Hakan Eroglu, Omar Zoheir Kamel and Lauren Tracey Betti Characters: 100,754 Group 21
1
Ethics within Nike
Group 21
Department of RUC
SIB, The International Social Sciences Bachelor
Semester and year:
2nd semester, 2016
Group members:
Hakan Eroglu Student ID: 58088
Omar Zoheir Kamel Student ID: 58198
Lauren Tracey Betti Student ID: 57291
Supervisor:
Niklas Aleaxander Chimirri
Characters: 100,754
Hakan Eroglu, Omar Zoheir Kamel and Lauren Tracey Betti Characters: 100,754 Group 21
2
ABSTRACT
This project addresses ethics within the business world. The business that is evaluated is the company
Nike, since it is arguably the biggest athletic wear company in the world. This project seeks to
understand how ethics are not the main focus in Neo-liberalism, instead, surplus is- which leads to
the critique of the company. This critic did eventually happen in the early 1990’s where several cases
of labour abuse happened in the company's production factories which led to the introduction of
Corporate Social Responsibility (CSR). The problem with CSR is that many sees it as a business
hiding its issues that are present. We are interested in understanding how businesses outsource their
production to countries where they can get away with abuse of labour, such as low wages, low taxes,
etc. To understand this we drew upon Aloy Soppe’s definitions of business ethics and several
definitions of CSR, since there is no universal definition. From Soppe, we get an understanding of
how ethics are in a firm and, additionally, we use Dahlsrud five dimensions and compare it to Soppe’s
ethical framework within ‘The Ethical Theory of the Firm’ . From these five dimensions, this project
focuses on three: economic dimension, stakeholder dimension, and social dimension.
By the end of the project it will be clear how Nike has evolved from a scandal struck company in the
1990’s, to become a more desirable and produce an even larger amount of commodities for the
population. Furthermore, one realizes that Nike’s ethics have changed positively yet Nike
acknowledges issues still occur though assures they are being solved with time.
Key-words:
Corporate social responsibility, virtue ethics, deontological ethics, teleological ethics, code of
conduct, neo-classical school of thought, neo-liberalism, outsourcing, production, abuse,
deregulation, scandal, Aloy Soppe, Dahlsrud
Hakan Eroglu, Omar Zoheir Kamel and Lauren Tracey Betti Characters: 100,754 Group 21
3
Contents
Ethics within Nike ............................................................................................................................................. 1
CHAPTER 1 ....................................................................................................................................................... 4
Introduction ................................................................................................................................................... 4
Problem Area ................................................................................................................................................. 5
PROBLEM FORMULATION ...................................................................................................................... 6
Literature Review .......................................................................................................................................... 6
Delimitation ................................................................................................................................................... 7
Chapter 2: Methods and Theory ........................................................................................................................ 8
Methods ......................................................................................................................................................... 8
Theory and Concepts ................................................................................................................................... 11
Chapter 3 ......................................................................................................................................................... 17
The Nike Case study .................................................................................................................................... 17
3.1 Introduction to the case ...................................................................................................................... 17
3.2 The history of Nike ............................................................................................................................ 17
3.3 The Business Nike ............................................................................................................................. 19
3.4 The Nike Scandals ............................................................................................................................. 20
3.5 Nike’s Corporate Social responsibility and Code of Conduct. ........................................................... 21
3.5 The summarizing of Nike .................................................................................................................. 23
Chapter 4 ......................................................................................................................................................... 25
Analysis ....................................................................................................................................................... 25
Discussion.................................................................................................................................................... 37
Chapter 5 ......................................................................................................................................................... 39
Conclusion ................................................................................................................................................... 39
Hakan Eroglu, Omar Zoheir Kamel and Lauren Tracey Betti Characters: 100,754 Group 21
4
CHAPTER 1 Introduction
The aim of this project is to investigate how and why corporations include ethics in their companies
overseas factories. The goal of our project is to use a case study and show what business ethics are
and how they impact the specific scandals within the chosen case and its effects. In order to do this,
we will look at the ethical approach in a multinational corporation and the exploitation of workers
and their working conditions overseas ultimately leading to the critic of the firm.
The case chosen for this project is the corporation Nike, which is one of world's leading shoe and
clothing manufacturer, and how they in the 1990s had issues with labour exploitations in their supply
chain (Nisen, 2013), leading to a discourse about business ethics, which we will further analyse and
study. To counteract the critiques the company faced during the 1990’s, Nike implemented a code of
conduct where they stated the rules that the factories had to oblige to regarding labour conditions and
wages. Furthermore, Nike published in 2001 their first Corporate Social Responsibility (CSR) which
indicated and enlightened the population that exploitation of labourers found the place but where to
change in the nearest future (Csrwire.com, 2016). On the other hand, some scholars believe that CSR
is about how companies manage their business processes to produce a positive impact on society. The
reason for this is that companies have a responsibility and a need to satisfy their stakeholders, whom
for the past decade have been taking an increasing in companies’ activities in terms of its products
and services, its impact on the environment and local communities and how it treats and develops its
workforce. One of the reasons for why there has been an increasing focus on CSR, is the ethical
scandals and corporate governance failures, which have led to decreasing trust in the corporations
(Rowe 442-444, 2006). Although this project is only going to focus on one specific case.
To define the concept CSR, we have chosen definitions from the World Business Council of
Sustainable Development (WBCSD), Dahlsrud, and an academic journal, due to the fact that there
no universal definition of CSR. Besides CSR, we are going to have an ethical value foundation that
is defined by Aloy Soppe in his writing Ethical theory of the firm. Soppe works in the department of
Corporate and Financial Law in Erasmus University Rotterdam, his ethical framework in his theory
draws upon philosophical and sociological aspects, which is the reason to why his definitions of
ethical value are chosen in this project as well as being objective. His theory is written with a
neoclassical school approach, though he criticizes it as being unethical, and he, therefore, takes
Hakan Eroglu, Omar Zoheir Kamel and Lauren Tracey Betti Characters: 100,754 Group 21
5
another approach regarding the theory of the firm, which we wanted to gain knowledge upon. The
neoclassical school of thought gave birth to neo-liberalism, which we will discuss further.
Problem Area
The purpose of this project is to examine the issues within a corporation, and to tackle how it is that
Corporate Social Responsibility (CSR) is implemented in such corporation. In order to understand
CSR, we are going to use different definitions because there is no universal definition. According to
Dahlsrud (Dahlsrud, 2008), there are 37 definitions of CSR. Furthermore, we will examine how CSR
has emerged and has received its ethical perspective. In this project, we focus on one case study,
which is the company, Nike. We will examine its historical background, mainly emphasizing on the
exploitation of labour in the early 1990s, and how the company has outlived the crisis. We will also
examine what impact such changes had caused to new policies for labour conditions, etc.
The ethical values are going to be the main focus of this project, which is explained in greater detail
in the theory section on the Ethical theory of the firm drawn upon by Soppe. The ethical values
described in the theory are divided into three different ethics: the virtue ethics, deontological ethics,
and teleological ethics. Soppe separates the ethical values in three giving larger knowledge and
different perspectives to the case and how CSR functions. These values will be described further
down in the theory section of this project. It order to attempt to answer the dilemma of whether
companies use CSR in order to focus on gaining a larger surplus or to become more ethical oriented,
we will use the neoliberalist approach, that originated from neoclassical school of thought, to examine
the company’s purpose. This approach focuses on outsourcing and the main goal is to gain a surplus,
even though this may violate modern society’s ethical values. As well as deregulate and change the
rule of the market. (Martinez and Garcia, 2016)
The problem this project is going to analyse is how corporations have concentrated on gaining as
much surplus as possible yet not considering working conditions, fair wage and other labour related
issues. Companies, like Nike, use a defensive strategy by claiming they don’t have control over their
contractors, and thus denying the accusations towards them. These claims will be elaborated later on
in the analysis and discussion section. It can be argued that outsourcing is the root of this ethical
dilemma, which brings about competition, cheaper labour or taxes within the country whereas in other
countries you gain more surplus. Outsourcing leads to having contractors in other countries, where
the labour issues that occur are of such substandard as poor working conditions, unfair wage and
other labour related issues. Nike outsourced their production and facilities to low-wage countries
Hakan Eroglu, Omar Zoheir Kamel and Lauren Tracey Betti Characters: 100,754 Group 21
6
where we see more than 700 factories. Due to a large number of factories, it is claimed to be hard to
keep count of unethical actions which we will further analyse in the project (Teather, 2005).
PROBLEM FORMULATION
Research question:
Why did ethical values get violated when Nike expanded their production to overseas factories?
Literature Review
In spite of the scholars and theories we have chosen, we are aware that we could have focused our
project differently in order for it to lead towards other directions. There are books and scholars we
were contemplating to use before leaning towards a narrower and clear direction that lead us to our
focus point, which we will elaborate on in this section. Previously, we had contemplated focusing on
the ethics of consumption and the clothing industry, ergo, on its effects such as climate change.
Consumerism, fast fashion, and sustainability would have been our main focuses.
The possible concepts we had considered using consisted mainly of, as previously stated, ethical
consumerism. Subsequently, we will add a short description of what we would have done within
consumerism and ethics. The idea was to focus on the consumer's perspective to understand their
need for an increasing desire to consume and also to focus on the effects this had on the planet. It
interested us what exactly it is that triggered the desire to consume, if they are aware of the damage
increasing consumerism causes to our planet- and more specifically- if they care.
The research we would have used was mainly by Professor Robert M Worcester in his ‘Ethical
Consumerism Research’. This article provides information such as research on companies and their
use of CSR, their priorities, 1,970 face-to-face interviews, 4 group discussions, an analysis of ethical
behaviour and an extended research on ‘what influences buying behaviour?’ , which would have been
perfect for our aim of the study. It also researches ‘what are ethical consumers?’, which describes
with research how individuals classify themselves and what is considered ‘ethical’ in consumerism.
This is something we found interesting to study and that we could have used by comparing the
different opinions of people and separating them into groups of different ages, gender, etc.. We had
also thought of mentioning how propaganda and the media influenced consumers and what group
was more influenced by such modern society we live in, in which it is practically impossible to avoid
propaganda and the media’s power towards influencing people. This would have been all achieved
using interviews, as many as possible, in the form of questionnaires targeting consumers of different
Hakan Eroglu, Omar Zoheir Kamel and Lauren Tracey Betti Characters: 100,754 Group 21
7
ages (Worcester, n.d.). Thus, studying ethics from the consumers point of view could have further
understood why humans act in such way and what are its effects on the planet.
Delimitation
This project has used the concept of CSR, and since there is no universal definition, we have used
different definitions, but we are aware that the definitions we have chosen to work with do not show
how to use the concept regarding business ethics. We have therefore applied Dahlsrud (Dahlsrud,
2008) five dimensions of CSR to Aloy Soppe’s ethical framework in our theory. Using different
aspects of CSR makes it easier for the reader to get an understanding of what CSR are, since as
mentioned before, that there are no universal definitions, which also contributed to, that we chose to
use Soppe’s theory in our analysis and concentrated more on CSR in the discussion part.
