Running head: THE PROMISE AND PERILS OF GLOBALIZATION: THE CASE OF NIKE 1

The Promise and Perils of Globalization: The Case of Nike

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THE PROMISE AND PERILS OF GLOBALIZATION: THE CASE OF NIKE 2

The Promise and Perils of Globalization: The Case of Nike

Executive summary

Nike is one of the established and profitable clothing and shoe companies in the globe.

However, the reality for most of the staff making Nike clothing and shoes is much less rosy. The

company paid insufficient wages to attain their basic needs, limited its workers from forming

independent unions, and the workers often encountered safety and health hazards. The proposed

ethical framework is based on the respect of individuals’ autonomy and preferences. The

proposed ethical framework argues that it is morally wrong to take the option of Nike factories

from the workers in Asian regions because they choose to work in those conditions.

Unsurprisingly, theories of care, utilitarianism and virtues ethics conclude that the only ethical

approach to this kind of working condition is to regulate sweatshop or do away with them. The

activists against Nike operations in the Asian market appear to assume that it is possible to

prevent harms as well as benefits to affected factory workers which is false. Therefore,

understanding that the factory workers choose to work in these factories implies that it is morally

wrong to control the sweatshop labour.

THE PROMISE AND PERILS OF GLOBALIZATION: THE CASE OF NIKE 3

Table of Contents

Executive summary.........................................................................................................................2
Table of Contents.............................................................................................................................3
Facts of the Case..............................................................................................................................4
Ethical Framework...........................................................................................................................5
Proposal for Resolving the Ethical Dilemma..................................................................................6
Analysis of the Proposal..................................................................................................................6
Egoism.............................................................................................................................6

Utilitarianism...................................................................................................................7

Deontology......................................................................................................................8

Virtue Ethics....................................................................................................................9

Care Ethics.....................................................................................................................10

Anticipated Impact of the Resolution............................................................................................11

THE PROMISE AND PERILS OF GLOBALIZATION: THE CASE OF NIKE 4

Facts of the Case

The same factors that allowed Nike to expand globally over the decades, benefiting from

global sourcing opportunity to generate low-cost products and investment into innovative

designs, also caused severe ethical issues for the company. In order to keep the cost of

manufacturing low and gain competitive advantage, Nike moved its athletic shoe production to

global regions with low labour costs (Locke, 2002). Shoe assembly began shifting offshore to

japan, to Korea and Taiwan and Southern China. Due to its experience with Japanese production,

Nike became a pioneer in offshore production as a cost-cutting strategy on shoe production.

When the cost of production increased in Japan, Nike moved its business to Vietnam, Indonesia

and China.

The working environment in the company’s factories has been a source of ethical

concerns. Nike has faced issues related to the allegation of abuse, widespread harassment and

poor working conditions. Since the factories in the Asian market have further subcontracted the

work, it has become a challenge for Nike to regulate the wages and working environment in

these factories (Locke, 2002). Sweatshop labour was not just a concern for Nike as it affected the

public consciousness across the production world. Maybe the issue that attracted sweatshop

labour to the American consciousness was when the human right activists demonstrated how

Gifford’s clothing lines belonged to the sweatshops in Honduras that utilised child labour. The

high visibility of Nike and the market leader made it ripe to attack when the company violated

labour rights.

The labour rights activists and the media have directed a barrage of criticism towards

Nike for labour and human right violation since the 1990s. The ethical issues include meager

wages, deficiencies in safety and health conditions, and indiscriminate firing and recruiting
THE PROMISE AND PERILS OF GLOBALIZATION: THE CASE OF NIKE 5

practices. Although most of these concerns have decreased as the company has sought to clean

its image, the criticism has damaged Nike’s reputation (Locke, 2002). Activists’ reports in

Indonesia, where Korean suppliers owned most of the company factories, highlighted various

incidents of labour violations and human right abuses. These events came to public attention

through stories on the CBS report regarding the company’s production facilities in Indonesia. In

1996, the Life magazine developed an expose depicting children in Pakistan stitching soccer

balls for the company (Locke, 2002). The children’s image harmed the company’s sales as well

as its reputation.

