Nike's CSR Policy - Ethical Issues and Dilemmas

NIKE – ETHICAL ISSUES AND DILEMMAS

INTRODUCTION

Nike has been dodging accusations of employing people in the developing and under-developed economies, at low wages and poor working conditions for a considerable period of time. Having tried course correction and public relations as a measure to salvage the bad image generated by the sweatshops that Nike is accused of running, Nike has undertaken massive efforts to overcome these hurdles. Herein we will analyze Nike’s international business operations with a critical eye over the ethical issues and dilemmas that this organization has faced while manufacturing its goods in foreign lands.

PROBLEM AREAS

There are a number of areas that are seen as weak points or links in this Nike case. We shall first highlight the problem areas and then dive into the ethical theories that are supposed to govern them. According to the Wikipedia dictionary, ethics is defined as a general term for the science of morality.^[1] While this branch of study can be further sub-divided into various categories, we have to remember that what is appropriate in a given situation may not be so among different circumstances and the decision of right or wrong is relative to its surroundings. Elaborated here are the issues and problems that stand out due to their ethical nature as issues or dilemmas faced by Nike and its operations towards its employees and customers as mentioned in the case study:

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Poor Working Conditions – In Nike factories, the laborers were provided with poor working conditions that were certainly below the norms accepted in the developed world. While lower standards of living may apply in the countries that have Nike factory contracts, the inhumanity of these conditions drives attention to Nike’s responsibility towards its employees. Considerable overtime and long working hours had to be endured by Nike employees desperate to remain employed in their country. An example states that Nike factory workers in Korea had to work for seventeen straight hours in silence. This indicates almost barbaric behavior on Nike’s part towards workers in these conditions.

Low Wages – Nike contracts with companies to do all of their manufacturing in developing or under-developed countries. While the wage levels there are lower than the ones in developed nations, Nike still fails to employ people at a rate that can sustain their basic needs. The wages provided are much lower than the wages needed and as such cheap labor is thoroughly exploited. Nike has attempted at correcting the problem and employing people at a rate at least equal to the minimum wages prescribed in the country.

Child Labor – Child labor laws in many countries are overlooked by Nike and children as young as 12 and 13 years of age are made to work long hours and treacherous conditions. Nike has taken steps to meet the starting age limit subsequently.

Operations in Countries with Union Restrictions – Nike has been known to set manufacturing efforts in countries like Indonesia and China that prohibit union operations. This leads to lack of revolt and protests that leave the employees with little choice regarding work conditions and wages. Ethically, it is hard to argue against these countries as their laws do not have provisions for employment governance. In fact these countries often do not have minimum wage requirements and abundant labor is put to use by companies like Nike for the absolute minimum.

Expensive Endorsements – While Nike has been continuously targeted by human rights committees, they have unceasingly maintained a high profile image by getting celebrities like Michael Jordan and Tiger Woods to endorse their products. Over five years, Tiger Woods is expected to earn 80-90 million US dollars of Nike money.^[2] Ethically it would have been more beneficial to engage a part of that money in Nike factory and employee enrichment.

Expensive Products – Nike sells its products at steep prices, while we all know that the products are manufactured in contracted factories on foreign lands for low costs. The cost of production being low leads Nike to generate massive profits from the sales revenues.

Cover-up Public Relations Efforts – Being involved in child labor initiatives was undertaken by Nike to handle the issue at large and also to rectify the public relations pitch for Nike. The actual problem is being pointed out as adequate wages problem as opposed to the child labor initiatives that seem like a cover up for the bigger issues plaguing Nike.

Lack of Development Work at Factory Locations – While one constantly hears stories of sweatshops and defense by Nike regarding its work force problems, one rarely hears of philanthropic activities adopted by Nike in the area of the factory location. For example, at Hershey, PA one hears of the development the company Hershey’s has done for the community. Likewise it reflects as selfish behavior from Nike in not supporting the causes faced by the community occupying Nike’s workforce.

Health Hazards in Factories – Skin and breathing problems are observed in factories that makes Nike products. Nike has to make sure that it performs by the standards set by OSHO in protecting employees from hazardous chemicals and processes in the manufacturing cycle.

ETHICAL THEORIES

Ethical theories can help rationalize certain decisions that Nike has made as a company and highlight the issues pertaining to its followed consequences. Let us now examine some ethics theories and observe the case of Nike in this light.^[3]

Egoism – This theory states that individuals or corporations have a right to guide their conduct placing ones own interest foremost in rational decisions. Through this theory one can justify the placement of profits or revenue generation as the high attained goal of an entity. In this regards Nike has played to the theory as far as possible. They have not only conducted manufacturing with cheap labor but also ensured that the factories do not earn even a little extra than they were supposed to. This theory states that every person that promotes self interest bring about social good. In this context we could see that while the founder of Nike, Phil Knight performed with self interest in mind, he was propelling Nike ahead by huge proportions. Doing so, he did manage to bring about the rise of one of the most well known brands in the world today.

