NIKE CASE

Nike claims to be "the only buyer to require full cash minimum wage" and says its "corporate policy is to keep orders at or below the level equivalent to 48 hours of work" per week in order "to require contractors to cap mandatory overtime at 60 hours per week." Nike also claims that "independent monitors and sources", such as firms like Ernst & Young, the World Bank and the Amos Tuck School of Business at Darthmouth University, "are verifying these issues on a routine basis for Nike".⁽¹⁾

This file will look at Nike's production methodes in Asia. Comparing Nike's proclaimed intentions with its actions. This file will start with an overview of Nike's stucture, the market Nike is operating at and Nike's Code of Conduct, followed by the complaints of the workers producing for Nike and several NGO's. These complaints involve: minimum wage which is often not paid by Nike's subcontractors and the fact that the minimumwage that is paid, does not cover living expenses. Compulsory overtime: workers are forced to work 12 to 16 hours a day, six to seven days a week, without even being paid properly for all the overtime they work. The abuse of the Korean, Taiwanese and Chinese management towards the Vietnamese, Indonesian, Bengalese and Chinese workers. The poor health and safety meassures and the lack of Union influence found at Nike's subcontracting factories. The file will end with an analysis of actions taken by Nike to have its Code of Conduct independently monitored and suggestions of NGO's to improve labour situations in Nike subcontracting factories.

Why focus on Nike?

As US human rights activist, Max White, puts it: "Nike is not the worst company on the planet. Reebok and others use the same workers and contractors in the same countries. Nike is, however, the largest such company and has set the precedent for apparel giants 'race to the bottom.' If Nike reforms, they will trumpet the change and other manufacturers will have to follow."⁽²⁾

The reason to focus on Nike is as White makes clear, based on the fact that Nike is the number one in sportswear. With, profits, turnover and marketing (sponsoring, endowments and advertising) figures that surmound all other sportwear companies. But also because Nike not only refers to it's position as a marketleader, but also sees it self as leading the industry in labour practices initiatives. They take their leading position very seriously. On their website, Nike says they are the first one to implement independent monitoring and the only one to pay minimum wage in Indonesia.⁽³⁾

In the text accompanying their 1992 Code of Conduct⁽⁴⁾, Nike states: "We seek to do not only that is required, but whenever possible, what is expected of a leader".

The witnesses in this case

The witnesse in this case will be: a researcher of the Asia Monitor Resource Center (AMRC), who will present information about Nike's labour practices in China. A worker of the Young One factory in Bangladesh, who will present information about the labourconflict at Young One. The third witness is a young consumer, involved in the sportshoe campaign in Begium.

The AMRC is an independent non-govermental organisation, based in Hong-Kong, which has been researching, documenting and supporting workers rights and labour rights throughout Asia for over 20 years. Together with the Hong Kong Christian industrial committee (HKCIC)⁽⁵⁾ they have investigated ongoing labour, health and safety problems at several factories that are contracted by Nike and other shoe companies in China to produce their shoes. Their report was released in October 1997 and this file for the Clean Clothes forum makes ample use of their material.

The Young One factory in Bangladesh (for a summary of the labour conflict see the appendix) is singled out here, because it gives a good perception of the way Nike manages labourconflicts at subcontracting factories. After the labourconflict at Young One became a fact, representatives of the Clean Clothes Campaign met with Nike officials in two seperate meetings to discuss the incident. In the first meeting the understanding was that Nike would investigate the allegations and an Ernst & Young report would be on the table for the second meeting. Nothing was less true. The second meeting, attended by Dusty Kidd, reversed the whole matter as Nike was not willing to share any of the information of Ernst & Young and only could, in the future, share some of the elements of the action plan in the case of Young One. On its website, Nike says: "In Europe, Nike is as commited to improving the nature and frequency of dialoque with NGO's as we are dedicated to continued improvement of our labor practices."⁽⁶⁾ Nike continues, in reverence to a.o. the meetings in the Netherlands, that it has "opened lines of communication." Unfortunately Nike has not responded (since the last meeting in September 1997) to several attempts of the Clean Clothes Campaign to discuss the matter further.

2.1 company profile

Nike produces 90 milion pairs of sportshoes every year. In last year revenues increased 42 percent, from $6.5 billion to $9.2 billion⁽⁷⁾. Regarding the production of sportshoes Nike remains number one in the world, followed by Reebok and Adidas. Nike is not only the biggest 'producer' of sportshoes, but also spends the largest amount of money on marketing and promotion. In 1996 the company spent $678 million for this purpose.⁽⁸⁾ Nike's estimated marketing budget (advertising and other promotion) for 1997 is $978 million.⁽⁹⁾ Besides many sports teams as the national Brazilian soccerteam who has a $200 milion contract with Nike, the company has more than 100 athletes under contract. Of whom Andrew Agassi ($100 milion for ten years) and Michael Jordan ($20 milion a year) are two of the best known.⁽¹⁰⁾

2.2 Outline of the industry

Western companies start to relocate production to Asia in the mid-1960's, especially to Taiwan and South Korea. Low education, low employment age, a lack of alternative employment and short employment spans combined with an anti union climate create a low wage labour factor that make Asian countries atractive to the relocating companies. In the 1970's Taiwan and South Korea become world's main sportwear producers. Nike⁽¹¹⁾ starts relocation of production in 1976, first towards Korea, and later Taiwan. By 1980, nearly 90 percent of Nike's production is made in Korea and Taiwan. But the 1980's present a second generation of even lower-wage producers in Asia, such as Bangladesh, China, Indonesia, Thailand and Vietnam.⁽¹²⁾ In the beginning of the 90's a large part of Nike's production moves to these countries.⁽¹³⁾

At the moment Indonesia is Nike's biggest production center, with 17 footwear factories that employ 90.000 workers and produce about 7 million pairs of shoes each month.⁽¹⁴⁾ The phrasing "at the moment" is quite adequate considering the comment of Nike spokesperson Jim Small's on recent increases in the legal minimum wage in Indonesia, now $2,46 dollar per day⁽¹⁵⁾, "...there's concern what that does to the market - whether or not Indonesia could be reaching a point where it's pricing itself out of the market."⁽¹⁶⁾

China is yet Nike's second largest production center. Last year Nike wanted to expand its production in China from between 6 million pairs per month in 1996 to 7 million pairs per month.⁽¹⁷⁾ This year Nike is looking at possibilities to move the production of it's goods to Second World countries.⁽¹⁸⁾

Gender and age

Women have entered the Asian work force in large numbers since its economic boom began in the 1970s. In general they earn less than men. Asian Nike subcontractors have been found to employ merely women as well. Respectively 70% and 80% of the workforce of the Chinese Nike producing factories Wellco and Yue Yuen are women aged 18-25 years.⁽¹⁹⁾ The FengTay factory in Banjaran, West Java has 7000 workers making Nike's, 75% of whom are women. And the Kukje factory (next door to Feng Tay) employs 5000 Nike workers, 80% are women.⁽²⁰⁾ Many factories hire only young girls without children, refusing to hire women over 24 or 26 and laying off women when they get close to marriageable age. The average age of women working for two Indonesian factories making Nike's is 16, of whom 41% were 15 years or younger when they started working there.⁽²¹⁾ Women who become pregnant usually leave their jobs, and in some factories are forced to leave by the company.⁽²²⁾

Subcontracting

Nike does not own the factories producing Nike goods. The mayor part of the production in South-East Asia is contracted out, but Nike has close links with these factories manufacturing Nike products. To become a subcontracter of Nike an enterprise has to prove that it is capable of manufacturing an end product according to Nike's design and specifications. The enterprise pays a licensing fee to Nike and during two to three years it will compete with other factories to obtain Nike orders. Each month the factories performance is assessed by Nike. Licences may be withdrawn if there is something wrong.

