Nike Sweatshop and Child Labor Scandal Essay Example

affected their reputation.

Nike Sweatshops Scandal

The scandal that was brought to the limelight about Nike Inc. touched on the conditions of work as well as violation of labor laws in the corporation. The two aspects of the scandal will be discussed independently focusing on the allegations, consumer reaction and the response of the corporation to the allegations.

Sweatshop Allegations

Nike has faced accusations of using sweatshops in the footwear and apparel manufacturing factories. The accusations began in 1970s when bloggers began to highlight the working conditions that were experienced in the Nike factories. Being an American multinational corporation, Nike was in a bid to seek cheaper labor. This made the corporation to move the production overseas in Taiwan, China, Vietnam, Pakistan and Bangladesh where labor is cheaper (Michelletti, et al., 2004)N. The company was alleged to take advantage of the people in these countries and whenever they complained of low wages and poor working conditions the company would close the factory and reopen elsewhere where production cost would low. It was discovered that in 1990s, Nike sold goods entirely produced from sweatshops. Nike had started outsourcing the factories in these countries removing the blame from their hands. However, the corporation was taken responsible by the public for the poor conditions of work.

It is unethical for any business or company to manufacture products and services through sweatshops. These poor conditions of work include underpayment, long working hours with low wages, overcrowding, lack of job security and unpaid overtime. These were the issues experienced by workers in Nike Inc. factories. They workers were overworked for long hours with a very low wage. They were not given job security or even

payment for any hours worked overtime as required by law. This brings out the unethical behavior the corporation portrayed while maximizing profits and reducing on operation costs. It is right for any business to cut on operation cost but in an ethical manner that does not affect the workers. Ethical practice in business requires employers to pay employees according to the hours they work the required time and all hours worked overtime (Rendtoff, 2009). They are also supposed to provide conducive working environment and also job security for the workers. Taking advantage of the poor communities who are willing to survive on minimum wage rather than with nothing was unethical for Nike Corporation.

Nike’s Response to Sweatshop Allegations

At the beginning of the allegations, Nike denied being part of the sweatshops with the argument that the factories were under the outsourced suppliers. The corporation denied the allegations and laid the blame on the outsourced suppliers but later in the years they admitted of the sweatshop allegations. The director at that time stated it clearly that they did not own the factories that were alleged to be sweatshops. A code of conduct could have been set by the corporation to monitor the operations in the factoriesto ensure good working conditions for the workers (Gini & Marcoux, 2012). Nike Corporation came into accepting the allegations later in the years. They admitted the mistake of not upholding a code of conduct for the factories to have good working conditions. They decided to respond to the problem ethically following the business ethics they could have at first.

The response by Nike started by monitoring the activities that were carried out in the

factories. All the factories under the corporation were installed with a code of conduct that was supposed to govern the workers and operations in the factories. This code of conduct included the aspects of safety, attitude, health, environment and people. Regulations were meant to be adhered to or the benefit of the workers and improvement of productivity. The aspects that were considered by the code were the limits of overtime, minimum wage, quality of the air in the factories and safety in regard to fire (Borgen Project, 2014). Nike also established an organization that was supposed to release the corporation reports on current conditions and planned issues. This was meant to deal with the factory practices that were unfair to the workers.Over the years, Nike adopted the strategy of monitoring the factories regularly (Rogers, 2009). This was meant to ensure that the factories are run well with the right business ethics. The response strategies taken by the corporation helped to turn it around by changing the ethical environment in the factories. The main goal before this realization was only to make profits while cutting on production and operation costs. After bringing the sweatshops to limelight, Nike has been able uphold business ethics and maintain good working conditions in the factories.

Consumer Reaction

At the time when the sweatshop scandal was brought to the limelight, university students were the major consumers of Nike’s products including athletic footwear and sports equipment. The consumers protested for the corporation to offer better services to the employees rather than concentrate on the profits alone. The reactions were seen through hunger strikes, protests and boycotts. The Worker Rights Consortium (WRC) brought students together

and organized protests for the use of Nike products in their schools (Web.Stanford.Edu, 2016). A national hunger strikes was organized by the students together with WRC to ensure that Nike products were not used in schools for athletics and other sports. Most workers in the factories were women and the unfair conditions subjected to them led the feminist groups to boycott products from Nike. All this reaction by consumers was meant to bring back the corporation to ethical practice in manufacturing of products. WRC is an organization that advocated for the rights of workers in the American society. Even if the factories were located overseas, the consortium had the obligation to do something because the corporation is American (Rendtorff, 2009).

Child Labor Scandal

Nike Corporation was criticized not only for the sweatshops but also for the use of child labor in its factories. It took the corporation many years to admit that it was unethical to employ children in the overseas factories. The reasons for preference of child labor, effect on the business and the solution to the problem will be discussed.

