Coke & Pepsi take corporate ethics to a new and refreshing level

This week, federal authorities arrested Joya Williams, an administrative assistant to a senior Coke executive, for allegedly attempting to sell Pepsi the recipes for Coke’s new soft drink. Coke and Pepsi, heretofore bitter rivals in the global soft drink market and fierce competitors for your pop dollar, rose above avarice and to set a new standard in corporate ethics. This, coming at a time when the number of corporate ethics scandals seems to be at an all-time high.

In May, Pepsi received a letter at their corporate office offering to sell them Coke’s new recipe. Pepsi responded by calling Coke executives and revealing the plot. Together, officials from the two companies called the FBI and worked with the Bureau to set up a sting operation. The sting resulted in the arrest of three individuals, including the Coke secretary, on May 23’rd. A Pepsi spokesman was quoted as saying, “we were just doing what any responsible company would do. Despite the fierce competition in this industry, it should also be fair.” Meanwhile, Coke CEO Neville Isdell stated that the incident “underscores the responsibility that we each have to be vigilant in protecting our trade secrets.”

Pepsi could have ignored the letter, leaving Coke to deal with a dishonest employee on their own. It would have been easier. But there was much more at stake here than simply a matter of corporate ethics, and executives at both companies recognized it. It might sound cynical to say that both CEO’s recognized the photo op presented in the situation although there might be some truth to it. In fact, both companies, American business icons to say the least, had much to gain by separating themselves from the myriad of other big name companies recently plagued by ethics scandals. Notwithstanding, both CEO’s knew that there was nothing more sacred in business than the secret(s) of each company’s success. Both knew that this was potentially bigger than both of them. Catching and prosecuting the alleged thief was the honorable thing to do. And cooperating in doing so was the only way to accomplish this.

Honesty and dishonesty within any organization begins at the top. An ethical organization does not become so by accident. It takes a determined CEO who makes high ethical standards one of his/her priorities. It has been said that employees only care about what their boss cares about. This is basically true. It’s the filter down theory. But if a CEO is ethically neutral or worse, ethically challenged, the likelihood exists that the rest of the organization will be a breeding ground for impropriety. However, when managers present examples of superior ethical conduct the rest of the organization will get the idea.

Theft of trade secrets is a serious federal crime with stiff consequences. It is investigated at the federal level because the very essence of our nation’s commerce system is at stake. A company’s proprietary intellectual property is what gives it competitive value in the market place.

Companies can help safeguard trade secrets by doing proper background checks on its employees. Credit reports should be part of the package for management employees and employees with audit or accounting responsibilities. For senior executive and board level screenings, federal criminal, SEC, and civil searches should be included. A properly structured exit interview can be instrumental in uncovering ethics problems in any organization. Protection of client lists, suppliers, and other sensitive data can be accomplished through proper controls that restrict internal access to such material. Penetration testing of intranet and internet based systems should be considered as part of your overall security program. Finally, access control systems that provide an audit trail can help secure your building and key internal areas.

There is little doubt that Joya Williams’ attorney will advise her to use the Sandy Berger defense and claim the alleged theft of the Coke recipe was inadvertent; simply an accident of sorts. If you recall, Sandy Berger was caught and prosecuted for stealing documents from the national archives (he stuffed them in his socks). For Berger, it worked. He got off with a misdemeanor charge. But unless Ms. Williams has friends in high places, it is likely she won’t be quite so fortunate. A violation of Section 1832, the Economic Espionage act of 1966, can result in stiff criminal penalties. A person who commits an offense in violation of Section 1832 can be imprisoned up to 10 years and fined up to $500,000.