Module Learning outcomes: Tick if tested here
LO1 Analyse concepts and theories of Corporate Social Responsibility (CSR) and business ethics.
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LO2 Discuss the relevance of ethical and CSR concepts in organisational contexts. ?
LO3 Differentiate CSR issues from the perspective of different stakeholders.
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LO4 Evaluate the outcomes of CSR strategies and provide reasoned predictions on the future use of CSR, and ethical perspectives, within organisational policy making. ?
Assessment types Weightings (%) Essay
100%
Assessment type, weighting and LOs tested by this assessment indicated in far Right hand column above
Important requirements
Mode of Working: individual
electronic submission
Requirement to pass: 40%
Hand in date 12th May 2014 by 23.59
Date you will receive feedback 9th June 2014
Resit/retrieval date July 2014
Assessment limits (in accordance with UWBS assessment tariff)
Between 3000 and 5000 words.
Always keep a copy of your work. Always keep a file of working papers (containing for instance copied journal article and early drafts of your work, etc.) that show the development of your work and the sources you have used.
Explanation of submission requirements and further guidance
• The assessment for this module is subject to a word limit to ensure consistency of approach across all modules. Your work should not exceed the limit indicated (excluding appendices). Do not feel that you have to “achieve” this word count in your work. What is important is that the work satisfies the stated learning outcomes which are articulated through the assessment criteria (see following).
• The requirement to keep a file of working papers is important. There may be circumstances where it is difficult to arrive at a mark for your work. If this is so you may be asked to submit your file within 3 working days and possibly meet with your tutor to answer questions on your submission.
• In the case of paper copy submissions you may also be required to submit an electronic copy of your work.
• Once your work has been marked it will be moderated by another lecturer and then will be subject to further moderation by an independent expert from outside the University.
• Your work will not be returned to you but you will receive detailed feedback explaining how your grade has been arrived at and how your work could have been improved upon.
• Always use of the Harvard style referencing system. The University’s Learning Information Services have produced a series of guides covering a range of topics to support your studies and develop your academic skills including a guide to Harvard referencing http://www.wlv.ac.uk/lib/skills_for_learning/study_guides.aspx
• Expensive or elaborate bindings and covers of written submissions are not required in most instances. (Refer to guidelines however in the case of dissertations).
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Assessment Brief/ Task
The detailed requirements for this task are as follows:
Nike and the reality of corporate social responsibility.
The Nike case study
This case study is based on an article by Simon Zadek in the Harvard Business Review for 2004. The case study has however been adapted and supported by academic commentary from other noted authors. There are two appendices. The first gives more detail to the activities taken by Nike. The second consists of some ideas and debates from noted authors. Business ethics and corporate social responsibility are new aspects of international business. From these quotations, from academic literature and from coverage of international events through news media, it is clear that subjects covered by the terms ‘business ethics’ and ‘corporate social responsibility’ are exercising ever greater influence on the policy and strategies of large companies. Employees and customers live in many different countries. These large companies need the support of, or at least the tolerance of, national governments to be able to operate in different locations across the world.
The multinational context
Nike has not been the only company to be attacked for its highly cost efficient, but ethically questionable, labour practices globally. It has been struggling with its public image to show it takes seriously its attitude to corporate social responsibility (csr). Auditing and reporting practices have come under scrutiny. The processes of organisational learning have happened on the way to constructing strategies of social responsibility. Nike has seen csr as an essential part of the realities of globalization.
In the 1990s protesters attacked Nike for the sweatshop conditions of its overseas suppliers. Nike’s every move was examined so as to strengthen the view that Nike management was driven by irresponsibility and greed. But Nike had a practical problem. According to Crane and Matten (2010:71) ‘Nike had long claimed that the identity and location of their suppliers could not be revealed because it was commercially sensitive information that their competitors could exploit’. That same defence could plausibly be used by other companies as well.
It can be said that companies need to identify and respond to society’s awareness of particular issues, even if the awareness is partly wrong or misinformed. Pharmaceutical companies, for example, are asked to sell life-saving drugs cheaply, even if full prices are needed to sustain research and development. Issues which were once radical, or unimportant, in the business environment, can become central to a company’s strategy. Nike seems to have experienced rapid changes.
Nike has a similar business model to other companies: namely to market highly expensive consumer products through cost efficient supply chains. The protests have forced the company to look at csr in tough new ways. The public have evolving ideas about csr.
Many companies pass through five distinctive stages of organisational learning in the process of developing csr. Please see the Appendix for a fuller explanation of the stages.. Learning is therefore both organisational and societal.
