70. Conpany A makes al l i ts purchases throLrgh tenders. For seven
years i n that market, my company has never been abl e to do any busi - ness wi th Company A (though we have sol d many bul k materi al s to other state-owned compani es i n that market). Ope of our new man- agers had a connecti on wi th the purchasi ng manager of company A, who promi sed to suppl y us wi th al l of our competi tors' bi ds i f we pay hi m a 2 percent commi ssi on on al l of our Sal es to hi s company' Our area manager accepted thi s arrangement. He got the competi ng bi ds, made our offer, and we got the tender. I learned of this situation when revi ewi n-g our i ncome and expenses chart. whi ch showed the 2 percent commi ssi on. What shal l I do, gi ven the fbl l owi ng: (l ) If I refuse to accept the busi - ness wi t hout any l egi t i mat e reasons (present l y t here are none) my company wi l l be bl ackl i st ed i n t hat count ry-where we get about l nternet Resources Vi si t the Deresky Compani on Websi te at www.pearsonhi ghered.com/ deresky fbr thi s chapter' s l nternet resources. 20 percent of our gross yearl y profi t. (2) l f I accept the busi ness and do not pay the 2 percent commi ssi on, the purchasi ng manager wi l l make much troubl e for us when he recei ves our shi pment. I am Sure that he wi l l not rel ease our 5 percent bank guarantee l etter about the qual i ty and quanti ty of the materi al . (3) If I accept the busi ness and pay the 2 percent commi ssi on, i t wi l l go agai nst everythi ng I have achi eved i n the 30 years of my career. You have three ethi cal probl ems here: Fi rst, your company has won a ri gged bi d. Second, you must pay the person who ri gged i t or he wi l l make l i fe mi serabl e fbr you. Thi rd, you have to deci de what to do wi th the area l-Ilanager who accepted this arangement' SOURCE: J. Del aney and D. Sockel l , "Et hi cs i n t he Trenches, " Acrct ss t he Botrrul (October 19901: 11. CASE STUDY Ni ke' s CSR Chal l enge IN 2005 NIKE returned to reporling on its social and environmental practices after a couple of years of silence due to le_eal concerns. The sports and clothing company is very important to countries such as Vietnam, wherelt is the largest private-sector employer with more than 50,000 workers producing shoes through subcontractors.l Nike's new report makes sobering reading. as it describes widespread problems in Asian factories. The conrpany said it audited hundreds of factories in 2003 and 2004 and found cases of abusive treatment in more than a quarter of its South Asian plants. For example, between 25Ta and 50Va of the fctories in the region restrict access to toilets and drinking water during the workday. The same percentage of factories deny workers at least one day off in seven. In more than half of Nike's tctories ernployees work more than 60 hours per week' In up to 257a, workers refusing overtime were punished. Wages were below the legal minimum at up to 257o of factories.2 For the first time in a major corporate report the details of all the t-actories were published. The report was significant for this transparency and being so candid about the problems that workers for Nike still face, and therefore the challenges that remain for the management. The NGOs working on these issues know that Nike is not alone in facing such problems' Indeed, they realise that the company has invested more in improving conditions than many of its competitors' Studies of voluntary corporate arrempts at improving labor standards in global supply chains have suggested that they are delivering widespread improvements,. and instead new approaches are needed that engage governments, NGOs, and local businesses' -' This reali zatjon has led to a new strategy from Nike. In May Nike' s Vice President of Corporate Responsi bi l i ty, Hannah Jones. tol d del egates at the Ethi cal Tradi ng Ini ti ati ve (ETI) conference that, whereas the company had previously been looking into how to solve prob- l ems for themsel ves, now they are expl ori ng how to create systemi c change i n the i ndustry. She expl ai ned that "premi urn brands are i n a l onel y l eadershi p posi ti on" because "consumers are not rewarcling url' fb, investments in improved social performance in supply chains. Like other compani es, tney have real i zedthat the responsi bi l i ty of one i s to work towards the account abi l i t y of al l . Consequent l y, one of Ni ke' s new cor por at e ci t i zenshi p goal s i s "t o ef f ect posi t i ve, syst emi c change i n wor ki ng condi t i ons wi t hi n t he f oot wear , appar el and equi pni ent i ndustri es." Thi s i nvol ves the company engagi ng l abor mi ni stri es, ci vi l soci ety and cornpeti tors around the worl d to try to rai se the bar so that al l compani es have to attai n better standards of soci al and envi ronmental performance. One exampl e i s i ts i nvol vement i n the Multi-Fibre Agreement (MFA) Forum to help countries, unions and others plan for the conse- quences of the end of the MFA. Chapter 2 . Managing Interdependence This new strategy is beyond what many consultants, media commentators and academics cunently understand. By claiming to be an advance in thinking, an article in The Economist in May, by the worldwide managing director of McKinsey & Company, illustrated the limits of cunent consulting advice. It suggested that seeking good societal relations should be seen as both good for society and good for profitability. "Profits should not be seen as an end in themselves," suggested Ian Davis, "but