Nike also helps subcontractors to find better production sites. This often leads to reconstitutions and closures in one country and to expansions and openings in another country. Although Taiwan and South Korea are not Nike's main producing countries anymore, they still play an important part in the Nike production cycle by transforming design into ready products. Many of the factories producing Nike goods in countries, like China and Indonesia, are South Korean and Taiwanese owned.⁽²³⁾

But Nike is not the only one in the "Nike-subcontracting-chain" to contract out production, its subcontracting factories also contract out their work. In China, for example, many big factories sub-contract part of their business to small partners on a regular or irregular basis, often to small township and village enterprises (TVEs). The working conditions in TVEs are notoriously worse than in other factories and have aroused serious criticism. According to goverment statistics, one-third of TVEs violate official standards on health and safety. Unfortunately, multi-levels of sub-contracting are often even difficult to identify, and make the monitoring of Nike's Code of Conduct extremely complex and incomplete.⁽²⁴⁾

2.3 The Nike Code of Conduct

"Seventy percent of the workers interviewed at the Wellco factory in China, did not know there was a Nike Code of Conduct which the factory should be using. In the Yue Yuen factory not even one worker interviewed knew of the Nike Code of Conduct."⁽²⁵⁾ And all this while according to Nike, it's Code is posted in the mayor workplaces throughout all it's subcontracting factories in the world. The Nike Code is also supposted to be handed out on a pocketsize card to all contract workers.⁽²⁶⁾ But as the accounting firm Ernst & Young, hired by Nike to examine the labourpractices of it's subcontractors, report, 40 of the 50 interviewed workers of the Vietnamese Tae Kwang Vina factory, did not read Nike's Code of Conduct, nor did they know exactly what Nike is.⁽²⁷⁾

In 1992, Nike establishes a Code of Conduct (a general statement of company philosophy ) The Code of Conduct bans the use of forced, prison or child labor and requires business partners to comply with local laws with respect to wages, benefits, overtime, child labor and environmental protection. Subcontractors and suppliers of Nike have to sign the one-page Code of Conduct. In 1997 Nike updates it's Code of Conduct. The new code now also includes:
1) "recognizing" the rights of free association, collective bargaining and freedom from corporal punishment,
2) requiering contractors to certify that they pay the minimum wage or prevailing industry wage (whichever is higher) and
3) restricting maximum working hours per week to 60⁽²⁸⁾, unless workers volunteer and sign a consent form.⁽²⁹⁾

The statement: "We seek to do not only what is required, but whenever possible, what is expected of a leader" that accompanies their 1992 Code of Conduct does not reapear in the 1997 text.⁽³⁰⁾

Nike says the Code of Conduct is enforced worldwide in a "two-tier program". First, Nike employees inspect factories on a "daily basis" to ensure compliance with all Nike production standards, labor included. Second, the company has hired the accounting firm of Ernst & Young to conduct unannounced audits that include employee reviews, research into any grievances filed, and payroll audits. In 1996 Nike also creates a "highlevel position" in the company to oversee compliance with the company's Code of Conduct, naming Dusty Kidd as director of its Labor Practices Group.⁽³¹⁾

Besides Nike's Code, Nike CEO Phil Knight has been invited to participate in the Apparel Industry Partnership on Workplace Standards created by US president Bill Clinton to address labor problems in the emerging markets of the garment and shoe industries. The aim of the code is to set up a system to assure consumers that their products are not made in sweatshops. The Apparel Industry Partnership laid down a set of demands which define descent and humane working conditions. These demands refer to: the abolition of forced and bonded labour, child labour, no mistreatment and abuse, no discriminaton, health and safety measures, freedom of association, the right to collective bargaining, minimum wages, working hours and overtime compensation. The Apparel Agreement was signed in april 1997.

According to a recently⁽³²⁾ filed lawsuit⁽³³⁾, of a Californian group of consumer and business lawyers against Nike, the company's statement that it guarantees a "living wage to all workers, that its workers in Southeast Asia make twice the local minimum wage, as well as free meals and health care, and are protected from corporal punishment; and that it complies with government rules on wages, hours and health and safety conditions." contravenes a broad state law that forbids unfair business practices and false or deceptive advertising. The lawsuit says Nike's Code of Conduct and statements such as the above were intedended "to entice consumers who do not want to purchase products made in sweatshops". Nike's claimes, the suit says, are refuted by studies from labor and human rights groups, news media investigations and especially the leaked Ernst & Young report.⁽³⁴⁾

So far Nike's structure and "labour constitution'. Now for some comments of NGO's that have been criticising Nike on several wrongs they found in the countries and factories where Nike goods are being made.

Non-sustainable wages (legal minimum wage)

"[Vietnamese Nike] workers are not making a living wage. They make an average of 20 cents per hour, or $1,60 a day from their factory jobs, but the cost for eating three simple meals is $2,10 a day." Ninety percent of the workers the Vietnam Labor Watch team interviewed in 1997, told them they received extra help in terms of money, food or housing from their families to make ends meet.⁽³⁵⁾ This while according to Nike, its subcontracting workers can spend portions of their sallery on "Jewelry, watches, even radio's and televisions"⁽³⁶⁾.

Nike pays it's factories extremely low rates per piece, thereby assuring that the subcontractors will not pay more than minimumwage to their workforce. It is often only because of their large volume that the contractors can survive. The only place to cut costs is the rate paid to workers. Although many Vietnamese earn no more than $300, the cost of living in rural areas is far below that in the cities. Shoe factories are located in expensive urban settings. Nike distingenuously compares its wages to the annual income of rural agricultural workers. To show things can be different, transnational Pepsi built a bottling plant in Vietnam six years ago and pays its entry-level workers, such as bottle cleaners, about $960, while the average worker in Ho Chi Minh City makes $800 a year.⁽³⁷⁾

In China the situation is not better. Typical basic wages there come to as little as ten cents an hour. With vast amounts of overtime, workers can earn from $38,- to $50,- a month. Factories also deduct up to one third of earning in fees for board and lodging, since the workers are usually young peasant women who migrate to the industrial zones and live in near-prison conditions in dormitories next to the factory.⁽³⁸⁾

Unfortunately the Indonesian minimum wage is not a living wage either. But by precipitous inflation shoe and garment workers are now driven to desperation. In a few months, Nike workers have gone from averaging about $2,- per day to about 70 cents. While some US employers have chosen to continue paying their Indonesian workers at previous US-dollar rates to buffer the workers from inflation, Nike has not made any such overture.⁽³⁹⁾

Another problem with wages, NGO's come across, is the comparison between rural and urban areas Nike makes. As many Vietnamese farmers earn no more than $300,- a year and Vietnamese Nike workers earn an average annual salary of $564,-. ($10.85 per week, $1.81 per day, 23 cents an hour.) which complies with the lokal minimum wage.⁽⁴⁰⁾

Nike thus concludes it pays it's subcontracting workers enough. Not mentioning that the cost of living in rural areas is far below that of the cities. And the expensive cities is where shoe factories are located.⁽⁴¹⁾

As a reply to complaints of NGO's that Nike does not pay a living wage, Nike has pointed out the free housing and meals that many of the subcontracting factories supply to their workers. But although this is true for some factories, most of the dormatories that are free, are overcrowded as well, 16 workers per room.⁽⁴²⁾

Cheating on wages

"The Chinese workers of the Nike producing Wellco factory, are given a quota to fullfill in the working day. However, the quota is very harsh, and often cannot be fulfilled in a day's work. When this happens, the worker must participate in "prolonged work" for which there is no pay."⁽⁴³⁾

Although Nike claims to be "the only buyer to require full cash minimum wage"⁽⁴⁴⁾, there are are numerous accounts of Nike subcontractors violating its promise, national laws and Nike's Code of Conduct. In a survey under Indonesian factories working for Nike it appeared that the highest percentage of workers was paid the Indonesian minimum basic salary. This still means a minority did not receive the minimum wage. And most of the Indonesian workers examined in Nike factories, never received the holiday bonus, which, according to Indonesian law, employers must pay to workers who have been employed for more than three months.⁽⁴⁵⁾

In April last year, 10.000 Nike workers in Indonesia went on strike because they did not earn the local minimum wage⁽⁴⁶⁾. The management initialy refused, but after a two-hour meeting at the parliament between workers, legislators, company executives, union leaders and manpower department officials, the firm agreed to pay the minimum wage without including allowances for attendance, overtime, transport, holiday pay and meals.⁽⁴⁷⁾

In China, 90% of the Nike manufacturing Wellco workers, said their wages violate minimum wage laws. The workers receive a base pay of Rmb 250-350 ($30-$42) per month before overtime, while the minimum wage in that part of China is Rmb 350 per month.⁽⁴⁸⁾ And 60% of the interviewed Yue Yuen workers recal strikes that occurred in the factory because the factory had not paid the full wages.⁽⁴⁹⁾ But Nike contractors also cheat their workforce out of other payments, thereby violating national laws and again Nike's Code of Conduct. For example, the Chinese Labour Law Article 44 states that overtime pay should be at least 1.5 times the regular wage. A survey of the HKCIC & AMRC shows that 70% of the Nike workers interviewed were paid by piece rate and did not receive any extra pay for overtime work.⁽⁵⁰⁾

While Indonesian law states that overtime pay for the first hour on working days should be one and a half time the salary per hour, for the second hour and following hours it is two times the salary per hour. Survey findings are that most of the interviewed received less than the required for the first hour and much less for the second hour.⁽⁵¹⁾

