NIKE CASE STUDY


Introduction
This paper is a based on a case study of Nike. The paper will be discussing legal and ethical analysis and how the impact the operational/ ethical issues of the organization, the paper shall also be discussing the contribution factors and how the company’s corporate culture may have helped to minimize the unethical behavior or actually contributed to/caused the unethical behavior. The paper is also going to provide ethical decision factors, which are going to address or going to be considered in resolving the legal/ethical issues identified within this case.  And finally the paper is going to provide an action plan for each of the legal/ethical issues along with recommendations that company can take to help prevent these issues in the future.

Nike is one of the famous franchises in the world that sells sportswear for all ages. But is mostly famous for their athlete shoes and apparel and Nike is also one of the major manufacturers of sport equipment as well. The slogan for Nike is “Just Do It”.  Nike was founded in January 1962 in Oregon, United States by Philip Knight and Bill Bowerman. Nike has somewhere around 700 or more retail outlets spread all over the world, and has approximately 45 offices only outside the United States. And it employs 30,000 people all over the world. Nike had a revenue excess of $16 billion in 2007. Nike’s factories are mostly located in Asian countries like Pakistan, India, Malaysia, China, Indonesia, Philippines, Taiwan, Vietnam and Thailand. In 1980 the company had a 50% market share only in the United States shoe market and then the company decided to go public and it did by the end of that 1980’s December. Through the 80’s Nike decided to expand its product line so that the line would include many other sports like tennis, golf, baseball, cricket, badminton etc. all over the world.  

Stakeholders
If we view the organization from a social responsibility perspective, enlightened organizations like Nike view internal and external environment as their stakeholders of the company that is the management of the company believes that the stakeholder can affect the processing of the company.  It must be remembered that every stakeholder has a very different criterion of responses because they all have a different interest in the company.

The primary stakeholders of the company would be the shareholders, business partners, the employees, and the customers/ consumers. What the shareholders and the investors want from the company is that the company achieves its profits, the employees of the expect work satisfaction, pay along with good supervision and the customers are concerned with quality, safety and availability of services when they require it. And when any primary stakeholder group is not satisfied the organization progress becomes questionable. From these the active stakeholders would be the employees, investors and the shareholders, whereas the passive stakeholders would be the customers and the customers want to get high dividends for their investment. (Stockdale & Crosby, 2004)

The secondary stakeholders of the company would be the community (which includes special interest groups). Most companies like Nike exit under only a charter and licenses and operate within the limits of safety laws, environmental protection and other laws and regulations. The socially responsible organizations like Nike consider the effect of their actions upon all stakeholders. What all of these want from the company is that company is ethically and socially responsible and when this secondary stakeholder group becomes dissatisfied, the reputation of the company gets tarnished (for example, the debate of sweatshops tarnished the reputation of Nike).

What the stakeholders want from the company is that they want their needs to be maximizing their value in the company. For example, if both the customers and the employees along with the stockholder interests are addressed then both of the groups will benefit from the sales of the company.

Legal Analysis
Legal responsibility defines what the society thinks is important with the respect appropriate behavior. The companies are expected to fulfill their economic goals within the legal framework. Legal requirements can be imposed by the local, national and international regulatory services.  (Stockdale & Crosby, 2004)

The legal dimension means the general environment of the company that includes federal, state and local rules and regulations that help the company to control the behavior of the employees. The legal challenges of the company would include the EEO (equal employment opportunity). The legal issues that were being faced by Nike and the factors that have contributed to the company being non-compliant are as follows:-
Health & Safety Issues Low Wages Indiscriminate Hiring & Firing Practices

