FREE ESSAY ON SHOPPING WITH A SOCIAL CONSCIENCE: THE BUSINESS PRACTICES OF NIKE

SHOPPING WITH A SOCIAL CONSCIENCE: THE BUSINESS PRACTICES OF NIKE

Do most consumers shop with a "social conscience?" (Think about it. Are you aware of where
the products you purchase are made and under what conditions they are manufactured?) When
consumers buy products, without knowledge of their origins, they could easily be
breaching their own code of ethics. This is clearly seen in an assortment of industries.
Each year hundreds of companies employ foreign labor for low wages and in terrible
working conditions. For example, much public attention had been brought to Kathy Lee
Gifford and her "sweatshops" overseas, as well as other unfair labor practices in third
world countries. One of the greatest participants in this mistreatment of workers is the
Nike Corporation. To earn the maximum profit for their products, Nike exploits thousands
of workers each year by offering them diminutive wages and the worst conditions to work
under. When famous athletes endorse Nike and consumers continue to purchase their
products, they only encourage and support these inhumane practices causing them to
virtually go unnoticed (Greene, 1998).
Last August Donna Greene of the New York Times conducted an interview with Dr. Fredrica
Rudell, Associate Professor of Marketing and Chairwoman of the Department of Marketing
and International Business at Iona College in New Rochelle, on the subject of shopping
with a "social conscience." Dr. Rudell, who has chaired the Environmental Concerns
Committee of Iona's Peace and Justice Program for sixteen years, believes that each time
a consumer buys a product he or she casts a "vote for the company that made the
product..." (Greene 1998). Dr. Rudell points out that companies respond well to what the
consumers have to say, citing the environmental and health movements as examples. The
Nike Corporation, unsurprisingly, was mentioned several times during the interview. She
criticized their labor practices and pointed out that until the public pressured Nike to
change their ways, nothing would happen. I believe that more of the public pressure Dr.
Rudell discussed needs to be put into action until Nike factory conditions are brought to
humane standards (Greene 1998).
Indonesia is one of the main locations for these factories, as well as the rest of
Southeast Asia. In these countries the minimal working age is fourteen, as opposed to
sixteen in the United States. Even at the age of sixteen, though, the jobs one can
perform in America are limited. Nike voluntarily made an agreement to only hire workers
age sixteen and up. Despite this publicly announced agreement, Nike continuously had many
children ages fourteen and fifteen working in their factories. In an interview with film
producer Michael Moore, Nike founder and CEO Phil Knight was not even aware of what his
company's labor practice regulations were. Nike's Director of Labor Practices, Dusty
Kidd, had to brief Mr. Knight on their policy in the midst of the interview. If the
company CEO does not even know the labor practice regulations, how can the institution be
following these rules at lower levels ("Nike's New Labor," 1998,pA18)?
Recently, in response to the pressure put on Nike by the media, human rights activists,
and concerned consumers, the minimum working ages were finally raised. At a press
conference in Washington on May 12, 1998, Nike Chief Executive Phil Knight announced that
the minimum age requirement for workers in shoe factories was going to be raised from
fourteen to eighteen and the minimum age requirement for the apparel factories from
fourteen to sixteen. Although these changes are a major step in the right direction,
these new regulations do not apply to current employees. The fact that this regalia does
not apply to the present staff means that there are still children under the ages of
sixteen and eighteen working in the factories. Nike only increased the age limits in an
attempt to appease critics and human rights groups. Their image was beginning to tarnish,
so Nike had to take action (Cushman, 1998, pD1).
The labor rights organization, Global Exchange, has harshly criticized Nike's work
practices for several reasons. Ninety-seven percent of Nike's workers are in poor, third
world countries. Most of these laborers are women and children who work for around $0.15
and $0.20 per day. Companies in Asia paid workers in China and Vietnam $1.60 a day and
workers in Indonesia less than $1.00 a day, when at least $3.00 per day is considered the
minimum living wage. Medea Benjamin, a spokeswoman for Global Exchange commented, "These
factories are sweatshops. They're clean, well-lighted sweatshops, but they're still
sweatshops" (McCall, 1998, p15). Until public pressure was applied to Nike, women worked
seventy-seven to eighty four hour weeks in Korean factories for mere cents an hour
(Greene, 1998). This has occurred in part because Nike refuses to manufacture in the
United States. They have not done so since 1984. According to Nike's own research, if
they would begin manufacturing in the United States, the price of shoes would raise one
hundred dollars a pair. Mr. Knight said that his main objective has been to give "the
American consumer an assurance that those products are made under good conditions"
(Cushman, 1998, pD1). American consumers could never be convinced of this without a wage
increase and overtime hour decreases (Cushman, 1998, pD1).
On Tuesday March 23, 1999, Nike raised its entry-level pay by $1.70 per month for
Indonesian workers. This pay increase amounts to Nike spending a total of $37.14 per
worker per month. This change only affects twenty five percent of the seventy thousand
Indonesians that work for Nike. This change came only when the government expressed
serious concern over the affects of the Asian financial crisis in their country.
