Case 22
Nike, Inc., and Sweatshops
J
onah Peretti decided to customize his Nike
shoes and visited the Nike iD website. The
company allows customers to personalize their
Nikes with the colors of their choice and their own
personal 16-character message. Peretti chose the
word “sweatshop” for his Nikes.
After receiving his order, Nike informed
Peretti via e-mail that the term “sweatshop”
represents “inappropriate slang” and is not
considered viable for print on a Nike shoe.
Thus, his order was
summarily rejected. Peretti e-mailed Nike, arguing
that the term “sweatshop” is present in Webster’s
dictionary and could not possibly be considered
inappropriate slang. Nike responded by quoting
the company’s rules, which state that the company
can refuse to print anything on its shoes that it
does not deem appropriate. Peretti replied that he
was changing his previous order and would
instead like to order a pair of shoes with a “color
snapshot of the 10-year-old Vietnamese girl who
makes my shoes.” He never received a response.1
T H E PR N I G H T M A R E BE G I N S
Before Nike could blink an eye, the situation
turned into a public relations nightmare. Peretti
forwarded the e-mail exchange to a few friends,
who forwarded it to a few friends, and so forth.
Within six weeks of his initial order, the story
appeared in the Wall Street Journal, USA Today,
and the Village Voice. Peretti himself appeared on
the Today Show, and he estimates that 2 million
people have seen the e-mail. At the height of the
incident, Peretti was receiving 500 e-mails a day
from people who had read the e-mail from as far
This case was written by Bryan S. Dennis, Idaho State University, and
revised by Archie B. Carroll, University of Georgia.
away as Asia, Australia, Europe, and South
America.2,3
Nike refused to admit any wrongdoing in the
incident and stated that they reserve the right to
refuse any order for whatever reason. Beth
Gourney, a spokesperson for Nike, had the
following to say regarding the incident:
Clearly, he [Peretti] was attempting to stir up
trouble; he has admitted it. He’s not an activist.
Mr. Peretti does not understand our labor
policy. If he did, he would know that we do
not hire children; our minimum age for hiring
is
18 . . . and we don’t apologize for not putting
the word “sweatshop” because our policy
clearly states: “We reserve the right to cancel
any order up to 24 hours after it has been
submitted.”4
Nike, Inc., is no stranger to sweatshop allega-
tions. Ever since the mid-1990s, the company has
been subject to negative press, lawsuits, and
demonstrations on college campuses alleging that
the firm’s overseas contractors subject employees
to working in inhumane conditions for low wages.
As Philip Knight, the CEO and founder of Nike,
once lamented, “The Nike product has become
synonymous with slave wages, forced overtime,
and arbitrary abuse.”5
H I S T O R Y OF N I K E , I N C .
Philip Knight started his own athletic shoe
distribution company in 1964. Using his
Plymouth Reliant as a warehouse, he began
importing and distributing track shoes from
Onitsuka Company, Ltd., a Japanese
manufacturer. First-year sales of
$8,000 resulted in a profit of $254. After eight
845
846 Case 22 | Nike, Inc., and Sweatshops
years, annual sales reached $2 million, and the
firm employed 45 people. However, Onitsuka saw
the huge potential of the American shoe market
and dropped Knight’s relatively small company in
favor of larger, more experienced distributors.
