Ethics has a significant role to play in the existence of successful companies regardless of their discipline or region. More importantly, considering the fast-changing economic, technological, political, and legal structures, businesses are embedded in a competitive world, full of stakeholders and power claims. As a result, for companies to be perceived as reliable partners in businesses, they are bound to implement ethics in their day-to-day activities. Additionally, businesses operate in ever-changing local, national, and multinational environments, which has forced companies to adopt ethics programs to respond to the negative publicity that arises from interactions with various environments (Nielsen & Massa, 2013). Since the company’s stakeholders stand to gain or lose from any actions and decisions by the firm, they play a key role in shaping the development of the business ethics programs for any organization. Failure to do this, companies risk the trust of their stakeholders, especially the customers and employees who are responsible for the success of the company. Considering the aforementioned circumstances, the following paper seeks to address how companies are developing their business ethics programs, with a particular interest in Nike Inc. company.
Nike Inc is an American corporation that is involved in designing, developing, and manufacturing footwear, apparel, equipment, and athletic accessories globally. The company was founded by Phil Knight and Bill Bowerman as Blue-Ribbon sports in 1964 (NIKE, Inc, 2019). Initially, the company imported Japanese shoes to the American market which had by then been dominated by Puma and Adidas. The company later thought of developing its brand of footwear, ending its relationship with the Japanese market, and renaming the company Nike Inc. in 1978. Nike Inc. grew and gained a global presence, where it is the largest seller of athletic footwear with a 37% global market share. The company sells its products in America in about twenty-two thousand retail accounts and it is present in at least a hundred and sixty countries globally. The company is directly involved in the designing, developing, and marketing of its products, while the independent contractors both locally and overseas are responsible for the manufacturing of the products (Nike, Inc. 2022). A majority of the products by Nike are sold under the flagship of Nike brand, but it also operates under the Converse Jack Purcell, Chuck Tylor, and All-star brands, which are fully owned as subsidiaries of Converse Inc.
The company’s headquarters is based in Oregon, USA. It employs at least forty-four thousand employees globally, and it is valued at $134.81 (Forbes, 2022). This makes Nike Inc. one of the world’s most valuable businesses in the sports business. The company is reliant on innovations in the design of the products as well as promotions which have fueled its growth both in the US and overseas. Further, the company is guided by its mission, which states that Nike Inc, aims to drive product innovation for athletes everywhere. This allows the company to test many ideas as a way of improving performance, reducing injury, delivering innovative products to the athletes, and enhancing the perception and feel of the products.
Nike is guided by its mission statement “to bring inspiration and innovation to every athlete in the world (Nike, Inc. 2022).” The statement portrays the unrelenting efforts by the company to always innovate and ensure that athletes all over are always contented despite the changing times and environments.
The vision statement for the company “do everything possible to expand human potential” shows the company’s desire to be the best in the sports world without limiting its capabilities. Further, it aims at impacting its consumers positively, an aim that is attained by incorporating helpful ideas to the communities it operates within, through social responsibility.
The core values of Nike are to be inspirational, innovative, authentic, distinctive, and connected for every athlete in the world (Nike, Inc. 2022). The inspiration is highly practiced among the employees, following the belief that happy employees make happy customers, which in this case is done by producing innovation-driven products.
Ethics in business are global and superlative. There are issues and new trends in the business world daily, and they require new decisions to be made by the business managers, decisions which may affect the company and the perception of the consumers towards the business. Bearing in mind that consumers are key stakeholders in organizations, it is crucial that ethical decisions are made in every operation and the decision that businesses engage in (Stavrova, 2020). Not only are ethics crucial to the consumers, but unethical decisions may also lead to unending lawsuits, which require the organizations to use money to pursue them, reducing the profitability of the organization (GARANTİ, Z, 2019). However, many organizations have engaged themselves in unethical practices which tarnish their name, and in the end-use advertisements to improve public perceptions. It is worth noting that advertisements do not promote advancements in the moral sensibility of humans. Further, (Venkatadurai, et al., 2014) notes that contemporary advertisements do not fulfill needs, but rather it creates a need for the consumer.
Following the lifting of trade barriers that allowed trade to go global, ethical behavior and social responsibility have gained more interest in the commercial and education settings. This is a result of multinational corporates expanding globally and as such, the ethical conduct of their officers and employees gain more importance because the cultural diversity attributed to the expansion may undermine common and shared ethical and cultural values (Stevens & Buechler, 2013). Additionally, in the business world of multinational companies, competition is key, and companies need to remain competitive as well as manage profitability in their businesses (Stavrova, 2020). As a result, many multinational corporations forgo the means to achieving their results, and this results in the making of unethical decisions, because ethics, become a secondary priority in their operations.
