Business Ethical Failure: Nike Labour Policies - Research Paper Example

 Business Ethical Failure: Nike Labour Policies Introduction Nike came into existence when Phil Knight met track coach Bill Bowerman in 1957. The two formed the Blue Ribbon Sports in 1962. Initially, the enterprise was importing high-tech sport shoes from Japan. In 1971, it began to subcontract its own shoe line and in 1972, the Nike brand was launched (Allen, 2006). Nike continued to come up with innovative shoes. By 1978, it had grown to become one of the major players in the American athletic apparel and sportswear market. Its sales expanded to Europe and South America. In 1980, Nike offered two million shares of common stock fuelling it to rapid growth and expansion. Even with the 1990 economic recession, Nike registered a turnover of $ billion (Allen, 2006). However, its operating profits fell by about 37 percent in 1998 following labour issues indifferent plants. Nike Labour Policies Nike has directly employed over 22, 000 people in different world countries. This includes about 5200 who are based at the company’s headquarters in Beaverton, Oregon. The company has consolidated its manufacturing processes in eight different countries. It was the only footwear manufacturing brand in Japan, Korea as well as Taiwan in early 1990s (Yang & Lee, 2013). These are three nations that had been abandoned by other major footwear brand. Nike was constantly moving its manufacturing processes around the globe. It forced it to employ people from the local regions to work in its factories. Nike’s labour policies focused on using sweatshops to produce its items. The sweatshops were found in South Korea, Vietnam, Taiwan and the People’s Republic of China. As the company’s economy and revenue grew, the workers became more productive but their wages did not rise. Some employees moved from the Nike factories to look for better paying jobs. Despite this being the case, it has continued to use the cheap labour in foreign counties through the sweatshops (Alberto, Locke & Qin, 2007). According to Allen (2006), the sweatshop labour policies denied the workers several rights. Apart from the low wages, the employees in these plants and factories worked in very unfavorable conditions that deny them the chance to lead quality lives. Moreover, they were denied the chance to be part of labour movements. They could not negotiate for better employment terms and good working conditions. In the instances where the workers have joined the labour unions and asked for better benefits and more rights, the factories were closed and moved to other nations (Powell & Skarbek, 2005). This was meant to allow the company to continue operating at the lowest cost possible so that it could maximize its profits. Initially, Nike denied the claims of selling goods made in sweat shops. However, more reports and investigations by different third party entities and groups revealed the unethical policies. The company was forced to respond to the issues acknowledging that it was an ethical failure. Different Unions and groups openly came out to oppose Nike’s practices. The boycott of its products by different sport bodies including the Olympic Committee forced Nike to rethink its labour policies. The boycotts affected its revenue and damaged its reputation in the global market. Analysis of Ethical Failure According to Griffin (2009), Nike had been using a very crude and unacceptable form of outsourcing. It operated other companies as well as its own factories to product the items in different nations and regions. The merchandises are manufactured in 900 different factories. In total about 660,000 people work directly and indirectly for Nike. Most of these workers are women who were trying to earn a living for their families in the developing countries. The Nike labour policies which promoted the use of sweatshops eventually led to a labour concern. The debacle was caused by different factors. The first reason for the failure was the lack of a clear framework to guide labour and employment practices in the Nike factories and the foreign sweatshops. Nike’s Code of Conduct stated that the company was driven to do what was required of a leader as it strived to grow in the global arena. The company also expected its business partners to do the same. In reality, this was not the case. Working inside the Nike factories was different to what was being glorified in the code of conduct (Daniel & Browne, 2013). The ethical failure was also as result of the company’s maximization of profits by reducing labour cost. Nike produced most of its items and goods in the third world countries. Although some of the Nike factories are located in developed countries around the world, most of the plants were found in Indonesia, Taiwan, China and Vietnam. The decisions to build the factories in the third world countries was influenced by the need to use cheap labour to reduce its operating cost and maximize profits. According to Daniel & Browne (2013) focusing on cheap labor while neglecting other key ethical concerns put Nike in a very difficult situation. The company was also unable to control the operating and the working conditions in the factories and the sweat shop. Complains were, therefore, filed against Nike individuals, labour unions and other corporations. Some of the human rights concerns and charges that were brought forward included child labour, physical, sexual and verbal abuse and unsafe working conditions (EIRIS, 2009). In other instances, the workers complained about the exposure to chemicals, use of manufacturing equipment and machines without safety precautions, forced overtime, long working hours and pay that is below the set out minimum wages. Spar & Burns (2001) states that investigations from advocacy groups in the working conditions ion the Nike factories revealed that the unethical labour issues at Nike in the 1990s was as a result of poor supervision structures in the factories. As Nike experienced rapid growth, they moved the primary production branches overseas. The increasing demands forced the factories to produce more. The workers in these factories were the poor inhabitats of the nearby areas. Since these people were so desperate to get income to sustain their livelihood, they had to put up with the poor conditions in the factory. The factories were headed by the Nike Contractors who in most cases lived in Europe and America. These heads did not have direct relations with their employees in the factories. The supervision duty was given to the upper level factory workers. Their supervision authority included enforcement of factory rules and making sure that the workers performed at optimal standards. After the contractors had given upper level factory workers the overall control over other employees and the practices in the factories, Nike could not monitor the conditions within the plants. Murphy & Mathew (2001) add that in some instances, the supervisors overstepped their mandate and ignored the labour and employment laws which protect the workers. They disregarded the labour laws in favor of lowering cost. The overall impact of this was increased production and low health standards of the workers. The other contributing factor to the ill labour practices in the Nike factories was the unprofessionalism of the supervisors. The supervisors in the different sweatshops and factories engaged