Knight was forced to start anew. However, instead
of importing and distributing another firm’s track
shoes, he decided to design his own shoes and
create his own company. The name he chose for
his new company was “Nike.”6
Nike’s Use of Contract Labor. When the
company began operations, Knight contracted the
manufacture of Nike’s shoes to two firms in
Japan. Shortly thereafter, Nike began to contract
with firms in Taiwan and Korea. In 1977, Nike
purchased two shoe manufacturing facilities in
the United States—one in Maine, the other in
New Hampshire. Eventually, the two plants
became so unprofitable that the firm was forced
to close them. The loss due to the write-off of the
plants was approximately $10 million in a year in
which the firm’s total profit was $15 million. The
firm had a successful IPO in 1980, eight years
after the company was founded. Nike became the
largest athletic shoe company in the world.7
Nike does not own a single shoe or apparel
factory. Instead, the firm contracts the production
of its products to independently owned manu-
facturers. Today, practically all Nike subcon-
tracted factories are in countries such as
Indonesia, Vietnam, China, and Thailand, where
the labor costs are significantly less than those in
the United States. Worldwide, more than five
hundred and thirty thousand people are em-
ployed in factories that manufacture Nike prod-
ucts. On an earlier website that is no longer
available, the company gave the following as a
rough breakdown of the costs per shoe. With
inflation ever with us, these figures increase over
the years, but these data give us an idea of total
costs relative to selling price:
Consumer pays: $65
Retailer pays: $32.50 to Nike, and then
doubles the price for retail
Nike pays: $16.25 and then
doubles the price to
retailers for shipping,
insurance, duties,
R&D, marketing,
sales, administration,
and profits
The $16.25 price paid to the factory includes:
Materials: $10.75
Labor: $2.43
Overhead + Depreciation: $2.10
Factory Profit: $0.97
Total Costs: $16.258
Even in today’s high-tech environment, the
production of athletic shoes is still a labor-
intensive process. For example, for practically all
athletic shoes, the upper portion of the shoe must
be sewn together with the lower portion by hand.
The soles must be manually glued together.
Although most leaders in the industry are con-
fident that practically the entire production pro-
cess will someday be automated, it will still be
years before the industry will not have to rely
upon human labor.
Other Firms in the Industry. Nike’s use
of overseas contractors is not unique in the athletic
shoe and apparel industry. All other major
athletic
shoe manufacturers also contract with overseas
manufacturers, albeit to various degrees. One
athletic shoe firm, New Balance Inc., is somewhat
of an anomaly, as it continues to operate five
factories in the United States.9
Nike spends heavily on endorsements and
advertising and pays several top athletes well
over a million dollars a year in endorsement
contracts. In contrast, New Balance has developed
a different strategy. They do not use professional
athletes to market their products. According to
their “Endorsed by No One” policy, New Balance
instead chooses to invest in product research and
development and foregoes expensive endorsement
contracts.10
 Nike, Inc., and Sweatshops | Case 22 847

THE S W E A T S H O P MOVE MENT

VS. NIKE
One pivotal event is largely responsible for the company maintained that employee wages are
introducing the term “sweatshop” to the American fair and higher than the government-mandated
minimum wage in all of the countries where the
public. In 1996, Kathie Lee Gifford, cohost of the
firm has contracted factories. The company
formerly syndicated talk show Live with Regis and
released the following data about its wages:
Kathie Lee, endorsed her own line of clothing for

Average Monthly
Wal-Mart. During that same year, labor rights
Minimum Wage at Nike
activists disclosed that her “Kathie Lee
Country Monthly Wage Factories
Collection” was made in Honduras by
seamstresses who
earned 31 cents an hour and were sometimes Taiwan 14,124 NT$ 25,609 NT$
required to work 20-hour days. Traditionally South Korea Won 306,030 Won 640,000
known for her pleasant, jovial demeanor and her
love of children, Kathie Lee was outraged. She Indonesia 115,000 rupiah 239,800 rupiah
tearfully informed the public that she was un-
China RMB 276 RMB 636
aware that her clothes were being made in so-called
sweatshops and vowed to do whatever she could Thailand 2,950–3,150 baht 4,435 baht
to promote the antisweatshop cause.11 Vietnam 331.050 VND$ 640.030 VND$

Nike Is Accused. In a national press con-

ference, Gifford named Michael Jordan as another
celebrity who, like herself, endorsed products
without knowing under what conditions the
products were made. At the time, Michael Jordan
was Nike’s premier endorser and was reportedly
under a $20-million-per-year contract with the
firm.12 Nike, the number-one athletic shoe brand
in the world, soon found itself under attack by the
rapidly growing antisweatshop movement.