Stage 1 Defensive ‘Its not our job to fix that ‘, the defensive stage, denial of event or ‘It was not our fault’
Stage 2 Compliance ‘We’ll do just as much as we have to’ the compliance stage often visible to critics. Nestles for example offered compliance to the law but the public wanted Nestle to show commitment to take more than legal action
Stage 3 Managerial ‘It’s the business stupid’. This is the stage for managers to take responsibility for the core problem, to make changes and to seek solutions.
Stage 4 Strategic ‘It gives us a competitive edge’’ Responsible business practice can help contribute to the company’s long term success.
Stage 5 Civil ‘We need to make sure everybody does it’. Companies promote collective action to meet the concerns of a society. Diageo and other drinks companies promote responsible drinking.
Nike’s story.
In 1990s the company was surprised when activists launched a hostile campaign because of worker conditions in its supply chain. Nike did make some mistakes. The company now participates in, and finances initiatives to improve worker conditions in global supply chains, and is keen to promote corporate responsibility more generally.
Stages 1 and 2 From denial to compliance
Nike has worked exclusively through global outsourcing. It has not made anything itself, except the first example, the prototype, in its design studio. Most competitors operated with similar organisational structures, with appalling working conditions in some suppliers’ factories.
Nike was targeted by activists not because the company was any worse than other companies, but because of its high profile brand. Indeed its business practices might be seen as being better than the activities of its competitors. Crane and Matten report that ‘Nike’s ‘Reuse-A-Shoe’ programmes have turned 23 million used sports shoes into material used by sports surfacing companies for gym flooring and soccer fields’. (Crane and Matten 2010:430).
The company’s first response was defensive, a response which quickly turned out to be unworkable. Early attempts to build credibility failed. Labour activist demands affected the highly profitable youth markets in North America and Europe. In 1998 Nike created a Corporate Responsibility department: a recognition that the aspect had to be managed by the company.
Stage 3 Managing responsibility
By the year 2000, 80 employees worked on labour issues. Expensive external professionals audited 900 suppliers. But Nike was exposed for not sincerely following its own publicised practices After a 6 month review, senior managers concluded that factory practices were not the problem, but rather problem lay in the common structure of performance incentives based on price quality and delivery times. Codes would be bypassed by buyers to hit targets and secure personal bonuses. The tension was between short term financial goals and long term strategy to protect the brand. To introduce and manage corporate responsibility meant challenging the entrepreneurial spirit that had brought success to the company over 30 years. The reaction was not just against change. Nike’s efforts to create better worker conditions had little effect on profitability. Most investors wanted only short term profits.
The American and British governments supported developed initiatives to help resolve such situational difficulties. The American Fair Labor Association and the British Ethical Trading Initiative helped to bring about compliance in higher labour cost standards by a number of companies.
Stage 4 Responsible business strategies
The important trade agreement in the clothing industry was the Multifiber Arrangement which caused Nike to search for spare quotas of production at lower prices from developing countries. Longer term commitments to suppliers would be impossible. The arrangement expired in 2005 leaving Nike freer to work with fewer, larger suppliers. Lean manufacture has followed, reducing the number of workers through the use of advanced production technologies. Workers need to learn these new production methods, so helping them increase their skills and receive higher wages.
In 2004 Nike acquired the footwear brand ‘Starter’, sold at large retailers such as Wal-Mart. ‘Starter’ operates to high production volumes and low margins, creating challenges to maintaining the company commitment to its labour codes. Customers seeking value focus on price, and are generally less interested in ethical concerns. Nike is however clear that it is committed to good wages for anyone who works in the supply chain. Nike has argued for regulated international labour standards, to deal with any disadvantage that might happen if it acted alone. Cooperation between competing companies makes sense.
Stage 5 Towards civil action
In July 2000 CEO of Nike Phil Knight attended the launch of the ‘Global Compact’ organised by the United Nations. He was the only CEO of a US company out of 50 company chief executives. Knight announced Nike’s support of ‘mandatory global standards for social auditing’ asserting that ‘every company should have to report on their performance ’against these standards. (Zadek 2004:132)
Bibliography
Buchholtz A and Carroll A (2012) Business and society, Ethics and Stakeholder Management, 8th edition, South Western, Cengage Learning
Crane A and Matten D (2010), Business ethics, 3rd edition, Oxford, Oxford University Press
Griseri P and Seppala N, (2010) Business ethics and corporate social responsibility, South Western, Cengage Learning
Wicks A C, Freeman R E, Werhane P H, Martin K E, (2010) Business ethics, a managerial approach, Boston, Prentice Hall
Zadek S (2004) The path to corporate social responsibility, Harvard Business Review 82, December 125-32
Guidance, instructions, and questions.
