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Nike Sweatshop

In: Social Issues

Submitted By ravi111
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Will Nike “Just Do It”?
Name: Huzefa Poonawala
Class: GM 675MC
Instructor: Eric Baker
Date: December 12, 2012

As one of the leading brands in athletic wear, it would seem that Nike would be in the frontlines promoting human rights in the factories where their products are made. There have been many reports of workers in Nike factories facing poverty, harassment, dismissal and violent intimidation (Wazir, 2001). The motto of “Just Do It” does not seem applicable to the company itself. Despite numerous reports and audits, Nike has yet to take action against human rights violations by their suppliers.
In 1998, the CEO of Nike, Phil Knight promised six main improvements in conditions at Nike factories around the world. These were: all Nike factories would meet US air quality standards, the minimum age would be raised to 18 for workers in Nike shoe factories and 16 for those in clothing factories, Nike would include non-governmental organizations in factory monitoring, and the company would make inspection results public, Nike would expand its worker education program, with free secondary-school equivalent courses, a loan program would be expanded to benefit 4,000 families in Vietnam, Indonesia, Pakistan and Thailand and research on responsible business practices would be funded at four universities (Wazir, 2001).
Despite such high aims by the company, there are still reports of human rights violations in factories manufacturing Nike products. In 2005, the company sent auditors to the factories to evaluate conditions of working environment. It also brought in an MIT professor to assess its audit data. The results were disappointing. Most suppliers’ factories had not improved, and some had even gotten worse. The CEO, Mark Parker, said “I’m proud of what we’ve accomplished, but we’re still not where we need to be. This is a never-ending challenge” (Trevino, 2007).
In 2011, the Fair Labor Association released a report on Nike’s factory in Indonesia (Keady, 2012). This report demonstrated that there were ongoing verbal, physical and sexual abuses in the factory. Nike “admits the abuse from contractors, which includes slapping workers in the face and calling them pigs and dogs, but says (astoundingly) there’s little they can do to stop it” (Shayon, 2012).
Nike fears that by paying living wage, they would lose the competitive advantage. Their goal of awarding contracts to the suppliers who bid at the lowest cost would be in direct conflict of paying higher wages to the workers. Since Nike dominates the market, it might be possible that the competitors follow its lead and Nike still maintains its lead. Companies like Adidas frequently use the same suppliers Nike is still using. Since Nike has never experimented with paying living wage, their fear is untested (Marlowe, 2009).
Another way of looking at this situation is: what would happen to the workers in Indonesia if Nike did not award contracts to those factories? Would their lives be better? In my opinion, the jobs they have are better than having no jobs. It might not be the best job, but at least they have some jobs! To be the devil’s advocate, Nike could argue that they are doing a favor to the Indonesians by bringing jobs and foreign investment to their country. If Nike insisted on better wages and living conditions from those suppliers, it is possible they could turn down Nike and take contracts from other companies.
In Nike’s defense, the manufacturing companies are abiding by their local laws and regulations. They are paying the workers the minimum wage permitted by the local government. The minimum wage does not always translate to a living wage. According to the Indonesian government, minimum wage only covers for 70% of the basic needs of one person (Nike FAQs, n.d.). There are many ways where Nike can follow ethical guidelines to promote better wages and living conditions for the workers in the factories. The workers should be protected and encouraged to speak honestly about the factory conditions. According to Trevino, people do what’s rewarded and avoid doing what’s punished. Nike has not been very keen on rewarding whistleblowers. In fact, the company has turned its back on individual workers who have been victimized for speaking to journalists (Connor, 2001). There should be procedures for monitoring factories and investigating worker complaints. Independent researches indicate that the overwhelming majority of Nike workers do not even understand their rights and do not believe factory owners can be trusted to resolve worker grievances. Nike has vigorously opposed the Workers’ Rights Consortium, a factory monitoring program that is independent, transparent and makes it a priority to build relationships of trust with workers (Connor, 2001). Nike should ensure that workers are paid decent wages. These wages should be enough to provide a small family with adequate food, housing and other basic necessities. As mentioned earlier, the factory owners pay the minimum wage required by the government, while this does not equate to a living wage for even a single person. Although there are many ways for Nike to promote ethical guidelines in the production lines, most of them require increase in cost. In a capitalistic society, where the main objective of a company is to make money, this is in direct conflict with their prerogative. According to Trevino, a company should fulfill its corporate social responsibility for three reasons: pragmatic, ethical and strategic reasons. For Nike, the pragmatic reason is that it should use its advantage of being the market leader or risk losing it. There are many stakeholders who can affect Nike’s reputation. These stakeholders, no matter how small, should be given due importance. With the advent of electronic media, even a small YouTube clip can wreak havoc on the organization’s reputation. Nike has experienced this firsthand in 1998 when Jim Keady launched a documentary “Behind the Swoosh”. This documentary showed the harsh living conditions of the Nike factory workers in Indonesia. The documentary triggered questions by reporters and media pointing fingers at Nike as a human rights violator. In response, Nike launched its own campaign called “Better World” where they promise to follow ethical guidelines and make living conditions better. In the following decade, conditions for those workers were only slightly better and far from what Nike had promised.
Indonesian Govt. US Govt. Owners Competitors

