Case 22

Nike, Inc., and Sweatshops

J onah Peretti decided to customize his Nike

shoes and visited the Nike iD website. The
company allows customers to personalize their
Nikes with the colors of their choice and their own
away as Asia, Australia, Europe, and South
America.2,3
Nike refused to admit any wrongdoing in the
incident and stated that they reserve the right to
personal 16-character message. Peretti chose the refuse any order for whatever reason. Beth
word “sweatshop” for his Nikes. Gourney, a spokesperson for Nike, had the
After receiving his order, Nike informed Peretti following to say regarding the incident:
via e-mail that the term “sweatshop” represents
“inappropriate slang” and is not considered viable Clearly, he [Peretti] was attempting to stir up
for print on a Nike shoe. Thus, his order was trouble; he has admitted it. He’s not an activist.
summarily rejected. Peretti e-mailed Nike, arguing Mr. Peretti does not understand our labor
that the term “sweatshop” is present in Webster’s policy. If he did, he would know that we do
dictionary and could not possibly be considered not hire children; our minimum age for hiring is
inappropriate slang. Nike responded by quoting 18 . . . and we don’t apologize for not putting the
the company’s rules, which state that the company word “sweatshop” because our policy clearly
can refuse to print anything on its shoes that it states: “We reserve the right to cancel any order
does not deem appropriate. Peretti replied that he up to 24 hours after it has been submitted.”4
was changing his previous order and would
instead like to order a pair of shoes with a “color Nike, Inc., is no stranger to sweatshop allega-
snapshot of the 10-year-old Vietnamese girl who tions. Ever since the mid-1990s, the company has
makes my shoes.” He never received a response.1 been subject to negative press, lawsuits, and
demonstrations on college campuses alleging that
the firm’s overseas contractors subject employees
THE PR NIGHTMARE BEGINS
to working in inhumane conditions for low wages.
Before Nike could blink an eye, the situation As Philip Knight, the CEO and founder of Nike,
turned into a public relations nightmare. Peretti once lamented, “The Nike product has become
forwarded the e-mail exchange to a few friends, synonymous with slave wages, forced overtime,
who forwarded it to a few friends, and so forth. and arbitrary abuse.”5
Within six weeks of his initial order, the story
appeared in the Wall Street Journal, USA Today,
and the Village Voice. Peretti himself appeared on HISTORY OF NIKE, INC.
the Today Show, and he estimates that 2 million Philip Knight started his own athletic shoe
people have seen the e-mail. At the height of the distribution company in 1964. Using his Plymouth
incident, Peretti was receiving 500 e-mails a day Reliant as a warehouse, he began importing and
from people who had read the e-mail from as far distributing track shoes from Onitsuka Company,
Ltd., a Japanese manufacturer. First-year sales of
This case was written by Bryan S. Dennis, Idaho State University, and
revised by Archie B. Carroll, University of Georgia. $8,000 resulted in a profit of $254. After eight

