Nike consistently underreacted to these concerns and as a result created an even larger public relations challenge for themselves by not internalizing it equivalent to a threat to profitability. As with any crisis that gets ignored, the critics only get louder the more they perceive their voices not being heard. For Nike, this continued on for years until they began to aggressively attack the problem as if it were one impacting profits, including the development of auditing and independent monitoring programs, and an open-door policy to Congressional critics who had the power to initial investigations and define if any U.S. laws were being broken or not.
Many of Nike's competitors subcontract production to Asian factories similar to those used by Nike. What was Nike singled out by human rights and labor activists?
Nike was singled out for a variety of reasons. First, the company's lack of seriousness in response to human rights and labor activities was taken as arrogance, which only fueled the activists to attack the company more. Second the company refused to apologize and stated instead that they had no responsibility for their supply chain partners' ethical or moral behavior. Keep in mind that during this period there are other companies including HP who have shown remarkable levels transparency with regard to their supply chains and have thoroughly defined Codes of Conduct for them as well. Third, Nike has exceptionally large profit margins and is considered the market leader in the U.S., both when measured by total sales and also by gross contribution margin. It dominates entire areas of the sporting goods and sporting apparel marketplace, and has done so through price reductions and very aggressive channel-based tactics. As a result, the company has gained a reputation for being exceptionally aggressive and focused on driving smaller competitors out of markets and also out of business in some cases. Fourth, Nike kept seeing the successful culmination of this challenge not as actually helping the workers achieve a better and more equitable standard of living, but in quieting their many critics. This came through as the entire set of actions and strategies taken were more focused on how to organize the company to respond to its many critics first, and not necessarily ensure payment to the worker level. It did not in fact step in and enforce its many programs (MESH, Code of Conduct, et.al.) with any urgency or level of pain inflicted on suppliers, with only one supplier being fired through the program's entire duration (DeTienne, Lewis, 359). Taken together, all of these factors contributed to Nike being promoted from just a violator of human and worker rights to the iconic image of one. By taking a far more aggressive stance at the beginning of the crisis and ridding their supply chain of companies participating in these practices, the company could have created significant positive momentum for itself. Its lack of immediate response and response that it was their right to have suppliers who may not have been ethical raises them to iconic status, which was a very difficult position to move away from once perceived as such.
What responsibility does Nike have to the workers of the factories of its subcontractors? What wage rates should it require them to pay their workers?
Nike failed to realize that it is a global, iconic brand and that even the workers in factories of their suppliers are a reflection of their value and sincerity. Dominating the market in several key areas of sporting goods, and apparel including shoes and paying millions in endorsement contracts while at the same time having the reputation of forcing suppliers to have workers in substandard housing and living conditions made the company look hypocritical at best. The lack of response sent the message of arrogance. Nike does have a responsibility to ensure its suppliers are paying workers a wage that allows them to have a life that is free from servitude and actually gives them freedom to pursue interests besides working 16 to 20 hours every day. Nike has the responsibility to ensure its supply chain is ethical. The wage rates need to align with the per capita incomes of the nations they are working in, and there also needs to be job grading and valuations that each supplier provides for auditing on a continual basis. The division of labor within suppliers also must be monitored by an external accounting firm as well. All of these actions are necessary for Nike to be perceived as more of an enabler of change on behalf of production workers in its supply chain and less of a company consumed only with opportunism.
Vidhi A Chaudhri. (2006). Organising Global CSR: A Case Study of Hewlett-Packard's e-inclusion Initiative*. The Journal of Corporate Citizenship,(23), 39-51.
Kristen Bell DeTienne, and Lee W. Lewis. "The Pragmatic and Ethical Barriers to Corporate Social Responsibility Disclosure: The Nike Case. " Journal of Business Ethics 60.4 (2005): 359.
Lim, S., and J. Phillips. "Embedding CSR Values: The Global Footwear Industry's Evolving Governance Structure. " Journal of Business Ethics 81.1 (2008): 143-156.