Nike. Inc., and Sweatshops

As a company, Nike has been the dominant presence in the athletic apparel industry globally. Although they were not the only company known to practice unethical manufacturing processes, they were the major target of criticism because of their leadership role.   To fight back against the negative publicity, Nike changed many working conditions and practices, arranged for independent audits by very reputable individuals in the industry to rate these improvements and grade the working conditions.

Nike has become one of those global companies targeted by a broad range of campaigning pressure groups and journalists as a symbolic representation of the business in society. In Nike’s case, the issues are those of human rights and conditions for workers in factories in developing countries. In the face of constant accusations, Nike has developed a considered response but the criticism of Nike still continues.

Nike produces footwear, clothing, equipment and accessory products for the sports and athletic market. It is the largest seller of such garments in the world. It sells to approximately 19,000 retail accounts in the US, and then in approximately 140 countries around the world. Just about all of its products are manufactured by independent contractors with footwear products in particular being manufactured in developing countries. The company manufactures in China, Taiwan, Korea, and Mexico as well as in the US and in Italy.

The Global Alliance report on the factories in Indonesia gave the following workforce profile: 58% of them are young adults between 20 and 24 years old, and 83% are women. Few have work-related skills when they arrive at the factory. Nike has around 700 contract factories, within which around 20% of the workers are creating Nike products. Conditions for these workers have been a source of heated debate, with allegations made by campaigns of poor conditions, with harassment and abuse. Nike has sought to respond to these allegations by putting into place a code of conduct for all of its suppliers, and working with the Global Alliance to review around 21 of these factories, and to pick up and respond to issues.

The main concerns expressed by workers relate to their physical working environment. A further report has been produced relating to a site in Mexico, which has experienced serious problems leading to labor disputes. In both cases, Nike responded to the audit reports with a detailed remediation plan. Nike should make changes in its policy in response to the negative criticism, but should not hinder the ability of the company to compete in the market place. Many of other companies, such as Wal-mart, do have the same business model, and they also hold corporate responsibilities to the society. Nike could comply with its competitors' policy on low-cost supply chains overseas so that civil activists will not be able to point out Nike's responsibility

1. For this particular case Nike face lots of ethical ad social issues. Many global companies like Nike, Inc. are seen as role models both in the market place as well as in society in large. That is why they are expected to act responsibly in their dealings with humanity and the natural world. Nike benefits from the global sourcing opportunities, therefore areas such as production and logistics have been outsourced to partner companies in low-wage countries like China, Vietnam, Indonesia and Thailand. As a result the company is limited nowadays to its core competencies of Design and Marketing. Nike does not merely sell products these days.

They spend billions of dollars for advertising contracts with famous athletes like Tiger Woods to increase the value of the brand by associating the factor of lifestyle to their products. The company's image has been damaged many times by press releases as well as a variety of NGOs who have long pointed out the inhumane working conditions in the production facilities of sporting goods manufacturers. This leads to the question whether should Nike orientate the regulations of the suppliers to the labor standards in their respective countries or those in the United States?

The labor conditions are so inhumane that Nike at least should try to converse to the US standard to improve the situation. The following analysis of an abstract of Nikes’ Responsibility Concept, including SHAPE and their Code of Conduct, should give an insight into the difficulties of the Sweatshops. Some of the ethical and social issues in this case study.

1.1Safety and Health The first aspect on which Nike has to work is the deficits in Safety and Health standards. In many of the production facilities, the working conditions cause a hazard to workers’ health. Although Nike demands the observance of Safety and Health Guidelines in its Code of Conduct, every day, workers come into contact with chemicals, some of which are known to trigger allergies. Audits by Ernst and Young confirm that “77% of employees suffer from respiratory problems.” While the companies do make protective gear available, these cannot be used due to the enormous time pressure in the production chain.

Special attention should also be paid to the factor of stress. The workers have to deal with two different forms of stress. On the one hand they suffer under the high pressure and frequently abusive work environments and on the other hand the stress which is forced by their supervisors if they do not for example manage to produce the expected quality standards. 1.2 Working Hours

The offense against the observance of working hours points out another example of the inhumane labor conditions at Nikes manufactures. The Code of Conduct foresees a weekly work load of 60 hours. In addition all workers have the right to one day off a week. Further conditions are set down in local employment laws. Overtime hours should only be disposed if necessary and workers have to be remunerated for that. Many suppliers have thus reduced the number of overtime hours so that they confirm to the Code of Conduct.