The customer, who had high respect for Nike products, diminished their opinions towards

the company. In 1996, an article in The New York Times attracted more public interests and

demonstration occurred all over the U.S. The condition of the company’s factories in Vietnam

was also the source of another ethical concern. The New York Times ran a leaked audit report of

its factories in Vietnam which highlighted unacceptable degree of chemical exposure in the

factories (Locke, 2002). The audit report also indicated incidents of health problems among the

staff and violation of the set code of conduct. In response to these ethical concerns, the company

has taken drastic measures to not only rectify problematic work conditions but also redeem its

reputation.

Ethical Framework

My ethical framework is based on the respect of individuals’ autonomy and preferences.

Respect of a people’s autonomy is based on the fact that it is ethically wrong to interfere with

people’s choice even if it detrimental to their health overall. Nevertheless, not all free will create

a strong claim for not interfering on people’s behalf. Some decisions may have a destructive

impact on individuals, such as voluntary slavery, that makes them fail to attain such a concern.
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However, when the contextual issues are of importance to the people’s primary commitments,

then they should have autonomy. Therefore, if it can be proposed that people are the best judge

of their interest, then it is clear that eliminating that option will likely harm them.

Proposal for Resolving the Ethical Dilemma

My ethical model of autonomy and preference can be used to solve Nike’s case study

based on six arguments. First, the workers in the Asian market choose to work in these factories.

Second, the decision of these workers to work in these factories indicates that they believe

working in these poor condition is the best available option. Third, their decision to work in these

poor conditions is an indication that we will harm the labourers by taking that alternative away.

Fourth, their decision to work in these factories is an indication that we will violate their

autonomy by taking that alternative away. Fifth, my framework opposes harming people or

violating their autonomy. Finally, it is not morally right to limit the option of Nike factories from

the workers in Asian regions because they choose to work in those conditions.

Analysis of the Proposal

Egoism

Milton Friedman argued that the role of a business is to use assets and participate in

functions created to increase profits. Based on this premise, the responsibility of Nike should be

narrowly limited and defined in making profits while confined to the rules of society. According

to the egoist, while companies are seeking to do good, the good should be attained for profit.

Specifically, the good should be done with self-interest in mind. Based on this theory, the goal

of Nike is profits and therefore, must maximise profit. The less they pay their workers in Asian

factories, the more they profit the stockholders. If the company choose to close their operation in

the Asian market and open in American markets, they will wage the workers the minimum wage
THE PROMISE AND PERILS OF GLOBALIZATION: THE CASE OF NIKE 7

of $7.3 per hours instead of the $3.70 per day. Although the company may stay profitable, its

operation in the American market may take noticeable harm.

Determining where to lay the blame for the challenges facing Nike’s factories in Asia is

quite absorbing when we consider the above issue. There is a need to appreciate that business

attitudes have often been considered as egoistic. Egoism impacts the choices we generate as it is

a self-based strategy. The idea is that the moral thing to do is to care for personal interest as we

are ethically demanded to make ourselves as happy as possible. As such, it can be argued that

workers’ self-interest, as well as Nike’s self-interest, should be blamed for the challenges facing

sweatshops in Asia. Although this can be said about Nike’s expansion into the Asian market, it

is evident that both consumers and Nike went great lengths to ensure that workers are treated

justly and fairly.

Utilitarianism

Utilitarian ethical theories are founded on people’s ability to predict the outcomes of their

actions. Utilitarian believe that choices that produced the most significant benefit to the most

individuals are the one that is correct ethically. John Stuart Mill’s Utilitarianisms provide a

logical and rational argument for a decision that people can use in a case by case basis (Joergens,

2006). Utilitarian can compare predicted results in a particular situation which may help

determine the best choice that is most beneficial for the most individual.