Using only one case study had limited us to only view business ethics from Nike’s perspective. We
are aware that using only Nike in our case study only gives us one company’s aspect on business
ethics and that we have to be careful about generalizing that every company acts like Nike.
Furthermore, we are also aware that if we used another case, we could have got another aspect of
business ethics. Using several case studies would have meant that neo-liberalism would have been
excluded, since the project had to be narrowed down. Additionally, we have chosen to use a case-
based study for this project's methods, we could have used several other variations of the quantitative
methods. One of these methods would be to make an interview approach, from this we would have
gained knowledge of the society's perspective of multinational companies and their production.
Furthermore, we could have seen how they would react and answer after they have gotten some details
described after hearing some of the scandals that occurred. The reason we did not choose this method
is due to how our project aim had changed into focusing on understanding how ethics in the neoliberal
society is, and not focusing on consumerism. We could also have interviewed some of the workers
that work at Nike overseas factories to get an inside view of working conditions.
Hakan Eroglu, Omar Zoheir Kamel and Lauren Tracey Betti Characters: 100,754 Group 21
8
Chapter 2: Methods and Theory
Methods
In order to answer our research question about business ethics in Nike, we first have to understand
what ethics are. In order to this, we have chosen to base our theoretical framework on Dahlsrud five
dimensions on CSR and Aloy Soppe’s theory about ethics. Aloy Soppe gives us three different aspects
within business ethics, which we will use in our case study analysis. Soppe first gives us a description
on finance and ethics, which gives us some background knowledge about how finance and ethics
work in a business aspect and the critique of the neoclassical school of thought from an ethical
perspective. He then gives us our analytical framework with his ethical framework, which is divided
into: virtue ethics, deontological ethics, and teleological ethics.
To analyse our case study, we first have to understand what it is we are going to analyse. In order to
do this, we first give a historical description about the corporation Nike. After this, we present two
scandals regarding Nike sweatshop scandals, the first one is about labour abuse in Vietnam, which
occurred in 1997 and the other in Indonesia in 2011.
In our discussion section, we focus on CSR and how it is used by corporations, and we further
examine outsourcing and neo-liberalism.
Qualitative research methods are going to be used in this project. Qualitative research is after
meaning. The data collected through qualitative research is focused on words and texts, as opposed
to quantitative research, where the focus is on numbers and statistics (Hesse-Biber and Leavy, 2011:
4). To analyse business ethics we chose to use a case study, in order to analyse a specific company
regarding business ethics. A case study is a research strategy within the qualitative paradigm, yet it
is not a research method. The reason for this is that a case study is a decision about what one is going
to study and therefore not a methodological decision (Hesse-Biber and Leavy, 2011: 255). It is not
possible to define case study, due to no agreed-on definitions amongst researchers, though some argue
that a case study is a heuristic device because “it is an approach that focuses one’s attention during
learning, construction, discovery, or problem-solving” (ibid.). The purpose of a case study is to
generate an in-depth understanding of a specific topic (Hesse-Biber and Leavy, 2011: 256), which is
the aim we are going for with the case study, to understand business ethics: what it is and how it
affects the business world.
There are three types of case studies: an intrinsic case study, instrumental case study, and multiple
case study (Hesse-Biber and Leavy, 2011: 258). The case study chosen for this project is the
Hakan Eroglu, Omar Zoheir Kamel and Lauren Tracey Betti Characters: 100,754 Group 21
9
instrumental case study. In an instrumental case study, a case is studied to generalize or provide
insight into a larger topic (ibid.). Since this project’s larger topic is business ethics, we use Nike in
our case study to show how outsourcing has contributed to Nike being unethical in their production.
To get a critical view on business ethics, the case this project will examine is one which had issues
regarding labour conditions. ‘’The unique contribution of a case study approach is that it provides the
researcher with a holistic understanding of a problem, issue, or phenomenon within its social context’’
(ibid.). As it is quoted, we gain a holistic understanding of the issues that or project focuses on, which
means the total overview of the situation. The aim is not to crucify Nike in our case study, but to get
an understanding of how ethical issues have changed the company’s ethical values and their code of
conduct.
Furthermore, this project will look at how Corporate Social Responsibility (CSR) is implemented in
Nike’s code of conduct and how CSR has developed. To be able to answer our research question, we
are going to gain knowledge about Neo-classical School of Thought, CSR, ethics in business and
collect data about the case study chosen. CSR is a concept which is an essential part of the project.
We are becoming more ethical in our consumption today and the attention to business ethics is
growing. The reason for this is because of several scandals regarding corporations unethical actions
regarding exploitations of the workforce, child labour, and environmental issues. (Valentine and
Fleischman, 2007). CSR is defined as “... the economic, legal, ethical, and discretionary expectations
that society has or organizations at a given point in time” (ibid). This means that society expects the
companies to be socially and ethically responsible, in addition, CSR also gives companies a positive
image towards the public.
From an Epistemological position, we will use Interpretivism. This is because we are reading theories
that are already existent and we are building upon them. Interpretivism is a theoretical approach that
focuses on subjective experience, small-scale, and seeking meaning (Hesse-Biber and Leavy, 2011:
15). The interpretive approach assumes that meaning is constructed through interactions between
humans or between humans and objects. Researchers working from this tradition see experience and
perspective as important sources of knowledge (Hesse-Biber and Leavy, 2011: 17). Interpretivism is
also associated with the hermeneutic tradition, which is about seeking to understand by interpreting
the meaning that interactions, actions, and objects have for people (ibid.). Furthermore, it argues that
the only way to understand social reality is from the perspective of those involved in it (ibid.).
Throughout our project, we have used an inductive method, which is associated with interpretivism.
Hakan Eroglu, Omar Zoheir Kamel and Lauren Tracey Betti Characters: 100,754 Group 21
10
We found our topic about business ethics and did research regarding this topic. Afterwards, we found
a theory that defined business ethics, and with this definition, we were able to analyse the case study.
The empirical data used in this project comes from both primary and secondary sources, and the data
is primarily qualitative data. As mentioned before, qualitative data is generally words and texts, which
is also what we have used in this project (Hesse-Biber and Leavy, 2011: 4). Since this project uses a
case study as a research strategy, most of the data collected come from secondary sources like
newspaper articles and academic journals. The primary sources used in this project are the Universal
Declaration of Human Rights from the UN, which is an official UN document, that every country in
the UN has signed for, and one can, therefore, see this as a reliable and trustworthy source. Primary
sources are e.g. interviews, government records, journals, photographs etc., which is basically first-
hand accounts, but, as mentioned before, we chose not to do other qualitative methods like interviews
and focus groups. This is the reason for the lack of primary sources. We use mainly secondary sources
in this project, due to a lot of the data and evidence that has been gathered for the case study has come
from these sources. The sources that were used to describe Nike’s history and the two scandals were
newspaper articles, academic journals, and websites. We have used newspaper articles as a source of
information regarding the scandals used in the analysis. We have also used different academic
journals to give us an insight in e.g. CSR and Nike. These academic journals are peer-reviewed and
are therefore more reliable, but we are aware that information can be interpreted in different ways by
academics.
In the theory, we are going to use the description of the five dimensions of CSR by Dahlsrud
(Dahlsrud, 2008) as a framework. The Ethical theory of the firm builds upon the framework and is
going to be used in the analysis. The reason behind this is is due to the fact that the ethical theory of
the firm and CSR collaborate on their perspectives of the shareholders, which then gives the reader
large knowledge on the subject regarding the ethics of business. Nevertheless, the ethical theory of
the firm described by Soppe elaborates on the ethical values within the business. These values will
become the main argument of the analysis of the Nike Scandal. The chosen Scholar is objective and
acknowledges philosophers within his writings, which will be further elaborated in the literature
review.
Hakan Eroglu, Omar Zoheir Kamel and Lauren Tracey Betti Characters: 100,754 Group 21
11
Theory and Concepts
The concept of Corporate Social Responsibility
The reason that the attention towards ethics and CSR is so important today is because of the recent
scandals regarding different corporations: the suggestion that business values are in decline.
Exploitations of the workforce and other questionable practices has obligated corporations to
emphasize on CSR and on business ethics to prevent future scandals. This is something that
companies which have been involved in scandals have learned. The importance of having a good
relationship with stakeholders, the general public, and the press is huge, not only ethically and
morally, but also financially (Valentine and Fleischman, 2007: 657).
To define the concept of CSR is a hard task. There are several definitions of this concept, and we
have therefore chosen to work with two academic journals: “How Corporate Social Responsibility
is Defined: An Analysis of 37 Definitions” and “Professional Ethical Standards, Corporate Social
Responsibility, and the Perceived Role of Ethics”, and a recognized international organization to help
us define CSR.
Like stated before, CSR has many different definitions. Thirty-seven to be exact, according to the
academic journal “How Corporate Social Responsibility is Defined: an Analysis of 37
Definitions”(Dahlsrud, 2008). As stated by this study, there are five dimensions on CSR:
- The environmental dimension
- The social dimension
- The economic dimension
- The stakeholder dimension
- The voluntariness dimension
Out of these five dimensions, the study used a coding scheme on google to examine which of these
five dimensions were used most in different definitions. The stakeholder and social dimension had
the highest scores, followed by the economic dimension (ibid). The dimensions, which this project
will examine are the following: the stakeholder dimension, the social dimension, and the economic
dimension. Therefore, the definition this project will use regarding CSR concerns the stakeholder,
social and economic dimensions. The reason why only three dimensions are chosen is due to the fact
that they go hand in hand with the ethical values which are described by Soppe.
Hakan Eroglu, Omar Zoheir Kamel and Lauren Tracey Betti Characters: 100,754 Group 21
12
A definition of CSR has been provided by the World Business Council for, Sustainable Development,
which is a CEO-led organization that urges the global business community to create a sustainable
future for business, society and the environment. The organization was created in 1992 and have over
200 member companies that represent all business sectors, all continents and have a combined
revenue of $US 7 trillion. The organization has strong relationships with stakeholders, which helps
debates and policy changes in favor of sustainable development solutions (usbcsd.org, n.d.).
Their definition of CSR is: "Corporate Social Responsibility is the continuing commitment by
business to contribute to economic development while improving the quality of life of the workforce
and their families as well as of the community and society at large." (Wbcsd.org, n.d.)
WBCSD concentrates on three fundamental pillars regarding sustainable development: economic
growth, ecological balance, and social progress (Wbcsd.or g, n.d.). WBCSD sees CSR as a tool for
companies to use to live up to their responsibilities towards the global citizens and the local
communities in a globalized world, and it is also something that economically pays off for the
companies (ibid). The WBCSD message is: “business is not divorced from the rest of society. The
two are interdependent and it must be ensured, through mutual understanding and responsible
behavior, that business’s role in building a better future is recognized and encouraged by society”
(ibid)
The authors of the journal “Professional Ethical Standards, Corporate Social Responsibility, and the
Perceived Role of Ethics and Social Responsibility” define CSR as: “the economic, legal, ethical,
and discretionary expectancies that society has of organizations at a given point of time” (Valentine
and Fleischman, 2007: 657)
These expectancies are driven by contracts between companies and society, which the companies
honor by addressing the societal challenges and providing assistance when needed to the stakeholders.
