Why Labor?

Inc. has worked to improve labor conditions in our footwear, apparel and
equipment supply chains for more than 15 years. Key issues in which we
have engaged include the health and safety of the workers who make our
products, excessive overtime, the ability of workers to freely associate, and
child labor and forced labor.
The nearly 800 contracted factories that supply Inc. employ a little less than
1 million people. The workforce is 67 percent female, with an average age of
32 You can navigate through more details of our contracted manufacturing
The labor problem
"The Labor Problem" is an economics term widely used toward the turn of
the twentieth century with various applications. It has been defined in many
ways, such as "the problem of improving the conditions of employment of
the wage-earning classes."It encompasses the difficulties faced by wageearners and employers whom began to cut wages for various reasons
including increased technology, desire for lower costs or to stay in business.
The wage-earning classes responded with strikes, by unionizing and by
committing acts of outright violence. It was a nationwide problem that
spanned nearly all industries and helped contribute to modern business
conditions still seen today. Possible causes include the failure to account for
the negative externality of reproduction in the face of finite natural resources
which results in over-supply of labor and falling living standards for wagelaborers, depersonalization by machines and poor working conditions
Contents

1 Time Frame

2 Causes

3 Notable Events

4 Effects

5 See also

6 Notes

7 References

Time Frame
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A popular debate about the Labor Problem is the time that it encompasses.
Some characterize it back as far as the 1860s, which is when many unions
and groups began to form. However there wasnt a problem present at this
time with the formation of these unions. Also, the first strike was a result of
the problem between wage earners and union officials, not employers and
unions or employers and wage-earners, which was the main conflict of this
time. Since the problem was within unions and not between unions and
employers, the Labor Problem had not yet become an issue. Many also
attribute the end of the problem to the end of the 1920s. This has some
merit but is also open to interpretation. Reforms began to pass to correct
many of the problems but reforms continued to pass well into the 30s, 40s
and 50s. The Civil Rights Movement took over in America, which brought
about even further legislation. Many attribute the end of the labor problem to
the late 20s because it marks a significant drop in strikes and violence and
an increase in passed legislation aimed at correcting the labor issues.
Causes
At the turn of the century machines were beginning to take a stronger
footing in the economy, which drove costs down. Always trying to maximize
profits, employers saw fit to lower wages for two main reasons. Machines
were making the production process cheaper meaning wages took up a
bigger percentage of costs, and when times were particularly tough, it made
sense to cut wages to stay in business. This depersonalization of the
production process meant that people essentially became expendable.
People were not eliminated completely but there was a significant job less.
This led to lower wages in the long run because fixed costs decreased (with
increased technology) so employers saw fit to cut wage expenses for this
now partially expendable labor force. Although the problem spanned many
industries, they were not all concerned with the same problems. For
example, the steel industry was mainly concerned with being phased out due
to technological advances while other industries, namely textiles, had
problems with child labor and working conditions. The variety of problems
and concerns led to legislation being passed, which covered different areas
and led to greater reform.
Notable Events
Riots broke out in Baltimore in 1877 due to the negligence of union officials.
It began as a railroad strike but eventually formed riots that lasted four days
and killed fifty people. The first strike due to depersonalization by machines
was the Homestead Strike in 1892 on the Carnegie Steel Company by the
Amalgamated Association of Iron and Steel Workers (AA). This ultimately
resulted in the attempted assassination of Henry Clay Frick, Chairman of The
Carnegie Steel Company, and a crushing blow in the attempt to unionize
steel workers. Another example is the Pullman Strike in 1894, where almost
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4,000 workers who were members of the American Railway Union (ARU)
went on a strike without permission of the union to protest wage cuts by the
Pullman Company One extreme example occurred when train engineers and
laborer stopped a train before it reached the station in New York, stranding
men, women and children alike in the heat.
Effects
Legislation like the Wagner Act (1935) and the Fair Labor Standards Act
(1938) were passed which forced employers to participate in collective
bargaining and presented a minimum wage respectively. Child Labor laws
have also been reformed, limiting the age at which children can begin work
and what type of work they can perform. The Department of Labor was
established in 1913. While some pieces of legislation like the aforementioned
Wagner Act and Fair Labor Standards Act werent passed until the 30s, their
roots trace back to this Labor Problem at the turn of the century when
demand for reform was growing in popularity. Many aspects of modern
business like an established 40-hour work week, overtime pay, collective
bargaining and safer working conditions among numerous other reforms can
all trace their roots back to this time period and the legislation passed to
correct it.
Labor unrest
From Wikipedia, the free encyclopedia
This article needs additional citations for verification. Please help
improve this article by adding citations to reliable sources. Unisource
material may be challenged and removed.
Labor unrest is organizing and strike actions undertaken by labor unions,
especially where labor disputes become violent or where industrial actions in
which members of a workforce obstruct the normal process of business and
generate industrial unrest are essayed.
Such a conception of labor action was common in the United States in the
nineteenth century, most prominently amongst mining interests in the
American West, and remained common in the twentieth century CE amongst
totalitarian states, such as the Soviet Union and People's Republic of China.

Our Approach,
we rewired our approach to managing risks and opportunities within our
supply chain. We launched new sourcing and manufacturing tools that are
embedded within product creation (discussed in the Manufacturing section),
3

and created an integrated, multi-disciplinary team to support sourcing

selection and performance. We also created a new organizational structure
within the company that brought together the labor compliance, health,
safety and environment, lean manufacturing, human resources management
functions into a single team; and the climate and energy, waste and water
management functions into a single team. More recently, we identified the
creation of a sustainable supply chain i.e., one that includes sustainability
on equal footing with cost, on-time delivery and quality as one of the pillars
of our sustainable business strategy and developed a vision of what success
looks like.
We have been working with contract factories to build their human resources
management skills and help them reach even higher levels of economic,
social and environmental performance. Our work has centered around three
fronts:

Working conditions in factories: environment, safety and health

Labor rights, freedoms and protections

Workers lives outside of the factory, and living conditions in their

communities

Our approach employs three main tools: audits, human resources

management (HRM) training and lean manufacturing (discussed in
Manufacturing). In addition, we have established collaborative efforts with
other brands and civil-society organizations to develop common approaches
for raising and sustaining standards in footwear, apparel and equipment
manufacturing.
A centerpiece of our work in the past few years is our HRM program, which
combines multi-stakeholder workshops, training for factory managers and
the surveying of workers. We have found that factory managers aiming for
full and consistent compliance with labor requirements sometimes lack the
systems and skills to achieve it. By providing the opportunities for contract
factory management to build their HRM capabilities, we strive to help them
create a sustainable framework for improving working conditions overall. In
addition, the training supports the creation of a strong foundation that will
enable them to practice lean manufacturing powered by a skilled,
empowered workforce.
Sustainable Manufacturing Training and skill development is embedded in
our commitment to Lean with an expanded focus, that can be applied to
areas including health, safety and the environment, environmental
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sustainability and energy/greenhouse gas management.

Our primary Lean Manufacturing training is delivered through our Advanced
Innovation Training Centre in partnership with MAS Holdings. In addition to
this program providing Lean training for contract factory staff, where
appropriate and possible, government officials, trade union representatives,
representatives from the International Labor Organization and other key local
stakeholders are able to participate in the training program.
Following the initial 12-week workshop and training program, there is a
continuous engagement process through which the factories execute their
own Lean implementation plan with guidance from the Lean Manufacturing
team. Factories are then expected to report improvements in performance as
a result of adopting Lean thinking, and participate in learning communities,
in which they continue to share Lean Manufacturing best practices on a
regular basis.
Code of Conduct
Code of Conduct more than 15 years ago and made further enhancements .
The Code starts we believe that although there is no finish line, there is a
clear starting line. It goes on to define employment conditions (voluntary,
regular, free of harassment, abuse discrimination and excessive overtime,
healthy and safe) as well as requirements on ages, freedom of association
and collective bargaining, and payment of compensation, and minimized
environmental impact. The Code applies to all contracted factories, is
available in all relevant languages, and is required to be posted for all
workers. The Code is also backed by Code Leadership Standards which detail
each element of the Code, describe how the Code will be assessed, and
share best practice and examples. (Link)
Factory Monitoring
approach to ratings and scoring changed in with the introduction and
implementation of new tools and indexes. A new Risk Index helps to us
identify, at the outset of a sourcing relationship whether with a new factory
or one already in our supply chain the potential for low performance. The
tool has evolved over time, assessing such areas as political risk, social/
compliance risk, economic risk and infrastructure and climate risk.
Our ultimate goal is to significantly reduce the amount of time required on
the front end to assess a potential factory for a new work order. We assess
factories at least annually and apply a gold/silver/bronze or yellow/red rating
to their performance on our Sourcing & Manufacturing Sustainability Index,
where Bronze describes good on across all criteria. If a factory receives a
yellow (noncompliant/serious) or red (noncompliant/ critical) rating, we
worked with them to improve their performance and rating through specific
steps outlined in a master action plan that we developed together with the
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factory leadership. If they failed to make progress against that plan, we

elevated these concerns with senior leadership in Manufacturing and
Sourcing as part of reassessing our business relationship.
Beyond the breakdown of factory ratings, we also look at trends in the types
and severity of violations found through auditing processes.
The most common issues found in monitoring are typically those related to
hours worked and wages. Issues with hours include the serious incidents of
contract factories with workers putting in between 60 and 72 hours per week
or not providing one day off in seven. Other issues in the general category of
hours include critical issues of no verifiable timekeeping systems, exceeding
daily work hour limits, working more than 72 hours per week, or not
providing one day off in 14.
Wages represents the other greatest area of noncompliance incidents. Most
wage-related incidents were miscalculations of wages or benefits, rather
than an overall failure to pay workers the agreed wage for work performed.
These kinds of incidents are systemic within factories across the industry, as
understanding and correctly paying social security-type benefits can mean
navigating confusing and complex laws and standards. We recognize the
complexity of and interest around the broad issue of wages, and we address
our efforts in our reporting.
We have continued to analyze the root causes of noncompliance. The three
main causes we have seen are: lack of systems, lack of commitment and
lack of knowledge.
Wages
We have undertaken research and continue our engagement with
stakeholders including non-governmental organizations, academics and
factories to better understand the impact of wages on overall quality of life
for workers and our role in wages.
While we neither own contract factories nor employ their workers, we can
influence their business practices including wages through our own
sourcing and assessment processes.
Wages are complex, affected by a market economy of global supply and
demand, including trade and social stability. But complex issues sometimes
call for complex responses. We continue to take positive steps and we
recognize theres more to be done.
Over the past 10 years, wages paid to workers in factories contracted have
been increasing at a rate higher than inflation of the country of factory
operation. These changes mostly align to growth in minimum-wage
standards, changes in pay structures and increased demand for labor. And as
a component of our total cost of finished footwear goods in , the proportion
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for wages has increased.

We are also working with other brands and on multi-stakeholder initiatives to
improve the industry as a whole and we are innovating our own supply chain
in a number of ways related to wages and other issues important to factory
workers.
One such area is with the Fair Labor Association, to develop a new fair
wage standard that identified 12 dimensions to fair wages. The dimensions
span areas covering systems, comparability (e.g. to other industries, to
inflation, to minimum standards, to cost of living), overtime, tying wages to
skills, protecting the factorys financial health and communication. The FLA
sets out the dimensions and provides a gradual way of addressing each one,
some based on information not readily available. We have begun addressing
these dimensions through our Code and work with factories but other areas
will take considerably more time and study.
As a leader in our industry, in incorporated updates into our Code of Conduct
and Code Leadership Standards to tackle some of the more pervasive wage
problems, such as full funding and payment of statutory severance by
factories and confirming that overtime is consensual and paid at a premium
rate of at least 125%.
These changes are backed by updated Code Leadership Standards on factory
closures and retrenchment (downsizing), which provide full detail of our
expectations regarding pay, benefits and factory responsibilities. The
Standards call for detailed actions in the case of factory closure or
retrenchment in addition to what is required by country law or collective
bargaining agreement, and factory management is encouraged to work
directly or in coordination with governmental, nongovernmental or other
third parties.
In addition, we have begun to define the actions we expect for contract
factories to make progress toward better wage systems that is, wages that
meet the FLA definition of fair wage. Examples of these actions include:
consistent payment of wages and benefits; standardized pay systems,
policies and procedures; communication and dialogue around wages, training
and development; monitoring and remediation; and wage self-assessments.
The systems call for methods to track legally required minimum wages as
well as different levels of worker education, skill, training and experience;
monitoring against inflation and consumer prices; and equal-pay policies.
We are addressing wages on several fronts. We know that standards are
important: they communicate intent, they reinforce our position, they serve
to heighten attention at factories for management and workers, and they
form a rigorous and necessary baseline for performance. But standards
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themselves do not drive change; they set only a minimum bar that can help
to identify and remove the worst performers.
We are also beginning to test with factories how they can increase workers
wages while maintaining a financially competitive business. Our theory is
that when factories invest in their workforce, they will see higher productivity
and returns that can be shared across Nike, contract factories and their
workers. We do not know the answers but are working with nongovernmental
organizations, academics, factories and other businesses to find out how this
can work and are committed to sharing the results to drive broader industry
change.
Excessive Overtime
We continue to evaluate why excessive overtime is a persistent issue in
contract factories. A high number of incidents are attributable to factors
within control, primarily forecasting or capacity planning issues, shortened
production timelines and seasonal spikes. However, it is unclear how often
these factors are directly linked to one of our brands, as some factories also
produce products for many other brands. In factories for which multiple
brands place orders, it is very difficult to isolate the root cause of productioncapacity planning bottlenecks. We are exploring ways to create internal
systems that allow us to isolate caused capacity spikes and imbalances that
can contribute to a factorys inability to effectively manage production
planning. In addition, we are creating new tools and reporting mechanisms
for apparel factories to proactively communicate when their production
team is approaching overtime limits that would be in violation of our
standards. We have instituted these reporting requirements in footwear
factories already, and have seen improvement in the management of
excessive overtime as a result.
We recognize that excessive overtime is a serious issue in terms of both
hours worked and days on the job without a break. We are focusing on these
areas through continued analysis of root causes, which has led us to identify
and address key business processes upstream from the factory. Variability is
one of those root causes. Some of the key variables we have assessed
include: seasonality in styles, the lack of predictability in consumer or
product demand, and the impact of global economic challenges. We are
working to develop our abilities to successfully respond to these real
variables without negatively impacting factories or workers.
We are addressing these issues throughout our product-creation process,
including via improved forecasting alignment, which involves coordination
across geographies, categories and product engines to get the right
information and decisions made at the right time. Were also optimizing our
sourcing base in footwear and apparel to handle fluctuations in capacity and
to adopt and implement the technologies needed to respond to the demand
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for emerging styles and products.