The individualism or egoism theory is based on economic assumptions which are an

aspect that is supported my framework. Interfering with Nike’s operation in Asia will likely

influence the profit level of the company, which may have an impact on the workers and the

company. Egoism theory supports autonomy and preferences aspect of my framework by valuing

Nike’s operation in Asia over people’s value. Suppose that compliance with the Asian market of
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beneficence demands that Nike gives benefits of Y to workers, but Nike is only willing to give a

benefit amount of Q, where Q<Y (Assumedly, Nike is not willing to prove Y because it would

result to reduction in profits which would harm workers). Proved that it is permissible for Nike

not to recruit anyone at all, will the workers make an offer contingent upon Nike’s willingness

waive Q and accept Y. If the workers can waive their claims to Y benefits when it is their interest

to do so, then Nike is not necessarily acting wrong in providing the Q, which is considered

insufficient. Therefore, the low wages are better for workers in these markets than the existing

alternative.

Deontology

The deontological model functions under the premise that organisations should not treat

workers as a means of their own goals. Deontologists consider Nike to have violated the rights of

the workers by attempting to generate high revenue through product outsourcing in the Asian

market, where there are fewer safety standards and less cost of labour. Nike did not prioritise the

welfare of its staff and facilitated poor work conditions by putting profits before the workforce.

Deontologists would argue that the poor ethical decision of the company did not respect human

life by ignoring employee judgments, rejecting their concerns and needs and denies them the

liberty to act on their judgements.

My ethical framework defends the ethical praiseworthiness and desirability of Nike. The

proposed ethical framework illustrates that it is ethically wrong for the activists and the media to

interfere, through boycotting, banning and legally regulating the factories, with choice of these

workers to work in these factories. The activists against Nike operations in the Asian market

appear to assume that it is possible to prevent harms as well as benefits to affected factory

workers which is false. Contrarily, economic orders and legal systems outline the specific
THE PROMISE AND PERILS OF GLOBALIZATION: THE CASE OF NIKE 9

approach of distributing benefits and harms to individuals who are affected by them. Since each

dimension of social structure harms some while benefiting others, no change to the current

economic and legal order should be condemned because certain people fare worse in its context

than they would in a feasible alternative. This can be explained using the reversal test. If the

activists object the upsurge in the minimum earnings rewarded to factory labours due to the

likely loss of work that would happen as a consequence, then a question emerges whether they

would oppose a decrease in the minimum wage paid to the factory workers when it had the

potential to increase the rate of employment. For example, paying two times as many factory

workers have current earnings. Therefore, understanding that the factory workers choose to work

in these factories implies that it is morally wrong to control the sweatshop labour.

Virtue Ethics

Virtues are character traits that are causative, contribute to a flourishing and are gained

by practising ‘like activities.’ So for example, one might note that alcoholism is a harmful habit,

the result of an inability to resist the pleasures of drink and that it seems similar to drug-abuse

and gluttony, so we can group them all under the term ‘self-indulgence’ and classify it as a vice.

Now, there is nothing wrong taking some occasional pleasure in drinking alcohol in most

people’s view, and certainly not with eating now and then (drug use though…?), so never

indulging could be a vice though it is not clear what to call it. The middle ground between these

two vices of self-indulgence and boorishness is the virtue of temperance, which is nothing more

or less than the ability to take pleasure in food and drink and sex and the like without indulging

to the point it does one harm.

The virtue agents will argue that Nike is not honest about its operations in the Asian

market. This is evident when the company tried to hide its audit report from the public. The New
THE PROMISE AND PERILS OF GLOBALIZATION: THE CASE OF NIKE 10

York Times ran a leaked audit report of its factories in Vietnam which highlighted the

unacceptable degree of chemical exposure in the factories. The audit report also indicated

incidents of health problems among the staff and violation of the set code of conduct. Besides,

the company is lack courage in standing up for its actions. The company is also not showing self-

control in caring for its profits as they are unfair to the workers. Since the main character of a

company is to increase profits for its shareholders, Nike has specific responsibilities by their

autonomy to make a profit. Although the company lacks the virtue of humanity, it attains its

main virtue of generating revenues as a business.

