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

Business Ethics: Worth a thought?The corporatestakeholders in terms of their importance to the firm,
world today faces rising ethical dilemmas in every dayand quite clearly the workers in Asia, do not seem to
operations. Ethical issues, often confused withbe anywhere near top of this priority list. As a
corporate scandals, are not necessarily as dramatic asconsequence, all the efforts of the firm are directed
that. Every department of every organization facetowards the consumers, who typically are in
moral and ethical dilemmas in their day to daydeveloped countries, with more money, and who can
functioning, and often enough corporations get awaynot care less about what might be happening in a
with unethical or immoral behaviour. Of course,Nike factory miles away from home.So has Nike done
reasons vary. Arguably, organizations cannot affordanything about it?Since the controversy first broke
the risk of not investing their time or resources inout in 1998, Nike has claimed to taken several steps
developing a comprehensive approach to corporateto correct the mistakes. Or so is what the
ethics. This report looks at two multinationalorganisation claims. This section of the article focuses
organizations, Unilever and Nike Inc. and draws aon Nike's efforts, the truth, the lies and the myths
comparison on their discriminatory practices in theabout it.
various countries or culture they operate in. Both theAfter the controversy broke out in the international
firms are identified with unethical behaviour, andmedia, Nike's founder and CEO Mr. Philip Knight made
although the circumstances and the firm's ways ofsix commitments:- All Nike shoe factories will meet
handling these issues are different, little seems tothe U.S. Occupational Safety and Health
have changed.Unilever Issue: Fair is Lovely!!AnAdministration's (OSHA) standards in indoor air
Anglo-Dutch company, Unilever owns many of thequality.- The minimum age for Nike factory workers
world's consumer product brands in foods,will be raised to 18 for footwear factories and 16 for
beverages, cleaning agents and personal careapparel factories- Nike will include non-government
products. Unilever employs more than 247,000 peopleorganizations in its factory monitoring, with summaries
and had a worldwide revenue of US$51.4 billion inof that monitoring released to the public.- Nike will
2004. (Unilever 2006). In India however the firm runsexpand its worker education program, making free
under its operations under the name of Hindustanhigh school equivalency courses available to all
lever. The company has a range of 'home andworkers in Nike footwear factories.- Nike will expand
personal care' products in the Indian market. One ofits micro-enterprise loan program to benefit four
the most successful brands of the company is 'Fair &thousand families in Vietnam, Indonesia, Pakistan, and
Lovely'. The company websites claims to be using aThailand.- Funding university research and open
patented technology for this fariness cream. Theforums on responsible business practices, including
website claims 'Fair & Lovely' to be formulated withprograms at four universities in the 1998-99 academic
optimum levels of UV sunscreens and Niacinamide,year. (Connor 2001)However there was still no
which acts safely and gently with the natural renewalmention of the human rights of workers, higher
process of the skin, making complexion fairer over awages, more reasonable working hours, safer and
period of six weeks.A number of ethical concerns arehealthier work places and respect for Workers' Right
however related to the product. Apart from the illto Freedom of Association. Later consumer activist
effects on the skin, as claimed by some doctors, theMarc Kasky filed a lawsuit in California regarding
advertising and marketing of the product has beennewspaper advertisements and letters Nike
doing more harm than good for the society. Itsdistributed in response to criticisms of labour
frequently-aired ads typically show a depressedconditions in its factories. Kasky claimed that the
woman with few prospects, gaining a brighter futurecompany made representations that constituted false
by having a boyfriend or attaining a job afteradvertising. Nike responded the false advertising laws
becoming markedly fairer (emphasized by severaldid not cover the company's expression of its views
silhouettes of her face lined up dark to light). On itson a public issue, and that these were entitled to
Web site the company calls its product, "the miracleFirst Amendment protection. The local court agreed
worker," which is "proven to deliver one to threewith Nike's lawyers, but the California Supreme Court
shades of change." (Unilever 2006). To many it mayoverturned this ruling, claiming that the corporation's
seem or sound strange for all this to happen in acommunications were commercial speech and
country where the majority of the people have atherefore subject to false advertising laws. (Kasky V.
