Thomas Donaldson, professor of legal studies at Wharton and Director of the Wharton Ethics Program, speaks to Knowledge@Wharton about the lessons to be learnt from Coke's crisis. According to Donaldson, ``the episode constitutes a moment of truth for Coke. It is a stark challenge for any company whose principal product is challenged in such a fundamental way.''

On what companies need to do in such times of crises, Donaldson says that in such a situation corporate managers must make decisionsquickly because the stakes are extremely high. Therefore, a crisis-management process is of utmost significance for every company. ``The company needs a means to bring members of its top corporate management together with information providers quickly so that a response to the public can be made as soon as possible,'' he says.

Apart from crisis management, Donaldson feels that corporate culture plays a big role in times of crises. And any corporate culture, which puts the customer first when his safety is threatened, is a winner, according to Donaldson.

On corporate culture, Knowledge@Wharton asks Donaldson: ``Are there examples of companies that have faced major crises and acted differently for cultural reasons?'' And Donaldson's reply is yes. He gives the example of Johnson & Johnson Tylenol poisoning episode of the early 1980s, where the company had developed the right culture. Says Donaldson: ``Johnson & Johnson Tylenol put the health of the consumer first when its product was poisoned. This case isstriking because the chairman, Jim Burke, was in an airplane when the news of the poisoning broke. Back then, air-to-ground communication was not as superb as it is today...but the decision to recall all Tylenol products was made before his plane hit the ground.''

So, the point is that the values that the company had put forward all along were adhered to at the time of crises too. ``And those values put the health of consumers first.'' Johnson & Johnson, by putting aside issues of litigation, did the right thing, says Donaldson. ``In doing so, it was able to do what many pundits said would never happen: It not only got the sales of its product back, but it got them back with the commitment of the consuming public that probably could not be shaken in a generation.''

On how companies can develop such a culture, Donaldson explains: ``There are many paths to developing a value-oriented culture that will help in a crisis. Johnson & Johnson had at the time--as it still does--credo challenge sessions.'' In thecredo challenge sessions, the company brings managers together to ask questions about the credo and whether they want to change any of the values in the credo. Not many changes are made in the credo. ``But in the process of testing the credo, incredible buy-in of the credo by managers occurs.''

Then Donaldson explains the steps by which a company can develop such a culture. Developing a culture, he says involves three major components: leadership, culture, and structures. Leadership, he says, is to be learnt by example. Like that of Johnson & Johnson. Giving another example of leadership, he says that Warren Buffet's leadership was exemplary when Salomon Brothers was caught during the early 1990s in a scandal involving the cornering of the US treasury market. Buffet wrote letters to all his managers giving them his home phone number, and asking them to report about any unethical practice in the company. According to Donaldson, the gesture showed that honesty was important to Buffet. Of the other twocomponents, culture is basically having values in the right place. And structure would include practices including reward for employees.

Finally, Donaldson says that the right instinct for the companies is the value-driven one, which is to pay almost exclusive attention to the health of the customer. And to give out the information that customers are looking for.