239 - Case 239, Part A SWEATING THE SWOOSH: NIKE, THE...

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Unformatted text preview: Case 239, Part A SWEATING THE SWOOSH: NIKE, THE GLOBALIZATION OF SNEAKERS, AND THE QUESTION OF SWEATSHOP LABOR Michael Clancy University of Hartford COPYRIGHTED MATERIAL Do Not Duplicate — This is Copyrighted Material for Classroom Use. It is available only through the Institute for the Study of Diplomacy. 202-965-5735 (tel) 202-965-5811 (fax) In early 1998, Phil Knight and “Le” were half a world apart geographically and a world apart financially. Both, however, were troubled, and their concern was over the same issue. Knight, the multibillionaire founder and current chair and chief executive officer (CEO) of Nike, the $9 billion athletic shoe and apparel maker, was preoccupied with his company’s performance. True, a year earlier in 1997 the company had recorded record-setting sales and profits, but in 1998 global profits were down sharply. Nike, in fact, was forced to lay off 1,400 workers in March of 1998 as a result of falling sales. Much more distressing, however, was the growing image among many consumers that Nike was a sweatshop employer, forcing young women especially to toil long hours in difficult conditions for substandard wages. Le, a 19-year old woman living on the outskirts of Ho Chi Minh City in Vietnam, worked in a factory making Nike shoes. She worked six-day weeks for $1.84 per day or $48 per month in 1998, slightly better than Vietnam’s minimum wage for the region. She, too, was worried.1 “How can I be happy?” she asked. “My salary is very low. I can barely afford my living expenses.” Copyright 2000 by Institute for the Study of Diplomacy. ISBN: 1-56927-239-5 Publications, Institute for the Study of Diplomacy, School of Foreign Service, Georgetown University, Washington, D.C. 20057–1025 http://data.georgetown.edu/sfs/programs/isd/ Yet Le’s wages, according to Vietnam’s Ministry of Planning and Investment, were no worse than other shoemakers operating in the country, and the industry paid higher wages than many others in the poverty-stricken nation. Le, who gave only her family name, said that roughly half of her salary was spent on food. Expenses such as a wooden bed in a boardinghouse and medical and welfare insurance left about one-third her salary. She saved that portion. Le would like higher wages, but in Vietnam, a poor country where most people work in agriculture or in other shoe and apparel factories, the alternatives are few.2 Knight’s position had always been that Nike paid fair wages given the market conditions in the countries in question, but now public pressure was mounting and he was facing increased calls to action. Streams of negative press reports stung the image of the company, as did sporadic protests against Nike products. As Nike’s sales and profits fell, so did the company stock price, and shareholders were beginning to call for changes. BACKGROUND: FROM “HEY BUDDY, WANT TO BUY SOME SNEAKERS?” TO THE GLOBAL SHOE In 1962 Phil Knight, a recent master’s in business administration (MBA) graduate and running enthusiast, visited Japan. He came home with the idea of 1 2 Michael Clancy importing tennis shoes from the country. Within two years he and co-founder Bill Bowerman (a University of Oregon track and field coach) each contributed $500 to start Blue Ribbon Sports (BRS) and began importing shoes from the Onitsuka Company, the manufacturer of Tiger brand. They placed their first order for just over $1,000 and sold their first pairs of shoes at the Oregon state high school track and field meet in 1964. The company sold one thousand pairs of shoes the first year and cleared $364.3 The shoes were prominently featured among track and field athletes in the 1964 Olympics in Tokyo, and quickly BRS drew a loyal following within a niche market of running enthusiasts due to their word-ofmouth reputation for quality, the publicity generated by the Olympics, and their low price.4 Gradually BRS expanded its operations, but it also became engaged in a power struggle with Onitsuka over distribution and supply. BRS wanted to import shoes from other suppliers, while Onitsuka sought out other distributors in the United States. Ultimately the matter ended in court. Meanwhile, Knight went to Japan, aligned himself with Nissho Iwai, a large Japanese trading and finance house, and ordered footwear from another supplier, including in 1972 the first shoes sporting the legendary “swoosh.”5 The Nike Corporation emerged from this dispute, and, as a company that designed its own shoes, marketed its own logo, and could freely determine its own suppliers, the Beaverton, Oregon-based firm became stronger and more independent. During the remainder of the 1970s, the company grew rapidly as it took advantage of its own innovations as well as changing market conditions. First, the company shifted its supplier base from Japan to lower-cost South Korea and Taiwan in 1973, which gave it a price advantage over leading competitors Adidas and Puma.6 In addition, the company established a strategic alliance with a key U.S. retailer, Foot Locker, to market its athletic products. Nike also developed innovative supply practices with Foot Locker and other stores, where retailers could place advanced orders or “futures” that guaranteed delivery and cost discounts.7 Nike also proved to be more flexible than competitors with design updates and supplies so that retailers could more effectively respond to changing market conditions.8 Nike’s other key innovation was its use of athletes as endorsers of shoes. Others had pioneered the practice earlier, but Nike made it a centerpiece of its advertising and marketing strategy. Beginning with track and field athletes and later expanding to basketball, football, tennis, soccer, and golf, Nike’s Case 239, Part A aggressive signing of athletes as role models and cultural idols helped the company shift its customer base from “running geeks to yuppies.”9 Finally, Nike was in some ways in the right place at the right time. The company benefited from a fitness craze, which saw running, jogging, and later, aerobics become a much greater part of Americans’ lives during the 1970s and 1980s. To be sure, Nike helped contribute to this craze through advertising, but the firm’s meteoric growth was aided by athletic footwear becoming a $5 billion business in the United States by 1985.10 By 1980, half the running shoes sold in America were Nike’s, and Nike sales reached $270 million.11 The next decade would see growth in sales increase tenfold.12 Nike’s rapid growth was not without dips, however. In the early 1980s, recession in the United States combined with growing competition in the footwear industry, led to lagging sales. Top competitor Reebok quadrupled its sales in one year and passed Nike to become the foremost athletic shoe company. Meanwhile, Nike profits fell 80 percent in one year, contributing to Nike’s first ever layoffs.13 In 1985, however, Nike introduced “Air Nike” models, which incorporated a cushion of gas in the heel of its shoes, and also signed basketball star Michael Jordan to an endorsement contract. The first two shipments of “Air Jordan” shoes sold out in three days in Nike’s Los Angeles store, and Nike sold a projected year’s supply of the shoes in the first three months.14 Overall Nike sales recovered by 1987 and doubled by 1989 to 1.7 billion.15 Nike’s success continued into the 1990s. At times it captured more than half the athletic shoe market in the United States. The company, which also started marketing apparel in the early 1980s, expanded into other athletic products such as soccer and golf balls. Total sales, which were $3 billion in 1991, grew to a staggering $9.2 billion in fiscal 1997. That same year, the company recorded record profits of $795 million.16 Phil Knight himself, as chief shareholder of the company, became one of the wealthiest people in America. Footwear, the New Global Organization of the Multinational Corporation (MNC), and Development Nike is in some ways thought of as the archetypal American corporation, but one interesting feature of the company’s success is that almost all of its production of shoes, apparel, and equipment is done “offshore” or in other countries. BRS and later Nike initially imported all their shoes from Japan. Soon the company moved almost all production into Case 239, Part A Sweating the Swoosh Taiwan and South Korea. As demand grew, Nike did open shoe factories in Maine and New Hampshire in 1978 but closed them in 1985 due to cost pressures. Gradually Nike moved operations to other Asian countries, including China and Thailand (1981), Indonesia (1988), the Philippines (1996), and Vietnam (1995).17 By 1998 the company manufactured, distributed, and sold athletic shoes and apparel in thirty-five countries, although almost all shoe production took place in poor countries in Asia. Nike, of course, is not alone. The athletic shoe and apparel business has gradually been moving offshore for decades, as have other industries including toys, consumer electronics, and auto parts. Today, according to Nike, 99 percent of all branded athletic shoe production is done in Asia. “There is no value in making things any more,” said Knight.18 Knight’s comments reflect important changes taking place in the world of corporations. Multinationals are, by their nature, global in scope in that their operations go beyond national borders. Multinationals have been around for centuries, but they have proliferated over the past fifty years. Controversy has followed, as debate has centered on whether they are independent or somehow carry the flag of their country of origin, as well as whether they contribute to or retard local development. In addition, many MNCs have become so large that their annual sales outpace the size of many countries’ entire economies—Shell, with corporate sales of $109 billion in 1994, for example, is larger than Malaysia (1994 Gross Domestic Product [GDP] of $68.5 billion), as is Nestlé ($47.8 billion) larger than Egypt ($43.9 billion) by this measure19—raising questions over the power they hold. The bulk of multinationals originate in wealthy countries such as the United States, Europe, and Japan, but increasingly firms from poorer countries have moved into global markets. Multinational corporations have been controversial within poor countries for many of the reasons mentioned above, but by and large governments of these countries have allowed the firms to enter their markets. In the case of footwear, the interests of firms and home governments coincided: during the 1960s, 1970s, and 1980s, growing competition led firms to attempt to reduce costs. Meanwhile, many countries in Asia, including first South Korea and Taiwan and later Thailand, the Philippines, Indonesia, and China, were mired in poverty. Most had agriculturally based economies with average earnings per year sometimes less than $100 per person. Government officials, as well as development advisors from 3 first world governments and multilateral lending institutions, viewed industrialization and export promotion as an answer to development problems. In short, multinationals saw more efficient production facilities while governments saw the firms as providing developmental benefits in the form of employment, export earnings, government revenue from taxes, and managerial and technical know-how. Taiwan and South Korea have had the greatest success in this sense, becoming NICs or Newly Industrialized Countries, or what some have called the “Asian Tigers.” By using a mixture of infant industry protection and market-based incentives, the two countries transformed their economies from agriculturally based to industrially oriented. Moreover, while early manufacturing focused on consumer nondurables such as footwear, apparel, and consumer electronics, today Taiwan and South Korea produce consumer durables such as automobiles and refrigerators, as well as heavy machinery and steel, all for the world market. In addition, per capita earnings, which were $110 in South Korea and $170 in Taiwan in 1962, grew to $2,690 and $5,550, respectively, by 1987.20 While Taiwan and South Korea have come to serve as developmental benchmarks, other countries pursuing industrialization have had mixed success. Brazil and Mexico, for instance, two leading NICs in Latin America, have industrialized over the past forty years, but per capita income has not grown as fast. Moreover, income inequality has grown during the industrialization process, and high rates of poverty have remained. In Brazil, the wealthiest one-fifth of the population earns more than thirty-three times the poorest one-fifth. The ratio for Mexico is 20:1 (compared to 8:1 in South Korea and 5:1 in Taiwan).21 In the Philippines, where export promotion began in the early 1970s, industrialization has taken place, but average annual growth rates actually shrank by 1.4 percent during the 1980s.22 The average Filipino, who earned $495 in 1970, saw his or her wages grow only to $630 in 1995. The average real income for Filipinos actually fell between 1982 and 1995.23 Despite these mixed records of success, more and more countries have embraced export strategies since the early 1980s, and many have come to welcome MNCs to play a part in this development strategy. There are various explanations for why firms go abroad in the first place, but virtually all focus on either more efficient production possibilities or the pursuit of new markets. Increasingly, MNCs have taken their production offshore not in order to sell to 4 Michael Clancy local markets, but to seek the cheapest and most efficient production platform. This process began with athletic shoes, clothes and apparel, and toys and consumer electronics but increased to other economic activities such as car production. By 1999, apparel was a $70 billion business in retail sales in the United States and footwear accounted for an additional $36 billion, but 55 percent of the former and 93 percent of the latter products were produced outside of the country that year.24 In addition to the move offshore, important organizational changes were taking place within MNCs. Within the traditional model of MNCs, most large, globally oriented firms strove for integration and centralization. Activities that had previously been purchased from support and service firms or suppliers, whether accounting or legal services, components to be assembled on an assembly line, or advertising and marketing, became part of the corporation itself. The advantage was believed to be one of control and efficiency. As a result, the world’s biggest corporations not only had very high numbers of sales and profits, but they also had lots of employees and facilities. The new model, in contrast, emphasizes “lean” or “flexible” production. Because market conditions frequently change, many firms have responded with organizational innovations that make them more adaptable to those changes. Again, footwear and apparel companies have been at the forefront of this revolution, and Nike has been at or near the lead. The most prominent feature of this new organization is a focus on low levels of inventory and outsourcing of many activities previously done within the firm. This outsourcing may include advertising, accounting, or perhaps most important, various aspects of production itself. In Nike’s case, one prominent feature of this flexibility is the outsourcing