Sweatshop Issues and Nike: Business Ethics

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Although companies experience competitive pressure induced by globalization, they should promote labor rights, basic wages, and unionization in developing nations where they operate. For multinationals seeking to increase profitability, robust worker protection policies impede the most efficient utilization of labor and create investment disincentives. Consequently, these organizations view weaker unions, minimal labor regulations, and lower remuneration as the ideal destination for subcontracting production due to the potential of higher profit margins. However, corporations are obliged to oversee the application of ethics in the conduct of their overseas’ partners due to the influence on the firm’s reputation and performance (Andrade et al., 2017). In the 1990s, Nike was widely condemned for outsourcing its manufacturing to Chinese and Southeast Asian sweatshops, which violated labor rights and engaged workers at 50 cents per hour (Iqbal & Chuan, 2016). Although Western entities have to demand that their foreign contractors implement the mandatory standards observed in the West, individual consumers and businesses have the ethical responsibilities to push for better employment conditions and employee protection.

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Minimum Wage, Labor Rights, and Unionization in Foreign Countries

Corporations should support the implementation of labor rights, a basic wage, and unionization in Third World countries where they have operations. Disparities in labor rights and employment standards among countries at different development levels are significant considerations in international trade and investment choices. Businesses facing growing aggressive competition from low-wage regions are tempted to invest or outsource services to jurisdictions with lax labor laws. However, it is imperative that such organizations promote fair labor practices, abide by the minimum wage requirements, and support unionization despite the absence of effective regulations. Artuso and McLarney (2015) contend that exploitative occupational practices create an unfair economic advantage, leading to continuous compromise on workers’ safety, standards, and remuneration. In this regard, enterprises which benefit from unjust practices could trigger heightened competition between countries and a downward spiral of rational decisions to enhance attractiveness to investors. Moreover, this means that even with the passage of legislation which enhances or raises labor standards and remuneration, global pressures may inhibit their adoption and application, as countries would rush to undercut one another.

Additionally, better remuneration and robust social protection are critical ingredients of stable economies, skilled labor, improved public service, and a working class which enjoys middle-class purchasing power. As a result, these conditions promote increased productivity, growth in the global economy, and provide an expanded market for manufactured commodities. For instance, Nike’s profitability would grow considerably if the sweatshop workers could afford the footwear and apparel they manufactured. Barth et al. (2020) contend that stimulating unionization ultimately leads to enhanced worker productivity, attributable to improved information flows, increased tenure, and better overall health. In the long run, these outcomes translate to operational efficiency and better organizational performance. Therefore, companies should stimulate unionization, minimum wage, and employment rights in Third World countries where they operate as innovative business growth drivers.

Ensuring the Implementation of Western Protocols by Foreign Contractors

Western companies have the right to ensure that their foreign contractors observe the standards required in the West. Organizations establish management control mechanisms designed to align foreign operations and subsidiaries with the core corporate culture, particularly in countries where the state may not sufficiently enforce Western-espoused ideals, such as labor rights. This implies that multinationals should decide on their core ethical and social responsibility values and empower the subsidiaries to formulate specific strategies, which reflect the desired ideals of the managing entity. The establishment of managerial control of the foreign subsidiary is integral as fraudulent and unethical practices can adversely affect the outsourcing firm’s reputation and market performance (Sroka & Lorinczy, 2015; Sageder & Feldbauer-Durstmuller, 2019). In other instances, some countries reprimand organizations which infringe their code of ethics through hefty fines since such practices violate the state’s laws where they are domiciled. Therefore, Western companies reserve the right to direct the observance of standards required in the West by their foreign contractors.

Consumers’ Ethical Responsibilities when Dealing with Firms Relying on Overseas Labor

When buying commodities or services, consumers make a deliberate choice on the type of business they give their money. Over the years, consumers have become increasingly concerned with various corporate practices, such as environmental protection, social responsibility, and the general conduct of companies. Ricci et al. (2016) posit that consumers play an integral role in compelling companies to operate ethically due to the inseparability of production and consumption. The view is corroborated by Vitell (2015), who notes that corporate social responsibility may fail in the absence of ethical conduct from consumers. From this perspective, it is imperative for consumers to evaluate the operational principles of the businesses which depend on overseas labor. For instance, customers who ordered Nike footwear and apparel in the 1990s endorsed the company’s exploitative employment policies and child labor in the Chinese and Southeast Asia sweatshops. Notably, outsourcing decisions are primarily influenced by cheap labor, lax employment regulations, and multinationals’ ability to manipulate the existing system. Therefore, consumers have an ethical responsibility of diligently gathering information about the practices of such firms and monitoring the journey of their products so that they adjust their purchasing decisions accordingly.

Universal Occupational Standards and Employment Protection

Although businesses have the right to operate under their standards and practices, they should adopt universal benchmarks on the workplace environment and employee protection. Outsourcing production to enhance profitability and minimize costs is increasingly becoming popular due to the availability of markets with cheap labor and nonexistent employment standards. However, companies should not be lured by the potential of high returns in such countries but should engage in fair and ethical labor practices. In many instances, the regulatory practices of the hosting country are ineffective and easily manipulated by the influential multinationals. From this perspective, organizations should promote the adoption of various universal standards and employment protection frameworks to raise workers’ general standards and reduce their exposure to occupational hazards. The approach should reflect the global commitment to fair labor standards and international employment rights.

Businesses have an ethical and moral mandate to promote unionization, basic wage, and labor rights for their employees. Although the companies outsource these services to reduce their operational costs, exploitative and unethical conduct could ultimately hurt the brand and lead to shrinking market performance. Besides, better remuneration, improved workplace conditions, and unionization foster economic growth, stability, and an expanded market for the manufactured commodities. Similarly, consumers should educate themselves about company operations, especially those with overseas activities. Additionally, consumers should be conscious of their power to influence business practices through their purchasing decisions. If an individual chooses to purchase goods from an unethical business, they support and endorse the continuation of such practices. However, ethical responsibility should be undertaken jointly by consumers and corporates for better outcomes.

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References

Andrade, J., Kavita, M. H., & Duarte, M. X. (2017). Business ethics: International analysis of codes of ethics and conduct. Revista Brasileira De Marketing, 16(1), 1-15. Web.

Artuso, M., & McLarney, C. (2015). A race to the top: Should labor standards be included in trade agreements? VIKALPA: The Journal for Decision Makers, 40(1), 1-14. Web.

Barth, E., Bryson, A., & Dale-Olsen. (2020). Union density effects on productivity and wages. The Economic Journal, 130(631), 1898-1936. Web.

Iqbal, M. W., & Chuan, G. C. (2016). Securing workers’ rights and equity in the midst of globalization and regionalization: Towards a sustainable and mandatory labor charter. Procedia, 219, 344-351. Web.

Ricci, C., Marinelli, N., & Puliti, L. (2016). The consumer as a citizen: The role of ethics for sustainable consumption. Agriculture and Agricultural Science Procedia, 8, 395-401. Web.

Sageder, M., & Feldbauer-Durstmüller, B. (2018). Management control in multinational companies: A systematic literature review. Review of Managerial Science, 13(5), 875-918. Web.

Sroka, W., & Lőrinczy, M. (2015). The perception of ethics in business: Analysis of research results. Procedia Economics and Finance, 34, 156-163. Web.

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Vitell, S. (2015). A case for consumer social responsibility (CNSR): Including a selected review of consumer ethics/social responsibility research. Journal of Business Ethics, 130(4), 767-774. Web.

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