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September/October 2009 - By Andrew W. Singer

At Coca-Cola, Most EthicsLine Reports Arrive Via The Internet

The Internet continues to change the world in ways that were completely unforeseen a generation ago—from the way people communicate to how they receive their news to where they purchase their books, clothes, and music.

It is even changing the way employees report business misconduct.

At the Coca-Cola Company (Atlanta), more ‘concerns’ about business conduct and ethics are now reported through the firm’s Internet portal than arrive via its ethics hotline (telephone).

Indeed, about three-fourths (75 percent) of the company’s EthicsLine questions and reports now arrive from its Internet portal as opposed to the telephone line (25 percent), according to Sharon J. Zealey, the company’s Chief Ethics & Compliance Officer.

This is particularly surprising because less than half of Coca-Cola employees use a computer at their work site, notes Zealey. A lot of them use the telephone, but many are obviously connecting with the Internet portal via their home computers or from other areas, like Internet cafes.
Cocal-Cola-E&C_Poster03
Coca-Cola’s EthicsLine was established in 2005. From the start it included both telephone and web-based reporting mechanisms. “It was very important to provide Internet access,” says Zealey in an interview, and it was one of the reasons the company selected EthicsPoint, a third party vendor based in Lake Oswego, Oregon, as its hotline provider. That firm was able to do both.

Introduced in 2005

 The immediate spur for implementing the EthicsLine at Coca-Cola was Section 301 of the Sarbanes-Oxley Act of 2002, which requires public companies to make available a hotline, or some other appropriate mechanism, for reporting financial or accounting wrongdoing.

“We went further than that,” comments Zealey, noting the company’s efforts to train employees in the use of the portal. “Our goal is to be a world class leader in integrity.”

EthicsLine use has been growing rapidly. In 2008, contacts increased 50 percent compared with 2007, says Zealey. “Education and training has had an impact,” although at least one business unit manager expressed concern about the increase in complaints from his unit. Zealey answered him that he was “burdened with success” and not to worry.

The increase in both questions and complaints is due to growing awareness of and confidence in the portal, asserts Zealey, not from increased wrongdoing within the company. She is confident that more calls are better. If the company received fewer calls, the organization would be more likely to miss something important, she suggests.

Not all reports are handled by the ethics and compliance office. Issues like sexual harassment and discrimination or other matters that are addressed by the company’s Workplace Rights Policy are passed on to human resources or other functional areas. (About 35 percent of all questions deal with workplace rights.) Sometimes the company’s bottlers “stumble” on to the web-based portal, and they have to be referred out to their own firm’s ethics and compliance platform.

Roughly half of contacts are questions; about half are complaints. They’ve had about 1,000 complaints since 2005, says Zealey.

Associates in office buildings and plants comprise the majority of contacts because of the workplace rights issues that tend to arise there. One complaint they get a lot of: “My manager treats me unfairly.”
About 15 percent of contacts remain anonymous throughout the process, says Zealey,

In really serious matters, employees are more likely to use the Internet portal, says Zealey. On the other hand, if an employee is based in Atlanta, where the company is headquartered, that individual will often drop into Zealey’s office and discuss the matter face-to-face.

With regard to allegations of breaches of the corporate code of conduct, violations are substantiated in about 60 percent of cases. In 40 percent no code violation is found.

Some matters are handled locally. In the case of petty theft, such as employees stealing product (e.g., the proverbial cases of Coca-Cola cartons ‘falling off’ the delivery truck), local management—in China, say—might investigate. Indeed, local management usually investigates any alleged theft or fraud with an economic value below $1,000. Local management might also deal with matters like the falsification of travel expenses.

The corporation’s ethics and compliance committee makes the actual determination whether or not a code violation has occurred, but often they are acting on local management’s recommendation.
Zealey, a former prosecutor, takes even relatively minor matters seriously because people who get away with such things tend to become “emboldened” and may later try things on a bigger scale, “so we consider even small reports important.”