of all footwear production to subcontracting firms. In other words, no Nike employee actually makes shoes in a factory. Instead, the multibillion dollar company employs just sixteen thousand people, despite the fact that the goods bearing Nike logos—shoes and apparel—are products of what economists call labor-intensive industries. These company employees work primarily in design, marketing, supervisory, and other support activities. The 450,000–550,000 individuals who actually work in factories producing Nike products do not work for the company. Instead they are employees of suppliers or subcontracting firms that make shoes and apparel for Nike. Many of the factories are owned by Taiwanese or South Korean firms, and many of the supervisors on the shop floor are Case 239, Part A also from those countries. It is not uncommon for these supplier companies to simultaneously turn out products for Nike and its competitors such as Reebok or Adidas in the same factories. Most factories are located in export-processing zones (EPZ)—areas of the host countries specified as a special economic region by the government. In EPZs, the factories, usually foreign owned, are exempt from many export and import taxes and frequently receive other tax breaks. The first EPZ was created in Ireland in the 1960s, but today there are literally dozens located mainly in poor countries in the world. Governments establish them as part of the larger strategy toward developing industry and promoting exports. EPZs tend to specialize in laborintensive assembly and manufacturing, especially apparel, footwear, consumer electronics, toys, and auto parts. One result of the proliferation of EPZs is that the global share of manufactured exports coming from developing countries grew from 4.3 percent in 1963 to 12.4 percent in 1985.25 One additional feature is worthy of mention. The overwhelming numbers of employees who work in such factories are young women, generally ages eighteen to twenty-five. One estimate is that women hold 80 percent of export-processing jobs in the world.26 In one example, a factory in Indonesia that produced goods for Reebok employed 4,500 people in late 1997, and all but fifty were women. It is not exactly clear why this is commonly the case. Advertising literature sponsored by governments seeking to attract MNCs plays up features such as low pay. One such ad, which ran in the spinning and apparel industry magazine Bobbin in 1990, states of a young woman “Rosa Martinez” in El Salvador, “You can hire her for 57 cents per hour. Rosa is more than just colorful. She and her co-workers are known for their industriousness, reliability and quick learning.”27 Local labor markets tend to be segmented, and another answer is that men will not seek work in these plants, preferring instead higher-paying jobs. Frequently, men avoid the factories because much of the work involves stitching and sewing, which the men traditionally view as women’s work. In other cases, employers specifically seek out women, perhaps because of their belief that women may be paid less because they were only working temporarily until they would marry and raise a family.28 Some employers also believe women are docile and a more easily controllable labor force, although researchers have produced contrary findings.29 Many academic researchers, especially those writing from a feminist standpoint, have long been critical of the wages and working conditions found Case 239, Part A Sweating the Swoosh in light assembly plants dominated by women. They tend to see the work as doubly exploitative: Powerful multinationals not only take advantage of poor, unskilled labor possessing few other options in developing countries, they also further enforce a gendered division of labor that reinforces conceptions of women’s work as being confined to cutting and sewing and worthy of minimal pay.30 In a wellknown critique of these findings, however, researcher Linda Lim contends that most critical reports are based on anecdotal evidence found in early experiences in export zones during the 1970s. She contends that with time, wages rise and working conditions become better. In addition, she raises the question of causation. Are MNCs the cause of gender discrimination, or is it already deeply rooted in these societies? Finally, she raises questions as to the motives of these critical scholars, arguing their findings are colored by “biases introduced by ideology, ethnocentrism, and vested political interests.”31 Whatever the case, women dominate light assembly industries in EPZs. This is also true with the production of athletic footwear, despite the fact that almost none of the women in question work for the company whose name is on the shoes they produce. THE SWEATSHOP DISPUTE The fact that Nike does not own the factories where Nike shoes are produced is especially important because Knight and the company he founded have been at the forefront of the debate over working conditions in these factories for some time. Labor activists, nongovernmental organizations (NGOs), women’s groups, and human rights activists have long claimed that the footwear and apparel industries have relied upon “sweatshops.” Although several issues have been raised under this charge, the most common concerns have been wages, hours, working conditions, the ability to organize unions, and physical treatment of workers. Women such as Le, they charge, arrive at work and are frequently overseen by supervisors who do not speak the same language, who frequently use militaristic discipline and corporal punishment, require overtime, have reportedly sexually harassed the workers, and even limit bathroom breaks to as few as two in a twelvehour shift. Nike has long been a leading target of these charges and, although always denying them, the company has changed its response over time. Indicative of Nike’s early approach was an incident in the early 1990s when labor disturbances were reported 5 in six Indonesian factories due to working conditions. Nike officials distanced the company from the conflict by maintaining that as a purchaser rather than employer, it took no responsibility for working conditions in the factory. “It’s not within our scope to investigate,” said John Woodman, Nike general manager in Indonesia at the time. When asked if he knew what the disputes were about, he said he had not asked. “I don’t know that I need to know.”32 Nike maintained this hands-off position for several years, despite growing claims by critics that, as a buyer of shoes built on specification, the company does have the responsibility and crucial leverage when it comes to what goes on in the factories where Nike shoes are built. “We don’t pay anybody at the factories and we don’t set policy within the factories,” said one company official. “[I]t is their business to run.”33 Another company official defended living conditions and wages in the factories where Nikes were made, saying, “I don’t think the girls in our factory are treated badly. The wages may be small, but it’s better than having no job.” The alternative, according to the official, would be “harvesting coconut meat in the tropical sun.”34 Aside from the charges noted above, critics have argued that 1) Nike and other footwear companies do not pay a living wage, and 2) a very small share of the final purchase price of the shoes actually goes to the workers who make them. Nike’s own figures show that from a $70 pair of shoes, about $2.75 goes into workers’ hands. (See Table 1.) The company defends this practice as in line with industry standards. As pressure against the company increased, Nike began to change its approach. One track has been to acknowledge many of the conditions prevalent in the factories