The practice of non payment of the local minimum wage or local set pay for overtime, is found in numerous factories producing for Nike. The Nike producing factory Feng Tay in Banjaran, West Jave (a Taiwanese joint venture company) ads to this: non payment of menstrual leave, sick leave (even with doctor's permission), maternity leave, holiday pay, food or transport allowances and rarely pays bonuses, all of which are stipulation's of the Indonesian National Labour Laws.⁽⁵²⁾

The last form of cheating on wages that will be adressed here was found in the Chinese Wellco factory. Seventy percent of the workers interviewed there, report that when they were hired, they had to pay a deposit. This deposit, they would receive back only after one year of employment or when dismissed under favourable conditions.⁽⁵³⁾

Compulsory overtime

"In China workers in many factories work a nine hour day, with a regular three or four hours overtime on top of that. Workers are often expected to work seven days a week, with only one or two rest days per month. In one factory, the only rest periods allowed are Sunday evenings and three days' holidays at Chinese New Year."⁽⁵⁴⁾

The situation as described above is widespread practice throughout the Asian subcontracting factories producing for Nike. This is for a large part due to Nike's demands of flexibility from it's subcontractors. Although Nike claims its "corporate policy is to keep orders at or below the equivalent of 48 hours per week in order to require contractors to cap mandatory overtime at 60 hous per week"⁽⁵⁵⁾, Nike also requires a delivery time of only 10 days for the subcontractor to make a sample of 1,000 pieces in different sizes and styles.⁽⁵⁶⁾ This pressure inevitably is passed on to the workers, forcing them to work hard and fast, and to put in execive amounts of overtime. The Indonesian Kukje factory (Korean owned), went through some changes since the introduction of Nike shoes. Before, the women said the existing daily target system was not stressful, relation between supervisors and workers seemed very good. After, normal daily production increased from 200 pairs of shoes a day to 300, Sunday holiday was cancelled, compulsory overtime became increasingly common, annual three day Christmas holiday was cancelled for the first time since the factory began production, workers were no longer free to go to the toilet (had to sign a leave slip), praying time had been cut short and the relationship between supervisor and workers deteriorated. And at the Feng Tay factory (next door to Kukje) traineewages, abuse, forced overtime (81% say they work 7 days a week normally...) are normal.⁽⁵⁷⁾

In the Yue Yuen factory in China, 80% of the workers report working 10-12 hours a day, six or seven days a week, not including the hour and a half for lunch and dinner. This means that the workers work 60-84 hours a week on a normal schedule, which is at least 11 hours a week more than the 49 hour⁽⁵⁸⁾ limit set by Chinese law. If we add total time spent, i.e. including lunch and dinner and morning exercises, the hours spent at the factory are even higher. Even if the factory applies for special permission from the local government to ignore this law, which the local government will often give to appease large companies like Yue Yuen, the limit can only be extended to 60 hours per week. Moreover, the fact that they must work six or seven days a week violates the law which requires giving two rest days per week. In this Nike producing factory 40% of the interviewed workers said that overtime is compulsory and 75% mentioned that if they failed to work overtime, they would receive a fine or a warning. Although 60% said that the overtime was not compusory, they said that if you do not complete your daily quota, you had to stay behind to complete it. The Chinese Labour Law and Nike's Code of Conduct all say that they will not use forced labour. However, coercing workers into forced overtime directly violates both Nike's Code and China's Labour Law.⁽⁵⁹⁾

In Indonesia workers are not supposed to work more than 7 hours per day of a total of 40 hours per week⁽⁶⁰⁾. Overtime is allowed, but for no more than a total of 54 hours per week, including both overtime and regular time. Although Indonesian laws stipulate the above the large number of Indonesian respondents making Nike's answered that they work 12 hours per day and sometimes 7 days in a week. The incidence of these violations depends on the volume of orders and does not happen every week.⁽⁶¹⁾

All the interviewed workers from the Nike producing Wellco factory in China, explain they work 11-12 hours a day as well. Four workers report that if they refuse to work overtime they can be fined Rmb 10-30 ($1,20-$3,61), which is more than a day's pay (10 cents an hour). Several workers mention that they did not realise that they would have to work overtime everyday when they were hired. The overtime of 3-4 hours per day, and Saturday and Sunday work hours violates China's Labour Law, which allows for only 36 hours of overtime per month. The Labour Law and Nike's Code of Conduct both clearly state that forced or coerced labour is not accepteble, yet workers in Wellco are forced everyday to work long hours. But if workers come up for their rights, they risk being fired. In March 1997, the assembly department of the Wellco factory went on strike, because of the long working days and the factory did not pay enough. Eight workers who went on strike were fired. In another instance, eight workers in the quality control department went on strike and were fired.⁽⁶²⁾

Trade unions

In recent years, there have been numerous strikes to protest against wages and working conditions, at factories producing Nike goods. Attempts have been made to form independent trade unions there as well. In general, however, strikes are put down and activists are sacked (usually after the strike is over) and blacklisted.⁽⁶³⁾

In China 60% of the workers at the Yue Yuen factory recalled strikes that had occured in the factory, usually because the factory had not paid the full wages. Most of those interviewed said they could make complaints to their supervisors, but half of them did not know what would happen if they did because they themselves had never complained. The fact that these workers did not complain to their supervisors is obviously not because they had nothing to complain about. To the HKCIC & AMRC researchers the workers did complain about the noise, air pollution and fumes at Yue Yuen. Many of them had skin irritations and several suffer from dizziness an headaches. Yue Yuen workers work 60-84 hours a week on a regular basis and their wages violate Chinese minimum wage.⁽⁶⁴⁾

In Indonesia, the majority of the companies surveyed in a 1996 study on Nike, have union officials that are generally selected by the management, not by the workers as is the standard practice throughout the world. The Collective Bargaining Agreements (CBA's) which should be negotiated between the union officials and the management, were not. The companies prepare the CBA's for the union officials to sign, without giving an opportunity for these union officials to negotiate or distribute the CBA's among the members to get their approval. Another function of trade unions is to monitor and enforce the implementation of labor regulations by the companies. The majority of the respondents said that most of the companies forbid their union officials to enforce on regulations and that the union officials do not educate them on their labour rights.⁽⁶⁵⁾

The Nike producing factories Samyang and Yue Yuen⁽⁶⁶⁾ are lokated in Vietnam. Within the first six months⁽⁶⁷⁾ of production severe labour rights abuses were reported at both factories. These reports have continued up until the end of 1997. Workers at both factories are still forced to do excessive overtime, and physical and verbal abuse continues at Yue Yuen. But, since key figures in the Ho Chi Minh Labour Federation, who were an important source of information, were reprimanded by higher authorities in June 1997, reports on labour abuses from the two factories have been silent.⁽⁶⁸⁾

Unlawfull lay offs and blacklisting

A Bangladesh newspaper, The Independent of Dhaka, reported on July 14 that 9 workers from the Youngone factory were in jail, 300 injured (50 seriously injured), 97 fired and 800 charged with criminal offenses after they tried to present a statement to their employer, a Nike contractor. Before the workers had chance to make their statement, they were attacked by an overwhelming contingent of police. Called in by the Factory management.

In March 1997, the assembly department of the Wellco factory went on strike, because of the long working days and a not being paid the local minimum wage. Eight workers who went on strike were fired. In another instance, eight workers in the quality control department went on strike and were fired.⁽⁶⁹⁾

In the Philippines, early October 1997, the Samma Corporation (a Korean company manufacturing Nike sports products in the Cavite Export Processing Zone), shut down its Shoe Upper Department (SUP) without any notice and reasons for doing so. The shut down put 296 regular and probationary workers out of work and on a waiting list. October 13, the management summoned 90 workers from its waiting list to report for work in the Baseball Gloves Department (BGD). Not more than 50% had responded. The majority of the workers demanded that all of those in the waiting list should be recalled to work. Because of the promise of the management that the SUP department would soon resume its operation for a new order. November 3, the management of Samma negotiated with the workers and they came to an agreement, which the management broke imediately. Insteed by Febuary 1998, 89 regular workers have been laid off. Twenty-one were laid off in October 1997, 26 were laid off in November 1997, 42 were suspended and dismissed for defiance to do forced overtime in January 1998 and the management keeps on forcing it's workers to commit unlawful forced overtime work.⁽⁷⁰⁾

The Youngone factory in Bangladesh, is known for its repressive atmosphere and for suppression of all union activities. Youngone employees, like other workers in the Dhaka export processing zone (EPZ), are deprived of their legal rights, even those supposedly guaranteed by law, such as freedom of association.

