Bus 162 --Team 2: Advertising or Free Speech? The Case of Nike and Human Rights 1.

What ethical issues faced by MNCs in their treatment of foreign workers could bring allegations of misconduct in their operations? Answer: These issues include, but are not limited to the following: wage rates and benefits working conditions such as job security, workplace safety, temperature, ventilation and other standards, working hours, breaks, vacations, worker compensation and unemployment benefits discrimination against women, older workers, cultural and religious minorities human rights violations such as child and prison labor environmental standards 2. Would the use of third party independent contractors alleviate or insulate MNCs from being attached, and would such use be a good defensive shield against charges of abuse of their employees? Answer: As is the case in the United States, the independent contractor status can only be supported through clear, legally defensible criteria, such as the amount of control the contractor has over the tasks to be achieved, the method the contractor is paid, the freedom of the contractor to work on other contracts simultaneously, and so on. Legally, these criteria are not likely to apply to the foreign workers of companies like Nike, who tend to have limited control over their performance, work long, fixed hours on company premises, and be paid on an hourly or piece rate. Therefore, it would be illegal to classify these workers as independent contractors, which exposes MNCs to more problems. Moreover, even if MNCs find a legal loophole to continue to classify their foreign workers as independent contractors, this will not shield their public image and reputation from public scrutiny and criticism for acting unethically and evading their social responsibilities, including paying these workers fair wages and protecting them with benefits, unemployment, and social security-type provisions, which independent contractors are not eligible for. 3. Do you think statements by companies that describe good social and moral conduct in the treatment of their workers part of the image those companies create and therefore are part of their advertising message? Do consumers judge companies and base their buying decisions on their perceptions of corporate behavior and values? Is the historic made in question (e.g. Made in the USA) now being replaced by the made by inquiry (e.g. Made by Company X or for Company X by Company Y)? Answer: Since awareness and expectations of corporate social responsibility are on the rise, good social and moral conduct will be an increasingly important criterion in consumers purchasing decisions. Therefore, it is legitimate to consider these statements as advertising messages. Moreover, companies have found that their ethical conduct is also associated with profitability. Reaping economic benefits from socially responsible actions would justify their classification as promotional activities. For the truly socially responsible organization, these changes represent tremendous opportunities for long

term success and competitiveness in global markets. Only companies that attempt to adhere to the letter, rather than the spirit of these shifting trends is likely to face increased litigation costs and reputation challenges. It is not likely that consumers will completely displace their emphasis on where products are made. Quality standards across countries are likely to continue to shape purchasing decisions, reinforcing the idea of purchasing products made in countries that emphasize quality. Prestigious associations of some products or ingredients with certain countries are also likely to persist (e.g. Italian leather, Brazilian coffee, Egyptian cotton, etc.). However, there is likely to be an integration of where a product is made with which company is making it and how it is being made, as viewed in Nike and many other cases. 4. Given the principles noted in the case, how can companies comment on their positive actions to promote human rights so consumers will think well of them? Would you propose a company (a) do nothing, (b) construct a corporate code of ethics, or (c) align itself with some of the universal covenants or compacts prepared by international agencies? Answer: There are two sets of interrelated considerations involved in this issue: ethical considerations and communication issues. The bottom line response with regard to communication issues is that companies should emphasize truthfulness in all of their communications, regardless of whether they are for public relations, advertising, shareholder reporting, regulation compliance, or any other purposes. The natural outcome of communicating socially responsible actions will usually be good publicity. On the other hand, the above alternatives address approaches in dealing with ethical considerations, which should be shaped by the organizations pre-established corporate values and codes of conduct, and informed by consequences of past actions, future forecasts, changes in the external and internal corporate environment, actions, initiatives and interests of diverse global stakeholders, and others. In other words, good publicity should be a by-product, rather than the goal, of ethical conduct and corporate social responsibility. What does Nikes continued financial success, in spite of the lawsuit, suggest about consumers reactions to negative publicity? Have American media and NGOs exaggerated the impact of a firms labor practices and corporate social responsibility on its sales? How should managers of an MNC respond to such negative publicity? Answer: Nikes continued financial success despite its scandals involving sweatshops indicates that either its customers have very short memories or that they simply do not care as much about Nikes ethics as they do about the companys products. The actions of media and NGOs to publicize unethical behavior by companies is probably beneficial because it may prompt other companies to think about how their actions affect all stakeholders, and encourage consumers to think about their own ethical standards before they buy. Companies should address negative publicity either with a statement defending their actions, or an acknowledgement of wrongdoing and a plan to make amends for doing so.

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