Nike: From Sweatshops to Leadership in Employment Practices

Nike, one of the world leaders in sports shoes and apparel, has certainly had its share of ups and downs in the 40 year history of the company. After decades of incredible growth from a small organization to a worldwide leader in its industry, it fell under scrutiny for its questionable ethical decisions, but has weathered the storm and enhanced and strengthened its brand and its commitment to corporate responsibility.

What were Nike’s mistakes in handling the negative publicity?

Nike made several mistakes in handling the negative publicity, but first and foremost was the decision to ignore it. As the study indicates, “the initial reactions of Nike officials to specific criticisms was to ignore them, the rationale being that they did not own the factories and were therefore not responsible for labor and human rights violations.” While this specific response may have worked for Nike on other issues, it certainly is a poor response to issues involving labor and human rights.

Second, in light of the allegations against Nike, the company chose to respond reactively rather than proactively. Rather than addressing the allegations immediately and explaining how they were taking steps to prevent future misconduct, the company instead chose to try and detract attention from the real issues and claimed that the problems “had to do with public relations rather than actual factory conditions,” which is effectively an attempt to blame others for their issues rather than addressing them. In doing so, Nike set a precedent of waiting to admit problems until they had become too large to continue ignoring, which became evident in their response to the lawsuit filed by Marc Kasky.

Finally, by not enforcing pre-established rules, Nike in essence chose to condone the behaviors that they were aware of. As the study indicates, while Nike had in fact followed suit with others in their industry by developing a code of conduct in 1992, “in theory, suppliers were required to sign the code of conduct and display it in their factories, but this was not enforced.” The lack of enforcement of this code of conduct indicates that Nike was more concerned about their profits than they were about their social responsibilities at that time.

Discuss the intent of their public relations tactics.

The intent of Nike’s public relations tactics seems to be based solely on how they felt that the public would receive their claims. Their initial response, as discussed, was to avoid the issues by claiming that they were “marketers and designers lacking knowledge about manufacturing.” However, the idea that they were unaware of problems was simply an excuse that the public would not tolerate. So in response, Nike attempted to reinforce their positive aspects in an extensive public relations campaign.

The first tactic used as part of the public relations campaign, hiring famous spokespersons, was an appeal to the uninformed public. The second tactic, specifically targeting a core segment of their business, was an appeal towards a more informed consumer of Nike products. Nike realized quickly that key stakeholders in their business were the colleges and universities that exclusively used their products, and they wisely tailored a public relations campaign geared towards ensuring that this key stakeholder was well informed of the steps that Nike was taking to address the allegations and improve their business. While the intent of addressing this particular stakeholder was a solid step in the right direction, Nike seems to have stopped short of addressing all of their stakeholders.

Do you think Nike is doing enough to improve conditions in its contract factories? What might they do differently or better?

Nike has absolutely taken significant strides to recognize areas for improvement in the handling of its social responsibilities, and they have also taken substantial steps to not only improve conditions in their contract factories, but set industry standards relating to such advancements.

Most importantly, Nike has learned “that an open-minded approach to the issues facing its industry is better than denial.” However, while many companies stop at that point when addressing social responsibilities, Nike has gone even further by moving “away from focusing on its own code of conduct and toward creating a standard code of conduct throughout the industry.” Nike has realized that social responsibility reaches far beyond their own company and permeates their entire industry. By recognizing the various stakeholders that are critical to its success, Nike has put itself in a position to respond to each of those stakeholders in an appropriate manner, giving the company extremely valuable leverage among all stakeholders.

How would you rank Nike’s improvements?

Nike’s improvements in social responsibility have been unrivaled not only in their industry, but in all industries. While Nike’s “evolution [has been] a difficult one filled with lessons learned along the way, employees worldwide and the company itself are reaping the benefits.” Perhaps just as importantly, “the company is learning to deliver equal value to its five different stakeholder groups: consumers, shareholders, business partners, employees, and the community.”

Nike’s efforts have not gone without notice. As the study points out, Nike has appeared in Business Ethics magazine’s list of “100 Best Corporate Citizens” in 2005 and 2006. In addition, since the study was published Nike appeared on that same list a third year in a row, climbing all the way to #3 in 2007.1 Not only that, but Nike has also “received a perfect score on the Human Rights Campaign Foundation’s Corporate Equality Index two years in a row.” Nike has clearly shown that it is committed to efforts that will improve the world it operates in.

By recognizing and responding proactively to each of its key stakeholders, Nike has transformed its business in the course of a relatively short time period. They have realized the extremely valuable lesson that ‘what goes around comes around.’ Most importantly, Nike has set a precedent not just for other sports apparel companies, but for other industries: a precedent of corporate integrity and responsibility to their stakeholders.