However, workers must now complete the required number of units in a shorter amount of time in order to satisfy the sporting goods manufacturers’ production schedule. “Workers complained about increased stress caused by tightened production schedules and new production system introduced by management to offset the reduction in working hours.” The reduction of working hours which at first appeared advantageous has apparently turned into a detriment for workers. 1.3 Remuneration

Another example of the inhumane conditions in the Nike factories is the low wages. A worker of Nike receives $ 2.28 a day. “This minimum daily wage only covers 78% of the basic need of one individual.” In its Code of Conduct Nike demands that remuneration be sufficient to cover the basic needs of employees. Remuneration, however, is not oriented on the cost of living. The companies have defended themselves by making the following statement: “Pay is oriented on the minimum wage for the respective country.”

This leads to the question whether it is allowed to criticize Nike for the low pay rates of its subcontractors for example in Indonesia? Nike can be criticized for that. In their introduction of the responsibility concept, the company points out that they are “not only doing what law wants, but what is expected by the leader.” Paying only the minimum wage is not what the consumer expects from a global player.

Only 0.4 percent of a $100 Nike Shoe is estimated for the wages. The majority goes to the retail industry and brand profit. One reason why they can keep it so low is that the company benefits from the competition among the low-wage countries. As a result Nike has strong purchasing practices, which place an enormous amount of pressure on suppliers. If they cannot cope with the price policies of the global player, Nike regularly moves their production and lets their products be manufactured cheaper somewhere else. The prices and performances that they demand are reflected in wages as well as working conditions. 1.4 Freedom of Association

A solution would be the possibility to form unions to give employees the chance to negotiate with the management to improve wages and working conditions. According to the Code of Conduct, Nike guarantees its workers the right to collective bargaining. The problem is that Nike mainly receives its wares from countries like China in which formation of unions is limited or even banned. Conclusion

The analysis shows that Nike has to improve the labor conditions in the production facilities. Otherwise the media and NGOs will continue pointing out the situation there and this can cause effects on the company’s image. As a result Nike could lose their position as the leader of the sporting goods industry.

2. Organizations take inputs from the society in order to operate, sustain and achieve success in the market. Therefore it becomes their primary duty to show their give back and responsible behavior towards the environment, society and community where they operate. Nike has its responsibilities towards it stakeholders, society and environment.

Factory people are not directly related but they are indirectly connected with company. Nike doesn't own these factories but these factories and their people are working for Nike and contributing in the worldwide success of Nike by providing their strong support in various forms. They help company in achieving cost advantage, economy of scale and competitive advantage in the market over its competitors. They help Nike to develop and achieve success in the market by providing quality and skilled work. Therefore I would say that It is the responsibility of Nike to take care of these workers and make them part of its success in terms of wages, benefits, growth and development.

Yes Nike does have responsibility to ensure that factory workers receive a 'living wage as these workers are working for Nike and pillars of the company. They contribute in Nike's success and failures, hence it becomes the important responsibility of Nike to ensure that they get sufficient wages to lead a normal life and fulfill their basic necessities. I agree with wages guidelines of FLA, it states that Nike companies should ensure that employees should be paid either minimum wages as required by the law or the average industry wages, whichever is higher. Every country has its own economic structure and environment. If Nike would pay higher than the industry norms and standards of a particular foreign country it will also create problems for Nike. Hence the best solution for current situation is that Nike pay as per the current industry rules of the market. 3.

I do not agree that it is ethical for Nike to pay endorsers millions while its factory employees receive a few. Nike pays endorser high amount because they help company to build strong brand image, reputation and brand equity in the market. As a result it helps company increase profitability and revenue. On the other hand factory employees are working day and night for the company to make them successful and achieve their organizational objectives and goals.

They help company in getting cost advantage and competitive advantage in rapidly changing global market scenario. It becomes the responsibility of Nike to ensure that these employees get sufficient amount lead a good life. I agree with the fact that that Nike has to use endorsers or pay high amount to these endorsers to build their brand in the competitive market. But Nike should not ignore these workers, they should pay sufficient amount to its factory employees too as they are the real people and reasons behind the success of the company. 4. Yes, it is Nike's legal, economic, social and philanthropic responsibility to monitor these subcontracted factories.

Since these factories and their people are part of Nike, they are directly or indirectly associated with the company. They are not the direct stakeholders but they are the real contributors in company's success. It becomes Nike's legal responsibility that they should get enough wages to live their life and fulfill their basic necessities, it is their economic responsibility to pay them well and make them partner in its worldwide success, it becomes their social responsibility to ensure the protection, benefits, compensation, development and growth of these workers.

Being a good corporate citizen they should take philanthropy initiatives, including direct giving, volunteerism and educational programs for the society, people, community for its growth and development. They should help employees to lead a good life. Therefore in short, it is Nike's responsibility to monitor subcontracted factories personally in order to avoid discrimination, low wages and other issues. CSR and business ethics were not popular and common concept ten years ago. Ten years ago businesses were engaged only in profit making by selling their products. They had responsibility towards their shareholders only.