YOU MUST USE relevant theory from the module to answer all the questions. Each question carries equal marks.
When you have fully understood the case, write an essay for each question below. The word length for each essay should be a minimum of 1000 words. The total word length should not exceed 5000 words. To achieve a grade of 60% or above you must include at 2 academic journal articles in the total assignment: not for each question. Do not include general unreferenced sources from Wikipedia or other sources without peer academic review.
1 Examine and justify actions Nike could take to improve the labour conditions of its workers in developing countries.
2 Assume you are the Chief Executive Officer (CEO). Discuss whether or not you should carry any personal responsibility for alleged misdeeds in the multinational company. What moral theories could you use? You should focus on normative ethical theories, not on theories related to corporate social responsibility.
3 Is it reasonable, or fair, to expect a large company in one part of the world to be responsible for the activities of a supplier in another part of the world? Include your assessment of future trends and developments for csr.
Confine your answers to the moral and csr aspects of this case. Seek guidance from your tutor in case of doubt, at an agreed scheduled session during the module. Your lecturer will not mark emailed draft assignments. You should NOT use the case to express any personal opinions about the nature and operation of modern capitalism.
Appendix 1: the five stages of organisational learning.
STAGE WHAT ORGANISATIONS DO WHY THEY DO IT
Defensive Deny practices outcomes or responsibilities To defend against attacks to their reputation that in the short term could affect sales, recruitment productivity and the brand
Compliance Adopt a policy based compliance approach as a cost of doing business To mitigate the erosion of economic value in the medium term because of ongoing reputation and litigation risks
Managerial Embed the societal issue in their core management processes To mitigate the erosion of economic value in the medium term and to achieve longer term gains by integrating responsible business practices into their daily operations
Strategic Integrate the societal issue into their core business strategies To enhance economic value in the long term and to gain first – mover advantage by aligning strategy and process innovations with the societal issues.
Civil Promote broad industry participation in corporate responsibility To enhance long – term economic value by overcoming any first mover disadvantages and to realize gains through collective action
Appendix 2. Some texts from noted authors
The texts below are given to highlight some of the issues in the subject areas of business ethics and corporate social responsibility. Not all comments from these authors can be used directly in the answers to the case study, but they should encourage you to think about company behaviour and practice. The texts illustrate some of the very real dilemmas faced by managers and policy makers in large organisations.
1 ‘It is being increasingly recognized by managers, policy-makers and researchers that business ethics in the global economy is simply too important to be left merely to chance. Global corporations such as McDonalds’s, Shell, Nike, Nestle and others have realized to their cost the threat that perceived ethical violations can pose to their zealously guarded reputations’. (Crane and Matten 2010:184)
2 ‘No issue has been more consistently evident in the global business ethics debate than the MNCs’ (Multinational Corporations’) use and abuse of women and children in cheap labor factories in developing countries. The major players in this controversy , large corporations, have highly recognizable names –Nike, Walmart, Reebok…..The countries and regions of the world that have been involved are also recognizable – Southeast Asia, Pakistan, Indonesia, ….’ (Buchholtz and Carroll 2012: 358)
3 Nike like ‘Many companies have discovered (or their critics have discovered for them) that in their suppliers’ factories, workers have been paid below a living wage, subjected to physical and verbal abuse, worked compulsory overtime, failed to have time off recognized, and even engaged in child labour.’ (Crane and Matten 2010:416)
4 ‘Nike’s problems with global outsourcing became an international scandal as pictures of children working in deplorable conditions reached mainstream newspapers…Boycotts, started on University campuses, prompted changes in policy for Nike’s outsourcing strategy. Eventually, Nike changed many of its policies and is now a leader in disclosing the conditions of its factories. Nike now performs many of the tasks that had previously been left to the factories or outside monitoring agencies.’ (Wicks et al 2010:378-379)
5 ‘Nike was heavily criticized in the 1990s for buying footballs from companies that used child labour in Pakistan…In 2006 Nike reacted to the concerns (over the continuing use of child labour) by shifting its football production to China and Thailand. This however had a harmful effect on employment in the area where football production takes place in Pakistan. A local newspaper commented on the decision as follows: “By severing its contract with the local company, Nike scored moral points with its customers in the West at the expense of 20,000 families who were affected, since 70 percent of local workers relied on Saga Sports for employment.” Since then Nike has reviewed its decision…’ (Griseri and Seppala 2010:180)