Abuse and intimidation of workers

"Verbal abuse and sexual harassment are frequent, and corporal punishment is often used. On 8 March 1997, 56 women workers at a factory making Nike shoes in Dong Nai, Vietnam, were forced to run around the factory's premise in the hot sun, because they weren't wearing regulation shoes. Twelve fainted during the run and were taken to the hospital. This was particularly painful to the Vietnamese because it occured on International Women's Day, an important holiday when Vietnam honors women."⁽⁷¹⁾'⁽⁷²⁾

This was last year. The manager in question has been sentenced by a Vietnamese court and does not work at the factory in Dong Nai any longer. An improvement? Indeed. Nike's improvement? Nike would like to believe so, but unfortunately an April 2, 1998, ESPN documentary on American television about Nike and Reebok, shows again abuses in Vietnamese subcontracting factories. Nike gave ESPN only access to its Tae Kwang Vina plant outside Ho Chi Minh City. Where 8.800 workers make 20,000 pairs of shoes a day. The entire workforce, including managers, was alerted the day before that ESPN would be filming in the factory. Even so, in the presence of ESPN crews, managers twice physically abused workers. Just before the end of the day's shift, a female Vietnamese supervisor was observed slapping an employee sharply across the forearm for not spreading glue slowly enough. When asked about the incident, the supervisor, Tran My Linh said, "I was just reminding her that, you know, she did something wrong, that's all... That's just the way we Vietnamese do it." Earlier, in the stitching department, a supervisor was seen angrily throwing a stitched upper portion of a sneaker at a worker from a distance of 10 feet.⁽⁷³⁾

In some factories the management chooses not to use corporal abuse. Verbal abuse and fines are used instead for punishment. At the Yue Yuen factory in China many workers mentioned that for minor offences, the fines were as much as three days pay⁽⁷⁴⁾, while for major mistakes the fines could be as much as nine days pay ⁽⁷⁵⁾ Rmb 90 ($10,84).⁽⁷⁶⁾

Accidents, injuries and poor health and safety regulations at the workplace

US-based labor advocate Thuyen Nguyen comments on Nike's labour malpractice in Vietnam: "It is a common occurrence for workers to faint from exhaustion, heat, fumes and poor nutrition during their shifts."⁽⁷⁷⁾

In addition to the exhaustion caused by prolonged overwork, workers in the factories producing for Nike face a range of dangers including fires in poorly regulated factories, accidents when handling machinery, and a range of skin and bronchial problems produced by constantly inhaling fumes from glue and other chemicals in poorly ventilated factories. The workers interviewed by HKCIC & AMRC at the Nike producing factories Wellco and Yue Yuen in China,complained that they experienced dizziness, skin irritations, headaches and dyspnea. While workers said the ventilations in the workplace was acceptable, all of them said the excessive noise, dust and crowded conditions in the workplace were a serious problem.⁽⁷⁸⁾

Nike says that it is working with its subcontractors to offer an environment that protects the workers' health and safety. Health concerns, however, should be raised when looking at al the evidence presented below.

According to a survey in Indonesia, most of the companies examined lack emergency doors. The majority of the respondents also answered that they had not been informed as to either the present danger or long term effects involved in working with the chemical substances in the factories.⁽⁷⁹⁾

In several factories producing for Nike, workers 'protect' themselves against a toxic mix of chemicals, by wearing cotton masks. Dara O'Rourke, an environmental consultant for the United Nations and human rights activist who often visits Vietnamese shoe factories, says: "Wearing a cotton mask to protect yourself against hazardous solvents is like wearing flip-flops in the NBA, it just doesn't work."⁽⁸⁰⁾

In November an inspection report by Nike's accounting firm, Ernst & Young, was leaked to the New York Times. In this report Ernst & Young found that workers at the Nike producing Tae Kwang Vina factory in Vietnam, were exposed to a chemical that exceeded legal standards by 177 times. Nike says those readings are impossible, even though it was Nike's own accounting firm, which documented the readings. Toluene, the chemical cited in the report, is known to cause damage to the liver, kidneys and central nervous system.⁽⁸¹⁾

The Ernst & Young report also found that the workers in the Tae Kwang Vina factory with skin or breathing problems had not been transferred to departments free of chemicals and that more than half the workers who dealt with dangerous chemicals did not wear protective masks or gloves.⁽⁸²⁾ The ESPN documentary, "Outside the Lines", had ample footage of workers coming into direct skin contact with highly toxic chemicals in the same factory. And according to the interviews done by HKCIC & AMRC, 80% of the workers said they did not 'need' any safety equipment or protection for their jobs.⁽⁸³⁾ Which is either due to ignorance and carelessness of the workers or due to ignorance and a lack of information and protection provision of the management. In either case it is managements responsibility to provide the workers with information about the chemicals they are working with and provide them the protection while working with the chemicals. It is Nike's responsibility to make sure its subcontractors provide this information and protection. Especially because Nike has a Code of Conduct which empasizes this. But since the factories employ largely young girls who are considered "old" and leave by their mid-20's, and in the absence of independent trade unions or effective regulation by the authorities, there are few incentives to employers to care for their workforce, and a large profit incentive to cut corners and the costs involved in providing adequate safequards for health and safety.⁽⁸⁴⁾

4.1 Demands of NGO's and unions

The main aim that the variety of organisations protesting against Nike have is that Nike recognises (and acts on) its responsibilities to workers for minimum standards of wages, working time and working conditions with an observance of all of the core standards of the International Labour Organisation⁽⁸⁵⁾ and that these responsibilities extend to all workers, whether or not they are employees⁽⁸⁶⁾. And more specific, that: employment is freely chosen ⁽⁸⁷⁾, there is no discrimination in employment⁽⁸⁸⁾, child labour is not used⁽⁸⁹⁾, freedom of association and the right to collective bargaining are respected⁽⁹⁰⁾, living wages are paid⁽⁹¹⁾, hours of work are not excessive⁽⁹²⁾, working conditions are decent⁽⁹³⁾ and the employment relationship is established⁽⁹⁴⁾.

In order to make sure that the above minimum standards are respected by the subcontractors, and to make sure that Nike takes it's responsibility serious, a system of independent monitoring should be established. A system in which Nike permits inspection at any time of their workplaces and operations by approved⁽⁹⁵⁾ inspectors. So far, most companies have resisted efforts to involve independent organisations in verifying compliance by suppliers with company codes of conduct. Trade unions believe this is one of the main weaknesses of current codes of conduct in that, by taking responsibility for monitoring its own code, the company acts as both judge and jury.⁽⁹⁶⁾ &⁽⁹⁷⁾

Year after year journalists have publicized Nike's overseas labor practices. In virtually every case the company claims the problems are "exceptions." But as shown before in this file, one example after another is mentioned. One exception after another? March, last year Thuyen Nguyen, released his own devastating report on Nike producing factories in Vietnam. Nike responded that the problems had been corrected. Later in the year the leaked report from Ernst & Young, repudiated Nike's claim. And last Febuary, ESPN's documentary, confirmed that in the same plant many of the same problems continued.

This April Nike said in a statement, "A growing body of data suggests our manufacturing practices will withstand the scrutiny of any objective body evaluating our code of conduct and workplace standards."⁽⁹⁸⁾
Does this mean, perhaps, things are changing? At the annual shareholder meeting on September 16, 1996, Nike still voted down a shareholder resolution submitted by the United Methodist Church Health and Pension Fund, asking Nike to allow independent monitoring of overseas factories by "responsible non-governmental groups".⁽⁹⁹⁾ But today, Nike would be in favour of such a resolution? Last January, Nike did not want to disclose the audit results of Ernst & Young, but Nike would now be willing to share future researches with its human rights and union critics?

Nike already says to have an independent monitor in the accounting firm of Ernst & Young, who are said to conduct unannounced audits at Nike's subcontracting factories. However several NGO's have commented on the findings and research methodes of Youngs GoodWorks report and on the fact that Nike did not make Ernst & Young's January report on the Vietnamese Tae Kwang Vina factory public, until after it was leaked to the press.

4.2 Nike: Ernst & Young, TRAC report

November 1997, TRAC, the Transnational Resource and Action Center released the first audit to be made public of labour and safety conditions in a factory producing for Nike. This report, which Nike's accounting firm Ernst & Young, produced in January of that year, was a confidential assessment of the Tae Kwang Vina plant, a factory which produces sportshoes exclusively for Nike in Vietnam ⁽¹⁰⁰⁾. Only after the Ernst & Youngs report had leaked through TRAC to the press Nike made the report public. In an analysis and critique of this audit⁽¹⁰¹⁾, Dara O'Rourke⁽¹⁰²⁾ came to some striking conclusions. Although Ernst & Young found the Nike subcontractor in violation of a number of Vietnamese labour and environmental laws the conclusion of their report was nevertheless that the factory was in compliance with the Nike Code of Conduct⁽¹⁰³⁾.