845
846 Case 22 | Nike, Inc., and Sweatshops

years, annual sales reached $2 million, and the Nike pays: $16.25 and then
firm employed 45 people. However, Onitsuka saw doubles the price to
the huge potential of the American shoe market retailers for shipping,
and dropped Knight’s relatively small company in insurance, duties,
favor of larger, more experienced distributors. R&D, marketing,
Knight was forced to start anew. However, instead sales, administration,
of importing and distributing another firm’s track and profits
shoes, he decided to design his own shoes and
create his own company. The name he chose for The $16.25 price paid to the factory includes:
his new company was “Nike.”6
Materials: $10.75
Labor: $2.43
Nike’s Use of Contract Labor. When the
Overhead + Depreciation: $2.10
company began operations, Knight contracted the
Factory Profit: $0.97
manufacture of Nike’s shoes to two firms in
Total Costs: $16.258
Japan. Shortly thereafter, Nike began to contract
with firms in Taiwan and Korea. In 1977, Nike Even in today’s high-tech environment, the
purchased two shoe manufacturing facilities in production of athletic shoes is still a labor-
the United States—one in Maine, the other in intensive process. For example, for practically all
New Hampshire. Eventually, the two plants athletic shoes, the upper portion of the shoe must
became so unprofitable that the firm was forced be sewn together with the lower portion by hand.
to close them. The loss due to the write-off of the The soles must be manually glued together.
plants was approximately $10 million in a year in Although most leaders in the industry are con-
which the firm’s total profit was $15 million. The fident that practically the entire production pro-
firm had a successful IPO in 1980, eight years cess will someday be automated, it will still be
after the company was founded. Nike became the years before the industry will not have to rely
largest athletic shoe company in the world.7 upon human labor.
Nike does not own a single shoe or apparel
factory. Instead, the firm contracts the production
Other Firms in the Industry. Nike’s use
of its products to independently owned manu-
of overseas contractors is not unique in the athletic
facturers. Today, practically all Nike subcon-
shoe and apparel industry. All other major athletic
tracted factories are in countries such as
shoe manufacturers also contract with overseas
Indonesia, Vietnam, China, and Thailand, where
manufacturers, albeit to various degrees. One
the labor costs are significantly less than those in
athletic shoe firm, New Balance Inc., is somewhat
the United States. Worldwide, more than five
of an anomaly, as it continues to operate five
hundred and thirty thousand people are em-
factories in the United States.9
ployed in factories that manufacture Nike prod-
Nike spends heavily on endorsements and
ucts. On an earlier website that is no longer
advertising and pays several top athletes well
available, the company gave the following as a
over a million dollars a year in endorsement
rough breakdown of the costs per shoe. With
contracts. In contrast, New Balance has developed
inflation ever with us, these figures increase over
a different strategy. They do not use professional
the years, but these data give us an idea of total
athletes to market their products. According to
costs relative to selling price:
their “Endorsed by No One” policy, New Balance
Consumer pays: $65 instead chooses to invest in product research and
Retailer pays: $32.50 to Nike, and then development and foregoes expensive endorsement
doubles the price for retail contracts.10
 Nike, Inc., and Sweatshops | Case 22 847

THE SWEATSHOP MOVEMENT the company maintained that employee wages are
VS. NIKE fair and higher than the government-mandated
One pivotal event is largely responsible for minimum wage in all of the countries where the
introducing the term “sweatshop” to the American firm has contracted factories. The company
public. In 1996, Kathie Lee Gifford, cohost of the released the following data about its wages:
formerly syndicated talk show Live with Regis and
Kathie Lee, endorsed her own line of clothing for Average Monthly
Wal-Mart. During that same year, labor rights Minimum Wage at Nike
activists disclosed that her “Kathie Lee Collection” Country Monthly Wage Factories
was made in Honduras by seamstresses who
earned 31 cents an hour and were sometimes Taiwan 14,124 NT$ 25,609 NT$
required to work 20-hour days. Traditionally South Korea Won 306,030 Won 640,000
known for her pleasant, jovial demeanor and her
love of children, Kathie Lee was outraged. She Indonesia 115,000 rupiah 239,800 rupiah
tearfully informed the public that she was un- China RMB 276 RMB 636
aware that her clothes were being made in so-called
sweatshops and vowed to do whatever she could Thailand 2,950–3,150 baht 4,435 baht
to promote the antisweatshop cause.11 Vietnam 331.050 VND$ 640.030 VND$

Nike Is Accused. In a national press con-

ference, Gifford named Michael Jordan as another Nike asserted that the entry-level income of an
celebrity who, like herself, endorsed products Indonesian factory worker is five times that of a
without knowing under what conditions the farmer. The firm also claimed that an assistant line
products were made. At the time, Michael Jordan supervisor in a Chinese subcontracted factory earns
was Nike’s premier endorser and was reportedly more than a surgeon with 20 years of experience.14
under a $20-million-per-year contract with the In response to the allegations regarding Michael
firm.12 Nike, the number-one athletic shoe brand Jordan’s endorsement contract, Nike stated that the
in the world, soon found itself under attack by the total wages in Indonesia are $50 million a year,
rapidly growing antisweatshop movement. which is well over what the firm paid Jordan.15
Shortly after the Gifford story broke, Joel Nike soon faced more negative publicity.
Joseph, chairman of the Made in the USA Michael Moore, the movie director whose doc-
Foundation, accused Nike of paying underage umentary Roger and Me shed light on the plight of
Indonesian workers 14 cents an hour to make the laid-off auto workers in Flint, Michigan, and
company’s line of Air Jordan Shoes. He also damaged the reputation of General Motors chair-
claimed that the total payroll of Nike’s six man Roger Smith, interviewed Philip Knight for
Indonesian subcontracted factories was less than his movie The Big One. On camera, Knight referred
the reported $20 million per year that Jordan to some employees at subcontracted factories as
received from his endorsement contract with Nike. “poor little Indonesian workers.” Moore’s cameras
The Made in the USA Foundation is one of the also recorded the following exchange between
organizations that ignited the Gifford controversy Moore and Knight:
and is largely financed by labor unions and U.S.
apparel manufacturers that are against free trade Moore: Twelve-year-olds working in [Indone-
with low-wage countries.13 sian] factories? That’s OK with you?
Nike quickly pointed out that Air Jordan shoes Knight: They’re not 12-year-olds working in
are made in Taiwan, not Indonesia. Additionally, factories . . . the minimum age is 14.
848 Case 22 | Nike, Inc., and Sweatshops

