Coca-Cola is at the center of a debate over corporate social justice, with an anti-affirmative-action activist threatening to sue over its supplier diversity program

• Coca-Cola spoke out against a Georgia voting law after being accused of dragging its feet.
• The company’s top lawyer just resigned after rolling out a program to elevate Black attorneys.
• An anti-affirmative-action activist calls Coke’s program an illegal quota and is threatening to sue.
• See more stories on Insider’s business page.

Coca-Cola can’t catch a break.

In late March, voting-rights activists in Georgia expressed dismay that Coca-Cola and other big Atlanta businesses hadn’t come out against their state’s new voting law. Now, after the company’s CEO condemned the law, it’s in the spotlight for replacing its top lawyer just after he rolled out one of the industry’s boldest diversity programs.

Bradley Gayton, one of the most prominent Black in-house lawyers in the US, joined Coca-Cola from Ford Motor Co. in September. In February, he unveiled a policy that required his outside law firms to have 30% of the hours they bill worked by women, lawyers from racial or ethnic minorities or lawyers with disabilities. Half of that time would have to be billed by Black lawyers. Failing to meet the goal would mean a 30% fee cut.

Gayton abruptly resigned in April, with some speculating that it was because of his aggressive push for diversity — specifically for Black lawyers. Others indicated that his effort to restructure Coke’s legal department rubbed some the wrong way. 

Regardless of the explanation, his successor, Monica Howard Douglas, has said Coca-Cola is pausing Gayton’s diversity policy. Douglas is a Black woman who has been at Coke since 2002.

But the program has already caught the attention of the anti-affirmative-action activist Edward Blum, who is well known for backing Abigail Ficher’s lawsuit against affirmative action at the University of Texas and Shelby County, Alabama, in its lawsuit that overturned key parts of the Voting Rights Act. In late April, Blum’s lawyers wrote a letter to Douglas saying they believed Coca-Cola’s outside counsel program was illegal. Blum told Insider that several small law firms are willing to sue Coca-Cola over the policy.

Businesses have been under pressure from investors, employees and other stakeholders to go beyond what the law requires when it comes to their impact on the world. BlackRock and other major shareholders have pressured companies to cut carbon emissions. Activists have asked businesses to oppose certain policies, like foreign-government censorship or the deportation of undocumented migrants, and to do more to elevate Black, Hispanic and female workers.

“It’s really about this conversation in corporate America,” said Jean Lee, who leads the Minority Corporate Counsel Association. “Does a corporation have a moral voice, and should they use that?”

The attack on Coke’s diversity effort comes just weeks after the company took heat from more liberal groups urging it to take a stronger stand against an election law backed by Georgia Republicans. The law includes some provisions that Democrats said would disempower minority voters and give the state’s legislative Republican majority undue influence over conducting elections.

Now Coca-Cola is being attacked from the right. Blum’s lawyers at Boyden Gray & Associates have worked against several corporate racial initiatives, including Nasdaq’s proposed rule on board diversity. Jonathan Berry, a lawyer at the firm, said it has also represented Blum’s group in opposing a housing-assistance program for Black people that the city of Evanston, Illinois, called reparations for discrimination.

Wesley Longhofer, a professor of organization and management at Emory University Goizueta Business School, said Coca-Cola is no stranger to taking stances on racial-justice issues, going back to 1964, when it got white Atlantans to turn out for an event in honor of Martin Luther King Jr. He said the company’s cachet can make it a focus for activists.

“Social-movement organizations oftentimes will target these iconic brands because they know these brands care about reputation, but also just to raise awareness,” he said.

Coca-Cola isn’t the first company to set diversity requirements for its outside law firms

There are about a dozen companies whose corporate legal departments have set expectations for the gender and racial composition of the law firms they hire, according to the Minority Corporate Counsel Association. HP, Novartis, Microsoft, and Facebook are among those known to do so. It’s common for legal departments to take a carrot-and-stick approach; Novartis has threatened to withhold up to 15% of a law firm’s fees if it doesn’t meet diversity standards, and Microsoft will give firms that meet diversity targets up to a 3% bonus on their fees.

Some companies set bars that are arguably higher than Coke’s. The Facebook spokeswoman Nneka Norville said in a written statement that the company now requires that 50% of the lawyers on its teams be diverse — including women, LGBTQ people, racial and ethnic minorities, and people with disabilities — up from 33% last year. It doesn’t impose an hours requirement like Coke, but it does require that women and minorities be given more than token assignments. These lawyers are expected “to serve as a relationship manager, make significant contributions in the courtroom or on deals, etc.” the spokeswoman said.

No one who spoke to Insider can recall any of those companies facing a potential lawsuit over their diversity programs. 

Kim Rivera, HP’s former chief legal officer, said companies, investors, law firms, and stakeholders see the harm that can come from “a persistent lack of inclusion and equity.” HP said it will hold back 10% of the bill from law firms whose invoices don’t reflect that at least 10% of the time was done or overseen by women and minority lawyers.

Rivera said a small portion of law firms shared negative feedback but added that feedback was motivated by a misunderstanding of what HP’s program actually does. HP said just 46% of its law firms were compliant with the program’s requirements when it was rolled out in 2017, a number that now stands at 100%.

Blum said in an email Thursday that his group’s public letter to Coca-Cola triggered “numerous calls and emails” about similar policies. He said they would be investigated “and challenged in court if necessary.”

Blum calls Coke’s program a ‘racial quota’

It’s not clear whether any lawsuit over Coca-Cola’s diversity requirement would succeed. In a letter to Coke, Blum’s lawyers cited a provision of federal law that bans race discrimination in private contracting. Blum, in a phone call, said his group has “no objection to companies casting a wide net, looking for unique law firms, unique contractors, unique individuals, companies that are owned by women, companies that are owned by racial minorities, companies that are owned by white men.”

“We have no squabble with that,” he said. “We have a squabble with Coke because these are racial quotas and racial quotas are completely forbidden in American civil-rights jurisprudence.”

Stacy Hawkins, a professor at Rutgers University, said the private-contracting law likely doesn’t apply to this situation. Law firms are owned by their equity partners, and while the exact breakdown of law firm equity is often confidential, law firm partnerships are overwhelmingly white.

“None of these policies or practices that have been adopted … speak to the difference between majority- and minority-owned law firms,” she said. “They speak to majority-owned firms and their use of minority lawyers.”

Coca-Cola wouldn’t make Gayton or Douglas available for an interview but released a statement that said: “When there is a leadership change, it takes time for the new leader to review the current status of the team, organization and initiatives. Monica is fully committed to the notions of equity and diversity in the legal profession, and we fully expect she will take the time necessary to thoughtfully review any plans going forward.”

Tom Mars, a former top lawyer at Walmart who helped the company add Black and Hispanic lawyers to its legal department, expressed disbelief that any law firm would take a public stance against Coke’s policy. 

“What law firm wants to be known … as the law firm that’s opposed to promoting diversity in the legal profession?” he said. “That would be strategically insane.”

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