Shortly after the Gifford story broke, Joel
Joseph, chairman of the Made in the USA
Foundation, accused Nike of paying underage
Indonesian workers 14 cents an hour to make the
company’s line of Air Jordan Shoes. He also
claimed that the total payroll of Nike’s six
Indonesian subcontracted factories was less than
the reported $20 million per year that Jordan
received from his endorsement contract with Nike.
The Made in the USA Foundation is one of the
organizations that ignited the Gifford controversy
and is largely financed by labor unions and U.S.
apparel manufacturers that are against free trade
with low-wage countries.13
Nike quickly pointed out that Air Jordan shoes
are made in Taiwan, not Indonesia. Additionally,
Nike asserted that the entry-level income of an
Indonesian factory worker is five times that of a
farmer. The firm also claimed that an assistant line
supervisor in a Chinese subcontracted factory earns
more than a surgeon with 20 years of experience. 14
In response to the allegations regarding Michael
Jordan’s endorsement contract, Nike stated that the
total wages in Indonesia are $50 million a year,
which is well over what the firm paid Jordan.15
Nike soon faced more negative publicity.
Michael Moore, the movie director whose doc-
umentary Roger and Me shed light on the plight of
laid-off auto workers in Flint, Michigan, and
damaged the reputation of General Motors chair-
man Roger Smith, interviewed Philip Knight for
his movie The Big One. On camera, Knight referred
to some employees at subcontracted factories as
“poor little Indonesian workers.” Moore’s cameras
also recorded the following exchange between
Moore and Knight:
Moore: Twelve-year-olds working in [Indone-
sian] factories? That’s OK with you?
Knight: They’re not 12-year-olds working in
factories . . . the minimum age is 14.
848 Case 22 | Nike, Inc., and Sweatshops
Moore: How about 14, then? Doesn’t that
bother you?
Knight: No.16
Knight, the only CEO interviewed in the movie,
received harsh criticism for his comments. Nike
alleged that the comments were taken out of
context and were deceitful because Moore failed to
include Knight’s pledge to make a transition from
a 14- to a 16-year-old minimum age labor force.
Nike prepared its own video that includes the
entire interview.17
Thomas Nguyen, founder of Vietnam Labor
Watch, inspected several of Nike’s plants in
Vietnam in 1998 and reported cases of worker
abuse. At one factory that manufactures Nike
products, a supervisor punished 56 women for
wearing inappropriate work shoes by forcing
them to run around the factory in the hot sun.
Twelve workers fainted and were taken to the
hospital. Nguyen also reported that workers were
only allowed one bathroom break and two drinks
of water during each eight-hour shift. Nike
responded that the supervisor who was involved
in the fainting incident has been suspended and
that the firm had hired an independent accounting
firm to look into the matters further.18
Nike Responds. In 1997, Nike hired former
Atlanta mayor Andrew Young, a vocal opponent
of sweatshops and child labor, to review the
firm’s overseas labor practices. Neither party
disclosed
the fee that Young received for his services.
Young toured 12 factories in Vietnam, Indonesia,
and China and was reportedly given unlimited
access. However, he was constantly accompanied
by Nike representatives during all factory tours.
Further- more, Young relied upon Nike
translators when communicating with factory
workers.19
In his 75-page report, Young concluded that
“Nike is doing a good job, but it can do better.” He
provided Nike with six recommendations for im-
proving the working conditions at subcontracted
factories. Nike immediately responded to the report
and agreed to implement all six recommendations.
Young did not address the issue of wages and
standards of living because he felt he lacked the
“academic credentials” for such a judgment.20
Public reaction to Young’s report was mixed.