Outside of those items influenced in some places overtime is expected by
both workers and factories, tied to broken models of compensation in which
the only way workers can earn more is by working more hours. We recognize
that excessive overtime is not sustainable from a worker or business point of
view, as the costs are high for both. We are working with factories to build an
understanding of these costs in terms of workers health and safety,
Freedom of Association
While factory noncompliance on issues of freedom of association (FOA) and
collective bargaining have remained steady at a low rate of all
noncompliance issues, these issues are serious and important. Our Code
states that both FOA and collective bargaining are to be respected and, to
the extent permitted by the laws of the manufacturing country, that a
contracted factory respects the rights of its workers, including the right to
form and join trade unions and other worker organizations of their own
choosing without harassment, interference or retaliation.
In countries where law restricts free association, we call upon factories to
facilitate alternative means to individually and collectively engage with
workers and to enable workers to express their grievances and protect their
rights regarding working conditions and terms of employment.
We have included further information on expectations for factories in our
Code Leadership Standards, and we address FOA in lean training with
factories.
We also are including FOA in the assessment of risk in our sourcing selection
process. We include country-based assessments, including the likelihood of
violations based on FOA and other core International Labor Association
standards.
Health & Safety
Our audits and reviews of health, safety and environmental performance
assess 35 different factors. The audit tool used for this area differs from the
labor tool, and global totals are assessed as an overall score rather than
number of incidents of noncompliance. Results from HSE assessments help
to inform training areas and the approach to working with contract factories
and addressing issues.
The top issues of concern are those areas of noncompliance associated with
the highest risk to workers. Hazardous materials and electrical safety are
high risk, especially within footwear manufacturing, due to the number of
manufacturing machines and chemicals involved in the processes.
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We make it a high priority to assess these risks, and auditors have additional
training in these areas, making them more likely to identify these issues in
an audit. More information on each area and the detailed Code Leadership
Standards that outline our expectations for each is available online, along
with the audit tool that provides information on how assessments are
conducted.
Across globally, our HSE team includes employees who conduct audits and
provide training. This staff provides technical assistance through workshops
and helps to teach factories how to chart their own safety-risk activities and
use case studies to focus on the highest-risk noncompliance issues.
Collaboration
We believe that collaboration with other companies and other sectors of
society is the only way to achieve systemic change in global supply chains. It
is an essential element of our approach and complements our direct
engagement with factories in our own supply chain. We collaborate with a
variety of organizations on new initiatives, some of which aim to develop
common approaches to assessing and sharing data on factory performance.

Labor
Introduction

See the Empower Workers dashboard for an update on our performance

With a total footprint of more than 2.5 million people across our value chain
and 1 million people in the contract factories we source from directly, labor
remains among our greatest areas of human impact and opportunities to
help bring about real change.
At the end just more than 1 million people with an average age of 32
worked in the 785 factories that we source from directly. We believe another
half million people work in the factories that make the materials used in our
products, and more than 1 million people work in raw material production.
(Some factories are vertically integrated, and play more than one of these
roles.)
We believe that a successful contract factory can achieve even more success
though more active engagement with workers as a source of innovation and
quality, which also presents an opportunity for workers to benefit. This
approach is part of the way we seek to do business through the progression
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of lean as a component of our manufacturing revolution (see

Manufacturing Revolution).

Contract Factory Performance

For years, we have been sourcing from factories that seek to meet our
minimum standards for good labor performance. In converted our contract
factory evaluation and scoring system from a letter-based system to a new
medal-based one in line with our Sourcing & Manufacturing Sustainability
Index (SMSI). The SMSI is one component of the overall Manufacturing Index,
which also assesses contract factory performance on quality, on-time
delivery and costing in equal measure. 49% of contract factories scored
bronze on the SMSI. By the end of 68% had reached that score.
Our transition to the SMSI is part of a strategic shift away from a compliancebased auditing and checking relationship with our contract manufacturers
and toward cooperation around lean manufacturing as a means to achieve
greater efficiency, built on a stable, agile, engaged and motivated workforce.
Because an engaged workforce is an empowered workforce. Were spending
more time with, and have processes in place to direct more business to highperforming factories (i.e., bronze or better). At the same time, we are
requiring lower-performing factories to pay for their own audits and to
remediate any issues found. Factories that fail to achieve bronze level
performance within a defined timeframe are reviewed by senior leadership
and are assessed penalties, such as a reduction in orders and are even
considered for removal from our contract factory base.
NOTE: Contract factory count includes Inc. contracted manufacturing. These
figures include Affiliates, prior to divestiture, and licensees.
we tightened compliance requirements, reducing the time period that
contract factories could remain yellow before dropping to red status (to two
consecutive quarters). This change resulted in an increase of red rating at
the end
SCORING METHODOLOGY: Bronze indicates full compliance with Conduct
and adherence to the 227 requirements in the Code Leadership Standards
(CLS) as measured by our Health, Safety & Environment and Labor tools
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(available online). Silver and gold reflect an additional commitment to lean

manufacturing and progressive achievement in performance management,
management systems and scoring on assessments tools covering lean
manufacturing, Human Resources Management, Energy & Carbon, Health &
Safety and Environmental Sustainability. Gold demonstrates global leading
manufacturing performance across all industries. Factories rated yellow or
red indicate performance out of compliance with our Code and CLSs, where
red indicates critical issues of noncompliance. No rating indicates a lack of
data.
Audits & Compliance

While our focus has become more strategic, audits and monitoring remain an
important component of how we know that our Code of Conduct is enforced,
and helps get factories to bronze status. We assess contracted factories to
review their ability to meet our high standards of social and environmental
performance both before and during their work with us. These assessments
take the form of audit visits by both internal and external parties, who gather
information on the Code Leadership Standards that amplify our Code of
Conduct.
In 94% of factories went through a full assessment of labor, health, safety
and environmental compliance. The remainder reflect the ongoing shift of
factories that were in the process of moving out of our supply chain during
the year. In violations were recorded in 16% of factories, a drop from 29% in
due in part to our decision to reduce our contract factory base. The top
issues found in were hours and wages. Among the top violations were issues
with paperwork or documentation, as well as overtime (considered hours
between 60 and 72 per week). Incidents of excessive overtime dropped from
116 to 55 in due in part to our reduced contract factory base. The
percentage of factories reporting no incidents also improved, increasing from
87% to 93%.
NOTE: More detailed discussion of factory performance trends is available in
the Manufacturing section of this report and on-line. Contract factory count
includes Inc. contracted manufacturing. These figures include Affiliates, prior
to divestiture licensee. Percentages are used to show the relative rate of type
of incident.
Three areas in our supply chain that remain a priority for our industry are
freedom of association, excessive overtime and wages. We continue to work
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with experienced organizations on these important issues. a participating

brand in the Play Fair Freedom of Association Protocol in Indonesia where
training of factory management and workers is providing the platform for
greater engagement in this area. As a member of the business caucus of the
Fair Labor Association (FLA), a seat on the organizations Compensation
Code Element Working Group that will provide recommendations to the FLA
on how to move forward with a standard for its members.
We continue our work with contract factories to address and eliminate
excessive overtime from the supply chain. Although this is an industry-wide
issue, we believe that lean manufacturing provides an approach that will not
only unlock greater value for the factories we work with, but when
implemented effectively will significantly reduce excessive working hours.
See further discussion online with deeper background on these and other
issues.
Worker Voice & Lean

We continued to work with factories to help them enhance their capacity

around human resources management (HRM). we provided training to
management at contract factories producing 91% of footwear product and
44% of apparel product by volume, covering 531,000 workers (61% of total
workers in the supply chain). This included surveying contract factory
workers. This training was integral to our lean manufacturing approach in
which we work with contract factory management to engage employees in
problem solving and continuous improvement and is now incorporated with
our lean approach overall.
One worker protection requirement is that contract factories establish
grievance systems. At the end of 82% of contract factories had such systems
in place and were in compliance with standards. Of those in compliance,
70% of factories reported use of their systems, which is comparable to the
rate . We recognize that having and using systems alone is not enough to
secure workers capability to communicate with factory management. We
continue to include training and approaches to raising worker voices as part
of the lean manufacturing approach we encourage factories to take.
believes lean can empower workers and teams. The companys journey with
contract factories toward lean manufacturing has helped reinforce the need
for factory owners to have a deeper understanding of the cultural differences
between management and workers priorities and perceptions, as well as the
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need to enhance communication and engagement with workers directly on

problem solving.
The success of the lean approach depends on three things:
Leadership factory leaders use lean to understand the levers that
lead to better business performance
People workers are engaged and enabled to drive business success
through continuous improvement and a more collaborative work
environment
Process factory processes are predictable and agile in response to
customer demand
The lean approach also seeks to engage the minds of those closest to the
work to solve the problems that prevent them from delivering quality product
on time, every time.
We require a commitment to lean as part of being accepted into our source
base, and a minimum commitment and progression for positive ratings
including measures in our Sourcing and Manufacturing Sustainability Index.
Some of the standard metrics we use to assess adoption include productivity,
HRM assessments, turnover, absenteeism and factory implementation of and
results from worker engagement and well-being surveys.
Valued Workers

We believe that a valued contract factory workforce means better business

for the factories and better well-being for individual workers. Factories that
value their workers investing in their skill building, listening to their ideas
on how to improve factory processes, communicating about issues that
matter to them, facilitating aspects of their lives that help them show up
every day at the factory healthy and on time can build a skilled, productive
and engaged workforce.
As part of this approach, we designed two pilot programs in Indonesia and
learned that to enable engagement of the contract factory workforce, we
needed contract factories to first stabilize production lines. Within these
pilots we worked with factories to improve data quality, and to study and
assess absenteeism, worker engagement and well-being, factory
management and supervisor skills. Each of these areas has shown to
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contribute to worker well-being and to individual and factory productivity.

Though early, results of well-being surveys in both footwear and apparel pilot
factories show that production pilot lines addressing these areas outperform
the control lines on both measures of production efficiency and worker
engagement.
Although we are still piloting this work, we want to be sure that success in
production efficiency and enhancements in contract factory performance
does not come at the cost of worker engagement and well-being, as some
lean studies at other contract factories have shown in the past.
Taken alone, these areas do not tell the whole story of worker well-being. We
also know that many workers want to improve their earnings, and
compensation systems can incentivize increased performance. We are
working with contract factories to explore and test such systems as part of
this work.
In addition, many factors outside the factory affect workers ability to show
up on time and in good health every day. As part of our efforts, we are
exploring how we can catalyze third-party investment in products and
services that could support workers daily needs. Many of the factories in our
supply base invest in providing support to their workers through on-site
health clinics or financial literacy training, though these efforts are not
consistently aimed at addressing worker needs. We are developing a scalable
and systemic approach to address these and other issues through
commercially viable ecosystems of services and products to support worker
needs.
We anticipate sharing more of our journey of exploring, testing, assessing
and scaling as we learn more through this work.
Taken alone, these areas do not tell the whole story of worker well-being. We
also know that many workers want to improve their earnings, and
compensation systems can incentivize increased performance without
reliance on excessive overtime. We are working with contract factories to
explore and test such systems as part of this work.
In addition, many factors outside the factory affect workers ability to show
up on time and in good health every day. As part of our efforts, we are
exploring how we can catalyze third-party investment in products and
services that could support workers daily needs. Many of the factories in our
15

supply base invest in providing support to their workers through on-site

health clinics or financial literacy training, though these efforts are not
consistently aimed at addressing worker needs. We are developing a scalable
and systemic approach to address these and other issues through
commercially viable ecosystems of services and products to support worker
needs.
We anticipate sharing more of our journey of exploring, testing, assessing
and scaling as we learn more through this work.

Health & Safety

We also score contract factories on 35 health and safety factors. In the

average contract factory score was 72% on our scorecard, which measures
compliance, performance and risk mitigation. The average score improved
from 69%
we worked with the Fair Labor Association to launch an accredited fire safety
train-the-trainer program. The program began with national trainers from
India, with a target to cascade globally.
Looking at the Systems

Through our systems innovation lens we are also further exploring the labor
system to better understand our points of leverage and opportunities for
innovation. We are developing a deeper understanding of all the elements
that affect labor, at every point in the process from governments to brands,
factory owners to unions to workers. We will review this work with external
stakeholders and then apply it to specific geographies.
This work has helped us focus more on opportunities to influence worker
well-being outside the contract factory. Some elements outside the factories
include lack of access to affordable and effective ways to manage money. As
a result workers employed by our contract factories may pay more than
necessary for basic goods and services such as energy, water and credit.
Health care and child care are also concerns for workers. We are looking at
how we can collaborate with other organizations and factory owners to
support workers in their lives outside the contract factory.