An issue raised by mainy NGO's is the alleged independece of research performed by auditores like Ernst & Young. As is stated in the report by Ernst & Young⁽¹⁰⁴⁾ "the procedures we have performed were those that you [Nike] specifically instructed us to perform. Accordingly, we make no comment as to the sufficiency of these procedures for your purposes". O'Rourke concludes that from this statement it becomes clear that Ernst & Young did not perform an "independent" audit, but followed Nike's instruction. Further Ernst & Young did spent approximately one week in the factory and relied largely on management information about working conditions, organisational practices, and wages to write their report⁽¹⁰⁵⁾. Information on workers perceptions and attitudes came from a survey of 50 employees "randomly selected...from the payroll register"⁽¹⁰⁶⁾.
O'Rourke has visited the factory 3 times, interviewd workers away from the factory, and came to different conclusions (see appendix) then Ernst & Young. O'Rourke therefore concludes it's assessment of the report that "The Ernst & Young audit also presents a strong argument that accounting firms retained by manufacturers are not the appropriate organizations to be conducting audits of labor and environmental conditions. Accounting firms such as Ernst & Young simply do not have the training, independence, or the trust of workers, to perform comprehensive, unbiased audits of working conditions"⁽¹⁰⁷⁾.

After the report became publicised Nike claimed it had immediately fixed the problems in the factory.⁽¹⁰⁸⁾ Nike officials claimed that overtime was slashed, safety and ventialtion had improved and the use of toxic chemicals had reduced. Dara O'Rourke however said that the workers reported that not much had changed since January⁽¹⁰⁹⁾.

4.3. Nike: Young/GoodWorks

In June 1997, Andrew Young published his monitoring report after inspecting 12 Asian suppliers of Nike shoes. His overal finding was that "Nike is doing a good job in the application of its Code of Conduct. But Nike can and should do better".⁽¹¹⁰⁾ Nike presented the report to the press with great fanfare.

Thuyen Nguyen's comment on the GoodWorks report is that "the problems with Nike shoe factories in Vietnam, Indonesia and China were not child labor but poverty level wage, excessive forced overtime, minimum wage violation, corporal punishment, and militaristic tactics to discipline workers. Andrew Young's report did not address any of these issues. Ambassador Young spent 3 days in vietnam, spending an average 3-4 hours in each factory using Nike interpreters. How is he expect to see, to hear or even to access the situation?"⁽¹¹¹⁾

In a meeting with the staff of HKCIC & AMRC, Young admitted the limitations of his discussions with the workers. He failed to admit these limitations, however in his report. HKCIC & AMRC authors agree with Thuyen Nguyen that Young did not spend enough time to come to eleborate conclusions. They add to the critisism on Young's report that, discussions with workers were all conducted on the factory premises and translated by Nike interpreters. Nike's spokesman, Veda Manager, says on this matter"We regularly provide translation for government officials and the media who visit" and "By any standard those were acceptable translators." According to Stephen Glass, Young hiering Nike translators is definately not acceptable to any standard. "In 1980, the International Law Association established the Belgrade Minimal Rules, to set common rules for the inspection of human rights conditions around the world. Rule Number 10, which most human rights groups consider essential, stipulates that analysts should provide all of their own experts. Diane Orentlicher, an international law professor at American University and author of Bearing Witness: The Art and Science of Human Rights Fact-Finding, says that rule certainly applies to translators: "Don't even worry about the Belgrade Rules, doesn't it just violate common sense?" she said. "How can you speak freely when your employer is listening or someone who might talk to the employer is literally in the room?"⁽¹¹²⁾

On top of the translatorsYoung was introduced by the factory management, which did not result to conditions under which the workers would "feel comfortable to share their true feelings".⁽¹¹³⁾ Apong Herlina, the director of the labor division of the Jakarta Legal Aid Institute underlines that the interviews were conducted with factory management present and ads that management chose which workers would be interviewed. She was also told by employees that managers gave them a "script" of items to tell the auditors, and they also say they have not been told who Ernst & Young is, except for "someone from the United States."⁽¹¹⁴⁾

HKCIC & AMRC continue that Young also failed to investigate wheter Nike shoes are being made in dangerous "three-in-on buildings"⁽¹¹⁵⁾. These factories are illegal because they are dangerous fire hazards. And that Young avoides the issue of wages, "saying that it was beyound the 'technical capacity' of his small company and that it was 'not reasonable' to ask any one particular US company to pay US wage levels abroad. Meaningful wage reform, he said, can only be achieved 'through national law or international standards'." ⁽¹¹⁶⁾ Young is distorting the arguments raised by Nike's critics. The critics are not calling on the company to pay US wages to its Asian workers, but to simply pay a living wage for the country in which they live. This is obviously significantly below the US wage, but also usually above the minimum wage as set by local governments. Nike does not admit that it has a responsiblity to pay a living wage, but it does say in its Code that workers should earn at least the local minimum wage. Young's decision not to consider questions about whether Nike pays its workers minimum wage also seems extraordinary, after all, since it is the labor activists' primary complaint. While the human rights groups have filed scattered reports of worker abuse, activists say nearly all of their complaints are that Nike is not paying the local minimum wage. Nike denies that it is breaking the law⁽¹¹⁷⁾ and Young does not examine whether laws regarding minimum wage and overtime pay were being respected.⁽¹¹⁸⁾

Furthermore Young does not mention the forced overtime that, according to NGO's, is ever so present in Nike subcontracting factories. Nor the fact that Nike's Code of Conduct and several national Law's on labour are being violated at Nike factories when it concerns the maximum amount of hours worked per week.⁽¹¹⁹⁾

On the fact that Young is silent about the use of hazardous chemicals, the only publicised Ernst & Young report⁽¹²⁰⁾ gives a clear picture of the situation in the Tae Kwan Vina factory, one of the newer factories Nike is using in Vietnam. As Young states he had access to the reports of Ernst & Young it is quite remarkable that he has nothing to say on the subject of hazardous chemicals in his report. Altogether not a report to be proud of or at least not to make public with as much fanfare as Nike did.

4.4 Nike: Bussiness school report

At the end of 1997⁽¹²¹⁾ Nike released a study by students at the Darmouth college into the wages of Nike workers in Indonesia and Vietnam and their expenditures. The conclusion of the study, communicated by Nike⁽¹²²⁾, was that "Nike contract workers in both countries consistently earn wages at or above government mandated minimum wage levels". Specifically remarkable was that the study found that a lot of the Nike workers earned enough money to actually have a discretionary income after paying for necessities.

Some of Nike critics reanalysed the report's data and came on the basis of this material to other conclusions. Dara O'Rourke⁽¹²³⁾ found that the data in the appendices showed a different picture on the wage level then the Dartmouth report concluded; in the 2 factories that were being researched in Vietnam, Sam Yang and Chang Shin, the workers were being paid below the local minimum wage.⁽¹²⁴⁾ On account of the savings the data in the appendices shows that in the Sam Yang factory only 18 of the 51 workers reported any savings whereas in Chang Sin none of the workers reported any savings at all.⁽¹²⁵⁾

The Dartmouth researchers assume that the current living conditions by Nike factory workers i.e. sharing one room with 5 other workers is appropriate. According to Thuyen Nguyen the students should have considered the factors leading to why these women are sharing a room. Maybe because the wages they received are not high enough for them to afford decent housing? Another assumption that is made in the Dartmouth study is that Nike factories are located in rural areas of Vietnam. But the Dong Nai, Bien Hoa city and Cu Chi economies are export processing zones, linked with Ho Chi Minh City. Which has caused prices in housing, food, and services to go up drastically in these areas. Using figures from rural Vietnam to compare wages received from these Nike factory workers is misleading.⁽¹²⁶⁾

Nike's claims to have retained the services of "independent world-respected auditors" have proven to be questionable. According to several NGO's the auditors hired by Nike to monitor its Code of Conduct are not only not independent. The auditors also use questionable research methods, of which Nike only makes the results public that do not harm its reputation. NGO's therefor press Nike to give permission to truly independent auditors to monitor the labour practices in its Asian subcontracting factories. Nike's other claim that the company is "the only buyer to require full cash minimum wage" have proven false as well. In factories in China, Indonesia and Vietnam, several workers did not get the local minimumwage. And Nike's statement that the minimum wage is a livingwage, because its subcontracting workers can spend portions of their sallary on "jewelry, watches, even radios and televisions" is refuted by reports of AMRC, Thuyen Nguyen, Jeff Ballenger and other human rights activists. In Vietnam three simple meals kost more than a day's pay at a Nike subcontractor and in Indonesia, the recent inflation, leaves 'Nike' workers with only 70 cents per day, instead of the $2,- they earned befor the inflation. While other US employers have chosen to continue paying their Indonesian workers at previous US-dollar rates, Nike has not made any such overture. Instead Nike is concerned that Indonesia could be reaching a point where it's pricing itself out of the market.

