By Jennifer Maloney and Lauren Weber
Twenty years ago, Coca-Cola Co. agreed to pay $192.5 million to
settle a race-discrimination class-action lawsuit, one of the
largest such settlements in U.S. history. Though the company didn't
admit the allegations had merit, Steve Bucherati, the soda giant's
first director of workplace fairness after the lawsuit, said the
facts were irrefutable.
"Make no mistake about it," the former human-resources executive
said. "Coke was 100% discriminating against Black employees."
In November 2000, Coke agreed to implement far-reaching changes
to its hiring, promotion and compensation practices. It also vowed
to become what it called the "gold standard" of fairness, with a
workplace that offered opportunities for all.
One decade after the settlement, Coke's effort looked like an
unqualified success. By 2010, Black employees held 15% of executive
roles in the U.S., up from 1.5% in 1998, shortly before the lawsuit
was filed.
Two decades after the settlement, that progress has reversed.
The share of Black executives is back down to 8%, according to
company data. And the representation of Black employees among
Coke's U.S. salaried staff is now 15%, or 5 percentage points lower
than where it stood in 2000.
"We didn't keep our eye on the North Star," said Valerie Love,
who joined Coke last year to lead HR for North America.
In the wake of protests that swept across the country this year
after George Floyd was killed in police custody, more companies,
including Estée Lauder Cos. and Microsoft Corp., are launching
efforts to diversify their workforces, with special emphasis on
improving Black employment at their companies.
Coke's diversity push started as an effort to address
discrimination against Black employees and broadened over the years
to encompass gender and other races and groups. It says it is again
making a priority of addressing the inequities faced by
African-Americans at the company. The 20-year effort offers lessons
for businesses struggling today with many of the same challenges,
including the difficulty of instituting long-lasting change.
At Coke, a sense of complacency set in, especially after the
company shifted to focus on gender diversity. A change in the way
the company reported its diversity numbers masked the backsliding
on Black employees, and a 2017 restructuring contributed to a sharp
drop in the pipeline of Black talent. Retention was also weak. The
company's two-decade effort was described by current and former
executives and employees, as well as task force members, lawyers
and others involved.
Coke is now planning to start new initiatives in January, aimed
at improving its hiring and promotion of Black executives and
employees.
Despite the decline, Coke still outpaces most corporate peers.
Among U.S. companies, Black employees in 2018 held 3.3% of
executive and senior manager roles, according to data from the
Equal Employment Opportunity Commission. In the food, beverage and
tobacco manufacturing industries, that share was 4.9%.
At rival PepsiCo Inc., 6.3% of U.S. executives are Black,
according to data the company disclosed in October. The company
said in June that it aims to increase Black representation in
managerial roles by 30% by 2025, including the addition of at least
100 Black executives.
Landmark Case
In 1998, Linda Ingram, an analyst at Coke's Atlanta
headquarters, contacted civil-rights lawyer Cyrus Mehri. She told
him a supervisor had called her a racial slur in front of her
colleagues, and, together, they discovered she was also paid less
than her white peers. She helped Mr. Mehri connect with dozens of
other Black employees at Coke who described similar problems.
In April 1999, Ms. Ingram and three other plaintiffs filed a
lawsuit alleging that Coke had systematically discriminated against
Black employees in salaries, performance evaluations, promotions
and terminations. Coke disputed the allegations, but when a new
chief executive, Douglas Daft, took over in early 2000, he
committed to settling the suit.
Coke agreed to pay $192.5 million. Part of the money went to
more than 2,000 current and former Black employees and into bonus,
pay-equity and training funds. The company said it would make
significant changes to its HR processes and submit to four years of
oversight from an external committee of civil-rights experts.
Coke created the director of workplace fairness role and tapped
Mr. Bucherati, a white executive who ran HR for the company's
global marketing operation.
"In the days after the lawsuit, white males were walking on
eggshells," he said. "The white guys would come in and talk to me
and say, 'This is about everyone but me.' I said, 'No, it's not.
We're not here to invalidate you, your contribution or your
opportunity to advance. We're just here to validate everyone, and
not everyone has been validated at work.' "
He emphasized to managers that the work around diversity should
improve meritocracy at Coke, not dilute it. Mr. Bucherati, who
became chief diversity officer in 2004 and held the role until
2015, said he told hiring managers: "The best person gets the job
every time. Full stop."
The company began applying data analysis to employment
decisions, including compensation, performance reviews, promotions
and layoffs. Statistical models raised red flags -- for example,
disparities in bonus or promotion recommendations. Mr. Bucherati
said he and his team reviewed those recommendations, unit by unit,
and questioned managers.
