Nike Report on Being Ethically Correct

[Executive summary] Nike Inc was involved in several controversies during the mid 1990’s which were revived in early 2000’s. The allegations have had the potential to adversely affect the brand image of the company. The company was criticized for operating factories in poor working conditions in low cost countries such as China, Vietnam, Mexico and Indonesia.

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Before these allegations were voiced, the following theories were applicable; a view that was noted by (Shaw, W, Barry, V & Sansbury, G 2009) was utilitarianism which was relevant to the individuals as the factory workers were given employment and a steady income, this was not offered in remote and poverty stricken parts of Asia. The egoism theory (Shaw, W, etal, 2009) which can be connected to both the organization, Nike Inc, and a western society.

The has been adopted to these two parties due to their self-interests for one another, when concerning Nike is was about increasing revenue and nothing else. While the western society saw this as a direct attack towards them as their jobs were taken from them and that these new employees in Asia didn’t even have the same benefits as the western workers. This lead to worldwide dispute among communities in the western world, ranging from protests to destruction of a factory. Following these allegations, reports found that Nike had been violating minimum wage and overtime laws in countries like Vietnam.

Post investigation, recommendations such as the use of the utilitarianism theory to the individuals as they knew no other and were happy to continue to work as long as they had a stable income to provide for their families. The duty of care (Shaw, W, etal, 2009) approach has been applied by Nike; as a business they have seen that they have a moral duty to its stakeholders [employees] which consists of being ethical and treating them with respect. The virtue theory allows a win-win outcome for all stakeholders in the Nike Inc case.

This theory can be used when discussing the western society. With society knowing of Nike improvements towards employees within its Asian factories has lead to an increase in profits over the years and a strengthening of customer loyalty and satisfaction towards the company. The report firstly looks at Nike’s situation pre investigation and the theories which applied to the society, organization and individuals. [Introduction] Nike Inc. is a clothing manufacturer, which has come under fire in recent years due to working conditions within its sweatshops in low-cost countries.

The allegations included: Nike was also criticized for using child labour in its contracted soccer ball factories in countries such as Pakistan and Cambodia. Such allegations have unstoppably undermined the company’s corporate social responsibility and adversely affect its brand image. Not meeting wage minimums “the 35 workers… interviewed told us that they cannot live on the basic factory wage”. This however made it possible for Nike to meet their financial objectives, with the added help of long working hours.

Women in the work force, for example women were forced to work “considerable overtime and long working hours” it had been reported [Vietnam Labour Watch], also it has been admitted by Nike that “they have either suffered or have witnessed sexual and verbal abuse” at factories in both Indonesia and Korea. Toxic waste including waste production, and the emission of Toluene which has been seen as a significant concern in “that many areas of the factory have a high concentration of toluene, reaching a level of 180 mg per sq. eter when the legal limit is 100 mg per sq. meter”. Up to three workers were fainting each day and “they attributed them to stress, exhaustion, heat, the smell of chemicals (glue, paint) in the factory” OH&S [working conditions [toilet and lunch breaks], clear floors, and proper protective equipment]. Noise problems are also of concern as “in several areas [they] were found to be much higher than the legal limit”. Society was outraged with the conditions that were alleged in the Nike sweatshops in multiple low-cost countries.

They expressed their concern with public demonstrations and in one extreme case, by burning down on an Indonesian factory, all as a result of Nike Inc’s operations involving child labour. Nike had placed focus on those children gaining an education to further themselves and their community. The company has faced many issues in regards to its ethical business decisions and social responsibility particularly as it was once role-model international company. As a result of such a trivial human rights scandal becoming public knowledge the image of their brand has since deteriorated.

