Nike Just Won’t Do It


In this paper, Nike’s business practices, pre and post 2001 will be explored through a deontological and teleological perspective in order to gain insight on whether Nike can be considered an ethical or unethical company.

Since the 1990’s, Nike became infamous for its stance on labor issues and the treatment of its employees. Through efforts spearheaded by Jeff Ballinger, a labor activist, Nike became the subject of accusation regarding its labor practices. Activists and consumers criticized the workers’ unsafe working conditions, low wages and long work hours.

Nike chose to be indifferent to the increasing public dissatisfaction, both to the consumers in the U.S. and to the government and laborers in the countries where it outsources production. Their goal was to minimize damage from the negative press by only taking token measure to appease critics. Initially, the negative publicity was not enough to motivate Nike to change their practices. Growing discontent with their treatment of workers and the choice of some of their key partners, college campuses, to suspend their contracts finally affected the company’s bottom line in 1998, when : “the company was beset by weak demand and retail oversupply” (Spar, 2002). The situation forced Nike to lay off some workers.

An article from 2013 on Business Insider shows a timeline of the most important events that Nike has taken in regards to labor issues. (Nisen, 2003) The famous 1998 speech by Phil Knight, where he stated that “The Nike product has become synonymous with slave wages, forced overtime, and arbitrary abuse…I truly believe the American consumer doesn’t want to buy products made under abusive conditions.” can be seen as a turning point for Nike. Phil Knight made number of promises, all seeking to improve Nike’s operations. Global Exchange, a global organization dedicated to labor rights outlines the promises that Nike has made to its stakeholders in the article “Still Waiting for Nike to do it”:

  1. “All Nike shoe factories will meet the U.S. Occupational Safety and Health Administration’s standards for indoor air quality.” This point was of crucial importance due to the fact that in 1997 “it was revealed that workers in one of its (Nike’s) contract factories were being exposed to toxic fumes up to 177 times the Vietnamese legal limit” (Connor,2001)
  2. “The minimum age for Nike factory workers will be raised to 18 for footwear factories and 16 for apparel factories.” Although this promise has been implemented to a large degree, it does not solve the fundamental problem of “economic development in…communities” (Connor, 2001) and “may force them (those younger than 18 and 16, respectively) into even more dangerous and degrading work” (Connor 2001).
  3. “Nike will include non-governmental organizations in its factory monitoring, with summaries of that monitoring released to the public.” This was “The most important of Knight’s promises…as far as rights groups are concerned” (Connor 2001). Nike focused its efforts on becoming a primary member of the Fair Labor Association, a worker rights watchdog. It commissioned a non-profit organization to conduct one audit of one factory and had discussions with NGO’s regarding its monitoring program. Still it decided to prevent NGOs from regularly monitoring factory conditions, instead preferring to release their own monitoring reports.
  4. “Nike will expand its worker education program, making free high school equivalency courses available to all workers in Nike footwear factories.” The high school education program has indeed been implemented, however due to the low wages, “a great majority of workers cannot afford to give up overtime income in order to take one of the courses” (Connor, 2001)
  5. “Nike will expand its micro-enterprise loan program to benefit four thousand families in Vietnam, Indonesia, Pakistan and Thailand.” Nike has indeed launched its micro-enterprise loan program. The factory workers, a major stakeholder, still receive wages below living standards.
  6. “Funding university research and open forums on responsible business practices, including programs at four universities in the 1998-99 academic year.” Nike has allowed some access to its factories, however all was in the company’s interest rather than publicly released information.

These promises were, according to many labor activists, inadequate in ameliorating all of the worker’s issues. Global Exchange lists six additional demands that they believe would drastically improve worker’s lives:

  1. “Protecting workers who speak honestly about factory conditions” Even though Nike does not directly employ many of the workers that produce their apparel, it has not made significant efforts to educate workers on their rights and protect them when disclosing labor abuses.
  2. “Regular, Transparent, Independent and Confidential Procedures for Monitoring Factories and Investigating Worker Complaints.” Nike’s decision to prevent independent monitoring and worker education by other entities apart from Nike itself and their contractors, such as PwC, has made many of Nike’s workers unaware of their rights under the Nike code of conduct. More so, Dara O’Rourke (assistant professor at MIT) observed that the PwC audits had “significant and seemingly systematic biases” in favor of factory owners (O’Rourke 2000)
  3. “Decent Wages.” One of the most important objectives that labor activists have is increased wages for the workers in Nike’s factories. Nike has refused all demands for significant reform. Nike’s workers, without working overtime are not paid sufficiently to “provide a small family with an adequate diet and housing and other basic necessities”. The workers therefore have trouble sustaining even themselves, not to mention their families.
  4. “Reasonable working hours.” Another criterion where Nike has refused to make substantial changes is working hours. “Independent research indicates that in many factories Nike workers are still being coerced into working up to 70 hours per week” (Connor, 2001). This correlates with the low wages that forces workers to accept overtime.
  5. “Safe and Healthy Workplaces.” Nike has only focused on reducing environmental toxins, neglecting the issues of “inadequate personal protective equipment, and lack of appropriate guards to protect workers from dangerous machinery” (Connor 2001).
  6. “Respect for Worker’s Right to Freedom of Association.” Working hand-in-hand with Nike’s refusal to educate and support workers individually lobbying for their rights, the lack of pressure on governments to support unions in China and other countries has allowed continued union suppression.

