Nike, Inc.
Where Nike has no limits, only goals
Child Labor Activist
09/02/2015

Table of Contents I. Executive Summary ………………………………………………………….. 1 II. Introduction ………………………………………………………………....... 2 III. Roots ………………………………………………………………………….. 3 IV. Taking Care of Goals ………………………………………………………… 4 V. Labor Scandal ………………………………………………………………… 5 VI. Wages ………………………………………………………………………… 6 VII. Boiling Water ……………………………………………………………….... 7 VIII. The Stakeholders …………………………………………………………...... 10 IX. Conclusion ……………………………………………………………………. 11

I. Executive Summary
Nike is a name brand known for its sports athletic gear. This report will examine the issues of Nike on a controversial dilemma in which Nike is ethically responsible for manufacturing its goods. Nike has been known to be a sponsor for the highest paid names in the sports industry. Michael Jordan and Tiger Woods are two of many that benefit from the Nike endorsements. Analytically speaking large corporations like Nike Inc. tend to contract a large portion of factories overseas to avoid the strict working regulations in the United States. These third world countries like Cambodia, Vietnam, Pakistan, China, Korea, and Taiwan provide access to readily abundant cheap labor. Nike believed investing in developing countries to manufacture their products which led them to their current multi-billion dollar success. The exploitation scandal of Nike’s success includes labor issues, under age child labor, and wages. People may summarize this in one word, sweatshop. Sweatshop is defined as a factory or workshop where workers are paid at a very low wage and work under very poor conditions. Nike’s poor working conditions led to some critical incidents such as death and labor abuse. Nike would move from one country to another to avoid paying higher manufacturing prices. Institutions such as Asian-American Free Labor Association aid the workers from harsh working conditions in these facilities, which were making employees sick. Apart from these issues, Nike’s negligence to comply underlines the magnitude of sweatshop labor, low pay wages, and abuse of workers. Nike’s strength pertaining to how it handled its sweatshop reputation is still unclear. However, statistically speaking Nike is a leader by nature, and its business as a whole has led them to achieve industry leadership. Nike is a believer in potential with no limits. Nike still has more goals to achieve. Nike is well recognized by its strong name brand, which has been made from their passion and greedy appetite. Nike is a name brand that has valuable assets. II. Introduction
Nike is an international leader when it comes to manufacturing sports products. Globalization is supposed to help contribute to economic growth, but critics believe that the benefits are exaggerated. As a direct result of globalization corporate structure, Nike has become a leading user of child labor and sweatshops to produce its products (Spar 2002). The results are poor working conditions in these plants in which Nike needs to explore better options for the employees. The workers have to work throughout the day in unhealthy work conditions while making the shoes. The chemicals in the factories are not being properly managed, making many employees sick, and in some cases to the point of death.
Nike did admit employing under age children in third world countries after the news broke out. But, in their defense, they state that birth information was hard to verify when birth records do not exist or they can easily be forged for as little as $5 (Nikebiz 2015). Nike was criticized by the press for employing Cambodian children. This led to more problems for Nike when the employee wages came to light. Many workers were being paid about $2.28 per day or .25 per hour, while working almost 84 hours a week (Nikebiz 2015). Nike also admitted to abusive treatment, either verbally or physically in many of the plants. Some employees were not allowed to use the bathroom or take a sick day. Others were being punished for making mistakes. Employees would get hit, slapped, kicked or even get fired if they spoke or complained. The corporate global philosophy has exhibited that Nike is not only exploiting workers but they have contradicted on how they help developing economies. Nike moves its production as soon as production prices are raised and always claim no responsibility to the issue of sweatshop labor.
Nike insist that it’s not their concern or responsibility the employee working conditions of the contracted factories. III. Roots Nike was founded in 1964 as Blue Ribbon Sports and initially operated as a distributor for the Japanese shoemaker Onitsuka Tiger. It became Nike Inc. in 1971 after the first Nike employee Jeff Johnson decided to name it after the Greek goddess of victory (O’Reilly 2014). Phil Knight and Bill Bowerman are the founders. Each invested $500 and, “the most valuable sports brand in the world” started (Frank 2015). Nike is headquartered in Beaverton Oregon, is the largest and most successful brand of shoes, sport equipment, clothing and controlling more than 60% of the market (kicksonfire 2015). Below is a timeline of the years of Nike (kickonfire 2015). 1. 1971 Nike changed its name and the Swoosh design logo was created. 2. 1984 Nike signs Michael Jordan to an endorsement contract and releases the first model of his signature shoe. The Air Jordan. 3. 1988 Nike introduces its “Just do it” slogan. 4. 1996 Nike signs Eldrick “Tiger” Woods 5. 1999 Bill Bowerman co-founder dies at the age of 88 6. 2004 Annual Revenues exceed $13 billion