16

CASE STUDY: PILOTING NEW WAYS OF WORKING

We believe factories that successfully address the well-being of their workers
by engaging with them directly to understand their needs will improve
factory performance. We also believe that factories need strong human
resource management (HRM) programs to increase understanding among
factory workers and management. Contract factories that do both of these
things address worker needs by listening and have a strong HRM program
will improve their business and our products.
We wanted to know how contract factories within our own supply chain could
do this, what impact it would have, and how to scale this learning, so we
started pilots in 2012 with two Indonesian factories.
OUR APPROACH
We built the pilots on the principles of lean manufacturing. We had already
incorporated lean into our work with contracted factories in previous years
and built an enhanced vision of lean that includes both environmental and
labor improvements alongside process efficiencies. Likewise, we introduced
training at factories in 2009 to increase factory management awareness and
understanding of HRM. The factories mostly succeeded at process
improvements and we had the opportunity to build up the people and
leadership components of lean.
For the pilot, we established an external advisory board to confirm we were
measuring the right factors. We recruited a range of thought leaders and
experts in labor and manufacturing to provide input, including academics,
think-tank members and independent consultants
PREPARING TO PILOT
We approached two factories one footwear and one apparel based on
their commitment to lean, completion of human resources management
training, and achievement in surpassing minimum compliance on our
Sustainable Manufacturing and Sourcing assessments. The factories felt that
they needed robust baseline data on empowerment and well-being
measures, as well as basic factory production metrics to show the impact of
new approaches. The two factories both trained managers and used lean
approaches ones that focus on continuous improvement processes that
reached out to and included factory workers. Additionally, both factories
were unionized and both had adopted lean practices, set up pilot and control

17

lines, established baselines and measured changes. Though the factories had
similarities, we found very different results.
PILOT IN ACTION: SETBACKS & SUCCESSES
Soon after we started the pilot, the teams identified opportunities to improve
and expand their data capabilities. Once data collection was stable we
established a baseline for the pilot period over five months.
The footwear factory assigned leaders who assessed worker feedback from
surveys conducted, determined which projects to undertake, assigned teams
to tackle them, set up approaches and ran the programs. Productivity
increased in the factory as a whole as well as on the pilot line, however so
did conflict. Though workers were involved in fixing the issues arising out of
surveys and proposing solutions to identified problem areas, surveys
indicated they did not feel motivated. Survey results showed a decline in
perceived levels of motivation after six months, but slight improvements in
perceptions of some areas of well-being and pay among those participating
in the factory-led pilot. More data and a comparison over time will provide
better perspective on these results.
During the footwear factory pilot we received reports of some egregious
behavior by line managers that violated our Code of Conduct regarding
harassment and abuse. We believe the root causes of this behavior were due
to competing priorities among supervisors and a lack of alignment between
the factory group chairman, factory management and supervisory levels. We
determined these conditions would make it difficult to effectively measure
the impact of the pilot and we decided to stop our engagement in the pilot
work with them. We worked with factory ownership and management to help
them establish a remediation plan which included running factory worker
engagement audits, developing a stronger relationship with union leaders,
establishing community outreach programs and building leadership
competencies. The factory also underwent a mutual trust and respect
training that included more than 9,000 factory workers (including line
supervisors and managers).
In contrast, the apparel factory management created conditions for workers
and management to review survey results and together they assessed the
best issues to tackle and then worked together to address them. The factory
management quickly realized that workers had good ideas and could
significantly help the business, and that they had not been tapping into this
18

vital resource. The apparel factory workers had suggestions around a number
of issues including factory transportation and supervisor/worker
communication. Workers were given time and attention when sharing their
views, and the worker-led priorities became the initial focus for pilot work
rather than factory management priorities. Line supervisors and factory
management participated and were responsible for enacting the worker
recommendations. Factory management also enacted management changes
based on their understanding of cultural, generational and gender issues
between themselves, who tend to be middle-age and male, and line workers
who tend to be women.
During the pilots the national minimum wages in Indonesia increased 50% to
70%, factory production growth rates continued to increase, and tensions
between some unions and factories escalated across the country. These
external factors did not have a significant impact on the apparel factorys
ability to carry out the pilot.
WHAT WEVE LEARNED
Through this piloting exercise we have learned a great deal about how
factories can enable worker engagement and well-being. We now have
evidence from within our own supply chain that factories investing in and
listening to their workers and involving them in production discussions makes
business sense, as measured by increased productivity and worker wellbeing.
We determined that additional things must be in place for a pilot to succeed,
including different data systems and approaches to data. We also know
contract factories must build a baseline of strong human resources capacity
as a crucial foundation to improve worker well-being.
As we expand our pilot work to additional factories and countries, we will test
more factors around engagement and well-being both inside and outside the
factory. Together with factories, we have a better understanding of what
factories need to have accomplished before participating in a pilot, and how
to gauge factory performance. Together we learned more direct involvement
is required at all levels of factory management to support problem solving
and worker engagement, and engagement and oversight throughout the
production function is critical. Additionally, we know management
capabilities are critical, especially the management systems used and the
behavior of line supervisors and factory management.
19

We are reviewing the results of the pilots and are more aware of how our
approach to sourcing and developing new frameworks and protocols should
work together to incentivize good behavior and practices by management at
contract factories.
We know that under the right conditions, contract factories can make
significant improvements that encourage, engage and involve workers as
valued contributors. We believe this work is too important to delay and that
moving to new models of working will require many improvements along the
way, from all sides including our own.
in tell the union its not needed. The activist Florence Reece wrote the union
ballad Which Side Are You On? in the midst of Kentuckys so-called Harlan
County . Posed this question late last week by the United Auto Workers,
employees of Volkswagens Chattanooga, Tenn., plant answered that they
dont want to be on the side of a union that is slipping into irrelevance. has
seen its membership decline to a fourth of what it was in the late Everything
had lined up for it in Chattanooga. Not only was VW officially neutral, it tilted
the playing field in favor of the union. The company allowed it to campaign in
the plant a major advantage while the unions opponents were
excluded. The media were praising Volkswagens enlightened European
attitude toward organized labor and celebrating imminent victory for the
union. Then the workers had their say. The UAW reportedly spent $5 million
in the course of a campaign that lasted two years, and it lost by a 712-to-636
vote. The motto of the old American Federation of Labor was a fair days
wage for a fair days work. VW workers felt they already had it. Wages in
Chattanooga are comparable to those of new hires of the Detroit
automakers. The unionization of the workforce would make it possible for VW
to form a European-style works council of management and workers to
make decisions about the plant. But workers already felt amply consulted by
management. Even UAW secretary-treasurer Dennis Williams attested,
Volkswagens a class act. This is hardly the Battle of the Overpass, when
company thugs beat UAW officials trying to organize Ford . This is a car
company putting out a welcome mat for union organizers who still couldnt
manage to organize. Florence Reece wrote, Come all of you good workers /
Good news to you Ill tell / Of how the good old union / Has come in here to
dwell. But the workers in Chattanooga didnt consider it such good news.
Bob King, the head of the UAW, thinks they are guilty of false consciousness.
If only they werent so viciously misled by outside agitators, such as
Tennessee senator Bob Corker, the former mayor of Chattanooga who helped
20

to woo VW to the city in the first place. He rightly said that the UAW is in a
death spiral and, more controversially, that the automaker would make a
rapid decision to invest further in the plant if the UAW lost the vote. King
alleges that Corkers comments violated the spirit of labor law, which is
nonsense. The senator doesnt work for VW, and he has the First Amendment
right to say whatever he wants. If Corker is guilty of dirty pool, who told a
group of Democratic lawmakers that no one opposed the UAW organizing the
plant except people Thats not inflammatory? The only law that will satisfy
King is one that forbids anyone from saying a discouraging word about his
union, which was found alone in a room in 2009 with two nearly dead car
companies. After the UAW did so much to chase automating out of Detroit
with unsustainable labor costs and ridiculous work rules, it is no wonder that
workforces havent welcomed it into the South, where right-to-work states
have become alluring destinations for foreign car companies. For the longest
time, the business model of the UAW has been to take its members dues
and funnel them to friendly Democratic politicians. Unless it breaks into the
South, the union knows its all but doomed. It may feel this institutional
imperative keenly, but workers in good manufacturing jobs who owe nothing
to this self-serving dinosaur from the 20th century dont. They can be
forgiven for wondering which side the union is Conservatives are celebrating
the defeat of the United Auto Workers in Chattanooga. But the defeat was
much narrower than it should have been, and the right needs to think
seriously about new, more constructive ways to give workers a voice within
large companies. First, why did the United Auto Workers fail to win the
support of a majority of workers at a Volkswagen plant in Chattanooga,
Tennessee? One popular explanation is that anti-union hostility from local
politicians played an important role, a former mayor , warned that if the UAW
organizing drive at the plant succeeded, Volkswagen would decide against
building a new SUV model at the plant. The trouble is that the head of the
local Volkswagen plant replied that Corker had it all wrong, and with good
reason. Like many German industrial firms, Volkswagen has heavy employee
representation on its board; and it also has board members appointed by the
left-of-center coalition government of the German state in which it is
headquartered. Volkswagens corporate leadership is thus accountable to a
board that is very friendly to organized labor, and one has to assume that
workers at the Chattanooga plant were well aware of managements
willingness (even eagerness) to work with the UAW. Much has been made of
the fact that Tennessee in the heart of Greater Appalachia, a region that has
grown less Democratic and more conservative in recent years. It is also true,
however, that the city of Chattanooga is 35 percent black, roughly twice the
21

black share of Tennessees population as a whole. Though I havent seen

hard numbers on the demographic composition of the workforce of the
Chattanooga plant, the Wall Street Journal observed that make up a sizable
portion of the voting workforce at the VW plant. And local Republicans, like
Corker and the regions current congressman, Charles Fleischmann, are
known for their pragmatic streak. As mayor of main crusade was revitalizing
the citys downtown, and Chattanooga is home to one of the countrys only
publicly-owned citywide fiber networks, an example of the kind of gee-whiz
public sector progressivism that East Tennessee Republicans dont reflexively
dislike. East Tennessee was Republican long before the rest of the state. For
one thing, this part of the state was opposed to secession during the Civil
War. Unlike Memphis, which has an intensely polarized political culture
closely connected to the racial politics of the Mississippi Delta, eastern
Tennessee industrialized relatively early, and the heirs of those first industrial
fortunes continue to play an outsized civic role. This is a region that defies
many easy stereotypes about the southern United States, if you care to pay
close attention. Yet the region is Republican, and it is certainly possible that
right-of-center voters at the Volkswagen plant responded to (accurate) claims
by outside groups, like the Center for Worker Freedom that the UAW backs .
In a similar vein, one can imagine that left-of-center voters at the plant were
more inclined to back the UAW on the same grounds. Some pro-UAW
observers seem to take it for granted that conservative white evangelicals
who opposed unionizing the plant did so on essentially tribal grounds. I have
yet to see anyone allow for the possibility that black support for the UAW
might have been similarly motivated (or perhaps it is only identity-driven
opposition to organized labor that is suspect, and not identity-driven
support). The fundamental reason a majority of Volkswagen workers at the
Chattanooga plant opposed the UAW effort seems to be that they were
content with existing arrangements at the plant. Indeed, it seems pretty
likely that many workers who favored the UAW drive were also content with
existing arrangements, as the UAWs pitch was they aimed to form
something like a cooperative works council that would bring labor and
management together to resolve common dilemmas. So the promise of an
adversarial union that would fight Volkswagen management tooth and nail
didnt appeal to the large segment of workers who were basically happy with
the status quo. And the UAWs willingness to work with Volkswagen
management meant that those workers who did yearn for an adversarial
union didnt have much faith that the UAW would play that role. The UAW
wasnt making much of a pitch: were not that scary, which is why
management loves us; but pay us dues so we can represent you in the
22

workplace and (sotto voce) help finance Democratic campaigns in Tennessee

and across the country. Even so, a large number of workers at the
Chattanooga plant did back the UAW, despite the fact that workers at the
plant were relatively well compensated. Among the most innovative firms,
its not the potential for upward pressure on wages that fuels the most
determined opposition to organized labor. Rather, it is the concern that
unions impose work rules that make it difficult for firms to embrace
organizational innovation. Critics of organized labor need to keep in mind
that workers have real grievances, and that U.S. labor law doesnt give them
many good options for addressing them. If our goal is to better the lives of
workers without making it impossible for firms to adapt to a changing
economic environment, we ought to allow employees to organize in new
ways, Alan J. Hauls made the following proposal: Radically different employee
associations that dont suffocate both their companies and their members
need to be created. New types of employee associations should support
worker incomes by enhancing worker training and worker mobility between
companies. This last goal will be realistic, however, only if there is a wide
variety of such jobs to be foundwhich in turn will require steps to make it
easier to organize the employee associations. Thus, Congress should
authorize employee associations that are easier to form than current unions,
but which do not have the power to interfere with managerial prerogatives
(which is pretty much every subject other than employee compensation as
determined by a collectively bargained contract). Of course, if the new types
of employee organizations are not suffocating their members, they may in
fact find it easier than old unions to attract new members. A related issue
goes to the heart of labor relations as it has traditionally been practiced in
unionized companies: structures for worker compensation. Uniform
compensation for workers of the same job classification led to a race to the
bottom with regard to worker productivity. Workers of the same job
classification who receive the same compensation lack incentive to be
productive, and indeed those who could be more productive have been
subject to social peer pressure not to make co-workers look bad. This
highlights a difference between aggregations of capital bargaining for
economic returns and aggregations of labor bargaining for economic returns.
When capital bargains with management for returns to capital, each dollar is
more or less the same, while in collective bargaining by labor there can be
significant differences in the productivity of individual workers. A solution for
retaining the appropriate aggregation of bargaining power in collective
bargaining by labor, while allowing for differences in productivity of workers,
is that the new employee organizations should be negotiating minimum
23

compensation levels for workers. Each individual worker can then negotiate
for additional and incentive compensation above the minimum. This floors,
not ceilings approach has the potential to appeal to management, which
would the flexibility it needs to spur productivity gains, and labor, as it would
allow workers to aggregate their influence within the firm to secure more
compensation. There is no guarantee that firms with employee associations
would outperform those without them. But managers wouldnt be able to
blame institutional sclerosis on these employee associations, as they
wouldnt be in a position to impose work rules that hamstring managements
problem-solving efforts. But proposal is just one of many conservatives might
pursue. The federal government could create a more expansive version in
which verified employees at large firms could provide anonymous feedback
on their employers. James Shark, a senior policy analyst at the Heritage
Institute, has called on Congress to legalize non-union employeeinvolvement programs. More broadly, one can imagine a broader legislative
package that would allow for employee-involvement programs and employee
associations that focus exclusively on compensation while also requiring that
traditional unions face periodic recertification elections and that they seek
opt-in permission from members to use union dues for political purposes.
This would give workers new options for workplace representation while
reassuring workers in union workplaces that they have a say in deciding
whether or not to be represented by a union, and whether or not their money
is being used in ways that reflect their political convictions. Instead of just
reacting to the labor movement, this agenda would take affirmative steps to
protect the interests of workers. View Comments Trending Related
Chattanooga and a New Labor
worker-problem-rich-Lowry
Order. The Council also advises the Minister on other health and safety
Introduction:
Poor working conditions have been present for centuries. Often times little or
nothing is done unless a tragedy occurs to persuade the public to rally for
worker rights. This was definitely the case in the United States during the
Industrial Revolution and even late in the 20th Century. These conditions
have for most purposes disappeared in the United States, with the exception
of some in the agricultural sector. However, internationally, mainly in poor
third world countries, that is far from the truth. Large corporations from the
United States have moved a large portion of their factories overseas to
circumvent the strict working regulations within the United States. The third
24

