All industries have the responsibility of maintaining high ethical and moral standards that comply with their policies and procedures. Providing a safe work environment and fair labor wages should be the ethical priority in all industries. With a clear overview of the manufacturing industry, it will help us understand the importance of a code of ethics and moral values, unethical behavior from known companies, issues leading to unethical behavior and impact on society. The manufacturing industry should always express integrity, fairness and basic rights within their companies policies and code of conduct to always ensure the safety of its employees. OVERVIEW OF THE INDUSTRYManufacturing is defined to be “the process of converting raw materials and/or parts into finished goods that can be sold in wholesale or retail markets or exported for sale in other countries. It covers a wide range of industries, from food and beverages to pharmaceuticals.
In the beginning of manufacturing, artisans were producing products and goods by hand with most of them working from their farms and homes. When the Industrial revolution began in the 18th century it brought changes in production of goods taking the artisans role as producers. This revolution brought the steam engine, which was used as the main source of power for machinery, increasing the rate of the production. The items were cheaper and faster to produce, therefore increasing the supply and demand allowing more and more factories to open in the United States (U.S.
). These factories employed men and women, but also children. In 1833 The Factory Act was created to set standards for the factories and protect children with the limit of hours worked on a daily basis. According to Bijan Dastmalchi of Symphony Consulting, Inc., companies simply lack the economies of scale that allow them to effectively compete with their larger competitors.
Few companies have the ability to invest in…. millions of dollars in equipment, personnel, and process technology required to compete in a market. Even though the U.S. continues to be one of the world’s leader in manufacturing, most jobs are outsourced overseas taking full advantage of the cheaper labor, cost of material and facilities. But until what extent will the industry go in order to take advantage of such manufacturing labor?CODE OF ETHICS AND MORAL VALUESThe image of a company should be like looking through a window to a clear horizon and not to thousands of clouds obstructing the view. That is why It’s important to implemented, enforced and promoted ethical practices within the industry.
It’s the duty of every industry to adapt a code of ethics and moral values to ensure integrity to all employees and provide them with a safe work environment, as well as fair labor rights. Manisha Paliwal discusses ethics and values stating that both drive what is right and what is wrong in human conduct….. also a relationship can be derived between value and ethics like this Law + Knowledge = Ethics so as, we know the consequences of our actions, we can convert values into rules of behavior that can be derived as ethics.
The industry tends to forget that fact ethics and moral values go hand in hand within the industry. An ethics code should be taken with the same importance starting top executives to the bottom employees. In many instances, when selecting contract manufacturers (CM) overseas, their social responsibility is forgotten by not applying their code of ethics and morals.
This causes for unnecessary social challenges to arise instead of promoting good business ethics to the outside world. The unethical behavior of many name brand companies has lead to damage not only the companies image, but to have a toll on sales, profits, morale and daily activities within the company. COMPANIES WITH UNETHICAL BEHAVIOR There are several companies within every industry that have proven to practice unethical behavior at their outsourced manufacturing locations. In the manufacturing industry companies like Nike, Adidas and Tommy Hilfiger have violated such conducts and the consequences caused the image of the company to decline and justify publicly their actions and solutions to provide either better work environments, safety measurements and fair labor wages.
Nike: Just do itEstablished in 1964 as Blue Ribbon Sports, distributing Japanese shoes “Onitsuka Tiger” to becoming “Nike” in 1971 after parting ways with their Japanese partner (“The Growth of Nike from the Beginning Timeline”). With a few successful events like selling the number one shoe in the US in 1974 to reaching 1 billion sales in 1987, it has not been all positive for Nike. With annual sales increasing by 10% in the last 5 years (“Nike Inc. Cl B.”) and being the most known athletic company worldwide, there has been much to comment on the unethical practices towards their outsourced manufacturing factories over the years.
When labor prices to manufacture the product rose in Korea and Taiwan, Nike moved their manufacturing to third world countries like China, Vietnam and Indonesia where wages are some of the lowest in the world. It’s important to define the term “sweatshop” in order to understand how Nike’s CM actions are unethical. A “sweatshop” is defined by the US Department of Labor as a factory that violates 2 or more labor laws. Sweatshops often have poor working conditions, unfair wages, unreasonable hours, child labor, and a lack of benefits for workers (“11 Facts About Sweatshops”).
The problems began in 1991, when a report documenting low wages and poor working conditions in Indonesia were published by Jeff Ballinger (Nisen, Max 2013). Ballinger also exposed that Nike’s CM were paying Indonesian workers $0.14 cents an hour, that is less than the minimum wage. In a factory in Vietnam it takes 25,000 workers a month to make million of shoes and the factory workers don’t make anywhere near the profit Nike makes. They work 6 days a week and earn about $0.20 cents and hour.
