Ethical Challenges Faced by Nike

I have chosen to research and discuss Nike as my business organisation and will go into detail about business ethics at Nike and the challenges that they have faced over the past five years. My assignment will describe the ethical challenges faced in detail and how Nike have reacted and adapted their ways to operate more ethically. I will also go into detail the main ethical frameworks that are applicable to Nike and how Nike have implemented these theories.

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Nike is a global company that engages in the development, marketing and sales of various products mainly athletic footwear, apparel, accessories and services. Nike was founded as an importer of Japanese shoes and has now grown to be the world’s largest marketer if athletic footwear. It currently has a global share of approximately 37 percent. Their products are sold worldwide through 22,000 retailers and around more than 160 countries. Most of Nike’s products are manufactured mainly overseas by independent contractors.  In 2017, Nike’s brand value in billion U.S. dollars was 29.6. (Statistacom, 2018)

For more information about Nike as a company and how they operate, take a look at our Nike SWOT Anlaysis.

Nike Ethical Issues

Nike have faced many ethical challenges over the past five years, I will go into detail five challenges that Nike has faced and what steps they have taken to overcome this.

Child Labour

Although Child Labour laws are in place in countries NIKE still choses to overlook this and children as young as 12 years of age are made to work in the factories for long hours. NIKE has taken the steps to abide but the laws set and meet the starting age limit.  Nike has also taken this a step further to not employ anyone under the age of 16 even though the minimum ages in some countries is lower than 16. (Independentcouk, 2017)

Expensive Endorsements

NIKE is continually being targeted my human rights committees but despite this they are able to maintain a high profile due to its celebrity endorsements from celebrities such as Michael Jordan and Tiger Woods. Michael Jordan has been one of the biggest endorser with Air Jordan’s introduced back in 1984. It is reported the he earns around $60 million per year. Ethically this money would more beneficial to the workers that make the shoes to enhance their wages, so they can live better lives and employee enrichment, a wage high enough for workers to maintain a normal standard of living. (Financesonlinecom, 2018)

Low wages

All of Nikes manufacturing is contracted to developing or under-developed countries. These countries wages are considerably lower to those in developed countries, but Nike still fails to employ people at rate that can allow the individual to sustain their basic needs. Nike is thoroughly exploiting cheap labour. Nike has attempted at correcting this problem and employing people at a rate at least equal to the minimum wages prescribed in the country. (Wwwftcom, 2018)

Expensive Products

Nike is known to sell the products are very high prices despite it being common knowledge that their products are manufactured in contracted factories on foreign lands where labour costs are low. Workers in the factories are paid $7 per shoe and the average retail price of NIKE shoe is $66.85 (Q4cdncom, 2018). With the cost of production being significantly lower than the retail price it means that NIKE can generate enormous amounts of profits in sales revenue.

Fainting in Cambodia factories

In 2017, women working in Nike factories in Cambodia suffered from repeated bouts of mass fainting which were linked to the working conditions they were subjected to. The women that collapsed where those that were working 10 hour days, six days a week. These long working weeks caused the women to feel exhausted and hungry in factories that were excessively hot with temperatures exceeding 37C, at these temperatures Nike is expected to install fans or air conditioning. Nike improved oversight of labour practices, and made sure factories had clean air.  (Businessinsidercom, 2018)

Ethics in Business

Ethics are the morals principles that are used as a guide the way a business behaves and operatives. (Business case studies llp, 2018). It involves questions about morality and what is perceived as good or bad or right or wrong.

Ethics can be split into to two main categories which are teleological and deontological. Teleological is an approach that can be referred to as results-oriented ethics, this is when it bases its judgement of consequences or outcomes before deciding on the action, even if an action is bad but it results in a good consequence it can defined as good. Whatever action is chosen it should always result in the most good for the most amount of people. This ethical system put outcomes before actions.

Teleological theories include the egoism and utilitarianism principle. Egoism is the theory based on self-interest. It is the idea that we should act in our own self-interest exclusively.  The utilitarianism theory works on the bases about getting the greatest good for the greatest amount of people. (Britannicacom, 2018)

Deontological is an approach that has to do with one’s duties and obligations. When you use the deontological theory you study the action and not the consequence therefore the end does not justify the mean, when using the deontological theory one should always ask what my duties are and what are my obligations are.

