JUST DO IT RIGHT

MGMT591
December 15, 2013

Introduction

I am a track and field athlete that markets for Nike. They are my sponsor. Nike Inc. produces footwear, clothing, equipment and accessory products for the sports and athletic market. It is the largest seller of sports garments in the world. It sells to approximately 19,000 retail accounts in the US, and then in approximately 140 countries around the world. Just about all of its products are manufactured by independent contractors with footwear products in particular being manufactured in developing countries. Nike developed a strong working relationship with Japanese shoe manufacturers, but Nike moved on to other countries seeking after alternative, lower-cost producers. Today the company manufactures in China, Taiwan, Korea, Pakistan, Vietnam, Indonesia, and Mexico as well as in the US and in Italy.

Nike has around 700 contract factories, within which around 20% of the workers are creating Nike products. Conditions for these workers have been a source of heated debate, with allegations made by campaigns of poor conditions, with commonplace harassment and abuse. As its founder and Chief Executive Officer, Phil Knight lamented in a May 1998 speech to the National Press Club, “the Nike product has become synonymous with slave wages, forced overtime, and arbitrary abuse.”(HBS Case # 9-700-047) “Hitting the Wall: Nike and International Labor Practices,” HBS Case # 9-700-047

Problem Statement

Is Nike doing just enough to clear bad publicity or are they really fixing their factory issues? How can Nike work toward fixing the issues they have been having with their overseas factories for good?

Literature Review

When Nike was founded in 1972, the company contracted with factories in Taiwan and South Korea to manufacturer shoes and related goods. Over the next two decades, workers in these countries successfully lobbied their governments to win improved wages and the right to form labor unions. Faced with these new challenges, Nike moved much of their production to countries like China, Indonesia, and Vietnam, where it is illegal for workers to organize, and where wage rates are some of the lowest in the world.

Disturbing stories were coming from many of the Nike factories throughout the world. Some described child labor, wages well below the poverty level and forced overtime. Others told of physical abuse from factory overseers, exposure to dangerous chemicals and poor air quality. These stories drew the attention of human rights groups, which began to bring media attention to these stories, hoping that pressure from the public could bring about change.

In 2002, Nike issued a company Code of Conduct to all its factories, regulating the conditions and safety requirements that work should be conducted by. The company's 2004 Responsibility Report established further health and labor standards, and described increased monitoring plans. This 2004 report was considered a major victory for workers and many human right's groups, because Nike included a full list of its factories and their addresses throughout the world. This has allowed for independent monitoring and investigations. While these were perceived as positive efforts on Nike's part, the human rights campaign against the Company has not ended. According to the Educating for Justice group, between 50 and 100 percent of Nike factories require more working hours than those permitted by the Code of Conduct. In 25 to 50 percent of factories, workers are required to work 7 days a week, and in the same percentage of factories, workers are still paid less than the local minimum wage.

Bowing to pressure from critics who have tried to turn its famous shoe brand into a synonym for exploitation, Nike Inc. promised today to root out underage workers and require overseas manufacturers of its wares to meet strict United States health and safety standards.

Nike believes that the sharing with factory locations with independent third parties on a confidential basis enables them to monitor their supply chain properly. They state that disclosure of the factory names, plus details of audits of those factories, would be used by the NGOs simply to make further attacks rather than as part of a dialogue to help the company to address and resolve those problems, which exist. As for wage rates, Nike feels that establishing what constitutes a "fair" wage is by no means as easy as its critics would have the public believe – and disparages the constant quoting of wage rates in US dollar equivalents, when these are meaningless given the different cost of living in the countries concerned.

Employees did not always seem to be the most important stakeholder to Nike. In the 1990’s, Nike was being criticized about sweatshop conditions in low wage countries. Since then, Nike has constructed a program to improve these labor issues. Today, a staff of 100 inspects several hundred factories a year, grades them on labor standards, and works with managers to improve problems. Nike also allows random factory inspections by the Fair Labor Association, which is a monitoring outfit founded by human rights groups and companies such as Nike, Reebok, and Liz Claiborne. Nike has implemented this program with the intention of eradicating the sweatshop problems they have encountered in the past. Although these efforts did not clean up the problems one hundred percent, they have done a great deal of good for the Nike sweatshop employees.

Nike Inc. is a good corporate citizen because of how much they value their stakeholders. They do a world-class job of interacting with, and supporting their stakeholders. Moral managers treat their employees as human resources, of just a means of production. “Moral managers treat employees with dignity and respect and ask that they make not only a physical contribution, but also actively participate in the strategic decision-making process within the firm. The managers treat the employees fairly and respect their rights, privacy and freedoms” (Carroll and Buchholtz, 2008). Mangers view the community as a valuable asset to be protected by the firm. Because of this, managers take a leadership role in being actively involved in helping promote education, environmental initiatives, recreational groups, and philanthropic groups (Stanwick 2009). These are attributes previously explained on a day-to-day basis. They make it a priority to make sure that these management styles are actually being practiced throughout the company and in order to maintain their ethical integrity. The management styles perfectly summarize Nike’s commitment to their internal and external stakeholders.