but to defend them as appropriate given the development levels of the country. Nike has consistently pointed out that workers are generally paid at least the mandated minimum wage in the countries, even if those wages only amount to a dollar or two per day. “In most cases workers earn compensation and benefits far in excess of the minimum wage, and by all responsible measurements of need, earn sufficient income to provide food, shelter, clothing and a measure of discretionary items as well, according to Nike.”35 In fact, these claims vary in practice. In Indonesia, Nike and other shoe factories pay minimum wage or slightly above, but in the mid-1990s the Indonesian government acknowledged that its own mandated minimum wage only covered 90 percent 6 Michael Clancy Table 1. Cost of $70 pair of Nike shoes:37 Labor Materials Rent, Equipment Supplier Profit Duties Shipping $2.75 9.00 3.00 1.75 3.00 .50 Cost to Nike 20.00 Research and Development Promotion and Advertising Sales, Distribution, Administration Nike Profit .25 4.00 5.00 6.25 Cost to Retailer 35.50 Retailer Rent Personnel Other Retailer Profit 9.00 9.50 7.00 9.00 Consumer Cost 70.00 of what it would cost one adult to purchase a basic basket of goods.36 In addition, common practice in Indonesia has been for firms to apply for waivers, which temporarily allow companies to pay less than the minimum wage. The Indonesian government has approved these waivers regularly. In contrast, in Vietnam, where labor laws are stronger, wages do appear to support a “living wage.” In Le’s case, she not only subsists but also saves some portion of her earnings. Yet even here, evidence is contradictory. A study by Thuyen Nguyen found that workers making Nikes earned the equivalent of $1.60 per day, less than the $2.10 necessary to pay for three meals of rice, vegetables, and tofu. Thirty-two of thirty-five workers he interviewed reported losing weight since beginning work in the factories.38 On the other hand, typical workers in Sam Yang, a South Koreanowned firm where Le works, earn an amount equal to half the average income in Ho Chi Minh City, twenty-five miles away, but four times that of workers in more remote parts of the country.39 Nike, which in 1999 was the largest private employer in Vietnam, paid on average twice what a teacher earned and also more than the typical doctor’s salary.40 In fact, Nike has consistently claimed that its own presence (or that of its subcontractors) has by and large benefited not only workers but also development in general. Case 239, Part A “We give people a chance to work themselves out of poverty,” said Knight. “When their bellies are full and they’ve got a roof over their heads, only then can they think about changing their economies.”41 The governments of the countries where the factories are located appear to concur. They actively sought out export-oriented, labor-intensive industry in an effort to generate economic growth. In Vietnam in 1995, the year that Nike first arrived in the country, average wages were about $200 per year, and more than half of the seventy-five million people lived in poverty.42 The communist government had instituted a series of economic reforms in 1989 to introduce more market mechanisms in the economy and integrate the country into the world economy as a development strategy. As a result, growth rates have averaged 8.6 percent per year between 1990 and 1998. During that same period, annual growth in industry increased by more than 13 percent, and exports were up a staggering 27 percent per year.43 Indeed, Nike officials do not see their movement from one country to another as “searching elsewhere for the bottom” of labor costs but instead as a measure of success. The company points to what one consultant refers to as the “Nike Index”: In simplest terms, the Nike Index tracks a developing economy’s economic development by Nike’s activity in each country. Economic development starts when Nike products are starting to be manufactured there (Indonesia, 1989; Vietnam, 1996). The economy hits the second stage —development at a level where per capita income indicates labor flowing from basic industries like footwear and textiles to advanced industries like electronics and cars (Hong Kong, 1985; Korea, 1990); and an economy that is fully developed when Nike has developed the country as a major market (Singapore, 1991; Japan, 1984; Korea, 1994).44 As criticism of labor conditions in factories producing Nikes continued, Nike rather quietly adopted its own code of conduct for factory conditions among its subcontractors in 1992. The code mandated that firms meet local minimum wage laws as well as those dealing with child labor. Later, the code was revised to make those standards stricter. In addition, the revised code prohibits forced labor and excessive overtime. It also mandates that subcontractors conform to all laws regarding benefits and comply with local occupational and safety laws.45 Today, Nike officials call the code of conduct vision- Case 239, Part A Sweating the Swoosh ary within the industry and note that only Reebok has followed with a code of its own. Adidas, the second largest athletic shoemaker in the world, along with Asics, Mizuno, and Fila, have no code.46 Critics, including human rights activists, religious groups, and labor unions, however, have pointed to two major weaknesses of the code. First, although it mandates the above features, the code also calls for a “memorandum of understanding” or voluntary adoption of measures such as the ability of workers to independently form unions and bargain collectively with management. This is especially important, they charge, not only because the U.N. International Labor Organization recognizes these as core labor rights, but also because factories that make Nike shoes have frequently been located in nondemocracies, where few legal labor rights exist.47 Second, the code raises the key issue of monitoring. The code of conduct may exist on paper, but without independent monitoring of conditions in factories, there is no guarantee that it is being met. “Nike got targeted early,” said Brian Quin of Harvard University’s Institute for International Development, who has studied Nike’s operations in Vietnam, “and its first reaction was to close the doors to independent monitors, journalists, inspectors. . . .It was a serious failure to communicate.”48 During the mid-1990s, Nike and its supporters remained at odds with critics, but Nike became much more sensitive to the labor issue. Aside from updating and upgrading its labor code of conduct, it also took other measures to support its claim that it was guaranteeing fair treatment in factories that produce Nike products. Beginning in 1994, it started hiring prestigious auditors such as Price Waterhouse and Ernst and Young to monitor factory conditions. At a more local level, it also worked with the Thailand Business Investment in Rural Development as an independent auditor in Thailand and the University of Economics, Ho Chi Minh City. In addition, Nike has worked with the World Bank and the Center for Development Studies at Harvard in buttressing its claims that workers are treated fairly and according to the law.49 Yet Nike officials were finding that for every action they took in this area criticism and negative publicity seemed actually to increase. “Boycott Nike” organizations were forming and NGOs and activists such as the No Sweat campaign, the Clean Clothes campaign, and Global Exchange reserved especially harsh treatment for Nike. Press reports also stung the company. In 1996, Life showed a photographic spread of children stitching Nike soccer 7 balls while working at home in Pakistan. The company responded by organizing, with a partner, the