unethical business practices by overlooking labour laws and employee rights. In other factories, the supervisors went ahead to pay off the political leaders so that they could overlook the working conditions and practices in the factories and sweatshops (Allen, 2006)). The political leaders in turn relayed the message to both the police and the military and it eventually led to limited government interference. The paying off of the political leaders allowed the supervisors to get information on impending activism against Nike. It also made it possible for the supervisors to prevent the workers from being part of the unions and advocacy groups. In almost all the factories, Nike lacked policies and procedures that could be used to ensure that the workers’ rights were respected. Most of the workers in the factories were women. There were no clear work guidelines to safeguard their well-being despite the company being aware that the female workers were vulnerable to abuse. It is for this reason that cases of sexual and physical abuse against women workers were reported in most of the factories. Even in such circumstances, the employees could not quit their jobs as it was their only source of livelihood. Cases of employee abuse by the supervisors were also common in the factories. They used corporal punishment to keep the workers in line and to be able to achieve the production targets at the expense of employee health and wellbeing (Murphy & Mathew, 2001). A very commonly given example was in Taiwan where a worker had his mouth taped shut because he was in a wrong position. Other workers were forced to run in circles in the sun when they went against the word of the unprofessional supervisors. All these issues were contrary to the laid down labour laws and even the company’s own code of ethics (Böhm & Land, 2012). Stakeholder Analysis The labour scandal that faced Nike in the 1990s was facilitated and caused by several players both within the Nike set up and outside the organization. The top managers in the company perhaps bear the greatest responsibility for the debacle. The labour policies and decision to cut cost through the use of sweatshops was passed and implemented by the executive managers at Nike. According to Rittenberg & Covaleski (2001), the shareholders pass the management and operation roles of a company to the executive managers and the senor employees. These employees come up with policies and initiatives which are meant to safeguard the interest of the shareholders while helping generate revenue and profits. In an attempt to meet their goals of increasing profits, the executive managers came up with policies which called for the moving of the production line to the countries and regions where the cost of labour was low. This, therefore, make them liable for the ethical debacle. They gave the go ahead for the policies and initiatives to be implemented in the different Nike factories. The other group that is responsible for the ethical failure that faced one of the biggest sports apparel manufacturing entities in the world was the Nike Board. According to Hugh & Sally (2006), the executive manager always sought approval from the board. Before any of the branches and factories was opened, the board was made aware and it was after their approval that the sweatshops were opened. Despite this being the case, the board came out to strongly to deny the claims that the goods being sold by Nike were coming from sweatshops. On the claims that the supervisors were mistreating the other employees, the board argued that they did not own the shops. This amounted to denying their reasonability over shops the company operated and the initiatives and ventures it got into. The argument that was being raised by the board that they had leveraged the responsibility over certain aspects of the business to the contractors could not be used to deny Nike’s involvement in the debacle (Powell & Skarbek, 2005). The Nike board was directly involved in ensuring that the shareholders interest is protected by approving the policies adopted by the executive managers. They were also require to ensure the wellbeing of all its workers. The Nike contractors and factory supervisors were also liable for the labour concerns faced by Nike. The contactors had not contact and relations with the workers in the sweatshops and factories making it possible for unethical practices to prevail. The supervisor on the other hand were the actual perpetrators of unethical practices in the factory settings where they disregarded Nike’s codes of ethics and any other labour law. Action Plan for Remediation The fundamental cause of the Nike labour issues was the lack of business ethics in the company. Chhaochharia & Yaniv (2007) informs that in enterprises where ethical standards do not exists, employees find themselves facilitating or contributing to unethical practices which eventually lead to scandals, financial and reputational losses. In the Utilitarian Theory, it is argued that in resolving ethical dilemmas, there is need to focus on minimizing harm that results from the decisions which are being made even as people strive to maximize benefits (Dietz & Gillespie, 2010). In this theory, when individuals make business decision, they must consider the interest of all the involved parties. In this regard, the employees and the top managers ought to have thought about their interest, those of the shareholders and the good of the general public. In some instance, it is not easy to find a balance between the two but the Kant’s categorical imperative approach can be used to minimize the harm. The theory argues that one cannot make decisions that give him benefits but impacts negatively on others. To deal with the fiasco that faced Nike, three are three factors and alternatives that need to be considered. First, Nike as required to come up with a robust and a practical labour policy which is guided by the international labor laws. By doing this, it will be possible to continue using the foreign factories while at the same time ensuring the wellbeing of the employees. Secondly, Nike is required to enhance accountability and transparency in its practices. According to Bricker, Borokhovich & Simkins (2003), the fact that the various factories were able to operate without interference and supervision from the relevant authorities prompted the unethical practices. Therefore, more accountability and transparency is required. Moreover, the boards at Nike and the executive managers are required to enhance oversight and supervision over factories so as to promote safe operations (Knight & Greenberg, 2011). Finally, Nike requires an affective environmental and occupational health and safety management system. Such a system will ensure that the wellbeing of the workers in the factories is guaranteed. The supervisors and the employees must be trained on the various aspects of the occupational health management system to promote compliance. References Alberto, B., Locke, R., & Qin, F. (2007). Does monitoring improve labor standards? Lessons from Nike. Industrial and Labor Relations Review, 61 (1), 3–31. Retrieved from http://eprints.lse.ac.uk/59405/1/Qin_etal_Does-monitoring-improve-labor- standards_2007.pdf Allen, W. (2006).The grasshopper and the ants: why CSR needs patient capital. Business for Social Responsibility. 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