Hitting the Wall: Nike and International Labor Practices

Hitting the Wall: Nike and International Labor Practices  

Jorge F. Rodriguez

Webster University

Introduction to Leadership

     As the author was able to study and review the Nike Case, it was noticed and shockingly surprising that Phil Knight, Nike CEO turned his back to the labor practices problems and complaints against his company.  As Nike focused on a market strategy of shaving cost to inject additional resources to marketing, the company created ethical and labor problems that damaged the company’s reputation.  Phil Knight had the brilliant idea of outsource all manufacturing of Nike.  The company had no-in house production or dedicated manufacturing lines products but independent contracting factories on different countries.  Having a “virtual” corporation, allowed Phil Knight to focused on celebrity endorsements to represent the company.  For these reasons, Nike looked to have company products manufactured in countries where labor cost were low such as China, Indonesia, South Korea and Taiwan.  Nike first made an agreement with contractors in South Korea and Taiwan; however, the rising cost of labor in these countries made Nike to shift its suppliers to other countries like China and Indonesia where low labor cost was available.

     As Nike was able to improve their production and profitability numerous accusations and complaints in regards to labor practices became public against Nike.  Nike was accused of forcing contractors to meet the production quota, which made labors to be treated cruel in Indonesia.  Although there were laws in favor of labors in Indonesia, Nike contractors did not comply with the law.  The author believe that Nike management did not handle the accusations in a proper way as they actually stated, “without an in-house manufacturing facility, the company simply could not be held responsible for the actions of independent contractors.”  Also, one of the company’s general manager said, “I don’t know that I need to know.”  Nike management of the publicity was horrendous as they initially flat out denied any obligation to rectify the exploitation if their suppliers’ workers.  Nike management failed to respond with sincerity up until their financial success slowed.  The author was very surprised that it took Nike roughly 18 years to realize that some serious steps were needed to address the allegations against the company.

Organizational Culture

     Nike managers did not contribute to having a healthy organizational culture.  Despite the

criticism, Nike insisted that labor conditions in its contractors’ factories were not – could not – b

be Nike’s concern or its responsibility.  For example, a company’s general manager in Jakarta

stated, “I don’t know that I need to know.”  In 1996, Nike was accused of child labor in foreign

countries and instead of denying the connection, Kathie Lee Gifford called upon fellow

celebrities such as Michael Jordan to investigate the conditions under which they endorsed