construction of stitching factories so that workers’ ages and hours could be more effectively monitored, but in some ways the damage was done. Human rights groups and other critics charged that without close press scrutiny, the practices probably would have continued. Most of Nike’s battles with its critics took place outside of the public spotlight during the early 1990s and were confined to charges and countercharges made by small activist groups and the company. This began to change in the mid-1990s as negative stories started to appear about the footwear and apparel industry, and the issue of globalization became something of a public debate. Among the first venues where this debate took place was the 1993 ratification of the North American Free Trade Agreement (NAFTA) between the United States, Canada, and Mexico. Despite the fact that prominent Republicans and Democrats backed the treaty, many Americans saw the agreement as pitting well-paid American workers against workers in developing countries who were paid just a few dollars a day. Although NAFTA was ultimately ratified and went into effect in 1994, unions, environmental groups, and human rights and consumer activists lobbied hard against the treaty, and public support was lukewarm at best. A stream of reports on mainstream U.S. companies that were alleged to engage in sweatshop production soon followed. In 1996, the Walt Disney Company endured a period of bad press over apparel and toy assembly plants, including reports that contractors paid Haitian workers less than the legal $2.40 per day.50 Disney’s defense was similar to Nike’s years earlier, as a spokesperson claimed, “The problem is, we don’t own the factories. We are dealing with a licensee.”51 Meanwhile, that same year popular talk show host Kathie Lee Gifford was humiliated by revelations that her clothing line was made in part by thirteen to fifteen year old Honduran children. Other shoe and apparel companies such as Reebok, Gap, Levi Strauss, Liz Claiborne, Wal-Mart, and many more endured damaging press reports and in many cases store protests. As the issue of global sweatshops became much more public, President Clinton took up the issue by organizing a summit to eliminate sweatshops in mid-1996. Driven by then-Labor Secretary Robert Reich, the summit was attended by officials from Nike, Liz Claiborne, Warnaco, L.L. Bean, and Patagonia, among others. Nike officials report that their 8 Michael Clancy company code of conduct was used as a working document for negotiations over an industry-wide code.52 Among other things, the meeting eventually produced such a code in April 1997 and an organization among signatories called the Apparel Industry Partnership (AIP). The summit did not quiet the most vocal critics, but for the short term it appeared to disarm broader public concern. KNIGHT’S DILEMMA Disputes over Nike labor practices continued throughout 1996 and 1997. In March 1996, fifteen women at the Sam Yang factory in Vietnam—the same factory where Le works—were reportedly beaten with the sole of a Nike shoe by a South Korean supervisor for poor workmanship. Two months later, the press reports of children as young as seven stitching soccer balls in Pakistan broke.53 Nike responded by distancing itself from the incidents and attempting to remedy the abuses. The South Korean supervisor was dismissed, and Nike announced it would no longer allow home work in Pakistan. The company also established its own internal labor department in October of 1996 and joined Businesses for Social Responsibility two months later.54 Shareholders also became more vocal. At the 1996 annual meetings in September, the United Methodist Church, holder of more than sixty thousand shares of Nike, called for close, independent monitoring of factories in order to clean up labor practices. The measure was voted down.55 The signals Phil Knight and Nike were receiving at this point were mixed. Although the incidents and growing criticism stung the company, the bottom line of sales and profits remained rosy. Sales reached $6.4 billion in fiscal 1996 and grew to record levels of nearly $9.2 billion by fiscal 1997. Profits also rose accordingly. Consumers, if they were concerned, did not let that concern stop them from buying Nike products, and the company’s stock price reflected its success. Yet gradually pressure on the company was growing and, most disturbing, it was moving from the confines of small NGOs that most people had never heard of to the front pages of newspapers. One such case took place in November 1996, when the CBS news show “48 Hours” documented factory workers punished by being forced to kneel with their hands over their heads for twenty-five minutes by supervisors in a plant making Nikes. Just four months later, on International Women’s Day, Case 239, Part A Thuyen Nguyen witnessed a Taiwanese supervisor force fifty-six women to run twice around a two-kilometer factory for wearing the wrong shoes to work at a factory that produced Nikes. Nguyen, a businessman and Vietnamese refugee who worked hard to lift the U.S. economic embargo against Vietnam, had been invited to the plant by Nike company officials. As one who believed that more trade and investment would aid Vietnamese development, Nguyen expected to be a sympathetic observer of working conditions there. “I realized then that Nike didn’t have any control over their factories,” said Nguyen later.56 He soon issued a twenty-seven-page document as part of a new group he helped found called Vietnam Labor Watch that meticulously criticized the company’s labor record. The report was widely publicized by the press. Nike’s response during this period was two pronged: First, it denounced such incidents as isolated and in no way representing the norm for most workers, much as it had in the past. In addition, however, it continued to take a more proactive and public path, which had begun earlier in 1996 with Nike’s very high-profile status at the Clinton administration’s ant-sweatshop summit. In a press conference in January 1997, Nike named former U.N. Ambassador and Mayor of Atlanta Andrew Young and his newly founded consulting firm Goodworks International to act as an independent monitor of factory conditions in Indonesia and Vietnam. Young’s report, issued six months later, turned up no signs of sweatshop conditions. “We found Nike to be in the forefront of the global economy,” said Young. “Factories we visited that produce Nike goods were clean, organized, adequately ventilated and well lit.”57 Nike took out full-page ads in several leading newspapers to publicize Young’s findings, but critics of the company’s labor practices argued that Young spent little time in factories and almost none in following up reports of abuses. “I think it is an extremely shallow report,” said Medea Benjamin, codirector of Global Exchange, one of Nike’s harshest critics. “I was just amazed that he even admitted that he spent three hours in factories using Nike interpreters and then could come out and say he did not find systematic abuse.”58 Young had investigated the factories for a period of two weeks, and his itinerary was widely known ahead of time. For Knight, Nike’s attempts to address labor problems head on appeared to be backfiring. In November 1997, Dara O’Rourke, a Case 239, Part A Sweating the Swoosh research associate at the Transnational Resource and Action Center, an environmental nongovernmental organization, and a consulting investigator for the United Nations’ Industrial Development Organization (UNIDO), released a report criticizing working conditions in the Tae Kwang Vina plant that made Nike products outside Ho Chi Minh City in Vietnam. More damning was that O’Rourke’s report was partially