Nike Inc. seems to have a great design on how they plan to interact with and commit to their stakeholders. Nike receives awards and honors for being a very ethical company around the world. It is not easy to recommend a plan to improve the corporate performance of a company like Nike. They have proven themselves to be a great corporate performer throughout the years. When Nike did have a problem in the past with their sweatshops, they implemented the program preciously explained. This seemed to have a major impact on not only Nike’s corporate performance but also improved the world’s view of Nike looking from the outside in. so, in turn; this drastically improved corporate performance for Nike.

Analysis

By the 1990s, disturbing stories were coming from many of the Nike factories throughout the world. Some described child labor, wages well below the poverty level and forced overtime. Others told of physical abuse from factory overseers, exposure to dangerous chemicals and poor air quality. These stories drew the attention of human rights groups, which began to bring media attention to these stories, hoping that pressure from the public could bring about change. Groups such as Education for Justice, Global Exchange and Students Against Sweatshop Labor led the effort against Nike. It is important to understand that the use of sweatshops was not then, and is still not, something that only Nike engages in. While many shoe and apparel manufacturers are accused of using sweatshops, human rights groups have focused their efforts on Nike, because of Nike's role as the sales leader in the industry. Groups like Global Exchange hope that by pressuring Nike to change, other companies will be motivated to change their own practices.

Nike has become one of those global companies targeted by a broad range of campaigning NGOs and journalists as a symbolic representation of the business in society. In Nike’s case, the issues are those of human rights and conditions for workers in factories in developing countries. In the face of constant accusations, Nike has developed a considered response, supported by corporate website reporting. However, Nike still can’t seem to get totally out of the jam. Even though Nike has made some moves toward fixing these factory issues, it seems that they are still getting complains about factory wages and child labor.

Solution

In terms of corporate citizenship, there is significant debate over the responsibilities of corporations. Should companies behave solely to enhance shareholder wealth, or should they act to benefit other groups (both within and outside the firm) as well? Should corporate decision-making be driven solely by economic considerations, or does other (social) factors equally important? How does one measure and account for these other considerations? Are corporations responsible only to their own employees and shareholders, or are they also responsible for the employees of their suppliers and subcontractors? What are the boundaries or limits of any individual company responsible? Given that there are no universal standards and that not all companies are promoting labor and environmental standards as rigorously as Nike is, how does one promote greater coordination and collective action among major producers? If some companies promote and monitor for higher standards and others do not, does this erode the competitive edge of the "good" corporate citizens? A related set of questions and divergent views characterize debates over globalization and its consequences. Should multinational companies abide by so-called international labor and environmental standards, or is this simply regulatory imperialism and de facto protectionism in another guise? Some of the most important external stakeholders to Nike are the environment, and the community (Nike's New Game Plan for Sweatshops, 2004). Will the imposition of these standards on developing countries diminish their competitive advantage and thus damage their economic development? Or will improve labor and environmental standards lead these local producers to upgrade their production processes and up-skill their workforces and thus enhance their long-term competitiveness? Who (which factors) should be responsible for developing these standards; National governments, international organizations, transnational non-governmental organizations, local trade unions and civil society groups or even individual corporations (through their own Codes of Conduct)? The standards if any, which are implemented, and the actors who set the standards will have dramatic consequences on the future trajectory – and the relative winners and losers of globalization. Thus, it should come as no surprise that these issues have provoked so much controversy and debate in recent years. These questions and how they are answered will shape the future of international management for many years to come.

If one recommendation had to be made, it would be to have an external monitoring system on Nike, not just external monitoring of the sweatshops and factories, but external monitoring of every aspect of the company. Nike should implement a system where external auditors come in every quarter and make sure that every reviewable aspect of the company be reviewed, and assessed. After the review and assessment, Nike should have someone go over the results and make sure that the results are concurrent with Nike Inc.’s code of conduct. After the results are reviewed, Nike should hold a meeting with workers or worker representatives to go over the results of the audit. This will insure that the results of the audit at the top level of the corporate structure get down to the lower levels of the corporate structure. If there are any problems with the findings of the audit, things can be changed from the bottom up, starting with the workers who actually, “put the wheels to the road” and make Nike Inc. as successful as it can be.

Completing this assignment has really given me insight on the day-to-day decision making problems of top stakeholders and managers of a major company. This assignment made me think outside of my normal box of just marketing the Nike brand. I had to really analysis the problem and come up with a real solution that would benefit the company as a whole as if I were a CEO. This will help me tremendously in the future as I plan to open a sneaker store selling excusive and limited sneakers online all over the world.

References

Carroll, Archie B. & Ann K. Buchholtz (2008). Business and Society: Ethics and Stakeholder Management. South-Western College Pub; 7 edition.

“Hitting the Wall: Nike and International Labor Practices,” HBS Case # 9-700-047

"History." Nike and the American Body. (n.d.). Retrieved April 02, 2010, from

"Nike's Labor Practices." ICMR. 2002. Retrieved April 02, 2010, from ICMR Center for Management Research:

Nike's New Game Plan for Sweatshops. Online Extra.2004, 09 20. Retrieved April 02, 2010, from Business Week:

Stanwick, P. S. (2009). Understanding Businness Ethics. Upper Saddle City,NJ: Pearson Prentice Hall, 2009. Print.“Hitting the Wall: Nike and International Labor Practices,”