Some praised Nike. However, many of Nike’s
opponents disregarded Young’s report as biased
and incomplete. One went so far as to state the
report could not have been better if Nike had
written it themselves and questioned Young’s
independence.21,22
In 1998, Nike hired Maria Eitel to fill the newly
created position of vice president for corporate
and social responsibility. Eitel was formerly a
public relations executive for Microsoft. Her
responsibilities were to oversee Nike’s labor
practices, environmental affairs, and involvement
in the global community. Although this move was
applauded by some, others were skeptical and
claimed that Nike’s move was nothing more than
a publicity stunt.23
Later that same year, Philip Knight gave a
speech at the National Press Club in Washington,
DC, and announced six initiatives that were
intended to improve the working conditions in
its overseas factories. The firm chose to raise the
minimum hiring age from 16 to 18 years of age.
Nike also decided to expand its worker education
program so that all workers in Nike factories
would have the option to take middle and high
school equivalency tests.24 The director of Global
Exchange, one of Nike’s staunchest opponents,
called the initiatives “significant and very posi-
tive.” He also added that “we feel that the
measures—if implemented—could be exciting.”25
COLL EGE S T U D E N T S , OR G A N I Z E D
L AB O R , AND NIKE
Colleges and universities have direct ties to the
many athletic shoe and apparel companies (such
as Nike, Champion, and Reebok) that contract
with overseas manufacturers. Most universities
receive money from athletic shoe and apparel
corporations in return for outfitting the univer-
sity’s sports teams with the firm’s products. In
1997, Nike gave $7.1 million to the University of
North Carolina for the right to outfit all of UNC’s
 Nike, Inc., and Sweatshops
sports teams with products bearing the Nike
Swoosh logo.26 Additionally, academic institutions
allow firms to manufacture apparel bearing the
university’s official name, colors, and insignias in
return for a fee. In 1998, the University of
Michigan received $5.7 million dollars in licensing
fees.27 Most of these contract and licensing fees are
allocated toward scholarships and other academic
programs. Today, these practices continue and the
amounts of money are much larger.
Organized Labor. In 1995, the Union of
Needletrades, Industrial and Textile Employees
(UNITE) was founded. The union, a member of
the AFL-CIO, was formed by the merger of
The
International Ladies’ Garment Workers’ Union
and the Amalgamated Clothing and Textile Work-
ers Union and represented two hundred and fifty
thousand workers in North America and Puerto
Rico. Most of the union members work in the
textile and apparel industry. In 1996, UNITE
launched a “Stop Sweatshops” campaign after
the Kathy Lee Gifford story broke to “link union,
consumers, student, civil rights and women’s
groups in the fight against sweatshops at home
and abroad.”28
In 1997, UNITE, along with the AFL-CIO,
recruited dozens of college students for summer
internships. Many of the students referred to
that summer as “Union Summer.” For the
students involved, it had the same impact that
“Freedom Summer” did for students during the
civil rights movement.29 The United Students
Against Sweatshops (USAS) organization was
formed the following year. The USAS was
founded and was led by former UNITE summer
interns.30
University Organizations. The USAS has
chapters at dozens of universities across the
United States. Since its inception, the
organization has staged a large number of
campus demonstra- tions that are reminiscent of
the 1960s. One notable demonstration occurred
on the campus of UNC in 1997. Students of the
Nike Awareness Campaign
| Case 22 849
protested against the university’s contract with
Nike due to the firm’s alleged sweatshop abuses.
More than 100 students demanded that the
university not renew its contract with Nike and
rallied outside the office of the university’s
chancellor. More than 50 other universities, such
as the University of Wisconsin and Duke, staged
similar protests and sit-ins.31
In response to the protests at UNC, Nike
invited the editor of the university’s student
newspaper to tour Nike’s overseas contractors to
examine the working conditions firsthand. Nike
offered to fund the trip by pledging $15,000
toward the students’ travel and accommodations
costs. Ironically, Michael Jordan is an alumnus of
UNC.32
Critics of the USAS contend that the student
organization is merely a puppet of UNITE and
organized labor. They cite the fact that the AFL-
CIO has spent more than $3 million on internships
and outreach programs with the alleged intent of
interesting students in careers as union activists.
