Nike and \"Sweat Shop\" Labor: Nike, a company headquartered in Beaverton, Orego

Question

Nike and "Sweat Shop" Labor:

Nike, a company headquartered in Beaverton, Oregon, is a major force in the sports footwear and fashion industry, with annual sales exceeding $ 12 billion, more than half of which now come from outside the United States. The company was co-founded in 1964 by Phil Knight, a CPA at Price Waterhouse, and Bill Bowerman, college track coach, each investing $ 500 to start. The company, initially called Blue Ribbon Sports, changed its name to Nike in 1971 and adopted the “Swoosh” logo—recognizable around the world—originally designed by a college student for $35. Nike became highly successful in designing and marketing mass-appealing products such as the Air Jordan, the best selling athletic shoe of all time.

Nike has no production facilities in the United States. Rather, the company manufactures athletic shoes and garments in such Asian countries as China, Indonesia, and Vietnam using subcontractors, and sells the products in the U.S. and international markets. In each of those Asian countries where Nike has production facilities, the rates of unemployment and under-employment are quite high. The wage rate is very low in those countries by U.S. standards—the hourly wage rate in the manufacturing sector is less than $ 1 in each of those countries, compared with about $ 20 in the United States. In addition, workers in those countries often operate in poor and unhealthy environments and their rights are not particularly well protected. Understandably, host countries are eager to attract foreign investments like Nike’s to develop their economies and raise the living standards of their citizens. Recently, however, Nike came under worldwide criticism for its practice of hiring workers for such a low rate of pay—“next to nothing” in the words of critics—and condoning poor working conditions in host countries.

Initially, Nike denied the sweatshop charges and lashed out at critics. But later, the company began monitoring the labor practice at its overseas factories and grading the factories in order to improve labor standards. Nike also agreed to random factory inspections by disinterested parties.  

Discussion Questions:

1.      Is the criticism of Nike fair, considering that the host countries are in dire need of creating jobs? Why or why not?

2.      What do you think Nike’s executive leadership might have done differently to prevent the sensitive charges of "sweatshop" labor in overseas factories?

3.      Why should multinational companies consider the so-called "corporate social responsibilities" when making investment decisions?

Explanation / Answer

1) The criticism of Nike is absolutely fair as a company with a global brand presence and with annual sales exceeding $ 12 billion can never in the name of creating jobs convert the factories into sweatshops.

The developing countries or the workers are of course in need of jobs and foreign investments, also there can certainly be wage disparity beween US and other Asian countries but it is absolutely morally and ethically incorrect to convert those factories into sweastshops and not provide the workers with basic necessities and amenities.

Apart from this there are several other problems which can occur due to these practices such as:

a) The company might face civil and criminal charges in the country of operations and may face severe penalties and prosections.

b) The irrepairable loss to the brand name of the company when such reports are higllighted by the media.

Thus in order to earn something extra or save on the labour cost the company might end up paying penalties and charges.

2) The Nike leadership can take a number of steps in order to prevent such charges :

a) The wage rate sould be revised in respect to the minimum wage rate applicable in that partcular country or as per the agreed rates with labour representatives, so that there would not be any such charges of under payment or disparity.

b) The company must provide all the necessary and basic amenities in the factory premises - such as clean drinking water and clean toilets.

c) The company must also regulate working hours as per the respestive country's norms.

3) The multinational companies should always remeber that each company works under a social structure where each one has certain social obligations to fulfil. The only motive of a company can never be earning from the society and not giving it back. It is always a give and take relationship which survives and so the global companies cannot in the name of creating jobs earn billions and pay " almost nothing" to the workers in their factories.

Thus in order to make successful investments it is always better to be a part of the society and create values, earn profits and give something back to the society which is the very basic concept of "corporate social repsonsilbilities".

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