But now scenario has changes due to increased awareness and globalization. Ordinary businesses are neither intrinsically human nor socially beneficial. After ten years, I believe significant number of companies will be convinced that it's in their strategic interest to incorporate CSR substantively into their operations. More and more companies will adopt business ethics and CSR practices and will see CSR as resulting in increased competitiveness and profitability.

CSR companies will be more inclined towards performing their social responsibility and promoting protection of human rights and generating economic, social and environmental benefits after ten years from now (Strandberg). 5. Nike is a global brand that is well known of its sports equipments through out the entire world. So when Nike (NKE) suffered a decreasing trend in its earnings per share after the news media focused attention on working conditions in Nike’s Indonesian Factories. On October 17, 1997 “48 Hours” (CBS) broadcast a scathing report of conditions in Nike Factories in Indonesia. Confirmation of these reports by various agencies led to a “Boycott Nike” campaign.

Hence Nike moved to improve conditions and repair the damage to its corporate reputation. So maybe the Nike’s personal might consider this few method in order to save its corporate reputation from damage due to the sweatshop controversy. • Ensure that factories start to pay workers the legal minimum and provide compensation to workers who have been cheated out of their rightful wages.

• Totally eliminate any forced overtime, eliminate all excessive overtime (i.e. overtime that violates the Codes of law) and pay the legal overtime rate.

• Stipulate that all workers must be given pay stubs upon receiving their wages so that they can see what they are paid for, at what rate, and what deductions were taken out.

• Immediately return all deposits illegally taken from workers upon their hire.

• Eliminate regulations that prohibit workers from talking to their coworkers.

• Stop making morning calisthenics mandatory.

• Stop the illegal procedure of deducting disciplinary fines out of workers’ paychecks.

• Investigate any allegations of beatings by security guards and other abusive treatment.

• Cease firing workers who are pregnant and provide them with their legally mandated maternity benefits.

• Provide childcare, social security benefits, medical insurance and bereavement leave, as stipulated under Chinese Labor Law.

• Eliminate the quota system or reduce it to an amount that can be easily accomplished in an 8-hour day.

• Undertake a health and safety review of factories with regard to dust and noise pollution, heat, fumes and congestion and provide companies with a 6-month plan to improve conditions.

• Make public a list of accidents and work-related illnesses that have affected workers in the past three years, what measures have been taken to prevent them, and how workers were compensated.

• Rehire workers who have been unjustly fired for participating in strikes or for efforts to improve factory conditions, and compensate them for lost back wages.

• Eliminate child labor by seeing that any workers under the age of 16 are provided with a stipend to go back to school and are guaranteed their jobs back when they are of legal working age.

• Provide materials and workshops to educate workers about the companies’ Codes of Conduct.

• Allow outside groups to provide education and awareness-training to workers about local labor regulations and workers rights, and ensure that workers who choose to attend such programs are not punished.

• Set up a compensation fund for workers who are injured or killed on the job.

• Ensure that all chemicals used in the factories are clearly labeled in the local language.

• Pressure the subcontractors and government officials to allow workers the right to freely organize. (Nike China Report, September 1997)

Nobody like to admit what they did was wrong. It is the same case as Nike when handling this problem too. Yes I must admit for the short term period it is not a “good business” for Nike’s to admit their past error but through this article we see that in 2007 they had claimed variety of CSR recognitions so meaning to say in the long run its better to admit what you did wrong and make a better future by paving the right attitude for both ethical and social responsibility in the future.

The case of Nike illustrates the decisions of a company acting to remedy the problem of negative public image and aggressive criticism in an environment of legal uncertainty. The company responded to this criticism using multiple PR tactics, and as a result, entered an unusual forum that blended the relatively tolerant ethical standards of typical advertising with the stringent requirements of CSR reporting. As more companies enter the multinational arena, and the public becomes more aware of social and environmental conditions in developing countries, the need for sufficient, transparent disclosure of corporate conduct will continually increase (Robertson and Nicholson, 1996).

Laws and models surrounding the reporting of operating practices have yet to be established, but the Nike case has drawn out the underlying ethical considerations for disclosing this kind of information and has brought national attention to the need for standards. The study of Nike Corporation’s struggle through a public relations crisis can be helpful in illustrating some of the dilemmas and alternatives a company faces when disclosing information to the public. The fact that Nike has brought these ethical and legal issues to light provides us a definitive example to reference when assessing the risks involved with corporate communication

6. In its mission statement the AFL-CIO states, “The mission of the AFL-CIO is to improve the lives of working families—to bring economic justice to the workplace and social justice” ( The anti-sweatshop movement in the U.S. and other industrialized economies has, in recent years, attempted to use consumer boycotts to eliminate sweatshop working conditions and child labor in less developed economies. Unions and college student groups have been leading the drive for sweatshop boycotts.