rather as a signal from society that their company is succeeding in its mission ofproviding something people want."" However, those who have expe- rience working in this field for some years, including Nike realise that, however we may wish to talk about the compatibility ofprofits with people and planet, the cufent societal frameworks for business are not making this a reality. The implication is that we have to make this so by changing those frameworks. The key strategic shift for Nike's rnanagement is that they no longer regard the company as a closed system. Instead, they understand its future depends on the way customers, suppliers, investors, regulators and othe$ relate to it. Their challenge is to reshape the signals being given out by those groups to itselfand its competitors, so that the company can operate in a sustainable andjust way, which is also financially viable. Nike's experience is pertinent to other companies, whose voluntary effofis are failing to address the root causes ofthe problems associated with their industry. Unilever, for example, was criticised by ActionAid for profiting from worsening conditions for workers on plantations.r Falling prices have led to plantations laying off workers and wages going unpaid-a trend that has seen a consequent increase in attacks against owners and managers. Applying a systems view to the situation would suggest that Unilever reconsider how it int'luences the global political economy that is driving dowr pdces for tea. The challenge is not only one of strategy but also leadership. Traditionally, analysts and educators on corporate leadership have assumed that it involves leading people towards the goal of their employer, the company. In May an article on Ieadership in Conference Board Canada's Organizational Performance Relie, quoted the thoughts of leaders from World War Il and the Korean War.o This reflects what Mark Gerzon describes as a f_ocus on "leadership within borders", when what the world needs is "leaders beyond borders."/ This merns people who can see across borders created by others, such as the borders of theirjob, and leach across such borders to engage others in dialogue and action to address systemic problems. We could call this "transcending leadership," which was alluded to by James McGregor Burns, in his path-breaking book Leadership.' It is a form of leadership that transcends the boundafies of one's professional role and the limits of one's own situation to engage people on collective goals. It is a form of leadership that transcends a limited conception of self, as the individual leader identifies with ever-greater wholes. It is a form of leadership that transcends the need for a single leader, by helping people to transcend their limited states of consciousness and concern and inspire them to lead. Perhaps the best modem example of transcending leadership is Gandhi, who aroused and elevated the hopes and demands of millions of Indians and whose life and personality were enhanced in the Focess. It is an irony of oul times that this anti-imperialist who chose to spin his own cloth could be an inspiration for the future direction ofexecutives in large companies sourcing clothes from factories across Asia. Gandhi called on us to understand our connectedness to "all that lives", and identify with ever-greater wholes. There is a lesson here for Nike and others. The appar- el sector is an open system, and so wider issues of trade flows, governance, media, financial markets and politics impact on the potential ofthe sector, and thus Nike, to become sustainable and iust. Without chanEes to the financial markets. Nike mav find its effons are in vain. References 1. www.csr-asia.com/index.php?p-1 925 2. www.csr-asi a.com/i ndex.php?p= I 855 3. BSR and PWC, "Public Sector Support for the Implementation of Corporate Social Responsi bi l i ty (CSR) i n Gl obal Suppl y Chai ns: Concl usi ons From Practi cal Experi ence" (2004), b sr. orglMeta/B S R_worldb an ksc m. pdf . 4. Ian Davis, "The Biggest Contract," The Economist,26 May 2005. 5. www. mallenbaker.net/csr/n1/82.html 71 d d o rake tt he ality he2 d i n won wi l l vi th ' t h e ars rch ing :ad urd ,le, ter In '/a, of :d. rat he ey fs. NS CS of D D- v. rS re LC o d d )t e 72 Part I ' The Gl obal Manager' s Envi ronment 6. Jeffrey Gand,z,"Leadership Character and Competencies," Organizational Performance Review, Spring/ Summer 2005 (conference Board canada). 7. M. Gerzon, Leaders beyond Borders (2004); www.urediatorsfoundation.org. 8. J. M. Burns, Leariership (New York: Harper & Row' 1978)' Source:,Nike Says Time to Team lJpl' The Journal of Corporate Citizenship, Lntumn 2005' i19 p. 10(3). By Jem Bendell. Auckland niversity of Technology, Director, Lifeworth. COPYRIGHT 2005 Greenleaf Publishing, reprinted with permission' Case Questions 1. In refening to the opening protile and the closing case fbr this chapter. discuss the challenges regarding corporate social responsibility that companies in the apparel industry face in its supply chains around the world? 2. Discuss the meaning and implications of the statement by a Nike representative that "consumers are not rewardin-u u, fo, investments in improved social performance in supply chains'" 3. What does it mean to have an industry open-systems approach to social responsibility? what parties are involvecl? who are the stakeholders? 4. What is meant by "leadership beyond borders"? 5. Is it possible to have "a compatiuitlty of profits with people and planet"? Whose responsibility is it to achieve that state?