IV. Taking Care of Goals
Nike eventually became the worldwide leader in designing and marketing of sporting products. “Our business model in 1964 is essentially the same as our model today: We grow by investing our money in design, development, marketing and sales and then contract with other companies to manufacture our products” (Nikebiz 2015). While Knight attended Stanford Business School in the 1960’s, he evolved Nike’s business model. Knight believed it was doable to produce at low-cost, in a first class Japanese manufactures’ that began to dominate US Consumers markets in footwear, in contrast most competitive sporting goods companies such as Adidas who were manufacturing their product in high-cost countries like Germany and the US. By outsourcing their products to lower-cost Japanese manufacturing companies, Knight conceived that Blue Ribbon could undersell its rival and be successful (Nikebiz 2015).
By 1972 a result of increase in Japanese labor cost, Nike moved its manufactures to South
Korea and Taiwan. In1975 and today that population is even higher and expanding at a blistering pace (Spar 2002). By 1980’s they believed 86% of its production looked convincing to keep in these two countries Nike instantly build a relationship with these two countries but when Taiwan and South Korea decided to increased their labor cost, Nike immediately looked for a new place to keep cost and manufactures low (Spar D 2002). Nike found China and Indonesia where manufacture would be cost effective. At this time Nike initially received attention from trend- setting teenagers and financial experts. Nike’s revenue jumped from $60,000 to a surprising $49 million in a period of ten years. In the mid 1990’s Nike surprised Wall Street when its revenues ascended to over $9 billion. Nike ruled over 40 % or the $14.7 billion of U.S athletic footwear industry and $64 billion in sports apparel around the world (Spar 2002). V. Labor Scandal
Nike’s success is seen unethical with its working conditions. In 1991 Nike’s practices were heavily criticized by the press when reports of child workers whom were injured or killed while working. In June 1996 an issue of Life magazine carried an article about child labor in
Pakistan, Nike knew it meant trouble. The article's lead photograph showed 12-year-old
Tariq hunkered over the hexagonal pieces of a Nike soccer ball which he would spend most of a day stitching together for the grand sum of 60 cents (Spar 2002). The report also found a number of children doing hazardous work, including jobs with toxic substances or dangerous machinery. This led Nike to state no one under 18 years old would be employed in the factories, although it later lowered it to 16 years old (WSJ 2013). Another report issued in 1997 was on a
Vietnamese women who was killed instantly in an incident which was caused by a broken machine that flew across the factory and striking her in the heart (Spar 2002). Other reports indicated abuse such as long working hours, and working conditions were inhumane. Nike tried to protect their image by denying any involvement in incidents reported by the media, but it rendered useless as reports beginning to rise in other factories in other countries contracted by them (Spar 2002). “We have about 530,000 workers working on Nike shoes and clothes on a given day. There are going to be incidents. There have been some in the past, and there certainly will be more in the future” (Nikebiz 2015 ), stated Nike in a communication. “There are too many workers, too many interactions daily; and in Vietnam, too much tension based on nationality to avoid any incidents” (Nikebiz 2015). Important and horrific as child labor certainly is, labor rights advocates know that eliminating child labor doesn't necessarily end labor abuses.
China is the world's single largest producer of sports equipment (Nikebiz 2015).

