FREE ESSAY ON NIKE

NIKE

There 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.