Factory Owners NIKE Customers

Factory Workers Financial Institutions Employees Community/ Interest Groups/
Media

The image shows how different stakeholders are affected by Nike’s decisions to follow (or disregard) ethical guidelines. Although the factory workers are indirectly affected, the factory owners are reliant on Nike’s decisions to pursue ethical guidelines being followed in those factories. Under the pragmatic approach, Nike should be on alert to act in ways to ensure corporate reputation. The widespread news of its harsh worker conditions could cost Nike its competitive advantage in the long run when customers try to distance themselves from a company plagued with human rights violations. For ethical reasons, Nike should take a proactive approach and ensure the rights of those workers are protected. This may cost Nike in the short term, but it should pay off in the long run with customer loyalty to the brand. As a promoter of human rights, Nike can even use its market leadership to promote better worker conditions in the industry. This would ensure Nike that it does not lose its competitive advantage and actually gains customer loyalty. Strategically, Nike can use the media to show how its factories are following ethical guidelines and providing better working conditions. The media should be given full, transparent access to Nike’s factories. This would give Nike free publicity and further its market leadership. Competitors would have to follow Nike’s example to stay in the game. If Nike were to use this correctly, it could increase revenues significantly enough that the increased costs would not affect its net profit. Trevino categorizes corporate social responsibilities as economic, legal, ethical and philanthropic responsibilities. Nike’s economic responsibility to its shareholders is to maximize profit while remaining within legal obligations. This economic responsibility is the basic responsibility of every business. The legal responsibility of Nike is to follow all laws and regulations set forth by the government the company is operating under. For Nike, this means the laws by the US government, but the factories in Indonesia have to follow the laws of the Indonesian government. The ethical responsibility of Nike would be to ensure that the factory owners go above and beyond what the law requires to provide suitable wages for the workers. Although the Indonesian government has a low minimum wage, it should be Nike’s ethical responsibility to insist factory owners to provide a living wage and good working environment. As a philanthropic responsibility, Nike should spend time and money on betterment of community. This community could be the surrounding community of Nike in U.S. or the surrounding community of its factories in Indonesia. For Nike to fulfill its corporate social responsibilities with respect to the factory workers in Indonesia, it needs to first understand their needs. As an American company, it is understandable when Nike can distance itself from responsibilities in a different country. Moving into a global marketplace, Nike cannot keep doing business without first understanding what the workers of those factories require from their employers. With reports of harsh living conditions, safety hazards, health risks and harassment, Nike needs to take responsibility and understand those workers’ requirements. When Jim Keady interviewed those workers in Indonesia (Keady, 2009), their biggest concern was that they wanted Nike’s investment to remain within the country. They wanted to work and contribute to Nike’s manufacturing, but just wanted better conditions and respect for themselves. Nike should understand that even though the factory owners might be working within legal bounds, it does not make them ethically sound. The company should understand how it can make the working environment better and enrich those workers’ lives. With sales revenue of $22.66 billion (Forbes, 2012), Nike should be able to change the industry methods of using cheap labor to fulfill its demands. As a market leader, Nike has a responsibility to the community to encourage better working conditions. Although Nike has shown progress in the past 10 years, it still has a long road ahead. Nike accepted responsibility for its actions and released a video “Better World” which is narrated by the co-founder and chairman Phil Knight. In this video, Knight explains how the company made mistakes and is now making changes to its production lines. He further talks about how the company is now promoting recycling in their products and also working towards the betterment of the neighboring communities. If this video is anything to go by, it would seem that Nike has decided to do the right and accept its corporate social responsibilities. Hopefully, Nike will “Just Do It” this time.

