Chapter 10

Leading an Ethical Organization: Corporate Governance, Corporate Ethics, and Social Responsibility

Learning Objectives

After reading this chapter, you should be able to understand and answer the following questions:

  1. What are the key elements of effective corporate governance?
  2. How do individuals and firms gauge ethical behavior?
  3. What influences and biases might impact and impede decision making?

 

Oliberté Shoes: Doing Business with Soul

In developing the model for ethical business practices, you must choose your company’s ethical priorities. Are you eager to avoid products made in abusive working conditions for sweatshop wages? Is the environmental impact of an item’s materials, production, and transport your major concern? Are animals harmed (or not) in the making of your product? Is it important for your company to give back to the community?

Canada’s Oliberté Shoes manufactures its wide selection of fair-trade footwear in several African countries, from locally sourced leather, and they retail at fifty stores across Canada. Two online British brands have huge ranges of cruelty-free, fashionable footwear made in European factories: Vegetarian Shoes operates in England’s oldest cooperative factory, and Beyond Skin even has a bridal line. MooShoes is a New York store (and online source) for synthetic sneakers and non-leather shoes, belts, and accessories.

On the environmental side, a number of sportswear giants are experimenting with high-performance “green” shoes using vegetable-based inks, recycled materials, and low-toxicity adhesion. Nike has an initiative to take back your hole-filled sneakers and grind them up into material for their green shoes or basketball court flooring. And you can buy Simple Shoes made from recycled tires and carpet padding, organic cotton, and hemp, or eco-certified leather and suede (Kielburger & Kielburger, 2012).

In 2002, Blake Mycoskie and his sister Paige competed on The Amazing Race. Although Blake’s team finished third in the second season of the show, the experience took him to Argentina, where he returned in 2006 and developed the idea to build a company around the alpargata—a popular style of shoe in that region. The premise of the company Blake started was unique: for every shoe sold, a pair would be given to someone in need. This simple business model was the basis for TOMS Shoes, which has now given away more than one million pairs of shoes to those in need in more than twenty countries worldwide (Oloffson, 2010).

The social initiatives that drive Oliberté shoes stand in stark contrast to the criticisms that plagued Nike Corporation, where claims of human rights violations, ranging from the use of sweatshops and child labor to lack of compliance with minimum wage laws, were rampant in the 1990s and 2000s. Some of the sportswear giants have reacted by establishing charitable foundations focused on human rights or girls’ empowerment (Nisen, 2013). While Nike and others struggle to win back confidence in buyers who were concerned with their business practices, Oliberté’s social initiatives are a source of excellent publicity and pride in those who purchase their products.

Although the idea of social entrepreneurship and the birth of firms such as Oliberté are relatively new, a push toward social initiatives has been the source of debate for executives for decades. Issues that have sparked particularly fierce debate include CEO pay and the role of today’s modern corporation. More than a quarter of a century ago, famed economist Milton Friedman argued, “The social responsibility of business is to increase its profits.” This notion is now being challenged by firms such as Oliberté, which argues that serving other stakeholders beyond the owners and shareholders can be a powerful, inspiring, and successful motivation for growing business.

This chapter discusses some of the key issues and decisions relevant to understanding corporate and business ethics. Issues include how to govern large corporations in an effective and ethical manner, what behaviors are considered best practices in regard to corporate social performance, and how different generational perspectives and biases may hold a powerful influence on important decisions. Understanding these issues may provide knowledge that can encourage effective organizational leadership like that of Oliberté and discourage the criticisms of many firms associated with the sweatshop corporate scandals.

 

References

Kielburger, C. & Kielburger, M. (2012, September 6). Ask the Kielburgers: Where can I get ethical shoes? The Globe and Mail.  Retrieved from http://www.theglobeandmail.com/life/giving/ask-the-kielburgers-where-can-i-get-ethical-shoes/article558737/#dashboard/follows/

Nisen, M.  (2013, May 9).  How Nike Solved Its Sweatshop Problem.  Business Insider.  Retrieved from http://www.businessinsider.com/how-nike-solved-its-sweatshop-problem-2013-5

Oloffson, K. (2010, September 29). In Toms’ Shoes: Start-up copy “one-for-one” model. Wall Street Journal. Retrieved from http://online.wsj.com/article/SB1000142405274870411 6004575522251507063936.html