Nike Company and the Ethical Production Issues

Nike is a Fortune 500 company based in the United States, with its headquarters, in Beaverton, Oregon. Nike is a sportswear, equipment and accessories manufacturer; it is one of the most famous brands which every person in the world recognizes. Nike’s revenue in the fiscal year 2008 approximates up to $ 18.6 billion USD; it employs around 30,000 people worldwide. Nike has been branded so heavily and so perfectly, that the Nike ‘swoosh’ [the tick] enables a person to recognize the brand in a second. ‘Just do it’, which is the slogan of Nike has become an inspiration and motivation for young sportsmen and even people, in general, to be confident and just go ahead with whatever one wants to do.

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Nike has been facing quite a few challenges when it comes to ethical production and especially labor rights. It is said that Nike is literally a sweatshop where employees are made to work relentlessly and in cruel conditions, which human beings should not be exposed to. It is also said that Nike has played a big role in increasing the total child labor statistics around the world. It hires little boys and girls who can be easily dominated and are hardly paid anything for their blood and sweat. Also, it is found that these workers are made to work and sleep in closed rooms with zero ventilation and these places are overcrowded. The unethical issue that was evident in this case was that fact that firstly, Nike did not respond to Peretti’s email – this is against the company policies to go ignore customers – this directly affects their public relations. Making shoes is a labor-intensive process; which means that the amount spent on labor should be high for their wages and bonuses. However, the only cost that the laborer’s cause is $2.6 out of $16.25 of the total production cost per unit. This is evidence showing that not enough is being paid to laborers and thus, exploitation is taking place – exploitation is when one takes advantage of a thing or mostly a person – here, Nike is exploiting its employees. The working conditions result in health hazards for the workers such as fainting, malnutrition, headaches, severe spine issues, so on and so forth. Another problem is that the audits, done by external companies in Nike to find out what the scenario regarding wages and payrolls is, vary a little from one another (Seib, Patrick, Fitzpatrick & Kathy; 1995). This discrepancy automatically brings about a cynical and skeptical idea into the heads of the watchdogs and consumers. Ernst & Young, Dartmouth, Vietnam Labor Watch and the Vietnamese Government study had the same conclusions; the pay is either above minimum wage rate or is average. However, Ernst & Young’s research and the study were limited to only 50 people from the workforce; that is a very small sample.

If just in case, these torturous and unethical activities take place in the factories that are not owned by Nike but have a contract with Nike; then the idea of stating Nike to be morally responsible becomes confusing. The fact that Nike is not directly torturing anybody in factories of companies such as New Balance, and are merely striking a deal with them to use their factories as production houses while just the design, etc. would be Nike’s. A corporation is morally responsible if somebody from the corporation does something unethical – this is because it is the people that make up the organization, or else it is not a living thing that works on its own. Moral responsibility comes if the person/corporation caused it or helped cause it along with not preventing it when it could and should have; the corporation does that on free will; lastly, it does that knowingly. So know it depends on the fact whether Nike is aware or not – in this case, Nike is aware of what is happening; thus, it is responsible because it did not prevent it from happening. If it wanted, it could have stopped the torture by breaking off the deal with New Balance, leaving no choice with them but to stop the torture and use ethical measures for production.

The world is progressing in every aspect of life. There is intense development and urbanization taking place. Day after day, as population increases, demand for goods and services also increases; this creates a need for more companies and more employment. Almost every day we hear names of new companies who have recently joined the market competition. As more and more companies are emerging, there is naturally a greater supply of similar goods in the market; some of these goods are better than the other which increases the standard of competition (Duck, 1993). Competition is not only restricted to your local market; with increasing globalization, the entire international forum is becoming your playing field. Competition is becoming so intense by the minute that no company can afford to slack off for even a day; every company needs to be operating at its maximum level to make its place in the market. However, production is not the only important task, marketing the product in the right places, right time and to the right people is essential/ Nike realizes the importance of marketing and advertising to make a brand stronger; thus, it uses several methods to do so. Celebrity endorsement is one of the easiest and the most effective methodologies of advertising; people who love that particular celebrity would automatically become fans of Nike’s products; also, that celebrity helps form a persona of the product. Nike uses Michael Jordan; the sportsman – this guy is one of the top most athletes and one of the most successful sportsmen; thus, it creates an image of the true sportsmen who wear Nike. But the question is, is marketing this important that one forgets about their employees? Not at all. Employees are the most important asset of the organization and if one is not good to them, that is the biggest negative marketing. It is completely unethical to pay the celebrities who do not put in their blood and sweat into production millions of dollars, while the laborers who work so hard to get only a few dollars. The justice phenomenon says that the benefits are divided equally and as they are deserved; clearly this practice is not taking place (Perle, 1989).