dark complexion of skin colour with variations inNike 2002)The parties subsequently settled out of
brownness. Ironically enough though, people from allcourt before any finding on the accuracy of Nike's
walks of life, be it a would-be-mother in law, or astatements, for $1.5 million. Discovery in the Kasky
young or an old male, everyone seems to have acase had the potential to open the Nike files to public
fascination for lighter skin. Women from allscrutiny, to document the mistreatment of workers
socio-economic backgrounds go to unbelievablethroughout the world, and the flow of money from
lengths to become just a little whiter.Although theNike to public interest groups. However Kasky and his
advertising done by Unilever for 'Fair & Lovely' is notlawyers settled this potential historic case for a $1.5
illegal but it certainly remains objectionable. In an eramillion donation to a group controlled by the shoe and
which is dawned by corporate scandals, such asapparel industry. There hasn't been a word about it
Enron and the Australian Wheat Board (AWB),since.(Weissman & Mokhiber 2002)In 2004 Nike
Unilever has been successfully running this product inannounced that it would be developing a balanced
over 38 countries. Ironically most of these countriesscorecard to integrate corporate responsibility into its
are under-developed/ developing country, who canbusiness. The sports goods manufacturer said it
do away with such practices. In India, a country withwould introduce corporate responsibility as an integral
a huge social and cultural divide, high unemploymentpart of its contract manufacturing business. Sourcing
and illiteracy levels, Unilever successfully deceives anddecisions were to be based not just on price, quality
manipulates people through its exaggerated claims.and delivery but also a contractor's pledge towards
Even if the claims were to be true, and such alabour management and environmental, health and
product was to make skin lighter, the company lookssafety programmes.In 2005, seven years from the
to gain market share and increase profitability bytime when the controversy was first made public, an
creating a mindset where lighter skin is superior to aindependent research conducted showed that
darker complexion. In reality people are buyingalthough 60% of factories monitored achieved an A
products that will cause more harm than good. Theor B rating in terms of compliance with agreed
demand for such "skincare" products is part of anstandards, a quarter of factories were found to
India-wide trend of women wanting to lighten theirpresent more serious problems. These ranged from a
complexions in the belief that lighter is better. Thislack of basic terms of employment and excessive
desire has a long history, a hangover from India'shours of work to unauthorised sub-contracting,
colonial past fuelled by contemporary globalconfirmed physical or sexual abuse and the existence
perceptions of beauty that give prominence toof conditions which could lead to death or serious
western marketing and fashion styles. Theinjury. The Guardian also reported some of the
advertisements shown fail miserably at all levels ofconditions that existed in the Chinese factories in
advertising ethics.One of the concepts that can be2005- Between 25% and 50% of the factories in the
used to explain the practices of Unilever advertising isregion restrict access to toilets and drinking water
Moral myophia, the failure of Unilever to see theduring the workday.- In more than half of Nike's
moral dimension at all. The advertisements done byfactories, the report said, employees worked more
the firm have probably been successful. How elsethan 60 hours a week. In up to 25%, workers
would you explain the never ending promotionalrefusing to do overtime were punished.- Wages were
campaigns all over the media; print, display oralso below the legal minimum at up to 25% of
broadcast. Success in this case relates to thefactories
increasing profitability of the firm after a particular ad(What are factory conditions in China 2005)Once
campaign. The social implications of this to the societyagain Nike said it would set up a taskforce to
are however conveniently ignored. Quite clearly,improve compliance with its code of conduct on
Unilever seems to be following the belief of the onlyworking hours. It will also work with factories to help
bad advert is one that does not work.The contentthem address the most pressing problems as well as
of the product website makes things a little moreseeking to establish a set of common standards
complicated. The website claims to be helping womenacross the industry. (Nike opens up in Standards
in India, often considered to be the weaker sex. TheDrive 2005)The question of course is, would anything
Fair and Lovely Foundation, an initiative of Hindustanstill be done. There is a good chance it may never be.
Lever Limited seeks economic empowerment ofNike sees business ethics as "no good at all", and
Indian women through information and resources inbelieves acting ethically would not be in the best of
the areas of education, career guidance and skillsinterests of the business. Not till the time, the sales
training. Comprising of an advisory body of leadingof the business go down alarmingly, would there be
individuals, this foundation aims to undertake variousany hope for any drastic improvements in these
projects and initiatives in keeping with its vision ofconditions. Nike has always had its share of
empowering women to a brighter future. Prominentcontroversies, and the firm seems to be thriving on
women organizations and achievers partner initiativeit. The firm manages to use the controversies as a
to promote economic empowerment of women.publicity tool. Thus far, Nike has treated allegations as
(Grace & Cohen 2005)Noble thought?It sure is, but atan issue of public relations rather than human rights.
what expense. Isn't it strange and ironic that thisEvery allegation is followed by the release of public
company, and others in the business, continue to sellstatements across various magazines and
fairness as a desirable quality, be it for success innewspapers stating the efforts made by the firm to
marriage or career, and equate dark complexionsmake the difference, but seven years down the
with failure and undesirability? Where does aroad, the differences are yet to be seen. Meanwhile
company draw the line between selling a product andthe efforts of Nike to manipulate and win even more
being socially sensitive? What is even more disturbingcustomers go on. The corporate website of the firm
is the fact that there is a constant attempt totalks heavily about their shifting approach to labour
disguise these socially unacceptable practices. Ascompliance.(Evolution: Shifting Approach to labor
noble as the idea behind the Fair and Lovelycompliance 2006)Unlike Nike, Unilever has not quite
Foundation might be, it still does not solve the rootbeen indulging itself in illegal activities, but does that
problem. Addressing one problem in the society canmake it any less harmful, or does that make Unilever
not come at the expense of exaggerating the otherany bit more ethical than Nike?According to this
one. Women in India need to be empowered, and bewriter, the answer to both the questions is NO. In
told that they are no less than their malefact what makes Unilever's practices even scarier
counterparts, however the people of India also needthan those of Nike is the fact that they cause as
to be told that the mere colour of skin does notmuch harm, but still there seems to be little concern
make one superior. The society needs to get overover it. The firm has been in operation since 1978,
the colonial hangover, and the least that companiesand even 28 years after there seems to be little or
like Unilever can do is not spend millions of dollars onno concern. There is little media coverage over the
campaigns which do more social harm than good.Nikemenace, possibly because of the advertising
Dilemma: Still waiting for them to "do it"!Anotherrevenues being paid, or just the ignorant nature of
corporate giant having its fare share of controversiesthe present day media, which seems to be more
over the years is Nike. Nike employs approximatelyinterested in scandals rather than some social
26,000 people worldwide. In addition, approximatelyconcerns in a third world country.The double
650,000 workers are employed in Nike contractedstandards practised by both Nike Inc, and Unilever
factories around the globe. More than 75% of theseare quite apparent as well. The majority of Nike
work in Asia, predominantly in China, Thailand,clothing is produced in countries it hardly has any
Indonesia, Vietnam, Korea and Malaysia (Nike 2006).sales, but of course the factory conditions of a
In 1998 Nike came under fire for the sweatshopworker based in an American factory is strikingly
conditions of the workers in the Nike factories indifferent from that of a worker in a Chinese factory.