In 1997 Nike ads the right of free association and collective bargaining to its Code of Conduct. Unfortunately, the Young One police violence against the protesting workers, does not show, compliance with the Code. Neither does the dismissal of actionleaders.

Nike also claims its "corporate policy" is to keep orders at or below the equivalent of 48 hours per week in order "to require contractors to cap mandatory overtime at 60 hours per week". This is not at all credible, looking at the overwhelming amount of 'Nike' workers working between 60 and 84 hours per week. The abuse of the Korean, Taiwanese and Chinese management towards the Vietnamese, Indonesian, Bengalese and Chinese workers is outrageous. As Vietnam Labor Watch and the ESPN documentary show, this, aclaimed "incidental" abuse is stil very much present in 'Nike's' factories. That ESPN could film abuse, even when the managers had been alerted the day before that ESPN would be filming, shows how common abuse is in the subcontracting factories.

Ernst & Young's report on the poor health and safety meassures taken in the factory examined, and Nike's reluctancy to make this aspect of the audit public show little respect of Nike's Code of Conduct. The fact that the workers use chemicals that exceed legal standards by 177 times, while wearing cotton masks that do not protect them sufficiently is a big offence of ILO conventions, national laws and, again, Nike's Code it self.

While rights promised in Nike's Code of Conduct often mirror the rights activists are calling for, there seems to be a wide gulf between the codes and the reality of conditions in the factories. Moreover, Nike's oversight of these conditions too often falls short of its promises.

• - Jeff Ballinger (1996), Press for Change, februari 1996.
• - Business Week, 12 May 1997.
• - Campaign for Labor Rights (1998), ESPN Exposes Nike Abuses in Vietnam, e-mail, 8 April 1998.
• - Campaign for Labor Rights (1998), Nike sued over sweatshopconditions, e-mail, 20 April 1998.
• - CCC (1998), The Clean Clothes Campaign: Campaigning to improve the working conditions in the garment industry worldwide, Clean Clothes Campaign, Amsterdam, 1998.
• - Tim Connor (1998), Unfair Dismissal at Nike Sub-contractor in the Philippines, e-mail, 14 Febuary 1998.
• - Bob Egelko (1998), Nike Sued Under Californian False-Ad Law, The Associated Press, San Francisco, e-mail, 20 April 1998.
• - Ernst & Young (1997), Environmental and Labor Practice Audit of the Tae Kwang Vina Industrial Ltd. Co., Vietnam., January 1997.
• - Duncan Green (1997), Just How Clean Are Your Shoes: Report on the Global Shoe Trade, CAFOD, London, 1997.
• - Stephen Glass (1997), The Young and the Feckless, The NEW REPUBLIC Magazine, August 1997.
• - Gerard Greenfield (1998), A Tale of Two Subcontractors: Samyang and Yue Yuen in Vietnam, Asia Monitor Resource Center Ltd., e-mail, 19 March 1998.
• - Steven Greenhouse (1997), Nike shoe plant in Vietnam is called unsafe for workers, New York Times, New York, 8 November 1997.
• - Peter Hancock (1996), Nike's Satanic Factories in West Java (Indonesia), Centre for Development Studies, Edith Cowan University, Western Australia, 1996.
• - Peter Hancock (1998), e-mail, 25 January 1998.
• - HKCIC & AMRC, Working Conditions in the Sports Shoe Industry in China (1997), Hong Kong Christian Industrial Committee & Asia Monitor Resource Center Ltd., 1997.
• - IRRC (1998), The Sweatshop Quandary: Corporate Responsibility on the Global Frontier, Investor Responsibility Reasearch Center, Washington, 1998.
• - LBH YLBHI PMK & INFID (1996), Executive summary outline impact study on nike 1996, Jakarta Legal Aid, Indonesian Legal Aid Foundation, Urban Community Mission & International NGO's Forum for Indonesian Development, 1996.
• - Nike (1998), www.nikeworkers.com
• - Dara O'Rourke (1997), Smoked from a Hired Gun: a critique of Nike's labor and environmental auditing in Vietnam as performed by Ernst & Young, Transnational Resource and Action Center, San Francisco, November 1997.
• - Thuyen Nguyen (1997), Nike Labor Practices in Vietnam, Vietnam Labor Watch, New York, 1997.
• - Thuyen Nguyen (1997), Nike Workers on Strike, e-mail, 23 April 1997
• - Thuyen Nguyen (1997), Workers win pay rise at Nike plant in Indonesia, e-mail, 23 April 1997.
• - Thuyen Nguyen (1997), Young Gives Nike Good Review, Vietnam Labor Watch, e-mail, 26 June 1997.
• - Thuyen Nguyen (1997), Comments on the "Dartmouth" Nike study, e-mail, 8 December 1997.
• - Reuter, AP, 28 April 1997.
• - Mike Rhodes (1997), Nike workers attacked in Bangladesh, e-mail, 3 Augustus 1997.
• - Mechtild Rosier (1997), producers of sportswear: company profiles of nike reebok adidas puma, centre for research on multinational corporations, Amsterdam, 1997.
• - Marijke Smit (1994), The Nike Way: Big through Subcontracting in Asia, centre for research on multinational corporations, Amsterdam, 1994.
• - J.B. Strasser and Laurie Becklund (1991), Swoosh: The Unauthorized Story of Nike and the Men Who Played There, Harper Collins Publishers, New York, 1993.
• - U.S. News & World Report (1997), 22 September 1997.
• - Andrew Young (1997), The Nike Code of Conduct: A Report on the Conditions in International Manufacturing Facilities for Nike Inc., GoodWorks International, 1997.
• - Max White (1997), Ernst & Young report released by TRAC, e-mail, 20 November 1997.
• - Max White (1998), Nike debates moving production from Asia, e-mail, 29 January 1998.
• - Max White (1998), Nike news from Oregon, e-mail, 15 April 1998.

• Nike's Code of Conduct 1997
• NIKE Inc. was founded on a handshake.
• Implicit in that act was the determination that we would build our business with all of our partners based on trust, teamwork, honesty and mutual respect. We expect all of our business partners to operate on the same principles.
• At the core of the Nike corporate ethic is the belief that we are a company of many different kinds of people, appreciating individual diversity, and dedicated to equal opportunity for each individual.
• Nike designs, manufactures and markets products for sports and fitness consumers. At every step in that process, we are driven to do not only what is required, but what is expected of a leader. We expect our business partners to do the same. Specifically, Nike seeks partners that share our commitment to the promotion of best practices and continuous improvement in:
• Occupational health and safety, compensation, hours of work and benefits.
• Minimizing our impact on the environment.
• Management practices that recognize the dignity of the individual, the rights of free association and collective bargaining, and the right to a workplace free of harassment, abuse or corporal punishment.
• Minimizing our impact on the environment. The principle that decisions on hiring, salary, benefits, advancement, termination or retirement are based solely on the ability of an individual to do the job.
• The principle that decisions on hiring, salary, benefits, advancement, termination or retirement are based solely on the ability of an individual to do the job.
• Wherever Nike operates around the globe, we are guided by this Code of Conduct. We bind our business partners to these principles. While these principles establish the spirit of our partnerships, we also bind these partners to specific standards of conduct. These are set forth below:
• Forced Labor (Contractor) certifies that it does not use any forced labor ­ prison, indentured, bonded or otherwise.
• Child Labor (Contractor) certifies it does not employ any person under the minimum age established by local law, or the age at which compulsory schooling has ended, whichever is greater, but in no case under the age of 14.
• Compensation (Contractor) certifies that it pays at least the minimum total compensation required by local law, including all mandated wages, allowances and benefits.
• Benefits (Contractor) certifies that it complies with all provisions for legally mandated benefits, including but not limited to housing; meals; transportation and other allowances; health care; child care; sick leave; emergency leave; pregnancy and menstrual leave; vacation, religious, bereavement and holiday leave; and contributions for social security, life, health, worker's compensation and other insurance.
• Hours of Work/Overtime (Contractor) certifies that it complies with legally mandated work hours; uses overtime only when employees are fully compensated according to local law; informs the employee at the time of hiring if mandatory overtime is a condition of employment; and, on a regularly scheduled basis, provides one day off in seven, and requires no more than 60 hours of work per week, or complies with local limits if they are lower.
• Health and Safety (Contractor) certifies that it has written health and safety guidelines, including those applying to employee residential facilities, where applicable; and that it has agreed in writing to comply with Nike's factory/vendor health and safety standards.
• Environment (Contractor) certifies that it complies with applicable country environmental regulations; and that it has agreed in writing to comply with Nike's specific vendor/factory environmental policies and procedures, which are based on the concept of continuous improvement in processes and programs to reduce the impact on the environment.
• Documentation and Inspection (Contractor) agrees to maintain on file such documentation as may be needed to demonstrate compliance with this Code of Conduct, and further agrees to make these documents available for Nike or its designated auditor's inspection upon request.

