Nike Essay

Nike: A Worldwide Corporation

Nike is a worldwide corporation that creates, produces, and sells sporting goods. The business is well recognized for its “just do it” logo, which exhorts athletes to pursue their goals. To promote its products, the corporation has concentrated on considerable advertising and celebrity endorsements, including Tiger Woods. As a result, Nike outsources its manufacturing to other nations that can have simple access to raw materials as well as affordable labor. Consumers enjoy Nike products because of their sleek, upscale feel and style. The fact that Nike provides them with comfortable shoes that can make exercise easier has made Nike a favorite among the younger generation, who place a strong emphasis on their health and fitness. Nike was in the headlines in 1998 for the sweatshops that they had in Asia and the ill treatment that the workers were subjected to (Powell & Zwolinski, 2012). The sweatshops lead to a couple of protests from civilians, students and corporations that urged the people to boycott Nike’s products (Harrison & Scorse, 2010). Nike hence suffered a big blow as some of the factories were closed down, their revenue decreased thus making them lay off some workers, and it has since taken so much effort from the company’s officials to reclaim its long-lost glory. This research paper elaborates the ethical dilemma that Nike Inc. faced and how it impacted on their business practices. Further, this article also illustrates the measures that then chief executive officer of Nike Inc., Phil Knight took to redeem the company. The essay will also suggest different measures that could be taken and how future leaders can shield themselves from such incidences.

Description of the Organization

Nike was incorporated on the 8th September by Phil Knight and Bill Bowerman and later became an incorporated company on May 30, 1971 (Powell & Zwolinski, 2012). Nike Inc. is the largest sports apparel manufacturing company in the world, and it faced top competition from Adidas, Reebok and Li Ning. Nike has over 700 shops globally where it sells its products (Harrison & Scorse, 2010). Most of Nike’s factories are in China, India, Taiwan, Malaysia and Thailand with various contract facilities across the world (Powell & Zwolinski, 2012). Nike’s operating segments include North America, Central and Eastern Europe, China, Japan and Western Europe (Harrison & Scorse, 2010). The primary brands are Nike, Jordan, Converse and Hurley. Nike Company sells other products such as bags, eyewear, gloves, sports ball, socks and protective equipment. Nike Inc. aims at accessing their customers through their online platforms, subcontracted companies and in some cases directly reach out to the customers.

Primary Stakeholders

The primary stakeholders of a company are people who directly benefit from its operations (Abrhiem, 2012). Nike has four participants, namely shareholders, employees, customers and the community. The company must continually ensure that they safeguard the welfare of their partners and not engage in activities that would cost them. Having a code of ethics hence lays the right guideline which the involved parties can follow so that they can maximize the welfare of the people.

Shareholders

Shareholders are people who have invested in Nike Company and who would, indeed, expect a return periodically. The investors hope that Nike will engage in the best market prices that will guarantee them high profits (Abrhiem, 2012). The stakeholders sustain the company’s finances and they hence should be rewarded with regular bonus and dividends that would encourage them to invest more.

Customers

Buyers expect the best quality and sustainability from Nike. For the company it is crucial to maintain its customers and regularly offer excellent customer services and new products (Abrhiem, 2012). Clients should also be enticed by discounts and incentives which hence make the prefer Nike’s products over the rest.

The Community

Nike operates under heavy environmental laws, land protection, licenses and procedures which dictate the activities within every manufacturing industry (Abrhiem, 2012). The society surrounding the company desires that Nike follows the right environmental procedures and also engage in minimal pollution. The public would also wish for Nike to employ people within the vicinity so that they can also have better living standards. The company should also give back to the community and also take care of the environment.

Employees

Workers are key stakeholders within Nike company, and they also look forward to better working conditions and better pay. Employees hence want to ensure that their efforts are recognized by the company, and this is illustrated through regular bonuses, higher pay and even holidays (Abrhiem, 2012). Nike may also impress its staff by providing them with sports attires at a discount. Laborers who are well-paid offer excellent customer services to customers, they are resourceful, and this reflects positively on their income.

Vision Statement (Based on their CSR Strategy)

“To help NIKE, Inc. and our consumers thrive in a sustainable economy where people, profit and planet are in the balance.”

Mission Statement

“To bring inspiration and innovation to every athlete.”

