Hitting the Wall: Nike and International Labor Practices
The case of Nike’s conduct with respect to corporate responsibility entails several major problems. Several of these problems are linked to each other. One issue outlined in the case is worker’s rights. Nike outsourced the production of its sports apparel to third party companies operating in the developing world. These companies operated in countries like China and Indonesia where the governments neglected the worker’s rights in favor of encouraging foreign direct investment. Workers in these production plants were overworked, underpaid and forced to work in unsafe conditions. The companies suppressed any attempt by the workers to protest against these conditions, even going as far as killing labor activists. The worker’s wages fell below the set minimum wages in the respective countries and failed to meet the worker’s day-to-day expenses.
Another issue highlighted is corporate responsibility. Nike executives, led by Phil Knight, outsourced the production of their merchandise to developing countries that had cheap labor costs. By outsourcing, Nike was able to get ahead of its competition and establish itself as a major brand in the west. However, the companies that Nike was outsourcing to were flouting international labor regulation. The revelation of poor worker’s conditions in Indonesia and China sparked a wave of anti-Nike sentiment in the west. The issue of corporate responsibility comes in from the fact that Nike ignored the situation in their production plants. The company’s executives refused to take action and attempted the problem under the rug. They hired auditing firms and researchers who released reports that were largely favorable to Nike and exempted the company from any wrongdoing. The issue of corporate responsibility is the most dominant in this case. If Nike executives had done the right thing, workers would have been treated well in the production plants and the crisis could have been averted.
The issues of corporate responsibility and worker’s rights are related to each other. This is because the company’s decision to outsource its labor needs indirectly facilitated the hiring of workers who were then forced to work in substandard conditions. Nike was aware of the poor worker’s conditions. The company is particularly responsible for the issue of poor wages because they intentionally outsourced to the third party companies to exploit the wage structure in the third world. Additionally, Nike’s executives were responsible for making sure that all of the company’s workers were treated well, but they failed to do so. As they much as they wished to exploit the poor wages structures in the third world, they could have done something about the worker’s rights and safety but instead, they chose not to act.
One possible solution to this issue is to increase taxes for corporations that choose to outsource their labor, in a bid to take advantage of weak labor laws in the third world. This would make the companies reconsider this outsourcing and perhaps even force them to bring the production plants back to the United States and help provide employment. Another solution is to fine companies that fail to take responsibility for the actions of any third party companies that they are working with. As much as Nike could not take action directly, they could have included stricter stipulations in their contracts that would have helped improve the conditions of their workers. Fining the companies would be a better course of action because it only affects the company flouting the labor regulations. On the other hand, increasing the taxes would affect other companies that outsource labor but do so responsibly. If the U.S. government fines Nike for not taking action against the exploitation of its workers, then the company would be obliged to take action.
The main problem that needs to be solved in Nike’s case is corporate responsibility and the culpability of Nike’s executives in the worker’s exploitation and abuse. The first step towards addressing the problem would be to establish with certainty that Nike executives were aware of the situation in their production plants. However, this is difficult to prove. Therefore, the best course of action in establishing Nike’s culpability would be to prove that the company had been negligent in handling the issue of worker’s rights. By inspecting the plants, it would be possible to prove that the company had been aware that its workers were underpaid or that Nike could have, at least, found out but failed to take the initiative. The second thing that should be considered is whether Nike attempted to take action. Authorities would check to see whether Nike attempted to improve the conditions of the workers. It would also be necessary to check whether any form action taken was sufficient and not just taken to improve the company’s public image.
If culpability were proven, the best course of action would be to fine Nike. The company should be forced to abide by the regulations of the international labor organization and fined heavily should it fail to do so. Fines are the best solution because they affect only the guilty company and dent the company’s revenue directly. This would be better than increasing taxes for companies that outsource labor because doing so would affect companies that act responsibly. Nike’s corporate irresponsibility is proven beyond doubt. A study conducted by Tuck School of Business revealed that the company was paying the workers poorly to maximize profits and not because of economic constraints. The study revealed that workers in Vietnam were paid $1.67 per day while the sneakers they made retailed at $150 (Bartlett and Beamish 687). Nike’s culpability is obvious. Meanwhile, competitors such as Reebok outsource labor but do so responsibly. Having also faced media criticism, Reebok took action and adopted a human rights policy in 1990 (Bartlett and Beamish 683). The fact that Nike faced the same criticism but failed to take action for several years shows that the company was negligent and fully culpable for the situation in the productions plants, in Asia.
A final recommendation is that labor laws in the United States should take into account the actions of American companies that have operations overseas. These laws should be adjusted to make sure that companies such as Nike could be prosecuted under American law for any labor crimes that they commit in overseas production plants. This law would help make sure that these companies treat workers in other countries the same as they would American workers. Additionally, the new law would make sure that even though companies outsource their production to cut down on wages, they do not compromise on serious issues such as the safety and rights of workers. Finally, the American government should deter American companies from having financial operations, such as the outsourcing of labor, in countries where the governments allow companies to commit human rights abuses.
Bartlett, Christopher A, and Paul W. Beamish. Transnational Management: Text, Cases, and Readings in Cross-Border Management. New York, NY: McGraw-Hill Irwin, 2014. Print.