Working Conditions at Nike, Research Paper Example

Introduction

Nike became a company in 1968 when a student and coach on The University of Oregon campus decided that athletes needed a better designed shoe.  Bill Bowerman and Phil Knight partnership under the business name Blue Ribbon Sports. Years later. Nike is the company that produces footwear, clothing, and accessories for the athletic market. Nike is considered one of the largest sellersof these items. Nike has a 40 year history in the USA. Nike brand is sold in 180 countries. During the 1990s, attention was brought to the existence of global sweatshops. It was discovered that more and more American companies were moving their manufacturing production to countries that had ineffective labor laws and few restrictions and guidelines. Many of the companies that used these third world countries to manufacture their goods found ways to rationalize their practices. Overtime, sweatshops have become a reality of today’s economy. Sweatshop labor produces much of what most Americans wear on a daily basis. However, most people only have a general idea of what sweatshops are. Bender explains:

“The term ‘sweatshop’ was initially coined during the industrial revolution in the 1880s and 1890s to describe the subcontracting system of labor. The sweatshops that served larger companies were run by middlemen who expanded or contracted their labor forces depending on the success or failure of different clothing fashions. The middlemen’s profits were tied to the amount of labor they could ‘sweat’ out of their workers—most often women and children—through low wages, excessive hours, and unsanitary conditions” (Bender, 2002)

Yet, companies are still using these sweatshops because they can produce their products for the cheapest prices. It is difficult to believe that in 2014 workers are still under conditions that are very similar to those of the Industrial Revolution (Adams, 2002). At this time the majority of workers were young and female. Workers around the world are being exploited and abused in sweatshops that have poor working conditions and produce health hazards.  In recent years, Nike has been under great ethical attacks for its business ventures in foreign countries.

Literature Review

Nike has been criticized for its lack of ethical consideration in the operations of its factories in Vietnam. Kahle, Broush, and Phelps (2000) examine some of the criticism that was noted in one on site inspection.  Nike is an American company, but all of it manufacturing is completing overseas in countries that pay their workers low wages. The title “sweatshop” has become synonymous with these allegations. There have been reports that workers are working in unhealthy and unpleasant conditions. There have even been reports that workers are being physically abused and exposed to toxic substances. Concerns about exposure to these chemicals have raised some ethical issues because most of the workers in the factory are women of child bearing age. However, many argue that the factory does more good than harm and that it has been a great asset to the Vietnamese people. The researchers inspected a factory in Huy Hoang. They said:

“We wanted to inspect the physical environment of the factory. It was clean, well lighted, and had no foul smell of chemical bonding agents. Seemingly endless rows of sewing machines provided work stations for employees on the shoe assembly line in the approximately 100,000 square meter facility than 32 lines were devoted to cutting and stitching. The factory campus had a large, pleasant lunchroom, an office complex for management, attractive lawn and landscaped areas, and some covered parking for bicycles and motor scooters. Both air and water filtration systems were in place, prompting one of the Korean managers to say, “The conditions here are cleaner than at my home.” The physical working conditions of the plant seemed quite in line with North American environmental expectations for a factory of this type” (Basu, 1999).

The researchers expressed that they did have preconceived notions about what they would see, but were pleasantly shocked to find the total opposite. They concluded by saying that Nike has made many ethical mistakes, but seem to be making strides in the right direction.

Landrum and Boje (2008) reviewed a study on the 1997 Nike wage controversies in subcontracted Asian factories. In mid 1997, Nike was under attack about alleged sweat shops that used child labor and physically abused its workers. Nike was slammed for being one of America’s larges corporations, but allowing foreign companies to operate under 19^th century practices.  For example:

“In the mid- and late-1990s, Nike was highly criticized for wage and labor practices in their foreign factories. CBS’ 48 Hours aired a segment on 17 October 1996 showing Nike’s subcontractor plants in Vietnam. Women and children were working in substandard conditions in Nike factories. On 20 March 1997, Thuyen Nguyen of Vietnam Labor Watch released his findings of Nike labor practices in Vietnam. He criticized Nike for paying low wages, working employees to the point of exhaustion, physical abuse of workers by management, and restricted water and bathroom privileges for employees.”