world countries such and Taiwan provide access to readily abundant cheap
labor. These corporations could now reap the benefit of the United States
consumer market, while keeping their costs extremely low in offshore
production. The media has awakened the public to this fact and several
prominent corporations have come under fire lately for the malpractices. No
corporation has come under as much criticism as the culture icon . It was
illustrated that conditions were sub-par in several critical areas of factories
overseas and minimal standards needed to be reached for all employees.
This report will investigate the example and how it has exploited workers in
Asia for financial gain. For several years little was known about factories
simply because there was little concern. But once news broke, the company
was attacked ceaselessly and strict recommendations were made to improve
conditions. This paper will look at why moved its factories to begin with,
what were the first recommendations, how responded to these needs, and
what could be expected for future improvement.
Moving Factories:
Before we look at the problems at the overseas sites, we must first
understand moved the majority of its production so far away from its
headquarters in Beaverton, Oregon. The untapped markets across the globe
presented several benefits. Of course there was the labor aspect in which
cheap labor could produce shoes and other clothing at the fraction of the
price it would cost domestically in the United States. As well, an aspect that
is less often recognized, expanding into the worlds most populous country,
opened up a tremendous opportunity as a stepping stone into While Adidas
was looking to grow in and the Soviet Union, wanted to get a leg up in
clothing the nearly 2 billion people in alone. (Swoosh, pg. 405) This and
today that population is even higher and expanding at a blistering pace.
All seemed well in the corporation as stockholders and managers were
receiving huge dividends and the public was receiving great products.
offshore practices have been consistently criticized in the press.
Labor conditions in Chinese and Indonesian factories were questioned in
some of the reports, pay scales of Asian line workers and famous athletes
were compared, and was even blamed for abandoning the American shoe
manufacturing industry of which it was never a significant part.
On Chief Executive Officer Phil Knight gave a talk on such allegations and
the companys new labor initiatives to combat them. In that discussion he
25

touched upon reasons for moving factories out of the United States and into
mainly third world countries in Asia. The following are excerpts from that
lecture.
It's been said that has single-handedly lowered the human rights
standards for the sole purpose of maximizing profits. And
products have become synonymous with slave wages, forced
overtime, and arbitrary abuse. One columnist said, represents
not only everything that's wrong with sports but everything
that's wrong with the world."
When we started we had two other manufacturers in make our shoes for us.
One was in Hiroshima, and the other was Kurume, just outside of Fukuoka. In
neither case were we 10% of their volume. We actually considered ourselves
fortunate that they would make shoes to our design. It never occurred to us
that we should dictate what their factory should look like, which really didn't
matter since we had no idea what a shoe factory should look like anyway.
But some 26 years later, I can tell you one of the few absolutes of this
business.
However bad you think shoe factories are today, they are far, far better than
those factories in Japan some 26 years ago.
When the Nixon administration cut the yen dollar loose from its exchange
rate that had existed since the end of World War II . . . In that process,
basically all
shoemakers quit making shoes in Japan.
We began making shoes in Taiwan and Korea, and in a bold experiment
we made up to 15% of our shoe products in two owned facilities in Maine and
New Hampshire.
Since that time, the U.S. economy has become by far the most robust in the
world,
and shoemaking has moved again . A lot of people say, "Why

26

don't you bring shoemaking back to the United States?" Our studies show
that using the same production techniques, the average cost at retail for a
pair of shoes if we did that would go up $100.
The average retail price for a pair of shoes is between $70 and $75, so
therefore it would go up to $170 or $175. The price of a pair of Air Jordans
which
sell for about $150 would go to $250.
There are only two ways of making shoe production come back to the United
States. Either new advances in automation, which from my viewpoint are a
ways
away, or establishing tariffs and quotas that dictate that shoes have to be
made in
the United States.
But just as in Japan, the factories in Taiwan and Korea that we established
back in
those early days were far better, have been far exceeded in terms of their
quality of work conditions than the factories that we had in Taiwan and
Korea, and frankly the factories that we had in the United States in the '70s
and early '80s.
We had one other thing as we went into these new factories in Southeast
Asia. We
got to build them from scratch. And now , having had quite a bit
of experience, was able to have quite a bit of input into what
these factories look like. And we believe they are the most
advanced and best physical facilities in the world. all our
experiences have caused us to really believe in the
benefits of international trade. The uplifting of impoverished people, the
better
values for consumers in industrialized nations, and most of all, the increased
27

understandings between peoples of different cultures.

We have about 530,000 workers working on 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. There are too many workers, too many
interactions daily; and in Vietnam, too much tension based on nationality to
avoid
any incidents.
before anybody else in the athletic footwear industry-and I believe
that only Levi Strauss had one instituted a code of conduct for
use in factories throughout . we took a step that I hadn't heard
of been taken by anybody, and I believe we were the first in any
industry, to have that code of
conduct audited by the international accounting firm of Ernst & Young. We've
been criticized for using a firm that we are paying for this review, and I think
this is really pretty funny. The only reason that a CPA firm has for its very
existence is its independence. And if in fact it was not independent, we have
a much bigger
problem than foreign factory relations. The whole New Stock Exchange is
built on a fraud.
The thing that we have learned more than anything else in this process is
that when Nike has gone into a country with its manufacturing operations,
wages have
increased and poverty has decreased. (Knight Speech)

These remarks gave crucial insight that an outsider would not know or really
understand without some background in the business world. It became more
clear why the company had decided to move its production base overseas.
However the attacks did not stop and the national media "picked up on the
28

campaign, which included accusations of exploitative wage scales and poor

working conditions confronting workers making abroad. continued its
rebuttal by "pointing out that, out of the more than 300 American shoe
factories that were shut down during a general exodus during
was not only criticized for treating workers poorly , but it was also attacked
for taking jobs away from the workforce. This assault was discredited by
officials. "Knight . . . and other officials argued that most of the employees of
the company have the kinds of white-collar marketing, design, computer,
and other jobs that are valued and desired in an advanced economy. The
officials were right that most the jobs the workers in were filling would not
suffice for the more skilled American counterparts. A highly advanced
economy such as the United States would want more skilled labor, but that
was a forgotten point during a lull in the economy at the start . The stage
had now been set for what was rapidly becoming a business war of profit and
welfare.
Past Recommendations:
Nothing said or did could curtail the wave of criticisms. Every person who
heard about this debate had an opinion on how the company should right its
labor practices. Once the media caught wind of the poor conditions, no
matter how few cases there actually were as Knight claims, it spread with
tremendous speed. was brutally criticized and it was clear it must make
changes in their practices. It was assumed that was willing to change it
practices in order to prevent human rights violations. No official would dare
disagree that it was essential that all workers be treated with dignity and
respect just as any American worker would. The laws that protect Americans
rights in their pursuit of life, liberty, and happiness, should also pertain to
any human. Those treasured laws within the United States do not stop
protecting at the border, but transcendent all nations and people. It was
therefore important that a company , that has such a profound influence on
the cultural, as well as business world, be a pivotal player in improving
human rights all over the world. The following were recommendations of how
the company could go about using its far reaching capabilities to change the
way labor practices were upheld throughout the world. The first list deals
with the problems that were most evident in China.
Ensure that factories start to pay workers the legal minimum and provide
compensation to workers who have been cheated out of their rightful wages.
29

 Totally eliminate any forced overtime, eliminate all excessive overtime (i.e.
overtime that violates the Codes of law) and pay the legal overtime rate.
Stipulate that all workers must be given pay stubs upon receiving their
wages so that they can see what they are paid for, at what rate, and what
deductions were taken out.
Immediately return all deposits illegally taken from workers upon their hire.
Eliminate regulations that prohibit workers from talking to their coworkers.
Stop making morning calisthenics mandatory.
Stop the illegal procedure of deducting disciplinary fines out of workers
paychecks.
Investigate any allegations of beatings by security guards and other
abusive treatment.
Cease firing workers who are pregnant and provide them with their legally
mandated maternity benefits.
Provide childcare, social security benefits, medical insurance and
bereavement leave, as stipulated under Chinese Labor Law.
Eliminate the quota system or reduce it to an amount that can be easily
accomplished in an 8-hour day.
Undertake a health and safety review of factories with regard to dust and
noise pollution, heat, fumes and congestion and provide companies with a 6month plan to improve conditions.
Make public a list of accidents and work-related illnesses that have affected
workers in the past three years, what measures have been taken to prevent
them, and how workers were compensated.
Rehire workers who have been unjustly fired for participating in strikes or
for efforts to improve factory conditions, and compensate them for lost back
wages.

30

 Eliminate child labor by seeing that any workers under the age of 16 are
provided with a stipend to go back to school and are guaranteed their jobs
back when they are of legal working age.
Provide materials and workshops to educate workers about the companies
Codes of Conduct.
Allow outside groups to provide education and awareness-training to
workers about local labor regulations and workers rights, and ensure that
workers who choose to attend such programs are not punished.
Set up a compensation fund for workers who are injured or killed on the
job.
Ensure that all chemicals used in the factories are clearly labeled in the
local language.
Pressure the subcontractors and government officials to allow workers the
right to freely organize.
The second report delta with the problems from involvement in Vietnam. The
following is the list of recommendations that report set out.
1.) should abandon the practice of using training/probationary wages or
paying the workers below minimum wage under the guise of providing
technical/vocational training. Many factory jobs do not qualify as technical
vocations and the current factories cannot be considered vocational schools.
Using this approach to underpay workers is illegal and unethical. Wages in
Vietnam are already at rock bottom. There is no need for to pay workers any
lower than the $45 monthly minimum wage.
2.) should make the implementation of its Code of Conduct a top priority,
putting it above even quality and cost. Once the situation improves, then
can shift this priority. demand that all managers who use corporal
punishment or are guilty of sexual harassment be dismissed. Nike should
make it the responsibility of the general manager of the factory to run a
factory that respects its workers. After three violations of Code, the general
manager should be dismissed. The current approach of having no specific
punishment for violating the Code of Conduct generates the impression that
the Code has no teeth.

31

3.) a stiff monetary penalty on the contracting company whenever it violates

the Code of Conduct. The current practice of not making the subcontracting
company responsible for its managers treatment of workers will only
encourage further violations. Companies tend to respond well to severe
monetary fines. With so many repeated violations after only 18 months of
operation in Vietnam, this is the only course of action left to demonstrate to
outsiders that serious about enforcing its Code of Conduct.
4.) immediately enforce the 60 hour work week specified in the Code. The
current practice of excessive, forced overtime (sometimes over 70 hours per
month) would be considered abusive by any standards.
5.) a good corporate citizen in Vietnam. cannot assume that creating low
paying jobs is good enough. Vietnamese workersand their supporters
around the worldwill not simply be grateful for the jobs and ignore the
deplorable labor practices in the factories. Moreover, it is unjust that
shareholders profit handsomely from the low wages paid these Vietnamese
workers. take some of the profits it makes from Vietnamese workers and
invest them in projects that help improve the lives of poor Vietnamese.
6.) work directly with the Vietnam General Confederation of Labor to hear
the complaints from workers and to talk with workers outside the factory
environment. We found that as long as the workers remain within the
confines of the factory, they are very fearful and are not willing to talk about
their conditions to anyone. The Vietnam General Confederation of Labor at
both the local and district levels were very helpful to us in arranging
meetings with factory workers outside factories. We believe that the
Confederation could be an important addition to efforts to improve its labor
practices.
7.) consult with several Vietnamese who are experts in shoe factories and on
how to establish better labor practices. Beside factories, we had an
opportunity to visit two other shoe factories in Vietnam: Thai Bin and Hip
Hung. Both are Vietnamese companies and both are producing high-quality
shoes for Western shoe companies such as Reebok and Fila. The presidents
of both of these companies have expressed their willingness to consult with
how to treat its Vietnamese workers. Even though they consider a
competitor, both of these managers are willing to help because they want to
improve the working conditions of the workers at the factories. Their desire

32

to help is sincere and generous, and we believe that take them up on their
offer.
8.) an independent monitoring board in Vietnam consisting of
representatives from neutral parties, including government labor officials,
NGOs, and labor unions There are many excellent organizations as well as
respected individuals, who would be willing to serve on such a board.
9.) immediately implement all of the recommendations made by Vietnams
Health Department to improve the health and safety conditions .
10.) implement all of the recommendations made by Ho Chi Minh Citys
General Confederation of Labor, which include: classes on labor rights for
workers, regular medical examination for workers, and establishing a pay
scale that is fair and abides by Vietnamese labor law.
These were basic recommendations that outlined the crucial areas that
needed the most drastic improvements. The most glaring need that the two
list demonstrate is that of clean conditions. The workers were forced to work
in a situation where the air was extremely polluted and dangerous chemicals
were handled without any protection. Even if the workers wanted to
complain, they were threatened that they would be severely punished for
doing so. That lead to another important point of both lists, the way workers
were treated. Often management forced employees to work overtime with
little pay. The final aspect both lists demonstrated was the need for a
investigative body. This organization would watch corporations and factories
and make sure no poor conditions were allowed to persist. The
recommendations were directed at , but was indirectly a call to all
corporations all over the world to implement them to improve conditions.
In the next section we will look to how these recommendations were
incorporated and other major corporations who operate factories around the
world.
Response (Actions):
When Phil Knight and the rest of the top officials at were given reports
regarding the human rights and labor violations being committed in their
Asian factories, it was very clear that they were going to have to take swift
action to remedy the situation. The fact was that "shoes and clothing are
only the secondary products of the fashion industry. What primarily sells is
33

