Nike: The Sweashop Debate

1. Nike: The Sweashop Debate International Business: Context and Strategy 2009 Carolina Camargo Hitesh Arjun Patrick Jermann

2. Nike • Nike had in 2006 a US$15 billion annual revenue. Their products are sports equipment, such as footwear, equipments and apparels. • In 2008 Nike had US$18.6 billion annual revenue. • Sell their products in 140 different countries. • Designs and sell, but they don’t manufacture. • They have 600 subcontractors with 650,000 workers

3. Context • Nike has been persistently accused by various interest groups of having subcontractors with hazardous conditions, some of them paying wages lower than the subsistence level or using child labor. These factories are called “sweatshops”.

4. Information objectivity In order to build an objective opinion, one should balance all the different statements, as the information given by each interest group is based upon their point of view. The FLA, for example, might be influenced by the apparel industry, but is still able to create a vital advantage in industry as well as working standards. It may be partially considered a industrial tool, as the WRC claims. Still, WRC is on its own side influenced through labor unions, which makes their statement about FLA less objective.

5. Case Timeline 1996: Made in USA (foundation financed by labor unions and domestic apparel manufactures) attacked Nike’s subcontractors for child labor and low wages. Nike made a statement saying that was false. 1996: CBS news report about the low wages and long work hours in a Nike’s subcontractors factory in Vietnam. 1996: Nike hires Andrew Young, former US Ambassador an Atlanta Mayor, to asses working conditions. He reported that there was no sweatshops, no hostile conditions, but there was crowded dorms and the workers were earning subsistence wages. 1996: Nike joins presidential task force agains sweatshops. 1997: Global Exchange (human rights organization) newsletter about the low wages in Indonesia and China. 1997: Global Exchange report attacking the working conditions in Nike’s and Reebock”s subcontractors factories in South China. 1997: Global Exchange present a liked report that Nike order from Ernst&Young that presented a very high chemical exposure, and long hours, bad conditions and low wages. Nike said this was actually a sign for their good monitoring system, and that they had already raised an action plan.

6. Case Timeline 1997: Independent companies start auditing the factories 1997: Nike terminates relationships with 4 Indonesian subcontractors for not complying with their policy. 1998: Phil Knight’s speech: change of the age limits, 100% factories audit scheme, chemical exposure within limits. 1998 - 2001: USAS protests and creation of alternative independent organization “ WRC” 2000: Nike announced it would release the complete reports of all independent audits of it’s subcontractors plant’s.

7. Nike’s Responsibility • Nike has the obligation to avoid contracts with sweatshop subcontractors or at least make them follow the company’s policy . The pay and working conditions that the workers of subcontractors receive is due in large part to the contract that has been negotiated by Nike. If Nike had chosen to make improved working conditions a part of the arrangement, them those benefits may have been passed on to the workers. • But it is uncertain to what degree Nike can influence the subcontractors payments to the workers, which limits Nike responsibility. • We believe that Nike should follow the laws, norms and standards of the country where it operates, as long as it complies with international human rights. • For example, in Indonesia Nike’s subcontractors pay their workers around US$2.28 per day, which is double the daily income of half the working population. We believe it’s not appropriate to criticize for low pay rates in this example, because they are making payments higher than national averages. Additionally if Nike wasn’t there, this workers would be either unemployed or would probably earn less. Therefore they are better off with Nike.

8. Global solution • Legal effort by third world government • Create global standards • Introduce human rights ranking for companies and certify them • Strengthen public pressure on countries and companies not complying with agreed standards

9. Policy Improvement • Direct Statement’s to criticism • Transparency and admitting “faux pas” • Stronger monitoring system • Act upon the results of their monitoring reports • Create an Ethics Division

10. Conclusion Nike should strive to find a strategy to maintain Nike competitiveness and at the same time follow the afore mentioned policies. Thank You For Your Attention.