Nike: How Much Has It Actually Changed?


No matter how big and successful a company or corporation is, they must abide by a code of ethics. Ethics guide the decisions that either individuals or groups make within the company. They influence whether a decision is right or wrong. Occasionally, businesses must make decisions that don’t have the biggest short-term return, because that decision was unethical. However, there will be times when a company decides to forgo making an ethical choice in the name of profits, and that’s what happened with Nike. Even though Nike claims to have changed their ways of doing business for the better and has improved factory conditions for their workers, they still put making profits and looking good to the public as their most important goals.

Throughout the 1990’s, Nike was plagued by accusations about the poor quality of their factories in Asia. This is because Nike outsourced all of its manufacturing to Indonesia, because the wages in Indonesia were lower than all the other countries that Nike was looking to outsource to, like Taiwan and South Korea (Spar, 2002). The Indonesian Government was very interested in bringing in foreign investors, which resulted in Indonesia ignoring labor union demands. According to a reporter from the Far Eastern Economics Review, Nike shoes made in Indonesia cost half the amount they would to make in Taiwan or South Korea (Spar, 2002). Nike did not own any of the factories that made Nike shoes, but instead had contracts with those factories.

Labor unrest began to take place in Indonesia during the 1990’s, and specifically in Nike’s contracted factories. This led to unwanted attention being brought on by journalists and media about Nike’s labor practices. Reports began being released from different labor associations about the harsh conditions of the Indonesian Nike factories. Nike specifically caught the ire of labor activist Jeff Ballinger, who made it his mission to bring down Nike (Spar, 2002).

During the early years of the Nike criticism, the company had a few half-hearted efforts to improve the factory quality for their workers. Nike hid behind the fact that they contracted out their factories, and were therefore not responsible for the working conditions (Spar, 2002). Negative backlash towards Nike increased, which resulted in Nike sending Nike workers, and Nike hired companies to inspect the factories. Critics were able to see through these actions, claiming that nobody that worked for Nike or was hired by Nike was going to criticize the company (Spar, 2002). Protests against Nike began to rise, taking place at the 1992 Barcelona Olympics, at the opening of Nike stores around the country, and at college campuses (Spar, 2002).

The criticism finally became too overwhelming for Nike. In 1998, Nike CEO Phil Knight addressed the labor accusations in a speech to the Nation Press Club. Knight conceded that, “the Nike product has become synonymous with slave wages, forced overtime, and arbitrary abuse” (Spar, 2002). In order to clean up their image and improve labor conditions, Knight stated that Nike would be undergoing reforms that consisted of, “raising the minimum age of all sneaker workers to 18 and apparel workers to 16; adopting US OSHA clean air standards in all factories; expanding its monitoring program; expanding education programs for workers; and making micro loans available to workers” (Spar, 2002). All managers were required to learn the native language of their workers, and receive training in cultural differences and acceptable management styles. Knight also stated that Nike would be more involved in Washington-based labor reform efforts (Spar, 2002).

However, was Nike trying to act in an ethical way with their reforms, or were they just a cover so that they could keep producing expensive products at a low cost? Also did Nike actually accomplish what they said they were going to accomplish, or was Knight’s speech just a ploy to improve the perception of Nike? Though Nike did join different labor unions, increase the ages of workers, and increase the transparency of the working conditions in their factories, it did not wholly change into an ethical company like Knight claimed.

According to Max Niesen’s Business Insider article How Nike Solved Its Sweatshop Problem, Niesen states that in 1999, Nike began creating the Fail Labor Association (FLA) (Niessen, 2013). The FLA is “a non-profit group that combines companies, and human rights and labor representatives to establish independent monitoring and a code of conduct, including a minimum age and a 60-hour work week, and pushes other brands to join” (Niessen, 2013). With regards to the FLA, Nike is currently working on the Central America Project along with other companies like Adidas, Gildan, Liz Claiborne, and PVH Corp. The goal of the Central America Project is, “to develop long-lasting mechanisms and tolls to produce measurable improvements in workplace conditions in El Salvador, Guatemala, and Honduras” (Free Labor Association, 2014). This is an ethical gesture of Nike to team up with other countries to try to improve the working conditions of South American countries.

