The Important Role Of Business Ethics Commerce Essay

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Business ethics is one of the top issues and is also the most misunderstanding issues in today's business society. Within the last several years, business ethics becomes a problem attracting a lot of attention when the competitive situation is more difficult than before. Society always wants companies to create high-paying jobs and protect the environment. But on the other hand, these companies want to reduce costs incurred to comply with environmental regulations in the production and improve labor productivity. And Consumers desire to buy the lowest price. From this arises the inevitable conflict in the concept of business ethics that called ethical dilemma due to differences in the interests of businesses between stakeholders and shareholders. Similar to other companies, Nike; a sport clothing manufacture; also faces some ethical dilemmas that they need to solve them ethically based on appropriate ethics theory and interests consideration of stakeholders in the organization.

II/ What is ethics and why ethics play an important role in decision making process.

According to Crane and Mattern, 2007, Business ethics is the study of business situations, activities, and decisions where issues of right and wrong are addressed. This concept is extremely important and brings a tremendous value chain for enterprises. For the media, make good business ethics to help businesses improve their public image - a major turning point in the branding. Because of no scandal affection, the value of shares can maintain stability. In addition, the prestige of enterprises will be improved. As the result of it, the business can attract more investments from internal and external relationships. In addition, business ethic also influences joint ventures issues. By doing good ethical practice, it can help the company gain high reputation and via this, the company can find a good partner. A business cannot do well in joint venture if they failed to do ethical practices.

IV/ Nike's background

In 1964, with tens of sports shoes in the trunk, Phil Knight started his business career. The company was founded on January 25 and officially named Nike, Inc... in 1978. Throughout the 1980s, Nike follows the marketing way of Audi and Fiat vehicles. They created the new style shoes with different characteristics such as Pegasus (1988), Air Max (1987) and then to Nike Air Jordan with the certification of the most famous athletes of all time - Michael Jordan. The firm promoted products brands such as Nike Golf, Nike Pro, Nike +, Air Jordan, including Hurley International, Umbro and Converse…etc. spending 40 years of operation, Nike become a US 8.2 billion company. In 2008. There are more than 30 000 employees working around the world.Although it is a successful company, along with this success is the ups and downs of ethical practices.

V/ Nike's Stakeholder analysis

Every decision of the board is affected by the influence of external and internal environment and it affects directly to the target, mission or the effect outcome. According to website, stakeholder analysis is a significant method for stakeholder identification and examining their needs. It is used to identify all key stakeholders who have a vested interest in issues with which the project concerned. This is a helpful tool for Nike to examine their ethical dilemma for the best solution.

When unethical practice happens, there were several negative effects on Customers. It has made a massive boycott of the community for Nike and customers felt unethical when using Nike products. It happened when a child in US was attacked because he wears Nike's shoes in 1990 In addition, there were 14-year old boy in a low price apartment was beaten to unconsciousness and was left on the subway tracks just because of shoes Nike's Air Jordan at his feet (, no date).As a result of it, the firm will meet difficult in their business strategy in advance.

Secondly, shareholder is the next term that Nike needs to consider. When there is news of unethical issue, the share prices of Nike will fell down. Such negative publicity can lead to decrease in investors' confidence in the company's ability to handle situation, which make negative impacts on the share prices. In 1992, profit of Nike decreased 40%. (Investment report, no date). Moreover, the relationship between Nike and university of Oregon became bad because the university joined Worker Rights Consortium (WRC) to against the firm. Following of this is the objections of other universities in US. (Multiply journal, no date)

Finally, the term relationship between Nike and supplier also has some impacts. Most of products of Nike are made by raw materials that are provided from developing countries because Nike can get more profits with lower price material supply. But, the main point is Nike can be influenced from unethical practices of some suppliers. For example, supplier can do offer a best price of raw material due to the tighten benefits of employee. However, cheapest is dearest. Nike may face a threat of quality of their products.

VI/ Nike's ethical dilemmas.

Every business has its own dilemmas. Nike is a global corporation that has branches and factories around the world with thousand employees and many suppliers. So, ethical dilemmas are issues that Nike has to face every year. However, the main ethical issue of Nike is whether to place the firm's benefits over the interests of the employees.