The anti-sweatshop movement received a great deal of popular attention when it was discovered that Kathie Lee Gifford's clothing company had employed Honduran sweatshop workers to produce her line of clothing for Walmart. Approximately 10% of the workers employed in this task were between the ages of 13 and 15. A 75-hour workweek was the norm in these factories. When this became publicized, Kathie Lee Gifford denounced these sweatshops and stated that she was unaware of the working conditions in these factories. So yes the campus antisweatshop movement did help the AFL-Cio’s goals. It seems as though the campus anti-sweatshop movement runs parallel with AFL-CIO.

Labor laws should be just for people around the world and not just in the United States, therefore UNITE and USAS take such philosophies and try to get them to others who need it as well. Even though there are implications that the students in these organizations are being “used” or “manipulated” into what they are doing, it is hard to see that if it were manipulation that someone from the organization would not speak up against these organizations.

The students at one point or another would feel that what is being taught to them is not right. Because no one really feels that way it is hard to assume that the students are being “used”. Instead it seems as if the students are being recruited and taught the beliefs of these organizations and the students as a result out of their own freewill choose to believe the teachings and choose to continue to do something about it. Used or not it seems as if some good is coming from it. Considering the seemingly non-violent protest and the cause being fought for it does not seem that anyone is really being used, or manipulated.

7. From reading the materials regarding the Kasky Vs. Nike, Inc. case I do believe that Nike’s defense is geared towards being more commercial speech than it is political speech.

The California Supreme Court held that Nike’s speech was commercial that could be punished under state false advertising and unfair competition laws. It reasoned that Nike’s speech was commercial speech rather than constitutionally protected political speeches because of three factors were met. First, the speaker, Nike and its officers, engaged in commerce. Second, the intended audience was composed largely of actual and potential purchasers of Nike products meaning the letters that Nike sent to the colleges were “addressed” and the letters to newspaper editors were statements to “maintain and/or increase its sales and profits”.

And the third fact that we should consider it as a commercial speech is the content of the speech consisted of representations of fact of a commercial nature that were intended to maintain and increase sales of Nike products. So the court noted that by “describing its own labor policies, and the practices and working conditions in own labor policies, and the practices and working conditions in factories where its products are made, Nike was making factual representations about its own business operations” with the aim of increasing its sales. Looking at this in long term perspectives, financially it could be very lucrative for Nike, and perhaps in this case commercial speeches would be best.

Politically it may be difficult for Nike to get an edge, but maybe Nike doesn’t care for that too much. But just because right now politics may not be a front burner issue or partner does not mean it won’t be later, and if it is later Nike will have some high hurdles to jump before it can get its foot back in the door. Furthermore since Nike’s profits have been increasing it has definitely made the correct choice for its business and shareholders.

8. In response to the criticism about its overseas labor practice, Nike’s have made several improvement actions. Nike’s create a new position for a vice president for corporate and social responsibility. This show that Nike’s is taking serious about its mistake and the company will take full commitment to make improvement on the ethical issue arrives. This new position also a way Nike tries to portrait its new image of a company that will promote good work culture in its organization. However, Nike went ahead and gave in to many demands that could effectively wear away its new reputation as an unethical business concern.

For example, the company hired well known independent auditors to look into the practices of the violation of labor rights in its associate companies. This ensured that the Nike could assess the company even if the company secretly violated labor rules to maximize profits. A bare minimum wage plan was agreed upon in various companies so that the workers could be assured of at least a decent minimum pay. Workers were offered a better safety package so that they could be kept away from harmful chemicals and reagents. A medical plan was constituted to look into medical problems and the internal quality of the factories was made to suit internationally accepted health standards.

This meant that the on-site hazards to the workers could be reduced to a great extent. Forced labor was abolished and a maximum limit on working hours was introduced. Similarly, the company discouraged engaging the services of children below a specific age for work in the factories. Labor issues like discrimination on the basis of religion, sex, and age were to be done away with and employees had to be given a right to organize themselves to press for their rights. In my opinion, it is Nike’s ethical responsibilities to address the situation and take the best affords it can to stop the sweatshop labor practice in its plants in developing nations.

Nike should bear responsibility all the way down the pipeline for everything that goes into the production of its sneaker. Although the production was subcontracted to independently owned factories and the workers were not Nike employees, but indirectly its still have the responsibility because of the workers contribution to the company. I believed that the company could enforce ethical work culture if it so desired. Nike’s can use administrative pressure on the local subcontract firm to improve the unsatisfactory labor practice.

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