References
Birch, S. (July 6, 2012). How activism forced Nike to change its ethical game. The Guardian Retrieved December 10, 2012 from http://www.guardian.co.uk/environment/green-living-blog/2012/jul/06/activism-nike.
Connor, T. (May 2001). Still waiting for Nike to do it. Global Exchange Retrieved December 15, 2012 from http://www.globalexchange.org/sweatfree/nike/stillwaiting.
Forbes. (April 2012). Nike Retrieved December 15, 2012 from http://www.forbes.com/companies/nike/.
Keady, J. (October 2, 2009). When Will Nike “Just Do It” On the Sweatshop Issue. Huffington Post Retrieved December 10, 2012 from http://www.huffingtonpost.com/jim-keady/when-will-nike-just-do-it_b_308448.html.
Keady, J. (April 30, 2012). Nike workers face verbal, physical and sexual abuse at factory in Sukabumi, Indonesia. Educating For Justice Retrieved December 15, 2012 from http://educatingforjustice.org/nike-workers-face-verbal-physical-and-sexual-abuse-at-factory-in-sukabumi-indonesia/.
Kenyon, P. (October 15, 2000). Gap and Nike: No Sweat? BBC News Panorama Retrieved December 12, 2012 from http://news.bbc.co.uk/2/hi/programmes/panorama/970385.stm.
Marlowe, M. (July 9, 2009). Why Can’t Nike “Just Do It?” Team Sweat Retrieved December 15, 2012 from http://www.teamsweat.org/2009/06/09/why-cant-nike-just-do-it/.
Nike FAQs. (n.d.). Global Exchange Retrieved December 15, 2012 from http://www.globalexchange.org/sweatfree/nike/faq
Shayon, S. (July 13, 2012). Nike Better World? Not for Converse Factory Workers in Indonesia. Brand Channel Retrieved December 15, 2012 from http://www.brandchannel.com/home/post/2011/07/13/Nike-Just-Not-Doing-It-Right.aspx
Trevino, L. & Nelson, K. (2007). Managing business ethics.4th ed.. Hoboken, NJ: John Wiley and Sons.
Wazir, B. (May 19, 2001). Nike accused of tolerating sweatshops. The Guardian Retrieved December 10, 2012 from http://www.guardian.co.uk/world/2001/may/20/burhanwazir.theobserver.…...

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Nike: the Sweatshop Debate

...Nike Corporation is one of the largest marketers of athletic apparel and sportswear equipment in the world and was founded in Beaverton, Oregon, in 1964 by Phil Knight and Bill Bowerman. According to Nike.com (2009) it had record earnings of 19.2 billion dollars and continues to grow at a steady pace. Nike sold its products in a 140 countries and successfully discovered that manufacturing its products was not the only method to successfully produce the results it was looking for but instead marketing and designing its products and contracting the manufacturing out to global factories 600 throughout the country. With the company’s success come painful lessons learned along the way. This paper will describe the legal, cultural, and ethical challenges that Nike Corporation faced as a result of its global business ventures. In addition, it will touch on the roles the host governments played in manufacturing Nike’s products and will summarize the strategic and operational challenges that Nike Managers face in dealing with the interworking of global business. Nike as well as other global companies in the industry has the option to manufacture their products domestically or internationally in either situation there are challenges. If a company chose to the domestic approach it could potentially be more expensive, however, the organization and its manufacturing facility contractors would have to adhere to U.S. labor and safety laws in the areas of wages, code of conduct,......

