Chapter #2 Commentary – Ethics and Business Decision Making
When reading this chapter think about whether ethics/morals and the law should or should not be the
same? For example, the current moral/legal issue is gay marriage. Those who oppose it usually do so
for a religious/moral reason, and want laws to prevent it. Those who are for it, are usually in support for
a moral reason based on equality and non-discrimination (human rights), and they want the laws that
prevent it to be changed. A similar situation surrounds the issue of abortion, which was illegal in some
states prior to 1972, but legal in others.
The Supreme Court did not “invent” legal abortion, much less abortion itself, when it handed down its
historic Roe v. Wade decision in 1973. Abortion, both legal and illegal, had long been part of life in
America. Indeed, the legal status of abortion has passed through several distinct phases in American
history. Generally permitted at the nation’s founding and for several decades thereafter, the procedure
was made illegal under most circumstances in most states beginning in the mid-1800s. In the 1960s,
states began reforming their strict antiabortion laws, so that when the Supreme Court made abortion
legal nationwide, legal abortions were already available in 17 states under a range of circumstances
beyond those necessary to save a woman’s life.
Those states included Alaska, Washington, Oregon, California, New Mexico, Colorado, Kansas, Arkansas,
Florida, Georgia, S. Carolina, N. Carolina, Virginia (which had contraception illegal at that time),
Maryland, and New York. The irony is that many of those states today would want to make it illegal.
Another issue with business ethics is the creating of corporate codes of conduct, and actual behavior.
Below are various things to read about actual conduct versus ethical conduct.
Nike, Inc. et al. v. Kasky, Marc
The Facts
Nike, Inc. (“Nike”), an Oregon-based corporation, makes and sells athletic apparel. In 1997, an
employee of Nike leaked a confidential audit by Ernst & Young about Nike’s labor practices in Southeast
Asia. The audit said that workers in the Nike factory were exposed to toxic chemicals without
protection, subjected to physical, verbal and sexual abuse, forced to work illegal excess overtime
without proper pay, and suffered from poor ventilation and lack of drinking water. Most people in the
factories are women under the age of 24.
Nike has been actively writing press releases, sending letters to newspapers, athletic directors, and
university administrations since the early 1990s, claiming that workers in Nike factories were treated
well. The leaked audit seems to show that Nike’s statements in these press releases and letters were
either false or misleading.
Marc Kasky is an activist in California who is suing Nike based on a California consumer-protection law
that allows one person to sue a company on behalf of all the people of California for consumer-
protection violations. Kasky is suing Nike for issuing false or misleading statements to the people of
California regarding Nike’s labor practices.
The Issue
Are the statements issued by Nike commercial speech and therefore subject to laws regulating
commercial speech, false advertising or other forms of commercial deception or are their statements
protected speech?
The First Amendment
The First Amendment guarantees the right to freedom of speech, generally unrestricted by the
government. However, there are limitations for certain types of speech. Commercial speech — speech
that is motivated by profit and serves a commercial purpose – can be regulated. In an effort to protect
consumers, commercial speech regulation mandates that commercial speech cannot be false or
misleading.
To determine if speech is commercial, courts apply a three-prong test, considering the speaker, the
intended audience, and the contents of the message. The speaker must be someone engaged in
commerce (the production, distribution, or sale of goods or services). The intended audience must be
actual or potential customers of the speaker, or a person that will likely repeat statements to customers
(such as the media). Finally, the content of the message must be representations of fact about business.
The statements made about the business are for financial gain.
Arguments for Kasky
• The statements made by Nike are commercial speech. The speaker is a company engaged in
commerce sending messages to an audience of actual or potential customers of athletic apparel. The
statements were designed to encourage people to buy Nike products.
• The statements can be regulated, even if they are related to labor disputes and not the actual
sale of products or services.
• The California law does not suppress the expression of points of view or ideas. The law
regulates misrepresentations of fact.
• There is no evidence or cases that show that California’s law deters companies from speaking
out concerning social issues or other areas of protected speech.
Arguments for Nike
• The statements made by Nike are not commercial speech. Nothing in the statements actually
proposes that any person buy Nike products.
• The statements are actually related to labor disputes. Speech related to labor disputes receives
full First Amendment protection.
• The statements were expressions of Nike’s point of view on the labor disputes. Expression of
ideas is protected by the First Amendment.
• California’s law “chills” protected speech, making companies, such as Nike, less likely to speak
out concerning social issues.
Decisions
The Court dismissed the grant of certiorari, believing that it should not have agreed to hear the case in
the first place because the case had not been fully adjudicated in the California courts. When the case
was first filed in a California trial court, Nike argued that there was no reason to litigate because the First
Amendment protected Nike from Kasky’s allegations and the trial court judge agreed. The issue in the
California courts has been whether the trial judge was correct to bar the case based on the First
Amendment. The California Supreme Court argued that the trial judge was incorrect and that the case
should at least be litigated in the trial courts.
This decision to go to trial is the issue Nike was challenging at the Supreme Court. By dismissing the
grant of certiorari, the Supreme Court said that it should not rule on the case until it has been fully
adjudicated in the California court system. Nike hasn’t lost the case; it has just lost the chance to avoid a
trial on the issues. If Nike loses in California, it is possible that the case might find itself before the
Supreme Court again.