Since 1998, Nike has made progress with increasing the transparency of its manufacturing by giving out more information. Efforts have intensified after 2001 with “some 600 factory audits” and “increased monitoring efforts that deal with some of the worst problems” (Nisen, 2003). In 2005, Nike published a complete list of factories it contracts with and published a “108-page report revealing conditions and pay in its factories and acknowledging widespread issues”.

Transparency was not the only area where Nike made progress: some environmental issues have improved and the microloan and education campaigns began. However, the main issue of low wages and high work hours has still gone unresolved. Human rights abuses are more visible but have not been stopped. For example, articles on how Nike workers are “kicked, slapped and verbally abused at factories making Converse” (Daily Mail.co.uk) still show workers’ rights abuses. Some corporate experts are still questioning whether Nike is doing all it can. Prakesh Sethi, corporate strategy professor at the City University of New York states that: “I simply find it impossible that a company of the size and market power of Nike is impotent in persuading a local factory in Indonesia or anywhere else in meeting its code of conduct” (Daily Mail.co.uk)

In conclusion, a variety of phenomena are fundamental to Nike’s condition post 2001: still occurring human rights abuses, low wage and high number of work hours, environmental and health concerns, issues with worker’s individual and collective efforts to improve their working conditions, transparency and the existence of some social programs.

For the ethics part of the paper, I will explore these concepts through the lens of deontological, teleological and virtue ethics.

“Deontological ethical views (from the Greek deon, meaning “duty”) are based on the concept of the inherent rightness or wrongness of actions, independent of their consequences” (Greenwood, 2002). Duties and obligations form the cornerstone of deontological ethical views, with each decision is weighted based on the duties and obligations of all parties. These duties and obligations form the cornerstone of deontological views. Kantian ethics, through its use of categorical imperative principle, is one of the main forms of deontological ethics. The categorical imperative principle puts a specific decision or action in the following context: “Act only according to that maxim whereby you can, at the same time, will that it should become a universal law” (Kant, 1993).

Human rights abuses as reported in factories contracted by Nike are condemnable by deontological ethics. When framed as a categorical imperative, these abuses paint a dystopian society that is easy to reject both on “moral intuition” (Greenwood, 2002) and Judeo-Christian teachings. Very similar reactions under the categorical imperative principle arise when analyzing other factors: the environmental and health concerns, the worker’s individual and collective plights, low wages and a high number of working hours. The harm caused by working in unsafe conditions, being unable to sustain one’s family, sense of alienation due to the lack of rights to free association and worsened work conditions due to the inability to bargain individually or collectively intuitively seem immoral.

However, deontological ethics typically frames actions in ways that “direct individual behavior” (Greenwood, 2002). Nike is a contractor and not the direct owner for the local companies that treat workers immorally. Although Nike is not preventing the unethical treatment of workers, it is not directly causing it either, making the local factory owners the primary agents that violate Kant’s principle of the categorical imperative.

Nike’s direct actions however, tell a different tale: it acted to increase transparency, employed stricter environmental controls and enacted policies that seek to help the underprivileged. All three of these policies when viewed as through the principle of the categorical imperative paint Nike in a very positive light. Increasing transparency, issuing environmental controls that increase safety and starting policies that aid the underprivileged are all moral acts.

We can judge Nike simply based on the actions that it is directly enacting by not factoring in what Nike is not doing (preventing mistreatment of workers). That would not make Nike a paragon of worker’s rights, but it would certainly not characterize it as being a predominantly immoral entity.

Another way to analyze Nike’s actions is through teleological ethics. Teleological ethics do not focus on actions in and of themselves, but on the “comparative assessment of their consequences”. Utilitarianism is a dominant form of consequentialism. “Utilitarianism defines an action as right if it maximizes the common or collective good-for example, the greatest good for the greatest number” (Greenwood, 2002).

The fact that Nike, despite its market power, does not take a strong stance on human rights abuses, and work safety within its factories has intense negative repercussions on the lives of workers manufacturing its products. Imposing a strict code of conduct would marginally increase the cost of their products. This will have a minimal impact on the lives of their consumers. However, the utility gained by the workers is, by comparison, very substantial. Nike’s efforts are on improving the efficiency of its manufacturing through the implementation of modern management systems such as lean manufacturing. The implementation of these systems, while improving efficiency, has had “no effect on health, safety and environmental compliance” (Distelhorst, Hainmueller, Locke, 2014). By impeding on worker’s rights to voice their opinion or organize in unions, Nike is also preventing social change from happening in low income countries, encouraging a status quo that has negative repercussions on laborers.

