The Gl obal Manager' s Envi ronment

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
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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?