Therefore, social responsibility is viewed as a bundle of ideas and actions utilized by companies to
facilitate advantageous relationships with stakeholders and improve welfare (ibid).
From these different definitions, we can conclude that CSR has five dimensions. On the other hand,
from the two definitions provided above, we can conclude that CSR concerns the responsibility from
the companies to be ethical towards their stakeholders and the environment. Additionally, the public
Hakan Eroglu, Omar Zoheir Kamel and Lauren Tracey Betti Characters: 100,754 Group 21
13
and stakeholders expect the companies to be ethical and provide for a sustainable future. If the
companies fail to do so, it will affect them negatively on the economic point.
The Neoclassical School of Thought
The term ‘neoclassical’ has been first brought into economics by Thorstein Veblen. This has been the
introduction to an additional school of thought, though such school was not Veblen’s target (Lawson,
2013: 947).
The neoclassical school of thought has the effect on our modern society, where it introduced many
academic analytical tools in economics, it gave many theories and policy stances Thus, it has
presented a set range of ideas, per say, which influences our society (ibid). The theory relates to the
present because of the introduction by Smith and Ricardo, where they focus on social relations and
in social relations of production as well as the concept of outsourcing production to gain surplus(T.
Lawson, p.962).
Where the neoclassical school of thought originated neoliberalism, which will be one of the focuses
later in the discussion part of this project. The neoliberalist approach describes how companies seek
to expand their surplus as a main focus. Some key concepts are Deregulation and The Rule of the
market. Deregulation reduced the government's regulation and immobilizes the environmental safety
within a working place. In contrast, the Rule of the market highlights the profits of ever gaining more
surplus which will be beneficial for everyone. This will be analyzed and discussed later in the project
(Martinez and Garcia, 2016).
Ethical Theory of the Firm
The ethical theory of the firm enlightens in how specific issues can be ethically analyzed, shareholders
is focused on in the property rights as the residual and the residual profit. The company is therefore
set as a direct investment project converting the input into output. From this perspective, the company
is not seen as individual capitalist but rather as an institution producing cash flow, looking at it this
way it removes social responsibility. By implementing this we remove the relationship between
social responsibility and efficiency. (Soppe, 2002: 2).
The introduction of money as a currency into economical transaction distanced humans from the
traditional implications of trade (Soppe, 2002: 2). From this we know how classical trade used to be,
Hakan Eroglu, Omar Zoheir Kamel and Lauren Tracey Betti Characters: 100,754 Group 21
14
beforehand you traded commodities between each other instead of buying the commodity, for
instance, a farmer trades some milk for some clothes.
This form went extinct you may say when money became globalized, turning culture into evolving
leaderships whenever economic growth needed to occur. Making money for the sake of money is
now an acceptable way of life. It formerly was seen as a high-class lifestyle with labour just producing
a commodity, now workers have more responsibility in developing more sustainable ways to produce
commodities. Additionally, the securitization process emerged with a focus on the international
financial markets, where banks emerged as not just a saving method but an investment opportunity.
The important factor for this project will be the ‘civil society’ that focuses on social welfare and the
responsibility within. In recent years. Europe particularly experienced a privatization of industries
that used to belong to the public sector. This increased the competition of private industries which
ultimately lead to the control of the public sector (Soppe, 2002:3). Though these industries have
realized that they have more responsibility than just maintaining cash flow, they have social
responsibilities within the community as well.
Throughout the project, we will use the ethical framework of the theory of the firm, which will be
split into three different sections: the virtue ethics, deontological ethics, and teleological ethics.
Virtue ethics:
Soppe draws on Slote ‘’Virtue ethics is described by Slote (1997, p. 177) as all ethics which are not
based on moral laws, rules and or principles” (Soppe, 2002:11)
This signifies that by looking into the virtue ethics we remove the moral of economical aspect and
we use the individual perspective on how to become virtuous.
Aristotle was one of the early scholars that described the importance of practical reasoning, leading
to the Christian perspective of human conduct (Soppe, 2002:12). Furthermore, virtue ethics draws
upon motivations of the individual moral agent. According to Aristotle virtue is defined as a desirable
character trait, for example courage, which lies between two ‘extremes’: rashness and cowardice. The
virtuous agents tries to find a balance in ethical decision-making. The aim is to do the right thing.
(Patel, 2016). Closely related to the practical reasoning is the Aristotelian discussion, who discusses
that the same product with different dimensions needs to be comparable, which is a problem whenever
commensurability is exchanged. Aristotle further argued and divided economic value into Exchange
value and Use value. An important note to consider is that whenever exchange value is introduced
Hakan Eroglu, Omar Zoheir Kamel and Lauren Tracey Betti Characters: 100,754 Group 21
15
in the pricing of goods or labour, ethics becomes less relevant in its transaction. (Soppe, 2002:13)
When looking at the neoclassical paradigm of the financial market economy, the use of exchange
values as prices makes it a goal to make money. Solomon further elaborates on Aristotle with the
implementation of six different dimensions within virtue ethics. Firstly, we see the question of
community and how self-interest of members is partially identical to the majority of the group.
Excellence is the second introduction, where it is stated that it is not enough to just do nothing wrong.
Thirdly, role identity, where all ethics are seen as contextual and elaborates on the issue with the
larger theories transcending into context and ends up with vacuity. The fourth element is integrity,
the linchpin of all virtues. Good judgement is the fifth element, which gives careful consideration to
the circumstances with the people involved. Finally, Solomon conveys the concept holism, where he
critiques the tunnelled vision of business, which is abutment by the narrow business curriculum and
the daily rhetoric corporate community (Soppe, 2002:13).
Deontological ethics
Deontological ethics originates from the Greek word deon, which translated to English means duty
(Soppe, 2002: 13). In deontological ethics, actions from humans are motivated by duties and are
‘enforced goodness’. The moral responsibility is both individual and collective (See Appendix Figure
4,2).
Soppe draws upon Kant’s ethical theory in Kant’s Fundamental Principles of the Metaphysics of
Morals (1785), which is the most acknowledged deontological theory. In deontological ethics duty,
rather than virtue, is the fundamental moral category (Soppe, 2002:13). Kant argues that the moral
rules as imperatives express what human beings ought to do either hypothetically or categorically,
which is a key feature within the imperatives of universalizability. Universalizability is that if
someone says that an act is right for one person in a situation, then it must be right for all humans in
that specific situation (ibid.). Thus, if the specific act is acceptable in the society, then it must be right.
Soppe, therefore, asks the question: “What if everyone acted as I do?” (ibid.). Raising the question of
whether if you do something that seems right in the individual's perspective it might not be the correct
act for another. Which leads to an important characteristic of Kantian ethics about human rights and
respect for other persons. Kant defined a human right as: “a moral capacity to bind others” (ibid).
This can be described as humans have a moral obligation to be good towards other humans. These
rights are then divided into: innate, which Kant describe as we belong to everyone and are “by nature”
independent of any juridical act. Kant argues that there is only one fundamental innate right, which
Hakan Eroglu, Omar Zoheir Kamel and Lauren Tracey Betti Characters: 100,754 Group 21
16
is the right to be free from the will of others, as long as this is compatible with similar freedom for
all. The second and last right is acquired, which is dependent on some human convention or juridical
act (ibid).
Kant, in his “Metaphysics of Morals”, questions whether ethics (similar to virtues) and the legal
system are based on metaphysical thinking. His answer to this questions is a clear yes. Virtues are
written in terms of duties, based on the legal system of a country (ibid). Duty is necessary because of
the existing legal control of discretion. It is a moral imperative that forces rational human beings, who
are a part of Nature, into the armour of duties (ibid). He, therefore, distinguishes between “duties
towards oneself and duties towards others”. Kant gives the example of a duty to oneself as opinions
on suicide and lying (Soppe, 2002: 14). He further argues that we have social duties, where the first
is to love others: love as a feeling towards well doing and beneficence towards other humans (ibid.).
Teleological Ethics
Teleological ethics (telos = goal) is a theory stating that the consequences of a moral act determine
the act’s worth and correctness. (Soppe, 2002:14)
The perception of ethics in this theory is the rightness or wrongness of an act which is judged with
reference to some defined end results, that is regarded as good or desirable (ibid). Thus, as opposed
to the two other ethics described previously, the ethics in teleological ethics is judged to be either
right or wrong after the act. In the modern viewpoint, the main strength of the teleological approach
is how it processes the reflections of all optional consequences of a given act. This thinking gives the
birth of neutral and objective ethics. (Soppe, 2002:14) Figure 4.2 (see appendix), summarizes the
ethical framework described in the sections above. The teleological approach gives insight on how
human acts consist within the consequences, rather than duties and inner freedom which is seen in
the virtue and deontological ethics (Soppe, 2002:15). Further on we see human behaviour is
determined by rationality in the teleological concept, and wealth is gained by optimizing utility
functions. The teleological approach sees wealth as a collective problem whereas in the virtue ethics
the moral is more individual based.
Hakan Eroglu, Omar Zoheir Kamel and Lauren Tracey Betti Characters: 100,754 Group 21
17
Chapter 3
The Nike Case study
3.1 Introduction to the case
The company we have chosen to focus on as a case study for this project is Nike. This is because it
is one of the most well-known multinational company in the world, with an exceptionally high
demand for its products. The structure will proceed as follows: firstly, we will introduce Nike’s
history and origination in order to be fully informed about the company. Subsequently, we will
proceed to research how the company works as a business. Further on we will evaluate examples of
scandals where the company tried to deflect negativity to avoid losing the trust from their consumers,
they used corporate social responsibility (CSR) to do this. Additionally, we will use these scandals in
our analysis section where the Ethical values will be implemented to give different reasons on how
these scandals occurred.
It must be clear that the aim of this study is neither to criticize or encourage Nike’s history but to be
examined in a way to evaluate the company’s behaviours and the explanations of such actions. It is
fundamental to know that athletic footwear encompasses different ‘harmful’ sectors. The reason for
this is that it is an extensive GVC (Global Value Chain) that is associated with different sectors. The
first is the agro-extractive, which includes: leather, crude oil, plastic, rubber, etc., the second is
industrial, which encompasses the shoe manufacturing process. Service is the last sector, which is
referred to as the marketing and retailing of the footwear. (Lim et Phillips, 2008: 144). Regardless,
we will mainly focus on the manufacturing process and all the ethics it encompasses.
3.2 The history of Nike
Nike is a company which was developed by Phil Knight. It all started in the back of his van, which
later turned out to become the multinational company that it is today. Nike originated from the minds
of two individuals: from Bill Bowerman’s idea of lighter and more durable racing shoes and Knight’s
love and passion for athletics. In the early 1960’s, Knight wrote a semester project based on
Bowerman’s idea of lighter running shoes: they wanted to craft the shoes in Japan and ship them into
the United States of America. The plan was set in motion when Knight visited Japan in the 1963
(Xroads.virginia.edu. ,2016).