Moore: How about 14, then? Doesn’t that standards of living because he felt he lacked the
bother you? “academic credentials” for such a judgment.20
Knight: No.16 Public reaction to Young’s report was mixed.
Some praised Nike. However, many of Nike’s
Knight, the only CEO interviewed in the movie, opponents disregarded Young’s report as biased
received harsh criticism for his comments. Nike and incomplete. One went so far as to state the
alleged that the comments were taken out of report could not have been better if Nike had
context and were deceitful because Moore failed to written it themselves and questioned Young’s
include Knight’s pledge to make a transition from independence.21,22
a 14- to a 16-year-old minimum age labor force. In 1998, Nike hired Maria Eitel to fill the newly
Nike prepared its own video that includes the created position of vice president for corporate
entire interview.17 and social responsibility. Eitel was formerly a
Thomas Nguyen, founder of Vietnam Labor public relations executive for Microsoft. Her
Watch, inspected several of Nike’s plants in responsibilities were to oversee Nike’s labor
Vietnam in 1998 and reported cases of worker practices, environmental affairs, and involvement
abuse. At one factory that manufactures Nike in the global community. Although this move was
products, a supervisor punished 56 women for applauded by some, others were skeptical and
wearing inappropriate work shoes by forcing claimed that Nike’s move was nothing more than
them to run around the factory in the hot sun. a publicity stunt.23
Twelve workers fainted and were taken to the Later that same year, Philip Knight gave a
hospital. Nguyen also reported that workers were speech at the National Press Club in Washington,
only allowed one bathroom break and two drinks DC, and announced six initiatives that were
of water during each eight-hour shift. Nike intended to improve the working conditions in
responded that the supervisor who was involved its overseas factories. The firm chose to raise the
in the fainting incident has been suspended and minimum hiring age from 16 to 18 years of age.
that the firm had hired an independent accounting Nike also decided to expand its worker education
firm to look into the matters further.18 program so that all workers in Nike factories
would have the option to take middle and high
Nike Responds. In 1997, Nike hired former school equivalency tests.24 The director of Global
Atlanta mayor Andrew Young, a vocal opponent Exchange, one of Nike’s staunchest opponents,
of sweatshops and child labor, to review the firm’s called the initiatives “significant and very posi-
overseas labor practices. Neither party disclosed tive.” He also added that “we feel that the
the fee that Young received for his services. Young measures—if implemented—could be exciting.”25
toured 12 factories in Vietnam, Indonesia, and
China and was reportedly given unlimited access.
COLLEGE STUDENTS, ORGANIZED
However, he was constantly accompanied by Nike
representatives during all factory tours. Further- LABOR, AND NIKE
more, Young relied upon Nike translators when Colleges and universities have direct ties to the
communicating with factory workers.19 many athletic shoe and apparel companies (such
In his 75-page report, Young concluded that as Nike, Champion, and Reebok) that contract
“Nike is doing a good job, but it can do better.” He with overseas manufacturers. Most universities
provided Nike with six recommendations for im- receive money from athletic shoe and apparel
proving the working conditions at subcontracted corporations in return for outfitting the univer-
factories. Nike immediately responded to the report sity’s sports teams with the firm’s products. In
and agreed to implement all six recommendations. 1997, Nike gave $7.1 million to the University of
Young did not address the issue of wages and North Carolina for the right to outfit all of UNC’s
 Nike, Inc., and Sweatshops | Case 22 849