EXECUTIVE SUMMARY

The Ernst & Young Audit

• *A confidential Ernst & Young audit of labor and environmental conditions inside a Nike factory in Vietnam was recently leaked to the Transnational Resource & Action Center (TRAC).
• *This is the first time that an accounting firm's labor and environmental audit of any apparel company has ever been made public.
• *The question of whether firms such as Ernst & Young are competent to monitor the shoe and garment industry is currently under discussion by the White House Apparel Industry Partnership. *An examination of the Ernst & Young audit raises serious questions about the legitimacy and competence of accounting firms' as independent monitors of labor and environmental issues. *TRAC is also releasing the first photos taken independently inside a Nike factory in Vietnam.
• *The Ernst & Young audit also sheds light on, and raises questions about the findings of Andrew Young, the former UN Ambassador hired to evaluate Nike's "Code of Conduct."

Ernst & Young on the Conditions inside this Nike Factory

• *The Ernst & Young report, which Andrew Young claimed to have access to, shows that Nike's "Code of Conduct," even when followed, allows dangerous working conditions to persist in its plants.
• *Although flawed in a number of ways, the audit notes continuing violations of labor laws on maximum working hours, unprotected chemical exposures, poor treatment of workers, and management control of the trade union.
• *Among the factory's 9,200 workers who produce 400,000 pairs of mid- to high-end Nike shoes per month, the audit reports high levels of respiratory illnesses in sections with high chemical use.
• *The audit determined that even though Tae Kwang Vina Company (the subcontractor in question) violates Vietnamese labor and environmental laws, it is at the same time in compliance with Nike's "Code of Conduct.
• *Tae Kwang Vina is reportedly the most technically advanced of Nike's subcontractors in Vietnam.

TRAC's Findings on the Conditions inside this Nike Factory

Confidential interviews with employees outside of the factory provided information about numerous violations of Nike's Code of Conduct that were not discovered by the Ernst & Young audit, including:

• *Violations of Vietnamese labor laws on pay;
• *Violations of Vietnamese labor laws on maximum overtime hours;
• *Forced overtime;
• *Strike breaking; and,
• *Physical and verbal abuse of workers.

Shortcomings of the Ernst & Young Audit

• *The audit is missing information regarding occupational health and safety, environment, and general working conditions.
• *The methodology employed by Ernst & Young ignores most accepted standards of labor and environmental auditing. For example, the audit involved no monitoring or sampling of air quality in the factory.
• *Most of the data came directly from management sources.
• *The audit overlooks many of the key issues of concern in Nike plants around Asia, including: physical and verbal abuse of workers, sexual harassment, repercussions for attempts to organize, and contract violations.

Relevance to the White House Task Force

• *This audit highlights how important issues can be covered up or ignored in "independent monitoring." Some form of public disclosure is critical to insuring the quality of auditing.
• *The audit provides a strong argument against using accounting firms to conduct labor and environmental audits.
• *The poor quality of this audit argues for truly independent monitoring of Nike plants. Labor, religious, or human rights organizations that pass an accreditation program would be more appropriate auditors. Notes

  1. 1 Nike (1998), website

  2. 2 Max White 15 April 1998, e-mail

  3. 3 Nike (1998), website

  4. 4 See appendix.

  5. 5 A local church related labour service organisation advocating labour rights in Hong Kong and China for the last 30 years.

  6. 6 Nike (1998), website

  7. ⁷ IRRC (1998)

  8. ⁸ Mechtild Rosier (1997)

  9. ⁹ U.S. News & World Report (1997)

  10. ¹⁰ Mechtild Rosier (1997)

  11. ¹¹ In this period the company was called Blue Ribbon.(Strasser & Becklund [1993])

  12. ¹² Strasser & Becklund (1991)

  13. ¹³ Duncan Green (1997)

  14. ¹⁴ IRRC (1998)

  15. ¹⁵ This figure was before the inflation in Indonesia started.

  16. ¹⁶ Reuters (1997)

  17. ¹⁷ IRRC (1998)

  18. ¹⁸ Max White, 29 January 1998, e-mail

  19. 19 HKCIC & AMRC (1997)

  20. ²⁰ Peter Hancock (1996)

  21. ²¹ Peter Hancock (1996)

  22. ²² Duncan Green (1997)

  23. 23 Marijke Smit (1994)

  24. ²⁴ HKCIC & AMRC (1997)

  25. ²⁵ HKCIC & AMRC (1997)

  26. ²⁶ Nike officials made this clear in a meeting members of the Clean Clothes Campaign Netherlands had in Hilversum (Netherlands), September 1997, and Nike claims it on its website.

  27. ²⁷ Ernst & Young (1997)

  28. ²⁸ This includes overtime work.

  29. 29 IRRC (1998)

  30. ³⁰ Compare Nike Code of Conduct 1992 and 1997, see appendix.

  31. 31 IRRC (1998)

  32. ³² 20 April 1998, see Bob Egelko (1998), e-mail

  33. 33 See appendix.

  34. ³⁴ Bob Egelko (1998), e-mail

  35. ³⁵ Thuyen Nguyen (1997), Nike Labor Practices in Vietnam

  36. 36 Nike (1998), website

  37. 37 Campaign for LaborRights, 8 april 1998, e-mail

  38. ³⁸ Duncan Green (1997)

  39. ³⁹ Max White, 15 April 1998, e-mail

  40. ⁴⁰ Campaign for Labor Rights, 8 April 1998, e-mail

  41. ⁴¹ Campaign for Labor Rights, 8 April 1998, e-mail

  42. 42 HKCIC & AMRC (1997)

  43. 43 HKCIC & AMRC (1997)

  44. 44 Nike (1998), website

  45. ⁴⁵ LBH YLBHI PMK & INFID (1996)

  46. ⁴⁶ This strike had a precedent: August 1995, a strike with 9.000 Nike workers participating was held at the Pou Chen factory in Indonesia. Reason: the management refused to pay the new minimum wage. (Jeff Ballinger [1996]).

  47. ⁴⁷ Thuyen Nguyen (1997), Nike Workers on Strike/Workers win pay rise at Nike plant in Indonesia, 23 April 1997, e-mails

  48. 48 HKCIC & AMRC (1997)

  49. ⁴⁹ HKCIC & AMRC (1997)

  50. ⁵⁰ HKCIC & AMRC (1997)

  51. ⁵¹ LBH YLBHI PMK & INFID (1996)

  52. ⁵² Peter Hancock (1996)

  53. 53 HKCIC & AMRC (1997)

  54. ⁵⁴ Duncan Green (1997)

  55. 55 Nike (1998), website

  56. ⁵⁶ Mike Rhodes (1997)

  57. ⁵⁷ Peter Hancock (1996)

  58. ⁵⁸ These 49 hours include the Chinese 9 hours overtime limit per week. (HKCIC & AMRC [1997])

  59. ⁵⁹ HKCIC & AMRC (1997)

  60. ⁶⁰ According to Indonesian labour laws.

  61. ⁶¹ LBH YLBHI PMK & INFID (1996)

  62. ⁶² HKCIC & AMRC (1997)

  63. ⁶³ Duncan Green (1997)

  64. ⁶⁴ HKCIC & AMRC (1997)

  65. ⁶⁵ LBH YLBHI PMK & INFID (1996)

  66. ⁶⁶ Yue Yuen is worlds biggest shoe manufacturing company. It has factories in China, Vietnam and Indonesia. This Yue Yuen factory in Vietnam should not be confused with the Yue Yuen factory in China.

