Nike Inc.
Nike’s Unethical Business Practices

Nike’s Unethical Business Practices
Love those Nike shoes your wearing? Have you ever thought how they were made, who made them, and at what price they were made at? I bet you probably don’t. I bet that you see those Nike shoes at the store, and think to yourself, “oh I like those shoes, I have to have them,” and then buy them. What you don’t know is that those pair of shoes you just bought were probably made in a third world factory by employees who are probably working in harsh working conditions. These factories are not owned and operated by Nike, but contracted by Nike. Nike chooses to locate the majority of their production in such countries because of the abundance of cheap labor. Nike contracts factories around the world in effort to get the best product for the cheapest price made, without concern for contracted factory employee. Nike has not been concerned about what goes on in these factories only that the product is made, because Nike is not in the business for Human Rights, they’re in the business of athletic shoes sales.
The Ethical Dilemma
Nike has been accused with human rights violations. The charges that were made against Nike include the following: the use of child labor in factories, unsafe working conditions including exposure to toxic chemicals and the use of machinery without the proper safety precautions, pay below minimum wage and forced overtime hours. The contracted factories Nike uses to produce its shoes have not operated in a way as to promote human rights. This becomes an ethical dilemma for Nike. The ethical dilemma Nike faces is whether or not to continue to benefit from cheap labor practices or spend more money to allow the contracted factories to improve its working conditions. Although Nike is profiting from the cheap labor cost of production, the contracted factory is employing children to make the product. At first glance Nike turns a blind eye to the business practices; however, once the media is alerted about the situation, Nike begrudgingly is forced to do something about the matter because of how the consumers react. Nike’s Code of Conduct now states that Nike “opposes child labor” and that Nike has “set age standards at 16 for apparel and 18 for footwear factories,” (“Code of Conduct”).
In factories in Vietnam, workers were exposed to Toluene, a reproductive toxin, at 177 times the legal limit (“Nike’s Labour Practices”). They were also exposed to other chemicals and glue without proper safety equipment. The factory workers lives have been severely impacted by this because of the lack of concern for workers safety. By not providing the proper safety equipment to perform a job and exposing workers to toxic chemicals that will reduce workers life spans dramatically, this is unethical and a huge human rights violation. Nike now ensures that all factories provide the right safety equipment for employees to do their job.
Nike has been accused of not paying a “living-wage” which is unethical and another human rights violation. A living wage is considered a pay that is able to supply basic necessities for a small family (Connor). In Vietnam, workers receive about $37 a month, which is below the minimum wage of $45 a month (“Fact Sheet”). In Indonesia, Nike has increased wages for workers to above the minimum wage set by the government. While this is seen as a step in the correct direction, worker’s pay is still roughly one half of what would be considered a “living wage” for this country (“Frequently”). In China, it is common for workers to engage in a 10 to 12 hour work day before working another two to four hours of overtime (“Nike’s Labour Practices”). In Vietnamese factories, workers making Nike merchandize have been found to be forced to work over 600 hours of overtime a year, which is more than 400 hours a year above the legal limit in Vietnam (“Fact Sheet”). Workers have reported being coerced into the overtime hours through threats of unemployment or forced indirectly by the low pay to volunteer for the hours in order to support their families. This in other words is a form of slavery. There are only 24 hours in a day and to spend 16 hours or more at work in order to keep a job is a complete denial of a right to life, or in other words a human rights violation.
Managements Perspective
In America, Nike's owners see the abuse much differently. In front of hundreds of shareholders, after announcing record earnings and another stock split, Nike's president and CEO, Phil Knight minimized the problems in Asia as simply an incident in which a single worker was hit over the head by a supervisor. Nike spokesperson Jim Small, while knowing that the conditions in the sixteen Indonesian plants are not ideal, said, "The bottom line is: Do we abuse our workers? Absolutely not." (Levy, "Working conditions protested at the opening of a new store). Roberta Baskin of CBS News commented that, "It turns out Nike has a great deal to learn about what goes on inside these factories."