Code of Ethics

Nike is guided by a code of ethics that dictates how they respond to the environment, the society and the legal structure in every country. The corporation is a signatory of the United Nations Global compact and follows the principles related to human rights (“Sustainable Innovation”, 2017). Nike therefore understands and protects the human rights internationally and also makes sure that they do not abuse people that they work with. Nike Inc. code of conduct has set out the minimal conditions that each contract factory ought to meet and also the contract suppliers (“Sustainable Innovation”, 2017). The administration follows the United Nations rules on company’s regulations, child labor and minimum wage and aims to apply the rules in the individual country where they have set up their operations in (“Sustainable Innovation”, 2017). The company also participates in organizations that look into the rights of employees which include the fair labor association, freedom of association, UN global compact and the international labor organization (“Sustainable Innovation”, 2017). Lastly, Nike is committed to having a sustainable production, green environment and an equitable supply chain (“Sustainable Innovation”, 2017).

Ethical Challenge

The ethical challenge that Nike was facing was the establishment of sweatshops in third world countries which exposed workers to hostile environments (Powell & Zwolinski, 2012). The company has made significant investments in advertising and broadcasting its products, but yet sources for cheap means of productions in other countries through contract companies (Harrison & Scorse, 2010). Nike was blamed for purely focusing on profits at the expense of their staff health and financial status (Powell & Zwolinski, 2012). The sweatshops indicated that, indeed, Nike Company infringed human rights including child labor, mistreatment of workers and insufficient pay as outlined below.

Child labor

Nike was in the spotlight for employing children to work in their factories in Vietnam, Indonesia, and Pakistan where they would manufacture balls (Harrison & Scorse, 2004). The company also contracted its production in other industries where they would not have regulated the ages administered to work for them (Powell & Zwolinski, 2012). In this case, children were exposed to poor working conditions and even work overtime meaning that they were denied the chance to access schooling (Harrison & Scorse, 2004). Nike code of ethics indicates that they do not hire children below eighteen years but yet it had underage laborers (“Sustainable Innovation”, 2017).

Mistreatment of workers

Nike was also accused of mistreating their employees in the various factories (Powell & Zwolinski, 2012). For instance, most of the workers were paid an inadequate salary that was even less their minimum wage in their country. In Indonesia, for example, the staff were earning as little as 14 cents per hour (Harrison & Scorse, 2004). The laborers were also exposed to long hours while in the excess heat and the exit doors were locked from outside meaning that they could not leave at will (Powell & Zwolinski, 2012). The employees would often faint due to the excessive heat and work that would be attributed to poor ventilation in the factories (Harrison & Scorse, 2010). There were also cases of abuse on workers by managers, who would kick, insult and even throw shoes at them being angry (Harrison & Scorse, 2004). In some case, the company would steal wages from their employees over trivial matters like work delay meaning that workers barely earned enough to sustain themselves (Harrison & Scorse, 2010). Little attention is also paid to solvents that were used in manufacturing shoes which in most cases affected workers leaving them with respiratory conditions like asthma (Powell & Zwolinski, 2012). In some cases, employees would also be restricted to visiting the toilet, and they also worked overtime about ten hours, six days a week with no additional payment (Harrison & Scorse, 2010). Workers were not allowed to file any complaints with the management, and they were fired if they challenged the administration.

How Leaders Addressed the Challenge

Admitting the fault. The chief executed officer, Phil Night, presented a speech in 1998 where he admitted that his company had indeed failed by not following good employee relations in the company and illustrated measures they had taken to stop the illegal practices in the contacted countries (Harrison & Scorse, 2010). Phil acknowledged that his business was synonymous with slave wages, abuse, overtime and little wages. The chief executive officer, however, indicated that they were going to raise the minimum wage, enhance monitoring and also adhere to OSHA clean air standards (Harrison & Scorse, 2010). Phil, however, mentioned that they uphold high employment standards and child labor would have happened by mistake since the minimum age is 18 years for all employees (Harrison & Scorse, 2010). The CEO, however, promised to develop initiatives that would improve the conditions in the company and adhere to the human rights commission standards.

Training their managers. Nike also educated its managers on fair trading practices and how they should conduct themselves at work (Harrison & Scorse, 2010). Most of the managers were accused of being rude and unfair to workers, and hence they were trained on better management techniques (Locke, 2003). The managers were also taught on accepting criticism as something positive and hence stop being intimidated by the complaints filed by the workers.

