Nike And Asian Labour Essay, Research Paper

There has been much debate and controversy recently concerning Nike’s Asian

labour practices. This is a very complex issue and one that is a long way from

being solved. It is very difficult to determine which side of this argument to

defend, as both sides acknowledge the facts, yet put a completely different spin

on them. Do you believe Nike’s critics who say they’re exploiting workers? Or,

do you believe Nike when they say that they are giving workers in these

countries wonderful opportunities to raise their standard of living? The

consensus answer to this question by all sides seems to be that Nike is

improving but still has a ways to go. Nike’s Asian ties can be traced back to

the birth of the company. The CEO, chairman of the board of directors, and

co-founder, Phil Knight, wrote his masters thesis at Stanford University in the

1960’s on the prospects for using Asian labor to produce goods cheaper and more

effectively. In order to incorporate this plan in to Nike’s business structure,

a partnership was set up with a Japan based company called Tiger Sports. Tiger

Sports would manufacture shoes for Nike in Asia then shipped them to the United

States to sell. In the 1980’s however, this aspect of Nike’s partnership with

Tiger Sports was dissolved, and Nike was forced to expand production from the

United States to countries such as Taiwan and Korea where their products could

be manufactured at the same relatively low cost that Nike enjoyed through the

Tiger Sports partnership. Over the last five of years, however, the production

numbers for these countries have been decreasing at an alarming rate due to the

fact that their economies expanded at a very rapid pace. This, in turn, caused

the cost of labour to increase dramatically, and therefore Nike could no longer

produce their product as efficiently as before. In lieu of the rapid economic

growth in the pacific rim, and the increased production cost, Nike has moved

more into countries such as Vietnam and China where the labour is cheaper and

labour laws less stringent. (VLF, VN Fact Sheet) Nike does not own any of the

factories that produces its products in Asia, and subsequently they do not

directly employ the workers or management. They contract out work to factories

that make all of the products and run all of the factories. They do, however,

have a massive amount of leverage when dealing with these factories because of

the huge contracts they supply. To ensure good labour practices, Nike has a Code

of Conduct that every contractor must agree to abide by in order to get a

contract. The Conduct Code in theory condemns and prohibits child labour,

requires that workers be paid fair wage, imposes caps on the days and hours a

worker can be forced to work, prohibits mistreatment or discrimination of

workers in any form, obligates factories to implement programs that benefit

worker’s health and safety, and recognizes and respects the workers right to

freedom of association. There are 1000 Nike employees worldwide monitoring

operations at the subcontractors and specifically the Code of Conduct adherent.

The most consistent criticism of Nike is that the workers in the factories

contracted by them are not aware of the Code of Conduct that was agreed upon,

and/or it is not enforced (especially the wages and overtime aspects) by the

factory officials. Critics contend that the factories pay less than minimum wage

at times, force too many overtime hours, and fail to make the workplace as clean

and as safe as standards dictate. Many of the factories that are contracted have

workers and management from different countries, causing some problems in

communication. Some factories in China have Taiwanese Managers while factories

in Vietnam have Korean managers. This is one reason offered by Nike in defense

of the factories failure to comply with the Code of Conduct. To look into this

issue, earlier this year Nike commissioned Andrew Young, a former civil rights

leader and United Nations ambassador to do an analysis of how well the Code was

working. Young and his staff visited four factories in Vietnam, Indonesia, and

China for three to four hours each led by Nike’s people. Young’s conclusion

proved not only to be uninformative, but somewhat aggravating to the public due

to its elementary tone. "Nike is doing a good job, but could do

better" was the statement released by Young at the end of the report.

Another aspect of the inquiry that bothered the public was the fact that Young

chose not to look into the issue of wages, a prime component of the Code. The

reason for this being "such an exercise was well beyond the technical

capacity of our small firm." (GoodWorks, Executive summary) Stephen Glass

calls into question Young’s work in his article. He criticizes Young and

GoodWorks International LLC (Young’s company) for not using their own

interpreters, not spending enough time in the factories, not consulting with

"experts" on the issue, and using this report as a public relations

ploy for his new company. He states, "But if the Nike report was ‘classic

Andy Young,’ it was also a classic sham, marred not just by shoddy methodology

but by frequent misrepresentations" (Glass). Young even admits that he and

his company are not "labor practices experts" (GoodWorks, disclaimer)

yet they were chosen to do this job. About a month ago a secret internal audit

performed by Ernst and Young was leaked to press (Audit). In it was information

about dangerous levels of carcinogens, as well as overtime abuse suffered by

workers. This information directly contradicts Young’s statement of "clean,

well-lit, ventilated factories." This report makes it appear that Young’s

report was strictly for public relations and had no real impact on rectifying

the situation, or bringing to light any of the issues that surrounded the

situation. Recently, Nike commissioned a study by graduate students from the

Amos Tuck School of Business at Dartmouth College to determine if workers in

Indonesia and China were earning a livable wage. The intent of this study was to

shed some light on the areas that the Young report failed to cover. The students

spent three weeks interviewing workers in each country, and at the end of the

study, three main conclusions were found. The first conclusion, "Nike

contract workers consistently earn wages at or above government mandated minimum

wage levels." The second conclusion states, "workers living on their

own can generate discretionary income in excess of basic expenditures such as

housing, transportation, and food." The third conclusion, "for workers

living in extended family households, Nike contract factory worker wages are

typically used to increase or augment total household income to raise overall

household living standards" (Nike, Press Conference). Although these

conclusions support Nike’s insistence that they do not sacrifice their workers

well being for their own financial gain, critics bring to light a valid point

when they argue that it is impossible to paint an accurate picture of the pay

scale in three weeks time by interviewing approximately 1% of the workers,

sometimes in front of management, which doesn’t allow the worker total freedom

of speech.