Hakan Eroglu, Omar Zoheir Kamel and Lauren Tracey Betti Characters: 100,754 Group 21
18
Knight found a shoe manufacturer in Japan that should namely Tiger shoes and started the company
Blue Ribbon Sports in the US. One of the most important years in Nike’s history was 1971, it was
this year Knight changed the company's name from Blue Ribbon Sports to Nike and established the
Swoosh trademark. (Xroads.virginia.edu, 2016). It was also in the 1970’s when Nike became a
worldwide company with sales reaching 270M$, many believe that this was due to the fitness
revolution that occurred in the time-period.
The history of Nike might seem as an issue free company but this changed in the 1990’s where the
Sweatshop scandals began to be open to the public, this will be further elaborated in the project. Thus,
in spite of Nike’s surpass, not all the company’s moves were as positive: CBS documentaries in 1996
came out to the public consisted of information on Nike’s factories with the mere goal of outlining
agreements in order to eliminate such ‘sweatshops’. In response, Nike’s reaction was to defend its
CSR activity and become part of the Apparel Industry Partnership (AIP). The AIP is an agreement,
which contains certain rules to eliminate issues such as ‘sweatshops’ in the United States and
elsewhere. The AIP has a set of certain principles that describe fundamental working conditions
(United States Department of Labour, 1997). Furthermore, Nike denied visits from NGO’s and
Global Exchange to factories or the monitoring firm. This made its image slump, though, in 1997, it
deteriorated additionally: with a visit to its Vietnamese factories. The U.S-Based Vietnam Labour
watch visited and publicized a study promoted by Global Exchange and the New York Times. This
issue encompassed details on the conditions workers suffered such as ‘unsafe heat, exhaustion, poor
nutrition, and beatings‘. Nike suffered consequences resulting from this publication, more
specifically, it suffered from newspapers reports from The Oregonian and Doonesbury, and Anti-
Nike groups, all eager for positive changes (Lim et Phillips, 2008: 147).
In 1998, a highlight for CSR in Nike occurred: Phil Knight became committed to improving the
company’s labour performance. After its fulfilments, the company implemented new CSR guidelines
that stopped numerous critiques, which lead to the introduction of ‘Future Vision’. Future Vision is
a GVC that provides exclusive contractors a relationship and safe footwear orders which lower the
economic competition and motivates the CSR to persist submissive (ibid.). Nike attempted to endorse
its CSR code by hiring Atlanta Major, civil rights leader, and Andrew Young, U.N ambassador. In
1997, it was concluded that Nike was doing better yet it was still not enough. Hence, the protests
continued, which consisted of anti-Nike protests occurring in 50 cities and in 11 additional countries,
as well as strikes in Indonesia and in Vietnam (ibid.).
Hakan Eroglu, Omar Zoheir Kamel and Lauren Tracey Betti Characters: 100,754 Group 21
19
Future Vision
Future Vision, by uniting contractors into five different ‘Manufacturing Leadership Partnerships’,
rebuilt the supply chain. This meant that the contractors were not differentiated according to
‘developed, developing, or volume producers (Lim et Phillips, 2008: 148). The company then
authorized the suppliers to perform numerous roles through their subordinate connections with Asia.
Nike then had a collaborative partnership- it portrayed interdependence, compassion, and trust. Thus,
Nike created a GVC characterized by less though with more cable manufacturers which shared duties
in Research and Development (R&D), manufacturing and CSR. (ibid.) Future Vision had another
important characteristic which kept the relationship between Nike and the MLP certain. Such
characteristic consisted of a contract model that gave every MLP a select manufacturing relationship
and furthermore minimum monthly orders. Thus, the extension of partner factories depended on
fulfilling the CSR guidelines, quality, price, and delivery. (Lim et Phillips, 2008: 149) Thereby,
suppliers applied CSR to retain MLP status and compete for labour, the repetition of such decency
grew into a custom and altered their stance positively. So much so that Nike’s new governance model
was aimed to update their CSR. (Lim et Phillips, 2008: 150)
3.3 The Business Nike
Nike is a company, which is known for its outsourcing and fragmentation. It is a company, which has
never owned factories yet has become one of the most important footwear companies in the world.
Hence, it has outsourced labour-intensive productions, which has grown to be vastly profitable.
(Merk, 2015: 116) Despite its profits, its outsourcing has also given the company many problems.
Ergo, the company dodged regulated labour markets of developed countries through the exclusion of
management control over labour forces to third parties (Merk, 2015: 118).
They had first started contracting manufacturers in Japan, though they shifted to South Korea due to
the rising prices. No more than one year later, these two countries were assembling inexpensive, high
end and mass-market shoes. (Lim et Phillips, 2008: 144). In spite of that, these countries began to
raise its prices and improve its democratic reform and labour activism, which lead to the relocation
of Nike’s GVC to Indonesia, China, Thailand, and Vietnam. Even with these changes, Nike continued
with the same Taiwanese and Korean subcontractors. (Lim et Phillips, 2008: 144). In the 1960’s
brands were the owners of the manufacturing sites. The shift began in the 1970’s, were an essential
rearrangement occurred, and Nike, as well as other companies, had started to implement a neo-Fordist
mode of production. This meant that the companies contracted manufacturers that employed low
Hakan Eroglu, Omar Zoheir Kamel and Lauren Tracey Betti Characters: 100,754 Group 21
20
skilled and low wage labour, mainly in Asia. (Lim et Phillips, 2008: 144). ‘Fordist’ factories are
characterized by the mental and manual work occurring in distinct parts of a factory (Merk, 124). As
Braverman explains: “like a hand, watched, corrected, and controlled by a distant brain. “ (Merk,
2015:116). Nike, as well as many different sourcing companies, train and teach their suppliers to
encounter international standards so that one specific model of shoe manufactured in Indonesia turns
out exactly the same as another of the same exact model manufactured in China. Now, in the present
decentralized setting, on a global standing, the same process prevails (Merk, 2015:124).
3.4 The Nike Scandals
Through the first decades of the company, Nike was able to ignore the bad working conditions
resulting from the supply chain. Although, in the 1990’s arose a new problem: CSR. The reports of
substandard working conditions became apparent to organized anti-sweatshops campaigns and soon
also to social media (Merk, 2015: 126). In the 1990’s, Nike began to face a new important issue that
changed many aspects of the company: CSR. Nike had become a huge brand, though the problem
was that its outsourcing was out of hand: Nike depended on the supplier’s actions. The problem grew
in the 1990’s when the suppliers were charged with “wage law violations, child labour, excessive
overtime, physical abuse, and unsafe working conditions. “ (Lim et Phillips, 2008: 145)
Various reports and scandals had displayed violations of ILO (International Labour Organization)
Conventions: ‘ILO Convention n.29, Convention n.98, Convention n.100, Convention n.105,
Convention n.111, Convention n.138’. All named Conventions came out to the public. Examples of
such Conventions are: forced labour, discrimination, minimum age employment, etc. Other issues
found in the Nike reports consisted of long working weeks that could go up to 70 hours, wages even
lower that the national laws permit, the presence of abuse both verbal and physical from management,
unsafe working conditions, the absence of environmental guidelines, short-term contracts and even
the lack of contracts overall. (Merk, 2015:126). Nike’s initial reaction was to deny such accusations
and all responsibility. It assured, “we don’t pay anybody at the factories and we don’t set policy within
the factories: it is their [the subcontractor's] business to run” (Merk, 2015:126). Nike published a 108-
page report, where it listed the 700 factories that produce its footwear and clothing. The report showed
cases of abuses, including forced overtime and restricted access to water. Furthermore, it shows
serious problems, especially in its Asian factories, with ‘abusive treatment’, physical and verbal, in
more than a quarter of its south Asian factories (Teather, 2005).
Hakan Eroglu, Omar Zoheir Kamel and Lauren Tracey Betti Characters: 100,754 Group 21
21
Between 25% and 50% of the factories in the region restrict access to toilets and drinking water
during the workday. The same percentage deny workers at least one day off in seven. In more than
half of Nike's factories, the report said, employees worked more than 60 hours a week. In up to 25%,
workers refusing to do overtime were punished. Wages were also below the legal minimum at up to
25% of factories. (Teather, 2005)
Michael Posner, the executive director of the organization Human Rights First, praised the report and
Nike for its transparency. He argued that the report was an ‘important step forward’(ibid.).
Nike joined a group called the Fair Labour Association, which is a group that includes other footwear
and clothing makers, NGOs and universities. The group conducts independent audits designed to
improve standards across the industry. Nike said in a statement in the report, that it needed further
cooperation with other companies in the industry (ibid.):
"We do not believe Nike has the power to single-handedly solve the issues at stake,”
3.5 Nike’s Corporate Social responsibility and Code of Conduct.
In 2001, Nike published their first corporate social responsibility report, which was aimed to assess
and impact on how the corporation runs the business. The report included detailed efforts on
developing environmental sustainability, managing global labour compliance and the company's
involvement in local communities. (Nike Inc., 2001)
We have only chosen the first CSR report in this project because it started Nike’s ethical development.
Philip Knight focuses very much on two areas in the report, natural environment, and labour
compliance. They have since 1998 had sustainable goals for the environment, the company’s factories
was to reduce pollution and produce re-manufactured materials in their products. To aid in the
monitoring of their environmental issues, Nike was one of only four companies that joined World
Wildlife Fund’s Climate Savers program (Nike Inc., 2001)
Additionally, Nike developed a special team of employees whose sole purpose was to monitor labour
conditions in their contract factory sites throughout the world, they also monitored wage and the
health issues that appeared in the scandals. In this area, Nike joined the Global Alliance for Workers
and Communities with a five-year commitment and 7.8 million$ investment. (Nike Inc., 2001).
When referring to CSR, athletic footwear is a good example for studying conflict because of the
change there had been from the 1960’s to the 1970’s. There had been a shift in the sector, a change
Hakan Eroglu, Omar Zoheir Kamel and Lauren Tracey Betti Characters: 100,754 Group 21
22
from direct ownership of factories, which later converted into a decentralized and market-oriented
which lead to a tough successful CSR fulfilment: this can be seen in the relationship between Nike
and its cooperation with its suppliers (Lim et Phillips, 2008:144). Then, Nike started to be publicly
critiqued by this code. Its first significant critique came in 1992 from Harper’s Monthly article by
Jeff Ballinger. Ballinger then publicized information of a young female Indonesian employee of a
Korean-based subcontracted of Nikes’. Ballinger explained how she earned 14 cents per hour and
worked six days a week: ten and a half hours per day. There had been also other reports on the course
at that time: such ones that assured physical abuse and the subjection to toxic substances. (Lim et
Phillips, 2008:145).
Nike’s code of conduct in 1992 included rules that demanded subcontractors to obey with local laws
that supervised wages and working conditions and took note of compliance. At that point, contractors
were obliged to use environmentally safe practices. They also had no right to discriminate for ‘race,
gender, religion, age, ethnic origin, or sexual orientation. (Lim et Phillips, 2008: 146). Creating the
code of conduct resulted as an easy task, though implementing it had not become one of such. The
reason was Nike’s market-oriented GVC. There were three different types of independently owned
and operated factories were present in the production system. These three consisted of:’ developed
partners’, ‘volume producers’, and ‘developing sources’. (Lim et Phillips, 2008: 146).
