexico-based soft-drink bottler Coca-Cola Femsa SA (KOF) $110,000 for dumping industrial waste.
In India, after an opening of the company’s bottling plan, residents of nearby villages started suffering from water shortages (Mathiason, 2006). Coke was also found to have pumped hazardous waste into farms fields and a local canal that flows into the Ganges. Together with pollution, the problem of water shortages resulted in massive rallies and eventually led to closure of several facilities.
In Haiti, the company was accused of labor law violation including wages below the legal minimum, violations of the overtime law and the irregular firing of union activists. Furthermore, the company has been accused of human rights violations in several countries, discrimination against women and minorities in its American bottling plants and underwent an investigation by the Securities and Exchange Commission (SEC) for allegedly committing $2 billion in accounting fraud (Day, 2003).
Together with obesity concerns, Coca Cola’s damaged image became the reason for banning all Coke’s products from campuses in world’s most prestigious universities, such as Oxford, New York University, University of Michigan, York University, Rutgers, and many others. All these incidents damaged Coca Cola’s brand and made ethical conduct a top priority for the company’s executives.
Brodzinsky, S. (2003). ‘Coca-Cola boycott launched after killings at Colombian plants.’ Guardian. Retrieved November 24, 2008, from http://www.guardian.co.uk/media/2003/jul/24/marketingandpr.colombia
Day, S. (2003). ‘Coca-Cola Settles Whistle-Blower Suit for $540,000.’ New York Times. Retrieved November 24, 2008, from http://query.nytimes.com/gst/fullpage.html?res=9907EEDE1E3CF93BA35753C1A9659C8B63
Mathiason, N. (2006). ‘Coke ‘drinks India dry’.’ Guardian. Retrieved November 24, 2008, from http://www.guardian.co.uk/money/2006/mar/19/business.india1
The Economist. (2008). ‘Beyond the ‘genocide Olympics’.’ Retrieved November 24, 2008, from http://www.economist.com/business/displaystory.cfm?story_id=11090045
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