Did Nike not see the unethical practice with the behavior from the CM towards the workers? In 1996 CBS reporter Roberta Baskin interviewed workers from the Nike’s CM factories, some told about their health issues since they began to work in the factory. Others told about physical abuse and how a supervisor was beating 15 lead workers with Nike shoes for poor sewing. CBS media exposure drew more attention to human rights groups about the conditions these factories were in, the child labor, low wages, poor working conditions and abuse. There were several groups that focused on Nike because they believed that as a sales leader in the industry these conditions were unacceptable. Nike was pressured by these groups to be the change in these unethical practices and lead by example.The protest not only came from these human rights groups, but now the factory workers were going on strike hoping for changes in wages and working conditions. In the speech given in 1998 by then-CEO Phil Knight. “The Nike product has become synonymous with slave wages, forced overtime, and arbitrary abuse,” Knight said.
“I truly believe the American consumer doesn’t want to buy products made under abusive conditions.” (“Nike Strives to Overcome Sweatshop Abuse”). Knight took the most important step towards change, when he realized Nike had a problem. In 1999 The Fair Labor Association (FLA) is created by Nike. FLA is a non-profit group that combines companies, and human rights and labor representatives to establish independent monitoring and a code of conduct, including a minimum age and a 60-hour work week (Nisen, Max 2013). Working conditions improved and Indonesian factories wages increased. Nike agreed to random inspections to make sure all standards are being followed.
Internally Nike makes changes creating a group that would be responsible of all inspections to CM and to ensure that all factory scores meet employee safety and working conditions. In 2002 the Code of Conduct was issued to all factories with regulating the working conditions and safety requirements that needed to be followed. Nike took a big step in 2005 when it published a detailed report, where all the unethical issues were acknowledged and until present time the company continues to display their standards and commitments as part of their social responsibility to society. But Nike’s transparency with detail reports doesn’t mean that all the issues were solved, Bangladesh is still in poor working conditions. We must be attentive in the future to see changes in the ethical practices of the not mentioned factories in the news. There is still work that needs to be done and not must not be forgotten. Nike has proven that by becoming a leader and dealing with the issues, it was able to manage a crisis with solutions that lead to a safer work environment and conditions, fair wages, a code of conduct, honesty and integrity to the world. Adidas: Impossible is Nothing In 1920, brothers Adolf and Rudolf Dassler started making shoes by hand the their mother’s basement.
Four years later they created “Dassler Brother Shoe Factory” what later would become Adidas (Wrinkler, James 2011). Working closely with athletes gave the brothers an advantage on what exactly an athlete needed on a sports shoe. Making their official debut in 1928 at the Amsterdam Olympic Games. The Dassler shoe became more of a success, when a German athlete won a gold metal in the Olympic Games in Los Angeles in 1932 and so began the growth of a successful business.
Adidas is born in 1948, after the brothers decide to part ways and Adolf gives part of his nick name (“Adi) and part of his last name (“Das”) to create a new brand name (Wrinkler, James 2011). As the years past Adidas became the second largest brand name in the athlete industry by dominating 80% of the players wearing their shoes in events. In 1978, Adi Dassler passes away leaving the company in the hands of his wife Kathe, who a few years later would pass and his son Horst, who became the sole owner of Adidas later on. As the cost of producing rises it caused Adidas to be less profitable and is when Horst works on a restructuring the company to keep up with competition. Unfortunately in 1986, Horst Dassler dies and doesn’t complete his plan of restructuring and Adidas losses hopes.
It wasn’t until three years the hip-hop group Run-DNC wrote a song about Adidas shoes, bringing people’s interest back to their shoes and helping Adidas become a corporation. finally becoming a corporation. Sales and profit were up the roof and in 1996 the brand becomes “the best sports brand in the world” (Winkler, James 2011).
Adidas celebrates its 50th anniversary in 1999 and everything so far seems to be nothing but success. It wasn’t until November 2000, that Adidas would be in the news for child labor in the sweatshops and in 2012 factory workers claimed they were forced to lie on inspections on safety.In 2000, the European Parliament hears about unethical practices from Adidas CM sweatshops towards the factory workers in Indonesia. The Parliament was ” told that clothes for Adidas were made in two factories using child labour, forced overtime and sexual harassment” (Burke, Jason). Nikomax Gemilang and Tuntex factories in Indonesia, had children as young as the age of 15 working 15+ hours a day, receiving low wages of $60.00 a month, taking illegal deductions from their wages, not allowing any emergency leaves and were punishing the factory workers.
Similar claims also were made from factory workers in Bangkok and Thailand, where workers had 12 hour shifts seven days a weeks, low wages and brutal actions were taken in order to meet the production deadlines. They also were denied workers rights such as holidays and sick leave payment. It’s hard to believe that earlier in the year Peter Csanadi a spokesman for Adidas said “We have factories where the conditions are very good and we take this whole issue very seriously….. We know we have had problems, and we had to terminate some contracts because we saw that the management were not interested in good working conditions…We work closely with factory management…..We also have a team of our own people who go to factories to sort out problems”(Chaudhary, Vivek 2000).
