Global Business Ethics Assessment 11th April, 2011.

Richie Ishmeet Deaver 10111115

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Introduction Global business ethics as the name suggests aims at the critical understanding of business ethics and morals at a global platform that is at multinational and national levels. The aim of this assignment is to study in depth the concept of corporate social responsibility (CSR), which has over the years grown its roots in arena of business ethics. In order to understand CSR and its related issues and activities, we will bring under the eye, Carrolls (1991) Four-part model of Corporate Social Responsibility. The assignment would be divided into two primary parts wherein the first part uses Carrolls model to critically analyze and evaluate Nike (Market leader in the Footwear merchandise) on its approach towards CSR. The second part however will be critiquing Carrolls model itself. In order to create a better understanding of the topic under debate, many academic theories will be incorporated into the essay to create point of references as well as comparisons when suitable. So that the criticism is not biased by any sort scholarly journal articles would be reflected on.

Parts A Using Carrolls (1991) Four-Part Model of Corporate Social Responsibility critically analyze Nikes approach to Corporate Social Responsibility. Understanding Corporate Social Responsibility A Starting point From the 1950s CSR has been in the minds of many academics for formal exploration and research. CSR picked up momentum in Europe only recently. Carroll (2008) showed CSRs progress over the years right from social initiatives and practices prior to 1950, increase in CSR theories in 1960s, development of contemporary themes 1980s to CSR in the 21st Century Redefinitions, research, alternative themes and Global expansion (Carroll, 2008, p.39). Corporate Social Responsibility is a commitment to improve community well being through discretionary business practices and contributions of corporate resources (Kotler and Lee, 2005, p.3). The World Business Council for Sustainable Development describes CSR as businesss commitment to contribute sustainable economic development, working with employees, their families, the local community, and society at large to improve their quality of life. The Confederation of British Industry (2001a) states that CSR is The Company accountability lies
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not only on their financial performance but also on their accountability on how they discharge their responsibilities in the society and environment. In wider base, CSR harmonize the company responsibility to protect environment, improve social living standards by improving health and safety practices and sustainable development across the world. From all the above definitions of CSR, a prominent distinction is noticed through words like discretionary that there are certain expectations from businesses which are not mandatory. And hence several authors and economists have questioned the business obligation towards the society and is this obligation an affordable one? (Schwartz and Carroll, 2003). The biggest promoter of this theory is Friedman who argues that greater corporate social responsibility not only distorts business activities but also serves to confuse and misunderstand the rationale of business (Fisher and Lovell, 2003, p.267-8). Similarly Wolf (2000) debates that the role of a company is to make profit and not to save the planet. The above argument shows us the variation in the views of many academics on the issues of how important CSR is Business practice. The relationship of business and the society seems to be a constant debate. Keeping all of these debates in mind we will critically evaluate Nikes approach towards CSR issues that were raised towards them. Our main point of reference would be Carrolls four part model, however it is important to know contrasting views on CSR in order to have a broader view point while critiquing Nikes stance.

Carrolls Four part Model for CSR According to Carrolls definition (1991), CSR resembles four kinds of social responsibilities that would probably make sense to the business community; those are economic, legal, ethical and philanthropic. These elements are set in a pyramid showing a basic building block system. Economic performance forms the base of all activities giving rise to legal considerations in business. Ethical obligation of an organization forms the most complicated block of the pyramid while philanthropic block can be seen as the icing on the cake by many businesses.

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Figure 1 Carrolls pyramid of CSR. Economic responsibility of a business is to maximize profits for its shareholders as well as stakeholders and hence have a competitive advantage in the market. It is a required parameter and crucial in the success of any business. Legal responsibility is the one set by the government and cannot be broken hence is again categorized under required fields. Ethical responsibility of a business is the most critical as it can either make or break the brand of a company. Carroll (1991) very rightly states that the most critical tensions occur in a business while maintaining a balance between ethical responsibilities to its counter parts. It is seen as an expected value in a business since there are no set rules for ethics; it changes depending on cultures and other such parameters. Philanthropic responsibility is a relatively newer term and is a desired value. It is a Greek word which means the love of the fellow human. It represents the business contribution towards developing the standard of quality of life of its employees, local communities and the society at large.

