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Shopping with a Social Conscience The Business Practices of Nike

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Do most consumers shop with a “social conscience?” (Think about it. Are you aware of where the products you purchase are made and under what conditions they are manufactured?) When consumers buy products, without knowledge of their origins, they could easily be breaching their own code of ethics. This is clearly seen in an assortment of industries. Each year hundreds of companies employ foreign labor for low wages and in terrible working conditions. For example, much public attention had been brought to Kathy Lee Gifford and her “sweatshops” overseas, as well as other unfair labor practices in third world countries.

One of the greatest participants in this mistreatment of workers is the Nike Corporation. To earn the maximum profit for their products, Nike exploits thousands of workers each year by offering them diminutive wages and the worst conditions to work under. When famous athletes endorse Nike and consumers continue to purchase their products, they only encourage and support these inhumane practices causing them to virtually go unnoticed (Greene, 1998).

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Last August Donna Greene of the New York Times conducted an interview with Dr. Fredrica Rudell, Associate Professor of Marketing and Chairwoman of the Department of Marketing and International Business at Iona College in New Rochelle, on the subject of shopping with a “social conscience.” Dr. Rudell, who has chaired the Environmental Concerns Committee of Iona’s Peace and Justice Program for sixteen years, believes that each time a consumer buys a product he or she casts a “vote for the company that made the product…” (Greene 1998). Dr. Rudell points out that companies respond well to what the consumers have to say, citing the environmental and health movements as examples. The Nike Corporation, unsurprisingly, was mentioned several times during the interview. She criticized their labor practices and pointed out that until the public pressured Nike to change their ways, nothing would happen. I believe that more of the public pressure Dr. Rudell discussed needs to be put into action until Nike factory conditions are brought to humane standards (Greene 1998).

Indonesia is one of the main locations for these factories, as well as the rest of Southeast Asia. In these countries the minimal working age is fourteen, as opposed to sixteen in the United States. Even at the age of sixteen, though, the jobs one can perform in America are limited. Nike voluntarily made an agreement to only hire workers age sixteen and up. Despite this publicly announced agreement, Nike continuously had many children ages fourteen and fifteen working in their factories. In an interview with film producer Michael Moore, Nike founder and CEO Phil Knight was not even aware of what his company’s labor practice regulations were. Nike’s Director of Labor Practices, Dusty Kidd, had to brief Mr. Knight on their policy in the midst of the interview. If the company CEO does not even know the labor practice regulations, how can the institution be following these rules at lower levels (“Nike’s New Labor,” 1998,pA18)?

Recently, in response to the pressure put on Nike by the media, human rights activists, and concerned consumers, the minimum working ages were finally raised. At a press conference in Washington on May 12, 1998, Nike Chief Executive Phil Knight announced that the minimum age requirement for workers in shoe factories was going to be raised from fourteen to eighteen and the minimum age requirement for the apparel factories from fourteen to sixteen. Although these changes are a major step in the right direction, these new regulations do not apply to current employees. The fact that this regalia does not apply to the present staff means that there are still children under the ages of sixteen and eighteen working in the factories. Nike only increased the age limits in an attempt to appease critics and human rights groups. Their image was beginning to tarnish, so Nike had to take action (Cushman, 1998, pD1).

The labor rights organization, Global Exchange, has harshly criticized Nike’s work practices for several reasons. Ninety-seven percent of Nike’s workers are in poor, third world countries. Most of these laborers are women and children who work for around $0.15 and $0.20 per day. Companies in Asia paid workers in China and Vietnam $1.60 a day and workers in Indonesia less than $1.00 a day, when at least $3.00 per day is considered the minimum living wage. Medea Benjamin, a spokeswoman for Global Exchange commented, “These factories are sweatshops. They’re clean, well-lighted sweatshops, but they’re still sweatshops” (McCall, 1998, p15). Until public pressure was applied to Nike, women worked seventy-seven to eighty four hour weeks in Korean factories for mere cents an hour (Greene, 1998). This has occurred in part because Nike refuses to manufacture in the United States. They have not done so since 1984. According to Nike’s own research, if they would begin manufacturing in the United States, the price of shoes would raise one hundred dollars a pair. Mr. Knight said that his main objective has been to give “the American consumer an assurance that those products are made under good conditions” (Cushman, 1998, pD1). American consumers could never be convinced of this without a wage increase and overtime hour decreases (Cushman, 1998, pD1).