The founders of the USAS are former UNITE
interns. The USAS admits that UNITE has tipped
off the student movement as to the whereabouts of
alleged sweatshop factories. Also, in an attempt to
spur campus interest in the sweatshop cause,
UNITE sent two sweatshop workers on a five-
campus tour. They have also coached students via
phone during sit-ins and paid for regularly
scheduled teleconferences between antisweatshop
student leaders on different campuses. According
to Allan Ryan, a Harvard University lawyer who
has negotiated with the USAS, “[T]he students are
vocal, but it’s hard to get a viewpoint from them
that does not reflect that of UNITE.”33
Many students have denied allegations that
they are being manipulated by organized labor
and claim that they discovered the sweatshop
issues on their own. Others acknowledge the
assistance of organized labor but claim it is “no
different from [student] civil rights activists
using the NAACP in the 1960s.”34 John Sweeney,
president of the AFL-CIO, claims the role of
organized labor is not one of manipulation but of
850 Case 22 | Nike, Inc., and Sweatshops
motivation. Others assert that the union merely
provides moral support.35
Regardless of the AFL-CIO’s intentions, the
students have had a positive impact upon the
promotion of organized labor’s antisweatshop
agenda over the years. According to the director
of one of the several human rights groups that are
providing assistance to the students:
At this moment, the sweatshop protest is
definitely being carried on the backs of uni-
versity students. If a hundred students hold a
protest, they get a page in the New York
Times. If a hundred union people did that,
they’d be locked up.36
By 2007, United Students Against Sweatshops
claimed to have approximately 200 affiliated high
schools, colleges, and universities, and contacts on
more than 400 campuses. USAS currently has
four staff members and offices in Washington,
DC, and New York City. Today, USAS promotes
The Sweat-Free Campus Campaign as a
multifaceted, extremely successful program in
which students organize antisweatshop
campaigns on their cam- puses, mandating that
the clothes bearing their collegiate logos be
manufactured under fair and ethical conditions.37
THE FAIR L ABOR ASSO CI AT IO N
AND THE W O R K ER R IG HT S
CONSORTIUM
In 1996, a presidential task force of industry and
human rights representatives was given the job of
addressing the sweatshop issue. The key purpose
of this task force was to develop a workplace code
of conduct and a system for monitoring factories
to ensure compliance. In 1998, the task force
created the Fair Labor Association (FLA) to
accomplish these goals. This organization is made
up of consumer and human rights groups as well
as footwear and apparel manufacturers. Nike was
one of the first companies to join the FLA. Many
other major manufacturers (Levi Strauss & Co., Liz
Claiborne, Patagonia, Polo Ralph Lauren, Reebok,
Eddie Bauer, and Phillips-Van Heusen) along
with hundreds of colleges and universities have
also joined the FLA.38
FLA Requirements. Members of the FLA
must follow the principles set forth in the
organization’s Workplace Code of Conduct. The
FLA Workplace Code of Conduct sets member
standards in the following areas: forced labor,
child labor, harassment or abuse, nondiscrimina-
tion, health and safety, freedom of association,
wages and benefits, hours of work, and overtime
compensation. Member organizations that license
or contract with overseas manufacturers or sup-
pliers are responsible for ensuring that factory
employees are paid either the minimum wage as
required by law or the average industry wage,
whichever is higher. Additionally, the code of
conduct sets limits on the number of hours
employees can work, allows workers the right to
collective bargaining, and forbids discrimination.39
Each member firm must conduct an internal
audit of every manufacturing facility on a yearly
basis. Furthermore, members of the FLA must
disclose to the FLA the location of all subcon-
tracted factories. This information will not be
made public. The FLA uses a team of external
auditors to monitor the compliance of these
factories with the FLA’s code of conduct. These
monitoring activities consist of a combination of
announced and unannounced factory visits, and
results are made available to the public.40
The WRC Alternative. The USAS opposed
several of the FLA’s key components and created
the Worker Rights Consortium (WRC) as an
alternative to the FLA. The WRC asserts that the
prevailing industry or legal minimum wage in
some countries is too low and does not provide
employees with the basic human needs. They
propose that factories should instead pay a higher
“living wage” that takes into account the wage
required to provide factory employees with
enough income to afford housing, energy, nutri-
tion, clothing, health care, education, potable
water, child care, transportation, and savings.
