Sunday, November 16, 2014

Under Armour fails to "Protect this House" -Matt Breton

Matt Breton 2009

Case Description
Company Overview

Under Armor started in 1996 by a former Maryland football player Kevin Plank. Kevin is the CEO of Under Armour. The headquarters is located in Baltimore, Maryland.  As a player he always wanted to wear athletic gear that could keep athletes cool and dry while playing in a game of any kind. Under Armor made gear for all seasons for any sport you wish to take part in. “Under Armour’s diverse product assortment for men, women and youth is complex, but the program for reaping the benefits is simple: wear HeatGear when it's hot, ColdGear when it's cold, and AllSeasonGear between the extremes. This technology in apparel can improve athletic performance and help maintain heat and cold climates so they athlete will not feel the playing conditions. Just like most companies around the world they have a mission statement that they have, in order to set a standard and to tell the customers what they expect of themselves.“To make all athletes better through passion, design and the relentless pursuit of innovation"


Case Controversy

Under Armour is a company that brings in athletes to represent there brand through endorsement deals.  They allegedly were performing illegal recruiting routines to try and persuade a young basketball player named Lance Stephenson. They wanted Lance to play at the University of Maryland, which just so happens to be the head quarters of Under Armour. There is no problem with companies offering young athletes money. It is a problem when these kids are still in high school or college. Under Armour is trying to get an edge on the young talent that will hopefully improve their brand. Under Armour has a strong code of ethics that they claim to abide by. They talk about obeying the laws but in this particular incident, they broke NCAA rules. If companies continue to disobey the law and perform unethical actions, in the long run, it can hurt their business financially and marketability. With already a huge competitor in NIKE, these kinds of actions can only help NIKE and hurt Under Armour. Under Armour cannot afford to take hits in the current market. When ethical issues came out about how Under Armour tried to influence a young athletes decision (Lance Stephenson) on where he should attend. It was wrong and against the rules of the NCAA. Lance's father was smart. "Lance Stephenson Sr said "Under Armour will have no influence on where his son goes to college and that the relationship with the company is "long term talk..." Players should not be persuaded with incentives on where to attend. School and academics come first, and are most important. 

(CEO/Founder Kevin Plank)

The stakeholders in this ethical issue stretch across Under Armour as a company. In particular CEO Kevin Plank. He makes the deals with different athletes he wants to sign that represent his brand. Another stake holder are the young collegiate athletes. These athletes make decisions where to go based on academics, scholarships, and other school perks they may get going to a particular school. To go along with the athlete stakeholders, your everyday consumer is another stakeholder. People who want to by the Under Armour product are all stakeholders, whether they purchase clothing, shoes, equipment etc… these people can be affected by the decisions that Under Armour as an organization makes. If Under Armour makes a bad product, or gets involved with legal actions, it can have a negative effect on the company, the opposite is also true. If Under Armour makes an amazing product or brings in an athlete that every likes and looks up to, it can generate lots of revenue and good press for the company.   Another stakeholder, are all the college and universities in the country trying to recruit different athletes to play for their school. In this particular case, all the stakeholders listed should be aware of their actions and the different penalties which can occur if they make the wrong decision. These should be ethically rationed decisions. There are rules and regulations in place that companies need to follow. Irrational decisions lead to consequences that can hurt a company in the long run. It only takes one violation to ruin a company for good. In this particular case, Under Armour was not ruined but their image took a minor hit. “The problem with Under Amour’s approach is that their relationships with colleges are, unlike Nike or Adidas, limited. Extremely limited.. With Under Armour limited with brand recognition, their methods need to be pushed in order to land that next “big” athlete for their brand. Prior incidents have happened in the past where athletes have received gifts from schools and resulted in a harsh penalty. For example, running back Reggie Bush played for USC, was accused of receive money bonuses for games in which he met standards for a booster and was given money for his performance. As a result of Reggie accepting these gifts he was stripped of his Heisman trophy. The NCAA follows these rules to the book and there is no way around them. Players receiving gifts is a violation and an ethical issue for these athletes.

Ethical Theories


Individualism was developed by Michael Friedman. In this theory, a company’s main goal is to maximize profits in particular for the owner (Kevin Plank Under Armour) and their stakeholders. These of course have to be within the law and human rights (Salazar). For Under Armour and this ethical case, they acted unethically because of the violation of the NCAA rules and regulations. The violated recruited, and presented perks for the athlete. On the ethical side, this theory allows Under Armour to recruit any player they wish in order to maximize the company’s profits. Presenting Lance with this shoe deal after his graduation gives Under Armour a chance to raise its profits because the player’s skills and abilities would become more developed after four years playing college ball. The shoe deal could improve the player’s abilities, which is a legal reason to sign players these contracts. “The hope is that, after college, these recruits blossom into the next Michael Jordan, the company sells a ton of shoes, the player gets rich, and everybody's happy”. This ethical theory was not followed by Under Armour and the University of Maryland because both failed to pass the rules and regulations that the NCAA has implemented to specifically prevent collegiate athletes to receive benefits while in college. “As a member of the NCAA, state university’s requires that all of its student athletes be amateurs in their sport Your are a professional if you: are paid (in any form) or accept the promise of pay for playing in an athletic contest; Sign a contract or verbally commit with an agent or a professional sports organization”. After reading these laws and violations in place by the NCAA, players need to follow these rules in order to stay a collegiate athlete, and perform in college athletics. Under Armour needs to wait for Lance to graduate college, and then he can be approached for a potential shoe deal with Under Armour.


