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November 17, 2000
Coke Settles Racial Discrimination Suit
by Mark Thomsen
Coca-Cola Co. has agreed to a large, multi-faceted settlement of a racial bias suit that includes
compensation for plaintiffs and third-party monitoring of internal employment practices.
SocialFunds.com --
In ending the 1999 discrimination case, Coca-Cola Co. will pony up a whopping $192.5 million.
Socially responsible investors will be interested to learn that, as part of the deal, an
independent task force will be established to inspect Coke's employment policies.
 "The settlement is meaningful,
constructive and fair to all parties," said Douglas Daft, CEO of the world's largest soft-drink
maker. He also said and it would "close a painful chapter in our company's history."
In
the package, Coke will pay $113 million in cash, $43.5 million in salary adjustments for
African-American employees over the next 10 years, and $36 million for the independent oversight of
employment practices and the initiation of diversity programs.
A seven-member task force
will be established that is expected to include civil rights, labor and business experts. The
company will chose three members, the plaintiffs will chose three members, and a chairperson will
be jointly named. It will serve for four years, keeping an eye on promotions, salaries performance
evaluations and other employment practices. Coke will be obligated to implement task force
recommendations unless it can prove in court that implementation could somehow endanger the
company.
The board of directors also must work with the task force to analyze and track
employment data. At the same time, the company will be required to confirm that managers consider
diverse pools of candidates for job openings, as well as make fair decisions.
By agreeing
to submit their employment practices to outside scrutiny, the Coke settlement has parallels to the
$176.1 million Texaco discrimination case settled in 1997. In July of this year, the Texaco Task
Force on Equality and Fairness submitted its third annual report to the court on progress the
company has made.
Coke hopes the settlement will be the last in a string of actions the
firm has taken since the suit was filed last year. Daft announced plans in March to develop new
diversity goals and to tie the compensation of top management, including his own, to reaching those
goals. In May, Coke announced a five-year, $1 billion initiative to boost diversity in the United
States. Among other points, the program specified more purchasing from minority-owned businesses,
investment in urban areas and a greater allocation of investment in minority financial institutions
and businesses. Coke also announced at the same time, separately, intentions to invest $200 million
to expand business in South Africa.
The four plaintiffs who filed the lawsuit will receive
no more than $300,000 each, and approximately 2,000 current and former employees will receive an
average of $40,000 each. Lawyers of the four firms representing the plaintiffs did well for
themselves, receiving a cool $20 million in legal fees.
Skeptics may claim that Coke is
throwing money at a problem hoping it will go away, but their chief insists that the company is
committed. "We cannot rest until we reclaim our position as the best when it comes to diversity,"
said Daft.
The company cannot afford to fail on this account. With the watchful eye of
third party verification, any missteps would become public rather quickly. If that happens,
consumer backlash may deal even a harsher blow than the outcome of this settlement.
©
SRI World Group, Inc. All Rights Reserved.
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