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Leading Up to the Scandal
Many companies, including Nike, move their production factories overseas to cut costs. -
Nike Moves Factories Overseas
o Nike moves factories overseas to China, Vietnam, Korea, and Taiwan
o Cheap labor produces shoes and clothing for a fraction of what it would cost in the United States
o Moving factories creates a stepping stone into Asian markets that Nike has not yet reached -
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Unfolding of the Nike Sweatshop Scandal
Inhumane labor environents and low wages come to light in Nike factories overseas. -
News of Nike Sweatshops Appear in the News
o Articles appear in Indonesian and Taiwanese newspapers regarding investigative reports and wage protests
o Most shoe factories illegally paid workers "training wage," which was less than the standard eighty-six cents a day -
Nike's Scandal Reaches Worldwide News
o UK’s Thames TV, The Economist, and Knight Ridder all report poor working conditions of Nike factories in Indonesia
o Exhaustive quota system, low wages, dangerous working environment, abusive supervision, child labor, and unclean air -
Nike Fights Back with New Regulations
o Nike formulates an official code of conduct for its contractors that is supposed to apply in all factories producing Nike products
o The code, first formulated in 1992 and amended in 1997 and 1998 is still in use today
o The code is called SHAPE: Safety, Health, Attitude, People, and Environment, and results in spending $10 million a year to follow the code, adhering to regulations for fire safety, air quality, minimum wage, and overtime limit -
Nike Responds to Continuous Bad Publicity
o Further bad press in 1994 included investigative reports in The Rolling Stone, The Boston Globe, The Los Angeles Times, The Chicago Tribune and a book by Donald Katz called Just Do It
o Nike hires accounting firm, Ernst and Young to do "social audits" at Indonesia-based contract factories to earn back consumer trust -
Nike Works to Build Public Trust
o Nike hires former UN ambassador Andrew Young to visit its contractors' factories in Asia and report on working conditions hoping that he would provide an independent endorsement.
o Human rights groups criticise tour as a public relations stunt
o Strikes outside of Nike stores and student protests begin in the United States
o Anti-Nike rallies are held in 50 US cities and 11 other countries -
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Corporate and Consumer Reactions
Consumers and the corporate world react to constant criticism of Nike's sweatshops. -
Stakeholder Reactions
o Share prices have dropped significantly and profits are weak
o CEO Phil Knight admits “The Nike product has become synonymous with slave wages, forced overtime and arbitrary abuse
o Nike pours its marketing expertise into its own corporate reputation and seeks to portray a caring company that is concerned about working conditions in its contractors' factories
o Nike becomes a member of the Fair Labor Association (FLA) that states that member companies will pay the minimum wage of the country -
Nike Partnerships Under Stress
o Nike has 'partnerships' with over 200 US colleges and universities,42 of which involve cause-related marketing deals providing them with a financial reason for supporting the company
o Under pressure from student activists, universities have been joining up with the Worker's Right Consortium (WRC) rather than the FLA
o 50 universities have joined up so far further undermining the credibility of the FLA -
Nike Makes Strides to Change Public Opinion
o Nike is using the internet to provide information that defines themselves as a trustworthy compnay and to profess a social conscience
o Nike has a whole section of its website devoted to responsibility, with sub-sections on labour, global community, environment and diversity
o In April 2000, Nike CEO Phil Knight announced the company would be publishing the results of monitoring of its contract factories by PricewaterhouseCoopers (PwC) on its website -
A Not So Happy Ending for Nike
o Nike has employed reputation management rather than instigated real reforms that addressed the underlying issues of their overseas factories
o Nike seems to be moving slow with regards to its major issues: paying a minimum wage, allowing workers to afford basic human necessitites, and granting workers the right to form independent labor unions
o Many people believe that once the public relations nightmare is over for Nike the company will revert back to its exploitative ways
