How should global corporations behave in the new international world order? What constitutes good corporatecitizenship in a world where the stakeholders are diverse and dispersed around the globe and where no clear or consensual rules and standards exist?These questions shape the behaviour of most multinational corporations (MNCs) today. Althoughmultinationals are eager to pursue the opportunities of increased global integration, they are increasinglyaware of the reactions which their strategies induce
both at home and abroad. Thus, they tread warily,lacking clear and agreed-upon definitions of good corporate citizenship.Through a case study of Nike, Inc.
a company that has come to symbolize both the benefits and the risksinherent in globalization
this paper examines the various difficulties and complexities companies face as theyseek to balance both company
performance and good corporate citizenship in today’s global world.
The Athletic Footwear Industry
The athletic footwear industry experienced an explosive growth in the last two decades. In 1985, consumers inthe United States alone spent $5 billion and purchased 250 million pair of shoes. In 2001, they spent over $13billion and bought over 335 million pair of shoes. Although the industry is highly segmented
by differentsports, models and price
the branded shoe segment is dominated by a few large companies (e.g., Nike,Reebok, Adidas). In fact, the top 10 footwear companies control over 70% of the global athletic footwear market. (See Table 1). Since displacing Adidas in the early 1980s and Reebok in the early 1990s, Nike hasbecome the largest and most important athletic shoe company in the world. (See Figure 1).
Since the 1970s, Nike, Inc. has been accused of using sweatshops to produce footwear and clothing items. Nike has denied the claims in the past, suggesting the company has little control over sub-contracted factories. Beginning in 2002, Nike began auditing its factories for occupational health and safety issues.
Nike has been accused of using sweatshops since the early 1970s, when it produced goods in South Korea, the People's Republic of China, and Taiwan. As these countries' economies developed, workers became more productive, wages rose, and many moved on to higher paying jobs. Nike found cheaper labor in the People's Republic of China and Vietnam, which prohibited labor unions. When workers demanded additional rights and benefits in these countries, the Nike factories closed and moved to a different location that would enable them to continue operating at a low cost.
Throughout the 1990s, Nike was criticized for selling goods produced in sweatshops. They originally denied claims against them. However, in 2001, Nike director Todd McKean stated in an interview that the "initial attitude was, 'Hey, we don't own the factories. We don't control what goes on there.' Quite frankly, that was a sort of irresponsible way to approach this. We had people there every day looking at quality. Clearly, we had leverage and responsibility with certain parts of the business, so why not others?" In 2005, protesters at over 40 universities demanded that their institutions endorse companies who use "sweat-free" labor. Many anti-sweatshop groups were student-led, such as the United Students Against Sweatshops. At Brown University, Nike went so far as to pull out from a contract with the women’s ice hockey team because of efforts by a student activist group that wanted a code of conduct put in place by the company.
Team Sweat is one of the largest groups that specifically tracks and protests against Nike. Team Sweat is "an international coalition of consumers, investors, and workers committed to ending the injustices in Nike’s sweatshops around the world" founded in 2000 by Jim Keady. While Keady was conducting his research about Nike at St. John’s University, the school signed a $3.5 million deal with Nike, forcing all athletes and coaches to endorse Nike. Keady publicly refused to support Nike and was forced to resign his position as soccer coach in 1998. Since resigning, Keady has done original research into the conditions in Nike's Sweatshops. He traveled to Indonesia and for a month lived among the Nike factory workers, surviving on $1.25 per day like they do (http://www.villanovan.com/news/jim-keady-speaks-out-against-nike/article_9e6f7512-e353-5b69-a10c-35747d476267.html)
Advocacy groups engaged in looking at the conditions of the factories in which Nike, Inc. products are made as a way to understand the problems more fully. Throughout the 1990s, Nike experienced rapid growth after they moved their primary branches of production overseas. Record breaking profits were reported and the number of factories increased to fulfill the consumers’ demand for Nike products. The employees were commonly the poor inhabitants of the area surrounding the factory looking for any sort of income. The heads of the factories were Nike contractors who often lived in America or Europe and did not have any sort of relations with their employees. The duty of supervision was given to an upper-level factory worker. The authority of the supervisor included enforcing rules the workers must follow and making sure that they were performing to optimal standards.