image. For to have its image associated with sweatshops in Asia was more
than an embarrassment; the revelations threatened sales. The shoe and
apparel producer could not afford to continue to see its name dragged
through the mud. Sales were dropping and being portrayed in the media as
a company who was willing to exploit workers and deprive them of the basic
wage needed to sustain themselves in an effort to expand profits.
Phil Knight officially responded to his critics . His speech was the result of
intense internal discussion about what actions needed to be taken to
improve conditions in the overseas factories. What they came up with were
several new "laws" that factories throughout the world were to be required
to obey.
The first initiative was to stop the use of a toxic adhesive called toulene.
Toulene has been found to cause harmful effects among workers who are not
properly guarded from the poison and the fumes that it emitts. In its place
researchers created a water-based adhesive which has no such side effects.
While the safe adhesive is not perfect for use in all shoes (especially plastic
soled cleated shoes), Knight assured the public that would continue its
research and by the end of calendar year would have all factories meeting
United States Occupational Safety and Health Administration (OSHA)
standards in indoor air quality. To assure this, stated that it will conduct
indoor air testing of all footwear factories and follow-up testing where
required. These tests will culminate in a final report made by an independent
non-government organization (NGO). Each factory will be given three months
from the date the final report was made to make corrections to bring the air
quality levels to those set forth by the OSHA.
The second initiative raised the minimum age of all footwear factories to 18
and raised the minimum age of apparel and equipment factories to 16.
Current workers of legal age in countries where the standard is lower than
new minimums were not to be affected. Knight was quoted as saying, zero
tolerance for underage labor. And I really do have to add this: There has
never been a time in history where child labor has been a problem. And I also
say that it really hasnt been a problem in the shoe industry as a whole.
In addition, Knight announced an expansion of education programs in the
factories, including middle and high school equivalency course availability for
all workers in footwear factories. Workers will be offered free classes during
non-working hours, and factories will be encouraged to raise the pay of
34

workers who complete the regimen. By 2002, will only be ordering from
footwear factories that offer some form of after-hours education to qualified
workers.
Finally, Phil Knight added that will increase support of its Micro Enterprise
Loan Program to a thousand families each in the nations of Indonesia,
Pakistan, Vietnam, and Thailand. This program provides loans to women who
wish to create small businesses. Knights goal was to provide capital for more
than five thousand businesses before. Unemployed women who can run
small businesses that boost their familys economic well being as well as
contribute to the communitys overall development are the focus of this
program.
Human rights organizations trumpeted initiatives as "an important victory for
workers around the world and consumers who have mobilized in protest of
unfair labor practices" (Global Exchanges Public Response...). However,
there are definitely loopholes within the policies that concern many. While
human rights groups such as Global Exchange applauded initiative to allow
non-governmental organizations to inspect the factories and make
summaries of the findings public, they question which NGOs plans to grant
accessibility. Also questioned was exactly how much information is going to
release in its "summaries."
The education programs which announced it was expanding also came under
fire from Global Exchange. It seems as if programs are more geared towards
office workers in the factory and not the factory workers themselves. In
addition, due to rampant overtime work and family obligations, the low-paid
workers have virtually no "non-working hours" in which to attend the classes
and study for the exams. The issue of overtime work must be remedied
before these educational programs can be properly implemented.
The new initiative concerning child labor regulation also leaves something to
be desired. It sets a minimum age of 16 in its factories, but made no
restriction for countries where workers are legally able to work at 14. It is felt
by many pushing reform that even if it is legal for a child of 14 to work in
certain nations, it is still considered improper child labor and should not be
condoned and implemented in factories of American corporations.
While most of these problems were minor and rather easily remedied, two
items left out of speech caused serious controversy. The first of these was
the omission of a commitment to pay workers a living wage based on
35

purchasing power. The shoe company stated that it will pay workers the local
minimum wage, but often times this wage is set too low by the government
in order to attract foreign investors. Human rights organizations are
pressuring to follow suit in other U.S. companies like Coca-Cola, Pepsi,
Goodyear, and Gilette that pay workers wages that allow them to meet their
basic needs, foster company loyalty and increase productivity.
The other major omission from Phil Knights speech was the right to organize.
In (where the majority shoes are made) workers are denied the basic right
to organize independent unions. All three countries have one government
sponsored union and efforts to create independent unions are squashed.
Human rights groups hope that will work with them to pressure local
governments to release jailed labor leaders and change labor laws and
practices to reflect internationally recognized labor rights.
In addition to own corporate initiatives, they became big players in the
formation of the Apparel Industry Partnership (AIP). The AIP was brought
together in the Clinton administration during the tenure of Labor Secretary
Robert Reich. It incorporates representatives of the apparel industry, human
rights groups, and labor unions, including , Liz Claiborne, Reebok, Phillips Van
Heusen, Business for Social Responsibility, the Lawyers Committee for
Human Rights, the National Consumers League, the International Labor
Rights Fund, and the Robert F. Kennedy Memorial Center for Human Rights.
Not directly participating in negotiations but affiliated with the organization
are L.L. Bean, Patagonia, Nicole Miller, and Kathie Lee Gifford. The AIP was
formed because of the public uproar from media reports of sweatshops being
the core producers of products such as Nike apparel and shoes, The Gap
clothing, and Kathie Lee Giffords clothing line sold at K-Mart.
The Apparel Industry Partnership was quickly put together for two main
reasons. First, the apparel industry itself feared that Congress might be
driven to legislate corrections without corporate input. Companies with
international production facilities could not be confident of controlling the
legislation that might come out of public hearings filled with horror stories of
sweatshop abuse in factories of familiar brand names. Second, President
Clinton was worried that this controversy would threaten the advancement of
the free trade agenda, a centerpiece of his presidency. The public was now
wary of assurances that increased international trade would produce an
increase in human rights. Clinton feared that this might jeopardize future
deals similar to NAFTA, which itself had passed by only a very slim margin.
36

Both the corporations and the Clinton administration needed an organization

that would produce serious damage control in a swift fashion. What resulted,
the AIP, is something that opponents say "was formed to protect corporate
reputations and to prevent a backlash against free trade, not to protect
worker right.
In the AIP released two papers for reform, the "Workplace Code of Conduct"
and the "Principles of Monitoring." These documents were criticized on two
fronts. The first was that people questioned whether there was sufficient
independence between those monitoring the factories and the corporations
themselves. The second was that the pay standard was set at the legal
minimum wage and not at the minimum to provide for workers basic needs.
The AIP went back to the bargaining table with the promise of producing a
final agreement in six months.
Eighteen and one half months later the AIP returned with a document that
only a subset of the taskforce had agreed upon. Both unions in the
Partnership (UNITE and the Retail, Wholesale and Department Store Union)
and the Interfaith Center on Corporate Responsibility, a human rights group,
refused to sign the "Preliminary Agreement" that had come forth from the
subset. These dissenters believed that these documents proved corporations
such were only involved in the AIP for a public relations boost, not to make
substantial changes in their behavior. They felt that trumpeted its
involvement in the AIP as evidence of its moral leadership, all the while
stonewalling on several key issues of its labor practices" (Sweatshop
Agreement, Part 1).
The first problem that was brought up and the other groups not signing the
"Preliminary Agreement" regarded the monitoring process set forth by the
AIP. They complained that companies are now free to choose the same
accounting firms as monitors that they have always employed for that
purpose, including firms that perform other services for the company. They
feel that these firms have a serious conflict of interest, and that their reports
are easily manipulated by the corporations. In response to this criticism, Phil
Knight quipped, "The only reason that a CPA firm has for its existence is its
independence. And if in fact it was not independent, we have a much bigger
problem than foreign factory relations. The whole Stock Exchange is built on
a fraud.

37

The second argument against the AIP document was that it allows for as few
as ten percent of a companys facilities to be subject to an annual inspection
in an initial three-year implementation period and only five percent of
factories a year thereafter. In addition, the corporations themselves are
allowed to choose the facilities to be inspected. While the Executive Director
of the Association has the power to modify the companys list (although
"there shall be a general assumption in favor of the Participating Companys
suggested list of Applicable Facilities"), a firm such as will always know in
advance which plants will be inspected ("Preliminary Agreement"). Human
rights groups such feel that by no means does this assure consumers that all
of the factories being used for production are up to basic standards. The nonsigners of the agreement also felt that the Associations annual public report
could potentially mislead the public since it would be based exclusively on
information provided by the company and its monitors own review of the
factories.
The AIP agreement requires employers to pay the higher number between
the minimum wage required by local law and the prevailing industry wage.
The document also provides for a Department of Labor Wage Study which
will attempt to create a sustainable living wage for each nation, but it does
not commit participating companies to assure their workers that level of pay.
It therefore does not provide that each corporation under this labor
agreement pay their workers a wage allowing them to purchase the
minimum level of goods to survive in their native country.
Yet another reason that some groups refused the AIP document was that it
did not restrict American companies from producing goods in countries that
have legal and practical prohibitions on freedom of association and the rights
to organize and bargain collectively. The only provision in the agreement was
that companies could not actively seek state authorities for assistance to
prevent workers from exercising these rights. felt that "this presumably
means you can let the army in the door but you cant call them. Compare
this with the codes and restrictions placed on multinational corporations in
apartheid the hollowness of this provision .
The AIP "Preliminary Agreement" failed to provide a consensus for the
reforms that need to be issued to remedy the problem of American
corporations exploiting international workers.

38

We are ... concerned that this agreement will

reinforce the tendency to view voluntary corporate
codes of conduct as a substitute for the enforcement
of existing laws and the adoption of legislation and
trade agreements designed to protect the rights of
workers in the global economy. While such codes can
in some circumstances supplement the rule of law in
protecting workers rights, they are a step backward
when they undercut the demands and actions of the
anti-sweatshop movement and allow corporations to
carry on business as usual .
For this reason, the human rights organization was unable to sign the
agreement. Timothy Smith, the Executive Director of the Interfaith Center on
Corporate Responsibility, agreed. He said of the accord:
key principles, such as payment of a sustainable
living wage to employees, and credible independent
monitoring, are not sufficiently addressed. The
agreement does take several important steps by
establishing a Fair Labor Association and a process
for monitoring factories worldwide, but without these
key principles, we cannot sign on at this time.
It is unfortunate that a unanimous agreement could not be brought forth by
the AIP, for one that divided the organization into separate parties, as has
happened, will not have the impact on the industry as one borne out of a
cohesive unit. Not everyone agreed with President Bill Clinton when he
stated that the accord will "give consumers confidence that the clothes they
buy are made under decent and human working conditions. [The]
agreement... is an historic step toward reducing sweatshop labor around the
world.
Since these reports were made in has begun to make the necessary changes
to further improve its factory conditions. The Interfaith Center On Corporate
Responsibility (ICCR), in a report based on a recent visit, found that the
health and safety standards had improved and that progress was being
made in limiting excessive overtime. In most factories, the ventilation
systems were excellent, and the workers were safely protected in their use of
toxic chemicals. In those failing to meet the new standards, improvements
39

were underway to bring them up to par. also abolished the "no talk" policy
which had forced workers to perform their duties in complete silence.
On the down side, has not fully addressed the issue of inadequate wages.
While they announced in that they will be increasing the pay of Indonesian
workers by twenty- five percent, those who are employed in C still struggle to
meet the basic costs associated with survival . In addition, has not
adequately addressed the issue of the workers right to organize and form
labor unions. Human rights organizations are hopeful that these issues will
be on the agenda for to reform shortly.
a high ranking official add to the turmoil associated with the reformation
process. Vice President Joseph Ha wrote in a letter to the Vietnamese
government that human rights and labor activists who are critical factories
have loftier goals of overthrowing the Vietnamese government. He stated:
The ultimate goal is political rather than economic.
They target Nike because is a high-profile company
and a major creator of jobs in Vietnam. Nevertheless,
this is the first step for their political goal, which is to
create a so-called democratic society on the U.S.
model .
Human rights groups were shocked at the statement, as appeared to be
allying with a Communist dictatorship and labeling human rights activists as
the enemy. This was very questionable activity coming from a corporation
that had been fighting a public relations battle for the last half decade. It was
especially dangerous considering the state of the Vietnamese government,
as there are many who will believe Hes statement and act on it, putting
many labor activists in serious danger. quickly released a statement
explaining that the views expressed in Hes letter were the views of the vice
president himself and not those of the corporation.
This situation heightened many peoples concerns that is a corporation
where an old guard remains opposed to the labor reform being made in their
international markets. Former labor organizer Jeff Ballinger said, "Theres a
hard core within the company that feels they were never doing anything
wrong, that the critics just happened to get the upper hand because of a
compliant and lazy media . This greatly discourages labor rights advocates
who had felt that was making serious amends to its exploitative practices.
denies that this faction exists within its company, and stated that it is fully
40

committed to the labor reform movement within its corporation and through
all other businesses.
This incident has brought to light another issue regarding international
companies place within the government of the foreign land. President
Clinton has always espoused a "constructive engagement" policy which
promotes free trade and foreign investment in part on the political grounds
that it promotes freedom and democracy. Some question, however, the true
effect that multinational corporations have on the governments . "Ask an
Indonesian if he thinks Western investment helped topple Suharto or kept
him in power. Ill guarantee you, hell say the latter," said Adam Schwarz, an
expert on the Asian labor affair . The ex-Indonesian leader was greatly aided
by corporations , as two Suharto-controlled foundations owned part of PT
Astra International, a conglomerate with power over biggest shoe-factory
partner in Indonesia.
Phil Knight ardently denies role in strengthening the reign of oppressive
leaders, saying that his corporation and others like it benefit workers by
paying them higher salaries than they would otherwise make. Knight
believes that invested in factories, wages have increased and poverty
decreased. It is true that both have both successfully industrialized since
other athletic shoe corporations began their production facilities in the
respective countries. governments and granting workers unprecedented
rights; however, as these countries have grown more free, removed its
production, relocating to places such , where labor laws are not enforced,
and the governments are more repressive. Many feel that democratization is
a side effect of shoe factories and the added revenues to economically
deficient countries that they bring. But it is not something that strives
toward or even desires, as is shown by its departure from these countries to
ones with political oppression.
Conclusion:
Since the issue of labor exploitation in brought to the media spotlight has
assumed a policy of reformation for its abuses. However, these changes have
not come about as quickly as many would have hoped. seems to be dragging
its feet with regards to the issues at the heart of the problem: paying a
minimum wage allowing workers to afford basic human necessitates and
granting workers the right to form independent labor unions. It appears that
these issues are the ones which will have the greatest effect on ability to
maintain its cheap labor force, and therefore it is economically
41