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The CSR pyramid is actually a checklist or a scale that measures the overall efficiency of a corporate. While Friedmans theory on business responsibility inclines towards profit maximization. Archie Carrolls theory goes beyond those boundaries and states the higher and implicit responsibilities of a corporate in a civilized society (Forbes, 2010).Taking this model into consideration we move on to study Nike organization in depth in our next section. Nikes CSR under Distress Nike is a major publicly traded sportswear and equipment supplier based in the United States. Established in 1972 Phil Knight, it progressed to become the leading marketers of athletic shoes and apparel in the world (Nike, 2004). An average company as measured by the S&P 500 only grows earnings at a compounded rate of 3%, in contrast, Nikes earnings growth since calendar year 2000, grew almost 4-1/2 times faster than average at 13.3%. However for all its success, the company has been accused for sweatshops with harsh working conditions. Bob Herbert, a New York times columnist commented that, Nike made its wealth and products with the slave labor of young Asian women. He compared Nike organization to a giant pyramid that crushed the backs of oppressed laborers (Herbert, 1996). This marked the beginning of persistent accusations on Nikes CSR policy and approach towards it. The main issues about Nikes conduct that were questioned consisted of human rights abuse, violence to labors and hideous working conditions within its Asian manufacturing Facilities (Savage, 2002). Nike tried to counterfeit these accusations with the prime statement that, Nike does not manufacture, it only designs and markets its goods. However to show that they are a morally correct company, they set out a PR task force (Kristen and Lee, 2005) and used other methods such as, published a Labor report, statement of corporate responsibility, personal letters to key clients, create website segment and newspaper advertisements, to portray their CSR practices. In response, reasons were leveled at Nike for why they might be practicing CSR, other than just on basic moral grounds, which included - Defending their important public image, Differentiating themselves from their competitors, Helping to prevent financially damaging boycotts, strikes, lawsuits, etc, Appealing to the ethical consumer, Appealing to the ethical investor, Appealing to the ethical employee, Pressure to do so from NGO's, Government or to combat public relations disasters, Using CSR policies as evidence that they do not need to be regulated any further than they already are at present.
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Implications of Carrolls Model on Nikes approach to CSR In order to evaluate Nikes approach towards CSR on the basis of Carrolls Four part model, we will separately cover each of the four parts stated in the pyramid (Figure.1). Economical Responsibilities Business organizations have always been created as economic entities designed to provide goods and services to its shareholders and stakeholders (Carroll, 1991). Friedman (1970) supports this by stating that the first and prime most purpose of an organization is to make profit. Sundaram and Inkpen (2004) qoute that corporations have to maximise their profits and managers have a fiduciary responsibilities to the shareholders. This particular statement has considered profit maximisation as the most important factor; however it can be argued that corporations cannot satisfy the shareholders expectation unless the needs of the stakeholders are met (Jamali, 2008), suggesting the importance of a stake holder approach to CSR. In case of Nike, it can be stated that Nike was the clear market leader and the company with the highest levels of global brand awareness. It also had an influential and well-known founder in Phil Knight, the sixth-richest man in the US (Marketing Magazine, 2005). Using Utilitarianism ethics theory, it can be seen that, the management of Nike was doing its share of economic responsibility towards its owners. However, using stakeholders expansion theory, employees also are a part of the stakeholders of a business and looking after the well-being of their employees was Nikes responsibility. Nike in its CSR approach that took place after the accusations were made did show actions taken for providing loans to its employees for educational purposes. Nike said it will match $75 contributions from private individuals to provide "serious venutre capital" to Vietnamese citizens. They claims they've issues 3200 such loans as of Nov. 1999. But that's only $2400 in loans and still does not even come up to a fraction of how much they spend on the ads to publicize this. On a traditional ethics theories of Justice and fairness, Nikes actions do not clear moral business practices. Legal Responsibility

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Business are expected to comply with the laws and regulations that reflect societys values and norms (Griseri and Seppala, 2010). As a business, we need to keep up with the federal, state and local regulations. Be a law- abiding corporate citizen and provide goods or services that meet minimum legal requirements (Carroll, 1991). Nike has always portrayed to a legally correct organization. However, questions do arise on their selection of manufacturing units. Nike has been criticized for contracting with factories in countries such as China, Vietnam, Indonesia and Mexico, where the mini wage limit is much lower than any other country. Even though legally this might be right from the point of view of virtue ethics is it legal to exploit employees on the basis that their country does not have stricter norm for pays?

Ethical Responsibilities Ethical responsibilities embody those standards, norms, or expectations that reflect a concern for what consumers, employees, shareholders, and the community regard as fair, just, or in keeping with the respect or protection of stakeholders' moral rights (Carroll, 1991). Tichy and McGill put in that "it is difficult to think of a more important basic business ethical commitment than to be a good citizen in the world of your business with real involvement of your people, as well as your money." Ethical responsibilities in this sense are often ill-defined or continually under public debate as to their legitimacy, and thus are frequently difficult for business to deal with. And this is exactly what Nike faced. Nike states that behaving ethically required going beyond the requirements of the law. It required the establishment and enforcement of rules that adhere to accepted moral principles of right and wrong (Hui, 2007). Its reponse to ethical accusations made were to, focus on the Code of Conduct to advocating common standards across the industry, initiate common monitoring platforms such as the Fair Labour Association and the Global Alliances legacy. Again considering Utilitarianism point of view, it cannot be said that the management of Nike was ethical towards its owners either. As the when confessed initially many of the managers newer even knew about the ethical issues that were being exploited at their manufacturing

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facilities. Clearly, Nike had not bother to implement the ethical learning and growth theories for their employees.