Pritchard (2013), argued that unethical or ethical behavior in business is a result of both individual characteristics, and contextual factors, and among these include the organizational culture of the firm at hand. For instance, (GARANTİ, Z, 2019) gave an example of businesses that are ethical, in their operations, there are clearly set guidelines or a code of ethics. Additionally, there exist incentive systems that ensure ethical behavior is promoted and economic outcomes are attained. Further, Nielsen, & Massa, (2013) argued that employees from ethical businesses carry themselves responsibly, and are accountable for their actions.
Stevens & Buechler (2013), argues that businesses do not operate in a vacuum, rather, they operate in the natural and social environment. Therefore, regardless of the pressures upon them, their operations should be accountable for the social and the natural environment around which it survives. Additionally, Kahle, et al., (2000) states that businesses have two reasons to be accountable for the social and natural environments. One, the operations of the organizations affect the stakeholders, and two, all junctures of actions have trajectories of unethical and ethical paths and the existence of the business is justified by the ethical alternatives that it chooses responsibly.
4.1 Theoretical framework
Theories in ethics exist as a guide to making ethical decisions. Although they are not predictive, they help people in justifying the ethical decisions they make. Some of the ethical theories include utilitarianism, the Kantian, deontological, and virtue theories. According to the utilitarianism theory, actions undertaken by people should seek to maximize happiness in others. This is mainly done by upholding human welfare above anything else. On the other hand, the Kantian and deontological theories find human beings to be instruments used to achieve an end (Pritchard, 2013). According to the theories, the ends justify the means, and as long as the results lead to happiness, then the action is righteous. For instance, Kants would not be against people being experimented upon to find a cure or answer some scientific queries.
Nielsen, & Massa, (2013) states that since people use their life experiences to determine the outcomes while using the utilitarianism theory, the predictions may not always be right, and this would not lead to utmost happiness for the recipients of the actions. In this case, the use of the Kantian and deontological theories where people are bound to their duties and obligations when they are making the decisions of the dilemma at hand may be the best applicable. The virtue theory instead of judging a person by his acts uses their personality to determine if they are capable of doing good or not (Venkatadurai, et al., 2014). For instance, a worker who is often late to work may not receive fair judgment on a given day when the employer decides to punish the latecomers. However, an employee who is always on time may receive a lenient judgment considering that other times they are always on time.
4.2 Importance of business ethics in this case.
Business ethics are an arrangement of principles that rely on conventional human qualities, and people from different associations and accomplices hold fast to them. Ethical behaviors and corporate social duty can be of significant advantages to the business while unethical can harm the business (Stevens & Buechler, 2013). Businesses have influence within societies they operate in, which means that Nike Inc has a high influence on the communities it operates around. Before Nike was established, other brands such as Adidas and Puma, also had good products. Consequently, the success of Nike depends on the emotions of its consumers as well as its ability to rationalize. The emotions can be triggered by a lot of factors and among them is the ability of the company to uphold ethical behavior in all its operations and decisions affecting those around them. It hence gets critical for Nike to have guidelines that inform its activities and ability to make ethical decisions.
While Nike has focused on achieving an excellent end product, the means to achieving the end product has often been overlooked, leaving the company under criticism from the public for the means used. Since the 1990s, Nike has faced various criticism over its operations. The following paragraphs entail the various unethical issues that faced Nike Inc. and their criticism is what necessitated the code of ethics.
5.1 Unethical issues by Nike
The first issue was sweatshops operations by Nike. The company was accused of moving a majority of its manufacturing processes to low-labor countries such as Vietnam, China, and Indonesia. These countries are collectivist communities that do not put profits first rather, they put group cohesion first (Isac & Remes, 2017). Consequently, their charges on labor are relatively low, making companies like Nike prefer their labor as a strategy to reduce costs and increase profits. Nike was not only accused of using the labor from those countries but it was also accused of making the employees work for extra hours at a very little wage (Lara, 2021). Additional charges included poor working conditions for the workers, discrimination in their hiring processes, and poor health and safety conditions. For instance in Indonesia, where the living wage per day is $3, Nike used to pay its employees there $1.60, yet the working hours were longer. Nike was hence accused of violating labor and human rights in the mainstream media.
According to Cerchia & Piccolo, (2019), utilitarianism is a moral theory that calls people to act in ways that bring good and happiness to a majority of the people. While following this reasoning, Nike did not do good to people affected by its actions, in this case, the employees, who are major stakeholders, yet they considered their profits first (Valjakka, 2013). The company forgot that the employees are the major stakeholders who should come first if a happy customer and shareholder are to be met (Imran, 2017). As a result, even though the wealth of the shareholders increased, the reputation of the company was tarnished by the unethical acts, changing the perception of its customers, and shareholders. However, based on the egoism theory, Nike is free to decide on what is beneficial to them, and going for low labor is what seemed right for the company. Although this may seem okay for the company, the utilitarian carries the day since the stakeholders are not pleased, and neither are the shareholders.