In the context of Nike, the main organisational traits entail justice, temperance, honesty,

and courage. Exploitation exists in the business cycle when a party gains an advantage over the

others. For example, the benefit provided by Nike is considered not enough from the perspective

of fairness. Taking virtue theory in perspective, fairness can be contextualised as establishing a

basis for the workers to earn appropriately in line with the cost of selling Nike products and their

roles. As such, the virtue of fairness forms an ethical standard for decisions that impact others,

but its appropriation in itself is a challenge since it is an abstract concept.

Care Ethics

Care ethics is related to virtue ethics but focuses on virtues that relevant to personal

relations such as loyalty, empathy, sympathy and compassion. Care ethics believe that ethics of

care are appropriate for global companies as it highlights the ethical model for guiding business.

The care ethics begins from the essential state of the relational of all human with the

environment and with each other and the assessment of various relationships as the primary

human condition throughout life. It argues that the individual’s ethical duty is to care for the

good of the person with whom the individual has developed a special relationship rather than
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following impartial principles. Specifically, it argues that each one of us needs to attend to our

needs as well as those individuals in our network, which includes the individuals who have a

close relationship with us.

Although what is happening in the Asian market is unlikeable, the Nike factories are at

works, and they are working to improve the economic welfare of society. If the Asian nations are

left to sustain their own understand of labour laws because it suits them, they will not survive. As

such, Nike is a moral right to focus on economic networks and relations in a different Asian

context. Although it is acceptable in some nations for very young individuals to work, it is not

acceptable in other nations. Therefore, Nike is ethically right in adhering to local labour laws

while refraining from coercion to attain minimum safety and health standards. The factory

workers in the Asian market are desperate to accept any job in such areas.

Anticipated Impact of the Resolution

The proposed ethical framework explains why companies operate sweatshops and why

developing countries allow them to exist within their borders. The awareness of corporate

outsourcing to low-income countries as well as its consequence has increased in recent years

because of the extensive use of the internet. These low-income nations already have a poor

working environment. Although Nike may prefer to works with the suppliers, it does not imply

that the company encourages poor working conditions. However, many customers are opting to

purchase their products from companies that ensure their workers safe and healthy (Clark &

Powell, 2013). The rise of ethical consumerism appears to negative affect Nike’s operation in the

Asian region. The proposed ethical framework illustrates that it is ethically wrong for the

activists and the media to interfere, through boycotting, banning and legally regulating the

factories, with choice of these workers to work in these factories. The activists against Nike
THE PROMISE AND PERILS OF GLOBALIZATION: THE CASE OF NIKE 12

operations in the Asian market appear to assume that it was possible to prevent harms as well as

benefits to affected factory workers which is false. Contrarily, economic orders and legal

systems outline the particular approach of distributing benefits and harms to individuals who are

affected by them. Since each dimension of social structure harms some while benefiting others,

no change to the current economic and legal order should be condemned because certain people

fare worse in its context than they would in a feasible alternative (Chan & Nadvi, 2014). Nike is

ethically right in adhering to local labour laws while refraining from coercion to attain minimum

safety and health standards. Since the factory workers in the Asian market will continue to be

desperate to accept any job in these environments, their autonomy and preferences should not be

regulated.

Variable such as law, economic, and socio-economic factors help the in the existence of

Nike factories in the Asian market. At first, Nike operates sweatshops to gain profits, and the

Asian countries allow them for the same reason. When ethical consumerism is prevalent, there

will be a less likelihood of evolving away from sweatshops. The report has explored the

relationship between the two in the context that financial outcomes are more persuasive than

ethical consumerism. However, this outcome can be reverse when consumer awareness and

media attention come into play. Specifically, consumer awareness and media attention determine

whether Nike will stand for sweatshops. However, the desires of countries such as Indonesia and

China for economic gain as well as the lack of understanding about sweatshop problem permitted

these condition to exist. The accusation of financial gain is highly persuasive in Nike’s operation

of sweatshops. Therefore, the adherence to goals of economic growth and innovation are more

ethical than a focus on human right trends in the Asian market.

THE PROMISE AND PERILS OF GLOBALIZATION: THE CASE OF NIKE 13

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