The issues of wages, work hours and social programs implemented by Nike can be analyzed together. Nike’s aim to maximize profits at minimal regard to the effect on their stakeholders has made it reticent to increase wages or reduce work hours. The benefits to their shareholders (less costs) and perhaps customers (potentially lower price) are readily visible. Their employees however, are very visibly impacted by the low wages. Laborers are spending upwards of 70 hours a week attempting to save enough to sustain their families, leaving them with little time to maximize their own utility. Nike’s policy of strictly enforcing an age minimum for laborers can even backfire by reducing families’ income and driving the very young workers into working riskier jobs if education is not an option. In this context, Nike’s policy of offering educational opportunities serves little if the beneficiaries are unable to take advantage of them due to the long hours of work. The microloans do offer some relief to impoverished families but fail to solve the fundamental issue of low income in the affected regions. A study by Alatas and Cameron analyzed whether increasing the minimum wage in a low-income country (Indonesia) had any negative effects on the workforce, apart from the obvious benefits of increased income. The findings were that there were “no evidence of a negative employment impact for large firms, both foreign and domestic, but some evidence that workers in small, domestic firms may lose their jobs” (Alatas, Cameron, 2004). Assuming the companies that Nike contracts are relatively large, an increase in wages would significantly better the lives of employees while only slightly reducing profit margins or slightly increasing product price. Therefore, the action that would maximize utility would be increasing wages and/or reducing hours, contrary to Nike’s current policy.

The transparency increase is an indisputable achievement, as it allows consumers to know much more about how the products that they are purchasing are made. This contributes to an increased awareness of issue of labor rights and increased consumer preference for ethically produced goods. Transparency is not enough to improve working conditions though, as Locke, Qin and Brause have determined in their paper “Does Monitoring Improve Labor Standards?: Lessons from Nike”. The conclusions were that “notwithstanding the significant efforts and investments by Nike and its staff to improve working conditions among its suppliers, monitoring alone appears to produce only limited results” (Locke, Qin, Brause, 2006). However, by “improving the ability of suppliers to better schedule their work and improve their quality and efficiency—working conditions appear to significantly improve.” (Locke, Qin, Brause, 2006)

Through a utilitarian perspective, Nike’s actions that aim to have a positive impact on workers only minimally affect their situation. Nike is not sufficiently addressing the two main factors that would improve worker’s lives, higher wages and shorter work hours.

Applying two different ethical systems produces two different interpretations of the same actions. By applying the deontological theory, Nike is not directly producing harm, is not working to stop the mistreatment of workers but is benefitting them in other ways. Analyzing the same situation through the teleological theory shows Nike issuing ineffective solutions to serious problems affecting its stakeholders and enabling exploitation of many laborers in low-income countries. The juxtaposition of these two theories shows the complexity of ethical thought and the difficulty of categorizing an entity, even as criticized as Nike, as being predominantly ethical or unethical.

Bibliography

Spar, Debora L., and Jennifer Burns. “Hitting the wall: Nike and international labor practices.” Harvard Business School Case (2002): 9-700.

Kant, Immanuel; translated by James W. Ellington [1785] (1993). Grounding for the Metaphysics of Morals 3rd ed. Hackett. p. 30. ISBN 0-87220-166-X.

Nisen, Max. “How Nike Solved Its Sweatshop Problem.” Business Insider. Business Insider, Inc, 9 May 2013. Web. 23 Nov. 2014. <http://www.businessinsider.com/how-nike-solved-its-sweatshop-problem-2013-5&gt;.

Connor, T. “Still waiting for nike to do it. San Francisco: Global Exchange.” (2001).

O’Rourke  ‘Monitoring the Monitors: A Critique of PricewaterhouseCooper’s Labor

Monitoring’, Professor Dara O’Rourke’s website, Massechussets Institute of

Technology: web.mit.edu/dorourke/www/,

Daily. “Nike Workers ‘kicked, Slapped and Verbally Abused’ at Factories Making Converse.” Mail Online. Associated Newspapers. Web. 24 Nov. 2014. <http://www.dailymail.co.uk/news/article-2014325/Nike-workers-kicked-slapped-verbally-abused-factories-making-Converse-line-Indonesia.html&gt;.

Greenwood, Michelle R. “Ethics and HRM: A review and conceptual analysis.”Journal of Business Ethics 36.3 (2002): 261-278.

Distelhorst, Greg and Hainmueller, Jens and Locke, Richard M., Does Lean Improve Labor Standards? Management and Social Performance in the Nike Supply Chain (September 22, 2014). Watson Institute for International Studies Research Paper No. 2013-09; Rotman School of Management Working Paper No. 2337601. Available at SSRN: http://ssrn.com/abstract=2337601 or http://dx.doi.org/10.2139/ssrn.2337601

Alatas, Vivi, and Lisa A. Cameron. “Should Nike and Reebok pay higher wages? The impact of minimum wages on employment in a low income country.” The Impact of Minimum Wages on Employment in a Low Income Country (January 8, 2004) (2004).

Locke, Richard M., Fei Qin, and Alberto Brause. “Does monitoring improve labor standards? Lessons from Nike.” Industrial and Labor Relations Review(2007): 3-31.

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