Nike's Labor Practices in the
Three Years Since CEO Phil Knight's
Speech to the National Press Club
By Tim Connor
Published by Global Exchange
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On May 12, 1998, Nike's CEO and founder Mr. Phillip Knight spoke at the National Press Club in Washington, DC and made what were, in his words, "some fairly significant announcements" regarding Nike's policies on working conditions in its supplier factories.
The announcements received favorable treatment from the press, with a New York Times editorial suggesting that Nike's new reforms "set a standard that other companies should match."
Nike's critics were more cautious, expressing concern that Knight's promises represented an attempt to sideline their demands for decent wages and rigorous factory monitoring and replace them with a significantly weaker reform agenda.
This report represents a comprehensive examination of Nike's labor performance in the three years since that speech was made. That performance is first assessed against the commitments Knight announced and is then compared with the human rights standards and independent monitoring practices labor rights organizations have demanded of the company.
Knight made six commitments:
1st Promise: All Nike shoe factories will meet the U.S. Occupational Safety and Health Administration's (OSHA) standards in indoor air quality.
Nike was the subject of considerable scandal in 1997 when it was revealed that workers in one of its contract factories were being exposed to toxic fumes at up to 177 times the Vietnamese legal limit. Although Nike claims that its factories now meet OSHA standards, it gives factory managers advance notice of testing, giving them considerable scope to change chemical use to minimize emissions on the day the test is conducted. Nike is also not yet willing to regularly make the results of those tests available to the interested public. Rights groups have challenged Nike to put in place a transparent system of monitoring factory safety standards involving unannounced monitoring visits by trained industrial hygienists.
2nd Promise: The minimum age for Nike factory workers will be raised to 18 for footwear factories and 16 for apparel factories.
Nike was severely embarrassed on the child labor issue in 1996 when a major story in Life magazine featured a photograph of a very young Pakistani boy sewing a Nike soccer ball. Evidence continues to emerge of young persons under the age of 16 employed in Nike contract factories. In the absence of economic development in their communities, however, excluding children from factories may force them into even more dangerous and degrading work. Global Exchange believes that payment of a living wage to adult workers would be by far the most effective means of benefiting children in areas in which Nike's goods are made.
3rd Promise: Nike will include non-government organizations in its factory monitoring, with summaries of that monitoring released to the public.
As far as rights groups are concerned, this was the most important of Knight's promises. Three years after it was made, Nike has contracted one non-profit organization to conduct one audit of one factory and is able to list a number of other NGOs with which it has held discussions which it claims will improve its monitoring program. What the company is still unable to say is which NGOs, if any, will be allowed to regularly monitor factory conditions and when summary statements of that monitoring will be released.
4th Promise: Nike will expand its worker education program, making free high school equivalency courses available to all workers in Nike footwear factories.
The education program has expanded, but wages paid in Nike factories are so low that the great majority of workers cannot afford to give up overtime income in order to take one of the courses. Payment of a living wage would give Nike workers with an interest in achieving a high school education the time and the means to do so.
5th Promise: Nike will expand its micro-enterprise loan program to benefit four thousand families in Vietnam, Indonesia, Pakistan, and Thailand.
It is much cheaper for Nike to give micro-loans to several thousand individuals outside Nike factories than to ensure that the 530,000 workers producing the company's product are paid a wage that would allow them to live with dignity. Nike's first responsibility is to the workers in its production chain. The company should commit to a living wage before it seeks public relations kudos by funding charitable programs like this.
6th Promise: Funding university research and open forums on responsible business practices, including programs at four universities in the 1998-99 academic year.
The company has refused reputable academics access to Nike factories to conduct research, and that research it has funded seems geared to providing private information to Nike rather than stimulating academic debate and increasing knowledge. If Nike is genuinely interested in investing in credible academic research into responsible business practices, the company should establish an independent committee made up of reputable and independent academics to determine which research should be funded.
The demands which rights groups have made of Nike but which Nike has deliberately ignored can also be grouped into six categories:
1st Demand: Protect workers who speak honestly about factory conditions.
Nike's track record in protecting workers who blow the whistle on sweatshop conditions is very poor. The company has turned its back on individual workers who have been victimized for speaking to journalists, and has cut and run from other factories after labor abuses have been publicized. Until this changes, Nike workers will have good reason to keep silent about factory conditions for fear that speaking honestly may result in them and their fellow workers losing their jobs.
2nd Demand: Regular, Transparent, Independent and Confidential Procedures for Monitoring Factories and Investigating Worker Complaints.
Activists have repeatedly asked Nike to allow rights groups to educate workers about their rights and to ensure workers can make confidential complaints to independent monitors when those rights are infringed.
Instead, Nike has made it the responsibility of each factory to educate workers about Nike's code of conduct and to establish a complaint mechanism. This deliberately ignores the interest factory owners have in keeping workers ignorant of their rights. All independent research indicates that the overwhelming majority of Nike workers do not understand their rights under Nike's code and do not believe factory owners can be trusted to resolve worker grievances.
Rights groups have also called for a factory monitoring program which is independent and rigorous. In response Nike has set up an elaborate array of different schemes for monitoring and factory assessment. While this variety of programs looks impressive in a public relations sense, Nike has deliberately set up each of these programs so that they fail two or more of the key tests of effective monitoring: independence, transparency, regularity and a relationship of trust with workers.
