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Multinationals: Why Don't They "Just Do It?"

Business Ethics: Worth a thought?The prioritizes its stakeholders in terms of
corporate world today faces rising their importance to the firm, and quite
ethical dilemmas in every day operations. clearly the workers in Asia, do not seem
Ethical issues, often confused with to be anywhere near top of this priority
corporate scandals, are not necessarily list. As a consequence, all the efforts
as dramatic as that. Every department of of the firm are directed towards the
every organization face moral and ethical consumers, who typically are in developed
dilemmas in their day to day functioning, countries, with more money, and who can
and often enough corporations get away not care less about what might be
with unethical or immoral behaviour. Of happening in a Nike factory miles away
course, reasons vary. Arguably, from home.So has Nike done anything about
organizations cannot afford the risk of it?Since the controversy first broke out
not investing their time or resources in in 1998, Nike has claimed to taken
developing a comprehensive approach to several steps to correct the mistakes. Or
corporate ethics. This report looks at so is what the organisation claims. This
two multinational organizations, Unilever section of the article focuses on Nike's
and Nike Inc. and draws a comparison on efforts, the truth, the lies and the
their discriminatory practices in the myths about it.
various countries or culture they operate After the controversy broke out in the
in. Both the firms are identified with international media, Nike's founder and
unethical behaviour, and although the CEO Mr. Philip Knight made six
circumstances and the firm's ways of commitments:- All Nike shoe factories
handling these issues are different, will meet the U.S. Occupational Safety
little seems to have changed.Unilever and Health Administration's (OSHA)
Issue: Fair is Lovely!!An Anglo-Dutch standards in indoor air quality.- The
company, Unilever owns many of the minimum age for Nike factory workers will
world's consumer product brands in foods, be raised to 18 for footwear factories
beverages, cleaning agents and personal and 16 for apparel factories- Nike will
care products. Unilever employs more than include non-government organizations in
247,000 people and had a worldwide its factory monitoring, with summaries of
revenue of US$51.4 billion in 2004. that monitoring released to the
(Unilever 2006). In India however the public.- Nike will expand its worker
firm runs under its operations under the education program, making free high
name of Hindustan lever. The company has school equivalency courses available to
a range of 'home and personal care' all workers in Nike footwear
products in the Indian market. One of the factories.- Nike will expand its
most successful brands of the company is micro-enterprise loan program to benefit
'Fair & Lovely'. The company websites four thousand families in Vietnam,
claims to be using a patented technology Indonesia, Pakistan, and
for this fariness cream. The website Thailand.- Funding university research
claims 'Fair & Lovely' to be formulated and open forums on responsible business
with optimum levels of UV sunscreens and practices, including programs at four
Niacinamide, which acts safely and gently universities in the 1998-99 academic
with the natural renewal process of the year. (Connor 2001)However there was
skin, making complexion fairer over a still no mention of the human rights of
period of six weeks.A number of ethical workers, higher wages, more reasonable
concerns are however related to the working hours, safer and healthier work
product. Apart from the ill effects on places and respect for Workers' Right to
the skin, as claimed by some doctors, the Freedom of Association. Later consumer
advertising and marketing of the product activist Marc Kasky filed a lawsuit in
has been doing more harm than good for California regarding newspaper
the society. Its frequently-aired ads advertisements and letters Nike
typically show a depressed woman with few distributed in response to criticisms of
prospects, gaining a brighter future by labour conditions in its factories. Kasky
having a boyfriend or attaining a job claimed that the company made
after becoming markedly fairer representations that constituted false
(emphasized by several silhouettes of her advertising. Nike responded the false
face lined up dark to light). On its Web advertising laws did not cover the
site the company calls its product, "the company's expression of its views on a
miracle worker," which is "proven to public issue, and that these were
deliver one to three shades of change." entitled to First Amendment protection.
