2. Nike: Company Profile
Nike produces 90 million pairs of sports shoes every year.
In 1998, revenue increased by 4% to a record $9.6 billion,
after revenue increases of 42% and 36% respectively in the
two preceding years. Nike is still the number one producer
of sports shoes, with Adidas close behind. Nike is not only
the biggest producer of sports shoes, but also spends the
largest amount of money on advertising and promotion. In 1998
the company spent $1.13 billion for this purpose. *4)
Famous sportsmen such as Michael Jordan, Andrew Agassi and
Tiger Woods have their names linked to Nike products and received,
respectively, $45 million, $10 million, and $28 million in
endorsements in 1998. The company designs and produces shoes
for just about every sport. Nike's presence in soccer (being
the world's biggest sport) became stronger after entering
into new partnerships with top European club teams such as
FC Barcelona and Inter-Milan. At the 1998 World Cup, six teams
(Brazil, Holland, Italy, Nigeria, South Korea, and the United
States) competed in kits designed by Nike. In November 1999
Nike negotiated a new contract *5)
with the Dutch soccer association, KNVB, and the Dutch team
will be playing with the swoosh on their shirts until 2006,
for about 10 million guilders a year.
Outline of the industry
North American and Western European companies started to relocate
production to Asia in the mid-1960s, especially to Taiwan
and South Korea. Low levels of education, low employment age,
a lack of alternative employment, and lack of long-term employment
prospects combined with an anti-union climate to create a
low wage labour environment that made Asian countries attractive
to these companies. In the 1970s Taiwan and South Korea became
the world's main sportswear producers. The US-based Nike *6)
started relocating its production in 1976, first to Korea,
and later to Taiwan. By 1980, nearly 90 percent of Nike's
production was done in Korea and Taiwan. But the 1980s presented
a second generation of even lower-wage producers in Asia,
such as Bangladesh, China, Indonesia, Thailand, and Vietnam.*7)
In the beginning of the 90s a large part of Nike's production
moved to these countries.*8)
At the moment, Indonesia is Nike's biggest production centre,
with 17 footwear factories that employ 90,000 workers and
produce about 7 million pairs of shoes each month. *9)
The phrase "at the moment" is appropriate considering
Nike spokesperson Jim Small's comment in 1997 on increases
in the legal minimum wage from $2.26 to $2.47 dollar per day
*10): "...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."*11)
But due to the currency crisis in Asia, Nike's dollar wages
in Indonesia shrank drastically to as low as 50 cents per
day, *12) "pricing Indonesia
back into Nike's market." China is Nike's second largest
centre of production, but expansion plans in China are a priority
for Nike.*13) The possibility
of moving production to Eastern European countries was also
being considered in 1998.
Women have entered the Asian work force in large numbers
since Asia's economic boom began in the 1970s. In general
they earn less than men. Asian Nike subcontractors have been
found to employ a high percentage of women as well. Seventy
and eighty percent, respectively, of the work force of the
Chinese factories Wellco and Yue Yuen, which produce for Nike,
are women aged 18-25 years.*14)
The Feng Tay factory in Banjaran, West Java, has 7,000 workers
producing for Nike, 75% of whom are women. And the Kukje factory
(next door to Feng Tay) employs 5,000 Nike workers, 80% of
whom are women. Many factories hire only young women without
children, laying off women when they get close to marriageable
age. Women who become pregnant usually leave their jobs, and
in some factories are forced to leave by the company.*15)
For example in the Formosa factory in El Salvador women who
apply for a job are required to undergo a pregnancy test .*16)
*4) Nike 1999 website (www.nikebiz.com)
*5)Although the "old" sponsorcontract between Nike and the
KNVB was not expired
*6) In this period the company
was called Blue Ribbon(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)
*7) Ibid.
*8) Duncan Green, "Just How Clean Are Your Shoes: Report on
the Global Shoe Trade", CAFOD, London, 1997
*9) IRRC, "The Sweatshop Quandary: Corporate Responsibility
on the Global Frontier", Investor Responsibility Research
Centre, Washington, 1998
*10) This figure was before the inflation in Indonesia started
*11) Reuter, AP, 28 April 1997
*12) Medea Benjamin "Wages and Living Expenses for Nike workers
in Indonesia, Global Exchange, September 1998
*13) IRRC 1998
*14) HKCIC & AMRC, "Working Conditions in the Sports Shoe
Industry in China", Hong Kong Christian Industrial Committee
& Asia Monitor Resource Center Ltd., 1997
*15) Duncan Green 1997
*16) Formosa-Evergreen, casefile for the Euro 2000 campaign
can be ordered at the clean clothes campaign)
Subcontracting
Nike does not own the factories producing Nike goods. All
production for Nike is contracted out to such locations as
south-east Asia. But Nike has close links with the factories
that manufacture its products. To become a Nike subcontractor,
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 competes with
other factories to obtain Nike orders. Each month, the factory's
performance is assessed by Nike. Licenses may be withdrawn
if something goes wrong.
Nike also assists its subcontractors in finding better production
sites. This often leads to lay-offs 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
chain. Many of the factories producing Nike goods in countries
such as China and Indonesia are South Korean- and Taiwanese-owned.
*17) 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 government statistics, one-third of TVEs violate
official standards on health and safety. Unfortunately, the
multiple levels of sub-contracting are often difficult to
identify, and make the monitoring of labour standards at all
levels of production extremely complex.*18)
In Thailand, for example, the Par Garment company has expanded
its business over the last few years yet reduced its size
and the number of workers. Most of its production is now contracted
out to smaller, neighbouring factories where workers are not
organised and labour rights are not a priority.
Social Responsibility
Nike's 1996 annual report contains almost no information on
Nike's policy on labour standards. This, however, has changed
drastically in the last few years. Today NIKE (like many other
multinational corporations) is under increasing scrutiny to
implement and enforce labour policies and standards. The pressure
is coming from many sides: public interest groups, the media,
governments, shareholders and a multitude of non-governmental
organisations (NGOs) and trade unions. The potential impact
of such pressure on profits has led to increasing concern
on the part of corporations.
NIKE itself is increasingly concerned with improving consumer
opinion of its record on labour issues and has therefore adopted
an extensive programme on corporate responsibility.
In 1992, Nike drafted its first Code of Conduct which banned
the use of forced, prison, or child labour and required business
partners to comply with local laws with respect to wages,
benefits, overtime, child labour, and environmental protection.
Nike subcontractors and suppliers were required to sign the
one-page Code of Conduct.
In 1997 Nike updated its Code of Conduct. In addition to
the points raised in the 1992 code, the 1997 version also
includes: (1) recognition of the right to free association,
collective bargaining, and freedom from corporal punishment;
(2) requiring contractors to certify that they pay the minimum
wage or prevailing industry wage (whichever is higher); and
(3) restricting maximum working hours to 60 per week - overtime
included - unless workers volunteer and sign a consent form.
On 12 May 1998, Phil Knight announced six new initiatives
to improve factory working conditions and increase opportunities
for people who manufacture Nike products. *19)
Based on these initiatives, Nike again amended its Code of
Conduct *20) and now claims
it will sever business relationships with any manufacturer
that refuses to meet these standards or exhibits a pattern
of violations. In the company's 1998 annual report Nike claims
they have terminated business with eight factories in four
countries for not meeting their Code of Conduct requirements.
*17) Marijke Smit, "The Nike Way: Big
through Subcontracting in Asia", Centre for Research on Multinational
Corporations, Amsterdam, 1994
*18) HKCIC & AMRC 1997
*19) In Appendix 2 the 6 labour initiatives
*20) In Appendix 1 the Code of Conduct of January 1999