Adidas started to perform audits in all the factories. However, it was reported that the factory workers were advised about such audits beforehand and were mandated to clean up, fill up first aid kits and practice answers if spoken to. A factory worker expressed “We have to tell them we’re paid the minimum wage, and we mustn’t tell them we work overtime at weekends”(Marks, Kathy). So Adidas acknowledge there was a problem, but yet no action was taken towards all the sweatshop factories to have better practices and follow work standards for the well being of these workers. As a company you are driven to make sales and increase profit, but at the expense of who? Even though Adidas raised the wages, provided time cards and eased the overtime, we cannot forget how unethical the treatment that was given to such workers was. In order to keep the image of a company admirable, you should be more conscious and ethical on how business is done.
Sales and profit are the goal in any industry, but without factory workers there is no product and with no product there is no sales or profit. Tommy Hilfiger Corporation: An American Classic Not all companies are as big and recognized like Nike and Adidas, but that doesn’t mean that a smaller company like Tommy Hilfiger Corporation is to be left out when speaking about unethical practices in CM factories. Founded in 1985 with the help of businessman named, Mohan Murjani and a marketing campaign in Times Square, he launched his first signature collection. In 1990’s, Tommy Hilfiger began to gain popularity with the hip-hop artist and was the biggest sponsor in the Britney Spears Tour: Baby One More Time (“Who is Tommy Hilfiger?”).
In the year 2000, the company began to have some financial troubles bringing sales 75% down and was sold to Apax Partners for 1.6 billion. However, in 2010 Tommy Hilfiger Corporation was sold to American clothing business, Phillips-Van Heusen for $3 billion (“Who is Tommy Hilfiger”). There has been over 500 factory workers killed in Bangladesh factories. One of the biggest fires occured in in 2012, when 120 workers died when fire broke out in the Tazreen Fashions textile factory (Al-Mahmood, Syed Zai). Another fire in the Ha-Meen Factory also took the lives of at least 24 people with unclear reasons on how the fire started. The deputy managing director Mr. Hussain said “that the company suspected an electrical short circuit, but that investigators from the government and the garment industry association were still working to establish the cause.
.. Fires can be very deadly because some factory owners lock exits to prevent workers from leaving their machines…
. the doors at the company’s factory had not been locked” (Manik, Julfikar Ali and Vikas Bajaj). This kind of unethical practices coming from CM factory owners is unacceptable. A human being must be treated with respect and by following a code of ethics that is possible. Protest by factory workers began demanding better working conditions and for companies like Tommy Hilfiger Corporation to assume responsibility and provide better working conditions. ABC News conducted an investigation and found out that business continued as usual and that woking conditions were still not safe in a country that has seen nearly 500 people killed by fires in these factories.
PVH has committed “to spend more than $1 million to enforce a set of safety reforms demanded by labor rights groups. Among them, an independent fire inspector and reports about safety conditions that are made public”(Ross, Brian 2012). It’s clear that the effort to make change was there, but according to a report by Scott Nova, the director of the Worker Rights Consortium, a year after the deadly blaze in Ashulia, three workers at factories making Tommy Hilfiger clothes died in two incidents. After this report broke out, PHV made a binding agreement that all factories doors should would be open for audits and that will make an effort to make these factories more safe. We must not forget that not only PVH outsources their production to CM, but companies like Gap, H&M and Walmart do as well. There is still much to be done by these brands and in hopes for a better future they must be moral and ethical when signing CM overseas. Many of those factory workers are there because the is no more job opportunities. They need to work to survive, but at no instance should their necessity become an open window to take advantage of their rights.
ISSUES LEADING TO UNETHICAL BEHAVIOR There are several factors that contribute the business unethical behavior. Nike, Adidas and Tommy Hilfiger Corporation are just some of the many other brands that practice this behavior. So where does it start? In order to be a good leader you must always lead by example.According to Chron.com here are some factors that contribute unethical behavior: management, money and unclear policies. From the top management (CEO’s, V.P., managers & supervisors) should be the ones to institute the type of ethical behavior to be followed by the company, but this is not always the case.
If for example the top managers that make unethical decisions, it will automatically give the impression to other workers that ethics don’t matter and that this is the way the business should run. Some unethical decisions are based solely on money. When the production of a product becomes costly, the company sources out in order to save money. This becomes unethical when the greed to make more becomes more important than the conditions where the product is being produced. This also applies to not participating in green-friendly initiatives because the cost of greener machinery is to high. Lastly most companies don’t have a manual with the code of ethics and moral standard, which leads to poor behavior with bad consequences. A company that uses no formal policy and offers no guide to its employees cannot expect them to be ethical in any workplace. Policies need to be available, clear and enforced in order to avoid some of the issues like the already mentioned brands could have avoided.
UNETHICAL BEHAVIOR IMPACT ON SOCIETY The unethical behavior of a company can have a great impact on society. With the social media and technology being so advanced, society is no longer unaware of any issues involving the actions of such. This unethical behavior can affect sales of the product because customers may avoid buying such product. Also it can lead to investors not willing to do transactions with such a dishonest company.
Many companies take the consumers opinions for granted, without realizing that the voice of an individual can be powerful when speaking out about poor behavior. It’s important to that companies understand the importance in credibility from society and to always enforce a positive image with actions that can be proven with acts of ethics, morale and kindness. CONCLUSION