 Nike, Inc., and Sweatshops
Additionally, the WRC supports public disclosure
of all factory locations and the right to monitor any
factory at any time. As of August 2007, 174
colleges and universities had joined the WRC
and agreed to adhere to its policies.41
Nike, a member and supporter of the FLA, has
opposed the Worker Rights Consortium. The firm
states that a concept of a living wage is impractical,
as “there is no common, agreed-upon definition of
the living wage. Definitions range from complex
mathematical formulas to vague philosophical
notions.” Additionally, Nike was once opposed
to the WRC’s proposal that the location of all
factories be publicly disclosed. Nike also has
claimed that the monitoring provisions set out by
the WRC are unrealistic and biased toward
organized labor.42
The University of Oregon, Philip Knight’s alma
mater, joined the WRC in the year 2000. Alumnus
Knight had previously contributed more than $50
million to the university—$30 million for aca-
demics and $20 million for athletics. Upon hearing
that his alma mater had joined the WRC, Knight
was shocked. He withdrew a proposed $30 million
donation and stated that “the bonds of trust,
which allowed me to give at a high level, have
been shredded” and “there will be no further
donations of any kind to the University of
Oregon.”43,44
NIK E COMES ARO UN D
In May 2001, Harsh Saini, Nike’s corporate and
social responsibility manager, acknowledged that
the firm may not have handled the sweatshop
issue as well as it could have and stated that Nike
had not been adequately monitoring its subcon-
tractors in overseas operations until the media and
other organizations revealed the presence of
sweatshops.
We were a bunch of shoe geeks who expanded
so much without thinking of being socially
responsible that we went from being a very big
sexy brand name to suddenly becoming the
poster boy for everything bad in
manufacturing.
| Case 22 851
She added, “We realized that if we still want to be
the brand of choice in 20 years, we had certain
responsibilities to fulfill.”45
Oregon Reverses Its Decision. In early
2001, Oregon’s state board of higher education
cast doubt on the legality of the University of
Oregon’s WRC membership, and the university
dissolved its ties with the labor organization.46 In
September of the same year, Phil Knight renewed
his financial support. Although the exact amount
of Knight’s donation was kept confidential, it was
sufficient enough to ensure that the $85 million
expansion of the university’s football stadium
would go through as originally planned. In 2000,
the stadium expansion plans suffered a
significant setback when Knight withdrew his
funding. Many of the proposed additions, such
as a 12,000-seat
capacity increase and 32 brand-new skyboxes,
were made possible largely due to Knight’s
pledge of financial support.47,48
Nike released its first corporate social respon-
sibility report in October 2001. According to Phil
Knight, “[I]n this report, Nike for the first time has
assembled a comprehensive public review of our
corporate responsibility practices.”49 The report
cites several areas in which the firm could do
better, such as worker conditions in Indonesia and
Mexico. The report, compiled by both internal
auditors and outside monitors, also notes that
Nike is one of only four companies that has joined
a World Wildlife Fund program to reduce green-
house admissions. Jason Mark, a spokesman for
Global Exchange, one of Nike’s chief critics,
praised the report and stated that Nike is
“obviously responding to consumer concerns.”50
K A S K Y V. N I K E , I N C .