sports teams with products bearing the Nike protested against the university’s contract with
Swoosh logo.26 Additionally, academic institutions Nike due to the firm’s alleged sweatshop abuses.
allow firms to manufacture apparel bearing the More than 100 students demanded that the
university’s official name, colors, and insignias in university not renew its contract with Nike and
return for a fee. In 1998, the University of rallied outside the office of the university’s
Michigan received $5.7 million dollars in licensing chancellor. More than 50 other universities, such
fees.27 Most of these contract and licensing fees are as the University of Wisconsin and Duke, staged
allocated toward scholarships and other academic similar protests and sit-ins.31
programs. Today, these practices continue and the In response to the protests at UNC, Nike
amounts of money are much larger. invited the editor of the university’s student
newspaper to tour Nike’s overseas contractors to
Organized Labor. In 1995, the Union of examine the working conditions firsthand. Nike
Needletrades, Industrial and Textile Employees offered to fund the trip by pledging $15,000
(UNITE) was founded. The union, a member of the toward the students’ travel and accommodations
AFL-CIO, was formed by the merger of The costs. Ironically, Michael Jordan is an alumnus of
International Ladies’ Garment Workers’ Union UNC.32
and the Amalgamated Clothing and Textile Work- Critics of the USAS contend that the student
ers Union and represented two hundred and fifty organization is merely a puppet of UNITE and
thousand workers in North America and Puerto organized labor. They cite the fact that the AFL-
Rico. Most of the union members work in the CIO has spent more than $3 million on internships
textile and apparel industry. In 1996, UNITE and outreach programs with the alleged intent of
launched a “Stop Sweatshops” campaign after interesting students in careers as union activists.
the Kathy Lee Gifford story broke to “link union, The founders of the USAS are former UNITE
consumers, student, civil rights and women’s interns. The USAS admits that UNITE has tipped
groups in the fight against sweatshops at home off the student movement as to the whereabouts of
and abroad.”28 alleged sweatshop factories. Also, in an attempt to
In 1997, UNITE, along with the AFL-CIO, spur campus interest in the sweatshop cause,
recruited dozens of college students for summer UNITE sent two sweatshop workers on a five-
internships. Many of the students referred to campus tour. They have also coached students via
that summer as “Union Summer.” For the phone during sit-ins and paid for regularly
students involved, it had the same impact that scheduled teleconferences between antisweatshop
“Freedom Summer” did for students during the student leaders on different campuses. According
civil rights movement.29 The United Students to Allan Ryan, a Harvard University lawyer who
Against Sweatshops (USAS) organization was has negotiated with the USAS, “[T]he students are
formed the following year. The USAS was vocal, but it’s hard to get a viewpoint from them
founded and was led by former UNITE summer that does not reflect that of UNITE.”33
interns.30 Many students have denied allegations that
they are being manipulated by organized labor
University Organizations. The USAS has and claim that they discovered the sweatshop
chapters at dozens of universities across the issues on their own. Others acknowledge the
United States. Since its inception, the organization assistance of organized labor but claim it is “no
has staged a large number of campus demonstra- different from [student] civil rights activists using
tions that are reminiscent of the 1960s. One notable the NAACP in the 1960s.”34 John Sweeney,
demonstration occurred on the campus of UNC in president of the AFL-CIO, claims the role of
1997. Students of the Nike Awareness Campaign organized labor is not one of manipulation but of
850 Case 22 | Nike, Inc., and Sweatshops