  67. 67 Production started in 1995. (Gerard Greenfield, [1998])

  68. 68 Gerard Greenfield (1998)

  69. 69 HKCIC & AMRC (1997)

  70. ⁷⁰ Tim Connor, 14 Febuary 1998, e-mail

  71. ⁷¹ Thuyen Nguyen (1997), Nike Labor Practices in Vietnam

  72. 72 On page thirty-four of Andrew Youngs GoodWorks report, appears a picture (taken by Young) of several female workers, many with their arms crossed, sitting at a table. The caption says that these are the women who were "forced to run around Vietnamese factory." Although the event was widely condemned in the media and the supervisor who ordered the 'run' was charched, Young said in an interview with The Atlanta Journal and Constitution earlier this summer, that the women were "laughing and joking about it" and were "pretty easy with the experience." Young added that he felt most sorry for the supervisor, who did not speak Vietnamese and who was facing court charges. (Stephen Glass [1997])

  73. ⁷³ Campaign for Labor Rights, 8 April 1998, e-mail

  74. ⁷⁴ For minor offences the fines were Rmb 30 ($3,61), while these Chinese workers earn 10 cents an hour, work 12 hours a day, and thus earn aproximately $1,20 a day. (HKCIC & AMRC [1997])

  75. ⁷⁵ For major offences the fines were Rmb 90 ($10,84), while these Chinese workers earn 10 cents an hour, work 12 hours a day, and thus earn aproximately $1,20 a day. (HKCIC & AMRC [1997])

  76. ⁷⁶ HKCIC & AMRC (1997)

  77. ⁷⁷ Thuyen Nguyen (1997), Nike Labor Practices in Vietnam

  78. ⁷⁸ HKCIC & AMRC (1997)

  79. ⁷⁹ LBH YLBHI PMK & INFID (1996)

  80. 80 Ernst & Young (1997)

  81. ⁸¹ Ernst & Young (1997)

  82. ⁸² Ernst & Young (1997)

  83. ⁸³ HKCIC & AMRC (1997)

  84. ⁸⁴ Duncan Green (1997)

  85. ⁸⁵ Including Conventions 29, 87, 98, 100, 105, 111 and 138.

  86. ⁸⁶ Wheter or not they are full employment workers or contract workers.

  87. ⁸⁷ There shall be no use of forced, including bonded or prison, labour (ILO Conventions 29 and 105). Nor shall workers be required to lodge "deposits" or their identity papers with their employer. (European CCC Code of Labour Practices for the Apparel Industry Including Sportswear)

  88. ⁸⁸ Equality of opportunity and treatment regardless of race, colour, sex, religion, political opinion, nationality, social origin or other distinguishing characteristic shall be provided (ILO conventions 100 and 111).

  89. ⁸⁹ There shall be no use of child labour. Only workers above the age of 15 years or above the compulsory school-leaving age shall be engaged (ILO Convention 138). Adequate transitional economic assistance and appropriate educational opportunities shall be provided to any replaced child workers. (European CCC Code of Labour Practices for the Apparel Industry Including Sportswear)

  90. ⁹⁰ The right of all workers to form and join trade unions and to bargain collectively shall be recognised (ILO Conventions 87 and 98). Workers' representatives shall not be the subject of discrimination and shall have access to all workplaces necessary to enable them to carry out their representation functions (ILO Convention 135 and Recommendation 143). Employers shall adopt a positive approach towards the activities of trade unions and an open attitude towards their organisational activities. (European CCC Code of Labour Practices for the Apparel Industry Including Sportswear)

  91. ⁹¹ Wages and benefits paid for a standard working week shall meet at least legal or industry minimum standards and always be sufficient to meet basic needs of workers and their families and to provide some discretionary income.

  Deductions from wages for disciplinary measures shall not be permitted nor shall any deductions from wages not provided for by national law be permitted without the expressed permission of the worker concerned. All workers shall be provided with written and understandable information about the conditions in respect of wages before they enter employment and of the particulars of their wages for the pay period concerned each time that they are paid. (European CCC Code of Labour Practices for the Apparel Industry Including Sportswear)

  92. ⁹² Hours of work shall comply with applicable laws and industry standards. In any event, workers shall not on a regular basis be required to work in excess of 48 hours per week and shall be provided with at least one day off for every 7 day period. Overtime shall be voluntary, shall not exceed 12 hours per week, shall not be demanded on a regular basis and shall always be compensated at a premium rate. (European CCC code of conduct) Those workers paid at piece rate should be given an amount of work that does not violate the 40 hours per week. Therefore, piece-rate should be able to complete their quota within the 48 hours week, and receive a living wage for this time. (European CCC Code of Labour Practices for the Apparel Industry Including Sportswear)

  93. ⁹³ A safe and hygienic working environment shall be provided, and best occupational health and safety practice shall be promoted, bearing in mind the prevailing knowledge of the industry and of any specific hazards. Physical abuse, threats of physical abuse, unusual punishments or discipline, sexual and other harassment, and intimidation by the employer is strictly prohibited. (European CCC Code of Labour Practices for the Apparel Industry Including Sportswear)

  94. ⁹⁴ Obligations to employees under labour or social security laws and regulations arising from the regular employment relationship shall not be avoided through the use of labour-only contracting arrangements, or through apprenticeship schemes where there is no real intent to impart skills or provide regular employment. Younger workers shall be given the opportunity to participate in education and training programmes. (European CCC Code of Labour Practices for the Apparel Industry Including Sportswear)

  95. ⁹⁵ Aproved by Nike and the involved NGO's.

  96. 96 One notable exception is happening in the Central American republic of El Salvador, where a group of local organisations monitors conditions in a factory which supplies The Gap clothing retailer. This arrangement, which so far only applies to a single factory among The Gap's many suppliers world-wide, was set up following publicity over abusive working conditions at the factory. Rather than curtailing its contract with the factory, activists persuaded The Gap to engage in improve conditons ther and in setting up independent monitoring procedures. The experiment is seen by the ILO as "a major precedent which could become standard practice in the future."

  97. 97 Duncan Green (1997)

  98. ⁹⁸ Bob Egelko (1998)

  99. ⁹⁹ Max White, 15 April 1998, e-mail

  100. ¹⁰⁰ This is the same factory that was visited 5 months after the release of the report by ESPN's "Outside the Lines", see the part about intimidation of workers.

  101. ¹⁰¹ Dara O'Rourke (1997)

  102. ¹⁰² Dara O'Rourke is a consultant to the United Nations Industrial Development Organization (UNIDO), and has conducted research in over 50 factories in Vietnam. One of them was the Tae Kwang Vina factory, a Nike subcontractor in the Dong Nai province of Vietnam, and the subject of the Ernst and Young audit. Mr. O'Rourke visited this factory three times in 1997. During the visits to the plant, he performed walk-through audits of environmental and working conditions, interviewed management personnel, met with Tae Kwang Vina's managing director, and with representatives of Nike Inc. in Vietnam. He also interviewed workers confidentially outside the factory--something that Ernst and Young failed to do.

  103. ¹⁰³ See the Executive Summary of the report in the appendix.

  104. ¹⁰⁴ Dara O'Rourke (1997)

  105. ¹⁰⁵ They performed no environmental monitoring or air sampling of their own. Occupational health and safety information came entirely from secondary sources (largely Vietnamese government agencies).

  106. ¹⁰⁶ Ernst & Young (1997)

  107. ¹⁰⁷ Dara O'Rourke (1997)

  108. ¹⁰⁸ Max White, 11 November 1997, e-mail

  109. ¹⁰⁹ Steven Greenhouse (1997)

  110. ¹¹⁰ Andrew Young (1997), GoodWorks report

  111. ¹¹¹ Thuyen Nguyen, 25 Juni 1997, e-mail

  112. ¹¹² Stephen Glass (1997)

  113. ¹¹³ HKCIC & AMRC (1997)

  114. ¹¹⁴ IRRC (1998)

  115. ¹¹⁵ "Three-in-one buildings" are factories that have teh factory on the ground floor, the warehouse on the second floor, and the wokers' dormitories on the third floor. Many workers have died in their dormitories when fires break out below them. (HKCIC & AMRC [1997])

  116. ¹¹⁶ HKCIC & AMRC (1997)

  117. ¹¹⁷ Stephen Glass (1997)

  118. ¹¹⁸ HKCIC & AMRC (1997)

  119. ¹¹⁹ See the part about overtime in this file.

  120. ¹²⁰ Which was publicised after it was leaked to the press through the Transnational Resource and Action Center.

  121. ¹²¹ First a summary was released in October 1997, 2 days before an international Nike protest day, 2 months later the whole study was released.

  122. ¹²² In a letter accompanying the study, written by Keith Peters, Communications Director for Nike.

  123. ¹²³ Dara O'Rourke (1997)

  124. ¹²⁴ Twelve workers at Chang Shin were being paid below the local minimum wage of $35 per month, 8 were paid $25,86. In Sam Yang 7 of the 11 workers were paid under the local minimum wage of 45$.

  125. ¹²⁵ Another point that O"Rourke and others make on this study is on the methodology. Their critics encompasses; the research team did not assume any bias on the part of the factory management; f.e. wages were reported by the factories, they did not look at any wagestubs (Dara O'Rourke). The factory management selected the workers in Indonesia which were mostly interviewed on factory grounds (Peter Hancock in e-mail of 25 January 1998).

  126. 126 Thuyen Nguyen, 8 December 1997, e-mail.