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2 Your company, a large multinational, has a new advertising campaign which stresses its honesty, fairness and ethical business behaviour. It has factories in several countries where wages are very low. At present it is paying workers the local market rate. Should you increase their wages?

3 A colleague in a company which tests medical equipment has been making bad mistakes recently at work. This is because she has a serious illness. You are her friend and the only person at work who knows this. She has asked you to keep it a secret. What should you do?

4 You are directors of a potato snack manufacturing company. Research has shown that any price increase causes an immediate dip in sales (although sales recover within six months). It has been suggested that you could maximise your profits by simply reducing the weight of the product in the packets and maintaining the current price. What should you do?

3. Do you agree with this statement? Give your reasons.

‘If we face a recession we should not lay off employees. The company should sacrifice a profit. It’s management’s risk and management’s responsibility. Employees are not guilty; why should they suffer?’

Akio Morita (1921-1999), co-founder of Sony

4. Read the report, discuss it in groups and give your opinion.

Business Ethics

Much has been made of the issues relating to Nike and its relationships with its suppliers in recent years. The bad publicity following allegations of the poor working conditions and low pay of workers, including child workers, making its products has caused some damage to Nike’s sales and reputation, something they have been keen to try to respond to.

We get the impression of Nike being a massive multi-national with hundreds of thousands of workers spread across the globe in different plants. In reality, Nike, in terms of its physical and human assets, is quite small. The number of people it employs directly is relatively small in comparison to other corporate giants.

In many respects, Nike represents a new breed of corporate operator. Its main asset is the famous ‘tick’ logo. Indeed it could be argued that this is its only asset, but what an asset! Put it onto almost any item and it adds value. Put it on a football manufactured for pennies in Pakistan, for example, and it can be sold for Ј25 in the UK; put it on any pair of trainers and the price the trainers can be sold at increases dramatically.

The people who produce these trainers, footballs, tee-shirts and so on, do not work for Nike directly; they are employed by a textile or shoe manufacturer in a

factory in Vietnam, Indonesia, Malaysia and so on. The manufacturer happens to have a contract to supply Nike with x amount of thousands of pairs of trainers or tee shirts or whatever. These items might be produced on the same production line as trainers being made for Primark, Asda, Adidas or Dunlop. What effectively sets them apart is that tick logo.

Strip this off and you would have difficulty telling one type of trainer apart from another!

Nike has now issued its second corporate responsibility report outlining the steps it has taken to address the concerns over its ethical responsibilities. The report discloses the names and locations of over 700 of the factories producing products for Nike across the world. The company say that it wants to be completely transparent in its dealings with its suppliers and make this information freely available to its shareholders and other stakeholders.

Nike recognises that it still has challenges ahead. There are still cases where basic employment standards are not met in some of the factories. But it believes this report represents a significant step towards identifying those problems and making it clear to all its stakeholders that it intends to deal with them.

Cynics might argue that this is just a ploy to try to improve its image and ultimately its sales and profits and that the profits it does make are still made off the backs of the poor.

What do you think?

The report is available via the Nike Web site.

READING

1. Which expression below does not form a collocation with the word ethical?

Create example sentences with the other expressions.

	ETHICAL	trading	behaviour	products	issues
		consumers	textiles	shopping	spending

2. Scan the article and underline expressions with the word ‘ethical’.

Ethical fashion: the latest trend?

The British market for ethical clothes is now around Ј43 million. Recently released figures show sales of ethical products grew by more that 50% in 2004. Marks & Spencer has chosen this month – the month of Fairtrade Fortnight – to begin selling Fairtrade clothing. The aim of the Fairtrade movement is to ensure farmers in developing countries receive fair prices for their products, such as food, tea and coffee, cotton and so on. So, does the fact that a major retailer is joining the move towards ethical trading signal a big change in the fashion industry? What is ‘ethical fashion’?

Eco-fashion involves producing clothes in a socially conscious way. It uses for example, organic cotton, which is softer. Supporters want clothing manufacturers and suppliers to provide safe working conditions as well as fair wages for their employees. The ‘Look behind the label’ campaign aims to inform shoppers of the way products are sourced. Typically, companies in this group aim to protect animal welfare and use recycled packaging. They are concerned about the conditions in ‘sweat shops’ and whether children are used in making goods.