The organization needs to take affirmative actions towards any kind of discrimination is done within the company. Affirmative action mostly refers to the management’s effort to correct the results of any past discrimination that was done against a protected class. These actions are basically written plans that show goals and objectives for hiring, training, promoting and compensating the people of the protected classes by the EEO laws and other laws that protect the laws of the protected groups. The management has to make sure for the future that any kind of discrimination does not occur again therefore the management of the company has to develop affirmative action plans voluntarily. The EEOC compliance is one of the main responsibilities of the HR department of the organization, the HR experts and managers have to develop a plan that would achieve the organization’s action goals in the least disruptive way. The affirmative action plans have to follow the steps if the HR department wants to make this program a success. The following steps are as follows:-Exhibit strong employer commitment Appoint a high ranking director Publicize commitment internally and externally Survey the workforce for underutilization and concentration
Develop goals and timetables Design remedial and preventive programs  (Stockdale & Crosby, 2004)

Ethical Analysis
In this case we are talking about the company doing the right thing that it is ethically responsible. Ethics can be defined as the code of moral principles and values that help to oversee the behaviors of the employees or teams with respect to what is right and what is not. To be ethically responsible, Nike decision makers need to act with equity, fairness and impartiality, respect the right of the individuals and provide different treatment to employees and individuals but only when it’s relevant to the goals and objectives of the company.
Ethical Issues

The organizations these days are also faced with ethical dilemma within the company. Ethical challenges arise in the organization when in a situation each alternative choice or behavior in undesirable because of potentially harmful ethical consequences. Right and wrong is not clearly identifiable in the situation. The ethical challenges (that is the sweatshop debate) that confront the global business of Nike are as follows:-

 The issue of child labor and the sweat shop problem has been one of the legal challenges Nike is faced with.
    Another challenge that is faced by Nike is the workers are given a very low wage and do overtime in countries like Vietnam, China and Indonesia under a subcontract.
    Another challenge that is faced by Nike is poor working conditions, squalid working conditions and forced labor in the factories that manufacture their products.
    And another challenge that is faced by the company is the environmental damage that is done to the society by air and water pollution, noises and change in the climate due to the pollution etc.  (Stockdale & Crosby, 2004)  

The role of the government also plays a major role in these challenges that are faced by Nike. As we know that government laws and regulations differ from country to country and this makes manufacturing of products very difficult challenge for the international companies like Nike. The host governments have laws concerns against consumer protection, information and labeling, employment, wages and salaries and safety of the workers who work in those firms. The international organizations must keep these rules and regulations in their minds and should abide by them. The most visible changes in the legal-political factors develop and grow out of international trade agreements and the emergence of international trade alliance between different countries for example, GATT or EU etc. (Stockdale & Crosby, 2004)

What happened is that the various roles that the host governments of different countries like China, Vietnam or Indonesia played in this particular global business’s operations were that they turned a blind eye towards the poor working conditions of the manufacturing plants. Another role that these governments played was that they did not do anything about the very low wages of the workers for example, in Vietnam the workers were paid 20 cents per hour or a mere $1.60 per day but in actual the living wage in Vietnam was actually $3 per day. And neither of these governments did do anything about child labor problems or the sweatshop problems.

Ethical Perspectives
    For this case study we are going to apply three kinds of ethical perspectives, which will help to demonstrate ethically sound behavior and which illustrate unethical behavior of Nike. the ethical perspectives that have been chosen are as follows:-

    Deontology Ethics: It has been argued in the theories of ethics that if people want to act morally then they need to act in accordance to the duty. It has also been argued in the ethics theory that it is the motives of the individual that carry out the actions and not the other way around, which is, the consequences of the actions of the individuals to act in a wrong or right manner. For example, in our case, fear of an employee in the department would be that he or she might get a customer who is not pleased very easily, and is hard to deal with, with that in mind this could help the employee to work hard and overcome his or her fears and this could only be done due to the adjustment of the employee’s behavior. but it also must be remembered that the fear of losing (for example, one job due to a customer’s hard to please attitude) can also de-motivate an individual to perform badly on the job can result in a great deal of problems for him or her and this is also due to the behavior adjustment of the employee.