According to Crane and Mattern, an action is morally right if it results in the greatest amount of good for the greatest amount of people affected by the action

A/ Nike has a poor environment for workers

Nike is facing the same dilemma of Foxconn, one of partner manufacture of Apple's product, is poor environment for workers. This indicates clearly by the protests of Vietnamese. According to "Vietnam Talking Point", in April 2010, thousands of Vietnamese Nike factory workers went on strike due to poor working conditions and low wages. In fact, this is taking place where Nike factories are positioned. Because of keeping low costs as one of completive advantages, Nike did not pay attention to the rights of workers. As a result of it, a wave of protests has affected the image of the company and for a long time, Nike was regarded as an unethical company. According to Australia Television Station report on july 2008(Annual report, 2009), the workers revealed that the living condition is unacceptable. "Housed in dormitories with overcrowded sleeping quarters, unhygienic toilet facilities and poor kitchen sanitation" is the reality they are suffering. Beside this, the workers are also suffering from violence situation in the workplace. "Nike workers are 'kicked, slapped and verbally abused' at factories making Converse" is not only the title of Mail online article on 13 July, 2011, but also what staffs are coping every day. In the factory, employees are treated in a humiliating. Applying Utilitarian theory to justify, it is reaching good result but poor working environment make workers not satisfaction. Under the view of egoism theory, employees have the right for their dignity. Nike takes incorrect action because of offering under standard working place.

B/ Nike is a sweatshop, paid low wages and excessive time.

The second issue that Nike is facing is concerned to the labor exploitation of wages and working time. There are evidence and allegations that Nike is a sweatshop because the employee did not receive commensurate remuneration towards their excessive working time. In Vietnam, many workers have to go through the day tired because they are not provided adequate nutrition for meals only 4000 VND ($0:21) to remain productivity although it has been increased 5%, (Jennie lee, 2010). Applying Utiliatism theory, Nike is doing the right way because the company contributed to reduce unemployment situation and boost the economy. Under a view of big picture, Nike has contributed many interests and helped national improve the socio-economic. However, in micro aspects, the employees are not satisfied with the salary and they may harm the company due to low productivity. Besides that, the theory is unsuccessful when scanning it to the basic rules of international labor organization in which "The rules of the global economy should be aimed at improving the rights, livelihoods, security, and opportunities of people, families and communities around the world. " (International Labourorganisation, 2011). , Nike feels sorry for issues they caused.

VII/ Nike Solution for the Ethical Dilemmas.

When there is an ethical dilemma, the company needs to have ethical practice solution immediately to handle the problems. It is very important because if the solution is not logical, the reputation of the firm will become worse and cause damage to the shareholders and stakeholders. The optimal plan is the plan that will bring not only the tangible value but also the intangible value to the firm. For the issue of poor environment, this dilemma is very important because it has direct impacts on not only the quality of products but also the reputation of Nike. In case of sweatshop issue, this issue is associated with non-profit organization of human rights such as FLA (Fair Labor Association) and it could make negative impacts forward to Nike's stakeholders. To handle these issues, Nike has appropriate strategies for internal and external environment. At first, Nike conducted an internal survey among staffs based on the "satisfaction pyramid"(Appendix) to carry out "worker satisfaction chart" (Appendix)

Via this chart, Nike established the "Code of Conduct" (Appendix) to force individual factory follow it. Through this, requirements are set for the suppliers which are to pay accepted wage and standard benefits defined in the labor contract. A remediation action will be made for any factories do not meet the standards. This issue is to make sure workers get their benefits and improves working conditions.

To ensure the compliance with "code of conduct", Nike conduct monitoring teams based in 21 countries to monitor these associates. As long as with the establishment of "SHAPE", inspection of general picture of labor, environment, safety and health standard. Next one is "M-audit" that provides in depth assessment of the labor management practices and working conditions at the factory. And the last one is "FLA" with the duty of unexpected examinations of supplier factories. When gathering all the output from these teams, Nike began grading systems (A-D) (appendix) for all their suppliers. This grade reveals all the information about actual situation of working environments. Via this, the company will have appropriate solutions to prevent unethical issues.

With approaches above, Nike not only improves the image of the company but also to improve the issues that stakeholders are facing. At first, by using the outcome data from the teams, Nike can control well the operation and can answer 3 main issues that are "the quality of working conditions among Nike's supplier, "Should the data reveal variation in working conditions among Nike's supplier? , "progress to improve working conditions factories?" .When the working condition was improved, workers will have critical change of positive thinking to the company and they will be the abundant resources in persuading the media to get rid of negative thoughts about Nike in the past and instead is an ethical company. Next, the firm can evaluate the effectiveness of the renovation. Some factories appear to be in or close to full compliance with Nike's code of conduct while others appear to suffer from persistent with wages, work hours and health, safety issues.