While the company is still reputable and has restructured is core business ethics, it will still take some time before the company can improve it’s imagine amongst western society. This improvement also assisted in gaining market share, making the company even more powerful and wealthier. [Pre-investigation] Prior to allegations in regards to Nike and its business ethics and social responsibility within its operation, the following parties had differing perspectives on the allegation regarding sweatshop conditions. Individuals – utilitarianism is noted by Shaw, W, etal, (2009) as being ‘the greatest happiness of all’ is an ethical theory that holds that an action is right if it produces, or if it tends to produce, the greatest amount of good for the greatest number of people affected by the action. The employees of the ‘sweatshops’ knew they were being worked, but it was better than their own life back home on the ‘family rice paddy’ David Teather [2005]. Even though the wage paid was below the ‘western’ world’s minimum, it was still a far amount for the third world community.

David Teather [2005] reports, a Wan Tianyan, a 21-year-old who followed his older sisters to the plant, as he could make a ‘$97 a month saving’. However utilitarianism incorrectly overlooks considerations of justice and distribution of happiness, which was felt by the ‘Western world’ whose jobs had been taken from them and given to someone else. The sweatshop workers seen the change to Nike as a positive outcome, but the ‘Western society’ felt abused and neglected by the company. Society – egoism is a Consequentialist theory that an action is right when it promotes the individuals best interests according to Shaw, W, etal, (2009). It is viewed on the belief that by nature, human beings are selfish. Motivations of society are for the whole world to be more ‘westernized’ – the western society saw Nike’s actions as ‘inhumane’ Dustyn Winder [2008] to the workers, D. Winder [2008] argues ‘when the workers at the Nike shop are required to make a certain shirt in six and a half minutes and are only paid 7 cents per item.

The same shirt sells for more than $22 in the United States. Society saw those working in a sweatshop no less a human being then themselves, and that they shouldn’t be treated any less then they would if working within ‘our’ society. Nike has been making their equipment in the third world, in such places as Pakistan and Bangladesh. With this said these countries have very cheap labor, authoritarian government and lack of human rights appeal and union movement, making it profitable to Nike to increase profit margins.

Society was in disgust with Nike and the organizations practiced policies within its Asian factories. Society saw that this was not correct business ethics and that everyone within the world, including the third world should be treated the same within their workplace. Moreover, the international brand came into these countries as a large international brand which also had many negative effects for their society, as the new brand is more famous and more commonly used now then the traditional local producers of similar products. Previously established businesses have now suffered. Organization – egoism (self interest) Nike had their own ‘self-interests’ at heart, to further increase profit margins. This was achieved by cheap labour overseas, including the use of children. To Nike it was more important to increase their own wealth while ignoring their responsibility to society. The employees of the sweatshops didn’t have many rights and according to David Teather [2005] some ‘employees worked more than 60 hours a week’, and their ‘wages below the legal minimum’ Teather [2005]. [Post-investigation]

Internal and external reports and societies view on the sweatshop conditions found that the environments were inhumane for the individuals working within the organization. • Individuals – utilitarianism, maintaining their objectives still to keep the business in production – employees within the Nike sweatshops now has greater support and better treatment, which is overseen by Nike in conjunction with the government but it, is also overlooked by independent auditors. This process will assist in ‘above-board’ behavior and well documentation of financial records.

This support creates the greatest amount of happiness for most employees; those that may be impacted on this new regulation would be the children, who are out of work and an income. This job has been their life and now they have nothing, and is education and development really going to improve the third worlds cultures and way? Therefore Nike is attempting to create an outcome that will benefit their employees in the ‘sweatshops’ and increase the company’s reputation but at the same time it is trying to change the cultures of the third world countries which have been practiced for many years.

To create a mutually beneficial outcome they need to understand and work with the ‘sweatshop’ workers to promote their wants and needs. In China, Mon Xijian a 31 year-old man along with his wife is earning sufficient money to buy an apartment complex back home. Meanwhile they expect their children to achieve a far higher level of education than they have. “I want them to get as much higher education as possible” Darwin [2010]. This demonstrates that in a Chinese culture, the money is adequate and that Nike has provided a source of ample income for them.