Additionally, Kantian ethics hold the claim that people are never and should never be mistreated, but rather respect should always prevail. However, there may be a contradiction to this theory, since the outcome determines the goodness of an act, if the duty and obligation were fulfilled, then the kant argues that the act was right (WPSU – Penn State Public Media, 2020). In this case, Nike would argue that the employees had the duty and obligation to produce the shoes and apparel. The question would, however, be what was the moral obligation of the company’s management that is responsible for overseeing that the employees work in good conditions and that their basic needs are met.
The other issue that faced Nike was child labor in the manufacturing workshops of Nike in overseas countries. The contracted factories were found to have hired children, especially in Pakistan where children aged between 9 and 16 were found to be working (Crossley, 2021). The presumed gain of exploiting children was that Nike would reduce its production cost and increase its profits. Due to the issue of child laborers, and sweatshops, Nike conducted an assessment on all its factories where it identified further problems such as lack of clean drinking water for the employees, restrictions on using the toilets, and highly toxic chemical concentrations. Additionally, the company found out that among the impoverished people, the company faced the issue of harassment for the employees, intimidation, and violence. According to these acts, Nike had violated the utilitarian theory by denying children their basic right to education, low pay that cannot alleviate poverty, and causing physical and psychological harm to the children (Valjakka, 2013). While Nike has been accused of sweatshops and child labor as a form of saving on their production costs and increasing profits, the company has been on the other hand been handing out expensive endorsements to celebrities as a form of marketing.
The other issue facing Nike arose, after the criticism of human rights and labor violation rights, where the company decided to work on its CSR as a form of mending things with the stakeholder and the shareholders. It hence entered into a social agreement with the University of North Carolina, where the university was supposed to have all its athletes wear Nike’s brand. While this may have helped amend things with the shareholders and stakeholders, the company denied the athletes their right of choice. According to Rawl’s theory, every individual has the right to choose what pleases them (Audard, 2014). In this case, the athletes are denied their right to choose what brand to wear other than Nike. Additionally, in a world where a variety of brands are present in the market, every individual deserves to try out all of them if they desire and settle for what pleases them. The university on the other hand also failed in its principle of duty, where it was supposed to walk away from companies that lack a moral obligation. If such happened, a company like Nike would have been compelled to work harder and improve on its business practices.
5.2 Nike’s code of ethics.
Following such criticism and accusations, Nike and its management developed a code of ethics that would apply to all employees. A code of ethics is a document that guides the actions of the employees, especially when faced with ethical dilemmas as a way of ensuring integrity, professionalism, and honesty among all the employees. Additionally, every decision made by employees at Nike regarding the company has an impact on the stakeholders regardless of the position held by the employee. Consequently, it is essential for the company to have a single document that provides a basic legal framework and basic behaviors that employees would require while making decisions. While Cerchia & Piccolo, (2019) notes that there are different types of ethics in terms of goals and approaches, Nike follows duty-driven ethics. This form of ethics only emphasizes the need for the employees to follow the given rules regardless of the results of that action. However, the company insists on the employees making decisions that they can be held accountable for. The code of ethics for Nike is specific on standards related to respect, health and safety, fairness, and sustainability. As such, all the partners are required to develop their code of ethics, which entails at the minimum Nike’s code of conduct and posting its code in the local language of the country of operation.
5.2.1 Health and safety
The company seeks to have a safeguarded workplace, where employees feel their health is appreciated and taken care of by the company. Activities that support the health, work-life balance, and well-being of the employees are hence promoted. For instance, the company allows and encourages the employees to participate in exercises as a way of ensuring that they are always fit. The health and safety policies are promoted to the employees, and any visitors received by the company. Acts of violence or threats are also treated as healthy and safety issues, and the company does not tolerate them whether they come from the employees, or from an outsider to employees (NIKE, Inc, 2019). As long as it threatens the security of the employee, the company takes that seriously and does not tolerate it.
Additionally, the company expects its partners who include the factories affiliated with it and the suppliers to have their buildings meet the local laws of construction, and meet the fire and emergency action plan such as detection systems, and exit routes in case of emergencies. The workers are also expected to be prevented from exposure to chemicals and other hazards that could be present in the workplace. Finally, workplaces with childcare facilities such as dorms or canteens are expected to be extra hygienic.
The company expects its partners and its management especially the human resource department to observe respect for employees and their decisions. This includes making employment to be voluntary and releasing those who no longer have the desire to work for the company. The company also expects all its partners to respect the minimum working age of sixteen years, with those who employ below that age regarded as practicing child labor, which is punishable. The employees should not be subjected to any form of discrimination, be it racial, sex, ethnic, gender, or any other form of discrimination while at the workplace. The employees are also entitled to the right of association and collective bargaining (NIKE, Inc, 2019). The partners should have private means of ensuring freedom of association in countries where employees are not allowed to have freedom of association and collective bargaining.