Marketing experts now speak of the ‘conscience consumer’. 33% of consumers consider themselves as caring, thinking shoppers. A survey on ethical spending found that 54% of people believe that, as a consumer, they make a difference to how responsibly a company behaves. The number of ethical companies is increasing. People Tree is an ‘ethical label’. It sources its clothes from Fairtrade groups in a number of developing countries. American Apparel makes high quality t-shirts – also, ethically made. Enamore creates clothing from organic textiles and recycled textiles.

Critics point out that less than 1% of the world’s cotton production is organic. They say this will only ever be a niche area, and that eco-fashion is too expensive to have widespread appeal. Only 5% of people who shop believe that ethics are crucial. Most people still have no real interest in changing their habits to shop ethically. One reason for low commitment is that people do not know enough about ethical consumerism. In Fairtrade Fortnight, is this all about to change?

3.Read the whole article. Which two viewpoints are outlined in the article?

4.Discuss the following questions in small groups. Be ready to report your ideas to the class.

a)Do you buy Fairtrade or organic articles, such as coffee / tea, food or clothes?

b)Do you believe that your shopping decisions can change a company’s behaviour? Give an example.

c)How well does your company score in the area of ethical practice? Can it improve in some ways?

5. a) How serious do you consider the following practices? Compare your thoughts with a partner.

a)paying out huge bonuses to company bosses

b)making a false expenses claim

c)misrepresenting company finances to the auditors

d)making money through insider dealing

e)wining and dining key clients at an expensive restaurant

f)hiding your true earnings from the tax authorities

b) Read the following five extracts from the business news. Match each extract with one of the practices listed in a).

1 Parmalat’s auditors Price water house Coopers now say the company owes 14.3 billion. Former managers of the Italian food firm, which declared itself

bankrupt last December, had overstated the company’s performance. It reported earnings of 651 million to investors, when it had only made 121 million for the nine-month period January to September.

2 Popular French pop singer Florent Pagney has been fined 15,000 for tax fraud. He was given a six-month suspended sentence for under-reporting his earnings in 1996 and 1997 by 540,000.

3 Martha Stewart, the American lifestyle guru, is currently on trial in New York, facing charges of acting on insider information for personal gain on the stock market. She strenuously denies the accusations.

4 A secretary in the UK has just been jailed for two and a half years for fraud after submitting false expense claims for foreign flights, expensive meals … and 100 bottles of champagne! She was found guilty of forging the manager’s signature and using her computer to create false receipts.

5 In Germany, the trial of six Mannesman bosses begins. They deny breaking the law when they approved paying out an unprecedented 57 million in bonuses to recompense executives after the firm’s friendly merger with Vodafone. They are accused of betraying their responsibilities to the shareholders.

1

2

3

4

5

c)Find words in the extracts with the following meanings:

a)declared that something is more than it actually is (Extract 1)

b)something officially stopped for a time (Extract 2)

c)claims that someone has done something illegal or wrong (Extract 3)

d)making an illegal copy of something in order to cheat people (Extract 4)

e)to pay someone who has suffered a loss (Extract 5)

6. Discuss the following questions in small groups and report your ideas to the class.

a)Do you agree with the penalties in extracts 2 and 4 in exercise 5 a)? If not, suggest alternatives.

b)Can you predict the outcomes for those standing accused in extracts 1, 3 and 5 in exercise 5 a)? What penalties, if any, would you recommend?

c)Do you think that individual and corporate fraud is on the increase? Justify your answer.

VOCABULARY THROUGH THE CONTEXT

Wrongdoing and corruption

Wrongdoing

PARADISO FINANCIAL SERVICES (Regulatory authority)

We regulate financial services; our job is to prevent financial wrongdoing and punish the wrongdoers.

Insider dealing or insider trading: someone buys or sells securities using information that is not publicly available. Chinese walls are measures that you can take to stop knowledge in one department of your company being illegally used by another department, to buy or sell shares for example.

Price fixing: a group of companies in the same market secretly agree to fix prices at a certain level, so they do not have to compete with each other.

Market rigging: a group of investors work together to stop a financial market functioning as it should, to gain an advantage for themselves.

