Nike Case Summary

Nike Case Summary

Nike’s public relations nightmare regarding the questionability of their labor force and working conditions began with an order of custom Nike iD shoes by Jonah Peretti. Peretti chose the word “sweatshop” to be printed on his shoes, and after he was denied this request, he asked to order a pair with a “color snapshot of the 10-year-old Vietnamese girl who makes my shoes”instead. Nike didn’t respond. In a few weeks, the situation exploded all over the news and Peretti was a celebrity.
Nike itself doesn’t own a single factory, but rather it contracts the production of its products to independently owned manufacturers. Practically all of these subcontracted factories are in places like Indonesia, Vietnam, China, and Thailand, where the labor costs aresignificantly less than those in the United States. Early in the company’s history, Nike had purchased two shoe-manufacturing facilities in the United States, which became so unprofitable that they were forced to close. Labor is so cheap for Nike in foreign countries that at one time, Nike was reportedly spending more on their single endorsement with Michael Jordan ($20 million-per-year) than they wereon the total payroll of their six Indonesian factories. This isn’t hard to believe when the laborers are working for 14 cents an hour to make Jordan shoes that cost well over a hundred dollars a pair. Nike only pays about $16.25 to make a shoe that we as consumers pay $65 dollars for in the stores. Nike doubles their price to $32.50 to retailers, who in turn double it to $65 for their ownprofit.
Aside from unethical labor wages being paid, the workers were far too young to be working in sweatshops, where laborers were often abused. Michael Moore, a movie director, interviewed Philip Knight, CEO and founder of Nike, about some of the age conflicts. Specifically, Moore asked if it was okay with Knight that 14 year olds were working in the Indonesian factories. Knight bluntlyresponded “No”. In addition to that, several plants in Vietnam in 1998 were inspected and they found cases of worker abuse. At one factory, a supervisor punished 56 women for wearing inappropriate work shoes by forcing them to run around the factory in the hot sun. Twelve workers fainted and were taken to the hospital. Also, workers were only allowed one bathroom break and two drinks of water duringeach eight-hour shift.
Nike took several measures to respond to all of these conflicts that were now associated with the shoe giant. They began by hiring Andrew Young, former mayor of Atlanta and vocal opponent of sweatshops and child labor to review the firm’s overseas practices. Some praised Nike for hiring young, however many regarded Young as biased and unable to give a complete report ofNike. Nike also hired Maria Eitel, former public relations exec for Microsoft, to oversee Nike’s labor practices, environmental affairs, and involvement in the global community. Like before, many saw it as a publicity stunt. In 1998, the Fair Labor Association (FLA) was created to develop a workplace code of conduct and a system for monitoring factories to ensure compliance. Nike was amongthe first companies to join the FLA. Later, the Workers Rights Consortium (WRC) was created as an alternative to the FLA, which focused much effort on increasing the wages that factories paid to workers. Nike openly opposed the WRC and claimed that it had unrealistic demands and was biased towards organized labor. Knight even went as far as withdrawing all of his massive funding efforts from hisalma mater, The University of Oregon, when they joined the WRC in the year 2000. In early 2001, Oregon dissolved its ties with the WRC, probably because of the lack of funding it was getting from Knight, at which point Knight renewed his funding.
The Educating for Justice organization (EFJ) continues to run a Stop Nike Sweatshops campaign. However, Nike’s critics have quieted down in...