Reasons for child labor Preference

Nike Inc. moved the manufacturing factories from America to Third world countries overseas due to the cost of production that had risen. The cost of labor was also high and the contractors were urged to move to Indonesia, Vietnam, China, Pakistan and Bangladesh. Ten year old children were employed in the factories in these countries. At this age, children are supposed to be at school dealing with childhood stuff. Employing such young children deprives them of their childhood and this is unethical business practice. It is also against the rights of children

as required by the law. Children below the age of 18 should not be employed for whatever duties that are there (Rendtorff, 2009). The corporation suppliers preferred child labor because it is cheap. They were not required to pay a lot in wages and they were able to have surplus for vigorous marketing and advertising.

Children are also vulnerable to manipulation without questioning or protests. They will do as they are told by the employers whether or not it is good for them. Adults can ask questions or even protest the poor working conditions but the children will continue working even when the conditions are not favorable. The children may not also ask for much even when they are overworked. They are comfortable with what they get from the employer. The suppliers preferred child labor for them to be able to reduce on operation costs and maximize profits. A company like Nike should not be involved in issues of child labor (Rogers, 2009). The manufacturing suppliers outsourced in Pakistan and Cambodia were not concerned with the effects child labor has on children and also on the corporation. It does not mean that the corporation’s directors were not aware but they ignored because business was good and profits were rising.

Effect of Child Labor on Nike Corporation

The use of child labor in the Nike manufacturing factories in Pakistan, Cambodia and other low wage countries affected the corporation greatly by tarnishing its reputation, decrease in sales and loss of consumer loyalty. In business reputation is vital for growth and attraction of new customers. Nike got a bad name through the child labor scandal and it greatly affected the trust

that people had in the products. When people realized that children were used to manufacture the products in the factories, they were surprised by how a multinational company could not afford labor. Coupling the child labor to the sweatshops gave the corporation the worst reputation and most customers lost trust in the products (Rogers, 2009).

Sales decreased when the scandal was known worldwide through the social media. Consumers in American and the rest of the world could not support the business of using child labor to manufacture products. The children employed in the factories were subjected to difficult and dangerous working conditions and this made people to change their minds about Nike products. Customer loyalty is important in any business and when it is compromised, acquiring new customers is difficult. Use of child labor by Nike factories led to loss of this loyalty and this in turn affected the sales and the profits (Rendtorff, 2009).

Solution to the Child Labor Problem

The Nike Corporation admitted it was wrong and unethical to employ children in the factories and the director Phil Knight made promises to the stakeholders, consumers and potential workers about the aspects they would improve o ensure business ethics were upheld. The corporation set the minimum age for its employees at 18 years for the footwear factories and 16 at apparel factories. This followed the embarrassment the corporation went through in 1996 when the issue of child labor in its factories was raised. Instead of employing children, payment of a competitive wage to the adults would benefit the children in these countries where the Nike products are manufactured (Borgen Project, 2014). Adult workers would help the children

since it was most likely that the children worked together with their parents. If the adults were paid well then they would be able to take care of the children and all their needs catered for.

In the countries where birth records were not available to show the actual ages of the employees a background check could be done to ensure that they were of age to work in the factories. Even the physical appearance could be used to predict the ages of those seeking employment in the factories. Another solution would be for the corporation to liaise with the recruitment firms in the countries to ensure that those employed have a met a threshold for a specific level of education. This is part of business ethics where the employer should find out about the age of the employees to avoid issues of child labor. The scandal served as an eye opener for the Nike Corporation to work hard towards upholding business ethics they had overlooked before (University, 2016).

Importance of Sweatshop and Child Labor Scandal to the Nike Corporation

Through the scandal Nike Corporation was able to enhance the business ethics and handle the workers well. The workers in the Nike factories saw a change in the work conditions from worse to better. Various aspects of business ethics were considered in the responses issued by the corporation. The workers received better treatment and working conditions. Children were also helped from the labor they provided in the factories. They were able to get back to school and this was helpful to the corporation in regaining customer trust and sales. On the contrary, it created a popularity for the

corporation and on rectifying the problems the sales rose back to what was there previously (Rogers, 2009).

Conclusion

Nike Inc. did not follow ethical guidelines in sweatshops and child labor manufacturing. The corporation failed to consider the working conditions of the employees as well as their ages. They have been able to improve the aspects of safety and health for the employees. They have also been able to curb child labor in most of the countries where the factories are located. At first, the corporation did not uphold the business ethics as required by the law. This is seen through the employment of children and the poor working conditions. The protests that were carried out by consumers helped the workers to get the changes as the corporation was embarrassed by the child labor and sweatshops scandal.

The corporation had denied responsibility for all the allegations tabled by various writers but they later admitted their mistakes and unethical behavior. It is through this that the corporation developed the code of conduct to be followed in the factories. This helped to regain the reputation of the corporation and also helped the workers to work in improved conditions. It is important for all business to adopt good and ethical behavior to ensure that the mandate of the business is carried out effectively. Businesses should also take responsibility of their actions as part of their ethical behavior and code of conduct.

References

1. Business Ethics and Social Responsibility. (2016). Managementhelp.org. Retrieved 28 March 2016, from http://managementhelp.org/businessethics/
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3. Micheletti, M., Føllesdal, A., Stolle, D., & International
   

Seminar on Political Consumerism. (2004). Politics, products, and markets: Exploring political consumerism past and present. New Brunswick, N.J: Transaction Publishers.