Social Group Perspective – It is not only self that determines all decisions but the surrounding that forms the social group under which the individual or company resides. It is the norm or standard in social groups wherein an entity can determine the wrong or right in that particular case. For Nike this social group has become a collection of customers, shareholders, employees, foreign contractors and others. The perception of right and wrong is determined by these social groups that operate differently in different places. For example, while the minimum wage in Indonesia, Korea and China may be less that that in the United States of America, the standard of living there will meet the minimum wage requirements and Nike has to ensure that they abide by that.

Cultural Relativism – Every country has its unique culture that accompanies it. For Nike, a company that has a presence in many countries in the world, minding the cultural relevance can prove to be an effective means to growth. For example, while bribes are seen as a cultural norm in some countries, they are seen as unlawful in certain other countries. Society as a whole in certain countries is known to consider bribes as a normal occurrence, which for some countries is a crime. This culture makes or breaks certain laws in place and as long as Nike abides by these laws, in the respective country, and at the same time minds its home country standards, controversy for Nike will be minimized.

Utilitarianism – This theory works under the premise that the greatest good is for the greatest number. Herein it is the majority that counts above anything else. If only a few elements of the entity think that the decision is wrong, the decisions must be right which is what is said by the majority. In the case of Nike, the decisions that were enforced by the majority are responsible for the sustained controversy surrounding it. The board obviously took certain steps in clearing the controversies that have affected the company. Since these decisions are taken with the view of the company good in mind, with the majority of the people agreeing to it, the decision must be seemed as right.

Deontological Perspective – This view goes by the saying ‘do unto others as you would have them do unto you.’ The duty to make this world a better place is a duty that one has to take upon themselves, besides following certain obligations. For example, telling the truth is an obligation and that is seen as ‘right.’ In the same way for corporations, it is the giving back in return concept that needs to be perfected. The corporation is obliged to provide a good product and it is entitled to bring positive changes to its constituents.

Values Clarification^[4] – This ethical theory expects that one is familiar with ones own views, reasoning and rationale. It is for this reason that companies try to build cultures within the organization in the same way that Nike has evolved its corporate culture. Nike’s branding, products and apparel indicate its image and success.

ETHICAL DILEMMAS

Nike has faced ethical dilemmas in operations and manufacturing for a while now. The definition of ethical dilemma states that it is a situation wherein exists conflicts between moral imperatives and choosing one situation consequence over another can lead to compromising of what also seemed like a viable solution in the situation^[5]. Let us go over the ethical dilemmas that Nike has faced over its functioning.

Manufacturing Ownership – Nike chooses to contract its manufacturing to factories in foreign lands where the wages and conditions do not meet developed nation’s standards. Yet they have their products made there at low costs after enforcing their product controls. While they could manufacture these products in the United States of America, profitability of these products wins over providing the home country with employment and opportunities in the manufacturing segment.

Advertising Budgets – Nike has endorsed many athletes and celebrities like Tiger Woods and Michael Jordan paying them exorbitant amounts of money. While the brand has succeeded in maintaining an image of athleticism, it has compromised on how the money could have been used to better serve the country where they have their factories.

Public Relations – Nike has had to go lengths to protect its public image and had to employ many legal experts and public relations individuals. The dilemma occurs when Nike may have to admit to its mistakes but doing so would cost them greatly, hence the truth may have to be manipulated and then disclosed, which does not conform to ethical standards.

Employee Enrichment – With the profits that Nike generated from manufacturing products in foreign countries at low costs, a dilemma in front of them can arise from the fact that even if the country’s wage and standards are met they fall way below the US standards. While Nike can invest in employee welfare, it is not a norm in the country that runs their factories. Besides a lot of these factories are contracted to do Nike manufacturing and Nike as such is not obligated to conduct factory and employee welfare.

CONCLUSION

While Nike has faced severe criticism due to its manufacturing decisions, it as a brand and product has fought and sustained its success. Ethics experts will continue to question Nike in unfavorable ways, however when we apply the ethical theories that have relevance in the business world, we observe that Nike does its best to meet the requirements. This is especially evident when Nike made decisions to conduct independent audits and engage in human rights activities. On the other hand Nike faces ethical dilemmas due to its operations and these dilemmas will continue to exist in the world economy. Nike has gone with the route of foreign contracting in its earlier phase and has received tremendous criticism through it. Faced with its plenty of ethical dilemmas, Nike has managed to sustain the product, develop new products and continue to be a force to reckon with as a consumer brand.

^[1] http://en.wikipedia.org/wiki/Ethics

^[2] http://www.golftoday.co.uk/news/yeartodate/news99/woods12.html

^[3] http://www.mgmtguru.com/mgt499/TN2_PAGE3.htm

^[4]http://64.233.187.104/search?q=cache:ofLIUDDIiW0J:jan.ucc.nau.edu/~dgs2/theories.pdf+theories+in+ethics&hl=en

^[5] www.ethicsscoreboard.com