understandable that the corporation is slow to remedy the problem. Many

human rights organizations, however, are not certain that will ever make
these changes. They feel that taking actions to reform its factory practices
because they were caught red-handed abusing poverty-stricken workers.
Many are of the opinion that once the public relations nightmare is over the
media exposure subsides, the shoe and clothing apparel company will revert
back to its exploitative ways. While CEO Phil Knight ardently deny these
accusations, one can only wait and see will make the additional necessary
changes to grant their factory workers the rights that many feel they
deserve.
Overview
Worker wages is a critical issue along the supply chain and we are working to
address it.
Nike requires our suppliers to pay workers at least the locally mandated
minimum wage and benefits, and any additional benefits outlined in
individual employee contracts or collective bargaining agreements. We
require contracted manufacturers to comply with a standard against which
we can audit consistently. Where factories are found not to have met these
standards, we require remediation action.
The issue of wages elicits debate on multiple fronts. There is debate on what
constitutes fair, competitive wages around the world, and there is debate on
how those wages are then paid in a way that does not negatively impact
growth and jobs. The last 18 months of the global recession, and the peak in
oil and commodity prices before that, both added new complexity and
dynamics to that discussion.
The global economic crisis has had a devastating impact on worker welfare
across the globe. In the apparel and footwear industry, millions of jobs have
been lost. For those fortunate enough to maintain employment, many have
seen their income decline. Industry-wide overtime work (and subsequently
overtime pay) has often not been available due to decreasing orders. In an
effort to control costs, some factories have eliminated optional benefits, such
as transportation allowances or attendance bonuses. These have so far been
short-term, recession-based industry trends; we are hopeful that many of
these benefits can be regained through the ongoing economic recovery.
Our Approach
We see four complementary work streams; three now and one into the future
(see below):
1. In the short term, has been working with other brands, NGOs, MSI's
and trade union representatives to advocate for the importance of the
42

apparel industry to the global development agenda. While the

Sustainable Apparel and Footwear Initiative of MFA Forum has not been
able to deliver programs that extend employment through supplier
assistance and social protection in the short term, the group's work has
catalyzed renewed focus on the sector and critical employment issues
2. In the mid term, we are exploring ways to partner with local
nongovernmental organizations to assess the community development
needs in targeted factory communities. We aim to determine whether ,
in collaboration with others, might play a role in helping to tackle
significant challenges that will further enable factory communities to
thrive. With research still needed to be finalized, it is our belief that
wages can go even further if significant obstacles, such as access to
health care and clean water, are removed for contract factory workers
and their communities
3. Overarching both work streams one and two is long-term aim, which is
that contract factory workers in our subcontract supply chain should be
rewarded with compensation that is equitable, competitive and locally
relevant. Yet we also acknowledge that the definition of what
constitutes an "equitable" wage varies greatly from country to country.
The issue of wages continues to be a source of discussion and debate
within the footwear and apparel industry and other industries, as well
as at the national and international levels. There is no single definition
of a living wage that is commonly accepted or auditable; making an
industry-wide approach challenging
Among the factors affecting the wage debate are the competing concerns of
various constituents. Shareholders want to see strong returns on their
investments. Consumers want products at competitive prices. Manufacturers
need to earn a profit to sustain their business and grow. Governments want
to attract and retain investment in order to fuel growth, jobs and revenue.
Most important, workers want to earn wages that meet their basic needs and
enable their families to take advantage of growing educational and economic
opportunities.
believes that local wage setting is best done by negotiations between
workers, labor representatives, the employer and the government. Because
the success of this process varies by country, increasingly sees the need for
further regional and global discussions among suppliers, governments, NGOs
and - importantly - workers, about the degree to which wages across the
industry are meeting workers' needs.
We believe there is ample room for innovation in this area, and that progress
must occur throughout the industry, and at the governmental level, not only
in supply chain. In the meantime, we are committed to deepening our
43

understanding of workers' challenges and exploring different mechanisms for

improving their welfare through new industry collaboration, public policy
advocacy and other efforts aimed at positively impacting workers' ability to
save and thrive.
On the Horizon
The fourth work stream goes beyond just meeting minimum requirements.
that a responsible, competitive industry which invests in its work force will
bring about locally relevant wages for workers over the long term. And we're
acting on that belief by partnering with contracted manufacturers in piloting
education programs which combine initiatives such as lean and HRM to
enable manufacturers to control costs and experience firsthand how
investing in workers improves product quality and the health of their
business. Even in areas where labor is in abundant supply, factories with
high levels of productivity, efficiency and stable orders tend to provide
attractive, equitable benefits to workers.
Invisible, exploited: Home-workers of Agras footwear industry

Agra turns out 250,000 pairs of shoes every day. Most of them are made by
invisible home-workers at the bottom of the global supply chain, who earn as
little as Rs 30 a pair

is a home-worker at one of the 4,500 home-based units in Agra, the

footwear capital of north India. For her, each new day marks a search for
work to keep food on the table, a roof over her family, and her children in
school. To her sub-contractor, she is known by a number. She is, quite simply,
44

one piece in the supply chain of a footwear brand -- one of the million
invisible workers in this industry.
wakes up at 6 every morning and gets to work assembling the upper parts of
shoes, stitching them together. But her work and therefore her income are
irregular. When it comes, her small thatched house turns into a warehouse
for the domestic footwear brand (she cannot pronounce the name properly).
When she delivers, she gets paid. Since she is not recognized as part of the
companys workforce, she is not entitled to sick pay, maternity benefits,
medical insurance, or pension.
Like works for one of the 200-odd sole-making units clustered around the
inner city. They supply material either to other units or to traders dealing in
shoes in the main wholesale market of Hing ki Mandi. Although the homeworkers usually get work throughout the year, the months between August
and March are peak periods, when production and thus business is good.
According to ILO Convention 177, home-workers are sub-contracted or
dependent workers working for an employer, intermediary or sub-contractor
for a piece rate. This means they are not entitled to a minimum wage. Often,
they are paid one-third or one-fourth of what a typical factory worker earns
on a per piece basis, apart from what they have to pay for supplies and
transport.
Low pay is only one of the problems home-workers face. Most home-workers
are usually involved in the most insecure areas of employment; they enjoy
no visibility in the supply chain; there are no occupational safety checks
despite complaints about health hazards arising out of poor working
conditions, use of toxic chemicals, especially glue, infected fingers and stress
from long working hours. And this is just the tip of the iceberg.
Agra is one of Indias most diverse and tightly knit footwear manufacturing
regions, still bearing the characteristics of an artisan-rooted low-tech cluster.
The locally available skilled artisan labor belongs mainly to the Muslim and
Sativa communities -- traditional shoe-makers from the Munhall era -residing in the inner city areas. Some artisans are home-workers, others are
wage workers who opt to work on a per piece basis during the slack season.
Home-workers are usually involved in five major shoe production activities -cutting, upper stitching, upper closing, pasting and finishing. Activities like
upper stitching are better priced, at around Rs 10-15 per piece, while cutting
will get a worker something like Rs 4-6 on a per piece basis. Assembly of an
entire shoe could fetch something in the region of Rs 30-40. In the traditional
home-working system, per worker productivity of a complete shoe varies
between three and five days.
45

India is the second largest global producer of footwear, accounting for over
13% of footwear production, and coming up with over 2,065 million pairs of
footwear every year. The countrys $35 billion footwear industry provides
over 20 laky jobs, of which 70% are in the unorganized sector. In Agra alone,
the daily footwear output ranges between 250,000 and 300,000 pairs of
footwear for both the export and domestic markets. Its share in the domestic
market is over half, and in the export market one-fifth. It hosts around 60
exporting units, 200 large domestic units, more than 200 small domestic
units and over 4,500 home-based units.
Then there are a number of footwear accessories manufacturers, all
accounting for a huge workforce and an even larger number of home-workers
sub-contracted for the task. For every factory laborer, there are over 10
home-workers working on a per piece rate.
Having an army of home-workers is a win-win situation for the industry.
Indeed, many major footwear companies are linked to home-working. Brands
like Nike and GAP have all been guilty of violating the requirements for
reasonable working conditions at their production facilities. They have been
criticized for being complicit in breaching the ethical lines set out by their
company. An internal report by Nike, for instance, found that nearly twothirds of the 168 factories making Converse (one of the companys brands)
products failed to meet the companys own ethical manufacturing standards.
The trend as regards domestic brands is worse; domestic companies operate
on a smaller scale and most do not have an ethical code of conduct.
Home-working brings about a complex relationship between employee and
employer. Although retailers do not directly employ home-workers, supply
chain decisions do directly impact them. And although suppliers do not
directly source materials from home-workers, they work on their products
and are deemed to be working on contract. They are therefore invisible to
the actors at the top. Likewise, home-workers are unaware of the range of
actors in this long sub-contracted chain and their responsibilities or ethical
obligations.
Because of their invisibility, traditional trade unions have never been able
to address home-workers issues, although small steps are being taken. In
Tamil Nadu, for instance, a home-workers federation has set up a savings
and life insurance scheme, offering members greater security and access to
loans. Companies themselves are moving to improve the precarious working
conditions of home-workers in their employ. Efforts are on by the Ethical
Trading Initiative to develop a multi stakeholder platform directed at
improving the condition of home-workers by offering them training in health
and safety issues, ensuring that they receive fair payment, and that
companies introduce artisan cards for them to increase their visibility in the
supply chain.
46

Apart from this, various international declarations like the ILO Convention
and the Kathmandu Convention have recognized and appreciated the rights
of home-workers. Business sustainability reporting frameworks like the
Global Reporting Initiative, Business Sustainability Initiatives, UN guiding
principles on business and human rights focus on the value of human rights
in the business supply chain; CSR forums recognize that businesses have a
social responsibility and that the sphere of influence for any business begins
by taking an ethical stand towards the workforce.
Dialogue between businesses, NGOs, trade unions and human rights
organizations would help create the required impetus on this issue.
Improving the work conditions of home-workers will bring greater
transparency and sustainability to global supply chains and also help
organize the informal economy. One of the principles defined in the National
Voluntary Guidelines (NVGs) developed by SEBI for 100 top listed companies
in the NSE (this could be applied to the top 500 companies) recognises
human rights and ethical sourcing as integral parts of business sustainability.
In April, the Business Social Compliance Initiative (BSCI) and Stop Child Labor
organized two stakeholder meetings, in Agra and Chennai, to discuss the
issue of home-working and child labor in the footwear industry. Each
stakeholder meeting drew a diverse audience of local footwear suppliers,
business associations, government officials, international brands and
retailers, international and local NGOs, trade unions, and social compliance
experts to analyze and chart out a sustainable path that could be taken to
eradicate child labor in the industry. The consultations yielded the idea of
initiating bottom-up research to better understand the socio-economic
realities of home-workers and to develop tools and guidelines to bring in
greater transparency and accountability in the supply chain. An encouraging
trend is that buyers are themselves voicing interest in such tools and are
slowly graduating to the concept of ethical supply chains. The bottom-up
research should help businesses devise specific initiatives to improve the
condition of home-workers
Types Of
Workers
Victorian workers compensation legislation establishes where an individual
considered a worker in certain types of occupations or industries.
These industries or occupations include:
From owner drivers operating as sole traders or partnerships (and often
referred to as "natural persons") are deemed workers of their hirer (the
courier or transport company they work for) unless the Work Safe determines
they are carrying on an independent business or trade.

47

Incorporated owner drivers are not deemed workers of their hirer and are
responsible for their own Work Safe insurance.
The Work Safes Owner Driver Guideline sets out when it considers an
unincorporated owner driver to be running their own independent business.
The Guideline also establishes the percentage deductions that apply based
on the various type and size of vehicles.

Owner Driver Guideline

What is outwork for Work Safe insurance purposes?

Outwork means contract work which involves packing, processing or work on
articles or material in the clothing industry. This work must be performed
outside the hirer's factory or workshop and in or about a private residence or
other premises that are not necessarily business or commercial premises.
Which outworkers are workers for Work Safe insurance purposes?
If an outworker enters into a contract with a hirer (other than the outworker's
family business) then so long as the outworker performs some of the outwork
personally, the outworker is a worker of the hirer for Work Safe insurance
purposes.
If a family business enters into a contract with a hirer to perform outwork
then each person engaged by the family business to perform the outwork
under that contract is a worker of the hirer for Work Safe insurance purposes.
A Municipal Councilor, while carrying out their duties as a Councilor, is
recognized as a worker by Victorian workers compensation legislation; and
the Council of which the Councilor is a member is, while they are carrying out
duties as a Councilor, their employer.
If a person is engaged to participate as a rider in a horse race conducted as
part of a race meeting held under Racing Victoria's "Rules of Racing"; or if a
person other than an apprentice or the owner or trainer of the horse to be
ridden, holds a license, permit or approval to ride granted in accordance with
the "Rules of Racing" and they agrees to do "ride work" on a horse at any
racecourse or training track or in the environs of a racecourse or training
track, then for Work Safe insurance purposes, that person shall be treated as
a worker solely employed by Racing Victoria while participating as a rider or
doing riding work. Any amounts paid to the person in respect of so
participating or doing shall be remuneration.
If a person is engaged to participate as a rider in a horse or pony race; or a
driver in a harness race - conducted as part of a mixed sports gathering
48

within the meaning of the Racing Act 1958 and held in accordance with
section 19 of the Racing Act 1958, for Work Safe insurance purposes, while
that person is participating, they shall be treated as a worker of the club,
association or body of persons holding the mixed sports gathering; and
amounts paid or payable to the person are remuneration.
Which taxi drivers are workers for Work Safe insurance purposes?
When a person has the use of a motor vehicle (the driver) under a contract
of bailment with another person (the operator) and they (the driver) use the
vehicle to carry passengers for reward and they (the driver) are required
under the contract to make payments to the operator for the use of the
motor vehicle, then the operator is deemed to be the employer of the driver
for Work Safe insurance purposes.
What must the operator declare as ratable remuneration for Work
Safe Insurance purposes?
If the operator is deemed to be the employer of the driver, then the amount
received by the driver for carrying passengers, less the amount paid or
payable to the operator for the use of the motor vehicle must be declared as
ratable remuneration by the operator for Work Safe insurance purposes.
Who is a door to door seller?
For Work Safe insurance purposes, a door to door seller is an individual or
other legal entity (the seller) who is engaged by a hirer/vendor under a
contract or arrangement (selling arrangement) and all of the following
conditions apply under that selling arrangement:
1. The seller is engaged:
o To sell goods door to door, or
o To party plan on-sell goods, or
o Sell services ancillary to the sale or on-sale of goods referred to
in either point above.
2. The seller is engaged in the sale or on-sale of goods including all
moveable personal property other than money or livestock and
including any removable fixtures of real estate; but not including
services provided to any personal property or fixtures of real estate, for
example, cladding and painting
3. The seller does not sell or on-sell goods to a body corporate
49

4. The seller is not an employee, but has an agency arrangement for the
door-to-door sale or on-sale of goods directly to the public
5. The sale or on-sale of goods by the seller takes place either at a
customer's residence, or at the customer's place of work, or elsewhere
than at the vendor's trade premises or a place where goods of that sort
are normally offered for sale
6. Where the sale by the seller is made away from the vendor's trade
premises, this cannot have been made as a consequence of the
request of the customer or the agent of the customer
7. The original approach (i.e. the initial physical attendance, not a
telephone contact) leading to the sale must not be made at the
vendor's premises
8. The sales made by the seller are either cash sales or credit sales but
not sales on a monthly credit arrangement;
9. Goods purchased from the seller must be used by the purchaser solely
for domestic purposes and must not include goods purchased to be
further processed in the course of manufacture or goods purchased for
commercial or industrial purposes
10.
The seller must personally organize the direct sale of the goods
to the end users of the goods
Is a door to door seller a worker for Work Safe insurance purposes?
A door to door seller, while performing work under a selling arrangement, is
not a worker of the hirer/vendor for Work Safe insurance purposes unless
Work Safe determines that that arrangement has been entered into with an
intention of directly or indirectly avoiding or evading the payment of Work
Safe premium by any person.
If a person is engaged by an employer to participate as a contestant in a
sporting or athletic activity (not in relation to section 19 of the Racing Act),
then the person will not be treated as a worker for Work Safe insurance
purposes while they are participating as a contestant in a sporting or athletic
activity; or engaged in training or preparation for the contest; or travelling
between a place of residence and the place at which the person is so
participating or so engaged.
Who is a timber contractor?