On Tuesday March 23, 1999, Nike raised its entry-level pay by $1.70 per month for Indonesian workers. This pay increase amounts to Nike spending a total of $37.14 per worker per month. This change only affects twenty five percent of the seventy thousand Indonesians that work for Nike. This change came only when the government expressed serious concern over the affects of the Asian financial crisis in their country. Coincidentally Nike’s wage increase began on April 1, 1999, the same day the Indonesian government implemented a nation-wide mandate to increase minimum wages. This pay increase also came shortly after Nike announced that it earned $124 million (or $0.44 a diluted share) during its third quarter. Ever since the Asian financial crisis has been spreading over the East, more and more Asians have been willing to take grim sweatshop jobs. These jobs have actually become the aspiration of the people living in the slums of Indonesia and Thailand (Kristof, 1998, pA1). The recent surge of unemployment caused by the financial dilemma has caused the employees to lose their main weapon in the battle for better conditions. Now desperate for jobs, the people cannot afford to be picky about their working conditions and wages. Even the measly wages and hazardous conditions offered in the sweatshops are better than the fate of living unemployed in the slums (Kristof, 1998, pA1).

A report from the Asian American Free Labor Institute in June of 1995 found that working conditions in factories that manufacture Nike products repeatedly have workers laboring for extremely long hours. Several situations proved that Nike nearly forced the workers to participate in overtime (which is most often unpaid). In September 1996 the Indonesian Legal Aid Institute (LBH) countered arguments by Nike spokespeople by showing concrete proof of overtime abuse. The LBH presented and Indonesian woman’s pay slip for August that showed she had worked and average of four and a half-hours of overtime day (Connor & Atkinson, 1996). An Australian researcher, Peter Hancock, investigated Nike factories in West Java and found that they require workers to work twelve hour shifts everyday. In addition, they only receive two days off per month. These conditions are terrible to begin with, but the worst part is that they are basically “forced overtime hours” (as cited in Connor & Atkinson, 1996). Mr. B. Athreya did a report on the conditions in factories making Nike sports shoes for the Asian American Free Labor Institute (AAFLI) in 1995. Athreya found that workers who did not show up for overtime were given ludicrous punishments. As he said, “senseless punishments, such as having to apologize personally to everyone in the section for not having shown up, or having to stand at attention, or to run around the Nikomas compound” (as cited in Connor & Atkinson, 1996).

Besides the exhausting number of working hours, most Nike employees go home to even worse surroundings. Nike provides these living quarters that often times are worse than the average Indonesian village. Double the maximum number of people live in these company “dormitories.” Around sixty to seventy percent of workers live in these housing projects:

Each building consists of a row of rooms, and each room has a door opening out onto a pathway. Each room holds a dozen people and has six bunk beds….Water for washing and bathing is available from outdoor wells….Drinking water is scarce. Drinking water is provided by the company once in three days….If the water runs out before three days, the workers have to buy more themselves (as cited in Connor & Atkinson, 1996).

The dormitories are not the only places to yield horror stories. The AAFLI reported that at several South Korean shoe factories company nurses said that severed fingers are so common that they throw them out in the trash heap. The Observer in London reported in December of 1995 that an interview with a village head in Nikomas revealed that a young woman had collapsed from heat exhaustion in the middle of the day. Instead of taking her for medical treatment, she was laid out in the workplace mosque. Later when they realized the girl had never regained consciousness, she was then taken to the hospital, where she died. Most of the time workers must go without medical treatment because the company is not willing to pay for health benefits or any type of care.

It is quite shocking that such a well-known and well-respected company would take such actions against other human beings. Why aren’t immediate actions being taken to correct such horrid mistakes by this super company? It seems that Nike’s neglect of responsibility is the key to their success. Nike’s own CEO summarized it best, “It’s not the company’s responsibility. We don’t pay anybody at the factories and we don’t set policy within the factories; it is their business to run” (Katz, 1994, p206). When attacked in the media, Nike has often used this argument (that they aren’t responsible because they don’t employ the workers). But this is not a valid excuse because Nike itself commonly takes the other side of the issue. Phil Knight once said in a 1992 article in his hometown newspaper, The Oregonian: “We do accept responsibility for the working conditions in factories we contract with to make our products, and we have tried to upgrade both the quality of life and the skills of the employees working in ‘our’ factories. Nike’s foreign factories generally offer the highest pay and the best working conditions of any athletic shoe factory in the particular country” (Knight, 1992, p19). This statement is contradictory in many ways. Wages and conditions are approximately equal from factory to factory throughout Asia. Also most of these factories produce several brands at the same time. Therefore one could not distinguish Nike’s foreign factories from those of another brand name.