VI. Wages
Nike’s other issue is low wages in contracted factories in developing countries. In the beginning Indonesia was the ideal place to manufacture at a low-cost. In the early 1990’s the minimum wage in Indonesia’s was capital scarcely $1, in contrast to a daily wage of $24.40 in South Korea and the U.S. average hourly pay of $8.00 in shoe factories (Spar 2002). With accelerated prevalence, Nike’s manufacturing practices have ejected into media, causing an outburst in the central point of public relations. The first to react was Indonesian government who raised the minimum wage from 2100 rupiah to 2500 rupiah, which is $1.24 American (Spar 2002). “Payment of living wages, which allows workers and their families to live in dignity is fundamental to eliminating sweatshops” (Nikebiz 2015). The workers need to live comfortably which means having the basic needs as clothes, housing, food, health care, education, water, childcare, transportation and even a savings account. However, the majority of low wage employees are still living in poverty and are still hungry. Table 1 contains the average apparel industry wages in countries where sweatshops (Powell B 2004). Table 2 we have Nike employee’s yearly salary (CNN 2004).

VII. Boiling Water
Nike is a company that began with $1,000, and is no surprise what they have done to generate billions. Nike has been brutally criticized by the media and it was clear it had to make changes. It didn’t matter what Nike said or did that could have limit the wave of criticism. Anyone who heard about the debate was opinionated on how the company should fix its labor practices. It was assumed that Nike was willing to change in order to prevent human rights violations (Spar 2002). This kind of labor such as a 12 year old stitching soccer balls, long shifts, and low pay wages in these developing countries is considered slavery, child abuse. For Nike to have its image associated with sweatshops in Asia was more than an embarrassment; the revelations threatened sales. Nike saw their sales drop instantly and was being portrayed as a company who was willing to exploit workers, deprive them of the basic wages needed, simply to sustain profits. Nike stated, “Nike has zero tolerance for underage labor. There has never been a time in Nike’s history where child labor has been a problem. And I also say that it really hasn’t been a problem in the shoe industry as a whole" (Spar 2002). According to Nike they wanted to follow the rules and regulations, and for that reason the first initiative was to stop the use of a toxic adhesive called toluene. Toluene has been found to cause harmful effects among workers who are not properly guarded from the poison and the fumes that it emits (Nike 2001). In its place Nike researchers created a water-based adhesive which has no such side effects. While the safe adhesive is not perfect for use in all shoes, Knight assured the public that Nike would continue its research and by the end of the 1998 calendar year would have all Nike factories meeting United States Occupational Safety and Health Administration (OSHA) (Nike 2001). There are still more changes that Nike had to complete in order to comply with the public. Human rights organizations are pressuring Nike to follow suit in other U.S. companies like Coca-Cola, Pepsi, Goodyear, and Gillette that pay workers’ wages that allow them to meet their basic needs, foster company loyalty and increase productivity (Spar 2002). Regardless Nike knew that changes had to be made since Nike was being investigated by congress and many human rights activist. According to Nike, an agreement with the AIP (American Industry Partnership) had to be signed (Nike2001). In April of 1997 the AIP released two papers for reform, the "Workplace Code of Conduct" and the "Principles of Monitoring." Since these reports were made in 1998, Nike has begun to make the necessary changes to further improve its factory conditions (Nike 2001). The Interfaith Center on Corporate Responsibility (ICCR), in a report based on a recent visit to Nike plants in China, Indonesia, and Vietnam, found that the health and safety standards had improved and that progress was being made in limiting excessive overtime. In most factories, ventilation systems were excellent and the workers were safely protected in their use of toxic chemicals (Nikebiz 2015). Even though Nike has made work environment better for these workers, the wages have not fully been addressed. A memo was created and released stating seven different aspects of working conditions. This code of conduct released by Nike that if accomplished they will have a business that is prosperous in the long term. Below are just a few to mention (Nike 2001). 1. Working to improve the environmental performance of our suppliers. 2. Eliminating waste and potentially harmful substances. 3. Designing a product that either be donated, brought back and re-manufactured or safely return to nature.
As explained by CEO Knight, Nike has invested in many factories where wages have increased while poverty decreased. Is true for both South Korea and Taiwan whom have successfully industrialized since Nike and other athletic shoe corporations began their production in their facilities. South Korea and Taiwan democratized, electing governments and granting workers unprecedented rights; however, as these countries have grown more free, Nike has removed its production and relocating to places such as China and Indonesia. Here labor laws are not enforced, and the governments are more repressive (Nike 2001). In Figure 1 the image tells its viewers that by supporting the Nike Inc. you are also supporting child labor (CD 2013). Figure 2 is the famous image printed on Life Magazine in 1996 of the 12 year old Pakistan boy stitching the soccer ball at .60 cents per day (Spar 2002). Figure 3, we see a 3 year old girl named Silgi starting to stitch soccer balls to help her mom whom together make a total of .75 cents a day (nmsu.edu 2006).
Figure 1 Figure 2
Figure 3
Figure 3

