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