The findings of factory investigations show that the supervisor often oversteps their duties. The laws protecting the workers are ignored in favor of cutting costs and lowering health standards. This is possible because political leaders are paid off by factory supervisors in order to limit governmental interference. The leaders relayed messages to military and police units to overlook the conditions in factories so that the illegal environment could remain open and functioning. They also were warned to watch for signs of labor activism near the factories to prevent workers from aligning with one another for better conditions.
Women represent a large proportion of factory employees. Approximately 75 to 80% of workers are women and a majority of those are in their teens or early twenties. Factory jobs may require women to work long hours, ranging from nine to thirteen hours per day, six days a week. They are severely limited in the amount of time they can take off and are forced to work overtime on several occasions during the week. Although there are more women employed at the factories, they represent the minority in the higher paid supervisor positions.
The goals of transnational advocacy groups working on behalf of Nike factory workers are to allow workers to obtain higher wages, improve the working conditions of the factories, enable them to organization, and gain the respect of their employers. Global efforts have increased the information being spread about Nike sweatshop conditions. Countries such as the Netherlands, Germany, France, and Belgium, where no Nike factories exist, have branches of organizations that work to better factory conditions. In countries like Indonesia, Thailand, Mexico, and Cambodia, where factories are common, non-governmental organizations push anti-Nike efforts by informing the public through the media of the work environment within the plants. Several well-known advocacy groups are the Global Exchange (United States), Christian Aid (United Kingdom), The Ethical Shopper (New Zealand), and the Clean Clothes Campaign (Europe).
There are several types of advocacy groups, ranging from human rights organizations, to religious groups, to labor associations. Each has different motives for supporting the factory workers but they work together in order to improve the conditions for factory workers. Advocacy groups function through donations, fundraising, and in some cases governmental funding. A majority of them create informational hand-outs that they distribute to citizens through the mail or at events. There has been a rapid increase in the use of the Internet as a means of distributing information between advocacy groups. The spread of news across national boundaries allows the groups to mobilize and unify campaigns.
The main focus of political efforts within the countries that house the factories is an increase in the minimum wage for workers. In Indonesia, other legislative efforts included limits on the number of hours a person can work per day, mandated rest periods, minimum age requirements, and a maternity leave for women. Restrictions on labor activism and labor unions limits the amount of unification workers can develop within the factories. When laws in Indonesia were lifted in the late 1980s, factory workers and non-governmental organizations staged many strikes at Nike factories protesting the poor working conditions. The organizations also worked with international allies such as the United States to bring about awareness in foreign, and often wealthier, countries. These allies provided aide for the workers who were not paid while on strike. The non-governmental organizations within the country have less of an impact on their government’s view of the protest, but the groups outside of the country have a stronger political pull because of their wealth.
William Stepp, of the libertarianMises Institute, argued that minimum wage is arbitrary and causes unemployment. Stepp continues further, stating that the workers were not exploited and clearly received benefits from working at the factories "by showing up for work every day, and by accepting a paycheck based on mutually-agreed-upon terms." In addition to pay, these benefits include free annual physicals, uniforms and clothing, a clinic and health service, a canteen stocked with food, recreation and entertainment, and transportation. However, Stepp did criticize Nike for its association with the World Bank, which he says is the real exploiter of third world countries.
A study by the Nike-founded Global Alliance for Workers and Communities found that 70% of Nike factory workers in Thailand rated their supervisors as good and 72% thought their income was fair. In Vietnam, most workers "thought the factory was a 'good place to work' and planned to continue at least three years" and 85% of those polled felt safe there. Further, they felt that the factory offered a more stable career and higher income than farmwork.
The addition of factories to poor Asian countries has allowed them to increase their revenue by providing jobs to previously unemployed groups of citizens. People flock to areas where they know a factory is going to be built in order to earn a wage, even if it is small. Human migration to factories is common among workers in order to be close to the factory. Migrant workers frequently send their wages back to their families in their home country, which further spreads the money brought about by the factories. These employees are willing to do work that citizens of first world countries are not, especially for low wages. Since most of the economies of the small, poor countries were centered around their market system, the introduction of large factories owned by a wealthy corporation greatly increased their flow of money.