Coincidentally Nike's wage increase began on April 1, 1999, the same day the Indonesian
government implemented a nation-wide mandate to increase minimum wages. This pay increase
also came shortly after Nike announced that it earned $124 million (or $0.44 a diluted
share) during its third quarter. Ever since the Asian financial crisis has been spreading
over the East, more and more Asians have been willing to take grim sweatshop jobs. These
jobs have actually become the aspiration of the people living in the slums of Indonesia
and Thailand (Kristof, 1998, pA1). The recent surge of unemployment caused by the
financial dilemma has caused the employees to lose their main weapon in the battle for
better conditions. Now desperate for jobs, the people cannot afford to be picky about
their working conditions and wages. Even the measly wages and hazardous conditions
offered in the sweatshops are better than the fate of living unemployed in the slums
(Kristof, 1998, pA1).
A report from the Asian American Free Labor Institute in June of 1995 found that working
conditions in factories that manufacture Nike products repeatedly have workers laboring
for extremely long hours. Several situations proved that Nike nearly forced the workers
to participate in overtime (which is most often unpaid). In September 1996 the Indonesian
Legal Aid Institute (LBH) countered arguments by Nike spokespeople by showing concrete
proof of overtime abuse. The LBH presented and Indonesian woman's pay slip for August
that showed she had worked and average of four and a half-hours of overtime day (Connor &
Atkinson, 1996). An Australian researcher, Peter Hancock, investigated Nike factories in
West Java and found that they require workers to work twelve hour shifts everyday. In
addition, they only receive two days off per month. These conditions are terrible to
begin with, but the worst part is that they are basically "forced overtime hours" (as
cited in Connor & Atkinson, 1996). Mr. B. Athreya did a report on the conditions in
factories making Nike sports shoes for the Asian American Free Labor Institute (AAFLI) in
1995. Athreya found that workers who did not show up for overtime were given ludicrous
punishments. As he said, "senseless punishments, such as having to apologize personally
to everyone in the section for not having shown up, or having to stand at attention, or
to run around the Nikomas compound" (as cited in Connor & Atkinson, 1996).
Besides the exhausting number of working hours, most Nike employees go home to even worse
surroundings. Nike provides these living quarters that often times are worse than the
average Indonesian village. Double the maximum number of people live in these company
"dormitories." Around sixty to seventy percent of workers live in these housing projects:

Each building consists of a row of rooms, and each room has a door opening out onto a
pathway. Each room holds a dozen people and has six bunk beds....Water for washing and
bathing is available from outdoor wells....Drinking water is scarce. Drinking water is
provided by the company once in three days....If the water runs out before three days,
the workers have to buy more themselves (as cited in Connor & Atkinson, 1996).
The dormitories are not the only places to yield horror stories. The AAFLI reported that
at several South Korean shoe factories company nurses said that severed fingers are so
common that they throw them out in the trash heap. The Observer in London reported in
December of 1995 that an interview with a village head in Nikomas revealed that a young
woman had collapsed from heat exhaustion in the middle of the day. Instead of taking her
for medical treatment, she was laid out in the workplace mosque. Later when they realized
the girl had never regained consciousness, she was then taken to the hospital, where she
died. Most of the time workers must go without medical treatment because the company is
not willing to pay for health benefits or any type of care. 
It is quite shocking that such a well-known and well-respected company would take such
actions against other human beings. Why aren't immediate actions being taken to correct
such horrid mistakes by this super company? It seems that Nike's neglect of
responsibility is the key to their success. Nike's own CEO summarized it best, "It's not
the company's responsibility. We don't pay anybody at the factories and we don't set
policy within the factories; it is their business to run" (Katz, 1994, p206). When
attacked in the media, Nike has often used this argument (that they aren't responsible
because they don't employ the workers). But this is not a valid excuse because Nike
itself commonly takes the other side of the issue. Phil Knight once said in a 1992
article in his hometown newspaper, The Oregonian: "We do accept responsibility for the
working conditions in factories we contract with to make our products, and we have tried
to upgrade both the quality of life and the skills of the employees working in 'our'
factories. Nike's foreign factories generally offer the highest pay and the best working
conditions of any athletic shoe factory in the particular country" (Knight, 1992, p19).
This statement is contradictory in many ways. Wages and conditions are approximately
equal from factory to factory throughout Asia. Also most of these factories produce
several brands at the same time. Therefore one could not distinguish Nike's foreign
factories from those of another brand name.
Large companies like Nike should learn to take responsibility for all matters involving
their products. Whether or not they hire the workers in these factories, the laborers are
making Nike products. Therefore it is Nike's social responsibility to make sure wages and
conditions are improved. It would not be extremely expensive or difficult for sneaker
companies like Nike to improve workers wages. In the May 3, 1995, issue of the Washington
Post, the costs going into a pair of $70 Air Pegasus was broken down (see attached
table). It was found that only $2.75 or four percent of the price paid by the consumer
was the cost of production labor. Therefore wages for production could be easily
increased without adding much cost to the shoes. If wages were doubled and the extra cost
was passed straight to the consumer, it would add no more than the cost of a pair of
shoelaces. This would be a $4 cost on a $100 pair of shoes. In actuality, Nike could go
as far as quadrupling the wages of workers and not even raise the cost of the shoes $10.
