Running head: Nike and the Sweatshop Debate Nike the Sweatshop Debate Shelia D. Marshall Global Strategies MGT 448 Shabbir Karim October 12, 2009 Nike the Sweatshop Debate Beneath all the hoopla and controversy about Nike being a successful company in the United States in which its earnings in 2009 according to Hoovers Inc. , 2009, Nike’s revenue for 2009 was $19, 176. 1 million and their gross profit was $8,604. 4 million, made possible by the hands of women and underage workers who work long hours and in unsafe conditions in those sweatshops in foreign factories located in foreign countries as Indonesia, China, and more recently in Vietnam.
Nike is a US sports company based in Beaverton, Oregon, Nike’s original name was Blue Ribbon Sports and its mission was and is today to be the world’s leading sports and fitness company (International Directory of Companies History). Nike has continued to soar in its market, being ahead of Reebok, Adidas, Fila, Converse, and New Balance however they are also ahead in the limelight with negative views on how their manufacturing companies are failing in their workplace ethics.
There are two basic options for footwear companies in the manufacturing of their products, the first option is that the company can own and operate the factories in which their product is being made and the second option is to subcontract their products out to secondary manufactures. In either case the facilities can be located domestically or internationally and the company can have an innumerable amount of issues within its systems and processes.
Companies that stay within the domestic territory have a better opportunity to manage the workplace such as the benefit of being able to evaluate and monitor workplace processes, skilled workers, job creation, government stability, and the ability to reinforce well understood labor practices. However, when using this option the company may suffer in paying higher wages to their workers. For companies choosing to operate overseas the process of monitoring the workplace has a lesser chance of being effective and the workplace may just as well be monitored but for the wrong easons. This is one of those debates that could go on forever; however at the end of the day someone should be responsible enough to admit and correct the wrong if indeed a wrong is being committed. I believe in fair wages for the work that is being done in the manufacturing factories that produce shoes and apparel. I do not believe in the rich getting richer at the hands of the less privileged, unskilled, or less fortunate. Several issues arise when the discussion about sweat shops come up in companies like Nike make the decision to go abroad.
For more than a decade Nike has been accused of having workers who were under aged, and who slaved away under hazardous conditions for below subsistence wages, Nike’s wealth, according to their detractors claim has been on the backs of the world’s poor (U of P readings). In the eye of the reader Nike had become a figure of the evils of globalization. In other words, a wealthy Western corporation exploiting the world’s poor to provide pricey shoes and apparel to the fortunate customers of the developed world.
Challenges for Nike are the legal, cultural, and ethical points of view of this case study. Even though Nike may subcontract its companies overseas, Nike still has a responsibility to make sure the manufacturing sites are ran with integrity. After the negative press, and investigations that took place to prove Nike was guilty of running sweat shops, Nike had to rethink their position overseas and they had to begin to think about the effect the negative press had on its financial stand as well the effect it had from an ethical point of view.
In the 90’s Nike began to take steps to rectify the implications such as the implementation of a code of social responsibility throughout its supply chain that would make an improvement in the working conditions of 800,000 workers at 700 factories in 52 countries. Nike’s goal was to make systematic changes for its suppliers and the entire industry this affected (Gail Dutton). However, suppliers were not so eager to make these changes because the suppliers wanted to see their direct benefits.
Nike had to become first partaker in the changes by first leading by example and secondly through education. Nike developed a supplier code of conduct and assembled an internal team to enforce the codes of conduct, also working with external processes to monitor the policies set into place and having consistent contact with their stakeholders. Other challenges for Nike were eliminating excessive overtime for factory workers; putting into practice human resource management systems, and educational raining would be tailored to their subcontracted facilities, put in place a freedom of association educational program in 100% of focused factories, and lead the charge in multi brand collaboration on compliance issues in 30% of their supply chain. Nike has realized that even though they have made an attempt to make changes within their subcontracting Companies this has not been enough and Nike realizes they have an ongoing obligation to the workers, as well to the different cultures that are involved.
Nike has a process called the Compliance Generation which involves; 1 (1986-2000). Presence -increasing their business value by establishing the function, fighting fires, building a global team, and establishing partners. 2 (2001-2006). Interaction – making the work more systematic, building excellence in management audits, building environment, safety, and health global process, creating transparency, and creating ratings. 3 (2006-2010).