Nike should have come out in the open and held press conferences and communicated instead of ignoring or shutting the media up – although, Nike did walk on this path they did not admit their mistake. As mentioned in the question as well, good business is when Nike admits their mistake – it is accepted that it is a big risk because all its customers would boycott it, but some grace is given for honesty. Also, if Nike shows immediate changes in their production environment, and publishes their improvements and good case practices in the media then the customers would see that Nike does care about the customer opinion and also about the employees, and thus, is willing to make a difference (Everalt, 1999). That adds to the credibility and also shows that the company is not egotistical and defensive, in fact, takes criticism as constructive. This would make the customers and employees both feel valued and their relationship with Nike would strengthen. However, admitting their mistake and not bringing about any good changes is pointless and a big mistake because the customers would totally run away from the brand. In the future, Nike should make a proper and rigorous labor policy that is not just there on paper but also in practice. Also, proper legislation should be passed and regulations should be made against those who do not follow the policy; lastly, action should be taken, that is, implementation of those laws should be shown in case of any breach of law. Making steps is pointless if nobody follows them.

The AFL-CIO is an American union movement; this is a group of employees who take action against the exploitation of laborers. The goal is to provide human rights to the laborers; making sure they are paid as much as they are supposed to be paid and the rates are not too low; they are provided with good working conditions and no dangerous activities are carried out. The student protest is a movement against the labor in organized forms – the problem here is that the AFL-CIO in order to succeed needs coverage and publicity; but they do not get it because of their nature. Students start protesting and they get so much attention comparatively. When this attention is transferred and the union members are overshadowed by these students, it does become a hurdle in their achievement of objectives.

Nike’s strong brand name was challenged a decade ago with several accusations. It is extremely difficult to develop a brand name in the first place and to maintain and manage it is really difficult. With such public accusations which everybody in the world is exposed to, the company needs to take severe actions to save its name. The accusation made in the early 1990s was that Nike’s production was unethical; the working conditions especially in countries such as China, Indonesia, and Malaysia were terrible and inhumane. The work hours were said to be very long and the pay was not enough to compensate for them. Also, the working conditions were physically challenging; also too many people were stuffed into one room with no cooling in hot weather. The managers and supervisors dealing with these workers were extremely abusive, both physically and verbally. They not only insulted and used abusive words for the workers but also beat them up very severely and cause the workers to be bruised and hurt and yet they had to work. This is the list of what is happening – how can this ever be justified by either commercial or political speech? When Nike, however, does try to justify it, it is commercial speech. This is because they are trying to convince the customers to buy their products by explaining that no activities of that sort are taking place in their production houses. The long-term implications of defense are not sustainable as the same things come up again and again unless one brings about a proper change. A proper change comes about only when the company understands what the problem is, accepts that there is a problem and then tries to find solutions to it. Long term implication of commercial is not that retainable – convincing can wear off and it is more like a one-time effect (Carroll & Buchholtz; 2008).

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References

Carroll, K., Buchholtz, A., (2008); Business and Society: Ethics and Stakeholder Management Authors; Edition7, Publisher Cengage Learning.

Everalt, D. (1999); Nike Inc.: Developing an Effective Public Relations Strategy.

Perle, S., (1989); “Morality and Ethics: An Introduction”, Skepticism in Ethics.

Seib, Patrick, Fitzpatrick, Kathy; (1995) Public Relations Ethics; Fort Worth: Harco

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