based on a leaked report from Ernst and Young, whom Nike hired to monitor conditions in the plant. The report, which received front page attention in the New York Times, found that employees were forced to work sixty-five hours per week, for $10 per week. In addition, the Ernst and Young audit found that the workers were exposed to carcinogens that exceeded local law by 177 times and that 77 percent of employees suffered from respiratory problems.59 The report was especially disturbing along two lines: First, it demonstrated that Nike officials knew of the conditions at the Tae Kwang Vina plant because of Ernst and Young’s confidential report, which had been turned over to O’Rourke by disgruntled Nike employees. O’Rourke, who visited the nine thousand-employee factory three times in 1997, also criticized the Ernst and Young document as understating the severity of conditions due to shoddy methodology. Second, the report documented these conditions within one of the newest and most modern facilities turning out Nike products, raising additional questions over the conditions at other factories. “We believe that we look after the interests of our workers,” said Nike spokesperson Vada Manager in response to the report. He claimed that Nike was responding to the problems after Ernst and Young made the company aware of the conditions. “This shows our system of monitoring works.”60 For Nike, however, the damage was done, as the company found itself on the defensive once again. Shortly after the O’Rourke report new charges surfaced that Nike and Reebok used child labor in China as young as thirteen years old who were paid 10 cents per hour. “Where in the world can we find the cheapest labor—even if it’s in the most repressed circumstances,” is the rationale of the companies, said Global Exchange’s Benjamin in making the reports public.61 Knight’s worries were heightened in 1997 and 1998 as additional incidents surfaced and as criticism moved even more to the mainstream. In 1997, documentary film maker and labor activist Michael Moore released the book Downsize This. The book prominently included Knight in a collection of mock 9 trading cards of what Moore called “corporate criminals.” On Moore’s ensuing book tour, which he also used to make a new film, The Big One, Knight invited Moore to visit Nike’s headquarters in Beaverton, Oregon. Moore surprised Knight with a gift of two open-ended airline tickets to Indonesia so that Knight could demonstrate to Moore that working conditions were fair. Knight refused to join Moore on the proposed trip, even though he admitted to never having visited the factories or the country. Later the film shows an interchange between Moore and Knight: “So if 12-year olds are working in these factories, that’s okay with you?” asked Moore. “They’re not 12. The minimum age is 14,” said Knight. “How about 14 then. Doesn’t that bother you?” “No,” replied Knight.62 Criticisms of Nike also found additional venues, and suddenly Nike seemed to face attacks from all sides. On college campuses students began protesting Nike’s contracts with the schools’ sports teams and coaches. At the University of North Carolina, students called on former legendary basketball coach Dean Smith to sever ties with Nike. In addition, the sports cable channel ESPN aired a special “Outside the Lines” with critical stories on labor practices by Nike and other shoe and apparel companies. In late 1997, women’s organizations in the United States, including the National Organization for Women (NOW), publicly criticized Nike for its treatment of women in factories. “While the women who wear Nike shoes in the United States are encouraged to perform their best, the Indonesian, Vietnamese and Chinese women making the shoes often suffer from inadequate wages, corporal punishment, forced overtime and/or sexual harassment,” NOW officials wrote in a letter to Knight. The letter was signed by, among others, the author Alice Walker and Democratic representative in Congress Maxine Waters (D-Calif.).63 This was especially damning criticism given that Nike had begun to target women as its newest growth market. Along another front, a labor activist sued Nike in April 1998 for violating California’s consumer laws by lying to the public about working conditions.64 Finally, even the comics appeared to be against Nike. Gary Trudeau’s “Doonesbury” strip ran a series that contained scathing criticism of the conditions in factories producing Nikes. Meanwhile, as public criticism grew, profits were beginning to shrink in late 1997 and early 1998. So did Nike’s stock price, and, consequently, Knight’s own personal net worth. Although Nike officials 10 Michael Clancy attributed the drop in sales to the Asian financial crisis that struck in 1997, there was deep concern that Nike and its trademark swoosh were losing their luster. In part this was no accident. “We figured out . . . that the only way to make our campaign against Nike’s labor practices work was to try to make the swoosh uncool,” said Benjamin of Global Exchange.65 The strategy appeared to be working. “A lot of kids think they are now discovering Adidas for the first time, as it becomes the anti-Nike” said one industry watcher.66 By April 1998, this was the dilemma confronting Knight: Press reports continued to be critical of Nike labor practices despite the company’s actions. Case 239, Part A Worse, many saw those actions as public relations ploys. Criticism had moved from the fringes to the mainstream of American society. Protesters regularly picketed Niketown stores in various cities. Even stockholders criticized company policies as the value of the shares declined. Worst of all, despite the fact that every American spent an average of $20 per year on Nike products and that 97 percent of Americans could identify the swoosh brand,67 Nike’s swoosh increasingly became the symbol for sweatshops in the eyes of many. For a shoe and apparel company that depended on fashion-conscious youth, there could be no worse fate for the Nike brand than that of becoming “uncool.” NOTES 1. Jennifer Lin, “Nike Battles Labour Charges: U.S. firm makes changes after alleged worker abuses in Vietnam,” Toronto Star, 2 April 1998. 2. Ibid. Le could make minimum wage and still be paid better than others in the country for two reasons. First, minimum wages frequently vary within regions of the country. Second, foreign corporations are forced to pay higher minimum wages than domestic employers by the Vietnamese government. 3. Walter LaFeber, Michael Jordan and the New Global Capitalism (New York: W.W. Norton, 1999), p. 59. 4. Miguel Korzeniewicz, “Commodity Chains and Marketing Strategies: Nike and the Global Athletic Footwear Industry,” in Gary Gereffi and Miguel Korzeniewicz, eds., Commodity Chains and Global Capitalism (Westport, CT: Greenwood Press, 1990), p. 252. 5. The Swoosh was created by Caroline Davidson in 1971 and represents the wing of the Greek goddess Nike. Davidson was paid $35 for the logo. Nike homepage, http://info.nike.com/faq/main.html. 6. Nike Company homepage labor timeline, http:// www.nikebiz.com/labor/time3.shtml. 7. Korzeniewicz, “Commodity Chains and Marketing Strategies,” p. 255. 8. Ibid. 9. J. B. Strasser and Laurie Becklund, SWOOSH: The Story of Nike and the Men Who Played There. (New York: Harcourt Brace Jovanovich, 1991), pp. 267–8, quoted in Korzeniewicz, “Commodity Chains and Marketing Strategies,” p. 255. 10. Cited in Korzeniewicz, “Commodity Chains and Marketing Strategies,” p. 248. 11. LaFeber, Michael Jordan, p. 61 12. Korzeniewicz, “Commodity Chains and Marketing Strategies,” p. 251. 13. LaFeber, Michael Jordan, p. 62. 14. Strasser and Becklund, Swoosh, p. 572. 15. LaFeber, Michael Jordan, p. 63. 