Transformation – Focus on building excellence in factory remediation, developing a sustainable sourcing strategy, building business integration and accountability, increasing contract factory ownership of corporate responsibility, and building industry conditions (Nikebiz). Not only does Nike have a responsibility to be in compliance, but also the host governments have a responsibility to protect the citizens who live and work in these countries. Labor laws must be enforced, and workers should be protected.
In an article written by Bao Doan the government, in an attempt to alleviate poverty and unemployment, has sometimes opened doors for labor abuses. According to the article international human rights groups and labor coalitions have tried urging foreign invested factories to improve the living conditions, and Vietnamese laborers have little power to organize boycotts to try to stop the treatment going on in said sweatshops. The Vietnam workers in these factories are protesting more to have a better quality of life and the government of Vietnam has a responsibility to make this happen.
The Vietnam government has the responsibility of ensuring workers when foreign investors enter Vietnam these companies are abiding by the country’s labor laws and if these companies refuse it is the responsibility of the Vietnam government to enforce the law or force out the company. Labor analysts say government officials are well aware that cheap labor and low production costs is a major draw for international investors in Vietnam, and some factory owners are affected by labor unrest nd increased pay have threatened to leave for China, where infrastructure costs are lower and the government is more liable to crack down on labor strikes. Critics say government enforcement of labor law has been lax and not one foreign company has been expelled for violating the law (Aaron Glantz, Ngoc Nguyen, 2006). The strategic and operational challenges’ facing global managers especially in the case of Nike is to continue to try and try to better its business performance and relationships with its foreign investments.
Nike must continue in its efforts to make a change by continuing the supplier code of conduct that extends the corporation’s values to its suppliers. Nike must continue in its efforts to retain good corporate social responsibility (CSR), which can have an influence on their suppliers. Nike must continue in its auditing practices, best practices in education, rewarding compliance and ensuring that variances from the standard are not ignored.
Nike must be able clearly to communicate what the company expects when outsourcing their product. Auditing companies according to Auret van Heerden, president and CEO of the Fair Labor Association, states placing monitors in these factories may be another option to curve the disadvantages these manufacturing sites may have. Monitors however must be monitored, if monitors are from outside the country they may overlook certain discrepancies or may not be aware of exactly what to look for.
However when monitors are from the same culture they oftentimes will know exactly what to look for and in any case monitors must be again strategically placed to assure the process is being effectively done to continue the protection of the workers in the shops. Developing a realistic corporate social responsibility policy or ethics policy is one of the first and most important steps a company can do to extend its values throughout its supply chain (Alexandra Wrage, president of TRACE). The debate against Nike and their involvement in sweatshops still remain to be resolved.
My personal belief is that the hosting country as well as the foreign investor has an obligation not only to the betterment of the country but both entities have an obligation to the workers in these factories no matter what the gender, educational background, or social status. Rules and regulations of governments should be obeyed whether it is from foreign investors coming into a country or whether it is those making the rules. Individuals should be treated with respect no matter what their social status is and money seems to be the social status behind Nike, and Vietnam’s government. References
Nike, Inc. http://www. hoovers. com/nike/–ID__14254,ticker__NKE–/free-co-fin-factsheet. xhtml, retrieved October 6, 2009 Source: International Directory of Company Histories, Vol. 36. St. James Press, 2001, http://www. fundinguniverse. com/company-histories/NIKE-Inc-Company-History. html, retrieved October 6, 2009 Hill: International Business: Competing in the Global Marketplace, Seventh Edition, retrieved from https://ecampus. phoenix. edu/classroom/ic/classroom. aspx, October 9, 2009 How Nike is changing the World One Factory at a Time by Gail Dutton, 2008, retrieved from http://ethisphere. om/how-nike-is-changing-the-world-one-factory-at-a-time/, October 9, 2009 Root Causes of Non Compliance, retrieved from, http://www. nikebiz. com/responsibility/documents/3_Nike_CRR_Workers_C. pdf, October 9, 2009 Sweatshop Labor in Vietnam, retrieved from www. stanford. edu/… /Swaetshop%20Labor%20Problem%20in%20Vietnam. doc, October 9, 2009 Vietnam’s labor strife worsens Series of strikes, protests over pay, working conditions, Aaron Glantz, Ngoc Nguyen, Chronicle Foreign Service Tuesday, May 30, 2006, retrieved from, http://www. sfgate. com/cgi-bin/article. cgi? f=/c/a/2006/05/30/BUGF8J3DID1. DTL#ixzz0Th13kZSh, October 11, 2009