motivation. Others assert that the union merely Eddie Bauer, and Phillips-Van Heusen) along with
provides moral support.35 hundreds of colleges and universities have also
Regardless of the AFL-CIO’s intentions, the joined the FLA.38
students have had a positive impact upon the
promotion of organized labor’s antisweatshop FLA Requirements. Members of the FLA
agenda over the years. According to the director must follow the principles set forth in the
of one of the several human rights groups that are organization’s Workplace Code of Conduct. The
providing assistance to the students: FLA Workplace Code of Conduct sets member
standards in the following areas: forced labor,
At this moment, the sweatshop protest is child labor, harassment or abuse, nondiscrimina-
definitely being carried on the backs of uni- tion, health and safety, freedom of association,
versity students. If a hundred students hold a wages and benefits, hours of work, and overtime
protest, they get a page in the New York compensation. Member organizations that license
Times. If a hundred union people did that, or contract with overseas manufacturers or sup-
they’d be locked up.36 pliers are responsible for ensuring that factory
employees are paid either the minimum wage as
By 2007, United Students Against Sweatshops required by law or the average industry wage,
claimed to have approximately 200 affiliated high whichever is higher. Additionally, the code of
schools, colleges, and universities, and contacts on conduct sets limits on the number of hours
more than 400 campuses. USAS currently has four employees can work, allows workers the right to
staff members and offices in Washington, DC, and collective bargaining, and forbids discrimination.39
New York City. Today, USAS promotes The Each member firm must conduct an internal
Sweat-Free Campus Campaign as a multifaceted, audit of every manufacturing facility on a yearly
extremely successful program in which students basis. Furthermore, members of the FLA must
organize antisweatshop campaigns on their cam- disclose to the FLA the location of all subcon-
puses, mandating that the clothes bearing their tracted factories. This information will not be
collegiate logos be manufactured under fair and made public. The FLA uses a team of external
ethical conditions.37 auditors to monitor the compliance of these
factories with the FLA’s code of conduct. These
THE FAIR LABOR ASSOCIATION monitoring activities consist of a combination of
announced and unannounced factory visits, and
AND THE WORKER RIGHTS
results are made available to the public.40
CONSORTIUM
In 1996, a presidential task force of industry and The WRC Alternative. The USAS opposed
human rights representatives was given the job of several of the FLA’s key components and created
addressing the sweatshop issue. The key purpose the Worker Rights Consortium (WRC) as an
of this task force was to develop a workplace code alternative to the FLA. The WRC asserts that the
of conduct and a system for monitoring factories prevailing industry or legal minimum wage in
to ensure compliance. In 1998, the task force some countries is too low and does not provide
created the Fair Labor Association (FLA) to employees with the basic human needs. They
accomplish these goals. This organization is made propose that factories should instead pay a higher
up of consumer and human rights groups as well “living wage” that takes into account the wage
as footwear and apparel manufacturers. Nike was required to provide factory employees with
one of the first companies to join the FLA. Many enough income to afford housing, energy, nutri-
other major manufacturers (Levi Strauss & Co., Liz tion, clothing, health care, education, potable
Claiborne, Patagonia, Polo Ralph Lauren, Reebok, water, child care, transportation, and savings.
 Nike, Inc., and Sweatshops | Case 22 851

