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March 15, 2000
Coke Connects Executive Compensation to Diversity
The soft-drink giant embraces diversity goals in the wake of a racial discrimination suit and a
threat of boycott.
SocialFunds.com --
Shareholder activists often seek to achieve social or environmental goals by linking them with the
compensation of company CEOs and other executives. Last week the CEO of Coca-Cola, a company beset
by allegations of discrimination, took the initiative to unilaterally link executive pay with new
employee diversity goals.
 Coke Chairman and CEO Douglas Daft announced in a
company-wide e-mail that the world's largest soft-drink maker plans to develop new diversity goals
and to tie top managers' pay with reaching those goals. Daft also plans to create a new office for
diversity strategies in the next few months, to be led by a vice president reporting directly to
him.
"Mr. Daft views diversity as a top priority for The Coca-Cola Company, and he wants
to accelerate the company's efforts in this area," said Ben Deutsch, Manager of Corporate Media
Relations. "He is firm and sincere in his commitment to diversity."
Coke's diversity
initiative comes in the wake of rising allegations concerning the company's treatment of
minorities. Eight current and former black American employees filed a lawsuit last year, claiming
black employees are discriminated against in pay, promotions, and performance evaluations. They are
seeking class-action status for the company's 2,000 black employees.
In addition,
hundreds of black people who lost their jobs as part of a Coca-Cola reorganization rallied the
weekend before, accusing the company of using layoffs as an excuse for "ethnic cleansing." Coke
announced in January that it was cutting 6,000 jobs worldwide, or 20 percent of its work force,
including a whopping 2,500 at its headquarters in Atlanta, a southern city with a large black
American population.
The rally of recently laid-off black employees assembled in a church
outside Atlanta, sparked by the revelation that Coca-Cola had awarded the outgoing CEO, Douglas
Ivester, a compensation package worth at least $30 million. The group demanded that Coke treat its
black employees better, and an official with the National Association for the Advancement of
Colored People (NAACP) threatened to launch a boycott of Coca-Cola products in the United States.
"We are doing everything we can during this difficult time to do right by our former and
current employees at every turn," said Deutsch.
Although the company asserts that the new
diversity goals are not directly related to the pending racial discrimination suit or other
allegations, the plaintiffs have claimed a partial victory. They plan to pursue their case, but in
the mean time Coke's move has helped deflect criticism and set the company on a more positive
course toward diversity.
Coke's recent diversity initiative is among the recommendations
of its Diversity Advisory Council, developed last year to provide recommendations to the CEO on how
to build a well-diversified workforce that will deliver a competitive business advantage. Other
Council recommendations will be enacted over the coming months.
"We're going to put
programs in place that will allow us to hold everyone in the organization, including the CEO,
accountable for cultivating and fostering a diversity of thinking at The Coca-Cola Company," said
Deutsch. "Diversity is a clear business imperative for our company and its long-term success."
It remains to be seen what measures of improved diversity will be employed, and how the
soft-drink giant will size up to the test. Social and environmental goals tend to be harder to
track than quality, customer relations, or financial goals. But if Coca-Cola's plans to improve
diversity are "the real thing," their initiative would make them an industry leader in this area.
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SRI World Group, Inc. All Rights Reserved.
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