Bribery and corruption

An illegal payment to persuade someone to do something is a bribe, or informally a backhander (BrE only), kickback or sweetener. To bribe someone is bribery. Someone who receives bribes is corrupt and involved in corruption. This is informally known as sleaze, especially in politics.

Fraud and embezzlement

I’m Sam Woo. I’ve been a fraud squad detective for 20 years and I’ve seen a lot! Once, a gang counterfeited millions of banknotes in a garage. We found US$10 million in counterfeit notes. They were very good quality. Counterfeiting or forgery of banknotes was a problem, but now all the forgers are in jail.

Faking luxury goods like Rolex watches was also a problem, but we’re working hard to close workshops where fakes are made.

There have been bad cases of fraud where someone offers to lend money, but demands that the borrower pays a ‘fee’ before they get the loan. People can be stupid.

And there’s embezzlement, a type of fraud where someone illegally gets money from their employee One accountant sent false invoices to the company he worked for, and paid money from his company into bank accounts of false companies he had ‘created’. He embezzled $2 million - quite a scam.

There used to be a lot of racketeers demanding ‘protection money’ from businesses. If they didn’t pay, their businesses were burnt down.

Money laundering, hiding the illegal origin of money, is common - gangsters buy property with money from drugs. When they sell the property, the money becomes

‘legal’. But banks now help by telling us when someone makes a large cash deposit.’

1. Answer the questions using expressions from Vocabulary.

1 Two ferry companies with ferries on the same route secretly meet in order to decide the prices they will charge next summer. What are they guilty of?

2 A company that wants to keep its share price high makes secret payments to investors who buy its shares. What are the company and the investors guilty of?

3 A rich businessman lends $1 million to a politician so that he can buy a house. The politician pays no interest on the loan and does not mention it when asked to give a complete account of his finances. Which word, used especially about politicians, do people use to talk about this?

4 Specialists in one department of a financial institution are advising Company X on a merger with another company. In another department of the financial institution, traders hear about this and buy large numbers of Company X's shares. What are they guilty of? (2 expressions) What should the financial institution do to prevent this?

5 A company selling weapons to a foreign government makes secret payments to politicians who make decisions on which companies to buy arms from. What could these payments be called? (4 expressions) What is the company and the government guilty of? (2 expressions)

2. Complete this table, using information from A above. The first row has been done for you. You may wish to refer to a dictionary.

Noun: crime Noun:		Verb: what	Noun: thing	Related
	criminal	the criminal	made or done	adjective
		does	in the crime
	embezzler
	faker	fakes	a
			a forgery
fraud	fraudster	defrauds	a
	monev		-	-
		racketeers	-	-

READING

1. Which of these are acceptable to offer / receive in order to secure a contract? Compare your answer with a partner.

Drink

Lunch / Dinner

Gift (e.g. foreign holiday)

Cash payment

2. Complete the ranking with the following countries: Argentina, Finland, Germany, Italy, Nigeria, Russia, UK.

Ranking “The least corrupted country”

________________

1________________

1________________

42 ________________

9 ________________

108 ________________

144 ________________

3. Scan paragraph two of the article and check your answers to exercise.

Transparency International

The efforts of TI (Transparency International) to raise awareness of bribery and corruption culminated on 9 December 2004 – the United Nations first anticorruption day. TI is a non-profit organisation working against corrupt international business and government practices.

In a recently published chart, Finland leads the way as the most uncorrupt country in the world, followed by New Zealand. High on the list are Denmark, Switzerland and Sweden. Of the G7 members, the UK is at 11, with Germany at 15. Russia is at position 90, Italy at 42 and Argentina at 108. Nigeria, notorious for bribery and corruption, is at 144, just above Bangladesh. The index of 146 countries omits some countries with high levels of corruption, because there is not enough evidence to make an assessment.

Giving and receiving bribes in order to facilitate doing business is common practice. But what is a bribe, and what is a legitimate commission? This was the question in the recent Munich football stadium scandal, where it was claimed that 3.2 million Euros were paid to enable the Austrian bidder, Alpine, to win the building contract for the Munich Arena.

The oil industry has frequently been criticised for making payments to corrupt governments. Shell claims that it is a ‘no bribes, fair competition business’ and publishes a chart of internal reported cases of bribery. However, critics say that oil companies could help end corruption by making public details of the payments made to governments and state controlled oil firms. No matter what preventative measures are in place, will corruption always be a part of doing business?