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...Nike: The Sweatshop Debate Summary: Nike is one of the foremost marketers of athletic shoes and apparel on the world. It established in 1972 with a handshake between two visionary Oregonians-Bowerman and his university runner Phil knight. It has annual revenue of $10 billion and it sells in total 140 countries. Nike does not do any manufacturing process only it designs and markets its products. It has 600 factories around the world that employ some 550,000 people. Nike is recognizable for its “swoosh” logo or the faces of its celebrate. Nike being one of the largest sportswear manufacturers, they don’t have any factories of their own but they manufacture through the subcontractors. Here lies the accusation that Nike’s subcontractors manufacture the shoes and the other products in sweatshops. This accusation though denied by the management of the Nike inc, however was seen by a report titled “48 hours” by Roberta Baskin. Besides this many other human right organizations like the global exchange and many others published their reports against the Nike incorporation. In response to these accusations Nike took many steps that included appointing a work assessment officer named Andrew Young, a former US ambassador to the UN, and also taking steps against their subcontractors who don’t follow the child labor laws. On March 1998, Phil Knight in a conference declared their initiatives regarding to improve working conditions for the 500,000 people that make products for Nike......

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...Running head: Nike: A SWEATSHOP DEBATE Nike: A Sweatshop Debate University of Phoenix MGT/448 Instructor J. Ryan April 17, 2012 Nike: A sweatshop debate. Nike, a multi-billion dollar corporation, is the world’s primary supplier of athletic shoes and attire. Over the past several years, Nike has been involved in much controversy over its possible sweatshops. The following will address the legal, cultural, ethical, strategic and operational challenges Nike faces because of this controversy, as well as their roles in resolving this issue. Legal, Cultural, and Ethical Challenges Even though Nike may subcontract its companies to foreign countries, it is still Nike’s responsibility to ensure the manufacturing sites are operated with integrity. With all of the negative press, and investigations that took place to prove Nike was guilty of running sweat shops, Nike had to take corrective actions overseas and consider the effect the negative press had on its financial stand as well the effect it had from an ethical point of view. They developed a code of conduct and terminated contracts with suppliers who did not comply. According to Hill (2009, p 154), Nike has “signaled a commitment to improving working conditions. It requires that foreign subcontractors meet minimum thresholds for working conditions and pay. It has arranged for factories to be examined by independent auditors.” Nike has also created minimum age requirements for factory workers as well as enforcing......

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...Study: “Nike: The Sweatshop Debate” Global Business Strategies - MGT 448 Introduction This document will explain the difficulties in the legal, social, as well as ethical area which the Nike Corporation had encountered because of carrying out international business in Vietnam government. This document prosecutes the strategically as well as operational problems which make part of Nike and equally demonstrates the part of Nike in the scandal of the operation plant and the moral problems which surround this sensitive case. Nike has encountered a lot of legal, social as well as moral problems above of when the example of the plant of the operation was encountered. “Nike is a global corporation that was established back in 1972 by the preceding University of Oregon track star Phil Knight, (Hill, 2009).” Nike is among the key sellers of tennis shoes and garments at low prices. The organization has more than $10 billion in annual incomes and sells its items in over a hundred and forty countries throughout the world. Nike is not associated with any one of its proper manufacturer. Nike doesn't get involved in their own production process. Nike designs and creates their own marketing plans. They also produce to more than six hundred international plants throughout the world. As per (Hill, 2009) by using these types of producers Nike is hiring 550,000. With regards to the legal repercussions this organization is experiencing include the rumor of operating sweatshops in......

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