Nike and Corporate Accountability - Case Study Example

Nike and Corporate Accountability Outline Introduction Review of Related Literatures Conclusion Introduction Nike, Inc., an apparel, sports equipment and shoe company, happens to dominate the athletic shoe market in the whole world. Despite the fact of the company’s very stable and unbeaten financial health status, Nike receives different criticisms on its global labor conditions. In terms of social aspects, Locke (2003) stated that Nike is highly criticized because of the low wages and poor working conditions given to the outsourced labor workers in factories located in different countries. Indeed, the Nike’s factory operations in various nations are seen to be problematic because of the work conditions among the workers that are really in need of improvement. Nike should be held responsible on changing their corporate behavior in the developing world. There is a need of transformation in this because of the consequences of inequality posted by capitalism and globalization. In this regards, this paper will use Nike as a case that illustrates an issue of corporate accountability. This paper will review the response of Nike to the consumer and political pressure for accountability and change. This paper will sketch out the issues between relationship of companies from the developed and developing worlds, most particularly, the working condition problem of the outsourced workers in the developing nations. Thus, this paper posits that despite its social accountability, Nike, the world’s leader in the athletic shoe market, must still fundamentally transform and further improve its global corporate labor operations located in different countries in order to improve the quality of life of the exploited workforce and the developing nations at large as well. Review of Related Literatures The phenomenon of globalization has greatly affected the condition of each country of the world today. O’ Brien (1992) defined the concept in relation to the geographical borders which can be global, international, offshore and global. According to O’ Brien (1992), globalization transcends geographical boundaries making the economy of the world interconnected and integrated. This makes the world markets for goods, services as well as capital interlinked (Redding, 1999). According to Hak-Min (1992), the developed nations are the ones who greatly benefits from this interconnectedness because of the unequal distribution of income between the developed and developing countries. It is the case that the share of income is skewed to the developed countries which makes their industries to grow far better while the developing nations are left behind. Meanwhile, according Rama (2003), globalization primarily affects the labor market in the developing countries because its common interest is the “cheap” labor costs through which the different companies in the developed worlds may highly maximize their profits. The poor wages together with the risky and abusive working conditions remain to trouble many factories in the third world countries. Given this, global companies which outsource labor from the developed countries are confronted with the ethical issues on how they conduct business for the greater good of society. Nike is one among the companies that are confronted by the issue of corporate accountability. The concept of corporate accountability is defined as the affected corporation’s responsibility to control the operations of that corporation for the greater good of individuals and society (Keith, 2010). According to Petrecca and Howard (2005), it owns more than 36 per cent market share in the athletic shoe sector in United States and more than 33 per cent for its athletic footwear alone at the global level even though if it is the case that the companies of Reebok International Ltd. as well as Adidas AG have just recently merged. Despite the stable financial status of the said company, Nike is highly criticized for the poor working conditions of its outsourced labor force in the developing regions of the world. According to Locke (2003), different scandals such as employing children in Cambodia and Pakistan, providing very low wages among the workers in Indonesia, and poor working conditions in Vietnam and China have tarnished the image of Nike (Locke, 2003). Locke, Kochan, Romis and Qin (2007) stated that the said corporation did not accept any accountability for these scandals because for Nike, these workers were not their employees but employees of the factories from which they sourced their supplies and products. Nonetheless, in 1992, Nike had begun creating a code of conduct which basically required its suppliers from the developed countries to follow the labor and environmental as well as health standards. In this case, Nike obliged its suppliers to sign and observe such code of conduct. In 1998, minimum age of footwear factory workers is set to 18 years old while for the apparel and sports equipment workers, minimum age is agreed to be 16 years old. Aside from that, Nike required from all their footwear suppliers to take on the standards for indoor air quality of United States Occupational Safety and Health Administration (OSHA). For them, the company has showed its seriousness of doing business ethically for the greater benefit of people. Such corporate responsibility was not limited only to the workers of athletic shoe but also involved the apparel division. However, it is the case that Nike’s