Business ethics has become a critical issue for companies operating around the world. Therefore, it is now an integral component of the business models while companies’ success also depends on how it preserves the ethical culture in their production environment. However, companies are also keen to generate huge profits to stay competitive in the market, which urges them to utilize shortcuts to save money without compromising the production capacity. But such attempts mostly result in their bad reputation as people are very concerned about the companies’ working environment. This creates a great challenge for the organizations which are operational in many countries having different cultural norms to safeguard the interests of all stakeholders. The following essay discusses a similar ethical challenge faced by Nike and evaluates its approach to dealing with this conflict.
Nike Inc. designs, manufactures, and sells gym accessories, footwear-based products, and sporting goods and is considered as one of the top multinational American organizations. Nike has opened its stores in several other countries to save money and provide products to its local customers at relatively better prices. However, Nike has been heavily criticized for using sweatshops since 1996 for manufacturing in China, Vietnam, Indonesia, and Mexico where workers get very low wages and work more than 60 hours per week under poor conditions (Powell and Zwolinski, 2011).
Although Nike denied this issue, it has to face severe criticism for the exploitation of cheap labor and deprived working conditions which consequently led to organizational changes both ethically and strategically in UK and USA (Powell and Skarbek, 2006). Nike, later on, confirmed the poor working conditions in its factories which have very no availability of drinkable water. Moreover, the factories were also found to be concentrated in toxic chemicals far higher than their ethical level along with exhibiting violence, physical and verbal abuse, harassment, and poor treatment (Wazir, 2001).
Effect on Stakeholders
The stakeholders who were affected by the sweatshops were primarily the investors, employees, and customers. However, the unethical practices at factories, on one hand, helped investors and business owners to make huge profits, but on the other hand employees and customers who have the potential to influence the whole business process were negatively impacted considering the overall effect of such practices. But if we consider this challenge in long run, it can be assessed that the company’s reputation was badly affected which ultimately reduced its sales and thus impacted its competitive position in the market.
Ethical Perspective of Nike’s Actions
From a strategic point of view, it is an effective decision to source cheap labor remotely and produces goods at lower prices in developing countries. However, it is also important that the companies take the responsibility to ensure the implementation of ethical labor rules. This emphasizes that the use of sweatshops where workers are subjected to a very hazardous environment must be abandoned. But Nike was unable to provide physical and ethical protection to its employees at the workplace while supervisors also aided in the unethical treatment of workers across various countries.
Furthermore, it blamed factory owners for not maintaining ethical practices and launched a campaign with the name “Just Don’t Do It” to remove the use of sweatshops (the Chu, 2017). However, to eradicate such maltreatment of employees, Nike needs to audit all manufacturing processes and issue annual reports to earn the trust of its customers. Moreover, it needs to monitor its supply chain more carefully to ensure that the ethical framework is successfully implemented.
Ethical issues are sometimes a great challenge for organizations to protect their reputation as a global brand as well as smoothly sustain their business activities. In this regard, the use of sweatshops for manufacturing goods by Nike was a very poor decision that led to many negative consequences for all stakeholders.
Chu, A. (2017). Just don’t do it: Former Nike garment worker speaks out against sweatshops. The Daily of the University of Washington. https://www.dailyuw.com/news/article_8fe931d0-1a77-11e7-a2e0-2f95bfad5f4f.html
Powell, B., & Skarbek, D. (2006). Sweatshops and third world living standards: Are the jobs worth the sweat? Journal of Labor Research, 27(2), 263–274. https://doi.org/10.1007/s12122-006-1006-z
Powell, B., & Zwolinski, M. (2011). The Ethical and Economic Case Against Sweatshop Labor: A Critical Assessment. Journal of Business Ethics, 107(4), 449–472. https://doi.org/10.1007/s10551-011-1058-8
Wazir, B. (2001, May 19). Nike accused of tolerating sweatshops. The Guardian; The Guardian. https://www.theguardian.com/world/2001/may/20/burhanwazir.theobserver