It’s imperative to involve local management in the integrity process, says Zealey. Some people are risk averse, she notes, and they’d prefer not to take a stand in such matters. But the corporation is requiring local managers to make a recommendation in such instances.

Most contacts are U.S. employees

A large majority of EthicsLine contacts—about 78 percent—are from U.S. employees (about half of the company’s work force is U.S.-based) but the numbers have been growing in other parts of the world. Three percent of contacts in the last year, for instance, came from China.

According to Zealey, the report volume hierarchy (from most to least) is: 1) North America (including corporate), 2) Pacific, 3) Eurasia, 4) Latin America, 5) Africa, and 6) Europe.

Coca-Cola doesn’t call its reporting mechanism a “helpline” as many companies do. Rather, “We frequently refer to the EthicsLine as the ‘hotline’ informally,” Zealey told us, or sometimes as the KO Hotline. (KO is the company’s famous stock [ticker] symbol.)

The EthicsLine is accessed via the Web at www.koethics.com. On the home page, a visitor is welcomed to the EthicsLine and informed that “This site is for employees, customers, suppliers and consumers of The Coca-Cola Company to ask a question or make a report regarding the company’s Code of Business Conduct, Workplace Rights Policy or other ethics and compliance matters. The information you submit will be treated confidentially.”

It is further noted on the page that the “EthicsLine is administered by a third party service that will forward your question or report to The Coca–Cola Company’s Ethics & Compliance Office.”

A special number is provided for “issues concerning immediate violence or threat.”

The European Union (EU) has always had a certain ambivalence vis-à-vis corporate hotlines, which are more likely to be seen as snitch lines, evoking unpleasant memories of totalitarianism. In the EU, Coca -Cola “can’t encourage the use of anonymous reports,” notes Zealey, but it can make a reporting channel available. When hotline calls come in from Spain, for instance, they are blocked and the caller is told in a diplomatically worded statement where they might go as an alternative.

On the EthicsLine home page, individuals within the European Union are informed that the “EthicsLine only allows you [i.e., EU-based employees] to report financial, accounting and auditing matters. Should you wish to report other matters, including issues under the Workplace Rights Policy, such reports should be made directly to your local management, Human Resources, or company legal counsel.”

Posters promoting EthicsLine use have been developed in 14 languages (see below), and the Internet site, too, is translated into 14 languages. If an employee can’t log on in his or her own language, the company will find someone promptly who can translate for them.

Local ethics officers

Much effort went into the design and support of the portal, says Zealey, but the real key to making the whole thing work is “the training that occurs locally.” Coca-Cola has a network of 75 local ethics officers (LEOs). Most of them—about 80 percent—are lawyers. They work with the local business units, managing many of the routine issues that arise. They often make decisions regarding potential conflicts of interest—can a company employee serve on a local board, say, or is an employee permitted to use certain company property outside the workplace, such as a laptop computer to teach a course after hours. (Coca-Cola does not have a blanket prohibition in the use of company property.)

But the “most important role of the LEOs is training,” says Zealey. The local ethics officers conduct the basic employee training as to what is permissible, what is in accordance with the code of conduct, and so on. In the course of this training, they also explain where an employee can go with a question or complaint—their office, the KO hotline, the EthicsLine internet portal, human resources, or somewhere else.

In May 2009, EthicsPoint, in conjunction with Corporate Ethics and Compliance Week, named Coca-Cola a winner of its “2009 Best Ethics and Compliance Portals” contest. “Entries were judged based on their clarity of message, quality of reporter experience and effective integration with an overall governance, risk and compliance strategy,” said EthicsPoint. Other winners were AkzoNobel, AstraZeneca, Staples, and Toyota Financial Services.

Reprinted from the September/October 2009 issue of Ethikos.
© 2009 Ethikos, Inc. All rights reserved.

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