Pepsi's EEOC violation isn't just about discrimination

Pepsi bottles line the self of a supermarket in Springfield, Ill., Tuesday, July 11, 2006. PepsiCo Inc., the No. 2 soft-drink maker, said second-quarter profit jumped 14 percent, helped by sales of non-carbonated beverages. (AP Photo/Seth Perlman)
AP

COMMENTARY: Pepsi is going to have to think again. Last week, the EEOC found that Pepsi's bottling company had adversely affected more than 300 black job applicants when it applied a criminal background check to their application, thus violating Title VII of the 1964 Civil Rights Act. The applicants were all turned down if it was found that they had been arrested - even though they had not been tried and, therefore, should still have been considered innocent of any crime or misdemeanor.

The law in this case is pretty clear - so what was going on? I'm sure there was a mixture of motives but the most likely suspect is: Covering your back. Why take a risk? Play safe. Don't do anything controversial. That is the ethos of more than a few corporations these days.

The reasons are obvious: At times of high unemployment, everyone's afraid of losing their job. Rumors have been rife that Pepsi is on the verge of a big lay off in order to reduce their pension obligations and thus increase profits. Whether they follow through with this move, that it is being widely reported, merely reflects the mood inside the company. When people are afraid, it's rare to find them thinking of justice first and themselves second. So of course they try to play it safe. What they don't do is think.

This contains important lessons for companies well beyond Pepsi. In the current economic climate, most large corporations are characterized by fear, sometimes paralysis and tunnel vision. It's no wonder entrepreneurial startups do so well in recessions; they're up against companies that have (deliberately or otherwise) hunkered down. But the irony is interesting: Bias always asserts itself at times of stress. So a danger grows just when you need it to recede. CEO Indra Nooyi likes to talk about "cherishing" her people and she's right. Because to get the best out of them, it helps if they feel safe.

The adventure travel writer, Robert Young Pelton made the point eloquently: "I am not afraid of danger," he wrote, "I am afraid of living miserably." The Pepsi employees who forgot about the law and about justice and made sure not to hire black applicants with ambiguous legal standing, they were living - and working - miserably: Trying to hire only the most unchallenging, unequivocal candidates. Did it ever occur to them that some of these candidates might have been unjustly arrested? That it would turn out they were innocent? No. Empathy doesn't do well in times of uncertainty.

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    Margaret Heffernan has been CEO of five businesses in the United States and United Kingdom. A speaker and writer, her most recent book Willful Blindness was shortlisted for the Financial Times Best Business Book 2011. Visit her on www.MHeffernan.com.