Introduction
Nike was founded on January 25, 1964 by “University of Oregon track athlete Philip Knight and his coach Bill Bowerman” as “Blue Ribbon Sports”. In 1978, the American company was renamed “Nike” in homage to the Roman “goddess of victory”. Between 1964 to 1978, Nike created the first “brand advertisement” called “There is No Finish Line” which helped the company achieve a market share of about 50% in the US, fueling the company’s next step of listing in the stock market. In December of that same year, Nike was listed in the New York Stock Exchange .
Nike is a multinational company having operations worldwide and having an impact of a lot of developing economies where the company has set up its production facilities. As of 2012, Nike employs more than 44,000 people worldwide. The Nike brand is the most valuable brand in the sports business industry, having a value of approximately $10.7 billion. The brand accounts for about 85% of Nike’s total revenue. Other brands contribute to the company’s growth strategy, including the acquisition of Umbro which puts Nike in the position of becoming the biggest football company in the world, Hurley that puts Nike in a commanding position in the beach and outdoor wear market, Converse which adds about US$ 1 billion to Nike and Cole Haan which has tremendous growth potential. Nike also markets their products under their own name such as “ Nike Pro, Nike + and Nike skateboarding” which makes their reputation for the brand increase. “In addition to manufacturing sportswear and equipment, the company operates retail stores under the Niketown name”. This has helped the company achieve stability even during the global economic slowdown. In fact, Nike has even weathered some cultural issues that it has encountered recently .
Strategic decisions such as this make the company highly competitive. The company’s ability to identify and solve its problems decisively adds to its financial prowess that ultimately results in growth. For such a large corporation, it is important that the perception of the company’s clients is maintained. For Nike, this is highly important because of its worldwide presence. Nike, as a multinational enterprise (MNE), should be “ethically responsible” which values. These business principles should help to ensure that its stakeholders are all protected. The application of these principles is reliant on the ability of the company’s decision makers to act fairly and impartially. Nike’s decision makers must especially ensure that its employees are treated well while the goal and objectives of Nike are kept in highest regard.
Nike is faced with ethical dilemma that is considered very challenging and has the possibility of undermining the success of the company. The problem with Nike is that this ethical situation is counter intuitive in nature to its primary goal of optimizing the returns provided to its shareholders. The ethical challenge for Nike exists because the situation the company is in benefits the company on one hand and harms the company on the other hand. The rightness or wrongness of the situation cannot be judged on face value alone.
Nike’s ethical issue is labor related. News reports that it uses child labors (sweat shops) in the production of its products. Other news reports indicate that the company pays very low wages to its workers under production contracts in countries that manufacture its products particularly those located in Vietnam, China and Indonesia. These workers are reported to be experiencing very poor working conditions. Other reports indicate that Nike’s factories are contributing to environmental damage in significant degrees .
On top of these issues, the government agencies that Nike deals with in its global operations play an important part in Nike’s business actions. Nike being a multinational enterprise (MNE) deals with a lot of different laws and regulations, as imposed by various government agencies. These governments enforce regulations that concern workers, trade and environment and Nike at best, should comply with these regulations to the letter. What has happened so far is that Nike is being criticized for trying to uphold its mandate of returning the highest possible returns to its shareholders. Nike is trying to do so by finding a location that would enable the company to enjoy margins through the provision of savings. These savings come from the avoidance of certain costs. In Nike’s case, it has avoided the cost of labor in high labor rate countries such as the United States, and has transferred its production in areas where the labor costs are more competitive such as in South East Asia. The countries such as China, Vietnam and Indonesia are all attractive destinations because their labor rates are very competitive and will result in lower unit costs per product produced. This makes Nike more competitive in the market place and enables the company to be profitable in the short term, and viable in the longer-term. Nike, in its desire to pursue this path, complied with the government regulations imposed by these countries including the wage rates paid (i.e. Vietnam pays its workers US$ 1.60 per day) and the type of acceptable worker arrangements (i.e. China allows children to work with their parents to increase their take-home pay). In neither of these situations where the governments of the respective countries alarmed that potential labor issues were being created nor were they of any understanding of the moral and ethical implications that resulted in serious criticism towards Nike.
Thus we see that on one hand, the ethical issues that are being thrown at the corporation are a result of Nike’s way of carrying out its objectives. In these situations, the company was merely carrying out its mandate. The other perspective, that which says that Nike has committed serious ethical issues is based on the perspective that Nike is a multinational enterprise and as such, should follow a global citizenship decorum that means that it should try to improve the lives and conditions of the communities that it works with. This means that Nike should have been guided by its ethical principles to create positive effects on these communities. Nike’s management believes that the provision of employment and other job opportunities is a demonstration of Nike’s global citizenship and code of moral conduct but its detractors insists that it should do more.