Consumers would hardly notice, but it would have a huge impact on Asian workers and their
families. Another good idea originates from John Harrington, a California investment
manager who oversees a $100 million fund of socially responsible companies. Mr.
Harrington suggests that Nike solve its problem by doubling the $0.80 a day wages of its
Indonesian workers. The money for doubling wages could easily be collected by cutting $20
million out of Nike's $1.3 billion advertising budget, or less than two percent of it
(McCall, 1998, p2). Harrington was quoted as saying, "I think that the publicity they'd
receive from that would be tenfold [the cost of doing it]" (McCall, 1998, p2). But
Harrington's proposal was overwhelming dismissed.
Companies such as Nike cannot continue to ignore the exploitation they are carrying out
everyday. Despite their minimal attempts to improve conditions in Asian factories, Nike's
workforce faces dangerous labor daily for too many hours and not enough pay. The
corporation needs to take responsibility for its actions and stop violating human rights.
If consumers could develop more of a social conscience and put more pressure on companies
like Nike, perhaps more positive actions would be taken. The pressure put on Nike by the
media, human rights groups, and consumers has made some small improvements. More action
needs to be taken in this matter in order to stop the suffering in Southeast Asia.
Consumers who become more committed to the cause of saving human lives could easily
institute a boycott of Nike products to apply more pressure to Nike. Everyone should
develop a deeper social conscience pertaining to their purchases and be more aware of
what is going into the products they buy. The purchases consumers make effect millions of
workers worldwide and their well being. The actions shoppers make to support or attack
Nike and other companies like Nike, make all the difference. When shopping, one should
try and remember the thoughts of Dr. Rudell and the people that are effected by their
decisions. (Do you know where your purchases were made and under what conditions?)
The Cost To Make A Pair of Shoes
In the table below, the cost of a US $70 pair of Nike "Air Pegasus" shoes is broken down
into its component parts. The data was compiled from research done by the Washington Post
newspaper. They used information from Nike, the US Customs Service, a large national
retail chain, the Athletic Footwear Association, industry consultants and executives. All
costs are in US dollars. (Washington Post 1995) I found this information at a human
rights group page, www.caa.org.
Where the money goes... How much of it goes there...
Production Labor $2.75
Materials $9.00
Rent, Equipment $3.00
Supplier's Operating Profit $1.75
Duties $3.00
Shipping $0.50
Cost to Nike $20.00
Research and Development $0.25
Promotion and Advertising $4.00
Sales, Distribution, Administration $5.00
Nike's Operating Profit $6.25
Cost to Retailer $35.00
Retailer's rent $9.00
Personnel $9.50
Other $7.00
Retailer's Operating Profit $9.00
Cost to Consumer $70.00
Bibliography
Bibliography
Atkinson, Jeff and Connor, Tim. (Nov 1996). Just stop it. Community Aid Abroad. 
[Online Civil Rights Group]. Available: http://www.caa.org.au/campaigns/nike/
Becklund, Laurie and Stasser, J.B. (1993). Swoosh: The unauthorized story of Nike and 
the men who played there. New York: Harper Business. 
Bingle, Gina. (1998, Jan 30). Nike's ethics officer will 'do the right thing'. Puget
Sound
Business Journal, 18, 28-31.
Coleman, Zach. (1998, Oct 9). Young does follow up on Nike Vietnam factories. Atlanta 
Business Chronicle, 21, 41-43.
Cushman, John. (1998, May 13). International business, Nike pledges to end child labor 
and apply U.S. laws abroad. New York Times, pD1.
Dorman, Peter. (1996). Markets and morality: Economics, dangerous work, and the value 
of human life. Cambridge: Cambridge University Press.
Editorial desk. (1998, May 18). Nike's new labor practices. New York Times, pA18.
Greene, Donna. (1998, Aug 16). Q/A Dr. Frederica Rudell- Shopping with a social 
conscience. New York Times, pD1.
Katz, Donald. (1994). Just don't do it: The Nike spirit in the corporate world. Holbrook:

Random House.
Knight, Phillip. (1998, Aug 1). Global manufacturing. Vital Speeches of the Day, 64, 
637-641.
Kristof, Nicholas. (1998, Jun 15). Asia's crisis upsets rising effort to confront blight
of 
sweatshops. New York Times, pA1.
McCall, William. (1998, Nov 9). Nike battles backlash from overseas sweatshops. 
Marketing News, 32, 14-17.
Moore, Thomas. (1996). The disposable workforce: Worker displacement and 
employment instability in America. New York: Walter de Gruyter Inc.
No author. (1995, May 3). Why it costs $70 for a pair of athletic shoes. Washington
Post.