China and other third world countries. The evidenceLikewise Unilever manipulates the market by
showed that the workers were regularly subject tointroducing fairness creams in cultures where beauty
physical punishment and sexual abuse and exposedequates fairness. To boost the sales, the company
to dangerous chemicals. (Nike Accused of Lyinggoes a step further by trying to position the product
About Asian Factories 1998). Sub standard workingby changing consumer perception of fairness as being
facilities, bare minimum wages and risks to health ofsuccessful, both socially and emotionally.Social
labourers mark NIKE factories in Asia. The firm wasimpacts? Did you ask?Of course that's hardly on the
also accused of practicing child labour in Pakistan.Soagenda. The interesting thing is, although Unilever
the question now is, why did it happen, and moreoperates in over 40 different counties, including
importantly, has anything been done since to correctAustralia, the 'Fair & Lovely' product is only available
it.So why did it happen?Well that is quite clear. Thein a handful of markets. The company does not have
reason why most firms outsource their activities toany 'Dark & lovely' brands in their western markets,
lesser developed countries is to exploit cheaperpossibly because they perceive this market to be
labour and production costs. Nike has a brandmore educated and therefore tougher to
reputation worldwide, and in-fact is a market leader inmanipulate.The firms of course have their reasons,
the sales of athletic shoes. The constant focus is toand one of them is us, the consumers, who purchase
formulate ways and strategies to reduce productionthese products. It is the age old formula of demand
costs, and one way of that is fewer wages to theand supply. We demand the product, and the firm of
workers. The high unemployment levels in the thirdcourse goes to any lengths to fulfil the gap. In
world countries, as well as the desperation for peopleUnilever's case, there is an obvious need in the mind
to be employed, in any kind of work, allowsof the consumers in India to have fair skin. Similarly
multinationals like Nike , the perfect platform tofor Nike, the worldwide demand for their apparels
indulge in malpractices without getting into too muchcompels the firm to go to unbelievable extent to
trouble. A look at some of the ethical issuesproduce lower cost products. The story
concerned with Nike's human (or inhuman!) rightunfortunately does not end here. We the consumers,
violations would give a better understanding of thethen put the firm under even more pressure to
concern.Ethical Dilemma:Any firm which expands itsmaintain their profitability, only this time we take the
operations globally needs to follow the basic code ofrole of investors. Investor's of course are only
international ethics:- Not to intentionally direct harm inconcerned with the share return, and cannot care
the host country. By providing below standard andless about how the firm maintains its
unsafe working conditions, and low wages, Nike wasprofitability.Jennifer Abbott and Mark Achbar, in their
clearly intentionally doing harm.- Benefit the hostdocumentary 'The Corporation', proved that
country. Although Nike was indeed expanding thecorporations in the present time fit the definition of a
number of jobs available in China, a desirable aspect,'psychopath'. The concern is that this psychopath is
but the extremely low wages meant it was allbeing raised and bred by us, the consumers, and the
beneficial for the corporation and not the people ininvestors. These are average times we are living in,
China.- Respect the human rights of employees.with every day more issues, more scandals and more
Reports of unsafe and hazardous working conditionscontroversies breaking out. However reading the
proved that Nike did not care much about the humanstories is nearly not enough. Something somehow
rights in China.- Respect the values, culture and lawssomewhere needs to change and change sooner
of the host country- as long as they are not morallyrather later, before it gets too late.End of
wrong or against human rights. (Grace & Cohenstory?Unfortunately, I don't think so.Pranay Rai is a
2005)It would be a fair assumption to make, if ayoung management student at Melbourne Business
certain behaviour is unacceptable in the homeSchool, Australia. Through his simple yet
country, it would most likely be morally wrong in aunconventional style of writing, Pranay hopes to
foreign environment as well. Managing stakeholdertouch the souls of millions across the globe, reminding
interests is also extremely important for any firm.them of the social issues that have been long
However problems arise when businesses fail toforgotten.
prioritize the stakeholder interests. Nike prioritizes its