Ethical Perspectives The analysis of Nike’s ethical situation is best conducted using three ethical perspectives. These perspectives are Deontology Ethics, Utilitarian Approach and Ethical Egoism . Deontology Ethics imply that the company Nike should act morally the company should therefore act in accordance with its mandates and duties. From an organizational perspective, this framework says that the company should carry out its actions based on its motivations and not carry out is actions as a mere consequence. Utilitarianism means that the company considers all the possible effects of its actions and evaluates all possible alternatives or solutions. It then makes a decision towards which option or action to take on the basis that that particular solution will maximize the returns it can provide its shareholders. We understand that this is the primary consideration of any private, for-profit organization and Nike is by no means an exception. Lastly, Ethical Egoism tells us that an organization will do what it should do based on a moral agent that would protect its self-interest. Simply put, the company will put its self-interest first which will guide its actions. This framework does not indicate external parties but assumes that the company has taken that into consideration as part of its ethical code.
Is Nike Ethical?
There is no question that Nike’s ethical code is under considerable scrutiny and the company can possibly be harmed by the ethical issues it currently faces. In view of the ethical frameworks described above, the evaluation of Nike’s ethical standings must be viewed not in singularity but should be taken in the context of what the company is trying to achieve. To do so, an examination of the company’s long-term objectives should be included in the analysis.
Nike plans to invest aggressively in its developing market geographies (Greater China, Central & Eastern Europe and Emerging markets) targeting low double-digit growth and an additional $3.0-3.5 billion revenue by the end of fiscal 2015. Nike plans to open new stores with a greater global item and therefore increase more profit with the encouragement of innovation. The company plans to open approximately 250-300 new NIKE-branded stores worldwide over the next five years to elevate the consumer experience and position the brand in the world’s premium shopping locations, as well as drive accelerated growth in digital commerce. Given these efforts, Nike Inc. Expects mid-teens growth in its “Direct to Consumer Business which should contribute and additional $2.2-2.6 billion by 2015”. Nike plans to “build a strong momentum in growing fitness market and to explore the market for products specifically designed for the requirements of maturing Americans”. This means that Nike wants to continue and manoeuvre for increase margins for the management and improvement in Products.
It would not be possible for Nike to achieve these objectives for growth if it pushes itself into a position where it losses credibility. Public perception is very important to an organization such as Nike and therefore addressing ethical issues is one of its priorities. Nike’s work morale is at its very highest, with the company striving to make its work practices more efficient and equitable for its employees, suppliers and partners. Nike focuses on marketing and sales, levering on its brand and reputation. Nike manages its finances and human resources well, again as part of its larger-than-average perspective towards ethical considerations.
Taking this into context as well as the issues thrown at Nike, we can make the conclusion that Nike, as a global organization that fully understands its commitments is an ethical organization. Nike’s management understands the required ethical responsibility of an organization of such magnitude. As such, Nike champions the cause of human rights, corporate governance, employee training and development, leadership development, suppliers and contractors management, community development and even environmental protection. These are all carefully laid out in the company’s code of conduct which is aptly called “ Inside the Lines” (as referenced to sporting activities). In all these issues, Nike’s leaders must make the commitment to communicate throughout the organization that Nike should adhere to strict business morals and ethical guidelines, regardless of its location. It should more importantly communicate this ethical standard to its public stakeholders, especially governments, investors, creditors and even its competitors to proclaim the working conditions it fastens its business viability to. Nike’s management should also communicate the ethical structures it employs to the point that it avoids humiliating ethical events. Nike’s ability to become transparent to its global client base should be made stronger, to leave no doubt that the company is endeavoring to fulfill its primary goal of satisfying shareholder requirements at the same time performing its ethical duties as a global organization. In this regard, based on the perception of the public and the financial performance of the company, it has done so superbly.
Works Cited
Holmes, Robert L. Basic Moral Philosophy (4th Edition). Belmont, CA: Wadsworth Publishing Company, 2006.
Nike. Code of Ethics. 2013. 7 August 2013 <http://investors.nikeinc.com/Investors/Corporate-Governance/Code-of-Ethics/default.aspx>.
Post, The Huffington. Nike Sweatshops. 5 May 2011. 9 August 2013 <http://www.huffingtonpost.com/news/nike-sweatshops>.
