Nike Sweatshop Manufacturing

Should Nike be held responsible for working condition in factories that it does not own, but where sub-contractors make products for Nike? Nike doesn’t own any manufacturing facilities and outsource its production. Therefore, it can’t be directly blamed for terrible working conditions. Nike can influence indirectly on working conditions at contracting factories thorough refusing to work with sweatshop factories.

However, Nike, like any other capitalistic enterprise, is looking for economy of scales and making more money for its shareholders, so each dollar counts.

In this case, Nike business ethics is being questioned. From another point of view, workers and employers have a voluntarily contract engagement and working conditions are on the same level as at other local enterprises.

However, if Nike claims to be a social responsible corporate citizen, it has to maintain business practices accordingly. They have to influence their partners to provide better working conditions and avoid long hours for child labor. Otherwise, they should be like everybody else and benefit from prevailing business practices in the third world countries.

• What labor standards regarding safety, working conditions, overtime, and the like, should Nike hold foreign factories to: those prevailing in that country, or those prevailing in the United States.

Nike has to follow traditional labor standards prevailing in the supplying countries due to the absence of ownership for production facilities. It will be almost impossible to impose American labor standards regarding safety, working conditions and overtime into a foreign country, because they all have their own authorities that regulate these issues.

Cheap labor is their only competitive advantage to attract foreign direct investments. Changing labor standards in compliance with the US regulations will lead to factory overhead expenses increase and lose of economies of scale.

Therefore, Nike should follow the current regulations and try to improve the standards and working conditions at their supplying factories to a certain acceptable extent.

• An income of $2.28 a day, the base pay of Nike factory workers in Indonesia, is double the daily income of about half the working population. Half of all adults in Indonesia are farmers, who receive less than $1 a day. Given this, is it correct to criticize Nike for low pay rates for its subcontractors in Indonesia?

Nike shouldn’t be solely responsible for the low pay rates for its subcontractors in Indonesia. It reflects the current labor market situation and the way local economy operates. However, Nike should do their best to influence the improvement of working conditions and pay rate increase at its subcontractors. Not only Nike exploits that the benefits of low pay rates in Indonesia, but, other foreign companies as well. It should be a common strategy to influence the improvements. These changes can’t happen at once, it should be a long-term strategy for the benefit of local workers. For instances, the average hourly pay rate is $1.3 in Moldova.

This number is significantly low than in the Western Europe. Many Western businesses are exploiting this advantage. China is another good example where average monthly salary has risen from $250 in 2005 to $600 in 2012. It was the government of China policy to increase salaries. Therefore, local governments should influence the pay rate increase, and MNE will follow the rules of the game.

• Could Nike have handled the negative publicity over sweatshops better? What might have been done differently, not just from the public relations perspective, but also from a policy perspective? Nike could have done a better job addressing not only the age issue and inferior working conditions, but the pay rate increase as well. Nike preferred to take care of certain critics selectively, leaving behind the main concern- pay rate.

Charging premiums for their products, Nike can afford be more accurate in selecting subcontractors and promoting better working conditions on sites. Nike hired onetime US Ambassador to the UN, US Congressman, and former Atlanta Mayor, Andrew Young, to assess working conditions in subcontractor’s plants around the world. He made a mildly critical report spending two weeks and visiting 15 factories only. It is obvious that the report was subjective and led to even more critics from human rights and labor groups. Nike should have been more objective showing more opportunities for improvement and making more positive publicity from eliminating trouble issues.

• Do you think Nike needs to make any changes to its current policy? Is so, what? Should Nike make changes even if they hinder the ability of the company to compete in the market place? Nike has to make changes to its current policies and support the Workers Rights Consortium. The times has changed and the business ethics is more important nowadays than it used to be several years ago. More attention is paid to top managers’ compliance with the ethics code after major bankruptcies involving unethical behavior, for instances, Enron.

Nike policies have to be updated to the modern conditions and business environmental requirements. Nike should care not only about its shareholders, but, about all stakeholders, including suppliers and consumers. These new trends should be stated in their policy clearly.

• Is the WRC right to argue that the FLA is a tool of industry? The Fair Labor Association grew out of the Presidential task force on sweatshops and included the Lawyers Committee for Human Rights, the National Council of Churches, the International Labor Rights Fund, some 135 universities and companies such as Nike, Reebok, and Levi Strauss.

It means that this Association was supported and funded by the companies whose operations they should examine. There is an obvious conflict of interests. It is more likely a tool for industry to protect itself and create publicity loyal to industry members. The Workers Rights Consortium is more independent, backed, and partly funded, by labor unions and refuses to cooperate with companies, in order not to “jeopardize its independence”. Therefore, they are capable of carrying out truly independent unprejudiced sweatshop audits.

• If sweatshops are a global problem, what might be a global solution to this problem? There is no a global solution to the problem of sweatshops while inequality and differences in stages of economical development exist. MNE are looking for better productions conditions and cheap skilled labor. There always are “third world” countries offering lower pay rates to attract foreign direct investments than their neighbors. It is a complex problem that requires a holistic approach. MNE should follow business ethics and spend more money on social support and infrastructure improvement in subcontracting countries.

United efforts of businesses, governments and the United Nations can only make a difference. Sweatshops are the only way of income in many countries. People have no choice, but, to work at sweatshops or die from starvation. Poverty reduction and life conditions improvement are the modern global challenges for the developed countries. It is unfair to make extra billions in profits at the expense of the poor and undeveloped countries in the 21st century.