Ethical Guidelines in Finance and Its Relation to Nike - Case Study Example

Ethical issues involved in the Nike case Nike is the largest supplier of athletic shoes, apparels and certain sports equipments. Although, it is a highly successful company, it continues to face ethical issues due to problematic working conditions in its manufacturing units in Third World countries. “Nike's wealth, its detractors claimed, was built upon the backs of the world's poor” (Case). Nike only supplies the products and has been using the manufacturing units in China, Vietnam, Indonesia, etc. In those units or “sweatshops” (as they were called negatively), the working conditions were hazardous and the employees were forced to work for long hours, without appropriate wages. Hazardous in the sense, even if the workers had skin or breathing problems, they were not transferred to departments free of chemicals and the employees who dealt with dangerous chemicals were not provided protective masks or gloves. (Case). If the employees wanted any leave from work, they had to work extra time to finish all the allocated work, then, only they are allowed to go. Even children were involved, and “Air Jordans,” range of shoes were alleged to be put together by 11'year-olds in Indonesia making 14 cents per hour. So, all these ethical issues, featured in the case, gave a negative ethical image for Nike 2. These ethical issues are important The above mentioned ethical issues are important for Nike because unless they solve it successfully, whatever success it achieves, it will get diluted. Because in current times, the target customers, media, certain groups and even other business organizations will view an organization favourably and associate with it, only if the organization incorporates ethics in every aspect of their functioning. If they miss ethics and carry out certain unethical actions, negatively impacting human rights, labour rights and even child lights, those organizations will not only be abhorred by various target groups, but will also be punished by relevant authorities. With Nike also being accused of such ethical violations, it is crucial for it to focus on these issues and take corrective actions. 3) Ethical guidelines in Finance and its relation to Nike Ethical guidelines may differ according to the various industries and also based on their role, company size, type of financial transactions that are carried out, etc. When one focuses on the financial discipline or sector, there are also many ethical guidelines according to the type of organization, the role and job of financial professionals, etc. However, there are certain common ethical guidelines in the financial sector. For example, finance code of ethics aids organizations and its top management to avoid significant legal problems or regulatory fines. (Codjia). For that, the code of ethics stipulates that organizations should avoid activities, which can be considered as illegal and/or unprofessional. U.S. regulations require a public accountant to maintain ethical values including correct procedures, secrecy, correct valuation without any external influence, etc, when auditing a company listed on a securities exchange. (Codjia). Thus, the financial professionals shall under no circumstance succumb to the pressure of the management in reporting the actual facts. 4. Reasonable solutions to Nike’s ethical issues Nike faced ethical issues mainly in its management of employees in its manufacturing units in the Third World Countries. It did not face ethical issues in its financial management matters. Although, the ethical codes related to finance sector may not be correlated to Nike’s ethical issues, and also the solutions cannot be found, there are still some applications and solutions. The main finance code of ethics talks about avoiding significant legal problems or regulatory fines, and from that perspective, Nike should carry out ethical activities in its manufacturing unit, so that they do not elicit any fines from the host governments. In addition, Nike should avoid activities, which can be considered as illegal and/or unprofessional in both the host country as well as in its home country of USA. When its own financial professionals or even external financial people carry out the financial analysis, care should be taken by them to bring out the realistic picture in the Third World units, without fudging the records and details 5. Jim Keady assertions Jim Keady was a former assistant coach of a College Soccer Team, who resigned his coaching job, after he refused to endorse or wear the Nike logo, after the College Team signed a contract with Nike. St. John's University Athletic department signed a $3.5 million dollar endorsement contract with Nike, which stipulated that all the college sport personnel and team staff has to wear sports wear with Nike logo. (Keady). However, Keady after coming to know a lot about the negative working conditions in Nike’s sweatshops did not endorse it. After his resignation, he studied further about the Nike’s workers in Indonesia, and found out how they were living in a pitiable state because of the meagre wages given by Nike. Thus, he countered his critics’ words that Nike’s jobs were “Great jobs for those people”, and also made others agree that Nike’s jobs and its scanty salary were not a great boon to the people in the Third World countries. (Keady). 