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What labor standards regarding safety, working conditions, overtime, and the like, should Nike hold foreign factories to: those prevailing in that country or those prevailing in the United States?
The unsuccessfully of labor standards which are child labor, hazardous working conditions, excessive working hours, and poor wages in developing countries are still the major problems. In order to increase company profits, Nike then reduces the cost by having the low labor wages paid. The multinational corporations such as Nike needs to developed code of conduct for their suppliers to make its unidirectional and correctly. The meaning of a code of conduct is the code that provides a guideline of ethical behaviors and values which company uses to follow when faced the problem in a day-to-day work (Locke, 2007). He also states that the code of conduct of Nike requires subcontractors to consider some basic labor, safety standards, and environmental and health. According to Kochan (2007), the codes of conduct do not protect the labor rights or improve working conditions but can limit legal liability and prevent the company reputation only.
According to the case, Nike faced the problem of the low labor standards in foreign factories that are the subcontractors. Nike had become a sweatshop -- symbol of the evils of globalization. The definition of sweatshops is unsafe and unhealthy working conditions including low wages, long hours or work with no overtime pay, health or safety, and child labor (Banfe, 2001). The sweatshops will occur in the factories that have the problems of poor labor standards (Miller, 2006). For example, the company that pays the salaries less than minimum wages and forces employees to work overtime. The sweatshops and low labor standards are the important factors that can impact the economic development (Park-Poaps, 2009). According to Miller (2006), the sweatshops don¿½t help low educated workers in the developing countries from poverty due to the fact that people have less alternative choices in choosing a job. A big American company ¿½ Nike outsources the foreign factories to manufacture their athlete shoes. This will caused the United States has the impact on unemployment rate (Greene, 2007). Due to the fact, huge labor markets are needed to satisfy the demand which increasing continuously (Schwartz, 2000). He also states that the requirement of the huge labor markets will cause the talent is become not important. According to Greene (2007), the salaries are set based on the productivity level. No company can pay a labor wage beyond the productivity level. The reason of poor labor standards in terms of minimum wages and hiring child labor caused Nike¿½s subcontractors to become a sweatshop. The setting of minimum wages should be cancel to deny the problems of the poor labor standards (Greene, 2007). The statistical analysis found that the anti-sweatshops campaign can increase the unskilled labor wages around twenty percent in the footwear factories (Miller, 2006).
Regarding to safety, working conditions, overtime, Nike should hold the conditions with foreign factories which are Indonesia, Vietnam, and China. If Nike persists on prevailing conditions in the United States, there is unessential for Nike to look for outside countries manufacturers. According to Park-Poaps (2009), the research found that the foreign outsourcing firms have impact on the stakeholders and governance structure in terms of the public pressure. Nevertheless, through the pressure that Nike received from many groups of association, the company should find the solution to improve the working conditions or labor standards from the Nike¿½s foreign manufacturers. If Nike can enhance its labor standards, Nike will receive benefits from the public relations rather than putting more effort. In addition, Nike can reduce the cost of developing public relation strategies. According to Park-Poaps (2009) in the recent time, the American companies place importance on corporate public relation in order to answer and perform the public response. The enhancement of labor standards in foreign factories could make Nike has good company¿½s reputation. To avoid the problems of the sweatshops, the improvement of education and a living wage should be done by the government in each country (Greene, 2007). Moreover, the viable systems of labor conditions should be control and restrict by non-governmental association such as non-governmental organizations (NGOs) (Park-Poaps, 2009).
Nike has got a high public pressure from the problem of sweatshop in the foreign subcontractor companies. Therefore, Nike should response to the public by creating the ethical labor management strategies which respect to human rights and also public relation management strategies based on the moral practice (Park-Poaps, 2009). Nike can also establish the codes of ethics in the corporate culture. According to Kantor (2002), the codes of ethic can produce a good effect on corporate social responsibility (CSR). The company that does the corporate social responsibility can create the company reputation in the positive way. Nike should put more effort in decision making when doing business internationally by having the ethical standards in human resource management in supplying company. According to Park-Poaps (2009) the ethical standards of the company can refer to the role of top management that can impact on the company reputations. The managers should present their higher standards as role models to employee in the way they should behave (Kantor, 2002). If Nike practices the better ethical labor standards, the company will receive good corporate image. Moreover, Nike should hold the foreign subcontractors to those prevailing in the United States by having the possible standards in term of working conditions and overtime that protect the basic rights of employees. In the production period, the productivity limitation within a day should not exceed employee strength and also should not hurt the worker¿½s health (Schwartz, 2007).
Regarding to the Nike case, the company could not meet the satisfaction of stakeholder which is the employees. The problem of employees seems to be the influential concern rather than other stakeholders. According to Schwartz (2000), a good company needs to meet the satisfaction of its stakeholders which are customers, shareholders, and employees. He also argued that if the employees lose their jobs, it is the company mistake. The emphasis of stakeholders especially in employees caused the company has more cost adding (Greene, 2007). He also states that many companies try to avoid the cost of labor by changing the ways in doing business. For example, the automated check-out counter in supermarkets and teller bank machines has been found in the developing world. The cost saving is become a major concern at the present time when the economic problems occur. In addition, the technology changing is also the possible factor to reduce the number of workers. Therefore, the change in technology and the cost saving could be the cause of the unemployment in developed countries such as the United States. These factors lead the big company ¿½ Nike needs to use the outsourcing manufacturers in foreign countries to produce their products.
According to Locke (2007), the ways Nike response to the public pressure are that all suppliers need to sign the code of conduct and post within the factories. In the code of conduct, it provides the training and the staff to control all of suppliers. In addition, Nike has approximately one thousand mangers working in those foreign factories to responsible for training Nike¿½s code of conduct and labor practices. Locke also argued that the new approval process of Nike is the three different types of audit which are a basic environmental, safety and health audit, and a more in-depth management and working conditions audit. However, the codes of conduct of Nike seem to be unsuccessful in some countries which the problems of poor wages and inordinate work hours or harassment (Locke, 2007). Hence, Nike should continue to check and evaluate the foreign subcontractor firms. In another way, Nike can use the trusty auditor firms to inspect the accuracy within those manufacturers.
In conclusion, the sweatshops are the major problem of Nike in doing business with foreign subcontractors to manufacturer their products. To eliminate the sweatshops, the related associations or government in those developing countries should come to look after and inspect Nike¿½s subcontractors. The needed of the huge labor markets in the real world can create the obstacle in the working conditions such as a low wages paid, no overtime pay, long-time working, and child labor. On the other hand, the education and a living wage are also important factors that need to concern in order to solve the problem of unskilled workers in developing countries. Moreover, Nike should hold the foreign factories to those prevailing in subcontractor countries ¿½ Vietnam, Indonesia, and China. To improve the labor standards regarding safety, working conditions, overtime, Nike should practice the ethical standards by concern on the human right and basic needs of employees. The managers should act as the role model on the ethical behavior to make the employees to follow the codes of ethic. In addition, the codes of conduct are important for the Nike foreign manufacturers to follow and practice in the correctly way. If Nike¿½s foreign subcontractors can improve the labor standards and working conditions by using the codes of conduct and the codes of ethic, Nike will get the benefit from the public relation in term of company reputation and also avoid public pressure.