The task force's work was set to end in 2005. By then, a new
CEO, company veteran E. Neville Isdell, had come out of retirement
to lead Coke. Born in Ireland and raised in Zambia, he had run for
student government in the 1960s at the University of Capetown in
South Africa on an antiapartheid platform.
A few months into his tenure as CEO, Mr. Isdell asked the court
to extend the task force's oversight by a year.
"We had complied but not committed," Mr. Isdell said in an
interview. He said he decided to request the extension after
hearing employees talk with relief about being free of the task
force. "When I asked some people, 'Do you think we've changed?,'
you'd get a stony silence," he said.
Some at the company viewed the task force as a burden, little
more than a box-ticking exercise, he said. "To me, we had to put
the company in a position where this would never happen to the
Coca-Cola Company again," he said.
Under the task force, Coke began requiring that candidate slates
for open jobs include at least one woman or minority. Executive pay
was tied to increasing diversity among the salaried workforce. Coke
stepped up external recruiting and started an executive mentoring
program that emphasized retaining and promoting Black employees.
Every promotion, pay increase and layoff was analyzed for
fairness.
When Coke decided to lay off 1,000 salaried employees in a 2003
restructuring, an internal analysis showed that Black employees
would be disproportionately affected. A closer look revealed bias
creeping into the subjective part of the formula used to identify
candidates for layoffs, Mr. Bucherati said. Coke improved the
process, and executives agreed to fewer layoffs, preserving jobs
for employees of all races, even though the change meant Coke
missed some financial targets that year, he said.
In annual surveys, employees' perceptions of fairness at Coke
increased year by year. By 2007, Coke ranked No. 4 on the magazine
Diversity Inc.'s list of top 50 companies for diversity.
The key to building support inside Coke was framing the
diversity initiatives as a business imperative, said Don Knauss,
who ran the North America business under Mr. Isdell and was one of
the executives responsible for implementing the task force's
recommendations.
The company was engaged in a "battle royal," he said, with
PepsiCo and the company then called Cadbury Schweppes, and was
losing market share to them in some categories. Mr. Knauss said he
and others spread the message that having Coke's leaders look like
its consumers was "a necessary thing to do to win, and you all want
to win, don't you?"
Different Target
In 2007, Muhtar Kent, the company's newly named president and
heir apparent to Mr. Isdell, launched an initiative to accelerate
the company's global recruitment and advancement of women. It would
eventually aim to increase the share of women in Coke's leadership
ranks, and all other levels of the company, to 50% by 2020.
Mr. Kent has said he created the program because he realized
women made about 70% of the purchasing decisions for Coke's
products but in 2008 occupied just 23% of the company's executive
roles.
The focus of the company's diversity work shifted immediately to
gender, several former executives said. Managers prioritized women
for hires and promotions.
Mr. Kent created a women's leadership council that began
developing a pipeline of women to rise through Coke's ranks. It
paired female executives with mentors, tracked women who were
"ready now" for promotion and aggressively recruited senior-level
women from outside the company. The women's initiative would become
one of the signature projects of Mr. Kent's tenure as CEO and
chairman. He served as chief executive from 2008 to 2017 and as
chairman from 2009 to 2019.
After 2011, Coke disclosed detailed data on its gender-diversity
progress but stopped disclosing diversity data by race. Instead,
its annual reports provided a total percentage of "multicultural"
employees, which it defined as anyone other than those who were
white and non-Hispanic. Those numbers showed racial diversity at
Coke improving.
Coke said it made the change because the gender data was global
while the racial data was specific to the U.S. The company now
believes that grouping multiple races and ethnicities into one
cohort "was ineffective and inaccurate," because it masked a
backsliding in Black representation, according to Lori George
Billingsley, Coke's current chief diversity officer.
Jonathan Mildenhall, a Black marketing executive who worked at
Coke from 2007 to 2014, said that when he arrived at the company,
"every meeting felt like a global community." He noticed around
2010 that the shift in focus to gender diversity, which he said was
admirable, hurt the company's progress on minorities. "I grew a
little cynical of the company's long-term commitment," he said. "It
should not be 'either/or.' It must be 'and.' "
The company was unable to maintain both priorities at once, some
former executives said. Its leadership either believed the racial
diversity problem had been solved, or that it was a
country-specific issue that was being addressed by the company's
U.S. leaders, they said.
Over time, Coke changed some of the policies that had been
implemented by the task force, which ended in 2006. For example,
the company stopped tying executive pay to increasing diversity in
salaried jobs.
Mr. Kent said the company during his tenure was focused on
building and retaining a diverse, global workforce. He noted
several high-profile Black and Hispanic leaders he appointed,
including Kathy Waller, who became the first African-American woman
to serve as chief financial officer of a Fortune 100 company. She
has since retired.
