Multinationality and Corporate Ethics: Codes of Conduct in the Sporting Goods Industry Rob van Tulder« ERASMUS UNIVERSITY ROTTERDAM, ROTTERDAM SCHOOL OF MANAGEMENT UNIVERSITY OF AMSTERDAM, FACULTY OF ECONOMICS The international operations of firms have substantial impact on the formulation and implementa- tion of business ethical principles such as codes of conduct. The in- ternational sporting goods indus- try has been a pioneer in setting up codes and thus provides much InrRopuction Controversies about international la- bor standards have provoked a variety of initiatives by companies, non-govern- mental organizations, governments and international organizations. These initi- atives have included codes of conduct, social labeling and investor initiatives (CEP, 1999; ILO, 1998; OECD, 1999; Sa- jhau, 1997; US DOL, 1997). These efforts have reflected attempts to arrive at more clarity concerning universal moral norms and the fundamental rights and Ans Kolk* relevant experience. Different sourcing strategies, degrees of multinationality and national backgrounds affect the contents of codes. Moreover, international (non-governmental) organizations prove equally effective in trigger- ing sophisticated codes. duties of multinationals (Bowie, 1997: Donaldson, 1989). The internationalization of business is, however, also accompanied by the persistence of national traditions, cul- tures and regulatory practices. This ap- plies to business ethics (Langlois and Schlegelmilch, 1990; Vogel, 1992), envi- ronmental policies (Kolk, 2000) and in- ternational innovation strategies (Pauly and Reich, 1997). Managers must con- tinue to consider divergent societal and governmental pressures in home versus *Rob van Tulder is professor in international public management at the Department of Business-Society Management. **Ans Kolk is associate professor in sustainable management at the Department of Accoun- tancy and Information Management. ‘This paper s one of the publications resulting from a joint, long-term project on multinationals and corporate social responsibility. Mirjam van Leeuwen is gratefully acknowledged for her contribution to cre 1g the datas on which this paper is based. ‘The authors would also like to thank the anonymous reviewers for their helpful comments. JOURNAL OF InrenNaTionat, Business Stupies, 32, 2 (SECOND QuaRTeR 2001): 267-283 267Murinationatrry ano Corporate Ernics host countries, especially when levels of economic development differ, and de- velop mechanisms, strategies and pro- grams for addressing cross-cultural di- versity and conflicts (Buller and Mc- Evoy, 1999; Donaldson, 1996; Jackson, 1997, 2000). ‘The convergence of national and inter- national strategic peculiarities has been particularly pronounced in the interna- tional sporting goods industry. The in- dustry is largely dominated by six com- panies equally distributed over the Tri- ad: two from the US (Nike and Reebok), two from Europe/Germany (Adidas and Puma) and two from Japan (Asics and Mizuno). The American companies were much quicker in adopting corporate codes of conduct. In this process, and in the steps taken towards implementation and monitoring, continued pressure by trade unions, consumers, human rights groups and the government played a pivotal role. Other leading/dominant companies in this industry, but with dif- ferent nationalities and international supply/production networks, followed different routes. This article analyses the evolution of codes of conduct in the sporting goods industry — considered one of the ‘best- practice’ industries in the world as re- gards the introduction of codes (Sajhau, 1997). The article examines monitoring and compliance mechanisms included in the codes adopted and proposed by companies, societal organizations, busi- ness support groups and international organizations. To obtain insight into the relative position of the industry, the codes applying specifically to this sector are compared to a reference set of 132 codes (cf. Kolk et al., 1999 for a detailed account of this analysis and an overview of the relevant literature). The compli- ance likelihood and the stringency of a corporate code still largely depend on the interaction of various stakeholders in its formulation and implementation. The case of the sporting goods industry sug- gests that this dynamic process is heavily influenced by the domestic con- text and the nature of the industry, but also by the structure of companies’ inter- national production networks (Ruigrok and Van Tulder, 1995; Whitley, 1999). A Cascape or Coves In the 1990s, a wave of voluntary com- pany codes appeared, triggered by atten- tion for developments which posed great legitimacy problems to firms, such as (tacit) support for oppressive regimes, international environmental damage or outsourcing to countries with inferior la- bor conditions, Well-known examples are the problems associated with invest- ing in Burma, human rights in Nigeria, oil spills in Alaska, the Brent Spar affair in the North Sea and sweatshops in Asia. ‘As a response, an increasing number of companies started to draw up codes to voluntarily commit themselves to spe- cific norms and values. These codes have been developed either individually or under the co-ordination of business sup- port groups, such as the International Chamber of Commerce. Business initia- tives interacted with the continued work of international organizations, govern- ments and social interest groups, result- ing in a veritable ‘cascade of codes’ (OECD, 1999). A prominent example of this particu- lar interaction has been the sporting goods industry, which consists of sports equipment and apparel, and athletic footwear. Throughout the 1990s, the sec- tor bread a wave of codes drawn up by different actors. Table 1 gives an over- view of the relevant codes in the sporting 268, Journal. oF IvrennaTionar Busivess SrupiesRos vAN Tunper, ANs Kouk TaBLe 1 Overview or Copes or Connucr RELEVANT TO THE Sportinc Goons InpustRy ‘Type of ‘Name of Gode of Conduct Year Actor Reason for Adoption ILO’s Tripastite Declaration of Principles 197910 concerning Multinational Enterprises and Social policy Nike's Code of Conduct & Memorandum 1992 company of Understanding Reebok’s Human Rights Production 1992 company Standards Athletic Footwear Association: AFA’s 1993 BSG Statement of Guidelines on Practices of Business Partners Puma’s Human Rights Undertaking to 1995 company Observe Universal Standards Mizuno’s Code of Business Ethics Undated company ‘American Apparel Manufacturers Undated BSG ‘Association: AAMA’s Statement of Guidelines Fédération Internationale de Footbal: 1999 10 FIFA’s Code of Labor Practice Apparel Industry Partnership: AIP’s 1997 BSG Workplace Code of Gonduct, World Federation of the Sporting Goods. 1997 10 Industry: WFSGI's Model Gode of ‘Conduct Clean Clothes Campaign: CCC's Code of 1997 SIG. Labor Practices Council on Economics Priorities 1997 SIG ‘Accreditation Agency: CEPAA’s SA8000 Nike's revised Gode of Gonduct 1998 company Nike's revised Code of Gonduct 1998 company Asian Human Rights Commission: 1998 SIG AHRG’s Human Rights Charter to regulate the conduct of multinational corporations a combination of external pressure of SIGs and the modia, and internal willingness to accept responsibility 4 combination of external pressure of SIGs and the media, internal commitment to human rights, and follow-up to Nike's initiative out of concern for the practices of business partners, and political and social issues in host ‘countries to maintain its present international standing and business reputation to express responsibility towards society to express commitment to fair and rational practice of business to recognize the responsibilities to consumers and workers to find a solution to the problem of sweatshops and respond to consumer concerns to ensure that member companies satisfy the highest ethical standards in the global marketplace to improve the working conditions in the garment industry to provide a standardized, global system for companies interested in assessing, monitoring and influencing the social accounitability of their suppliers ‘and vendors, as well as their own facilities to incorporate AIP standards in its code to incorporate Nike’s new labor initiatives to promote awareness and realization of human rights in the Asian region 2, No. 2, Seconp Quarter, 2001 269