Niesen also states that from 2002-2004, Nike performed 600 company audits, which included multiple visits to factories that had been problematic. In 2005, Nike became the first company in its industry to publish a complete list of the factories that it has manufacturing contracts with (Niessen). Also in 2005, Nike additionally published, “a detailed 108-page report revealing conditions and pay in its factories and acknowledging widespread issues, particularly in its south Asian factories” (Niessen). As a part of Nike’s corporate social and responsibility reports, Nike continues to post its commitments, standards, and audit data (Niessen). This increase in transparency has helped improve Nike’s image, but not everything since Knight’s speech has been positive.

Knight promised that Nike would accomplish six goals during his 1998 speech. Below is a table from Tim Connor’s Still Waiting for Nike To Do It, which details whether or not Nike accomplished what they said they would, the reasons Nike had those goals in the first place, and what Nike should do in the future.

Knight’s Six Promises The History Has Nike Done It? What Should Nike Do?
Adherence to US Occupational Health and Safety Administration (OSHA) standards in factory air quality Leaked 1997 audit showed workers in Nike supplier Tae Kwang Vina were being exposed to toxic gases at up to 177 times the Vietnam legal limit Nike gives factories advance notice of testing, allowing them to change chemical use on the day the test is conducted. Nike is not yet willing to regularly release the results of those tests Ensure that health and safety monitoring include unannounced factory visits. Fully disclose the methodology and results of its air quality testing program
Raising the minimum age for factory workers to 18 for footwear factories and 16 for apparel factories 1996 story in Life magazine on child labor in the soccer ball industry in Pakistan embarrassed Nike There is some evidence of workers younger than this still working in Nike contract factories When families cannot afford to feed their children, enforcing factory age limits can force those children into even more dangerous and degrading work. Nike workers should be paid enough to provide their children with food shelter and basic education
Involving non-government organizations in factory monitoring, with summaries of the monitoring made available to the public Nike’s reliance on for-profit firms to monitor its factories had drawn consistent criticism. As far as rights groups were concerned, this promises to include NGOs in factory monitoring was the most important announcement in Knight’s speech Nike had held discussions which it claims will improve its monitoring program. It will not say which NGOs, if any, will be allowed to regularly monitor factory labor standards, or when summary reports will be released to the public To be genuinely independent, factory monitors should be selected by an independent body such as the Worker’s Rights Consortium, in which unions and human rights groups are strongly represented
Expand education programs making high school equivalency courses available to Nike sportshoe workers Nike’s own initiative The education program has expanded, but wages are so low that only a very small proportion (2%) of Nike workers can afford to give up overtime income in order to take one of the course If Nike workers were paid a full time wage that covered their basic needs (including basic education), then they would have the time and the means to take after hours high-school courses, or choose to improve their lives in other ways
Increased micro-enterprise loan program to a thousand families in the countries of Vietnam, Indonesia, Pakistan, and Thailand Nike’s own initiative Nike announced which organizations are implementing these programs and that the loans have been made to 5,000 individuals, but has declined to say in which regions they are operating or how much the program costs It is far cheaper for Nike to give micro-loans to 5,000 individuals outside Nike factories than to ensure that the 530,000 workers producing the company’s product are paid a wage which would allow them to live with dignity. Nike should commit to a living wage before it seeks public relations kudos by funding charitable programs like this
Funding university research and open forums on responsible business practices, including funding four programs in United States universities in the 1998-1999 academic year Nike had funded some research prior to 1998 but that research had been heavily criticized for lacking academic rigor Nike held one open forum on health and safety in November 1998. The company has refused reputable academics access to Nike factories to conduct research, and the research it has funded seems geared to providing private information to Nike rather than stimulating academic debate Set up an independent committee made up of reputable academics to assess funding applications and determine which should be funded. Ensure that the results of all research is released publicly

Even though Nike has made some strides in the right direction, it is evident by Connor’s chart that they still have a long way to go. In fact, it appears that some of the actions taken by Nike allowed for Nike to get away with hazardous working conditions, like exposing workers to too many toxins or hiding the findings discovered during the factory audits (Connor, 2001). Also, although Nike had good intentions with their six goals, based off of the chart it looks like they did not follow through on the majority of issues.

In terms of ethics relating back to Nike, during a dialogue between Nike representatives Todd McKean and Amanda Tucker and Nike critic Jeff Ballinger an audience member asked the Nike representatives if there was an ethics officer at Nike. The Nike representatives responded by saying that nobody at Nike had the title of ethics officer (Wokutch, 2001). If a company is as concerned about doing the right thing as Knight made it sound during his speech, it would make sense that he would install an ethics officer, but he did not.