"Racial and gender diversity is critical to success in
business," Mr. Kent wrote in response to questions from The Wall
Street Journal. "There is no doubt that I had more work to do; for
example, in some cases our top diverse talent was ultimately
recruited away, and of course some also retired. This is an ongoing
journey for all."
'Leaky bucket'
Robert Long, a Coke veteran who in 2016 was the new head of
global research and development, met a group of new hires that year
at corporate headquarters. "Around the table there was not one
Black face," he recalled in an interview. "The leadership that were
doing the hiring didn't have the clear guidance to make that a
priority."
After he voiced his concerns, subsequent meetings with new hires
were more racially diverse, he said. Mr. Long, now Coke's chief
innovation officer and one of two Black executives reporting
directly to the CEO, plans to retire in February.
The company had meanwhile become "a leaky bucket" for Black
talent, said Andrew Davis, a Black executive who became Coke's
chief diversity and inclusion officer in 2016. Some Black
professionals left because they felt they weren't advancing fast
enough or that their influence was limited, former executives
said.
A lot of the attrition was because of the company's culture, Mr.
Davis said. Coke had attracted a more diverse workforce but needed
to focus more on building an open culture where people felt like
they belonged at the company, he said.
Senior managers who arrived from outside didn't always get
coaching and support to learn Coke's culture and develop internal
networks, according to a person involved in the efforts.
"We were doing a good job bringing people in, but there wasn't a
sense of, 'I can see myself here for the long haul,' " Mr. Davis
said.
He left Coke in 2018 to become chief HR officer at home builder
Lennar Corp.
In 2017, amid falling sales, Coke announced it would cut 1,200
corporate staff around the globe as part of an $800 million
cost-cutting initiative.
Coke ran an adverse-impact analysis to make sure layoffs didn't
disproportionately affect any racial group without justification
and determined the moves were fair, the company spokeswoman said.
Coke also allowed layoffs to be appealed, she said.
Still, the layoffs, combined with voluntary departures as
high-profile Black executives were hired away by other companies,
contributed to a sharp decline in Black employment at Coke, the
spokeswoman said. The share of Black executives fell by nearly half
to 7% in 2017 from 13% in 2016.
The layoffs undid years of work building a pipeline of Black
talent, said Carolyn Jackson, a former head of HR for Coke's North
America unit who retired in 2016.
The cover of the Atlanta Tribune, a magazine for Black business
leaders, celebrated Coke in 2016 with a photo of 17 of the
company's Black women executives, and in early 2017 with a similar
photo of its Black male executives. Less than half of those
executives are still at the company.
A New Pledge
In recent years Coke has added training for company leaders on
recognizing bias; a new HR position focusing on diversity in
executive recruitment; and an effort to recruit talent not just for
current job openings but for their future career paths at the
company.
Next month, Coke is launching a 10-year internal and external
talent-recruiting program for people of color with an emphasis on
Black executives. It will begin a training and development program,
also with an emphasis on Black executives, taking lessons from the
success of its women's leadership council. The company has also
pledged to disclose data each year showing its record on paying
employees fairly.
Coke plans to set goals for Black representation in executive
roles based on the availability of candidates inside the company
and the general labor pool, as well as on census data to mirror the
markets where the company has large footprints, said Ms. George
Billingsley, the diversity chief. Black people account for 51% of
the total population in Atlanta, where Coke was founded 134 years
ago and where about half of its 10,000 U.S. employees are
based.
Meanwhile, Asian and Hispanic representation has continued to
grow, with those groups making up 9% and 11% of executives,
respectively, up from 5% and 6% in 2010. Coke has increased its
representation of women to 35% in top paying jobs, though it hasn't
reached its 2020 goal of gender parity.
Ms. Jackson, the former HR executive, and other former
executives said they worry that too few "champions" remain at the
company -- senior leaders such as Mr. Knauss; Sandy Douglas, a
white executive who led the North America unit through most of Mr.
Kent's tenure and made racial diversity a top priority in hiring;
and Ms. Waller, the former chief financial officer. They and other
former senior executives lived through the lawsuit and were
committed to helping fix the problem.
"It's a historically stubborn issue," said Bradley Gayton, a
Black executive who joined Coke in September as general counsel.
"What that's going to require is that all of us put a shoulder to
the wheel here."
After Mr. Floyd was killed, Coke's current CEO, James Quincey,
who took the helm in 2017, held a video town hall with employees.
He described the company's current representation of
African-American leaders as "poor."
"America hasn't made enough progress, corporate America hasn't
made enough progress and nor has the Coca-Cola Company," he
said.
Write to Jennifer Maloney at jennifer.maloney@wsj.com and Lauren
Weber at lauren.weber@wsj.com
(END) Dow Jones Newswires
December 16, 2020 12:45 ET (17:45 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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