People were outraged because more than 90 percent of the workers in the Nike factory were women. These workers received on average about $2.40 per day, while in the United States the average retail value for a pair of shoes was about $180 dollars (Clark 1996).  After reviewing the data, the researchers concluded that Nike need supporting evidence to prove that their wages were reasonable and that their working conditions were healthy and safe.  Nonetheless, they concluded that there are some questionable practices. In 2007, several of the Nike workers at plants in Vietnam went on strike because they claimed they were abused and barely made enough money to survive.  The researchers hoped that this review would shed light on some ethical issues that Nike has endured and how they are attempting to rectify those issues.

Zadek (2004) says Nike hasn’t always followed its tagline of “Just Do It”. He says their slogan is inspirational to the millions of consumers who wear the company’s gear, but the company is not upholding its high standards.  Nike has battled many allegations about ethical issues, but that has had very little effect Nike sales in the United States. Nike CEO said, “Whatever the channel where Nike products are sold, we have a growing conviction that it is essential to work with others to move toward the adoption of common approach to labor compliance codes, monitoring, and reporting to help ensure broader accountability across the whole industry”.

Commonalities of Literature

All of the articles address the ethical issues the organization has been faced with in recent years. One common issue was child labor. Another issue was that workers were given very low wages and are not paid overtime. The final issue was the working conditions. Many workers reported having been exposed to harsh chemicals that have been linked to birth defects and infertility issues. This was a great concern because more than 90 percent of the workers are women of childbearing age. The concern of how to fix these issues proved difficult because rules and regulations differ from country to country, which makes manufacturing difficult for international companies like Nike. Nonetheless, Nike was criticized because it seemed to turn a blind eye to all these issues.  Deontology ethics has been argued in all three articles. According to this type of ethics, people act morally in accordance to duty. For all of the countries examined, different laws governed their work conditions and compensation rate. So, the researchers argued how is one to know what is appropriate. With this theory, it can be inferred that Nike should have insured that certain standards were kept regardless to the laws within the country of its operation. Neither of the articles gives a straight forward solution to the problem, but they all seem to imply that Nike needs to compensate those affected and provide training and development to ensure that this does not happen again. To do this, a system of best practices can be implementing by using incentives and rewards for those factories that are abiding by the rules and standards of Nike.

Nike Study

The question that many are asking is how global corporations should behave in their international business ventures:

“If Nike has behaved ethically, why then is it embroiled in such controversy? The answer is to be found in three areas. First, Nike must contend with a variety of stakeholder groups, each of which has an identifiably different set of interests, many of which conflict. Second, in business it is not sufficient to behave within the bounds of law and ethical principle; public perceptions are crucial. Third, management practices can be mistaken without being unethical” (  Kahle, Boush, Phelps, 2014)

Nike does not actually manufacture any of its shoes. Their shoes are made by private contractors in other poor, undeveloped countries. Many shoes are made in Indonesia and Vietnam. Nike provides these companies with the designs and specifications for each shoe that is made. Once the company has made the shoe, it is then shipped back to the United States for distribution.  Indonesia and Vietnam is categorized by many poor and unemployed people. The government in these countries is very weak and unenforced.  Many organizations have alleged that Nike Factories are operating under unacceptable working conditions. Some workers even report physical and mental abuse. For example: “Workers say exhausted colleagues regularly faint from overwork. Punishment for misdeeds consists of petty humiliation. A supervisor who skipped work one Sunday to care for his sick wife and child was forced to clean toilets and then was demoted. Another worker had to run laps around the factory because shoes she assembled had defects “(Malkin, 1996).

Child Labor

Several  allegations have been reported that workers as young as 14 years of age are working in Nike factories  more than 60 hours in a week, but only making as little as a dollar per day. The safety and health standards are reported to very minimal. At that rate, it is estimated that the cost of labor for each pair of shoes is less than 4 percent of the price consumers pay for a pair of shoes (Price, 2007).   Nike officials argue that the profits they make are comparable to any other major corporations in the industry. Nike also ensured that they followed the employment laws and minimum wage laws for each respective country.  For example, “Although wages at Changshin clearly fall below U.S. levels, the local norms also enter into determining fair wages. The low turnover rate implies that workers consider the wages acceptable relative to alternatives” ( Sutter, 2001  ) Eventually, labor unions and human rights activists in the United States began to campaign in hopes of drawing attention to  the working conditions of Nike’s factories in other countries. As a result, Nike received pressure for stakeholders and retailers to change working conditions in foreign factories.  Nike responded to the criticism by establishing monitoring systemsof the working conditions in foreign factories.