Taking this away from them would have a detrimental effect on their lifestyles and hopes to send their children to an institute seeking higher education. • Society – the virtue theory suggested by Shaw, W, etal, (2009) is the moral responsibility of the individual and the social attributes which determine the action – ‘quality of the person’- Nike needs to enhance the well-being of people in their social relationships – Since the media uproar Nike has improved many of the problems like low wages, working conditions and child labour but had to result in some people getting fired..

With society knowing that Nike is being a socially responsible and ethically correct business, it will strengthen its ties with society as a whole. Society has viewed Nike’s new procedures positively. This can be seen with assessing their income statement 1997 and 1998. Their Net Income for 1997 was 795. 8million and in 1998 it was 366. 9million, which was around the time of all the sweatshop scandal, and since the improvements have been implemented Nike as of 2008 has increased its Net Income to 1. 9billion.

This has shown that by Nike acting morally right and being ethical has seen it increase its profit and market share. The increase in profit and market share has shown the relationship between our western society and Nike improve and that society in general is seeing Nike as a socially responsible and ethically correct entity. To make up for the lost local Chinese business and market share, Nike may need to reinvest into the economies of the third world countries through selling shares to their people at a reduced price nd also assist their small businesses e. g. providing infrastructure, technology and information. They need to continue to prove themselves as an ethically responsible organization and continue to make-up for the previous scandals. • Organization – in accordance with Shaw, W, etal, (2009) ideas the ‘duty of care’ theory argues that since we are interdependent upon others for our individual identity and well-being we have a moral obligation to consider the needs, desires, values and well-beings of those whom we have relationships with.

Nike has attempted to correct the problem to become a socially responsible multinational corporation; this has been achieved by employing people at a rate at least equal to the minimum wages prescribed in the country. Since Nike has attempted to do this the relationship between workers and employees have been improved therefore productivity has increased because the workers are willing to work as they are happy with their conditions and pay. After the investigation into Nike and its sweatshops in the developing world, on May 12, 1998, Nike’s CEO and founder Mr.

Phillip Knight, made six promises that would improve the well-being of its workers in the alleged sweatshops. One being that the minimum age for Nike factory workers will be raised to 18 for footwear factories and 16 for apparel factories. According to Tim Connor [2001], ‘payment of a living wage to adult workers would be by far the most effective means of benefiting children in areas in which Nike’s goods are made. ’ Reducing the total amount of child labor will increase living standards and raise literacy levels of those living in third world countries.

Also the older workers are being educated to be able to communicate and keep up with the more educated younger generation. In doing this Nike will be respecting and valuing its employees, having this ‘duty-of-care’ will improve relations and productivity. [Conclusion] Nikes positions within the world have inspired questions in regards to their ethical business standards. Nike Inc. has come under pressure from society, due to its operations and conditions within its sweatshops. Nike commencing operations in low-cost countries has seen an increase in employment and heir Gross Domestic Product [GDP]. While Nike has faced severe criticism due to these manufacturing decisions to start production overseas, it, as a brand and product have fought and sustained its success after constant debate between individuals, society and organizations. Ethics experts will continue to critic Nike in unfavorable views about the production costs and how the staff are being treating, however when we apply the ethical theories that have relevance we observe that Nike does its best to meet the requirements and attempts to satisfy the majority of the public which was proven.

This was especially proven when, Nike made decisions to conduct independent audits and engage in human rights activities. Nike still faces ethical dilemmas due to its operations in the third world and these dilemmas will continue to exist in the world economy with it always constantly changing. Nike has gone with the route of foreign contracting in its earlier phase and has received criticism through it. With plenty of ethical dilemmas, Nike has managed to continue the product, develop new products and continue to be a force to reckon with as a consumer brand.

Meanwhile local business owners have been impacted on, such as a decrease in sales volume and/or bankruptcy, resulting in the closure of their business. The individual’s perspective on the Nike situation remained the same, despite there being a change in the organizations and societies view and theory. Due to their changing views and theories this has helped influence the restructuring of Nikes internationals operations and working policies.


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