‘Developed partners’ were the factories that prevailed with advanced technology and modern
manufacturing skills. They were accountable for producing Nike’s latest and inexpensive products
for cheap retail prices. (Lim et Phillips, 2008: 146)
‘Volume producers’ consisted of the factories which were characterized by large size and large
capacity. These factories were mass producers, capable of producing from 70,000 to 85,000 pairs of
shoes per day. (Lim et Phillips, 2008: 146)
‘Developing sources’: these factories were located in Thailand, Indonesia, China. They branched out
Nikes gathering into areas with even lower labour costs. They had only basic manufacturing skills,
yet they effectively stimulated the responsibility of their production capability. (Lim et Phillips,
2008: 146)
Nike took advantage of the three separate subcontracting system. It put the three factories in
opposition to each other and ended relations with such suppliers that were unsuccessful in meeting
product performance and price guidelines. (Lim et Phillips, 2008:146)
Hakan Eroglu, Omar Zoheir Kamel and Lauren Tracey Betti Characters: 100,754 Group 21
23
In spite of economic excellence, the subcontracting system condemned Nike’s code of conduct. This
was because the buyer was reasoning the possibility of not buying if suppliers price was high and
thus this pressure made the code of conduct be less imposed. Nike was also unsettled about the option
of the subcontractors to switch to another buyer in order to attain a superior economic agreement.
(Lim et Phillips, 2008:146). Due to all this, Nike did not enforce correctly its code of conduct: this
brought, even more, critiques and public pressure increased. Nike received critiques from the New
York Times and even faced criticism from the Interfaith center of Corporate Responsibility, the
General Board of Pension, and Health Benefits of the United Methodist Church. (Lim et Phillips,
2008:146)
3.5 The summarizing of Nike
With the case of Nike, we can conclude that it has issued decisions in order to solve problems such
as a negative image to the public and criticisms towards their actions. It is shown how as corporate
transparency grows, the company is obliged to change and make certain ethical decisions, which are
mainly between society and business. (DeTienne and Lewis, 2005:373)
There have been many changes in the company’s supply chain, for instance, Nike has upsized its
supplier issues to ‘working conditions, environmental protection, and community welfare’. Despite
the fact that it had decided on a CSR code of conduct, it had not easily or rapidly implemented it,
which is because it used a market-oriented manufacturing system. Nike’s solution was to change from
an ‘arm’s-length’ contracting to a ‘collaborative partnership’, which indicates that social legitimacy
results in adjustments in the GVC. The partnership implemented a relief to the suppliers that suffered
from price pressure and worries about being substituted for cheaper competitors. (Lim et Phillips,
2008:152). On the other hand, contractor’s also had positive changes because of the certainty of
minimum orders which meant that community morality was introduced, something that is an
indication of a solid and a correct implementation of the CSR code dedication. (Lim et Phillips,
2008:153).
Positive changes
The contractors had gone from ‘conditional morality’, because they followed CSR for order and
supplier purposes, to implanting a ‘community morality’ where CSR is contemplated as virtuous
itself. Nike had cleared their bad image by its adjustments, this was done mainly by Future Vision
and through the changed within the contractor base towards CSR commitments.
Hakan Eroglu, Omar Zoheir Kamel and Lauren Tracey Betti Characters: 100,754 Group 21
24
The abundant CSR improvements can make us reconsider what are the real reasons for such change,
and weather they are purely due to Nike’s monitoring and restrictions of its suppliers. Though we can
prove that external, third-party, and internal monitoring take place, it is not enough to completely
justify such shift in supplier behaviour or even for the contractor’s extra CSR codes. Nike is now a
company in which two inspections per year, in each active factory, is accepted to monitor, track, and
assist. (Lim et Phillips, 2008:152).
Hakan Eroglu, Omar Zoheir Kamel and Lauren Tracey Betti Characters: 100,754 Group 21
25
Chapter 4
Analysis
In this section, we are going to analyse the Nike sweatshop scandal that occurred in the 1990’s. The
reason behind our choosing of Nike is due to its importance in the multinational globalized society
and it becoming one of the leaders in ethical value (Csrwire.com. 2016). The analysis will be
structured with a brief introduction to the scandal and its history within Nike, next, we will implement
the concepts that are presented in CSR and the ethical theory of the firm. Even though CSR has five
different concepts or dimensions there are only three that are valuable for this project. Thus, the
analysis will be split into three different sectors with different outcomes.
The scandal started with an inspection that happened in January for Nike’s internal use only. There
were reported many unsafe conditions at one of the shoe factories in Vietnam. Ernst & Young, who
were the accounting firm, wrote that workers at the factory near Ho Chi Minh City reported that
employees were forced to work 65 hours a week, which is for more than Vietnamese law allows, for
only 10 $ a week. It also found that the employees were exposed to carcinogens that exceeded local
legal standards by 177 times and 77 % if the employees suffered from respiratory problems
(Greenhouse, 1997). Nike is not the only American manufacturer who has problems in overseas
plants, but they are the only one able to do something significant about it since it earned about 800
million $ on last year's sales. (1997) (ibid)
A Nike spokesman, named Vada Manager, said after several allegations that: ''We believe that we
look after the interests of our workers. There is a growing body of documentation, that indicates that
Nike workers earn superior wages and manufacture product under superior conditions.'' (ibid). He
and other Nike officials said that the company had taking actions to improve working conditions. It
had cut overtime, improved safety and ventilation and reduced the use of toxic chemicals. ''This shows
our system of monitoring works,'' Mr. Manager said. ''We have uncovered these issues clearly before
anyone else, and we have moved fairly expeditiously to correct them.'' (ibid). While Nike has been
heavily critiqued over working conditions such as low pay and working long hours, the report from
Ernst & Young report showed another front for Nike’s critiques: air quality in its factories. The report
showed, as mentioned before, that carcinogen was in the air at different factories at 6 to 177 times the
amount allowed by the Vietnamese regulations, which is actually 4 times more strict as American
standards. Extended exposure to carcinogen is known to cause damage to the liver, kidneys and
central nervous system (ibid).
Hakan Eroglu, Omar Zoheir Kamel and Lauren Tracey Betti Characters: 100,754 Group 21
26
Twenty-five miles northeast of Ho Chi Minh City is the Tae Kwang Vina factory, which was also
inspected by Ernst & Young. The factory is one of Nike’s biggest plants at that time, and it has 9,200
workers and makes 400,000 shoes each month. The report shows that thousands of young women,
most under the age of 25, worked 10,5 hours each day, six days a week, in excessive heat and in foul
air, for only a little over 10$ a week. Furthermore, the report showed that workers with skin or
breathing problems were not moved to another department free of chemicals, and more than half of
the employees who dealt with these dangerous chemicals did not wear protective gloves or masks,
even in highly hazardous places. The workers did not know that the chemicals they were working
with were dangerous (ibid).
Dara O’Rourke, an environmental consultant for the United Nations Industrial Development
Organization, made the report available. His job involves inspecting factories in Vietnam. The reason
for making the report public was that he wanted to pressure Nike to treat their workers better, and
because he thought that Ernst & Young let Nike off easy. After his own inspection, Rourke said that
the wages at the plant were the lowest of any of the 50 factories he visited in Vietnam and that working
conditions were well below average (ibid). Tien Nguyen, Nike’s labour practices manager in
Vietnam, told the press at a news conference that as soon as Ernst & Young’s report got published,
the company had taken steps to improve working conditions. For instance, the number of working
hours were reduced from 65 to 40 hours per week, and many more fans were installed to prevent
hazardous working conditions. Mr. Nguyen also acknowledged that the company had not done any
measures to determine if the chemical levels were low enough to meet the legal standards (ibid).
Nike’s director of labour relations, Dusty Kidd, said that ''it's markedly better than shoe factories in
the United States. The shoe factories in Vietnam are among the most modern in the world. The
factories there are excellent factories, but there are a lot of things they could get better.'' (ibid)
Mr. O’Rourke, who visited the factory three times as part of his United Nations duties, said that many
workers still failed to wear protective gear, that the wages remained very low and that the managers
still harassed the workers. He also critiqued the Ernst & Young report, which concluded that most
employees were happy with the wages and working conditions. He argued that the workers whom
Ernst & Young interviewed were scared to speak the truth, and the interviews the conducted found
much discontent (ibid).
Hakan Eroglu, Omar Zoheir Kamel and Lauren Tracey Betti Characters: 100,754 Group 21
27
Indonesia
Workers in Indonesia, who produce Converse sneakers, say that their supervisors throw shoes at them,
physically and verbally abuses them. Nike admits that such abuses occur among some of the
contractors, but says there is little that they can do to stop it (The Huffington Post, 2011).
Dozens of workers were interviewed by the Associate Press and these interviews showed that Nike
has far to go to meet the standards the company set for itself a decade ago to end its reliance on
sweatshop labour. One female worker, who stayed anonymous out of fear, said that they were
powerless and that their only choice is to stay and suffer, because if they speak out about the abuses,
they will get fired (ibid).The factory has around 10,000 workers, who are mostly females, and they
only earn around 50 cents per hour. That salary gives them enough to buy food and bunkhouse-type
lodging, but little else. Some of the workers said that they are being hit and scratched in their arms.
Others said that they were fired after filing complaints (ibid).
“They throw shoes and other things at us,” said a 23-year-old woman in the embroidery division.
“They growl and slap us when they get angry” (ibid)
Mira Agustina, a 30-year old woman who was fired in 2009 for taking a sick leave, even though she
had a doctor’s note said in an interview that it was a horrible job, “Our bosses pointed their feet at
us, calling us names like dog, pig or monkey.” (ibid)
At another factory located in outside Jakarta, another Taiwanese contractor making Converse shoes,
a supervisor ordered six female workers to stand outside in the blazing sun because they could not
meet their goal of completing 60 dozen pairs of shoes. “They were crying and allowed to continue
their job only after two hours under the sun,” said Ujang Suhendi, 47, a worker at a warehouse in the
factory (ibid). The company own inquiries found workers at two factories, who were subjected to
some serious physical and verbal abuse including the aforementioned punishment, where workers
were forced to stand in the sun, according to a Nike executive who oversees the company’s efforts to
improve working conditions (ibid). An internal report from Nike showed that almost two-thirds of
168 factories making Converse products worldwide fail to meet Nike’s own standards for contract
manufacturers. Twelve of them are in the serious category, where problems like illegally working
hours and denying access to Nike inspectors occur. Nike claimed that they were not aware of the
physical abuse occurring at those factories. Ninety-seven of the factories are in a category where no
progress is made regarding improving problems ranging from isolated verbal harassment to paying
Hakan Eroglu, Omar Zoheir Kamel and Lauren Tracey Betti Characters: 100,754 Group 21
28
less than the minimum wage. Furthermore, six factories have not even been audited by Nike. Nike
defended itself by blaming the pre-existing licenses to produce Converse goods and argues that it
prevents the parent company from inspecting factories or introducing its own code of conduct (ibid).
About the license agreements Nike stated:
“We have been working every time we can to renew those agreements or change those agreements
or to cease those agreements and to ensure that when we do new agreements we get more ability to
influence the licensee and their subcontractors much more directly” (ibid)
This statement is critiqued by some corporate experts, who also question whether Nike is doing
everything they can:
“I simply find it impossible that a company of the size and market power of Nike is impotent in
persuading a local factory in Indonesia or anywhere else in meeting its code of conduct,” (ibid) -
Prakash Sethi, a corporate strategy professor at Baruch College at the City University of New York.