4. Read the whole article and summarise the key points.

5.Create a word diagram for each of the words in italics in the article. Make sentences with the words and expressions.

6.Work in small groups. You are on a committee for business ethics. Decide on the outcomes of the following cases and present your ideas to the class.

a)A salesman pays a government official to help his company win a difficult contract.

b)A shareholder of a team bribes a referee in order to win an important football match.

c)The CEO of a company donates company funds to a political party.

WRITING

Write a composition ‘Piracy in our modern life. Is there any place for it?’

Project work: Study the case.

In 1998, Coca-Cola set up a bottling plant in Perumatti in the southern state of Kerala. Since it opened, local villagers have complained about the fall in the amount of water available to them and have blamed the fall in supplies on CocaCola who, they claim, use up to a million litres per day at the plant. Coca-Cola claims that the shortage in the water is due to the lack of rains in the region. CocaCola even sends round tankers of water to the region to help the local community. Local farmers are claiming that their livelihood has been destroyed since the building of the plant and that the number of people working on the land has dropped considerably because they cannot survive.

Following the cleaning of the bottles, a waste sludge is produced that CocaCola have been disposing of on the land of local farmers, claiming it was a useful fertiliser. Following a BBC Radio 4 programme, samples of the sludge were analysed by scientists at Exeter University in the south-west of England and found to contain toxic chemicals including lead and cadmium - both of which can be harmful to humans - and further suggested that there was little or no benefit of the sludge as a fertiliser. Recent tests by the local state laboratories find that the levels of toxic chemicals are within safety levels but that it should not be used as a fertiliser.

In a separate development, sales of Coca-Cola have been hit by suggestions that its drinks produced in India contained higher levels of pesticide residues than was healthy! A large number of bodies have joined in the local community’s campaign demanding the plant be closed down and that tests be carried out on Coca-Cola to assess its safety. A lawsuit to this effect was thrown out in August, which prompted Coca-Cola to issue an angry comment claiming that the reports were scurrilous, unnecessarily scared large numbers of Coca-Cola’s customers and put thousands of jobs in its plants throughout India at risk. Coca-Cola claims to

employ in excess of 5,000 people in the country, not to mention the many thousands that are linked in some way to the product.

Analysis

There are a number of issues relating to this incident that demonstrate the ethical and moral issues surrounding business.

∙Coca-Cola has become one of the most popular drinks in India.

∙Coca-Cola’s business in India leads to a wide range of direct and indirect employment related to the business as a result of $1 billion (Ј520 million) worth of investment by the company.

∙Coca-Cola claims that its activities are entirely legal.

∙How honest are the claims that Coca-Cola is making?

∙How reliable are the claims made by those who oppose Coca-Cola’s activities?

∙What conflicts arise between the responsibilities that Coca-Cola has to the environment and the local community, and to its shareholders, suppliers and employees?

∙How much pressure would local council officials be under to give Coca-

Cola

a clean bill of health, as some would suggest?

Related Web sites for Research

Use the links below to help research the issue and to get further information about the circumstances and problems that are raised by this story. Then answer the question below which is typical of an analysis and evaluation based question in an examination on this topic.

A list of reports relating to Coca-Cola’s operations in India - from domain- b.com

Coca-Cola in India accused of leaving farms parched and land poisoned - from the Guardian

Coca-Cola India

‘Coke plant will not be allowed to function’ - from CorpWatch Cola Companies Told to Qui - also from CorpWatch

People’s Union for Civil Liberties - Kerala - another pressure group India bans soft drinks in pesticides row - from the Guardian

Question

To what extent are Coca-Cola meeting the needs of it primary stakeholders?

Guide to the Answer

∙You will need to briefly outline the key issues surrounding Coca-Cola’s presence in India

∙You will need to identify the 'primary stakeholders' in this case

∙ Use the research you have conducted to offer an argument related to the main

issues identified - use the research to support your analysis

∙ Following from the analysis, make some judgements about the extent to which Coca-Cola is meeting the needs of its primary stakeholder needs

Extension Work

To what extent would a social and environmental audit help Coca-Cola to answer its critics?