The program the Nike enacted is called MESH (Management of Environment, Safety and Health). This program was charged with the task of monitoring working conditions in the foreign factories. Although the program is supposed to target all aspects of working conditions, Nike has given detailed reports of the air quality in the factories. Certainly, air quality is important, but some many other factors affect working conditions.

Working Conditions

In many Third World countries, working conditions are deplorable. The sad part of situations is Third World countries is that the workers are afraid of speaking out. Women are especially afraid to speak out because they know that their jobs could be immediately terminated. However, when social media began airing information about factory conditions, workers have been reporting and speaking out about their concerns.  The Nike Corporation has a tainted history with the sweatshop industry (Clark, 1996). Nike has insisted that they were abiding by all laws and regulations within their country of operation, but they have still been criticized. Nike has been accused of taking advantage of Third World conditions to make profits. For example, an article in the Community Aid Abroad said:

In 1989 more than half of Nike’s sneakers were made in South Korea, which was then ruled by an authoritarian government. As South Korea became a democracy and workers gained wage increases and union rights, Nike shifted production to Indonesia and China. Barely 2% of Nike’s sneakers are now made in South Korea. In 1996, when Indonesia was ruled by the dictator Suharto and the only legal union was run by the government, 38% of Nike’s sneakers were Indonesian-made. Since then Suharto has fallen, Indonesia has taken its first faltering steps toward democracy and workers have been able to form their own unions. In the process Indonesia’s share of Nike’s sport shoe production has fallen to 30%. According to the Wall Street Journal this could fall further to 26% since Nike ceased ordering from the PT Doson factory in October “(www.caa.org).

According to critics, this shifting in Nike’s factory boundaries supports the allegations that Nike is in search of the cheapest labor possible. These practices were continued well into the late 90s.

Child Labor Statistics

According to the latest report of the International Labor Organization (ILO), 246 million children between the ages of 5-17 engage in child labor. The majority of the world’s 211 million working children between the ages of 5-14 are found in the Asia-Pacific region (127.3 million or 60%), Sub-Saharan Africa (48 million or 23%), Latin America and the Caribbean (17.4 million or 8%), and the Middle East and North Africa (13.4 million or 6%). The rest can be found in both transitional and developed economies. Asia has the highest total number of child workers, but Sub-Saharan Africa has the highest proportion of working children relative to population. In Third World countries, children often work alongside adults in factories.

Stakeholders

Nike is one of the world’s most profitable companies. The company does its best to meet the needs of all its stakeholders.  When the needs and beliefs of stakeholders are not met, this can adversely affect the profits and image of the company. For example,” someconsumers may have apreference for productsthat cause less harm toothers or that are manufacturedin their ownhome countries. The lattercharacteristics may be called ethical factors” (Basu, 1999) Nike delivers products intended to inspire athletes.  Consequently, one of Nike’s primary stakeholders is the people who are affected by the company.  The people who are affected by Nike are a wide range including society, government, consumers, and shareholders. Nike invests in a wide range of community change through sports as a way to produce social change. Nike sponsors the Homeless World Cup, which is an organization that supports homeless persons by trying to change their condition through encouragement and community involvement.

Internal stakeholders should be the most important stakeholders to Nike. Internal stakeholders are those employees who work for Nike. Nike is widely known for celebrity endorsements. For example, Nike is almost synonymous with Michael Jordan and his brand of shoes. However, no one celebrity or endorsement is more important to Nike than its workers because the workers are the ones that produce the products. Consequently, providing a healthy and safe workplace, appropriate pay, and a pleasant work environment are key goals of the company. In the early 90s, the employees did not seem like the most important stakeholders for Nike when it was criticized for operating sweatshops in foreign companies. Since this time, Nike has developed a quality care system that uses external monitors that all aspects of the company is reviewed and assessed.

