Nike's Labor Practices

Related between industrial relation

Case Details: Price:

Case Code Case Length Period Pub. Date Teaching Note Organization

: BECG018 : 12 Pages : 1996 - 2001 : 2002 : Available : Nike, CBS News, Vietnam Labour Watch : Apparel and Footwear Industry : USA, Vietnam

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Themes

HR Practices and Policies

Industry Countries
Abstract:

The case describes the maltreatment of employees and sweatshop conditions in Nike's Asian factories. In many Asian countries, Nike violated local labor laws. According to the Vietnam labor watch, Nike did not pay the minimum wages, did not provide proper working conditions, and did not take adequate health and safety measures. In addition, Nike turned a blind eye to child labor and sexual harassment in its factories. Though the company has taken some measures to improve the situation, it has failed to improve the working conditions and put an end to the ill treatment of its employees.
Issues:
Conflict between economic performance and social obligations, non-profit organizations/special interest groups in creating awareness of malpractices

Contents:

Page No. Breach of Code of Conduct Background Note 1 2

The VLW Report Nike's Reaction Three Years Later Exhibits

Keywords:

3 4 5 7

Maltreatment, employees, sweatshop, Nike, Asian, local labor laws, Vietnam labor watch, wages, proper working conditions, adequate health, safety measures, blind eye, child labor, sexual harassment, factories

Nike is being hypocritical in its support of children's programs in public schools while exploiting child labor in its shoe factories."
- The Canadian Catholic Organization for Development and Peace.

"I think that's always been true, that basically we have not had a problem with child labor. It has been somewhat of a problem in the apparel industry, but it hasn't been a problem at Nike factories."
- Philip Knight, CEO, Nike.

Breach of Code of Conduct

On 17 October 1996, CBS News1 ran a 48 hour program covering the inhumane treatment of workers by their supervisors, the payment of wages below the legal minimum wage, and the sexual abuse of several women workers at Nike's shoe manufacturing plants in Vietnam. Workers had been physically assaulted on the job. Temporary workers were paid, on an average, 20 cents per hour while team leaders were paid $42 per month2; regular workers were paid even less.

The CBS news program aired interviews with team leaders and even showed a copy of a labor contract to substantiate its claims. On March 14, 1997, Reuters reported that 56 women were forced to run around one Nike factory. Twelve of them went into shock, fainted and were taken to hospital. As a result of these reports, a group of Vietnamese Americans contacted labor groups and journalists in Vietnam. A group called Vietnam Labor Watch (VLW) was organized to study the working conditions of workers at factories in Vietnam and monitor Nike's labor practices on an ongoing basis. VLW visited Nike's factories in Vietnam and met workers, shoe manufacturing executives, labor union representatives and legal experts.
By late 1997, VLW came out with a report that accused Nike of violating numerous labor laws. According to the report, Nike did not pay the minimum wages, did not provide proper working conditions, did not take adequate health and safety measures. In addition, Nike turned blind eye to child labor and sexual harassment in its factories. The report also observed that there was a difference between the practices in Nike's factories in Vietnam and what Nike told American consumers about its labor practices. Analysts said that in spite of its good image in the US, Nike was a very different company in Vietnam and other Asian countries.3 The sweatshop4 conditions in Nike's Asian factories was confirmed by several leading newspapers and journals including The New York Times, USA Today, The Wall Street Journal, AP, and Reuters. However, Nike had repeatedly claimed that it did not tolerate worker

maltreatment in its Asian factories. The company had developed and published both a "Code of Conduct" and an agreement with its Asian subcontractors, setting out the company's position on wages and working conditions. But analysts felt that in spite of some cosmetic measures, the company had not really shown any real interest in addressing the issue. Jim Cox, executive president of the New York based GCI group,5 said, "Nike has adopted a defensive attitude throughout. Recently, Nike seems to be grudgingly coming around to admitting something may be wrong but they missed an opportunity at the outset when they effectively said 'we're Nike and we're not doing anything wrong. We don't own these plants so they aren't our problem"...

Background Note

In 1958, Phil Knight, a keen athlete and an undergraduate at the University of Oregon, and his track coach Bill Bowerman realized the need for a good American running shoe. The track shoes produced by Adidas and Puma were made of leather, had little cushioning, and used steel spikes for traction. Knight felt there was scope for improvement in these shoes. After graduating, Knight enrolled in the School of Business at Stanford University. At Stanford, Knight analyzed the shoe manufacturing industry and arrived at the conclusion that with cheap Japanese labor, an American manufacturer could sell track shoes that rivaled Adidas in quality, at significantly lower prices.
In 1964, Knight and Bowerman decided to form their own athletic shoe company and called it the Blue Ribbon Sports (BRS) Company. Bowerman's job was to test the shoes, offer design ideas, and persuade coaches he knew to endorse the shoes. The company decided to specialize in designing and selling high-performance shoes made in Japan. In 1971, the duo developed a distinctive trademark and a new brand name. They named the brand Nike, after the Greek winged Goddess of Victory. A local Portland student, Carolyn Davidson, who was paid $35 for the design, created Nike's "Swoosh" symbol. The new Nike shoes were launched at the 1972 Olympic trials held in Eugene, Oregon. Knight and Bowerman quickly cashed in on the publicity by advertising that Nikes were worn by "four of the top seven finishers." During the first half of the 1970s, Nike's sales grew from $10 million to $270 million. The growth was facilitated by the creation of the waffle sole and the cushioning system (patented by Nike), known as Nike Air...

Excerpts The VLW Report

According to surveys and interviews carried out by VLW, workers in Nike's factories in Vietnam were exploited in many ways. Nike's Code of Conduct (see Exhibit I) was being violated consistently by its contractors. Though Nike claimed that it was trying to monitor and enforce its Code, it did not have an effective system in place for monitoring and enforcement. There were not enough Nike supervisors in all of Nike's factories in Vietnam to ensure that its contractors were complying with the Code of Conduct on a day-to-day, shift-to-shift basis...
Nike's Reaction
Nike constantly denied that it used unfair labor practices. The company sent representatives to college campuses in the US in an attempt to convince students that Nike's treatment of foreign labor was fair.

In addition, Nike targeted journalists in countries in which they had factories to report their side of the story.

Vada Manager, Nike's senior spokesperson, explained the rationale for this move, "Unlike USbased reporters, who are writing about factories they have never visited, journalists working in those countries understand the local conditions." Nike offered a 12-minute online video tour of its contracted shoe facilities in Vietnam...
Three Years Later
In May 2001, a report prepared by a labor rights group claimed that even after three years, Nike had not delivered on its promises. The report said that Nike used to warn its factory managers about inspections by its own inspectors in advance, allowing them to minimize toxic fumes by the time they arrived...