NikeThere has been much debate and controversy recently concerning Nike’s Asian labour practices. This is a very complex issue and one that is a long way from being solved. It is very difficult to determine which side of this argument to defend, as both sides acknowledge the facts, yet put a completely different spin on them. Do you believe Nike’s critics who say they’re exploiting workers? Or, do you believe Nike when they say that they are giving workers in these countries wonderful opportunities to raise their standard of living? The consensus answer to this question by all sides seems to be that Nike is improving but still has a ways to go.
Nike’s Asian ties can be traced back to the birth of the company. The CEO, chairman of the board of directors, and co-founder, Phil Knight, wrote his masters thesis at Stanford University in the 1960’s on the prospects for using Asian labor to produce goods cheaper and more effectively. In order to incorporate this plan in to Nike’s business structure, a partnership was set up with a Japan based company called Tiger Sports. Tiger Sports would manufacture shoes for Nike in Asia then shipped them to the United States to sell. In the 1980’s however, this aspect of Nike’s partnership with Tiger Sports was dissolved, and Nike was forced to expand production from the United States to countries such as Taiwan and Korea where their products could be manufactured at the same relatively low cost that Nike enjoyed through the Tiger Sports partnership. Over the last five of years, however, the production numbers for these countries have been decreasing at an alarming rate due to the fact that their economies expanded at a very rapid pace. This, in turn, caused the cost of labour to increase dramatically, and therefore Nike could no longer produce their product as efficiently as before. In lieu of the rapid economic growth in the pacific rim, and the increased production cost, Nike has moved more into countries such as Vietnam and China where the labour is cheaper and labour laws less stringent. (VLF, VN Fact Sheet)
Nike does not own any of the factories that produces its products in Asia, and subsequently they do not directly employ the workers or management. They contract out work to factories that make all of the products and run all of the factories. They do, however, have a massive amount of leverage when dealing with these factories because of the huge contracts they supply. To ensure good labour practices, Nike has a Code of Conduct that every contractor must agree to abide by in order to get a contract. The Conduct Code in theory condemns and prohibits child labour, requires that workers be paid fair wage, imposes caps on the days and hours a worker can be forced to work, prohibits mistreatment or discrimination of workers in any form, obligates factories to implement programs that benefit worker’s health and safety, and recognizes and respects the workers right to freedom of association. There are 1000 Nike employees worldwide monitoring operations at the subcontractors and specifically the Code of Conduct adherent.
The most consistent criticism of Nike is that the workers in the factories contracted by them are not aware of the Code of Conduct that was agreed upon, and/or it is not enforced (especially the wages and overtime aspects) by the factory officials. Critics contend that the factories pay less than minimum wage at times, force too many overtime hours, and fail to make the workplace as clean and as safe as standards dictate. Many of the factories that are contracted have workers and management from different countries, causing some problems in communication. Some factories in China have Taiwanese Managers while factories in Vietnam have Korean managers. This is one reason offered by Nike in defense of the factories failure to comply with the Code of Conduct. To look into this issue, earlier this year Nike commissioned Andrew Young, a former civil rights leader and United Nations ambassador to do an analysis of how well the Code was working. Young and his staff visited four factories in Vietnam, Indonesia, and China for three to four hours each led by Nike’s people. Young’s conclusion proved not only to be uninformative, but somewhat aggravating to the public due to its elementary tone. Nike is doing a good job, but could do better was the statement released by Young at the end of the report. Another aspect of the inquiry that bothered the public was the fact that Young chose not to look into the issue of wages, a prime component of the Code. The reason for this being such an exercise was well beyond the technical capacity of our small firm. (GoodWorks, Executive summary)
Stephen Glass calls into question Young’s work in his article. He criticizes Young and GoodWorks International LLC (Young’s company) for not using their own interpreters, not spending enough time in the factories, not consulting with experts on the issue, and using this report as a public relations ploy for his new company. He states, But if the Nike report was ‘classic Andy Young,’ it was also a classic sham, marred not just by shoddy methodology but by frequent misrepresentations (Glass). Young even admits that he and his company are not labor practices experts (GoodWorks, disclaimer) yet they were chosen to do this job.
About a month ago a secret internal audit performed by Ernst and Young was leaked to press (Audit). In it was information about dangerous levels of carcinogens, as well as overtime abuse suffered by workers. This information directly contradicts Young’s statement of clean, well-lit, ventilated factories. This report makes it appear that Young’s report was strictly for public relations and had no real impact on rectifying the situation, or bringing to light any of the issues that surrounded the situation.
Recently, Nike commissioned a study by graduate students from the Amos Tuck School of Business at Dartmouth College to determine if workers in Indonesia and China were earning a livable wage. The intent of this study was to shed some light on the areas that the Young report failed to cover. The students spent three weeks interviewing workers in each country, and at the end of the study, three main conclusions were found. The first conclusion, Nike contract workers consistently earn wages at or above government mandated minimum wage levels. The second conclusion states, workers living on their own can generate discretionary income in excess of basic expenditures such as housing, transportation, and food. The third conclusion, for workers living in extended family households, Nike contract factory worker wages are typically used to increase or augment total household income to raise overall household living standards (Nike, Press Conference). Although these conclusions support Nike’s insistence that they do not sacrifice their workers well being for their own financial gain, critics bring to light a valid point when they argue that it is impossible to paint an accurate picture of the pay scale in three weeks time by interviewing approximately 1% of the workers, sometimes in front of management, which doesn’t allow the worker total freedom of speech.
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