Additionally, the WRC supports public disclosure She added, “We realized that if we still want to be
of all factory locations and the right to monitor any the brand of choice in 20 years, we had certain
factory at any time. As of August 2007, 174 responsibilities to fulfill.”45
colleges and universities had joined the WRC
and agreed to adhere to its policies.41 Oregon Reverses Its Decision. In early
Nike, a member and supporter of the FLA, has 2001, Oregon’s state board of higher education
opposed the Worker Rights Consortium. The firm cast doubt on the legality of the University of
states that a concept of a living wage is impractical, Oregon’s WRC membership, and the university
as “there is no common, agreed-upon definition of dissolved its ties with the labor organization.46 In
the living wage. Definitions range from complex September of the same year, Phil Knight renewed
mathematical formulas to vague philosophical his financial support. Although the exact amount
notions.” Additionally, Nike was once opposed of Knight’s donation was kept confidential, it was
to the WRC’s proposal that the location of all sufficient enough to ensure that the $85 million
factories be publicly disclosed. Nike also has expansion of the university’s football stadium
claimed that the monitoring provisions set out by would go through as originally planned. In 2000,
the WRC are unrealistic and biased toward the stadium expansion plans suffered a significant
organized labor.42 setback when Knight withdrew his funding. Many
The University of Oregon, Philip Knight’s alma of the proposed additions, such as a 12,000-seat
mater, joined the WRC in the year 2000. Alumnus capacity increase and 32 brand-new skyboxes,
Knight had previously contributed more than $50 were made possible largely due to Knight’s pledge
million to the university—$30 million for aca- of financial support.47,48
demics and $20 million for athletics. Upon hearing Nike released its first corporate social respon-
that his alma mater had joined the WRC, Knight sibility report in October 2001. According to Phil
was shocked. He withdrew a proposed $30 million Knight, “[I]n this report, Nike for the first time has
donation and stated that “the bonds of trust, assembled a comprehensive public review of our
which allowed me to give at a high level, have corporate responsibility practices.”49 The report
been shredded” and “there will be no further cites several areas in which the firm could do
donations of any kind to the University of better, such as worker conditions in Indonesia and
Oregon.”43,44 Mexico. The report, compiled by both internal
auditors and outside monitors, also notes that
Nike is one of only four companies that has joined
NIKE COMES AROUND a World Wildlife Fund program to reduce green-
In May 2001, Harsh Saini, Nike’s corporate and house admissions. Jason Mark, a spokesman for
social responsibility manager, acknowledged that Global Exchange, one of Nike’s chief critics,
the firm may not have handled the sweatshop praised the report and stated that Nike is
issue as well as it could have and stated that Nike “obviously responding to consumer concerns.”50
had not been adequately monitoring its subcon-
tractors in overseas operations until the media and
other organizations revealed the presence of KASKY V. NIKE, INC.
sweatshops. Nike’s problems with fair labor issues continued
on a related front. Labor activist Mark Kasky had
We were a bunch of shoe geeks who expanded sued Nike in 1998, arguing that Nike had engaged
so much without thinking of being socially in false advertising when it denied that there was
responsible that we went from being a very big mistreatment of workers in Southeast Asian fac-
sexy brand name to suddenly becoming the tories. At issue was the question of whether Nike’s
poster boy for everything bad in manufacturing. defense of its practices was commercial speech, for
852 Case 22 | Nike, Inc., and Sweatshops

which there are laws against making misleading economic decisions have a profound effect on
claims, or political speech, for which free speech human lives.55
protections apply. The California Supreme Court
ruled that Nike’s statements about labor conditions
could be construed as false advertising. Nike NIKE LATER GETS POSITIVE
appealed this ruling to the U.S. Supreme Court, RECOGNITIONS
which sent it back to the California court without In spite of its controversial record on the issue of
making a judgment on the free speech issue. In sweatshops and monitoring labor practices
September 2003, Kasky and Nike settled the case abroad, Nike has been the recipient of a variety
for a $1.5 million donation to the Fair Labor of CSR recognitions over the past several years.
Association.51 The settlement, however, left many For example, Nike claimed the only spot in its
questions unanswered.52 Many feared that the risk industry for the 2007 SustainableBusiness.com list
of lawsuits would have a chilling effect, causing of the World’s Top Sustainable Stocks. In addition,
firms to stop releasing social responsibility reports, in the Apparel category, Nike was named to the
which unlike the SEC financial reports, are all 2007 World's Most Ethical companies list compiled
voluntary. In 2001, Nike issued a corporate social by Ethisphere magazine. Finally, Nike earned the
responsibility report, but the company announced No. 3 ranking on the 2007 “100 Best Corporate
that, due to the California decision, they would not Citizens” list published by CRO magazine. Nike’s
release a corporate social responsibility report in ranking rose from No. 13 in 2006 and No. 31 in
2002–2003. Nike released a “Community Invest- 2005.56
ment” report detailing its philanthropic efforts
instead.53 In 2004, the company did release a
sustainability report.54
Questions for Discussion
1. What are the ethical and social issues in this
CRITICS QUIET DOWN BUT DON’T case?
GO AWAY 2. Why should Nike be held responsible for what
Nike’s critics have not gone away, but they have happens in factories that it does not own?
quieted down as the company has taken steps to Does Nike have a responsibility to ensure that
address many of the criticisms made over the factory workers receive a “living wage”? Do
years. Though the critics are less vocal today the wage guidelines of FLA or WRC seem
compared to previous periods, there is still some most appropriate to you? Why?
ongoing opposition to the company. Typical of 3. Is it ethical for Nike to pay endorsers millions
the continuing opposition is the organization while its factory employees receive a few
Educating for Justice (EFJ) that runs a continuing dollars a day?
Stop Nike Sweatshops campaign. In 2006, EFJ 4. Is Nike’s responsibility to monitor its subcon-
planned a film titled Sweat. The film, as described tracted factories a legal, economic, social, or
on EFJ’s website, is the journey of two young philanthropic responsibility? What was it 10
Americans uncovering the story behind the years ago? What will it be 10 years from now?
statistics about Nike factory workers. Through
the lens of their experiences, they claim viewers 5. What could Nike have done, if anything, to
will discover the injustices of Nike’s labor prevent the damage to its corporate reputa-
practices in the developing world, specifically in tion? What steps should Nike take in the
Indonesia, and how Nike's cutthroat, bottom-line future? Is it “good business” for Nike to
 Nike, Inc., and Sweatshops | Case 22 853