    Utilitarianism Approach: Utilitarian approach is based on considering all the effects that happen due to a decision alternatives for a solution and then selecting one alternative which maximizes and provides the greatest satisfaction to the large number of people or population. Utilitarian ethics are code for public and personal actions. For example, in our case, in the management culture of the organization and its departments, they believe in providing the employees with good working conditions, with fair wages and salaries along with secure employment, it is for all the employees who work there. When the organization is hiring recruits to fill out a particular position, makes sure that the candidate that is applying for the job has the education along with the skills the position requires even if it is an entry level position because here individuals get the job based on both but especially their skills that is their ability to communicate with the customers or not, why, because communication is very important because it helps Nike to know more about the needs and demands of their customers and to provide them with the best customer experience.  (Stockdale & Crosby, 2004)

    Ethical Egoism: is about a condition in which moral agent tend to do what they believe is in their self interest. This approach is more like the individualism approach; this approach contends the acts of an individual as moral when they promote the person’s best long term interests. The action that is intended to produce a greater ratio of good to bad for the individual when compared with other alternatives is the rights to one perform. It must be remembered that everyone in this world is perusing self-direction; the greater good is ultimately served because people learn to accommodate each other in their own long term interest. For example, in Nike teams play a very important role, without teams the departments would not be able to grow and learn. The teams learn to communicate and collaborate with one another; through this collaboration the goals and objectives of the organization are achieved. And Nike also strongly believes that the employees of the company need to be involved within the company, this will help the employees become empowered. For example, Nike sustains top performance through their people. The management of the company pays attention to its employees and empowers them to certain degrees which in return makes their employees satisfied with their jobs and remain motivated. (Stockdale & Crosby, 2004)

Contributing factors: Corporate Culture and Corporate Governance/Guidelines
Ethics can be more clearly understood when they are compared with behaviors that actually govern the laws and free choice. There are great deals of companies that get into trouble with the simplified view that choices are governed either by law or free choice. As principles of ethics and social responsibility are more widely recognized, the companies can use codes of ethics and their corporate cultures to govern behavior, thereby eliminating the need for additional laws and avoiding the problems of unfretted choice. There are different kinds of guiding principles that can prevent Nike type scandals, and this is what the company did, they are as follows:-

Employment Practices
The management of Nike took a look at its employment practices; they made sure that the company is following the policies on recruitment, training, health, safety and welfare. The management of the company should also oversee that the environmental practices. To make sure that the company follows procedures that are responsible in terms of waste disposal and avoidance and energy inputs etc. (Malachowski, 2001)
Training Plan

Conduct and design a training program for the employees. Training and development efforts enable the employees to assume expanded duties and greater responsibilities. The management must also remember that training and development programs are not universal solutions to every need of the company. Effective job designs, selection, placement and other activities of the HR department are also very important. Create such a program that would help the management in dealing with problematic behaviors of the employees. The company used cross functional teams to develop products and services and solve the issues that arise. (Malachowski, 2001)
Assessing Performance

Set targets and identify performance measure standards. If performance is to be rated accurately, the performance of the company would require the management to asses each and every relevant performance dimension. A multidimensional form increases the usefulness of the performance appraisal for giving rewards and the facilitate the employees of the company to grow and develop and this in return will help the company to become more professional and it will also help in to grow and develop.  
Ethical Responsibility

The management of Nike should understand that why ethical responsibility is needed within the company because it is the obligation of organization’s management to make decisions and take actions that will grow the welfare and interest of the society and as well the organization. It would include activities and commitments that are related to human rights, governance and ethics, development, working conditions of the employees, community involvement, customer satisfaction, relations with the company’s suppliers and customers and lastly respect for diverse cultures and different people etc.

Ethical Decision Factors to Consider
    The ethical factors that are needed to be considered by the management of Nike in respect to the ethical perspectives (which are mentioned above) are as follows:-

