”A company that makes nothing but money is a poor business”

”A company that makes nothing but money is a poor business” Henry Ford

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Introduction – The Nike Sweatshop debate Presenters… The Agenda of today Team Alexandra Bustros Stu Haigh Christian S. Hein Jin Ji 1 1 Overview of the case and updates 2 The theoretical framework 3 A) Is Nike responsible? B) Nike’s response … the question being raised…. C) The global perspective and issue 4 Further perspectives 5 Conclusion and Q&A

Overview and updates:Nike - A Quintessential Global Corporation - and where is the Debate now? 1 What is being presented in the case….. … and what has happened since • Company background • Established in 1972 by Phil Knight • Leading marketer of athletic shoes and apparel • Annual revenue (2006): $15B, same size amunt of the GDP of Island and Uganda • Designs and Markets, but not manufactures • Decade-long Debate • Accusation “sweatshop” – low wage, long hours, poor conditions • Nike’s Response commit to improve working conditions • 1996, Fair Labor Association (FLA) – independent monitoring • association • More… • United Students Against Sweatshop - Workers Rights Consortium (WRC) • June 8, 2006, The anti-sweatshop legislation was introduced in the Senate (S.3485) by Senator Byron Dorgan (ND) • 2008, EFJ Co-Director, Jim Keady, reports that the status of the two key issues for workers – wages and collective bargaining – has gone largely unchanged since EFJ’s research in Indonesia began in 2000. Source: The case 4

The theoretical framework- Ethics - Approaches and Arguments 2 Overview • Straw Men • Milton Friedman – ‘SR is to ↑ profit and play by rules’ • Cultural Relativism – ‘when in Rome’ • The Naive Immoralist – ‘if everyone else is, we can’ • The Righteous Moralist – ‘Home = host’ • Utilitarian • Moral worth of actions determined by consequences • Kantian • People are treated as ‘ends’ not ‘means to the end’ • Rights Theories • Humans rights transcend boundaries and cultures • Justice Theories • ‘Just distribution’ is considered fair and equitable Source: World factbook

The theoretical framework –QuestionableorEthical? 2 The whole spectra Cultural Relativism Utilitarian Ethics Justice Theories Righteous Moralist QUESTIONABLE ETHICAL Naive Immoralist Kantian Ethics Rights Theories Milton Friedman The Drawbacks • Milton Friedman – Rules can be grey with International Business • Cultural Relativism – is what’s in Rome right? • The Naive Immoralist – Defeatist • The Righteous Moralist – Competitiveness compromised • Utilitarian – Too hard to measure costs/benefits • Kantian – Incomplete, absence of substance • Rights Theories – Costs and competition • Justice Theories – Many theories of ‘Just distribution’, often conflict Source:

The theoretical framework –Wheredoes CSR comeintoplay? 2 Transition in the way civil society functions CSR defines a new way for business to act in civilsociety Source: Christian Hein, Paper on CSR in Denmark US Embassy Copenhagen

Themes: A) Is Nike responsible? 3 What should be done? • Nike should be held RESPONSIBLEfor working conditions in foreign factories because: • Obvious point: • Outsourcing was the solution to cutting cost • But also because: • Might be pressuring the subcontractors to meet unrealistic goals • They chose to deal with the geographical distance • Did not incorporate ethical considerations into its decision making • SO Nike is responsible of the unethical working conditions Source: World factbook

Themes: A) Is Nike responsible? 3 Overview What if, in Indonesia paid anincome of $2.28 a day, the base of Nike factory workers, which is double the daily income of about half the working population. Should we criticize Nike for the low pay rates of the subcontractors in Indonesia ? Source: World factbook

Themes: B) Nike’s response? 3 What should be done? • Focus on min Wage as well as min Age • More robust audit process • Not just 1 team (PWC) • Better methods • Provide Industry with thought leadership, eg. GM and The Sullivan Principles for South Africa • Conduct Focus Groups to determine price elasticity subject to price increase borne out of increasing wages • Better support sub-contractors by providing Management Consulting and direction on HRM • Improve Nike’s Organisational Culture: • Employee Ethical People • Ethical Culture • Ethical Leadership • Ethical Decision Making • Instil Moral Courage Source: World factbook

Themes: C) The global perspective and issue 3 Is sweatshop a global problem, and what is the solution? • If one believe in the theory of competitive advantages and believe that international trade is NOT a zero sum gamethen the present of transnational companies is good, since they represents a substantial part of the world trade. And therefore the abandonment of free trade like presented in the case by the foundation “MADE in the USA” would NOT be the right solution, if world inequality at the same time should be mitigated. • The correct way would be to lay it in the hands of global governance like WTO, UN, (among others) and make them monitor that the developing countries got sufficient safe guards and legal enforcement to prevent the most severe case of bad work conditions and further offer consultancy in how to govern it. Source: World factbook, Wikipedia

Further perspectives Wouldn’t a relative perspective not be more appropriating? 4 Insights: • What is the alternative if these people was not employed by NIKE’s subcontractors? Isn’t it better to work for a low pay than no pay at all? • Doesn’t the presents of Nike (transnationals/multinationals) help the development of the countries? (taxes, income, infrastructure, education, ect.)? • How is the salaries compare to average salaries in the country/countries? • PPP vs. Nominal figures - Yes people live for a dollar a day but if transnational's where not there would you think that the number would increase or decrease? • In the eagerness to do good is a better place to start not rather the amount of paid “Official development assistance” only 5 countries in the world live up to the requirement of UN • When the low salaries is being mentioned doesn't the PPP and thereby relative disposable income have to be taken into account? This could be measured in many ways; we have made the calculation based on the GDP pr. Capital figures, and the showing that the standard deviation is 24,7% higher for nominal GDP pr capital compare to PPP. Making up for part of the low salary. • Isn’t the competitiveness of these countries lying within the low salaries? Source: World factbook, http://en.wikipedia.org/wiki/Official_development_assistance

Conclusion and Summing up 5 Conclusion Questions? • No cut & dry answer • Each case is different • Stakeholders vs. Shareholders • Short term vs. Long term • Global governance is the way to create a level playing field

”A company that makes nothing but money is a poor business”