Nike: The Underlying Ethical Issues
The definition of ethics is defined as, “the discipline dealing with what is good and bad and with moral duty and obligation, ” as stated by Merriam-Webster. Ethics and morals are at the forefront of most company’s’ mission statement as it helps project their image to others. Ethics and morals can be seen within corporate social responsibility programs that companies may implement as a way to provide a better understanding of how the company recognizes its responsibility to society. In recent years, this has become a prominent subject of interest to many consumers due to the rise in sexual assault allegations, race and gender discrimination, and racial bias issues in the workplace. There have been many companies that have seen moral and ethical issues plunge them into national and local news headlines, however one company that stands out in this list is Nike.
Nike, over the past two decades has been prominently in the news for issues relating to their manufacturing procedures, work environment, pay, and advertising. First, a brief history and background of this global shoe company. Nike was founded back in 1964 originally as a reseller in the United States of Japanese shoes. The company’s headquarters is in Beaverton, Oregon with a total managed employee base of about 70, 000 employees worldwide. Nike experienced extreme growth from the earlier 1970’s onward, allowing them to go public in the 1980’s. This athletic shoe company over the years has endorsed many well-known athletes to represent its’ brand, such as; Lebron James, Kobe Bryant, and Michael Jordan to name a few. By endorsing these athletes, they were able to drive growth and revenue even higher, allowing the company to expand its focus to other areas. These areas included athletic apparel, equipment, and many sports accessories. By expanding into these areas, Nike was able to become exclusive provider of athletic wear and custom shoes to professional, collegiate, and high school sports leagues which expanded their visibility.
Nike has a total of 339 United States retail stores and 592 international retail stores as of 2016 according to Craig Smith of DMR Business Statistics. This company represents the “American dream” and continues to be a success story, yet due to the fast growth and success of the company, there came many ethical and moral issues.
One of the first issues that arose during the growth of the company was the wage discrepancy and working conditions of the manufacturing facilities. In the case, “Nike in Southeast Asia” it became prominent that there was an ethical and moral issue regarding the treatment and wage discrepancy between foreign workers in the manufacturing facilities (Indonesia, Vietnam, and China) and wages of American workers. One can argue that the cost of living is drastically different between the countries mentioned, however ethical and moral treatment should be the same no matter where one is located. Even though the company was grossing upwards of $10 billion dollars at the time, the workers’ wages in those foreign countries mentioned did not increase and the conditions stayed the same. This was apparent by the following excerpt from the case, “In the early 1990s, young Indonesian women working in plants under contract with Nike started at 15 cents an hour. With mandatory overtime, which was often imposed, more experienced workers might make $2 for a grueling 11-hour day”. When Nike was criticized for this, they repeatedly denied any responsibility and pushed the blame on their contractors who handled the manufacturing facilities in the foreign countries. The conditions were overlooked due to lack of regulations in the underdeveloped countries that houses the facilities. One could argue that large corporations like Nike, are coming in and giving jobs to thousands of people who would otherwise be poor and have no source of income.
Since the initial public criticism of the company’s moral ethics towards foreign workers, they have implemented a department that specifically focuses on improving and managing working conditions at these facilities. This did not stop the public from criticizing and attacking Nike for how they produced and manufactured their apparel and shoes. A statement by then CEO, Phil Knight showed how society viewed Nike’s practices, “The Nike product has become synonymous with slave wages, forced overtime, and arbitrary abuse, " Knight said. "I truly believe the American consumer doesn't want to buy products made under abusive conditions". This was the turning point of how Nike operated as a company from an ethical standpoint. The Fair Labor Association was born, this was a group of companies, human rights, and labor representatives that was implemented as a way to independently monitor and institute a code of conduct due to the allegations against Nike.
Internal auditing done by Nike also increased, helping minimize unfair working conditions and wage discrepancies. Nike implemented requirements regarding raising the minimum age and wages for workers, as well as, a list of all of the factories whom they did business with. This transparency allowed the company to slowly regain trust and its image with consumers and its employees. Nike has also created and posted a Code of Ethics policy within their Sustainability Policies page on their website as a reference. Nike has a CSR.