16. Nike Company figures, http://info.nike.com/invest/ ar_f_history.html. 17. Nike Company Home Page, http://www.nikebit.com/labor/time2.shtml. 18. Bethan Brookes and Peter Madden, “The GlobeTrotting Sports Shoe,” Christian Aid homepage, http:// www.oneworld.org/christian_aid/global_shoe.html. 19. “Globalization: The Facts,” The New Internationalist 296 (November 1997). 20. World Bank figures reported in Barbara Stallings, “Introduction: Global Change, Regional Response,” in Barbara Stallings, ed., Global Change, Regional Response: The New International Context of Development (Cambridge, England: Cambridge University Press, 1995), p. 15, and Gary Gereffi, “Paths of Industrialization: An Overview,” in Gary Gereffi and Donald L. Wyman, eds., Manufacturing Miracles: Paths of Industrialization in Latin America and East Asia (Princeton, NJ: Princeton University Press, 1990), p. 8. 21. World Bank data reported in Gereffi, “Paths of Industrialization,” p. 16. 22. World Bank figures reported in Linda Y.C. Lim, “Southeast Asia: Success Through International Openness,” in Stallings, Global Change, Regional Response, pp. 241, 244. 23. The figures are in constant 1987 dollars. United Nations Development Program, Human Development Report, 1998 (New York: Oxford University Press, 1998), pp. 141, 145. 24. Robert Collier, “U.S. Firms are Reducing Sweatshop Abuses,” San Francisco Chronicle, 17 April 1999, p. A1. 25. Leslie Sklair, Assembling for Development: The Maquila Industry in Mexico and the United States (La Jolla, Calif.: Center for U.S.-Mexican Studies, University of California-San Diego, 1993), p. 15. 26. Susan Tiano, Patriarchy on the Line: Labor, Gender and Ideology in the Mexico Maquila Industry (Philadelphia, PA: Temple University Press, 1994), p. 44. Case 239, Part A Sweating the Swoosh 27. Richard Barnet and John Cavanagh, Global Dreams: Imperial Corporations and the New World Order (New York: Simon and Schuster, 1994), p. 325. 28. Tiano, Patriarchy on the Line, p. 37. 29. Ibid., pp. 217–18; Sklair, Assembling for Development, pp. 171–2. 30. See, for instance, Maria Patricia Fernández Kelly, For We Are Sold: I and my People (Albany, NY: SUNY Press, 1983); Barbara Ehrenreich and Annette Fuentes, “Life on the Global Assembly Line,” Ms., January 1981, pp. 53–71; Cynthia Enloe, “Women Textile Workers in the Militarization of Southeast Asia,” in June Nash and Maria Patricia Fernández Kelly, eds., Women, Men and the International Division of Labor (Albany, NY: SUNY Press, 1983), pp. 407–25. 31. Linda Y. C. Lim, “Women’s Work in Export Factories: The Politics of a Cause,” in I. Tinker, ed., Persistent Inequalities (New York: Oxford University Press, 1990), p. 119. 32. Quoted in Barnet and Cavanagh, Global Dreams, p. 328. 33. Quoted in Brooks and Madden, “The Globe-Trotting Sports Shoe.” 34. Ibid. 35. Nike Company Home Page, FAQ, 2/2/98, http:// info.nike.com/faq/main.html. 36. Reported in Asian Labour Update (April, 1997), p. 38. 37. Source: Nike: Why it Costs $70 for a pair of Athletic Shoes,” Washington Post, 3 May 1995, reprinted in Asian Labour Update (Oct. 1997-Jan. 1998): p. 16. 38. Bob Herbert, “Nike’s Boot Camps,” New York Times, 31 March 1997. 39. Lin, “Nike Battles Labour Charges.” 40. David Lamb, “Job Opportunity or Exploitation?” Los Angeles Times, 18 April 1999, Part C, p. 1. 41. Quoted in Jenifer Porges, “Nike’s Code: Is It Just a P.R. Tool?” Asian Labor Update 26 (Oct. 1997-Jan. 1998): p. 13. 42. Keith Griffin, “Restructuring and Economic Reforms,” in Keith Griffin, ed., Economic Reform in Vietnam (New York: St. Martin’s Press, 1998), p. 1. 43. World Bank, World Development Report 1999–2000 (New York: World Bank, 2000), p. 251. 44. Nike Company Home Page, FAQ, 2/2/98, http:// info.nike.com/faq/main.html. 45. Porges, “Nike’s Code;” p 10. 46. Nike Company Home Page, FAQ, 2/28/98, http:// info.nike.com/faq/main.html. 11 47. Porges, “Nike’s Code,” p. 10. 48. Quoted in Lamb, “Job Opportunity or Exploitation?” p. C1. 49. Nike Company Home Page, FAQ, 2/2/98 http:// info.nike.com/faq/main.html. 50. Debora Spar, “Human Rights Find Niche in Global Marketplace,” Minneapolis Star and Tribune, 26 March 1998, p. 18A. 51. Ibid. 52. Nike Company Home Page, FAQ, 2/2/98, http:// info.nike.com/faq/main.html. 53. Global Exchange Home Page, 7/2/99, www.global exchange.org/economy/corporations/nike/chronology.html. 54. Ibid. 55. Global Exchange Home Page, 7/2/99, www.globalexchange.org/economy/corporations/nike/chronology.html. 56. Lin, “Nike Battles Labour Charges.” 57. Dan Kanedy, “Nike’s Asian Factories Pass Young’s Muster,” New York Times, 25 June 1997, D2. 58. Ibid. 59. Dara O’Rourke, “Smoke from a Hired Gun: A Critique of Nike’s Labor and Environmental Auditing in Vietnam as Performed by Ernst and Young,” TRAC Nike Report, 10 November 1997, available on Corporate Watch Home Page 2/2/98, www.corpwatch.org/trac/nike/ trac.html; Steven Greenhouse, “Nike Shoe Plant in Vietnam is Called Unsafe for Workers,” New York Times, 8 November 1997, p. A1. 60. Quoted in Greenhouse, “Nike Shoe Plant in Vietnam.” 61. Global Exchange Home Page, www.globalexchange.org/economy/corporations/nike/chonology.html “Nike, Reebok cited in child labor abuses,” Associated Press. 62. Michael Moore, director. The Big One, Miramax Films, 1998. 63. Quoted in Steven Greenhouse, “Nike Supports Women in Its Ads, but Not Its Factories, Groups Say,” New York Times, 26 October 1997, Sec. 1, p. 30. 64. Reuters, “Nike Accused of Lying about Asian Factories,” in the New York Times, 21 April 1998, p. A18. 65. Quoted in Timothy Egan, “The Swoon of the Swoosh,” New York Times Magazine, 13 September, 1998, p. 66. 66. Ibid. 67. Egan, “The Swoon of the Swoosh.” Case 239, Part B SWEATING THE SWOOSH: NIKE, THE GLOBALIZATION OF SNEAKERS, AND THE QUESTION OF SWEATSHOP LABOR Michael Clancy University of Hartford COPYRIGHTED MATERIAL Do Not Duplicate — This is Copyrighted Material for Classroom Use. It is available only through the Institute for the Study of Diplomacy. 202-965-5735 (tel) 202-965-5811 (fax) On May 12, 1998, Phil Knight stood before the National Press Club in Washington, D.C., and made a startling announcement. “It has been said that Nike has single-handedly lowered the human rights standards for the sole purpose of maximizing profits,” he told the audience. “The Nike product has become synonymous with slave wages, forced overtime and arbitrary abuse. I truly believe that the American consumer does not want to buy products made in abusive conditions.”1 With that, Knight also announced a series of new policies for its subcontracting facilities. Henceforth, the minimum wage for new workers in all factories making Nike shoes would be eighteen, and sixteen in factories making other Nike products. In addition, Nike committed itself to allow independent monitors from labor and human rights groups to join its own auditors in the factories. In effect, this would allow Nike’s harshest critics to keep a close watch on working conditions in the plants. Knight also announced that new air quality standards meeting U.S. regulations rather than local standards would be imposed in all factories to ensure better ventilation.2 “We believe that these are practices which the conscientious, good companies will follow in the Copyright 2000 by Institute for the Study of Diplomacy. ISBN: 1-56927-239-5 Publications, Institute for the Study of Diplomacy, School of Foreign Service, Georgetown University, Washington, D.C. 20057–1025 http://data.georgetown.edu/sfs/programs/isd/ 12 21st Century,” said Knight. “These moves do more than just set the industry standards. They reflect who we are as a company.”3 Nike’s longtime critics offered measured support for the moves but criticized Nike for failing to raise wages, which had been