The next ethical theory is Utilitarianism. Utilitarianism stats that it is the “happiness of all conscious beings”. (Salazar). You want to “maximize happiness, and minimize pain for all of the stakeholders because doing this will overall improve the well being of society”. (Salazar). For this particular case, Under Armour, the NCAA (University of Maryland) and the player (Lance Stephenson) all the main stakeholders. In order for each of these stakeholders to receive maximum happiness, the shoe deal needs to be executed.  If the deal is made, Under Armour will receive maximum profits resulting in happiness within the company. For Lance Stephenson, signing this deal will result in happiness knowing that he will be making millions before he even enters colligate sports. Also, it can improve a player’s performance in the sport knowing that he needs to perform at a high level to maintain his contract deal. Lastly for the University of Maryland, it can improve the recruiting ability in the future when they are looking to bring in new athletes for the next basketball season. It also gives them a big advantage and leverage to show other recruits that signing with Maryland can bring opportunities such as a shoe deal and a wealthy contract for when they leave college. This ethical theory of Utilitarianism is ultimately an ethical theory that which Lance Stephenson, University of Maryland, and Under Armour can all reach maximum happiness and satisfaction. In the long run, Under Armour can use this as a tool for recruiting other athletes to sign with their company. As a company in the shadows of NIKE they need to generate big name signings in order to generate the same amount of buzz NIKE brings in with such recruits like LeBron James, and Kevin Durant. University of Maryland gains happiness because it gives the school a major recruiting edge against other colleges such as Duke, or UNC. Schools receive benefits when their school performs at an elite level that is better than other college teams. Lastly Lance gains happiness because he will already be a big name player before he even plays a game of basketball. 


The next ethical theory is Kantianism.This theory was introduced by Immanual Kant. In this ethical theory, Companies should do what is right because it is the right thing to do. The most important parts of this theory are Motivation, and the ability to make a conscious efforts  for the company to do whatever is right is the most important part. Companies cannot just think about themselves and try to take advantage of the companies stakeholders (Salazar). Under this ethical theory and for Under Armour influencing different recruits with these enticing shoe deals if they sign with University of Maryland is completely unethical based on this theory. Both of these organizations are not doing the right thing by providing extra incentives to these recruits to sign with their company. For athletes such as Lance Stephenson these students, and student comes before athlete, should be making their college decision based on academics, location, money (sometimes) and overall student satisfaction. Ultimately the decision of what school that athlete chooses is where he/she will be spending at least 4yrs of their lives. For student athletes their decision has an additional added factor to their decision. Lance should be making the decision along with the other reasons listed previously, but on how well the athletic program is for him. A recruit doesn't want to play for a school that doesn't offer benefits that can better off a player for the future; also athletes don’t like to play for a program where they are not “that good”. By looking at this ethical theory Under Armour and University of Maryland both made the wrong ethical decisions making them fail being part of the Kantianism theory. “The player's father, Lance Stephenson Sr., said Under Armour will have no influence on where his son goes to college and that the relationship with the company is "long-term talk . . . a hope and a prayer.”. Even though Lance’s father has a say where his son goes, it is his sons overall decision.

Virtue Theory
The last ethical theory we will be observing is the Virtue Theory. This theory was first introduced by Aristotle.  This theory looks at whether or not stakeholders hold virtues. “Character traits that promote wellness or flourishing of individuals within a society” (Salazar).  There are 4 main virtues of a character. Those virtues are courage, honesty, Temperance/self-control, and Justice/fairness. These are all virtues that business/companies should all value and go by. Companies that don’t have virtues, usually have vices. Vices are the opposite of virtues. For example dishonesty and exploitation are both examples of vices. For this case with Under Armour they are being unethical based on this theory. They are only offering shoe contracts to certain players and not everyone who enters the draft. Especially the other recruits that University of Maryland is targeting. Not every recruit that goes to University of Maryland is receiving this glamorous shoe deal from Under Armour. This shows that Under Armour is not concerned with their stakeholders; they are only looking to make a profit that benefits the company. They are only concerned with exceeding the “bottom-line” and will do what they need to, to make a profit. By offering these shoe deals that will guarantee the player millions is unethical and illegal. These recruits are high school athletes looking to continue athletics in college. These players might not even by 18 years old witch is an illegal notion. “For most contracts, the general rule is that while it's not illegal to enter into a contract with a minor, the contract is voidable at the discretion of the minor. Voidable contracts are usually valid contracts and are binding unless the child cancels it”. Companies cannot legally sign a minor without a parent/guardian. The overall actions taken by Under Armour offering this “minor” a contract shows that Under Armour lacks virtues, and is an unethical company. Under Armour needs to show virtues such as “goodness” and “honesty” in order to be ethical under the Virtue theory.

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