Deontological theories includes the principles of virtue, duties and rights. The principle of virtue is what you should incorporate into your life, traits such as respect and honesty. Principles of duties refers to your moral duty to make ethical decisions and the principle of rights is when a decision is made that respects the rights of the individual. (Britannicacom, 2018)

Ethical Frameworks Applicable to Nike

I will now go into detail how the above-mentioned frameworks apply to the working practices of Nike.

Nike is well known to use athletes to endorse their products such as Tiger Woods, Michael Jordan and Lebron James. According to Michael Jordan’s contract he earns around $60 million per year and labourers are paid low wages. Based on the Utilitarianism principle, this endorsement only benefits Nike and Michael Jordan, other endorsers and shareholders while workers suffer with the low wages that they are paid. It would be more ethical to all parties if the Nike used some of the money that was paid to the endorser and used this to positively impact the employee’s welfare by paying them more and improving work condition. It is unethical for Nike to pay out large amounts to the endorsers whilst their workers welfare is not up to standard.

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Based on the Egoism theory Nike has a right to make decisions based on what is most beneficial to them. In this case Nikes goals is to make as much profit as they can. They have contracted labour out to developing and under-developed countries and ensure that the factories for no earn even an extra that what they are supposed to. This shows that founder Phil Knight is only caring for himself despite his workers being negatively affected.

Based on the Principle of Right Nike are well known to employ children as their labour is cheap. But children have the right to education and shouldn’t be made to work until they are of legal age to do so. Therefore, Nike should refrain from hiring child labour which violates their right to stay and school to get an education. Although Nike get cheap labour allows for them to make high profits, children suffer both physically and psychologically.

Based on the Principle of Duty Nike should be doing the right thing by its labourers. Nike contracts works out countries that pay a lower wage than developed countries and this is to maximise their profits. But not only are the wages low the working conditions are inadequate. It is wrong for Nike’s owner and shareholders to me paid significantly more than the workers. Nike should look to paying workers a rate that can allow the individual to sustain their basic needs. Nike has a duty to do the right thing, even if the right thing to do yields a negative result.

Nike has been known to hide the truth to protect their public image and have employed teams of public relation and legal experts to help with this. Nike face the dilemma that when they have to admit to their mistakes it can impact negatively on them and be costly to the company and this is the reason why they distort or hide the truth. Based on the principle of virtue this does not conform to the ethical standards.  Nike had a law suit filed against them after they were found to be lying about the conditions in the Asian factories. Workers made statements that they were regularly punished physically and were subject to sexual abuse. They also stated that they were regularly exposed to chemicals and forced to work overtime unpaid. (Business standard, 2018)

In conclusion Nike have found themselves constantly in the media in regard to their unethical ways of working and the treatment of their workers. Whilst they are taking steps to improve conditions they still have a long way to go. But despite their unethical Nike still remains as one of the top sportswear brands and yields a large profit each year. Nike should continue to seek ethical ways of working through use of ethical principles.

References

• Britannicacom. 2018. Encyclopedia Britannica. [Online]. [26 October 2018].Available from: https://www.britannica.com/topic/teleological-ethics
• Business case studies llp. 2018. Businesscasestudiescouk. [Online]. [26 October 2018]. Available from: https://businesscasestudies.co.uk/anglo-american/business-ethics-and-corporate-social-responsibility/what-are-business-ethics.html
• Business standard. 2018. Business-standardcom. [Online]. [26 October 2018].Available from: https://www.business-standard.com/article/specials/nike-sued-over-asian-sweatshops-conditions-198042201097_1.html
• Businessinsidercom. 2018. Business Insider. [Online]. [26 October 2018].Available from: http://uk.businessinsider.com/how-nike-fixed-its-sweatshop-image-2015-6
• Financesonlinecom. 2018. Financesonlinecom. [Online]. [26 October 2018]. Available from: https://financesonline.com/top-10-most-expensive-nike-shoes-endorsements-from-kobe-bryant-to-tiger-woods/
• Independentcouk. 2017. The Independent. [Online]. [26 October 2018]. Available from: https://www.independent.co.uk/news/nike-brings-in-rules-to-cut-child-labour-1159744.html
• Q4cdncom. 2018. Q4cdncom. [Online]. [26 October 2018]. Available from: https://s1.q4cdn.com/806093406/files/doc_financials/2014/docs/nike-2014-form-10K.pdf
• Statistacom. 2018. Statista. [Online]. [26 October 2018]. Available from: https://www.statista.com/statistics/632210/nike-brand-value/
• Wwwftcom. 2018. Financial Times. [Online]. [26 October 2018]. Available from: https://www.ft.com/content/45439480-d072-36be-9acc-7c136968fc66