Employees are expected to be treated and treat each other with respect and dignity, where all instances of harassment in form of physical, emotional, or sexual acts are not tolerated. The employees are also expected to work no longer than the regular work hours depending on the local laws. Employees working overtime are expected to have a consensus with the employer and they should be compensated. Employees are to be paid decent pay, which is consistent with the minimum wage of various countries (NIKE, Inc, 2019). The pay should not be subject to disciplinary deductions, and the employees should be accorded the necessary benefits such as transportation allowances, housing, sick leaves, and pregnancy leaves among others. Additionally, all the employees are expected to uphold integrity in all their acts, where, they do not just follow the written policies, but act ethically regardless of the moments at hand.
Nike commits to corporate sustainability following an understanding that corporations are a major source of pollution in society, and that they are powerful social actors, who are expected to portray a positive image to societies they operate around. Nike provides that all its partners and employees adhere to social responsibility in their respective positions (NIKE, Inc, 2019). The partners are expected to monitor and report on their volatile organic compounds, greenhouse gases, and other hazards to the environment. The company engages in social responsibility by sponsoring major events in the communities they operate and they fund athletes as a way of giving back to society. Additionally, the company has community support programs that offer support to the needy. For instance, the company gave at least $89 million globally to support at least 17 million needy children (Dean, 2020). Further, the company encourages its employees to be socially responsible as well as give back to society whether in form of their time or money.
There is a corporate governance board at Nike that has been selected by the company’s shareholders and tasked with various roles at the company. The key purpose of the board is to ensure that the interests of the major shareholders in the company are represented. The establishment of the board follows the longstanding commitment of the company to corporate purpose. This includes the inclusion of human rights, sustainability, diversity and inclusion, corporate sustainability, global community, and social impact.
The board also has its goals which are to promote the sustainability of the firm and to ensure the interest of the major stakeholders which include the customers, employees, local communities, and the government are promoted. According to the stakeholder’s theory, companies have more responsibilities than fulfilling the interest of the shareholders, since without the support of the stakeholders, then the companies would be nothing (Cerchia & Piccolo, 2019). For instance, without the customers, or the employees, the company would not be functional. Ensuring that their interests are taken care of hence puts the company in a better position to compete with its competitors. This is done by creating a set of guidelines that guides key decision-making processes at the company. One example of such guidelines is the code of ethics.
The board ensures that the code of ethics is established and reviewed from time to time, to allow the company to act ethically and legally to avoid tarnishing the company’s name as well as avoid unnecessary legal pursuits. The board elects the nominating and corporate governance committee, which helps run the activities of the board. Some of the responsibilities of the committee include:
- Developing and making a recommendation of a code of conduct of the company for the board to approve.
- Seasonal review of the code of conduct and make a recommendation of the proposed changes for the board to approve.
- Make a recommendation of requests for waivers of the code of conduct for executive officers and directors for the board to approve and ensure that the waivers are promptly disclosed as the law requires.
Ethical consultants are responsible for guiding employees of a company on ethical practices by identifying, analyzing, and helping in resolving ethical issues in the firm. They help the employee to get a thoughtful reaction to ethical dilemmas and issues (Pritchard, 2013). At Nike, there is an ethics and compliance office set aside for receiving all ethical complaints, giving ethical guidance where needed, and taking actions against those who are found engaging in unethical practices. Additionally, the company has a portal known as the speak up portal, where employees have options of reporting their concerns anonymously, and their concerns are taken forward to the necessary authority, in this case, the ethical consultants, who then determine if the practices reported were unethical or not.
At Nike, employees are educated based on their various levels at the company to ensure that they are aware of their expected mode of conduct while at the company. It is here they are made aware of their role towards the company, and when they need to make various reporting regarding various behavior they observe while working for the company.
In conclusion, business ethics have been found to be essential in any organization, for they are capable of lifting a company to new heights, or bringing it to its knees when the organization engages in unethical acts. Although studies have been key in stating that the corporate purpose of business is to make profits, the truth remains that the shareholders cannot survive in the absence of key stakeholders such as the consumers and the employees. This makes it key to ensure that organizations behave ethically towards all their stakeholders, and also ensure that it remains accountable for their operations around their environments as a way of ensuring a sustainable future for the organization and the community around it. It is even more important to take care of the employees, for happy employees are capable of taking care of the rest of the stakeholders. However, when employees are neglected as was the case for Nike Inc. companies get a negative perception from the public, who are the targeted customers, shareholders and investors. With a code of ethics for such companies, employees have a basic guideline that guides every decision that they make to ensure that the decisions are within the legal and ethical framework.