acknowledge its past errors and become more 12. Del Jones, “Critics Tie Sweatshop Sneakers to
socially responsible? ‘Air’ Jordan,” USA Today (June 6, 1996), 1B.
6. What are the goals of the AFL-CIO? Does the 13. Ibid.
campus antisweatshop movement help or 14. Nike Press Release, June 6, 1996.
hinder the AFL-CIO’s goals? Are the students 15. Del Jones, 1B.
being “used” by the AFL-CIO? 16. Garry Trudeau, “Sneakers in Tinseltown,”
Time (April 20, 1998), 84.
7. Regarding the Kasky v. Nike, Inc. case, is Nike’s
17. William J. Holstein, “Casting Nike as the Bad
defense of its practices commercial speech or
Guy,” U.S. News & World Report (September
political speech? What are the long-term
22, 1997), 49.
implications of your decision, not only for
18. Verena Dobnik, “Nike Shoe Contractor
Nike but also for business in general?
Abuses Alleged,” Atlanta Journal-Constitution
8. Conduct your own personal research on (March 18, 1997), A14.
Nike’s response to sweatshop-type situations. 19. Simon Beck, “Nike in Sweat over Heat
What are they doing now? Raised by Claims of Biases Assessment,”
South China Morning Post (July 6, 1997), 2.
Case Endnotes 20. Matthew C. Quinn, “Footwear Maker’s
Labor Pledge Unlikely to Stamp Out
1. Copy of e-mail exchange found at Depart- Criticism,” Atlanta Journal-Constitution (June
ment of Personal Freedom website, http:// 25, 1997), F8.
www.shey.net/niked.html. 21. G. Pascal Zachary, “Nike Tries to Quell
2. Ibid. Exploitation Charges,” Wall Street Journal
3. ABC News website, http://abcnews.go (June 15, 1997).
.com/sections/business/DailyNews/ 22. Simon Beck, 2.
nike010402.html. 23. Bill Richards, “Nike Hires an Executive from
4. Ibid. Microsoft for New Post Focusing on Labor
5. Bien Hoa, “Job Opportunity or Exploitation,” Policies,” Wall Street Journal (January 15,
Los Angeles Times (April 18, 1999). 1998), B14.
6. Philip Knight, “Global Manufacturing: The 24. Philip Knight, 640.
Nike Story Is Just Good Business,” Vital 25. Patti Bond, “Nike Promises to Improve Fac-
Speeches of the Day, 64(20): 637–640. tory Worker Conditions,” Atlanta Journal-
7. Ibid., 637–640. Constitution (May 13, 1998), 3B.
8. These data were presented on an earlier Nike 26. Allan Wolper, “Nike’s Newspaper Tempta-
website that is no longer available. The site tion,” Editor & Publisher (January 10, 1998),
was: http://www.nikebiz.com/labor/faq 8–10.
.shtml. 27. Gregg Krupa, “Antisweatshop Activists
9. New Balance website, http://www.new Score in Campaign Targeting Athletic Re-
balance.com/corporate/aboutus/corporate_ tailers,” Boston Globe (April 18, 1999), F1.
about.php, retrieved September 21, 2007. 28. UNITE webpage, http://www.uniteunion
10. New Balance website, http://www.new .org/research/history/unionisborn.html.
balance.com/. 29. Krupa, F1.
11. David Bauman, “After the Tears, Gifford 30. UNITE webpage.
Testifies on Sweatshops—She Turns Lights, 31. Wolper, 8–10.
Cameras on Issue,” Seattle Times (July 16, 32. Wolper, 8.
1996), A3.
854 Case 22 | Nike, Inc., and Sweatshops