Critiques further argue that companies that outsource their manufacturing to the lowest-cost countries,
keep prices down but allows apparel, electronics and toy companies to reduce their accountability for
the bad working conditions that occur in those factories. Even if the concern about sweatshop labour
has increased, some of the contractors just move their operations to more remote areas, which is
further away from international and local watchdogs. An example of this can be seen in Pou Chen,
which is the largest Converse factory, and it is located in a hilly city where the minimum wage is way
below the national average. This place can only be reached by car, which takes around five hours
across bumpy, wimpy roads (ibid). After years of critique over sweatshop labour at factories abroad,
Nike, in 2005, became the first major apparel company to disclose the names and locations of its
factories abroad. Nike has not published the locations of its factories making its Converse products
yet, though had planned to do this by the end of 2011 (ibid).
Nike Report
After the scandals in the 1990s that led to protesting against Nike from its consumers, the CEO Phil
Knight made a public speech in 1998 promising change (Newell, 2015). A report by Tim Connor
(Connor, 2001) looked at the promises made and if they were accomplished. Phil Knight promised
six main improvements (Connor, 2001: 1-2):
Hakan Eroglu, Omar Zoheir Kamel and Lauren Tracey Betti Characters: 100,754 Group 21
29
All Nike shoe factories will meet the U.S. Occupational Safety and Health Administration’s
(OSHA) standards in indoor air quality
The minimum age for Nike factory workers will be raised to eighteen for footwear factories
and sixteen for apparel factories
Nike will include non-government organizations in its factory monitoring, with summaries of
that monitoring released to the public.
Nike will expand its worker education program, making free high school equivalency courses
available to all workers in Nike footwear factories
Nike will expand its micro-enterprise loan program to benefit four thousand families in
Vietnam, Indonesia, Pakistan, and Thailand.
Funding university research and open forums on responsible business practices, including
programs at four universities in the 1998–99 academic year.
Besides these six improvements, labour right groups had made some demands to Nike, which the
company ignored. These demands can be divided into six categories (Conner, 2001: 3-6):
1st demand: Protect workers who speak honestly about factory conditions
Nike has a bad reputation on protecting workers who blow the whistle on bad working conditions in
Nike’s factories overseas. This has resulted in many workers keeping silent fearing that they will lose
their jobs (Connor, 2001: 3).
2nd demand: Regular, Transparent, Independent and Confidential Procedures for Monitoring
Factories and Investigating Worker Complaints.
Activists have asked Nike to allow rights groups to educate workers about their rights and to ensure
workers that they can file complaints without getting fired. In spite of this, Nike gave the
responsibility to the factories to educate workers about Nike’s code of conduct. The problem with
this is that a majority of Nike workers do not understand their rights under Nike’s code of conduct,
and they do not trust the factory owners which this is something all independent research has shown
(Connor, 2001: 3).
3rd Demand: Decent Wages
Nike has rejected that they pay workers a living wage, which includes providing for a small family
with adequate diet and housing and other basic needs. Nike uses instead statistics selectively and
Hakan Eroglu, Omar Zoheir Kamel and Lauren Tracey Betti Characters: 100,754 Group 21
30
gives a misleading impression that the current wages it pays to its workers are fair and adequate, even
though that many workers struggle to survive on these wages, which are barely enough to cover their
individual needs, let alone those of their family (Connor, 2001: 4).
4th demand: Reasonable Working Hours
Nike workers are still being forced to work up to 70 hours per week, and if they refuse to do so, they
are being humiliated or threatened with being fired. It also reported that it is extremely difficult to
obtain sick leave and their annual leave is often refused (Connor, 2001: 4).
5th demand: Safe and Healthy Workplaces
Nike has made some important progress in reducing toxic chemicals use in the production. Although
there have been few occasions where independent health and safety experts have access to Nike
factories. There has been found serious hazardous working environments with high level of exposure
to toxic chemicals, and lack of protective equipment. There is also evidence that workers suffer stress
from spending large amount of time in high pressure and frequently abusive work environments
(Connor, 2001: 4)
6th demand: Respect for Workers’ Right to Freedom of Association
A big part of Nike’s production are made in countries like China, where independent unions are
illegal. Nike has refused to put pressure on China’s government to allow workers to organize.
Furthermore, Nike has failed to prevent the suppression of unions in some of its own contract
factories. Nike has on few occasions taking steps towards these rights, but only because of massive
public pressure (Connor, 2001: 5).
Tim Connor argues that Nike has treated the sweatshop allegations as an issue of public relations
rather than a human rights issue. The promises made by Knight was an attempt from the company to
change the media focus to issues the company was willing to address, instead of issues regarding
forced overtime and suppression of workers’ right. The projects announced by Knight had only a little
benefit to the workers. One of the most important promises was to allow NGOs to monitor factories
and release these to the public has not been fulfilled. One area where there has been some
improvement is health and safety. A problem with this area is that the company does not allow
transparent monitoring involving unannounced factory visits, but when experts have been allowed to
visit the factories they have found serious hazards. Even if Nike calls themselves “industry leader” in
CSR, they still exploit their workforce and there still occurs labour abuse in some of their factories.
Hakan Eroglu, Omar Zoheir Kamel and Lauren Tracey Betti Characters: 100,754 Group 21
31
There are many promises, but Nike has overall failed to withhold these promises three years after
they made them (Connor, 2001: 5).
Virtue Ethics:
Virtue ethics is characterized by the incentives of a person’s moral agent, which means that it is
focused on the rationality in striving towards moral greatness. As said earlier, Aristotle’s was an
ancient developer in this specific ethics, and according to Aristotle’s Virtues Ethics, it is based on
appealing character traits such as courage, which is amidst two opposite others as rashness and
cowardice (Patel, 2016).
The aim of such ethics is to continually enact the right actions, this includes actions towards people,
to the right degree, time, and way.
The approach comes from Aristotle’s belief that people are appealed to perform the right action, yet
one does not involuntarily initiate such tendency, though “you are what you do”. (Soppe, 2002: 12)
Thus, one does the right action because it wishes to be virtuous, it does not happen randomly. Another
trait of such ethics is that the moral agent comes out of a ‘relevant moral community’, this means that
it is of value to consider the moral agent of where the individual performs because an individual’s
ethos comes from such surroundings (Patel, 2016). There are two types of virtue ethics, and both are
relatable to the analysis of the scandals. The first is intellectual and the second moral. Intellectual
refers to the abilities of the mind, for example, the capacity to understand, reason, judge, etc.
Subsequently, moral virtues are practices, for instance: the practice of being polite- to be polite, one
must perform politeness. Thus, all virtues are only reached with recurrence (Patel, 2016). When
analysing the scandals in Indonesia, it is clear that allowing individuals to function under unsafe
conditions during long periods of up to even 65 hours per week for minimal pay is not the correct
action to take (Greenhouse, 1997). With such high standards in morality, one could not be able to
accept such inhumane conditions such as in the factories in Nike, with the continuous hazard of
chemicals that endanger the individual’s body. Judging the situation from the workers point of view,
if we consider moral community, one can imagine that the workers character is being constantly
challenged. When working on such poor and inhumane conditions, one is not properly practicing a
‘good moral character’ because of the constant negative surroundings.
We can apply virtue ethics to the change Nike has gone through from the company it was 20 years
ago to the one it has become in the present. It has changed its actions such as the code of conduct
Hakan Eroglu, Omar Zoheir Kamel and Lauren Tracey Betti Characters: 100,754 Group 21
32
implemented in 1992. This code, as mentioned earlier, required subcontractors to comply with local
law and became forced to use environmentally safe practices. At the same time, there were not
permitted to discriminate amongst the workers. (Lim et Phillips, 2008: 146) Despite these changes,
one still can argue that it is not sure if the reason for such change in behaviour is due to striving for
morality, as seen in virtue ethics, or to strive for other interests.
The scandal in Vietnam, from a virtue ethics point of view, resembles the scandal in Indonesia. This
is due to the low moral agent present in both scandals, in either case, there is no consideration towards
the worker. Neither of the factories has the capacity of either intellectual nor moral virtues. For
instance, being physically abused in Indonesian factories and being thrown shoes at does not in any
way make anybody a better person (The Huffington Post, 2011). Taking the perspective from another
point and looking at it from Nike’s view, it is clear that denying change for such long periods of time
is also not morally acceptable. Living in ‘fear’ and feeling ‘powerless’ and having no freedom of
speech such as the female Indonesia worker, does not allow virtue ethics to be practiced: and, as
learned, virtue ethics is only present with practice. (The Huffington Post, 2011). Thus, as mentioned
earlier in the theory section, there are six different dimensions within the virtue ethics, which can be
individually analysed to evaluate actions from both the Indonesian and Vietnamese scandal. The first
dimensions are the community where, the self-interest within the community is seen as the labours
voice, whereas the self-interest in each labourer is the same, they want better wages and better
working conditions. Nike deregulates the labours voice by removing their power to unite, it is known
that many factories will fire the labour if they choose to criticize their conditions. (The Huffington
post, 2011). The second dimension is excellence, Soppe describes the second dimension as
excellence, where he argues that it is not enough to do no wrong, you have to do it perfectly (Soppe,
2002: 12). Whenever the scandals appeared during the 1990’s Nike tried to right their wrongs by
implementing their CSR and a more ethical code of conduct, but as we see in the Indonesia case,
scandals still happen. One can then argue that Nike had the right intentions regarding their CSR and
code of conduct, but it did not stop every factory to keep exploiting the labourers, even though Nike
still strives to achieve excellence in every factory. This is seen when they published a 108-page report,
that listed all the factories Nike worked with. Furthermore, the report showed cases of abuses and
other problems with its factories (Teather, 2005). Integrity is the third dimension, which plays an
important role in virtue ethics. The workers have no chance to integrate and become comfortable in
the working environment. Which is seen in the Vietnam scandal, where 77 % of the employees
suffered from respiratory problems, due to hazardous working conditions (Greenhouse, 1997). Nike’s
Hakan Eroglu, Omar Zoheir Kamel and Lauren Tracey Betti Characters: 100,754 Group 21
33
overseas factories do not show integrity when it comes to their workers. This has been clear in the
two scandals, chosen in this project, but as mentioned before, Nike tries to do a better job, when it
comes to their workers by forcing the overseas factories to comply with Nike’s code of conduct. Tien
Nguyen, Nike’s labour practices manager in Vietnam, told the press that the company has taken steps
to improve working conditions, but at the same time told the press that the company had not done any
measures about the hazardous environment in some of the factories (Greenhouse, 1997). Nike tries
to show good integrity by telling the press that they are taking steps towards better working
conditions, but recent scandals like the one in Indonesia shows that Nike does not do enough to
prevent labour abuse, and therefore one can think if Nike has integrity. Good judgment is the fourth
dimension, we so no practice of good judgment in these scandals, there is a lack of empathy and
morality. Though it needs to be acknowledged that Nike as mentioned implemented their CSR to gain
more trust and a better judgment of their factories and their image. Soppe also draws on the Fifth
dimension Holism where he uses Solomon’s criticism of the ordinary business life (Soppe, 2002: 12).