(Unilever 2006). To many it may seem or The local court agreed with Nike's
sound strange for all this to happen in a lawyers, but the California Supreme Court
country where the majority of the people overturned this ruling, claiming that the
have a dark complexion of skin colour corporation's communications were
with variations in brownness. Ironically commercial speech and therefore subject
enough though, people from all walks of to false advertising laws. (Kasky V. Nike
life, be it a would-be-mother in law, or 2002)The parties subsequently settled out
a young or an old male, everyone seems to of court before any finding on the
have a fascination for lighter skin. accuracy of Nike's statements, for $1.5
Women from all socio-economic backgrounds million. Discovery in the Kasky case had
go to unbelievable lengths to become just the potential to open the Nike files to
a little whiter.Although the advertising public scrutiny, to document the
done by Unilever for 'Fair & Lovely' is mistreatment of workers throughout the
not illegal but it certainly remains world, and the flow of money from Nike to
objectionable. In an era which is dawned public interest groups. However Kasky and
by corporate scandals, such as Enron and his lawyers settled this potential
the Australian Wheat Board (AWB), historic case for a $1.5 million donation
Unilever has been successfully running to a group controlled by the shoe and
this product in over 38 countries. apparel industry. There hasn't been a
Ironically most of these countries are word about it since.(Weissman & Mokhiber
under-developed/ developing country, who 2002)In 2004 Nike announced that it would
can do away with such practices. In be developing a balanced scorecard to
India, a country with a huge social and integrate corporate responsibility into
cultural divide, high unemployment and its business. The sports goods
illiteracy levels, Unilever successfully manufacturer said it would introduce
deceives and manipulates people through corporate responsibility as an integral
its exaggerated claims. Even if the part of its contract manufacturing
claims were to be true, and such a business. Sourcing decisions were to be
product was to make skin lighter, the based not just on price, quality and
company looks to gain market share and delivery but also a contractor's pledge
increase profitability by creating a towards labour management and
mindset where lighter skin is superior to environmental, health and safety
a darker complexion. In reality people programmes.In 2005, seven years from the
are buying products that will cause more time when the controversy was first made
harm than good. The demand for such public, an independent research conducted
"skincare" products is part of an showed that although 60% of factories
India-wide trend of women wanting to monitored achieved an A or B rating in
lighten their complexions in the belief terms of compliance with agreed
that lighter is better. This desire has a standards, a quarter of factories were
long history, a hangover from India's found to present more serious problems.
colonial past fuelled by contemporary These ranged from a lack of basic terms
global perceptions of beauty that give of employment and excessive hours of work
prominence to western marketing and to unauthorised sub-contracting,
fashion styles. The advertisements shown confirmed physical or sexual abuse and
fail miserably at all levels of the existence of conditions which could
advertising ethics.One of the concepts lead to death or serious injury. The
that can be used to explain the practices Guardian also reported some of the
of Unilever advertising is Moral myophia, conditions that existed in the Chinese
the failure of Unilever to see the moral factories in 2005- Between 25% and 50% of
dimension at all. The advertisements done the factories in the region restrict
by the firm have probably been access to toilets and drinking water
successful. How else would you explain during the workday.- In more than half of
the never ending promotional campaigns Nike's factories, the report said,
all over the media; print, display or employees worked more than 60 hours a
broadcast. Success in this case relates week. In up to 25%, workers refusing to
to the increasing profitability of the do overtime were punished.- Wages were
firm after a particular ad campaign. The also below the legal minimum at up to 25%
social implications of this to the of factories
society are however conveniently ignored. (What are factory conditions in China
Quite clearly, Unilever seems to be 2005)Once again Nike said it would set up
following the belief of the only bad a taskforce to improve compliance with
advert is one that does not work.The its code of conduct on working hours. It
content of the product website makes will also work with factories to help
things a little more complicated. The them address the most pressing problems
website claims to be helping women in as well as seeking to establish a set of
India, often considered to be the weaker common standards across the industry.
sex. The Fair and Lovely Foundation, an (Nike opens up in Standards Drive
initiative of Hindustan Lever Limited 2005)The question of course is, would
seeks economic empowerment of Indian anything still be done. There is a good
women through information and resources chance it may never be. Nike sees
in the areas of education, career business ethics as "no good at all", and
guidance and skills training. Comprising believes acting ethically would not be in
of an advisory body of leading the best of interests of the business.
individuals, this foundation aims to Not till the time, the sales of the
undertake various projects and business go down alarmingly, would there
initiatives in keeping with its vision of be any hope for any drastic improvements
empowering women to a brighter future. in these conditions. Nike has always had
Prominent women organizations and its share of controversies, and the firm
achievers partner initiative to promote seems to be thriving on it. The firm
economic empowerment of women. (Grace & manages to use the controversies as a
Cohen 2005)Noble thought?It sure is, but publicity tool. Thus far, Nike has
at what expense. Isn't it strange and treated allegations as an issue of public
ironic that this company, and others in relations rather than human rights. Every
the business, continue to sell fairness allegation is followed by the release of
as a desirable quality, be it for success public statements across various
in marriage or career, and equate dark magazines and newspapers stating the
complexions with failure and efforts made by the firm to make the
undesirability? Where does a company draw difference, but seven years down the
the line between selling a product and road, the differences are yet to be seen.