50

A timber contractor is an individual who is engaged by a hirer and agrees to

undertake all or any of the following activities under a timber contract:

Fell trees and deliver the timber to the hirer;

Cut firewood and deliver the firewood to the hirer;

Fell trees or cut shrub on land of which the hirer is the occupier;

Clear stumps or logs from land of which the hirer is the occupier;

Remove stumps or logs, whether by loading them onto a vehicle or

otherwise.

When is a timber contractor a worker?

A timber contractor is a worker of a hirer where they:

are engaged in the course of or for the purposes of a trade or business

undertaken by the hirer;

are a natural person or a partner in a partnership; and

agree to undertake work for the hirer under a timber contract.

When is a timber contractor not a worker?

A timber contractor is not a worker where the timber contractor:

subcontracts the timber contract in its entirety;

does not personally perform any work under the timber contract and
employs or engages persons to perform all of the work under the
timber contract; or

is a partner in a partnership of two or more individuals and no part of

the work under the timber contract is performed personally by any
member of the partnership.
What remuneration is ratable for timber contractors?
Where a timber contractor is taken to be a worker, the amount paid or
payable by the hirer to the timber contractor for the performance of work,

51

less the applicable standard deduction, is considered to be remuneration for

Work Safe Insurance premium purposes.
What is the standard deduction applicable to timber contractors?
If a timber contractor working as a tree feller provides his or her own
materials or equipment, and does not purchase such materials or equipment
from the hirer, a standard deduction of 25% is applicable where the total
amount paid by the hirer includes amounts in respect of those materials or
that equipment.
Who is a secretary of co-operative housing society or a cooperative?
This means a secretary of a co-operative housing society within the meaning
of the Co-operative Housing Societies Act 1958 or a co-operative within the
meaning of the Co-operatives Act 1996.
Which secretaries are workers for Work Safe insurance purposes?
If as a secretary the secretary is entitled to be paid more than $400 per
annum then the secretary is a worker of the co-operative housing society or
the co-operative for Work Safe insurance purposes. For Work Safe premium
purposes the amount (other than in respect of expenses) paid or payable to
the secretary is remuneration.
If a person is ordinarily engaged in any employment that involves persons
customarily attending certain pre-arranged places (places of pick-up) where
employers select and engage persons for employment then any such person
shall be deemed, while in attendance a place of pick-up for the purpose of
being selected, to be working under a contract of employment with an
employer, and the employer who last employed that person in customary
employment is deemed to be their employer.
Secondary school students
If a student at a school is placed with an employer for work experience; and
the principal of the school has made a work experience arrangement with
the employer in accordance with the Education and Training Reform Act
2006, then while undertaking the work experience the Department of
Education and Early Childhood Development is deemed to be the employer
of that student for Work Safe purposes and the amount paid or payable to
the student for the work experience is deemed to be remuneration for Work
Safe insurance purposes
Post-secondary TAFE students
52

If a post-secondary student of a TAFE provider is placed with an employer for

work experience or on the job training; and the governing body of the TAFE
provider has entered into a "practical placement agreement" with the
employer about the placement of that student in accordance with the
Education and Training Reform Act 2006, then while employed under the
agreement the Department of Education and Early Childhood Development is
deemed to be the employer of that student for Work Safe insurance
purposes; and the amount paid or payable to the student for work under the
agreement is deemed to be remuneration for Work Safe insurance purposes.
Undergraduate and Post-graduate students
University students or students studying university-level qualifications that
are undertaking work placements, work experience, clinical research,
research based in a workplace as part of their qualification or course of study
may not be recognized as workers by the Workplace Injury Rehabilitation and
Compensation Act. For advice on a case-by-case basis please contact the
Premium Policy Team
If a person is a participant in the Commonwealth Green Corps program or the
Commonwealth Special Employer Support program, then while participating
in the program the provider of that program is deemed to be the employer of
the participant for Work Safe purposes; and the training allowance payable
to the participant in that program is deemed to be remuneration for Work
Safe insurance purposes.
The following persons are deemed to be workers of the Crown for Work Safe
insurance purposes:

A responsible Minister of the Crown

A member of the Legislative Council or the Legislative Assembly

A person holding any judicial or other office to which the person is

appointed by the Governor in Council

A bail justice

Any person being the holder of any office as member of any public
corporation, institution or body or of the governing body thereof

A member of police personnel within the meaning of the Police

Regulation Act 1958 in respect of the exercise and performance of the
powers and duties as such a member, whether arising at common law
or under any statute by the instructions of superiors or otherwise.
53

When there is a arrangement between the owner of the land and an

individual (the share farmer) whereby the share farmer is entitled to receive
a share of the income derived from the land (either in cash or in kind) in
exchange for their work on that land the share farmer may be the worker of
the land owner.
For the share farmer to be the worker of the land owner they must be
entitled to receive less than one third of the income derived from the land or
the written share farming agreement must state that the land owner is liable
for the share farmer in the event that they are injured out of or in the course
of the sharefarming work (i.e. under Victorian workers compensation
legislation). More information on share farmers can be found in the share
farmer Work Safe Guideline.
If by Order in Council published in the Government Gazette (at the request of
a religious body or organization specified in the Order as having made the
request), the Governor in Council declares that persons within a class
specified in the Order, who are not otherwise workers for Work Safe
insurance purposes are workers of that body or organization, then for Work
Safe insurance purposes, the specified persons within the class will be
treated as workers employed by the religious body or organization; and such
amounts as are determined by agreement between Work Safe and the
religious body or organization are remuneration.
Whether Ministers of Religion can be Workers
Labor Hire
If your business provides labor or on-hire services, the insurance premium
you pay will be largely based on each of your registered clients or on-hire
workplaces.
The premium will be calculated using your employer performance rating and
the industry rate for each of these workplaces. This provides a greater
incentive for labor hire employers to improve workplace health and safety for
their workers.
Your obligations are further explained in:
Labor hire - Frequently asked questions
Summary of what you need to do
1. Supply the following details to your Work Safe Agent in advance of
each new workers' compensation policy commencing:
54

o The legal name and business name of each on-hire client

o The address of each on-hire client
o Your head office address
2. Upon receipt of these details, your Work Safe Agent will advise you of
the appropriate industry classification to help you calculate your
remuneration
3. When you know the classification, you must advise your Work Safe
Agent of the client's workplaces and the relevant remuneration
4. Your Work Safe Agent will register these on-hire workplaces to your
Work Safe insurance
5. Once your Work Safe Agent has recorded all the relevant information,
they can provide an estimate of total premium payable for the coming
period
Worker And Contractor Assessment Tool
Purpose of tool
The purpose of this tool is to assist a user to assess whether a person is a
worker or taken to be a worker of an employer / hirer under sections 3 and
schedule 1 clause 9 of the Act.
Limitations of tool
This tool does not provide assessments in relation to whether a person is or
was taken to be a worker before for any periods that end on or before 30
June 2011.
For assistance in relation to assessments prior to these dates please contact
your WorkSafe Agent.
This tool does not provide an assessment in relation to the following
contractual arrangements:
a contract for the carrying of goods between a hirer and an owner
driver (see schedule 1 clause 8 of the Act);

55

 a contract for the performance of work by a secretary of a co-operative

housing society within the meaning of the Co-operative Housing
Societies Act 1958 (see schedule 1 clause 4 of the Act);
a contract for the performance of door to door selling work by an
individual (see schedule 1 clause 5 of the Act);
a contract for the performance of work by an individual that is a timber
contractor (see schedule 1 clause 6 of the Act);
a contract of bailment between a taxi driver and another person (see
schedule 1 clause 7 of the Act);
a contract between a land owner and a share farmer (see schedule 1
clause 12 of the Act);
a contract between a hirer and an outworker (see schedule 1 clause 19
of the Act);
persons employed by the Crown or administrative units (see schedule
1 clause 14 of the Act);
Municipal Councillors (see schedule 1 clause 15 of the Act);
sporting contestants (see schedule 1 clause 17 of the Act);
riders and drivers in certain races (see schedule 1 clause 18 of the
Act).
Workers making Converse sneakers in Indonesia say supervisors throw shoes
at them, slap them in the face and call them dogs and pigs. the brand's
owner, admits that such abuse has occurred among the contractors that
make its hip high-tops but says there was little it could do to stop it.
Dozens of workers interviewed by The Associated Press and a document
released by show that the footwear and athletic apparel giant has far to go
to meet the standards it set for itself a decade ago to end its reliance on
sweatshop labor.
That does not appear to explain abuses that workers allege at the Pou Chen
Group factory in Sukabumi, some 100 kilometers (60 miles) from Jakarta - it
didn't start making Converse products until four years after bought

56

Converse. One worker there said she was kicked by a supervisor last year
after making a mistake while cutting rubber for soles.
"We're powerless," said the woman, who like several others interviewed
spoke on condition of anonymity out of fear of reprisals. "Our only choice is
to stay and suffer, or speak out and be fired."
The 10,000 mostly female workers at the Taiwanese-operated Pou Chen plant
make around 50 cents an hour. That's enough, for food and bunkhouse-type
lodging, but little else. Some workers interviewed by the AP in March and
April described being hit or scratched in the arm - one man until he bled.
Others said they were fired after filing complaints.
"They throw shoes and other things at us" said a 23-year-old woman in the
embroidery division. "They growl and slap us when they get angry.
"It's part of our daily bread."
Mira Agustina, 30, said she was fired in 2009 for taking sick leave, even
though she produced a doctor's note.
"It was a horrible job," she said. "Our bosses pointed their feet at us, calling
us names like dog, pig or monkey." All are major insults to Muslims. Indonesia
is the world's most populous Muslim nation.
At the PT Amara Footwear factory located just outside Jakarta, where another
Taiwanese contractor makes Converse shoes, a supervisor ordered six female
workers to stand in the blazing sun after they failed to meet their target of
completing 60 dozen pairs of shoes on time.
"They were crying and allowed to continue their job only after two hours
under the sun," said Ujang Suhendi, 47, a worker at a warehouse in the
factory. The women's supervisor received a warning letter for the May
incident after complaints from unionized workers.
The company's own inquiries also found workers at the two factories were
subjected to "serious and egregious" physical and verbal abuse, including
the punishment of forcing workers to stand in the sun, said Hannah Jones, a
executive who oversees the company's efforts to improve working
conditions.

57

"We do see other issues of that similar nature coming up across the supply
chain but not on a frequent level," she said. "We see issues of working
conditions on a less egregious nature across the board."
which came under heavy criticism a decade ago for its use of foreign
sweatshops and child labor, has taken steps since then to improve conditions
at its 1,000 overseas factories. But the progress it has made at factories
producing gear with its premier "swoosh" logo is not fully reflected in those
making Converse products.
An internal report released to the AP after it inquired about the abuse show
that nearly two-thirds of 168 factories making Converse products worldwide
fail to meet own standards for contract manufacturers.
Twelve are in the most serious category, indicating problems that could
range from illegally long work hours to denying access to inspectors. A
spokeswoman said the company was not aware of physical abuse occurring
at those factories. Another 97 are in a category defined as making no
progress in improving problems ranging from isolated verbal harassment to
paying less than minimum wage. A further six factories had not been audited
.
blames problems on pre-existing licenses to produce Converse goods that it
says prevent the parent company from inspecting factories or introducing its
own code of conduct.
It says the situation is further complicated because the license holders
themselves usually farm out the production work to a subcontractor. Most of
the agreements have come up for renewal in the past five years. But it is
only the past two years that it has made a concerted effort to incorporate
Converse factories into the monitoring program that applies to factories.
"We have been working every time we can to renew those agreements or
change those agreements or to cease those agreements and to ensure that
when we do new agreements we get more ability to influence the licensee
and their subcontractors much more directly," Jones said.
Some corporate experts question whether the company is doing all it can.
"I simply find it impossible that a company of the size and market power of
impotent in persuading a local factory in Indonesia or anywhere else in
58

meeting its code of conduct, a corporate strategy professor at Baruch

College at the City University of New York.
Critics of outsourcing manufacturing to the lowest-cost countries say it keeps
prices down but allows apparel, electronics and toy companies to reduce
their accountability for the conditions in such factories. Even as concern
about sweatshop labor has grown, some contractors have simply moved
operations to more remote areas, farther from the prying eyes of
international and local watchdogs.
Indonesia is third-largest manufacturing base, after China and Vietnam, with
140,000 workers at 14 contract factories. Of those, 17,000 produce its
Converse line at four factories.
Pou Chen, the largest of the four Converse factories, is located in a hilly city
where the minimum wage is well below the national average. Sukabumi can
only be reached by car - a five-hour journey across bumpy, winding roads.
The plant started making Converse products in 2007.
The Taiwanese contractor said it fired one supervisor after being told workers
had spoken to The AP earlier this year.
Others involved in mistreatment, however, have been allowed to keep their
jobs, according to Pou Chen.
Nike says the factory is developing programs to teach managers cultural
sensitivity and leadership skills.
It says it also is closely monitoring the PT Amara factory.
After years of criticism over its labor practices at factories abroad, the first
major apparel company to disclose the names and locations of hundreds of
plants that produce its sneakers, clothes and other products.
It admitted finding "abusive treatment" - either physical or verbal - in many
of plants. The complaints ranged from workweeks that exceeded 60 hours to
being forbidden to go to the bathroom.
The Beaverton, Oregon-based company has since invested heavily in training
managers and more closely monitoring their activities.

