Tonight at his lecture, Ed Freeman brought up a story about Nike. Nike is a company who’s brand is so well established that not only are its business practices under scrutiny, but so are its suppliers’ business practices…and their suppliers’ practices. Freeman’s Nike example was that the dye their suppliers used was produced from flowers grown on plantations that exploited child labor. Freeman said that this is good. This is capitalism. I agree with Freeman.
It’s a good thing that Google gives us the ability to easily research what negative and positive press companies accumulate. Google facilitates consumer awareness. Consumer awareness leads to scrutiny and it’s this scrutiny that makes companies like Apple and Nike have to act to change their brand to better represent the values they sell. One step to stopping the horrible working conditions like those of Foxconn in China is to have better informed consumers. Awareness is the first step to solving wide spread social problems. Freeman’s stakeholder theory is grounded in maximizing the stakeholder value. If you treat your employees poorly then people are going to find out about it. The value of your brand is only worth as much as the value it brings to the world. I like this because it encourages people to act ethically. If you act ethically your perceived value to the world increases.
One of the reasons that Apple still outsources to places like Foxconn is obviously the lower costs. That being said if Apple were to stop outsourcing to China it would raise costs significantly. To steal again from Freeman’s lecture, what if there didn’t have to be a tradeoff? What if Apple had a burning desire to solve the ethical dilemma that all major electronics corporations are currently faced with. Should we value lower costs or better working conditions? A company with resources like Apple could innovate a new, cheaper way to produce their products. This innovation could become a competitive advantage or a new product line. This is how capitalism supports stakeholder theory. Capitalism values the innovations that consumers value the most. There is not just one factor that determines the price a consumer will pay for a product. It is a combination of factors like price, brand, utility, etc.. Innovations that increase many factors are the ones that increase stakeholder value the most.
Obviously avoiding tradeoffs is easier said than done…but why should anyone settle for tradeoffs?