Another unethical aspect of Nike’s treatment of their workers that Connor is how they barely give them enough money for their basic needs of food, shelter, and basic education (Connor, 2001). This is an argument that Thomas Donaldson would agree with. While outlining his ten international rights, Donaldson includes the right to ownership property, the right to minimal education, and the right to subsistence (Donaldson). Donaldson would take issue to Nike workers not being able to afford those three fundamental rights, because Nike doesn’t pay the workers enough.

A week after Knight’s speech, New York Times author Bob Herbert cautions people to not so easily believe everything that Knight said in his speech. Herbert opens his article by saying, “Let’s not be too quick to canonize Nike” (Herbert, 1998). According to Herbert the main problem with Nike is the low wages. Herbert writes, “It’s not the minimum age that needs raising, it’s the minimum wage. Most of the workers in Nike factories in China and Vietnam make less than $2 a day, well below the subsistence levels in those countries. In Indonesia the pay is less than $1 a day” (Herbert, 1998). According to human rights organizations, “Nike’s overseas workers need to make the equivalent of at least $3 a day to cover their basic food, shelter and clothing needs.” Taking advantage of a society where citizens have to work, regardless of how little the pay is, is unethical. It would not cost Nike very much to increase wages to $3 per day, but they choose not to because it would hurt Nike’s profits.

However, in 2012 Nike announced that it will be having a new approach to improving factory culture. Nike now has factories in ten different countries, as shown in the image below (Nike’s World, 2014).

Nike's World

According to Bloomberg in a 2012 article, Nike contract manufacturers now must emphasize worker benefits and safety even more for the factory grading system (Townsend, 2012). Hannah Jones, vice president of sustainable business and innovation at Nike, stated, “We will be moving away from companies that are not committed to putting workers and sustainability at the heart of their growth agendas” (Townsend, 2012). This is a result of Nike increasing its labor standards due to worker suicides at Apple factories (Townsend, 2012). As stated previously by Connor, Nike used to just monitor their factories and warn them in advance if an inspection were coming. This failed at improving factory quality because factories would only improve conditions for the inspections and then regress back to the old conditions (Townsend, 2012). Nike is now, “trying to persuade contract manufacturers that better labor practices and sustainability improves productivity with lower worker turnover and reduced costs” (Townsend, 2012). By 2020, Nike has the goal that all of their contracted factories will get an “A” or “B” rating. Though this is a very big step in the right direction, Nike still chose not to increase wages for the workers (Townsend, 2012). This raises the question again, is Nike only promoting sustainable factories because they will be cheaper for Nike, or are they trying to be ethical by improving the working lives of its employees.

Bibliography

Connor, T. Still Waiting For Nike To Do It. May 2001.                       http://www.globalexchange.org/sites/default/files/NikeReport.pdf

Donaldson, T. Rights in the Global Market. https://mail.google.com/mail/u/0/?AuthEventSource=SSO#search/jcomas%40bucknell.edu/149960ec72722954?projector=1

Herbert, H. In America; Nike Blinks. The New York Times. May 21, 1998. http://www.nytimes.com/1998/05/21/opinion/in-america-nike-blinks.html

Niesen, M. How Nike Solved its Sweatshop Problem. Business Insider. May 9, 2013. http://www.businessinsider.com/how-nike-solved-its-sweatshop-problem-2013-5

Nike, Inc. Fair Labor Association. http://www.fairlabor.org/affiliate/nike-inc

Nike’s World. Wall Street Journal. April 21, 2014. http://online.wsj.com/news/interactive/Nike?ref=SB10001424052702303873604579493502231397942

Spar, D. Hitting the Wall: Nike and International Labor Practices. Harvard Business School

Townsend, M. Nike Raises Factory Labor and Sustainability Standards. Bloomberg. May 3, 2012. http://www.bloomberg.com/news/2012-05-03/nike-raises-factory-labor-and-sustainability-standards.html

Wokutch, R. Nike and its critics: Beginning a dialogue. Jun 2001. http://search.proquest.com.ezproxy.bucknell.edu/docview/219901152?OpenUrlRefId=info:xri/sid:wcdiscovery&accountid=9784

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One thought on “Nike: How Much Has It Actually Changed?”

  1. I like seeing all the updates since 2002. Not having an “ethics officer” can be a good thing. Sometimes an organization is better off having a priority integrated across the organization. If you have an ethics officer, it can lead to everyone else believing “ethics isn’t ‘my” job around here.”

    Why do you give Connor’s report so much weight? Do you agree with the goals he sets? is it odd that an outsider would try to set Nike’s agenda for most responsive?

    Like

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