Nike And Asian Labour


     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.