Ethics refer to what is defined as right or wrong in the morality of human beings and social issues are matters which could directly or indirectly affect a person or many members of a society. In this case study, Nike has been accused of subjecting employees in their subcontracted factories overseas to work in inhumane conditions for low wages. The CEO and cofounder of Nike lamented that “The Nike product has become synonymous with slave wages, forced-overtime and arbitrary abuse.”
Initially, the firm purchased two shoe-manufacturing facilities in the United States but eventually had to shut them down due to tremendous loss in profits. Today, practically all of Nike’s factories are subcontracted and located in countries such as Indonesia, Vietnam, China and Thailand, where the labour costs are significantly lesser than those in the United States. The founder of Vietnam Labour Watch, Thomas Nguyen, inspected several of Nike’s plants in Vietnam in 1998 and reported cases of worker abuse.
At one of these factories which he inspected, a supervisor punished 56 women for wearing inappropriate work shoes by forcing them to run around the factory in the how sun. Twelve workers fainted and had to be taken to the hospital. He also reported that workers were allowed only one bathroom break and two drinks of water during each eight-hour shift. The ethical and social issues in this case are that Nike unethically takes advantage of these labour markets because it provides them with a higher profit.
Nike should also be held responsible for what happens in factories they do not own to a certain degree because low-cost manufacturing has always been their strategy in the market. Although they do not directly own these factories, they should take the initiative to be socially responsible and monitor the minimum working conditions as it would reflect on the company’s image. A living wage is defined by the wage which allows the earner to afford basic needs such as food, shelter and other necessities of life.
The labour cost of manufacturing a shoe is $2. 43 while the consumer pays $65 for it. Nike could still afford to pay its workers a living wage without raising its prices to the consumers. Realistically, the wage guideline of the FLA seems more feasible as it is based on a fixed statistic of minimum wage as required by law or the average industry wage, whichever is higher. That being said, the minimum wages of some developing countries are too low and would not provide the benefits of a normal living for the employees.
Therefore, the guidelines of the WRC seem more appropriate to me and it would be considerable to take into account the wages of a normal-income employee and follow that guideline. It is unethical for Nike to pay endorses millions of dollars while its factory employees receive a few dollars a day. Sure, it is important for them to market their products and using celebrities and spokespeople would cost tons of money but there are many other ways for them to market their products without the need to exploit the conditions of employees in third world countries.
All other major athletic shoe manufacturer also contract with overseas manufacturers albeit to various degrees. Athletic shoe firm New Balance Inc. is somewhat of an anomaly as it continues to operate five factories in the United States. However, New Balance has developed a different marketing strategy in comparison to Nike. They do not use professional athletes to market their products. Instead, they choose to invest in product research and development. New Balance also makes most of their shoes in the United States, paying workers over 30 times what Nike workers get in Vietnam, yet they still make a profit.
To achieve corporate social responsibility, Nike should seriously consider the impact of their company’s actions on society. It is an obligation to take actions that protect and improve the welfare of society as a whole, along with their own interests. They should be responsible for the legal, social and philanthropic aspects of its subcontracted factories. They are not paying their employees the legal minimum wage, caring about the working conditions and welfare of these employees and just not taking into consideration the well-being of others.
Ten years ago, the company had been subjected to negative press, lawsuits, and demonstrations on college campuses alleging that the firm’s overseas contractors’ subject employees to work in inhumane conditions for low wages. With the introduction of the fair labour association and worker rights consortium, Nike is slowly trying to improve the working conditions on subcontracted factories and hopefully in 10 years, they would be able to re-establish themselves as a morally acceptable company. Nike could have observed the ethical and social guidelines of how an organisation should be managed.
They should not have hired minors under 16 to work. And instead of purchasing two shoe-manufacturing facilities in the United States, Nike could have just purchased one plant and see how their operations went before thinking about purchasing another plant. When the firm finally saw success in 1980, eight years after the company was founded, and became the largest athletic shoe company in the world, they could have finally purchased the shoe-manufacturing plants in the United States and it would probably have been a success, without having the need to subcontract factories and cutting the cost of labour just to have a bigger profit.
This in turn would not have caused so much negative press that the company has had to deal with so far. For future references, Nike should learn from their past mistakes and treat the subcontracted employees morally, pay them a better wage and improve their working conditions. They should also better manage their subcontracts and not just use them as proxies for Nike to distance themselves from taking any responsibility for the way their factory workers are treated. The subcontractors are considered stakeholders in the organisation and Nike, as the manager, should make it their concern as to what is happening in these factories.
Bad press will take a long time to subside and what Nike can do from now is to acknowledge its past errors and become more socially responsible for the sake of their future. Colleges and universities have direct ties to the many shoe and apparel companies that contract with overseas manufacturers. Most universities receive money from athletic shoe and apparel corporations in return for outfitting the university’s sports teams with the firm’s products. What motivates them is the bad image they could be portraying when they wear the firm’s apparel.
They could be seen as promoting the cause for sweatshops. The United Students Against Sweatshops (USAS) organisation was formed in 1998 and led by former UNITE summer interns. The USAS staged a large number of campus demonstrations which protest against the university’s contract with Nike due to the firm’s alleged sweatshop abuses. More than 100 students demanded that the university not renew its contract with Nike and rallied outside the office of the university’s chancellor. More than 50 other universities staged similar protests and sit-ins.
The reason why their activism is not widespread is because it is hard to get a viewpoint from them that does not reflect that of UNITE. It was claimed that Nike owes $2. 2 million in severance pay to workers in Honduras when two Nike factories were closed. When hounded over their exploitation of workers, Nike released a statement that they are “deeply concerned”, but cannot assume any responsibility for the actions of their “subcontractors”. In my opinion, Nike should pay the severance owed.
Although they do not own the factories, they are still involved with the overall management and well-being of the workers. At the end of the day, the subcontractors are under the employment of Nike and should be responsible for the employees. Despite its controversial record on the issue of sweatshops and monitoring labour practices abroad, Nike has been the recipient of a variety of corporate social responsibility recognitions over the past several years. Many of these awards are for issues other than their labour practices abroad.
They have been named as one of the 100 Best Corporate Citizens for 2010 for Corporate Responsibility magazine and one of 100 Most Sustainable Corporations in the World in 2009. Nike has appeared to be taking actions for mishandling the sweatshop issue as well as they could have and for not adequately monitoring its subcontractors in overseas operations until the media and other organisations revealed the presence of sweatshops. They seem to have realised their mistake of not being socially responsible and are trying to make amends for their wrongdoings.