Ethical Processes Within Companies Nike - Essay Example

and Section # of In the 1900s, the company faced allegations for using child labor in the third world countries for production. Even though Nike took measures to reduce the practice, there remain critics who accuse the company of still following the practice and Nike must still respond to them promptly and effectively. THE CRICISMS The criticism revolved around countries such as Cambodia, Indonesia and Pakistan where under aged children were being exploited in the production of soccer balls, athletic sneakers, and other Nike products. Indonesia A labor advocate in Indonesia blamed the company that children, under the age of 16, are being employed by Nike in the production of their athletic sneakers (Harsono, 1996). This was not the first time somebody has raised a voice on this issue. An American lobbying group had criticized the company with the same practice earlier. Indera Nababan, member of the Yakoma, a nonprofit organization in Indonesia, also said that the company pays the under aged employees with a basic minimum wage of 5,200 Indonesian rupiah, equivalent to US $2.17, that is barely enough for them to survive and show up at work the next day. (Harsono, 1996) Cambodia Another instance of the was seen in Cambodia where Nike, a company which offers millions of dollars worth of sponsorship deals, was caught having children, as young as 12 years old, as employees. These children were being paid a mere 31 pounds a month. This evidence was caught on tape by BBC journalists filming undercover at the Nike factory in Cambodia. Moreover, a child was found having false papers as a proof of age to get the job. (Johnson, 2000) NIKE’S RESPONSE Nike responded to the problem promptly and took bold steps to deal with the criticisms. Minimum Age in Indonesia In response to the allegations that were made regarding the underage employment in Indonesia, Phil Knight, CEO of Nike, declared a set of policies that were going to be adopted by Nike as code of conduct (Connor, 2001). These included setting a minimum age of 18 years for employment in the footwear factory in Indonesia. Also, the company promised to meet U.S. Occupational Safety and Health Administration’s (OSHA) standards in the work environment. Moreover, the employees were promised to be given education of high school equivalent courses in the factories. These policies were enough to change the picture of child labor Indonesia. The decision of minimum age was widely considered to be a brave step by Nike to eradicate child labor, at least from its domain. Cambodia Factory Shut Down Nike took another bold step and pulled out its factory in Cambodia after being stamped with the child labor scandal. Following the allegations, Nike management in Britain initiated an investigation of their own to find out how much truth there is in the accusations. Alongside this, spokespersons for Nike communicated through the media and informed them of the steps it was undertaking. (Johnson, 2000) The spokespersons for Nike said that their investigation did find them some traits of child labor in the factory. They also highlighted that the factory was already being kept under a check because there had been reports of using too much overtime. Hence, they made up their minds to pull out of the factory. Moreover, to show their gratitude for the children who were deprived of their work after the factory was pulled out, Nike decided to continue paying wages to them. (Johnson, 2000) Nike’s Confessions Nike admitted to the problem of child labor being practiced in its factories in different countries. However, spokespersons also stated that eradicating the practice completely might not be as easy as it seems. Philip Knight, chairman of the company, had been receiving reports and being bombarded with criticisms about very young children being made to work in Nike factories in countries like Pakistan, Cambodia and Indonesia. He responded to these allegations by taking a series of steps that involved admitting to the practice and convincing the critics that it was happening accidentally. He clearly stated that the issue of child labor is of utmost importance for the company. (Boggan, 2001) Knight stated that the companys minimum age requirements were the highest in the world with a minimum age of 18 required for employment in the footwear sector and 16 required for apparel and equipment. He further justified that in countries like Bangladesh and Pakistan, it is very easy to get fake documents made and falsify the age. Therefore, it becomes very difficult to verify. Nike imposes strict conditions in the contracts with the factories abroad but admitted that in some cases, these conditions were not being properly adhered to. For instance, the company’s outsourcing in Pakistan’s city of Sialkot proved to be disastrous for