33. Jodie Morse, “Campus Awakening,” Time 48. Ron Bellamy, “Nike CEO to Resume Dona-
(April 12, 1999), 77–78. tions to University of Oregon,” Register Guard
34. Krupa, F1. (September 26, 2001).
35. Morse, 77–78. 49. William McCall, “Nike Releases First Corpo-
36. Ibid. rate Responsibility Report,” Associated Press
37. USAS website: http://www.studentsagainst State & Local Wire (October 9, 2001).
sweatshops.org//index.php?option=com_ 50. Ibid.
content&task=view&id=16&Itemid=66, 51. Adam Liptak, “Nike Move Ends Case Over
retrieved September 21, 2007. Firm’s Free Speech,” New York Times (Sep-
38. Fair Labor Association website: http://www. tember 13, 2003).
fairlabor.org/participants/companies, re- 52. For a more thorough discussion of this
trieved September 21, 2007. controversy, see David Hess and Thomas
39. http://www.fairlabor.org/conduct, retrieved Dunfee, “The Kasky-Nike Threat to Corpo-
September 21, 2007. rate Social Reporting,” Business Ethics Quar-
40. Ibid. terly (January 2007), 5–32; and Don Mayer,
41. Worker’s Rights Consortium website, http:// “Kasky v. Nike and the Quarrelsome Ques-
www.workersrights.org/as.asp, retrieved tion of Corporate Free Speech, Business Ethics
September 21, 2007. Quarterly (January 2007), 65–96.
42. Nike website, http://www.nikebiz.com/ 53. http://www.srimedia.com; for detailed
labor/index.shtml. coverage of this case and its implications,
43. Philip Knight Press Release (April 24, 2000) see http://www.reclaimdemocracy.org/
found at: http://www.nike.com/nikebiz/ nike/.
news/pressrelease.jhtml?year=2000 54. William Baue, “Gap and Nike Engage Stake-
&month=04&letter=g, retrieved October 14, holders for Assurance Statements on Sustain-
2007. ability Reports,” Nike website: http://www
44. Louise Lee and Aaron Bernstein, “Who Says .nike.com/nikebiz/nikebiz.jhtml?page=59
Student Protests Don’t Matter?” BusinessWeek &item=tppr&year=2005&release=07a, re-
(June 12, 2000), 96. trieved September 22, 2007.
45. Ravina Shamdasani, “Soul Searching by 55. Educating for Justice: http://www.educa
‘Shoe Geeks’ Led to Social Responsibility,” tingforjustice.org/nikewages/sweat.html,
South China Morning Post (May 17, 2001), 2. retrieved September 21, 2007.
46. Greg Bolt, “University of Oregon Ends 56. Nikebiz.com, Company Overview, Awards
Relationship with Antisweatshop Group,” & Recognitions, Corporate Social Respon-
Register Guard (March 6, 2001). sibility: http://www.nike.com/nikebiz/
47. Hank Hager, “Frohnmayer: It’s a Very nikebiz.jhtml?page=3&item=awards, re-
Happy Day for Us,” Oregon Daily Emerald trieved September 22, 2007.
(September 27, 2001).
 CASE 2
Nike, Inc., and Sweatshops

https://www.youtube.com/watch?v=ENcvNC4HnOg
1. “Nike does not own a single shoe or apparel factory. Instead, the firm contracts the
production of its products to independently owned manufacturers.” Characterize the
Nike’s use of Contract Labor.
2. What are the ethical and social issues in this case?
3. “The company maintained that employee wages are fair and higher than the government-
mandated minimum wage in all of the countries where the firm has contracted factories”.
Comment the company's strategy taking into account the ethical approach followed.
4. “Nike spends heavily on endorsements and advertising”. Comment critically Nike´s
strategy.
5. “Knight referred to some employees at subcontracted factories as “poor little Indonesian
workers.” Comment this expression taking into account the ethical perspectives.
6. “Members of the FLA must follow the principles set forth in the organization’s
Workplace Code of Conduct”. Discuss the FLA principles in the light of the ethical
theories addressed in class.

Notes:
 Rough breakdown of the costs per shoe - desagregação dos custos por sapato
 An endorsement for a product or company involves appearing in advertisements for it
or showing support for it.