efforts like that of the code of conduct is seen to be so minimalist by others for the reason that employees in factories would not even understand such for having no means of education and no means of power to assert the operation. Even with such criticisms, it is the case that some see the efforts exerted by Nike to be real. As a matter of fact, the company has created new departments like Labor Practices and Nike Environmental Action Team (NEAT) under the Corporate Responsibility and Compliance Department just to ensure that improved working, environmental and health standards in the factories from which they are sourcing their products. The company holds about 80 corporate responsibility and compliance managers from which over half are from the countries which manufacture the products of Nike. Indeed, the “codes of conduct” of Nike illustrates their practice of corporate accountability because of the pressure of non – governmental organization (NGOs) and consumer groups (Mamic, 2004). Indeed, it is the case that the consumers are strong drivers of corporate responsibility (Smith, 2007). Nonetheless, such efforts of Nike’s social responsibility are not enough. In fact, they are limited. Creating the codes of conduct to be signed and agreed by the potential suppliers of Nike products as well as having departments that to ensure that the manufacturing factories in the developing nations would comply with the agreement, this does not ensure that the improved working conditions of the workers. Locke et al. (2007) suggested that more frequent visits of the regional staff of Nike to the factory would develop greater amount of trust and greater work relationship which positively affects the working conditions of the workers in the said factory. However, this is not always the case. Moreover, codes of conduct only gets better the working standards in general but this is not stable. The improvement of the working standards is based on the presence and work relationship showed by the regional staffs of Nike to their suppliers. Compliance must be sustained and improved by means of incorporating the management structures and processes that regulates the production, human resource, and improvement of quality. It must also be sustained in the supply chain management’s operational and strategic aspects. In order for this to be effective, there should be conformity on the national laws of the developing countries to the internationally accepted labor standards. Also, it should be the case that workplace unions can voice out their concerns in their working conditions. Conclusion It is the case that the phenomenon of globalization has transcended the geographical borders of United States and other developing nations from which Nike sources its products. However, it is true that Nike greatly benefits from this interconnectedness due to the unequal distribution of wealth despite such partnership. Nike sources the labor force from the developing countries because of the fact that its labor cost is low. In this regard, Nike can highly maximize its profit. However, Nike is confronted with such ethical issues on how they conduct their business for the reason that their workers in these countries have low wages and poor working conditions. Despite their efforts to improve the working conditions of the workers in the factories because of the pressure from the consumers and NGOs, it is still the case that Nike must fundamentally transform and further improve its global corporate labor operations. The codes of conduct and monitoring by the regional staffs are still regarded as minimal efforts in improving the quality of life of the exploited workforce. Aside from their corporate response for accountability and change, it is still the case that these workers are exploited. In order for the workers to have quality lives, aside from being determined to implement the codes of conduct, Nike must also do something with the low wages of these workers who create the Nike products yet could not even afford to buy those. They must also have benefits like the rest of the workers. They must also protect these workers. The government of the developing countries must also take part in such improvement in the quality of lives of the workers through implementing laws. References: Hak-Min, K. (1999). Globalization of international financial markets: causes and consequences. Hants: Ashgate Publishing Limited. Locke, R.M. (2003). The promise and perils of globalization: The case of Nike. In Thomas A. Kochan and Richard Schmalensee (eds) Management: Inventing and delivering its future. Cambridge, MA, MIT Press, pp. 39–70. Locke, R., Kochan, T., Romis, M., & Qin, F. (2007). Beyond corporate codes of conduct: Work organization and labour standards at Nike’s supplier. International Labour Review 146(1-2): 21-40. Mamic, Ivanka. (2004). Implementing codes of conduct: How businesses manage social performance in global supply chains. Geneva, ILO. Norm, K. (2005). Evolution of corporate accountability: from moral panic to corporate social accountability. Business Law International 11(3): 247-276. O’ Brien, R.1992. The Global Financial Integration: The End of Geography. London: Pinter Publishers Limited. Petrecca, L. & Howard, T. 2005. Adidas-Reebok merger lets rivals nip at Nikes heels. USA Today, Money, Final Edition, B1. Retrieved from Redding, S 1999 Globalisation. Economic Review (17) 1: 16-19. Smith, N. C. (2007). Consumers as drivers of corporate responsibility. London. Read More