Another Nike's response is a 12 minutes recording video visit of its contracted factories in Indonesia, Thailand, Vietnam and China. Via this activity, Nike wanted to convey a message "an open company with safe working environment, clean, happy and satisfied workers." Although this action had some positive impact, it is not enough to convince the media because the accuracy of information is not high.

Viii/ Best practice and Value.(CSR)

In order to recover the reputation of the company, the specific action must be launched. And the suitable solution must be related to the improvement of the environment, social community and human being. First of all, the company needs a way to improve employer and the brand image. Next, youth or community is one of factor Nike needs to take into account because this factor is one of the target markets of Nike. Besides, environment is always a hot topic all the time. So, it is necessary to implementing different activities towards environmental protection issue. Overall, a big value is what Nike needs to convey through above activities.

Children play an extremely important role for Nike in the implementation of the above objectives. In CSR activities, the fast food company Mc Donald, is one of the successful companies in the implementation of this issue. One of their famous CSR is the event of the title "UNICEF, McDonald's® and Ronald McDonald House Charities® Team up to Raise Funds for Children" (Csrwire report, 2012) .Unicef ​​is a large and prestigious organization on the world in social activities. Mc Donald did a very good job in working with organizations to enhance their image and Nike should follow Mc Donald to achieve the best value associated with this organization. Nike can corporate with UNICEF to conduct appropriate CSR that related to children like: fund to school, charity for children, education, children protection, poverty reduction, children health care…etc. By doing this, Nike can remove the negative thinking of child labor, one of ethical dilemma effectively and get back imagine.

PepsiCo is one of the large companies to contribute to disaster relief in Haiti in the amount of up to $ 1 million (Csrwire report, 2012). In case of Nike are faced with images is an irresponsible company with people, Nike can learn follow PepsiCo in disaster relief will greatly contribute to improving the firm's image. By following this way, Nike brings a big value not only to suffer but also to remove the ethical dilemma such as poor working conditions by contributing to the rebuild of construct.

According to Crane & Mattern, Postmodern theory say "It encourages individual actors to question everyday practices and rules, and to listen to and follow Their emotions, inner convictions and 'gut feelings' about what They think is right and wrong in a particular incident of Decision-making." Applying this theory to justify, CSR activities is an action of supporting community and social. However, this action will be seen as ethical or unethical based on the feeling of each of circumstances. By doing CSR in the way of PepsiCo and Mc Donald, Nike would be able to achieve its objective because the action has positive impacts on emotions, inner convictions that Nike is trying to help and ready to become an ethical company.

IX/ Recommendation.

As already know, Nike is a company heavily invested in the marketing stage by signing a contract with the sport star such as Micheal Jordan, Tiger hood, Amstrong…etc. these super stars will be representing the brands of Nike in all strategic activities. The main point is that the budget for these is up to millions of dollars. However, the Nike imagine will be harm in case of negative scandal. Therefore, Nike needs another solution. Instead of signing contract, Nike may consider the way of using this budget to improve working conditions and increase salary for workers. By doing this, Nike not only can avoid ethical dilemma and unexpected scandal but also do marketing by these workers as mentioned above at the same time. As a result, it enhances Nike reputation and the firm can gain interests toward shareholders and stakeholders.

Although the working conditions has improved, there are still some contracted partners did not comply with the requirement set out in the code of conduct. In this case, Nike needs to be more aggressive in the implementation of penalties. Besides that, the firm needs to utilize the effectiveness of IT technology by installing supervisor camera or secret device that can help Nike to detect any unethical practice because in some factories, the data from monitoring team does not bring authenticity information due to the secret relationship among supervisor members.

Lastly, although there are lots of efforts to solve the problem of low wages, it still happens in some countries. To avoid any mistake or confused issue, the firm needs to learn the labor law to find out salary rate before opening. Nike may refer to labor law of host countries to follow the national minimum wages to ensure that employees paid enough for their living.


Although Nike is facing problem, it still brings brings the names and the addresses of all the factories to public. In addition, nonprofit organizations are permitted to inspect to guarantee the working conditions. Nike has to do some CSR to make people around feels grateful by supporting the Nike's activities. Moreover, the way to solve ethical dilemmas when it occurs will affect entire of business activity in advance. So, a careful reaction is highly recommended. In conclusion, Depending on each of theory that is used to analysis, it is called that ethical or unethical. For Worker, their requirement is ethical because of theory of egoism. In contrast, Nike's action is right due to ultilitarism. Right or wrong is not important; the important is Nike need to balance benefits of both sides.