Nike: From Sweatshops to Leadership in Employment Practices - Case Study Example

Ethics can be defined as making decision between right and wrong. When Nike started a massive international expansion plan the company should have realized that the labor conditions of many third world countries were flawed to begin with. When the firm entered into manufacturing contracts in foreign nations the company needed to emphasize to the contractors the importance of business ethics. Each contract should have included a code of conduct that the contractor had to follow. In order to put pressure on the contract to comply with the ethical standards and code of conduct of the company each contract should have included a termination clause in case of non-compliance with the code of conduct and ethical expectations of the company.

“A code of conduct is a company's voluntary belief in a set of morals, standards and proper behavior for its operations, enforced by the business's leaders” (Ehow, 2011). The company could have prevented the existence of sweetshops if the contractor would have felt that doing so put at risk the value of the contract due to the possibility of immediate cancellation. The use of an ethics training program would have done wonders for Nike back in the late 1990’s. . The program should have reiterated that Nike is completely against the use of child labor.

During the seminar the managers would be force to sign several documents that would protect Nike against any liability. For instance the manager would sign a cero child labor tolerance clause which stated that the contractor would lose their manufacturing contract if even one case of child labor occurs associated with the Nike production and it would have to pay a $10 million fine. The ethics program would also include certain clauses to prevent contractors from relieving themselves of responsibility.

Nike should have made it illegal for a contractor to subcontract the work that Nike hired them to do. Nike could have benefited a lot from the use of the ethics audit since its implementation could have prevented the company’s sweatshop scandal. In order to determine the effectiveness of an ethics program firms must perform ethics audit. The ethics audit is typically perform by another firm. Ethics auditing is used to determine the impact of a firm’s policies in its internal and external environments.

The use of ethics audit could have helped Nike identify the vendors that were running illicit operations that violated human rights and governmental employment laws. The ethics audit is a component of the social audit. A social audit is composed of customer relationship, employee relations, environmental policies, ethics program, corporate governance, and community involvement. The ethics audit includes an assessment of the ethical and legal aspects of the business. Nike got into deep waters with the general public due to the fact that the company did not realize that sweatshops were being financed with Nike’s money.

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