VIII. The Stakeholders
“Early in our corporate responsibility journey, we learned the importance of engaging and listening to multiple stakeholders. They help us prioritize key issues and develop our corporate responsibility policies and approaches. We see stakeholder engagement as a key enabler of both risk mitigation and innovation” (Nike 2001). Nike stakeholders have a range of positions across the company. They contribute to the day to day operations of the company. They have an essential interest in the corporation because any scandal directly or personally can affect them. Nike explained that their stakeholders help prioritize key issues and develop corporate responsibility policies, while learning a great deal from their interactions (Nike 2001). Below is the chart of the Primary and Secondary Social Stakeholders and Stakeholders Potential Threat. Image from (Nike 2001)

IX. Conclusion
Nike Inc. a leader by nature, who believes in potential with no limits and only believe in goals. Nike has passion and a big greedy appetite. Nike is viewed by its strong name brand, a brand that is a valuable asset to the Nike Corporation. However, all the strength and goals cannot be seen in good by consumers when manufacture issues such as, harsh working environments, child labor and low wages have embarrassed the corporation. Nike has been successful with their philosophy of contracting independently owned manufactures. Nike success is to make their products at a low cost; generating billions of dollars. Another key factor of Nike success is that Nike does not own a single shoe or apparel factory. Nike believed that by having the jobs in third world countries Nike would be helping their economy. However, we have seen that is not the case. Nike believes that the main problem has been the issue of child labor, not the wages. But as explained by columnist Bob Herbert “it’s not the minimum age that needs to be raised, it’s the minimum wage” (Nikebiz2015). Many workers are still under paid and Knight whom was interviewed by Michael Moore stated “Nike has no responsibility because the factories do not belong to Nike” (Nike 2001). Yet, Nike products are being produced by thousands each day. Even though Nike has made the work environment better for the workers, the wages have not been fully been addressed nor corrected. Human rights organizations are in doubt if Nike will ever make the proper wage changes. It seems Nike is only taking actions to reform its factory practices because they were caught abusing the workers. Therefore, one fundamental impact is to improve working conditions in the global supply chain and industry as a whole. Nike states that worker wages is a critical issue and they are working to address it (Nike 2001). If Nike ever decides to make changes to the employee wages, they will not be able to profit as they have throughout the years. Below is an example of an estimated cost of 1 Nike shoe. Here you see that even .60 cents or $1.00 does not compare to the profit Nike makes (Spar 2002). $3.37 | Labor Cost | $3.41 | Manufacture’s overhead | $14.60 | Materials | $1.12 | Factory Profit |

Total $22.50 Factory price to Nike. Nike wholesale price is $45.00. Final retail price $90.00 (Spar 2002).
In conclusion, while Nike Inc. and its founder Phil Knight come to terms in regards to the proper wages, one can only wait and see if Nike will make the suitable changes to grant the factory employees the rights that they have been working hard for.

References
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Powell, B (2004, September 27). Independent institute. Sweatshops and Third World Living Standards: Are the Jobs Worth the Sweat? Retrieved September 7 2015 from: http://www.independent.org/publications/working_papers/article.asp?id=1369
Nike Inc. (2001). Nike Inc. CR report. Retrieved September 7, 2015 from http://www.nikeresponsibility.com/report/uploads/files/Nike_FY01_CR_report.pdf
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Convergent media & Divergent voices. (2013, July 3) Convergentdivergent.wordpress. Culture Jamming. Retrieved September 7, 2015 https://convergentdivergent.wordpress.com/2013/