Company audits. Nike Inc. made an examination of all the employees in the various factories and publicly published all the reports (Harrison & Scorse, 2010). The company has, however, failed to access full information from some of the company in the poor states since the officials acknowledge that most present fake identification since they are desperate for work (Locke, 2003). Nike Inc. administration does not allow third parties to audit the company and instead uses their personnel which also raise questions about the authenticity of the facts published annually.

Human rights group. Nike Company joined various human rights groups to understand how to treat workers better and adhere to a particular code of conduct in the workplace (Locke, 2003). For instance, the company formed the fair labor association in 1999 that establishes the minimum wage, working hours and worker’s treatment and they have also beckoned on other companies to join (Harrison & Scorse, 2010).

Better working conditions. Nike Company raised the minimum wage for most of their workers, admitting that it could not take care of their daily needs and hence sustainable (Locke, 2003). The company also improved the working environment in the various factories. There was now better ventilation, and workers were now required to work for lesser hours (Harrison & Scorse, 2010). The company also compensated workers who had not received their salaries due to disciplinary matters and made sure that all the workers have signed a contract that gives them a right to their pay (Harrison & Scorse, 2010). The company also followed OSHA’s standards and offered their employees protective gears that would protect them from the chemicals they were using in the industries.

More Effective Ways of Addressing the Challenge

Nike should have allowed external auditors to conduct a complete audit in all their factories (Locke, 2003). It would have been prudent to acknowledge that their auditors may be biased and hence not disclose full information on the workers and the working conditions in the various factories. The company should have also offered to sponsor the children that had previously been employed in the factories to guarantee them a bright future. Most of the children were employed in Vietnam, Indonesia, and Pakistan because they came from a poor background and hence needed to support their parents to survive (Harrison & Scorse, 2004). It should hence be prudent to help the children so that they can access primary education and be resourceful in the future. Lastly, Nike should have done thorough investigations into the documentation presented by the workers at the time of employment to ensure that they are authentic to avoid hiring children.

Recommendations

Future leaders should have a code of conduct that directs the way they relate to their employees (Dion, 2012). The leaders ought to follow a utilitarian approach that seeks to maximize the benefits of other people (Abrhiem, 2012). In this case, employers should ensure that they have set the right policies which dictate the minimum wages, working hours, and pay for overtime work. In other words, they are responsible for the welfare of their employees (Powell & Zwolinski, 2012). Companies should have open and transparent communication with their employees to make them comfortable, and they also have the right qualifications for their job (Dion, 2012). According to the transactional leadership theory, there should be a mutual benefit between workers and managers to enhance positive values within a company (Abrhiem, 2012). The administration should also find a practical and sensible way of punishing their employees (Powell & Zwolinski, 2012). Confident leaders should not be intimidated by assertive employees, but they should learn how to take criticism positively. Setting reasonable standards for their employment contracts is likely to avoid unfair practices. Lastly, there should be a mutual benefit to a company and their employees.

Conclusion

Although Nike is a globally established sports apparel company, it had failed to meet the minimum threshold required by the human rights commission. The company was involved in sweatshops where they would access cheap labor and yet ill-treat their workers. Nike, however, managed to deal with the ethical dilemma but first acknowledging that they were wrong and made suggestions on how they would improve the working conditions of the various factories. The company has managed to reclaim its brand, and since then it pays its workers better, allowed them to get into labor unions and dealt with the child labor challenge. It is important to ensure that managers follow the code of ethics and that employees are well-treated.

References

Abrhiem, T. H. (2012). Ethical leadership: Keeping values in business cultures. Business and Management Review, 2(7), 11-19.

Dion, M. (2012). Are ethical theories relevant for ethical leadership?. Leadership & Organization Development Journal, 33(1), 4-24.

Harrison, A., & Scorse, J. (2004). The Nike effect: Anti-Sweatshop activists and labor market outcomes in Indonesia. UC Berkeley. NBER.

Harrison, A., & Scorse, J. (2010). Multinationals and anti-sweatshop activism. The American Economic Review, 100(1), 247-273.

Locke, R. M. (2003). The promise and perils of globalization: The case of Nike. Management: Inventing and delivering its future, 39, 40.

Powell, B., & Zwolinski, M. (2012). The ethical and economic case against sweatshop labor: A critical assessment. Journal of business ethics, 107(4), 449-472.

Sustainable Innovation. (2017). Retrieved 19 August 2017, from http://about.nike.com/pages/sustainable-innovation