Pepsi CEO’s emphasis on ethics pays off

Leaders can give long lectures about ethics. But the real test occurs in quiet moments when employees decide whether to do what’s right.

How can a CEO influence such decisions? By emphasizing the importance of ethics, especially when it’s easy to give in to temptation.

For over a century, Coca-Cola and Pepsi-Cola have competed for market share. Both beverages contain a syrup recipe that’s a heavily guarded trade secret.

Steve Reinemund, Pepsi’s former CEO, recalls an incident in which his counterpart at Coca-Cola called out of the blue. Coke’s CEO thanked Reinemund for his actions, but Reinemund had no idea what that meant.

Digging for information, Reinemund discovered that a rogue employee at Coke sought to sabotage his employer by stealing a product ingredient list and mailing it to Pepsi. When an administrative aide at Pepsi opened the letter, she recognized its intent and immediately resealed it and sent it to Coke’s general counsel.

She did not discuss it with anyone at Pepsi or show it to any colleagues. Notifying Coke’s legal team struck her as the right thing to do.

“It was a great day for PepsiCo,” Reinemund says.

The employee’s wise move validated Reinemund’s belief that a leader sets an ethical tone and takes every opportunity to reinforce it. Such messaging cascades down the ranks and enables individuals to make sound judgments.

Like many CEOs, Reinemund established boundaries for how much risk he and his team should take when weighing strategic moves. But he frequently declared that when facing an ethical issue, no risk is acceptable.

“That is especially true today as it is so hard for a company to recover when there has been some ethical miscalculation,” he says.

— Adapted from “Corporate CEOs talk ethics, leadership at Soderquist anniversary event,” Kim Souza, www.thecitywire.com.