1) Chart highlighting differences in U.S. and China, Indonesia and Vietnam Countries Population living below $2 per day (%) Life Expectancy rates (Years) Human Development Index (HDI) Rank (2010) United States nil 78.37 4 China 36.3 (2007) 74.68 89 Indonesia 50.6 (2009) 71.33 108 Vietnam 38.5 (2008) (“Poverty headcount ratio at $2 a day”) 72.18 (“Life expectancy at birth”) 113 (“Human Development Index (HDI)”) 2) Cultural dimensions by Geert Hofstede Based on the cultural variations that are visible from place to place, country to country, cultural dimensions model of Geert Hofstede describes five dimensions of differences between national cultures. Asian countries including China, Indonesia and Vietnam fall into the high power distance group because of their historical and religious backgrounds, as powerful elders hold the key in family and organizations as well. USA on the other hand falls into the low power distance group, and so there is not a huge gap between management and the staffs. When viewed from personal and organizational perspective, USA follow Individualism as there are mainly nuclear families and also there is not much of Trade Unions, which collectively bringing together employees. In the case of Asian Countries, it is a mix of collectivism as well as individualism. That is, these countries have sizable joint family structures following collectivism, however without major Trade union movement; it seems to follow individualism as well. USA falls into the category of feminine countries, as women and men carry similar values of humility and caring, focusing on relationships and solidarity. China, Indonesia and Vietnam fall into in the category of masculine countries, where women are not as assertive and competitive like the men, including in the organizational sphere. USA does not follow the dimension of uncertainty avoidance, as they and their organizations explore and venture into the unknown, taking risks, while, the Asian countries bound by culture and family follow the dimensions of uncertainty avoidance. There is no clear distinction between USA and the three Asian countries regarding the dimension of long-term versus short-term orientation, because it changes according to situations and individuals. 3) Common cultural dimensions of the three counties and Nike's decision The cultural dimensions that are found in China, Indonesia and Vietnam have sizable commonalities. The first common dimension of population living below the wage of $2 per day is almost similar in all the countries. However, China has made rapid strides, and is showing positive numbers, while Indonesia and Vietnam have higher number of people. These higher number people below the $2 wage played a decisive role in Nike’s decision to subcontract work in these countries. The life expectancy and HDI in these countries are also on the same lines, however China shows a slightly higher or better figure because of its economic growth. Although, theses two cultural dimension does not play a direct role in Nike’s decision, it shows how these countries are still not developed, and depend on foreign organizations to pep up their economy. This is where Nike can play a major role. 4) Fair Labor Association (FLA) and influence on Nike case Fair Labor Association (FLA) is a non-profit labour rights organization, which was established in 1999 as a result of a task force, formed by former USA President Bill Clinton. The main objective of FLA is to actualize an optimum working environment in the outsourced manufacturing units or sweatshops particularly apparel and footwear factories by eliminating unfair activities including child labour. As it is a multi-stakeholder initiative, FLA now includes among its “members the Lawyers Committee for Human Rights, the National Council of Churches, the International Labor Eights Fund, some 135 universities, and companies such as Nike, Reebok, and Levi Strauss.” (Case). The other domestic or international human rights "watchdog" groups like Global Alliance and International Labor Rights Fund also play a role in elevating the working conditions in sweatshops including in Nike’s. For example, Global Alliance in their report spoke about how the female employees in Indonesia are verbally and physically abused by their employers, leading Nike to implement a ''remediation plan', through which “workers can file grievances against their employers”. (“Report Says Nike Plant”). 5) Chose of purchasing the Nike products After reading the case and conducting other researches about Nike and its practices in its outsourced manufacturing units, I think I will still buy any feasible Nike products. Because by simply not buying their products, individuals like me cannot make them change favourably. They will not know that an individual (me) has not bought the product and so they will change their practices. It does not work that way, the key is not about buying the product or not, however, by raising the unethical practices in various forums, and importantly making them change and making them adopt ethical practices in a more optimal manner. Works Cited Codjia, Marquis. “Code of Ethics in Finance”. Ehow.com, 10 June 2010. Web. 12 May 2011. “Human Development Index (HDI) - 2010 Rankings”. United Nations Development Programme, 2011. Web. 12 May 2011. Keady, Jim. “When Will Nike "Just Do It" On The Sweatshop Issue?” Huffpost Impact, 2 Oct 2009. Web. 12 May 2011. “Life expectancy at birth”. Central Intelligence Agency, 2010. Web. 12 May 2011. “Report Says Nike Plant Workers Abused by Bosses in Indonesia”. The New York Times, 2001. Web. 12 May 2011. “Poverty headcount ratio at $2 a day (PPP) (% of population)”. World Bank, 2009. Web. 12 May 2011. Read More