This is also seen as one of the key aspects of the neo-liberalist approach, where gaining surplus
without considering the consequences of outsourcing and it influences the ethics of business. Finally,
Role Identity is the last dimension described in the virtue ethics, but this was not addressed in this
project
Deontological ethics
Deontological ethics describes the rational choice of an act, there is no consideration of the
consequences it might have. Deontological ethics’ key feature is universality, which is that if someone
says that an act is right for one person in a situation, then it must be right for everybody in that specific
situation (Soppe, 2002: 13). Soppe raises the question “What if everyone acted as I do?” (ibid.).
Especially the phrase that was presented by Soppe needs to be acknowledged whenever the
deontological values are presented.
Whenever we use the case of the Ho Chi Minh City factory in Vietnam, there is a clear violation of
the moral judgment. The working conditions and working hours of the labours are not only a clear
violation of the Vietnamese law but it is also in violation of the working ethics that there is in America,
or specifically the Capital Washington DC (Bankrate.com, 2016). The minimum wage in Washington
DC is 10.5$ per hour, whereas in Vietnam the labours get paid 10$ a week. The prices for
commodities is different in each country but there is no morale in paying such a low wage.
Additionally, the working conditions in the factory are very poor, the labour is exposed to toxic
Hakan Eroglu, Omar Zoheir Kamel and Lauren Tracey Betti Characters: 100,754 Group 21
34
chemicals and is not correctly equipped with clothing to prevent sickness. This would again be a large
violation of the American working forces. To disclaim these accusations one of the Nike spokesman
Vada presented an argument where he criticized the allegations that were presented. He argued that
Nike paid their labours superior wage and had better working conditions than elsewhere (Greenhouse,
1997). Which again contradicts the moral where Nike protected themselves by claiming that their
factories were superior than other factories, even if they breached the general working laws. After
extensive heat from the public about these poor conditions for the labours in the Vietnamese Tien
Nguyen publically announced that the working conditions were to improve, where Dusty Kidd Nike’s
director of labour made a more business related statement. Kidd stated that the factories in Vietnam
were more modern and were better than the factories in the United States. The reason behind this
statement was the fact that Vietnamese factories produced a higher quantity of shoes than in the
United States. (Greenhouse, 1997)
If we remove the focus from Vietnam to more present days, the moral judgment is completely lost in
the case of the Indonesian workers. There have been several incidents within the Converse factories
(bought by Nike) where physical abuse is documented. Nike Admits that these abuses occur but they
have stated that the conditions are out of their control. Additionally, the wage issue that occurred in
the Vietnamese factories has moved to Indonesia where workers earn 50 cents per hour. (The
Huffington Post, 2011). These violations of western working morale are very against the
universalizability approach where working conditions should theoretically have been of the same
standard.
Deontological draws upon on its ethics from Kant, who in his theory of ethics focuses on human
rights. Soppe draws from Kant that the only fundamental innate right is the right to be free from the
will of others and this goes for all, which means that all human beings have the same freedom (Soppe,
2002: 13). Looking at the case of worker abuse in Indonesia, where the supervisors in a factory
producing Converse shoes physically and verbally abuses their workers (The Huffington Post, 2011),
shows that the innate freedom the supervisor has, is not the same as his workers. In the article, there
are several examples of workers being subjected to some serious punishments (ibid). This goes
against Article 5 of the ‘Universal Declaration of Human Rights’ by the United Nations (UN General
Assembly, 1948), which says “No one shall be subjected to torture or to cruel, inhuman or degrading
treatment or punishment” (UN General Assembly). Kant's innate human right draws parallel to the
aforementioned Universal Declaration of Human Right, which should be applied to all humans.
Hakan Eroglu, Omar Zoheir Kamel and Lauren Tracey Betti Characters: 100,754 Group 21
35
The last thing Soppe draws from Kant is ‘ethical duties’. Kant distinguishes between duties towards
oneself and duties towards others, which is described in detail in the theory section (Soppe, 2002:
14). Duties towards others are described as a social duty to love others, love is here meant as an
imperative for well-doing and beneficence for others (ibid). In the article about labour abuse in
Vietnam, it is clear to see that Nike’s ethical duty towards its workers are very bad compared to the
universal moral and ethical view the society has (Greenhouse, 1997). Its workers work under terrible
conditions with low wages. Though when the report got published, Nike took steps to improve
working conditions, so one can argue that Nike did this because of its ‘ethical duties towards others
and that they did not know about the bad working conditions before the report was published. As
mentioned before, there is one more duty in Kant’s ethical duties the duty towards oneself. (Soppe,
2002: 14). This can be seen when the CEO of Nike, Phil Knight, made a public speech regarding the
sweatshop issues that Nike was accused of and he promised changes. He acknowledged that there
was a problem and hence told the truth to the public, which is an example of duty to oneself (Newell,
2015)
Teleological ethics
Teleological ethics is a theory that defines and explains ‘right’ actions. A rightness of an action is one
which achieves maximizing happiness.
Nike outsourced their production to low-wage countries to gain more surplus. If you look at this from
a teleological perspective, Nike maximizes its utility because their end-goal is more surplus.
Decisions made in the teleological concept regarding wealth distribution are based on rationality and
optimizing utility (Soppe, 2002: 15). Outsourcing to gain more surplus was a rational choice, if you
can produce your products cheaper, why not do it? It is a logical choice. Where Nike failed in this
issue, was their moral responsibility towards their workers and the society, within teleological ethics
the moral responsibility is collective, and one can, therefore, argue that it is not only Nike’s fault but
also other multinational companies and the subcontractors in the low-wage countries. The reason for
this is because in teleological ethics the moral responsibility for the distribution of wealth is a
collective problem because everybody is assumed to be rational (Soppe, 2002: 15). When everybody
is assumed to make rational choices, then one can argue that these choices are the ‘right’ ones. Yet,
the consequences of the outsourcing, which led to labour abuse, were wrong according to the
consumers, the public, and different labour right groups who showed their disagreement with this by
not buying Nike product and demonstrating against the company (ibid). Labour right groups made
Hakan Eroglu, Omar Zoheir Kamel and Lauren Tracey Betti Characters: 100,754 Group 21
36
demands to Nike regarding wages, working conditions and the right to be in a labour union (Connor,
2011). To further this critique Soppe draws on consequentialism which is seen as rightness in actions
regarding their consequences. (Soppe, 2002: 15).
The scandals in the 1990s showed that Nike’s actions were not ‘right’ due to the labour abuse that
occurred in the factories. Nike acts towards their workers are clearly seen in the examples provided
in this project about labour abuse in Vietnam and Indonesia. As mentioned above, the consequences
of outsourcing and the eagerness to gain more surplus lead to the scandals that reduced the popularity
of the company and ‘forced’ them to change their code of conduct into a more ethical correct
approach. This is seen in their goals, which will be described further down in this section. After the
sweatshop scandals in the 1990’s Nike changed their goals to become a more ethical correct company.
These changes were published in their 2001 CSR report, they focused on two distinct areas which
were the National environment and labour compliance (Nike Inc., 2001).
The issues that were presented in the case of the Vietnamese factories, low wages and horrible
working hours, were to be changed during the next period of Nike’s development. Nike implemented
a dedicated team of thirty individuals to ensure that workers around the world had reasonable wages
and humane working hours (ibid.). This was Nike’s goal or telos. If we fast forward to a more present
time, these issues have not changed as we have seen in the case of the Indonesian worker. You may
say that their telos was not achieved in that area, though this might not completely be the truth since
many of the factories may have developed more ethical correct working conditions. Due to the
limitation in sources, there was no clear evidence for this. Additionally, the sweatshop scandals
resulted in many consumers protesting against Nike and Nike experienced a drop in their sales. Nike’s
reputation was bad and therefore the company made a public speech in 1998 promising change
(Newell, 2015). Besides promising change, labour rights groups had some demands to Nike. There
were six demands, which were mentioned and described in detail above about the case study (ibid).
These demands and Nike’s own promises of change can be seen as their new end-goal towards a more
ethical approach to their production. These goals are made after Nike’s former end-goals was seen as
wrong, and therefore, one can argue that the consequences of these new goals give utility to both Nike
regarding a better public image to further sales, and to their workers regarding better working
conditions and wages.
Hakan Eroglu, Omar Zoheir Kamel and Lauren Tracey Betti Characters: 100,754 Group 21
37
Discussion
After analysing the cases with the ethical values, questions on whether Nike was intentionally turning
the blind eye to the contractors rise. In the Indonesian case, Nike acknowledges physical abuse but
say that there is little to do. But are there truly, the consumers would demand them to stop their
cooperation with the subcontractor. From an ethical perspective this would be the best answer, though
not from a business perspective. These factories are the drive behind the large surplus Nike has every
year. This goal to gain an ever increasing surplus is seen when we look at how the business of the
21’st century is. Many scholars believe that neo-liberalism is the economic blueprint, and especially
the last decades where globalization is ever increasing you may say this assumption is correct. Neo-
liberalism is a branch of the neoclassical school of thought. This approach highlights the importance
of free-market and less influence from the government, also know as the Rule of the Market (Martinez
and Garcia, 2016).
An important aspect of the Rule of the Market is that it does not take in consideration of the social
damage, the cases indicated highly that the workers could not form organisations or protest against
their working conditions which are somewhat a goal within neoliberalism. Additionally, eliminating
public good and the term community is also a direct consequence of this approach. Individualism is
very much in focus, you may say that individualism is a two faced dilemma. On one hand you have
the rich people that keep individualizing their surplus granting them more, whilst the poor keeps
continuing in a downwards spiral until they reach conditions presented in the factories and have to
accept them. Furthermore, Nike promised that change would happen and they were working on
improving their labours conditions. This might be a false assumption, because how can a single
company maintain an overview of their factories around the world, and nevertheless, maintain a high
ethical standard that differs in every country. Though the fact that they acknowledge there are issues
and that they are working on preventing these situations in the future Nike presented us with their
CSR in 2001, they have ever since strived to change and improve their ethical position which one can
argue have increased their surplus in this more ethical oriented society.
Another question the analysis could not answer is what is the origination of these issues, we believe
that whenever companies start outsourcing their production abuses occur. If Nike kept their
production of shoes within the United States the possibility to manipulate wages and un-organize
their labours would not have been a possibility. Again, these relate to the neoliberalist approach
mentioned above. This outsourcing crisis is not only a specific issue with Nike but is rather something
Hakan Eroglu, Omar Zoheir Kamel and Lauren Tracey Betti Characters: 100,754 Group 21
38
that keeps occurring and more scandals is revealed to the public. Outsourcing is a key business
approach within the modern society to gain more surplus, whenever you reduce the cost of your
labours and taxes you gain more wealth, pretty simple actually which makes it such an attractive
approach for multinational companies.