Nike spends between $250-$280 million dollars a year on athletic endorsements. Nike's total annual payroll at six Indonesian factories is less than what Nike pays superstar Michael Jordan per year. A pair of Nike's top-of the-line running shoe, the Air Max shoe retails for $140. Nike admits that the direct labor cost to produce the shoe is about $3.50, which doesn't account for Nike's marketing or distribution costs. It is not that Nike can't afford to pay it's workers more, they just don't choose to. It is just recently that the public found out and began to pressure Nike to raise wages. Wages have gone up a little bit, but not good enough for the leading sports shoe manufacturer. Nike can still do a lot better. Nike has treated sweatshop allegations as an issue of public relations rather than human rights. The promises made by Phillip Knight in his May 1998 speech were an attempt by the company to switch the media focus to issues it was willing to address while avoiding the key problems of subsistence wages, forced overtime and suppression of workers' right to freedom of association. The End Result Should Nike be involved and concerned about the working conditions in these third world factories? Yes. Nike has the resources and the ability to influence change in the in the business agreements with these sub contracted factories. Nowadays as a society we want businesses to be responsible for their actions towards the environment and society. We want them to operate ethically and in a socially responsible way. We want to know that our environment is cared about, and that we as a society are cared about by our Corporate Giants & Dwarfs.
As stated earlier, Nike should be responsible to those employees of the factories they have contracted because these people are the ones who are building the shoes for them to sell. Although most of the subcontracted factories are in third world countries where labor is cheap and cost of living is low that doesn’t mean its ethical for Nike to pay the lowest possible pay for the production of their shoes, or allow harsh working conditions for these factory workers. Nike with all the money they make, they have the capability to influence the factories to operate differently. Nike has a social responsibility to make the factories follow proper regulation. Nike is the moral agent to its contracted factories and through being so they have a social contract with society that they will pursue policies that follow the lines of actions that are desirable objectives and values of our society. “Because ultimately business exist at the pleasure of society and as a result must comply with the guidelines established by society” (H.R. Bowen).
Nike today has taken a new approach on the matter of corporate social responsibility, while in the past it was the black sheep of corporate America, it has taken huge strides to clean up its image. Nike was named one of the Top Socially Responsible brands by young adults. Donations to charity, use of green products, and employing fair labor practices were just a few of the criteria which the students based their opinions of the corporations.
The irony of this is that it seems like just yesterday that Nike was constantly under attack for their labor practices. They were maligned for much of the 1990′s by accusations that they underpaid their labors, that they took advantage of the cheap labor in third world countries. Nike’s inclusion as the top apparel company on this survey indicates that those hard feelings are not affecting generation Y. That speaks volumes to the job Nike has done over the past decade to turn themselves into a more socially responsible corporation.

References
"Code of Conduct." Nikebiz: Responsibility. Jan. 2004. http//www.nike.com/nikebiz/nikebiz.jhtml?page=25 (1 Feb. 2004). “Nike’s Labour Practices.” Red de Solidaridad de la Maquila Solidarity Network. 1998. http://www.maquilasolidarity.org/campaigns/nike/labprac98.htm (25 Jan. 2004).
Conner, Tim. "Still Waiting for Nike to Do It." Global Exchange. May 2001. http://www.globalexchange.org/campaigns/sweatshops/nike/faq.html.pf (25 Jan. 2004). “Nike – VN Fact Sheet.” Boycott Nike. 30 Jan. 1999. http://www.saigon.com/~nike/factsheet.htm (1 Feb. 2004).
"Frequently Asked Questions." Global Exchange. 13 Aug. 2003. http://www.globalexchange.org/campaigns/nike/codes.html (1 Feb. 2004).
Levy, Dan., "Work conditions protested at opening of new store." San Francisco Chronicle, Sat, Feb 22, 1997: pA15
Text (Lewis, Goodman, Fandt, Michlitsch, Adminstrative Management, 2007) p.61