    Leadership by example: The CEO of Nike and the senior managers of the company need to be openly and strong committed to the social responsibility and ethical conduct. They must give constant leadership in renewing the ethical values and the social responsibility of the company. The management must be active in communicating about the company’s commitment in the speeches, directives, company publications and especially in actions too. The CEO along with the company’s managers is the ones that set the tone of the organization most clearly by their behavior.
    Code of ethics: Code of ethics state that the values or behaviors that are expected and those that will not be tolerated backed up by management’s actions. (Schuler & Jackson,  2007)
    Ethical structures: ethical structure actually represents the various systems, positions and programs that a company can undertake to implement a social effort and ethical behavior. An ethics committee is a group of executives under the CEO to oversee the company’s ethics and CSR efforts, for example, the Nike committee that conducts corporate social responsibility efforts.
    Whistle blowing: employee disclosure of illegal, immoral or illegitimate practices on the employer’s part is called whistle blowing. No organization like Nike can rely only on codes of conduct to prevent such kinds of behavior. When there are no effective protective measures, whistle blowers suffer and the company may continue its unethical or illegal activities.  The CEO and the management of Nike should make sure that the managers are trained well so that they view whistle blowing as a benefit and not a threat. (Schuler & Jackson,  2007)

Recommended Corrective Action
There are two recommended corrective action plans that I would suggest to the management of Nike; 1) compensation and 2) training and development. When talking about best practice it must be remembered that best practice can be defined as an idea that suggests that there is some sort of technique, method, process, incentive or reward which is considered to be more useful at producing the desired outcome or result for the company than any other technique, method or a reward etc. (Schuler & Jackson,  2007)
Compensation

Compensation can be defined as what the employees of the company receive in exchange for their contribution to the company. When they are managed correctly that is the employees whether they are executives or not, it helps the company to achieve its targeted goals and objectives and the company is able to obtain, maintain and retain a productive workforce. The outcomes due to pay dissatisfaction can be very harmful to productivity and can disrupt the quality of work life. For constructing a compensation package for the executives, it is important o follow the following steps:-

    Job analysis and evaluation
    Construction of a Point System (Schuler & Jackson,  2007)

Training & Development
Skills, Knowledge Ability of Workers
Program Context
Needs Assessment
Training & Development Objectives
If the company wants to achieve its desired goals and objectives and if it wants to receive the benefits, then the human resource managers and specialists must assess the needs, objectives, content and learning principles that are connected with training. Preliminary steps in preparing a training and development program are as follows:-Actual Program
 Learning Principles
Evaluation Criteria
Evaluation

It must be remembered by the HR managers that when making training program to follow the above diagram in the sequence before the training and the development program can commence. As implied by the diagram, the individual who is responsible for training or development must assess the needs of the employees and the organization like Nike to learn those objectives that need to sought. Once the objectives are set then the content and learning principles are to be considered by the trainer who is training the employees. (Schuler & Jackson,  2007)

Recommendations
    The management of Nike should look at the employment practices; they should make sure that the company is following the policies on recruitment, training, health, safety and welfare.
    The management of the company should also oversee that the environmental practices. To make sure that the company follows procedures that are responsible in terms of waste disposal and avoidance and energy inputs etc.
    Conduct and design a training program for the employees. Training and development efforts enable the employees to assume expanded duties and greater responsibilities. The management must also remember that training and development programs are not universal solutions to every need of the company. Effective job designs, selection, placement and other activities of the HR department are also very important.
    Create such a program that would help the management in dealing with problematic behaviors of the employees. The company use uses cross functional teams to develop products and services and solve the issues that arise.
    Set targets and identify performance measure standards. With the help of performance management, Nike will be able to develop skills of people to achieve their capability to satisfy their ambitiousness and also increase profit of a firm
    Nike has decided to use a PR campaign so that it is able to repair its social image due to the sweatshop debate.
    The management of Nike should understand that why ethical responsibility is needed within the company because it is the obligation of organization’s management to make decisions and take actions that will grow the welfare and interest of the society and as well the organization. It would include activities and commitments that are related to human rights, governance and ethics, development, working conditions of the employees, community involvement, customer satisfaction, relations with the company’s suppliers and customers and lastly respect for diverse cultures and different people etc.

2 comments:

cat2006house said...

I think this looks like an ethic and legal study of Nike rather than a "thorough" case study of Nike.

FearDeathLimitLife said...

Hi could I please have a list of REFERENCES? Great article by the way.

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