The increasing interest regarding business ethics from the company's’ stakeholders have forced
multinational companies like Nike to be more responsible and Nike has therefore concentrated more
on their code of conduct and CSR reports after the sweatshop scandals. One can argue that the scandal
that happened in Indonesia shows that even though Nike has been more active regarding CSR,
problems still occur and therefore CSR does not work as it was intended. The analysis showed that,
when it comes to ethics, Nike failed in the 1990s with the sweatshop scandals and the promises they
made after did not hold. From a critical perspective Nike failed, but if you look at it objectively, Nike
is doing better and the company has taken many measures to be more responsible and transparent.
The company published a big report that listed all its factories that produce its footwear and clothing,
and also the different labour issues that occurred in the different factories (Teather, 2005). Like stated
in our CSR section: Exploitations of the workforce and other questionable practices has obligated
corporations to emphasize CSR and business ethics to prevent future scandals (Valentine and
Fleischman, 2007: 657). Looking at the case study, it is clear to see that the emphasis on CSR and
business ethics, have prevented big scandals for Nike, but is CSR enough? The answer to this is no.
As we mentioned before, Nike published a report listing all its factories, started to make CSR reports
and became more transparent, but it did not prevent the labour abuse that occurred in Indonesia.
Additionally, companies use CSR-reports to show their shareholders and stakeholders that the
company contributes positively to the environment and their workers. These reports indicate to the
society that they acknowledge that issues occur, but they try to solve them so they can keep the
consumers demand rising. There is no corporate law that says a company has to publish a CSR report,
it is something the companies chose to do itself. One reason for this can be, that a company wants to
show its consumers that they actually care about a sustainable future, and if something comes up
regarding business ethics, the company can ‘prove’ with the CSR report, that they actually tried to
prevent unethical issues.
Hakan Eroglu, Omar Zoheir Kamel and Lauren Tracey Betti Characters: 100,754 Group 21
39
Chapter 5
Conclusion
This project sought to answer the question of why abuses happen within Nike’s overseas factories.
The reason as to why this question sought to be answered is due to Nike’s influence and impact on
their business branch which is athletic wear.
The reason these abuses happen, as seen in the entire project, is because of their subcontractors and
factories. Nike outsourced their production to low wage countries, because of low production cost,
which gives the company more surplus. The surplus was the main goal. The high demand for Nike
products with the consumers meant that the factories had to produce a high number of products and
unethical values started to appear. This high demand and outsourcing combination lead to abuse of
labour within the factories whenever the factories produce more the company gain a larger surplus.
To enlighten this issue we took two scandals, which had occurred in Nike’s subcontractor factories,
spread over different time gap. From the scandals, it becomes clear that there was an unethical
approach during the 1990’s which lead to the company's code of conduct and CSR presentations. In
the analysis, the project examined from Soppe ethical framework, which gives different ethical
approaches to the case study. From the first ethical approach, the virtue ethics, there has been no
intent in implementing a moral agent character in order to assist and empathize with factory workers.
Knowing virtue ethics highlights on the well doing of actions, one can conclude efforts have not been
enough to satisfy such ideal approach. We gained knowledge from the six dimensions defined by
Soppe, with integrity as being the most valuable approach since we could conclude that Nike lost
their integrity by outsourcing to low wage countries, but they try to gain it back by forcing the
overseas factories to comply with their code of conduct, and being more transparent by publishing a
report that list all their overseas factories and the challenges regarding labour abuse and bad working
conditions (Teather, 2005). The other dimensions showed that Nike tried to right their wrongs by
implementing CSR and improve wages and working conditions, but that problems still occur within
these issues. From the deontological approach, we can see that there are violations of the moral
judgment in both scandals. The moral judgment consists of low wages, bad working conditions, and
physical and verbal abuse from the factory supervisors. From Kant’s focus on human rights and
ethical duties, it is argued that the factories violate human rights regarding punishment of labours.
Nike’s ethical duties towards others were the reason for they became more transparent and publish a
report that listed all their factories. The last ethical duty, which is duty towards oneself, was seen
Hakan Eroglu, Omar Zoheir Kamel and Lauren Tracey Betti Characters: 100,754 Group 21
40
when the CEO Phil Knight made a public speech, where he acknowledged the things Nike was
accused off.
Finally, concluding what we got from the teleological approach, we have seen that Nike’s telos in the
early stages of they wanted to gain a larger surplus and expand their facilities. The rising demand for
their products gave them an unethical approach that went very well with the neo-liberalist thought
which helped them in their ever expanding company. After the scandals became public to the society,
Nike changed their telos to become more ethical oriented and become a role model for other
companies to prevent crisis and scandals that happened. To help them achieve this telos they used
CSR. The reason why companies use CSR is to show their consumers that they care about the
environment and their workers and to show that they are socially responsible. Furthermore, CSR also
forces companies to be more responsible, it gives more focus on business ethics, and it attracts more
consumers by their new moral and ethical improvements - which eventually leads to more profit for
the company. Thus, the reason why Nike implemented their CSR code was to acknowledge that they
had difficulties with their subcontractors as well as to demonstrate to the public that they are aware
of these issues and are working to correct them.
Hakan Eroglu, Omar Zoheir Kamel and Lauren Tracey Betti Characters: 100,754 Group 21
41
Bibliography and Appendix
Bankrate.com. (2016). The 10 States Where The Minimum Wage Is Highest | Bankrate.com. [online] Available
at: http://www.bankrate.com/finance/jobs-careers/states-with-highest-minimum-wage-2.aspx [Accessed 22
May 2016].
Bhattacharya, C. (2009). Corporate Social Responsibility: It's All About Marketing. Forbes. [online] Available
at: http://www.forbes.com/2009/11/20/corporate-social-responsibility-leadership-citizenship-marketing.html
[Accessed 23 May 2016]
Dahlsrud, A. (2008). How corporate social responsibility is defined: an analysis of 37 definitions. Corp. Soc.
Responsib. Environ. Mgmt, 15(1), pp.1-13.
Connor, T. (2001). Still waiting for Nike to do it. San Francisco, Calif.: Global Exchange.
DeTienne, K. and Lewis, L. (2005). The Pragmatic and Ethical Barriers to Corporate Social Responsibility
Disclosure: The Nike Case. J Bus Ethics, 60(4), pp.359-376.
Csrwire.com. (2016). Nike Releases First Corporate Responsibility Report – Press Releases on CSRwire.com.
[online] Available at: http://www.csrwire.com/press_releases/24905-Nike-Releases-First-Corporate-
Responsibility-Report [Accessed 17 May 2016].
Greenhouse, S. (1997). Nike Shoe Plant in Vietnam Is Called Unsafe for Workers. NY Times. [online]
Available at: http://www.nytimes.com/1997/11/08/business/nike-shoe-plant-in-vietnam-is-called-
unsafe-for-workers.html?pagewanted=all [Accessed 16 May 2016].
Huffingtonpost, (2011). Nike Faces New Worker Abuse Claims In Indonesia. [online] Available at:
http://www.huffingtonpost.com/2011/07/13/nike-faces-new-worker-abuse-indonesia_n_896816.html
[Accessed 16 May 2016].
Lawson, T. (2013). What is this 'school' called neoclassical economics?. Cambridge Journal of Economics,
37(5), pp.947-983.
Lim, S. and Phillips, J. (2008). Embedding CSR Values: The Global Footwear Industry’s Evolving
Governance Structure. J Bus Ethics, 81(1), pp.143-156.
Hakan Eroglu, Omar Zoheir Kamel and Lauren Tracey Betti Characters: 100,754 Group 21
42
Merk, J. (2015). Global Outsourcing and Socialisation of Labour - the Case of Nike', in: van der Pijl, K. The
International Political Economy of Production (ed.), Cheltenham: Edward...
Martinez, E. and Garcia, A. (2016). CorpWatch : What is Neoliberalism?. [online] Corpwatch.org. Available
at: http://www.corpwatch.org/article.php?id=376 [Accessed 22 May 2016].
Micheletti, M., Føllesdal, A. and Stolle, D. (2004). Politics, products, and markets. New Brunswick, N.J.:
Transaction Publishers.
Nike Inc., (2001). Nike Releases First Corporate Responsibility Report. [online] Available at:
http://www.csrwire.com/press_releases/24905-Nike-Releases-First-Corporate-Responsibility-Report
[Accessed 18 May 2016].
Nike News. (2016). Manufacturing. [online] Available at: http://news.nike.com/pages/manufacturing
[Accessed 27 Apr. 2016].
Nisen, M. (2013). How Nike Solved Its Sweatshop Problem. Business Insider. [online] Available at:
http://www.businessinsider.com/how-nike-solved-its-sweatshop-problem-2013-5?IR=T [Accessed 27 Apr.
2016].
Newell, A. (2015). How Nike Embraced CSR and Went From Villain to Hero. Triple Pundit. [online]
Available at: http://www.triplepundit.com/special/roi-of-sustainability/how-nike-embraced-csr-and-went-
from-villain-to-hero/# [Accessed 17 May 2016].
Patel, P. (2016). Applying Virtue Ethics: The Rajat Gupta Insider Trading Case. [online] Seven Pillars
Institute. Available at: http://sevenpillarsinstitute.org/morality-101/applying-virtue-ethics-the-rajat-gupta-
case [Accessed 16 May 2016].
ROWE, M. (2006). Reputation, Relationships and Risk: A CSR Primer for Ethics Officers. Business and
Society Review, 111(4), pp.441-455.
Soppe, A (2002) Ethical theory of the firm in L. Zsolani (ed.) Ethics in the Economy - Handbook of Business
Ethics. Peter Lang, Oxford - Bern - Berlin - Bruxelles - Frankfurt am Main - New York - Wien p. 81-104.
Teather, D. (2005). Nike lists abuses at Asian factories. The Guardian. [online] Available at:
https://www.theguardian.com/business/2005/apr/14/ethicalbusiness.money [Accessed 16 May 2016].
usbcsd.org. (n.d.). World Business Council for Sustainable Development. [online] Available at:
http://usbcsd.org/about/world-business-council-for-sustainable-development/ [Accessed 26 Apr. 2016].
UN General Assembly, Universal Declaration of Human Rights, 10 December 1948, 217 A (III), available at:
http://www.refworld.org/docid/3ae6b3712c.html [accessed 17 May 2016]
Hakan Eroglu, Omar Zoheir Kamel and Lauren Tracey Betti Characters: 100,754 Group 21
43
United States Department of Labour, (1997). Apparel Industry Partnership's Agreement. [online]
Training.itcilo.it. Available at: http://training.itcilo.it/actrav_cdrom1/english/global/guide/apparell.htm
[Accessed 24 May 2016]
Wbcsd.org. (n.d.). WBCSD - World Business Council for Sustainable Development. [online] Available at:
http://www.wbcsd.org/work-program/business-role/previous-work/corporate-social-responsibility.aspx
[Accessed 26 Apr. 2016].
Xroads.virginia.edu. (2016). Nike History and Timeline. [online] Available at:
http://xroads.virginia.edu/~class/am483_97/projects/hincker/nikhist.html [Accessed 17 May 2016].
Yu, X. (2008). From Passive Beneficiary to Active Stakeholder: Workers’ Participation in CSR Movement
Against Labor Abuses. J Bus Ethics, 87(S1), pp.233-249.
Appendix
Figure 4.2