59

sweatshops
For many years, has been accused of using sweatshops to produce footwear
and apparel. has denied the claims many times, suggesting the company
has no control over sub-contracted factories.
Contents

1 Allegations
o 1.1 Factory investigations

2 Advocacy efforts

3 Counter-criticism

4 Nike response

5 Consumer reaction

6 Other controversies

7 See also

8 References

9 External links

Allegations
accused of using sweatshops since when it produced goods in South Korea,
People's Republic of China and Taiwan. As their economies developed,
workers became more productive, wages rose, and many workers moved on
to higher paying jobs. Labor unions also gained more influence. found
cheaper People's Republic of China, and Vietnam, which prohibited labor
unions. When workers demanded additional rights and benefits in these
countries, the factories closed and moved to a different location that would
enable them to continue operating at a low cost. Throughout was heavily
criticized for selling goods produced in sweatshops. They originally denied
claims against them. However i, director Todd McKean stated in an interview
that the "initial attitude was, 'Hey, we don't own the factories. We don't
control what goes on there.' Quite frankly, that was a sort of irresponsible
way to approach this. We had people there every day looking at quality.
60

Clearly, we had leverage and responsibility with certain parts of the business,
so why not others?" In 2005, protesters at over 40 universities demanded
that their institutions endorse companies who use "sweat-free" labor, unlike .
Many anti-sweatshop groups are student-led, such as the United Students
Against Sweatshops. At Brown University, went so far as to pull out from a
contract with the womens ice-hockey team because of efforts by a student
activist group that wanted a code of conduct put in place by the company.
This vode stated that should have a system to monitor working conditions in
the factories where collegiate athletic gear is made. Team Sweat is one of
the largest groups that specifically tracks and protests against . Team Sweat
is an international coalition of consumers, investors, and workers committed
to ending the injustices in sweatshops around the world" founded in 2000 by
Jim Beady. researched labor practices while attending graduate school at St.
John's University in New York. Keady doubled as a soccer coach at St. Johns
University, and while he was conducting his research about , the school
signed a $3.5 million deal with , forcing all athletes and coaches to endorse .
Keady publicly refused to support and was forced to resign his position as
soccer coach in 1998. Since resigning, Keady has done original research into
the conditions in Sweatshops. He travelled to Indonesia and for a month
lived among the factory workers, surviving on $1.25 per day like they do. [1]
The Worker Rights Consortium (WRC) is made up of students, labor union
members, and other workers rights groups. The Consortium holds
conferences to introduce issues relating to employees around the world and
discuss possible solutions.
Factory investigations
Advocacy groups commonly engage in looking at the conditions of the
factories in which products are made as a way to understand the problems
more fully. Throughout the 1990s, experienced rapid growth after they
moved their primary branches of production overseas.[2] Record breaking
profits were reported and the number of factories increased to fulfill the
consumers demand for products. The employees were commonly the poor
inhabitants of the area surrounding the factory looking for any sort of
income. The heads of the factories were contractors who often lived in
America or Europe and did not have any sort of relations with their
employees. The duty of supervision was given to an upper-level factory
worker. The authority of the supervisor included enforcing rules the workers
must follow and making sure that they were performing to optimal
standards.[3] The findings of factory investigations show that the supervisor
often oversteps their duties. The laws protecting the workers are ignored in
favor of cutting costs and lowering health standards. This is possible because
political leaders are paid off by factory supervisors in order to limit
governmental interference. The leaders relayed messages to military and
police units to overlook the conditions in factories so that the illegal
environment could remain open and functioning. They also were warned to
61

watch for signs of labor activism near the factories to prevent workers from
aligning with one another for better conditions.[4]
Women represent the larger proportion of factory employees. Approximately
75 to 80% of all workers are women and a majority of those are in their teens
or early twenties.[5] Jobs are scarce and factory positions are often the only
source of work for these young women. The factory job requires women to
work long hours, ranging from nine to thirteen hours per day, six days a
week. They are severely limited in the amount of time they can take off and
are forced to work overtime on several occasions during the week. The
hourly wage varies from as low as thirteen cents to twenty cents per hour,
adding to a total of about two dollars per day. This amount is less than the
minimum physical needs value, which is the lowest possible wage a person
can earn and still be able to maintain their basic needs.[5] Although there are
more women employed at the factories, they represent the minority in the
higher paid supervisor positions. Men are overwhelmingly given the
supervising position and they are often older than thirty years old. Cases of
employee abuse by supervisors have been found in several factories. The
use of corporal punishment to keep workers in line has been cited several
times. In one instance, a worker had his mouth taped shut after moving to an
incorrect position. Other misdeeds include forcing workers to run in circles
outside in the sun.[6]
Advocacy efforts
The goals of transnational advocacy groups working on behalf of factory
workers are to allow workers to obtain higher wages, improve the working
conditions of the factories, enable them to organization, and gain the respect
of their employers.[7] Global efforts have increased the information being
spread about sweatshop conditions. Countries such as the Netherlands,
Germany, France, and Belgium, where no factories exist, have branches of
organizations that work to better factory conditions. In countries like
Indonesia, Thailand, Mexico, and Cambodia, where factories are common,
non-governmental organizations push efforts by informing the public
through the media of the work environment within the plants.[7] Several wellknown advocacy groups are the Global Exchange (United States), Christian
Aid (United Kingdom), The Ethical Shopper (New Zealand), and the Clean
Clothes Campaign (Europe).[2]
There are several types of advocacy groups, ranging from human rights
organizations, to religious groups, to labor associations.[7] Each has different
motives for supporting the factory workers but they work together in order to
improve the conditions for factory workers. Advocacy groups function
through donations, fundraising, and in some cases governmental funding. [7] A
majority of them create informational hand-outs that they distribute to
citizens through the mail or at events. There has been a rapid increase in the
62

use of the Internet as a means of distributing information between advocacy

groups. The spread of news across national boundaries allows the groups to
mobilize and unify campaigns.[8]
One of the most popular forms of protest is the Mobilization Day, in which
protesters around the world take an active role in improving conditions for
factory workers. At stores, such as those in San Francisco and New York City,
protestors stood outside and handed pamphlets to customers describing the
conditions of the factories where products are made. Although these
protests do not normally include violence, in San Francisco during the early
1990s, the protestors stormed the store, destroying thousands of dollars of
merchandise and damaging a Swoosh symbol hanging outside. The
protestors were taken under arrest and had to pay for the damage caused
but they were not charged with criminal activity.[9]
The main focus of political efforts within the countries that house the
factories is an increase in the minimum wage for workers.[7] In Indonesia,
other legislative efforts included limits on the amount of hours a person can
work per day, mandated rest periods, minimum age requirements, and a
maternity leave for women.[9] These reforms are not always enforced but the
introduction of them indicates a movement towards additional workers
benefits. Restrictions on labor activism and labor unions limits the amount of
unification workers can develop within the factories. These laws prevent
workers from being able to hold protests or strikes. When laws in Indonesia
were lifted in the late 1980s, factory workers and non-governmental
organizations staged many strikes at factories protesting the poor working
conditions.[7] The organizations also worked with international allies such as
the United States to bring about awareness in foreign, and often wealthier,
countries. These allies provided aide for the workers who were not paid while
on strike.[7] The non-governmental organizations within the country have less
of an impact on their governments view of the protest, but the groups
outside of the country have a stronger political pull because of their wealth.
Counter-criticism
William Step, of the Misses Institute, argued that minimum wage is arbitrary
and causes unemployment. Step continues further, stating that the workers
were not exploited and clearly received benefits from working at the
factories "by showing up for work every day, and by accepting a paycheck
based on mutually-agreed-upon terms." In addition to pay, these benefits
include free annual physicals, uniforms and clothing, a clinic and health
service, a canteen stocked with food, recreation and entertainment, and
transportation. However, Step did criticize for its association with the World
Bank, which he says is the real exploiter of third world countries.[10]

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A study by the Global Alliance for Workers and Communities found that 70%
of factory workers in Thailand rated their supervisors as good and 72%
thought their income was fair. In Vietnam, most workers "thought the factory
was a 'good place to work' and planned to continue at least three years" and
85 percent felt safe there. Further, they felt that the factory offered a more
stable career and higher income than formwork.[10]
The addition of factories to poor Asian countries has allowed them to
increase their revenue by providing jobs to previously unemployed groups of
citizens. People flock to areas where they know a factory is going to be built
in order to earn a wage, even if it is small. Human migration to factories is
common among workers in order to be close to the factory. Migrant workers
frequently send their wages back to their families in their home country,
which further spreads the money brought about by the factories.[8] These
employees are willing to do work that citizens of first world countries are not,
especially for low wages. Since most of the economies of the small, poor
countries were centered around their market system, the introduction of
large factories owned by a wealthy corporation greatly increased their flow of
money.[6]

response
began to monitor working conditions in factories that produce their
products.[11] During the installed a code of conduct for their factories. This
code is called SHAPE: Safety, Health, Attitude, People, and Environment.[7]
They spend about 10 million dollars a year to follow the code, adhering to
regulations for fire safety, air quality, minimum wage, and overtime limits. In
1998, introduced a program to replace its petroleum-based solvents with
less dangerous water-based solvents.[12] A year later, an independent
expert[who?] stated that Nike had, "substituted less harmful chemicals in its
production, installed local exhaust ventilation systems, and trained key
personnel on occupational health and safety issues."[13] The study was
conducted in a factory in Vietnam.
Recently, has developed a program to deal with claims of unfair practices.
claims to have hired a staff of 97 people to randomly inspect several
hundred of their factories each year also gave the Fair Labor Association, a
working conditions watchdog, the privilege to randomly inspect any factory
that produces products.
created a non-governmental organization called the Global Alliance for
Workers and Communities that became aligned with several other groups
including the International Youth Foundation. The organization releases
reports about the corporation and its plans to improve current conditions.
The Global Alliance received backlash in 2001 when a report about the did
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not include recent events such as strikes, worker terminations, and the lack
of collective bargaining in their Indonesian factories.[9]
Between audited its factories approximately 600 times, giving each factory a
score on a scale of 1 to 100, which is then associated with a letter grade.
Most factories received a B, indicating some problems, or C, indicating
serious issues aren't being corrected fast enough. When a factory receives a
grade of D, threatens to stop producing in that factory unless the conditions
are rapidly improved. Had plans to expand their monitoring process to
include environmental and health issues beginning in 2004.[11]
Monitoring has become the most popular method of enforcing regulations in
factories. After studying the results of the audits, this system has been found
to be not as effective as authorities expected. When studying the monitoring
process, it is important to look at how the monitoring is done, who takes part
in it, and the purpose of the check.[14] The person conducting the visit must
go in without a bias towards wanting or not wanting to find any flaws in the
factory. Inspectors associated with the company have been found to hide
errors and those with non-governmental associations or other interest groups
have exaggerated findings. In order to have a fair monitoring process the
inspector must be unbiased in either direction. Factories can also vary in
their level of performance. The monitoring process must be carried out at
each individual unit in order to gain an understanding of the factory system
as a whole. Greater involvement of higher-level employees such as those
working for the corporate system is seen as a possible solution to labor
issues.[14] At the design level, the intricacy of patterns on products has been
controlled in order to prevent factory workers from being unable to complete
the merchandise.[14] By diffusing benefits to the factory workers from a
powerful position, able to create a better working environment in production.
Consumer reaction
Common form of protest to the insufficient factory conditions by consumers
include protests, hunger strikes, and boycotts. Several universities, unified
by the Worker Rights Consortium, organized a national hunger strike in
protest of their school using products for athletics. Feminist groups also
mobilized boycotts products after learning of the unfair conditions for the
primarily female workers. In the early when began a push to increase
advertising for female athletic gear, these groups created a campaign called
Just Dont Do It with the goal being to inform women of the poor conditions
of the factories where women created products.[7]
The spread of information in regards to the factory conditions has been
spreading more rapidly since social media has become a method of
international communication. Websites such as Facebook and Twitter have
allowed people from distant countries to share their ideas and collaborate
65

with each other. Advocacy groups commonly have groups on social media
sites that allow their members to post about upcoming events and to keep
members informed about the activities of the group.[8] In a Vietnamese
factory, a worker accused his employer of striking him. After contacting a
factory advocate, the worker was interviewed by a news station and the
video eventually reached an affiliate in Vietnam where it was viewed by
millions of watchers throughout the world before officials in the United States
had formally heard of the incident.[9]
Other controversies
chairman Phil Knight planned to donate $30 million to his alma mater, the
University of Oregon. When the University of Oregon joined the Worker
Rights Consortium (WRC), Knight revoked his donation because the WRC has
a history of being unfriendly towards shoe companies. The Fair Labor
Association is supported and the United States government, while the
Workers Rights Consortium is not.[15] There has been debate between the
university and Knight about the legitimacy of the FLA and which labor
monitoring organization is more effective.
Another dispute arose personalization system, . MIT graduate Jonah Pretty
attempted to order a pair of shoes . He chose to have the word sweatshop
embroidered on them. sent Pretty an email explaining that his
personalization request could not be granted for one of four things: it
contained another party's trademark or other intellectual property, the name
of an athlete or team does not have legal right to use, profanity or
inappropriate slang, or was left blank. Pretty replied, expressing that his
personalization did not contain content violating the aforementioned criteria.
responded by allowing Peretti to alter his personalization and Pretty chose
not to change it and cancelled the order.Ironically, the publicity led to selling
more of the personalized shoes

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