Cases: Nike: The Sweatshop Debate

1. Should Nike be held responsible for working conditions in foreign factories that it does not own, but where sub-contractors make products for Nike?

Although Nike may be technically removed from responsibility in some areas, it clearly has the obligation to be certain that exploitation by subcontractors do not occur. Certainly the pay and working conditions that the workers of subcontractors receive is due in large part to the contract that has been negotiated by Nike. If Nike had chosen to make improved working conditions a part of the arrangement, then those benefits may have been passed on to the workers. Still, Nike is a publicly owned firm whose goal is to improve the wealth of its shareholders. The workers in these Asian countries were happy, even eager, to accept the conditions that were provided as a manufacturer of Nike. The reason is that those wages were probably equal or superior to wages available from other sources. If Nike were to leave the country because of the pressures placed upon it, the workers would undoubtedly suffer greatly.

2. 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.

Clearly, Nike has the responsibility to hold suppliers to those conditions that prevail only in the supplying countries. If it insisted on prevailing conditions in the United States, there would be little reason for Nike to seek contractors from outside countries. However, through pressure or contractual concessions, it is possible for Nike to seek ways to improve the conditions of workers in supplying countries. In doing so, Nike may find that it receives some public relations benefit rather than undergoing the effort and the cost of developing defensive PR strategies.

3. 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?

Although student answers will vary according to their sensitivity on this issue, Nike probably should not be held responsible for the pay rates of its Indonesian subcontractors. The worker pay, and resulting low cost of goods, is a major reason why Nike has contracted with these subcontractors. The result has been to given jobs to Indonesians who might not other wise have them. It is also not clear to what degree Nike can influence the pay that subcontractors pay to workers. Therefore, it is not fair to be continually critical of Nike in that regard.

4. 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?

There is certainly major room for Nike to improve on its handling of the negative publicity. A defensive policy of denial is always more poorly received than an open admission of fault with constructive strategies for improvement. Part of Nike’s problem was that it didn’t address the total criticisms, and chose to answer the age issue rather than the issue of total inferior working conditions. Its strategy to announce policy change at large public relations functions appeared insensitive, rather than addressing criticism directly, on the spot, and with corrective action strategy in hand. From a policy perspective, it would be better to suggest programs for training of workers, changes in suppliers and a general improvement of the plight of the worker. The development of advisory boards and the involvement of interested agencies and outside organizations to achieve a consensus for the improvement of working conditions might be more effective, both from a PR point and a policy initiative than to continue to with its own inward looking policies.

5. Do you think Nike