being socially sensitive? What is even Meanwhile the efforts of Nike to
more disturbing is the fact that there is manipulate and win even more customers go
a constant attempt to disguise these on. The corporate website of the firm
socially unacceptable practices. As noble talks heavily about their shifting
as the idea behind the Fair and Lovely approach to labour compliance.(Evolution:
Foundation might be, it still does not Shifting Approach to labor compliance
solve the root problem. Addressing one 2006)Unlike Nike, Unilever has not quite
problem in the society can not come at been indulging itself in illegal
the expense of exaggerating the other activities, but does that make it any
one. Women in India need to be empowered, less harmful, or does that make Unilever
and be told that they are no less than any bit more ethical than Nike?According
their male counterparts, however the to this writer, the answer to both the
people of India also need to be told that questions is NO. In fact what makes
the mere colour of skin does not make one Unilever's practices even scarier than
superior. The society needs to get over those of Nike is the fact that they cause
the colonial hangover, and the least that as much harm, but still there seems to be
companies like Unilever can do is not little concern over it. The firm has been
spend millions of dollars on campaigns in operation since 1978, and even 28
which do more social harm than good.Nike years after there seems to be little or
Dilemma: Still waiting for them to "do no concern. There is little media
it"!Another corporate giant having its coverage over the menace, possibly
fare share of controversies over the because of the advertising revenues being
years is Nike. Nike employs approximately paid, or just the ignorant nature of the
26,000 people worldwide. In addition, present day media, which seems to be more
approximately 650,000 workers are interested in scandals rather than some
employed in Nike contracted factories social concerns in a third world
around the globe. More than 75% of these country.The double standards practised by
work in Asia, predominantly in China, both Nike Inc, and Unilever are quite
Thailand, Indonesia, Vietnam, Korea and apparent as well. The majority of Nike
Malaysia (Nike 2006). In 1998 Nike came clothing is produced in countries it
under fire for the sweatshop conditions hardly has any sales, but of course the
of the workers in the Nike factories in factory conditions of a worker based in
China and other third world countries. an American factory is strikingly
The evidence showed that the workers were different from that of a worker in a
regularly subject to physical punishment Chinese factory. Likewise Unilever
and sexual abuse and exposed to dangerous manipulates the market by introducing
chemicals. (Nike Accused of Lying About fairness creams in cultures where beauty
Asian Factories 1998). Sub standard equates fairness. To boost the sales, the
working facilities, bare minimum wages company goes a step further by trying to
and risks to health of labourers mark position the product by changing consumer
NIKE factories in Asia. The firm was also perception of fairness as being
accused of practicing child labour in successful, both socially and
Pakistan.So the question now is, why did emotionally.Social impacts? Did you
it happen, and more importantly, has ask?Of course that's hardly on the
anything been done since to correct it.So agenda. The interesting thing is,
why did it happen?Well that is quite although Unilever operates in over 40
clear. The reason why most firms different counties, including Australia,
outsource their activities to lesser the 'Fair & Lovely' product is only
developed countries is to exploit cheaper available in a handful of markets. The
labour and production costs. Nike has a company does not have any 'Dark & lovely'
brand reputation worldwide, and in-fact brands in their western markets, possibly
is a market leader in the sales of because they perceive this market to be
athletic shoes. The constant focus is to more educated and therefore tougher to
formulate ways and strategies to reduce manipulate.The firms of course have their
production costs, and one way of that is reasons, and one of them is us, the
fewer wages to the workers. The high consumers, who purchase these products.
unemployment levels in the third world It is the age old formula of demand and
countries, as well as the desperation for supply. We demand the product, and the
people to be employed, in any kind of firm of course goes to any lengths to
work, allows multinationals like Nike , fulfil the gap. In Unilever's case, there
the perfect platform to indulge in is an obvious need in the mind of the
malpractices without getting into too consumers in India to have fair skin.
much trouble. A look at some of the Similarly for Nike, the worldwide demand
ethical issues concerned with Nike's for their apparels compels the firm to go
human (or inhuman!) right violations to unbelievable extent to produce lower
would give a better understanding of the cost products. The story unfortunately
concern.Ethical Dilemma:Any firm which does not end here. We the consumers, then
expands its operations globally needs to put the firm under even more pressure to
follow the basic code of international maintain their profitability, only this
ethics:- Not to intentionally direct harm time we take the role of investors.
in the host country. By providing below Investor's of course are only concerned
standard and unsafe working conditions, with the share return, and cannot care
and low wages, Nike was clearly less about how the firm maintains its
intentionally doing harm.- Benefit the profitability.Jennifer Abbott and Mark
host country. Although Nike was indeed Achbar, in their documentary 'The
expanding the number of jobs available in Corporation', proved that corporations in
China, a desirable aspect, but the the present time fit the definition of a
extremely low wages meant it was all 'psychopath'. The concern is that this
beneficial for the corporation and not psychopath is being raised and bred by
the people in China.- Respect the human us, the consumers, and the investors.
rights of employees. Reports of unsafe These are average times we are living in,
and hazardous working conditions proved with every day more issues, more scandals
that Nike did not care much about the and more controversies breaking out.
human rights in China.- Respect the However reading the stories is nearly not
values, culture and laws of the host enough. Something somehow somewhere needs
country- as long as they are not morally to change and change sooner rather later,
wrong or against human rights. (Grace & before it gets too late.End of
Cohen 2005)It would be a fair assumption story?Unfortunately, I don't think
to make, if a certain behaviour is so.Pranay Rai is a young management
unacceptable in the home country, it student at Melbourne Business School,
would most likely be morally wrong in a Australia. Through his simple yet
foreign environment as well. Managing unconventional style of writing, Pranay
stakeholder interests is also extremely hopes to touch the souls of millions
important for any firm. However problems across the globe, reminding them of the
arise when businesses fail to prioritize social issues that have been long
the stakeholder interests. Nike forgotten.




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