Nike - just do it?

Swiderski & Associates, LLC is a small accounting firm consisting of five professionals from northeastern Pennsylvania. Its owner, Paul Swiderski (hereinafter referred to as the “subject”), considers himself to be an ethical leader and stresses making ethical decisions within the enterprise. In a previous report, the subject’s personal approach to a business ethical decision was transformed into an ethical leadership decision making plan/model from which his employees can draw upon when faced with a business ethics issue.

The purpose of this essay is to apply this model to a current global business situation. More specifically, this report examines the ethical decision making process as it applies to Nike’s child labor practices in Southeast Asia. First, the issue of Nike’s child labor practices is discussed, followed by an application of the ethical decision making process to analyze and make recommendations for leadership action.

About Nike

“Nike is the largest seller of athletic footwear and apparel in the world. The company is primarily engaged in the design, development, and worldwide marketing of footwear, apparel, equipment, and accessories. The company operates in the US, Europe, Asia Pacific, the Middle East and Africa. It is headquartered in Beaverton, Oregon” (Marketline, 2007, par. 1). In 1996, Nike was accused of allowing unfair labor practices in Southeast Asia, including the employment of unethical child labor practices (Jenkins, 2003). More information is presented in the following sections.

Child Labor Practices in Southeast Asia

In the 1990’s, activist groups and charities focused their attention on unfair labor practices in Southeast Asia, including child labor violations (Jenkins, 2003, Zadek, 2004). These groups targeted Nike because of its high-profile brand, not because its business practices were any worse than its competitors' “(Zadek, 2004, par. 16). Nike’s initial reaction was to counter “with public statements showing that it required all contractors to sign, abide by and document compliance with a Memorandum of Understanding that commits its contractors to follow all local laws about wages, benefits, child labor, equal opportunity, working conditions, etc.” (Jenkins, 2003, par. 9).

When Nike’s initial attempts to counter public statements with their own failed, the company hired firms to conduct independent investigations into the issue. However, the firms retained by Nike were either unqualified or lacked appropriate credibility (Jenkins, 2003, Zadek, 2004). “In 1997, the company asked Andrew Young, a U.S. civil rights leader and former United Nations ambassador, to carry out an independent audit of Nike contractors' labor practices. Young examined 12 factories and reported favorably for Nike, finding no evidence of widespread abuse or mistreatment, but did comment that Nike could do better” (Jenkins, 2003, par. 10). Pressure from activist groups continued (Jenkins, 2003, Zadek, 2004).

Finally, Nike became proactive in this matter by “creating its first department specifically responsible for managing its supply chain partners' compliance with labor standards. And in 1998, Nike established a Corporate Responsibility department, acknowledging that acting responsibly was far more than just reaching compliance; it was an aspect of the business that had to be managed like any other”(Zadek, 2004, par. 17).

Business Discipline

There are two dominant disciplines involved in this case: corporate social responsibility, and supply chain management. Both are intermingled in with international business theories.

Decisions to Be Made

Nike had to make a clear decision to alleviate pressure from activist groups. When public statements and appeasement (by way of independent investigations) fail, Nike’s executives were required to think of a different way to truly solve the issue from a long-term perspective.

International Regulations

This case deals with child labor; however, no standardized international code of child labor laws exists. Nike would have to resort to complying with the labor laws of the individual foreign countries in which it operates and/or supply chain members reside.

Potential Issues Involving Disparate Legal Systems and Practices

The following questions/issues arise:

Can a company establish and enforce policies on supply chain members?

Should the company use the host country’s or supply chain member’s, or develop a higher, standardized policy for all supply chain members to follow?

Application of Critical Thinking Approach

Revised business ethics decision model for Swiderski & Associates, LLC
I.	Gather the facts and determine what the issue is. Ask questions if necessary.
II.	Identify all possible solutions to the issue/problem.
III.	Examine each solution and identify:
	A.	Applicable laws/regulations, if any
	B.	Interpretation of existing laws/regulations, if identified in A, above
	C.	Legal reasoning
	D.	Legal ramifications, if any
	E.	Consistency in application
	F.	Appropriateness
	G.	Long-term ramifications for client and firm
	H.	Ethical norms
	I.	Advantages
	J.	Disadvantages
	K.	Audit Risk
IV.	Select solutions and discuss options with client.

The predominant issue, based on the facts presented, is that Nike’s supply chain members violated child labor laws. As a result of these findings, activist groups and non-profit organizations pressured Nike to make changes by using the press as their medium. In such cases, there are three solutions: ignore the issue (or do little outside issue press releases); hire independent investigators to validate data; or engage leadership to take a proactive approach in dealing with the issue. The first two options have proven to fail, while the third option lead to more positive results for the company over the long-run.

References

Jenkins, A. (April/May, 2003). What would you do. Communication World, 20(3). Retrieved September 5, 1007 from the EBSCOHost database.

Marketline (2007). Nike [company information]. Retrieved September 5, 2007 from the Marketline database.

Zadek, S. (December, 2004). The Path to Corporate Responsibility. Harvard Business Review, 82(2). Retrieved September 5, 1007 from the EBSCOHost database.