Philanthropic Responsibility Carroll defines philanthropic responsibilities as those which Communities desire firms to contribute their money, facilities, and employee time to humanitarian programs or purposes, but they do not regard the firms as unethical if they do not provide the desired level. Therefore, philanthropy is more discretionary or voluntary on the part of businesses even though there is always the societal expectation that businesses provide it. It can be said that this is the only responsibility where Nike has been completely fair towards its all Stakeholders. Nikes management took care of keeping the brand name competitively always right and at the same time did a lot of sponsorship and donations. However it can be noticed that most of these efforts were not discrete as it is meant to be and hence can be seen as a Publicity stint especially in the face of harsh criticism. According to the Coalition of Labor Union Women, the 20-million dollars which Nike paid Michael Jordan to endorse products for one year is equal to the amount they paid Indonesian workers to produce 19 million pairs of shoes, many valued at as much as $120 a pair (Coalition of Labor Union Women). Stakeholder/ Responsibility matrix Stakeholders Owners Customers Employees Community Competitors Suppliers Social Groups Economic Fair Medium Unfair Unfair Unfair Unfair Legal Fair Medium Unfair Unfair Unfair Fair Unfair Ethical Fair Unfair Unfair Unfair Medium Unfair Unfair Philanthropic Fair Fair Unfair Medium Fair Unfair Unfair

Activist Unfair

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Part B Critiquing Carrolls Model Carroll's four part model has been very widely used by numerous theorists (Wartick and Cochran 1985; Wood 1991; Swanson 1995, 1999,Aupperle 1984; Aupperle, Carroll, and Hatfield 1985; Bur- ton and Hegarty 1999; Clarkson 1995). Businesses and society: business ethics texts have incorporated Carroll's CSR domains (Boatright 1993; Buchholz 1995; Weiss 1994) or have depicted the CSR Pyramid (Carroll and Buchholtz 2000, 2003; Jackson, Miller, and Miller 1997; Sexty 1995; Trevino and Nelson 1995). According to Wood and Jones (1996: 45), Carroll's four domains have "enjoyed wide popularity among SIM (Social Issues in Management) scholars." As cited by Schwartz and Carroll (2003). Such use suggests that Carroll's CSR domains and pyramid framework remain a leading paradigm of CSR in the social issues in management field. Due to the acceptance and impact of Carroll's CSR contributions, it may be appropriate to reexamine his model to determine whether it can be modified or improved or if there is a possible alternative approach to conceptualizing corporate social responsibility. Carroll and Buchholtz in their book Business and Society: Ethics and Stakeholders management, 7th edition state that, No metaphor is perfect, and the CSR pyramid is no exception. It is intended to portray that the total CSR of business comprises distinct components that, taken together, constitute the whole. Though the components have been treated as separate concepts for discussion purposes, they are not mutually exclusive and are not intended to juxtapose a firms economic responsibilities with its other responsibilities. (Carroll and Buchholtz, 2006, p.46) Hence, it can be argued that even carrolls four part model might have certain draw backs like (1) the use of a pyramid to depict the relationships among the four components of the model; (2) the role of philanthropy as a separate component in the model; and (3) the incomplete theoretical development of the economic, legal, and ethical domains (Schwartz and Carroll,2003).

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1. The use of a pyramid to depict the relationships among the four components of the model Reidenbach and Robin (1991: 274) use a pyramid to depict their con- ceptual model of corporate moral development, and suggest that the top of the pyramid represents the highest or most advanced stage of moral development (i.e., the "ethical" corporation), while the base of the pyramid portrays the low- est or least advanced stage (i.e., the "amoral" corporation). This is clearly not the perspective of the pyramid's rankings of CSR priorities that Carroll intended. Carroll has very clearly stated that all the Four responsibilities have an equal contribution in the organizations CSR but by using a Pyramid format, it appears that the economic responsibility has prudence over the other ones and there is a diminishing value as we go above.

2. The role of philanthropy as a separate component in the model As discussed in the initial part of this paper, the word discretionary is notable in all the definitions of CSR. However, Philanthropic can also at times be seen as discretionary. L'Etang 1994 and Stone 1975 echo this by stating that philanthropy cannot be considered as a responsibility in itself. The ethical principle of utilitarianism can be used to justify many philanthropic activities (Schwartz and Carroll,2003).

3. The incomplete theoretical development of the economic, legal, and ethical domains It is seen that Carroll provides little discussion of how corporations may engage in multiple domains other than by suggesting that a toy manufacturer making safe toys would be complying simultaneously with its economic, legal, and ethical responsibilities (1979: 501).

These issues have been tackled and solved in the three Domain approach towards CSR.

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Reference

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