effectively cut in Indonesia and Thailand due to falling local currencies associated with the Asian financial crisis. “Sweatshops are known to the U.S. public as places where people work in miserable conditions for miserable wages,” said Global Exchange’s Benjamin. “Nike is addressing the miserable conditions, but a sweatshop is a sweatshop is a sweatshop unless you address miserable wages.”4 In 1998 and early 1999, Nike announced a series of additional measures to aid workers and monitor conditions. The company switched adhesives used on its shoes from solventbased to waterbased in order to improve air quality. Such a step was also part of a broader agreement reached in November 1998 with President Clinton’s AIP. The negotiations had been deadlocked for two years over monitoring working conditions. The agreement called for a code of conduct regarding child labor, wages, health and safety standards, and a system of independent monitoring. “The agreement’s not very good,” said Mark Levinson, director of research at the Union of Needletrades, Industrial and Textile Employees (UNITE). “How can you talk about eliminating sweatshops without making a commitment to pay a living wage? And the agreement allows companies Case 239, Part B Sweating the Swoosh to produce in countries that systematically deny worker rights.”5 In March 1999, Nike offered Indonesian workers pay raises of 6 percent and an improved benefits package.6 By June 1999, two more raises followed, hiking average wages to more than 43 percent above the minimum wage. Yet because wages are paid in local currency and the Indonesian rupiah had lost much of its value, the wages, about 20 cents per hour, gave the average worker only three-quarters of the purchasing power she or he had before the economic crisis struck.7 In addition to raises, the company helped found the Global Alliance for Workers and Communities in order to improve the “work environment, life skills and communities of global manufacturing employees around the world.”8 In 1999, Nike also began a microloan program in Indonesia and announced plans to expand it elsewhere. The response has been mixed. Some of Nike’s harshest critics have toned down their criticism. “We’ve been in a direct dialogue with Nike for the last six months. We really feel like they’re getting it,” said Benjamin. “This is like the kinder, gentler Nike coming out.”9 Yet if some activist NGOs took a more measured line while continuing to scrutinize Nike’s actions, public reaction has been less favorable. By 1999 and 2000, a considerable amount of anti-sweatshop activity moved across college campuses and focused on collegiate licensing agreements for apparel with college and university logos and sponsorship of athletic programs by apparel and footwear companies. Despite Nike’s calls for protest groups to join the Fair Labor Association (FLA), an organization founded by the AIP, many activists argue that the organization is dominated by business interests. Instead many have joined alternative organizations, including United Students Against Sweatshops (USAS) and the Workers Rights Consortium (WRC). USAS has led student protests, sit-ins and the takeover of buildings at several institutions, including Duke, Harvard, Stanford, Yale, Wisconsin, and Michigan as part of their call for higher labor standards and greater accountability. In response, some fortyeight colleges and universities have formed and joined an alternative organization to the FLA, the WRC, which has called for acknowledgment of factory locations (many licensing companies argue factory locations are a “trade secret”) and truly independent monitoring of conditions in the factories.10 For workers like Le, however, some changes may be evident in working conditions, but wage rates remain steady. In addition, incidents of worker 13 abuse continue to be reported. Nike claims it has zero tolerance for such incidents and has temporarily cut relations with factories that have failed to comply with its standards. Despite the continuing disputes, many in the NGO community argue that Nike’s recent reforms have had a wider effect in the footwear, apparel, and toy industries and that therefore significant victories have been won. “The fact that industry leaders are taking these new steps, as insufficient as they are, is because so much public pressure has been put on them,” said Benjamin. “It’s a sign of real progress.”11 Deborah Spar, professor of business administration at Harvard, argues that such public pressure forces companies to “race to the top” of corporate responsibility rather than “race to the bottom” of wages.12 Whether this turnaround has come quickly enough, or is extensive enough, for Nike to salvage its image is unclear. Colleges and universities have been the centers of the harshest criticism, and Nike, which is also a major provider of athletic uniforms and equipment for college teams, has begun to fight back. While some colleges have joined the FLA, many instead became members of the WRC. In March 2000, the company announced that it would stop sponsoring Brown University’s hockey team after Brown joined the WRC. A month later, Knight announced he would stop giving money to his alma mater, the University of Oregon, after it, too, joined the WRC. The latter group has set up its own more extensive code of conduct and independent monitoring. The next day, Nike broke ties with the University of Michigan for the same reason.13 Nike’s strategy in 2000 appears to be a mixture of accommodation and firing back at its strongest critics. While cutting back financial sponsorship to some universities, Nike has also announced that it will make public where its factories are located and has sponsored student inspections of factory conditions. Yet concern in Beaverton is that these actions may have come too late. The company even put some of the letters it receives on the issue on the cover of its annual report. “Your actions so disgust me that I will never buy one of your products again,” read one. “I hope my attitude proves universal.”14 Nike’s own focus group studies indicate huge image problems among its core buyers, youth. “You can make a lot of mistakes around here, but the brand is sacred,” said Knight recently. “I messed that up.”15 14 Michael Clancy Case 239, Part B NOTES 1. Quoted in E.J. Dionne, “Nike a long way from Finish Line,” Denver Post, 15 May 1998, p. B11. 2. John H. Cushman, Jr., “Nike Pledges to End Child Labor and Apply U.S. Rules Abroad,” New York Times, 13 May 1998, p. D1. 3. Ibid. 4. Quoted in Dionne, “Nike a long way from Finish Line.” 5. Steven Greenhouse, “Groups Reach Agreement for Curtailing Sweatshops,” New York Times, 8 November 1998, p. A20. 6. Wall Street Journal, 24 March 1999, p. B2. 7. Dave Morberg, “Bringing Down Niketown,” The Nation, 268: 21 (June 7, 1999): p. 16. 8. Nike Company Home Page labor newsletter, Vol. 1, No. 1, 6/28/99, http://www.nikebiz.com/labor/letter.shtml. 9. Quoted in Stephanie Salter, “Global Exchange and a Kinder, Gentler Nike,” San Francisco Examiner, 21 March 1999. 10. Chris Stetkiewicz, “Nike Spikes ‘Sweatshop’ Critics,” Reuters, 7 May 2000. 11. Quoted in Robert Collier, “U.S. Firms Reducing Sweatshop Abuses,” San Francisco Chronicle, 17 April 1999. 12. Spar, “Human Rights Find Niche in Global Marketplace.” 13. Stetkiewicz, “Nike Spikes “Sweatshop’ Critics.” 14. William McCall, “Nike’s Image Under Attack,” Associated Press printed in Buffalo News, 23 October 1998, p. 5E. 15. Quoted in Egan, “The Swoon of the Swoosh.” ...
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This note was uploaded on 10/26/2008 for the course IR 210 taught by Professor Lynch during the Fall '06 term at USC.

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