Case Study 1
Nike: The Sweatshop Debate
                                                    TFSU    Zhu Mo
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In recent five years, as a global sport empire, Nike’s success has been widely discussed and debated on the level of the world. However, Nike’s affluence has appealed dozens of doubt coming from media and non-profit institutions, which have conducted investigations on its value chain. As an astonishing result, its manufacturing factories in south-east Asia, as reports indicate, are sweatshops where workers slaved away in hazardous conditions for below-subsistence wages.
<1> Should Nike be held responsible for working conditions in foreign factories that it does not own, but where subcontractors make products for Nike?
As for the question one, I reckon, Nike is definitely responsible for working conditions in foreign factories, even Nike does not own. Globalization, the way I see it, has created all the
advantages for the terminal “point” or “dot” in the value chain, in which, of this case, the Nike controls and occupies these vital resources. However, its advantage should not be an excuse for lowering the benefit that the manufacturing factories, which are in the end of value chain, deserve to obtain.
My second point is, although Nike does not own those foreign factories, there is a certain kind of interrelationship between them, which in this case, the contract. The profits of those factories are solid because of Nike’s proportion for them. If Nike’s proportion standard made for manufacturing process is low, then those workers in the sweatshop, i.e. whose working conditions, won’t change due to the unequal status between Nike and its subcontractor. We can do some math to see why those workers’ working conditions cannot improve. There are 25,000 labor forces working in a factory of Saigon, one of “Nike towns”, where women workers work 6 days a week and earn $40 per month. In sum, the labor expense of that factory is $1,000,000 per month, not to mention the other administrative overheads for that factory. Thus, under the pressure from labor forces and its employer, the owner of that factory is pushed to lower and lower the wage standard of labor forces and e
nhance the working hour to further increase captivity. And again, these are all Nike’s fault.
Thirdly, although Nike’s headquarter recently claimed that it had conducted audit on those “sweatshops” in Asia, the public is not satisfied with the results. Some individual or institution protest, the censorship is prearranged by the local factories, plus the translator is appointed by these factories, so the result itself will never be trustworthy.
The current situation over this is not one-side fault, I mean, Nike didn’t deliberately lower down the proportion of manufacturing factories as profit, which is reality due to the underdevelopment of those countries.
<2> What labor standards regarding safety, working conditions, overtime, and the like, should Nike hold foreign factories to: those prevailing in that country or those prevailing in the United States?
There are two such standards regarding the working conditions, safety, overtime:
a. PELs: Permissible Exposure Limits
b. OSHA: Occupational Safety & Health Act
Since there is no such a functioning standard in Indonesia, Vietnam, Philippines etc., I suppose the formation of these standards should be the responsibility of non-profit international organization, such as ILO. The two standards mentioned previously don’t work because they are formed in U.S, in which the terms are favorable for Nike, not for manufacturers. It is impossible for Asian countries to form these standards, because once it is done, the cost and expense of manufacturers will rise to a higher degree, and Nike won’t accept to raise the working standards in the light of losing low labor cost advantage from these countries.
<3> In Indonesia, an income of $2.28 a day, the base pay of Nike factory workers, is double the daily income of about half the working population. Half of all adults in Indonesia are farmers, who receive less than $1 a day. Given these national standards, is it appropriate to criticize Nike for the low pay rates of its subcontractors in Indonesia?
Here I have to mention the social responsibility of a corporation. In term of international bus
iness, the social responsibility of one corporation indicates how to deal with the externality that corporation has incurred. E.g. the Gulf Oil Spill in 2010, the EP was responsible to compensate the loss, environmental, economical, social, and so on. In this case, Nike is not exceptional. In the manufacturing process of shoemaking, the working environment is filled with toxic substance. To plus the low wage rates, Nike has become the major target of public criticism.
Nowadays, it is an overwhelming rule that social responsibility overweighs economic benefits. We can find out dozens of cases that corporations collapsed because of losing social credit even though their operations were not wrong. When you have lost public faith, you have to be taken out; this is the iron law of modern world. So it works for Nike. “The corporate executive would be spending someone else's money for a general social interest. Insofar as his actions in accord with his ‘social responsibility’ reduce returns to stockholders, he is spending their money. Insofar as his actions raise the price to customers, he is spending the customers' money. Insofar as his actions lower the wages of some employees, he is spending their money. The stockholders or the customers or the em
ployees could separately spend their own money on the particular action if they wished to do so”.

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