The quarterly program of S.A.F.E. (Safety, Health, Attitude, People, Environment) assessments, conducted by Nike staff, is obviously the least independent. There is no evidence that Nike staff actually interview workers as part of these assessments let alone attempts to establish a relationship of trust with them.
Nike's program of annual factory monitoring by PricewaterhouseCoopers also lacks independence. PwC was selected by Nike, reports to Nike and conducts a monitoring program designed by Nike. To the extent that independent observation of PwC's monitoring practice has been allowed, it indicates that PwC auditors fail to establish a relationship of trust with workers and that the quality of their monitoring can be extremely poor. Dara O'Rourke (an assistant professor at MIT) recently observed several PwC factory audits first hand and concluded that they had "significant and seemingly systematic biases" in favor of factory owners and against the interests of workers (O'Rourke 2000).
While there are elements of the Fair Labor Association's (FLA) proposed monitoring program that represent important improvements on Nike's current very poor system, the Association's ability to ensure that workers' rights are respected will be significantly undermined both by the questionable independence of its external monitors and by the long delays between factory monitoring visits--which will on average occur in each factory only once every ten years. The Global Alliance for Workers and Communities is an attempt by Nike to shift focus away from the human rights agenda promoted by the company's critics. The Alliance deliberately avoids investigating key human rights issues and its research methodology does not allow time for researchers to create a relationship of trust with workers.
Nike has vigorously opposed the Workers' Rights Consortium, a factory monitoring program that is independent, transparent and makes it a priority to build relationships of trust with workers. In contrast, Nike's monitoring and factory assessment programs are not independent, lack full transparency and have so far made very little effort to win workers' trust so that they can speak honestly about factory conditions without fear of reprisal.
3rd Demand: Decent Wages
Nike has rejected demands that it ensures that Nike workers are paid a living wage--that is, a full time wage that would provide a small family with an adequate diet and housing and other basic necessities. Instead, the company has used statistics selectively and in a misleading fashion to give the false impression that wages currently paid to Nike workers are fair and adequate. Meanwhile those workers struggle to survive on wages that are barely enough to cover their individual needs, let alone those of their children.
4th Demand: Reasonable Working Hours
Independent research indicates that in many factories Nike workers are still being coerced into working up to 70 hours per week and are being humiliated in front of other workers or threatened with dismissal if they refuse. Nike workers also frequently report that it is extremely difficult to obtain sick leave and that the annual leave to which they are legally entitled is often refused, reduced or replaced with cash without the worker having any choice in the matter.
5th Demand: Safe and Healthy Workplaces
Nike has made important progress in reducing the use of toxic chemicals in sportshoe production. Unfortunately, on the few occasions in recent years that genuinely independent health and safety experts have been allowed access to Nike contract factories, they have found serious hazards including still dangerously high levels of exposure to toxic chemicals, inadequate personal protective equipment, and lack of appropriate guards to protect workers from dangerous machinery. There is also considerable evidence of workers suffering stress from spending large amounts of time in high pressure and frequently abusive work environments.
6th Demand: Respect for Workers' Right to Freedom of Association
So far Nike's promise to protect this right has been largely empty. A considerable proportion of Nike's goods are made in countries like China where independent unions are illegal. Nike has refused to call on the Chinese government to allow workers to organize and has actively opposed calls for trade pressure to be put on the Chinese government to encourage it to improve its record in this area.
Nike has abjectly failed to prevent the suppression of unions in a number of its contract factories, including the PT Nikomas Gemilang and PT ADF factories in Indonesia, the Sewon and Wei Li Textile factories in China, the Formosa factory in El Salvador, the Natural Garment factory in Cambodia, the Savina factory in Bulgaria and factories owned by the Saha Union group and the Bangkok Rubber group as well as the Nice Apparel, De-Luxe, Lian Thai and Par Garment factories in Thailand.
On those few occasions when Nike has taken any steps to advance this right in specific factories, it has done so grudgingly and after considerable public pressure. While elements of Nike's eventual response to the current dispute in the Kuk Dong factory in Mexico have been positive, Nike's actions on the issue been characterized by unnecessary delays, lack of follow through and failure to actively promote the urgent need for a free and fair union election.
Thus far Nike has treated sweatshop allegations as an issue of public relations rather than human rights. The promises made by Phillip Knight in his May 1998 speech were an attempt by the company to switch the media focus to issues it was willing to address while avoiding the key problems of subsistence wages, forced overtime and suppression of workers' right to freedom of association.
The projects Knight announced have been of little benefit to Nike workers. Some have helped only a tiny minority, or else have no relevance to Nike factories at all. The most significant promise, to allow NGOs to monitor its factories and release summary statements of that monitoring, has simply not been fulfilled.
Health and safety is the one area where some improvement has occurred. But even here the company is not willing to put in place a transparent monitoring system involving unannounced factory visits. On the few occasions when independent safety experts have been allowed to visit Nike factories, they invariably have found very serious hazards.
The inaction of the last three years shows that rights groups are justified in treating the company with suspicion and demanding that factory monitoring be both genuinely independent from Nike's control and publicly reported in full. While Nike touts itself as an "industry leader" in corporate responsibility, Nike workers are still forced to work excessive hours in high pressure work environments, are not paid enough to meet the most basic needs of their children, and are subject to harassment, dismissal and violent intimidation if they try to form unions or tell journalists about labor abuses in their factories. The time has come for the company to adopt the reforms which rights groups have advocated. It is indefensible that activists, consumers and most importantly Nike factory workers are still waiting for Nike to do it.