Managers are also internal stakeholder; however, they can either negatively or positively affect the company. For Nike, many of the managers in several of their Korean factories had a very negative impact on the company’s image. Many unethical issues such as discrimination, physical abuse, and poor health standards were found to be taking place. When employees are treated poorly the direct result is usually poor or low productivity.  From the business perspective, sweatshops are a lucrative business for some stakeholders. Workers are generally underpaid while working in conditions that are difficult to endure (Malkin 1996).

Consumers are left with a moral decision to make. Certainly, workers of sweatshops deserve better pay and more comfortable working conditions. Many people around the world sympathize with what the workers are enduring. Nonetheless, the sales of Nike products are not decreasing. The question consumers must ask themselves is whether or not they are willing to sacrifice morality for their brand name.  Consumer demands can undoubtedly be linked to the increase of unethical conducts by factories in foreign countries. Likewise, consumers must take a stand to ensure that they receive quality products, yet the workers who produce those products are not abused or mistreated.

Conclusions

So, the question is should Nike be held accountable for the conditions in foreign factories. To many, the answer is obvious. Nike is directly affiliated with any company that produces its products. Consequently, when those affiliates are making bad choices those choices affect the company. Much evidence has been uncovered that supports the allegations that Nike has taken advantage of Third World countries in order to make a profit. Nike has been criticized greatly for their ethical practices. The decisions that companies make that pertain to ethics are often difficult. These decisions affect so many stakeholders in different ways. Nike has been greatly criticized for its unethical treatment of Asian workers in its foreign factories.  The eradication of sweatshops is a must. However, systematic conditions that allow these sweatshops to exist in Third World countries must be changed. There are many ethical issues surrounding sweatshops. These issues need to be addressed by all stakeholders of the Nike Corporation. However, some commonality must be agreed upon to determine what ethical practices really mean. For example:

“Ethical issues concerning producers, particularly in developing countries, are currently at the forefront of debate. Manufacturers are confronted with a plethora of ethical subjects such as child labor, fair working conditions, fair wages, the ecological sustainability of their production methods, intellectual property right violations and counterfeits, to name just a few. Arguably, child labor is the issue where most agreement exists. However, despite the unethical, unjustifiable and degrading nature of child labor, it is still a problem in many developing countries” (Kahle, Boush, and Phelps, 2014).

Unfortunately, the truth is that people in Third World countries have no other alternative to choose from. Many researchers have even alluded to the fact that workers of sweatshops are better off financially because they work in these factories. They have the opportunity to improve their living standards. Westerners are often criticized for comparing working standards in places like Asia to those of America. Yet, others have pointed out that media exposure of unethical practices is just an attempt by competitors to gain advantage over their rivals.

Works Cited

Adams R. J., (2002).  Retail Profitability and Sweatshops: a Global Dilemma, Journal of Retailing and Consumer Service, 9 147-153.

Basu, Kaushik. 1999.Child Labor: Cause, Consequence, and Cure, with Remarks on International Labor Standards. Journal of Economic Literature 37 (3)

Beder, Sharon. (2002). Putting the Boot In. Ecologist, 32, 24-31.

Bender, D. (2002). Sweatshop subjectivity and the politics of definition and exhibition.International Labor and Working-Class History, (61), 13-23.

Clark, C. S. (1996, August 16). Child labor and sweatshops. CQ Researcher, 6, 721-744

Eter Alford, Jakarta Correspondent (2012). One-Man Crusade to End Nike Sweatshops Pays Off. The Australian 11(1)

Kahle, Lynn R., David M. Boush, and Mark Phelps (2014) Good Morning, Vietnam: An Ethical Analysis of Nike Activities in Southeast Asia. Sport Marketing Quarterly 9(1)

Malkin, E. 1996. Pangs of conscience. Business Week. 3486: 46-8.

Price, T. (2007, August 3). Corporate social responsibility. CQ Researcher, 17, 649-672.

Sutter, D. 2001. Can the media be so liberal? The economics of media bias.  Cato Journal. 20: 431-51.