its image. The factory in Sialkot was supposed to produce good quality footballs and provide a good working environment for the employees. Instead, the factory sub-contracted the operations to local villages and under-aged children were made to work in the process. (Boggan, 2001) ANALYSIS OF NIKE’S RESPONSE According to Jim Collins, every great company can fall, and there are five stages of decline that it might experience. The five stages are: 1. The Hubris of Success 2. Undisciplined Pursuit of More 3. Denial of Risk and Peril 4. Grasping for Salvation 5. Capitulation to Irrelevance or Death A company can recover from any of the first four stages but not the fifth one. Nike’s ethical dilemma could be related to Stage 2 of the five stages. Nike is a gigantic company with its network spans over tens of countries throughout the world. It was, perhaps, the undisciplined pursuit of more that the company experienced in the 1900s attempting to expand and become the market leader in the industry. This expansion that comprised of outsourcing, licensing and contracts with different organizations away from the hub in Oregon, weakened its management capabilities. The company could not effectively supervise and monitor its operations in the other countries and therefore ended up being the target for allegations and the ethical problem of child labor. This could have affected the brand image of the company massively as labor parties and non-profit organizations would have labeled and portrayed the company of being hungry for profits and showing no ethical consideration for the human resource it employs. However, the company did not remain in “Denial of Risk and Peril” for very long. CEO Phil Knights took a note of the problem and addressed it in a timely manner. He realized the disastrous consequences that not addressing the issue would cause. Instead of the expansions and outsourcing bringing in more revenues for the company, this ethical issue could bring in a bad reputation for the company and jeopardize its revenues. Phil Knights, as well as other spokespersons for Nike, remained on their toes. They communicated effectively with the stakeholders and took important steps to curb the effect of the allegations. If they had delayed the response that they gave to the stakeholders and remained in denial of the problem for too long, they could have ended up entering stage 5 and would not have been able to recover. CONCLUSION Nike did a great job in curbing the effects of the criticisms of child labor in the late 1900s and early 2000s. However, it is evident from this paper that, as viewed by Trevino and Brown, managing the ethical processes within companies are not simple. Nike Inc. is one of the most successful companies in the world. Its management practices set a bench mark for many companies in the industry. Even then, Nike faced difficulties in managing its operations overseas and became the target of child labor allegations due to its inefficiency in managing ethical processes. Despite the fact that the company adopted many new policies and procedures to convince the stakeholders and media that child labor practices in the company were accidental and not intentional, it still faces condemnation by the critics for not following its code of conduct effectively. A recent allegation includes exploitation of under aged children in the production of Nike goods (Radio Free Asia, 2009). This proves that ethical processes within companies are not simple at all. It involves a continuous effort in terms of supervision and monitoring of the internal processes of the company. And in case allegations are raised, they should be responded to promptly and effectively by the company’s spokesperson, just like Nike did, to make sure that their brand image is not deteriorated and the customers are told the company’s side of the story. This would help develop trust between the customers and the company and sow seeds for success in the long run. BIBLIOGRAPHY Book Connor, T.(2001). Still Waiting For Nike to Do It: Global Exchange Collins, K.(2008). Exploring Business. Upper Saddle River New Jersey: Pearson Prentice Hall Dlabay, L. Burrow, J. & Kleindl, B.(2008). Intro to Business. Seventh Edition: South Western Educational Publishing Articles Harsono, A. (1996). Nike Accused of "Slave" Child Labor. Albian Monitor/News [Internet]. Available from http://www.albionmonitor.com/9606a/nikelabor.html [Accessed 14th December 2009] Boggan, S. (2001). Nike Admits to Mistakes Over Child Labor. CommonDeams.Org [Internet]. Available from http://www.commondreams.org/headlines01/1020-01.htm [Accessed 14th December 2009] Johnson, G.(2000). NIKE RUNS INTO A STORM; Sportswear giant quits factory in child. BNET [Internet]. Available from http://findarticles.com/p/articles/mi_qn4161/is_20001001/ai_n14520595/ [Accessed 14th December 2009] Read More