It's long been a dirty secret: racism at Coca-Cola Co. The company's Southern bottlers taunted and terrorized Coke's first black salesmen. Privately, legendary Chief Executive Robert S. Woodruff questioned civil rights legislation in the 1960s. And if the worst excesses of the past are gone, according to internal Coke documents released as part of a current lawsuit, even today the median salary for black employees is 44% less than that for whites.
Now Coke has a chance to make a clean break from this ugly past--and right those old wrongs. On May 16, the company offered $1 billion over five years to support minority-owned suppliers, banks, and retailers. At the same time, Coke is feverishly negotiating a financial settlement with former black employees who have sued. This highly charged case, which contributed to the ouster of former CEO M. Douglas Ivester in December, has exposed to the world the deep racial divisions inside Coke.
LITTLE URGENCY. The stakes are immense--a real test of management will. Former Coke employees want $176 million, about $76 million more than Coke is offering. Coke's attorneys also seem fearful that giving in will incite Asian, Hispanic, and other minority groups to file similar suits. But the longer Coke allows the problems to fester, the more damage it risks to its reputation--and the greater danger that it will waste a perfect opportunity to clean up. Texaco Inc. used a similar discrimination case as a chance to become a model employer. Similarly, Coke, as a premier marketing company, needs to become a model for diversity in Corporate America.
Publicly, Coke long has seemed a strong backer of civil rights. It was a generous contributor to the Southern Christian Leadership Conference, Rainbow/PUSH Coalition, and other civil-rights groups. But when it came to its own workforce, the story was quite different. It took until the mid-1980s--more than a century after the first Coke was poured--for the first black to be appointed to senior management. Even recently, there seemed little urgency to do more. According to allegations filed in the discrimination lawsuit, former CEO Ivester told a transferee stunned by the latent racist culture at its headquarters that it would take "15 to 20 years" before blacks would be fairly represented within the company.
The cola giant needs a cultural overhaul. Just as Texaco needed to scrub its "oil rig" culture clean of racism, Coke needs to scrap the insular environment that ex-employees say is predominated by good ol' boys from the University of Georgia. New CEO Douglas N. Daft's pledge to tie 25% of each manager's compensation to how well they achieve specific diversity goals is a laudable first step.
But these financial incentives must be matched by organizational changes. Coke must also build better ties to minority colleges, as well as search firms who can recruit top talent to Coke. They say they've been slighted in the past. Another priority should be adding some diversity to Coke's star-studded board. The only present minority member is former United Nations Ambassador Donald McHenry, who needs to be joined by minority directors with more civil-rights experience than he has. "He's spent his life in the nice world of diplomacy," grouses Joseph Lowery, president emeritus of the SCLC. "Coke needs some field hands on its board who can keep the fires burning."
And to regain the trust that has been squandered, Coke should take Texaco's lead and create an independent panel that would be given the power to review--and overturn, if need be--all of Coke's hiring, firing, and promotions. "You have to give this group the access, but you must hold management accountable," says Weldon Latham, a Washington (D.C.) attorney retained by Texaco to help implement its reforms.
In his first six months at the helm, the new CEO Daft has said all the right things, pledging to ensure that "everyone who touches Coca-Cola should benefit." But he needs to move quick. Just as Vietnam became not Kennedy's, but Johnson's War, and in time Nixon's War as well, the longer Daft negotiates, the greater the risk that this becomes his legacy too.