Large companies like Nike should learn to take responsibility for all matters involving their products. Whether or not they hire the workers in these factories, the laborers are making Nike products. Therefore it is Nike’s social responsibility to make sure wages and conditions are improved. It would not be extremely expensive or difficult for sneaker companies like Nike to improve workers wages. In the May 3, 1995, issue of the Washington Post, the costs going into a pair of $70 Air Pegasus was broken down (see attached table). It was found that only $2.75 or four percent of the price paid by the consumer was the cost of production labor. Therefore wages for production could be easily increased without adding much cost to the shoes. If wages were doubled and the extra cost was passed straight to the consumer, it would add no more than the cost of a pair of shoelaces. This would be a $4 cost on a $100 pair of shoes. In actuality, Nike could go as far as quadrupling the wages of workers and not even raise the cost of the shoes $10. Consumers would hardly notice, but it would have a huge impact on Asian workers and their families. Another good idea originates from John Harrington, a California investment manager who oversees a $100 million fund of socially responsible companies. Mr. Harrington suggests that Nike solve its problem by doubling the $0.80 a day wages of its Indonesian workers. The money for doubling wages could easily be collected by cutting $20 million out of Nike’s $1.3 billion advertising budget, or less than two percent of it (McCall, 1998, p2). Harrington was quoted as saying, “I think that the publicity they’d receive from that would be tenfold [the cost of doing it]” (McCall, 1998, p2). But Harrington’s proposal was overwhelming dismissed.

Companies such as Nike cannot continue to ignore the exploitation they are carrying out everyday. Despite their minimal attempts to improve conditions in Asian factories, Nike’s workforce faces dangerous labor daily for too many hours and not enough pay. The corporation needs to take responsibility for its actions and stop violating human rights. If consumers could develop more of a social conscience and put more pressure on companies like Nike, perhaps more positive actions would be taken. The pressure put on Nike by the media, human rights groups, and consumers has made some small improvements. More action needs to be taken in this matter in order to stop the suffering in Southeast Asia. Consumers who become more committed to the cause of saving human lives could easily institute a boycott of Nike products to apply more pressure to Nike. Everyone should develop a deeper social conscience pertaining to their purchases and be more aware of what is going into the products they buy. The purchases consumers make effect millions of workers worldwide and their well being. The actions shoppers make to support or attack Nike and other companies like Nike, make all the difference. When shopping, one should try and remember the thoughts of Dr. Rudell and the people that are effected by their decisions. (Do you know where your purchases were made and under what conditions?)

In the table below, the cost of a US $70 pair of Nike “Air Pegasus” shoes is broken down into its component parts. The data was compiled from research done by the Washington Post newspaper. They used information from Nike, the US Customs Service, a large national retail chain, the Athletic Footwear Association, industry consultants and executives. All costs are in US dollars. (Washington Post 1995) I found this information at a human rights group page, www.caa.org.

Where the money goes…How much of it goes there…

Sales, Distribution, Administration$5.00

Bibliography

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Bingle, Gina. (1998, Jan 30). Nike’s ethics officer will ‘do the right thing’. Puget Sound
Business Journal, 18, 28-31.

Coleman, Zach. (1998, Oct 9). Young does follow up on Nike Vietnam factories. Atlanta
Business Chronicle, 21, 41-43.

Cushman, John. (1998, May 13). International business, Nike pledges to end child labor
and apply U.S. laws abroad. New York Times, pD1.

Dorman, Peter. (1996). Markets and morality: Economics, dangerous work, and the value
of human life. Cambridge: Cambridge University Press.

Editorial desk. (1998, May 18). Nike’s new labor practices. New York Times, pA18.

Greene, Donna. (1998, Aug 16). Q/A Dr. Frederica Rudell- Shopping with a social
conscience. New York Times, pD1.

Katz, Donald. (1994). Just don’t do it: The Nike spirit in the corporate world. Holbrook:
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Knight, Phillip. (1998, Aug 1). Global manufacturing. Vital Speeches of the Day, 64,
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Kristof, Nicholas. (1998, Jun 15). Asia’s crisis upsets rising effort to confront blight of
sweatshops. New York Times, pA1.

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Marketing News, 32, 14-17.

Moore, Thomas. (1996). The disposable workforce: Worker displacement and
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No author. (1995, May 3). Why it costs $70 for a pair of athletic shoes. Washington Post.

Cite this Shopping with a Social Conscience The Business Practices of Nike

Shopping with a Social Conscience The Business Practices of Nike. (2018, Jul 02). Retrieved from https://graduateway.com/shopping-with-a-social-conscience-the-business-practices-of-nike/

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