Nike began to monitor working conditions in factories that produce their products. During the 1990s, Nike installed a code of conduct for their factories. This code is called SHAPE: Safety, Health, Attitude, People, and Environment. The company spends around $10 million a year to follow the code, adhering to regulations for fire safety, air quality, minimum wage, and overtime limits. In 1998, Nike introduced a program to replace its petroleum-based solvents with less dangerous water-based solvents. A year later, an independent expert[who?] stated that Nike had, "substituted less harmful chemicals in its production, installed local exhaust ventilation systems, and trained key personnel on occupational health and safety issues." The study was conducted in a factory in Vietnam.
Nike created a non-governmental organization called the Global Alliance for Workers and Communities that became aligned with several other groups including the International Youth Foundation. The organization releases reports about the corporation and its plans to improve current conditions. The Global Alliance received backlash in 2001 when a report about the Nike Inc. did not include recent events such as strikes, worker terminations, and the lack of collective bargaining in their Indonesian factories.
Between 2002 and 2004, Nike audited its factories approximately 600 times, giving each factory a score on a scale of 1 to 100, which is then associated with a letter grade. Most factories received a B, indicating some problems, or C, indicating serious issues aren't being corrected fast enough. When a factory receives a grade of D, Nike threatens to stop producing in that factory unless the conditions are rapidly improved. Nike had plans to expand their monitoring process to include environmental and health issues beginning in 2004.
Monitoring has become the most popular method of enforcing regulations in Nike factories. After studying the results of the audits, this system has been found to be not as effective as authorities expected. When studying the monitoring process, it is important to look at how the monitoring is done, who takes part in it, and the purpose of the check. The person conducting the visit must go in without a bias towards wanting or not wanting to find any flaws in the factory. Inspectors associated with the company have been found to hide errors and those with non-governmental organizations or other interest groups have exaggerated findings. Greater involvement of higher-level Nike employees such as those working for the corporate system is seen as a possible solution to labor issues. At the design level, the intricacy of patterns on Nike products has been controlled in order to prevent factory workers from being unable to complete the merchandise. By diffusing benefits to the factory workers from a powerful position, Nike is able to create a better working environment in production.
Common form of protest to the insufficient factory conditions by consumers include protests, hunger strikes, and boycotts. Several universities, unified by the Worker Rights Consortium, organized a national hunger strike in protest of their school using Nike products for athletics. Feminist groups also mobilized boycotts of Nike products after learning of the unfair conditions for the primarily female workers. In the early 1990s when Nike began a push to increase advertising for female athletic gear, these groups created a campaign called "Just Don’t Do It" with the goal being to inform women of the poor conditions of the factories where women created Nike products.
The spread of information in regards to the factory conditions has been spreading more rapidly since social media has become a method of international communication. Websites such as Facebook and Twitter have allowed people from distant countries to share their ideas and collaborate with each other. Advocacy groups commonly have groups on social media sites that allow their members to post about upcoming events and to keep members informed about the activities of the group. In a Vietnamese Nike factory, a worker accused his employer of striking him. After contacting a factory advocate, the worker was interviewed by a news station and the video eventually reached an ESPN affiliate in Vietnam where it was viewed by millions of watchers throughout the world before officials in the United States had formally heard of the incident.
In 2000, Nike chairman Phil Knight planned to donate $30 million to his alma mater, the University of Oregon. When the University of Oregon joined the Worker Rights Consortium (WRC), Knight revoked his donation because the WRC has been blocked by Nike from inspecting its factories. The Fair Labor Association (which was co-founded by Nike in 1980s) is supported by Nike and the United States government, while the Workers Rights Consortium is not. There has been debate between the university and Knight about the legitimacy of the FLA and which labor monitoring organization is more effective.
Another dispute arose from Nike’s personalization system, NIKEiD. MIT graduate Jonah Peretti attempted to order a pair of shoes from Nike. He chose to have the word “sweatshop” embroidered on them. Nike sent Peretti an email explaining that his personalization request could not be granted for one of four things: it contained another party's trademark or other intellectual property, the name of an athlete or team Nike does not have legal right to use, profanity or inappropriate slang, or was left blank. Peretti replied, expressing to Nike that his personalization did not contain content violating the aforementioned criteria. Nike responded by allowing Peretti to alter his personalization and Peretti chose not to change it and cancelled the order. Ironically, the publicity led to Nike selling more of the personalized shoes.
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