Nike’s problems with fair labor issues continued
on a related front. Labor activist Mark Kasky had
sued Nike in 1998, arguing that Nike had engaged
in false advertising when it denied that there was
mistreatment of workers in Southeast Asian fac-
tories. At issue was the question of whether Nike’s
defense of its practices was commercial speech, for
852 Case 22 | Nike, Inc., and Sweatshops
which there are laws against making misleading
claims, or political speech, for which free speech
protections apply. The California Supreme Court
ruled that Nike’s statements about labor conditions
could be construed as false advertising. Nike
appealed this ruling to the U.S. Supreme Court,
which sent it back to the California court without
making a judgment on the free speech issue. In
September 2003, Kasky and Nike settled the case
for a $1.5 million donation to the Fair Labor
Association.51 The settlement, however, left many
questions unanswered.52 Many feared that the risk
of lawsuits would have a chilling effect, causing
firms to stop releasing social responsibility reports,
which unlike the SEC financial reports, are all
voluntary. In 2001, Nike issued a corporate social
responsibility report, but the company announced
that, due to the California decision, they would not
release a corporate social responsibility report in
2002–2003. Nike released a “Community Invest-
ment” report detailing its philanthropic efforts
instead.53 In 2004, the company did release a
sustainability report.54
C R I T I C S Q U IE T D OW N BUT D ON ’ T
GO A W A Y
Nike’s critics have not gone away, but they have
quieted down as the company has taken steps to
address many of the criticisms made over the
years. Though the critics are less vocal today
compared to previous periods, there is still some
ongoing opposition to the company. Typical of
the continuing opposition is the organization
Educating for Justice (EFJ) that runs a continuing
Stop Nike Sweatshops campaign. In 2006, EFJ
planned a film titled Sweat. The film, as described
on EFJ’s website, is the journey of two young
Americans uncovering the story behind the
statistics about Nike factory workers. Through
the lens of their experiences, they claim viewers
will discover the injustices of Nike’s labor
practices in the developing world, specifically in
Indonesia, and how Nike's cutthroat, bottom-line
economic decisions have a profound effect on
human lives.55
NIKE LATER GETS POSITIVE
RECOGNITIONS
In spite of its controversial record on the issue of
sweatshops and monitoring labor practices
abroad, Nike has been the recipient of a variety
of CSR recognitions over the past several years.
For example, Nike claimed the only spot in its
industry for the 2007 SustainableBusiness.com list
of the World’s Top Sustainable Stocks. In addition,
in the Apparel category, Nike was named to the
2007 World's Most Ethical companies list compiled
by Ethisphere magazine. Finally, Nike earned the
No. 3 ranking on the 2007 “100 Best Corporate
Citizens” list published by CRO magazine. Nike’s
ranking rose from No. 13 in 2006 and No. 31 in
2005.56
Questions for Discussion
1. What are the ethical and social issues in this
case?
2. Why should Nike be held responsible for what
happens in factories that it does not own?
Does Nike have a responsibility to ensure that
factory workers receive a “living wage”? Do
the wage guidelines of FLA or WRC seem
most appropriate to you? Why?
3. Is it ethical for Nike to pay endorsers millions
while its factory employees receive a few
dollars a day?
4. Is Nike’s responsibility to monitor its subcon-
tracted factories a legal, economic, social, or
philanthropic responsibility? What was it 10
years ago? What will it be 10 years from now?
5. What could Nike have done, if anything, to
prevent the damage to its corporate
reputa- tion? What steps should Nike take
in the future? Is it “good business” for
Nike to
 Nike, Inc., and Sweatshops | Case 22 853

acknowledge its past errors and become more 12. Del Jones, “Critics Tie Sweatshop Sneakers to
socially responsible? ‘Air’ Jordan,” USA Today (June 6, 1996), 1B.
6. What are the goals of the AFL-CIO? Does the 13. Ibid.
campus antisweatshop movement help or 14. Nike Press Release, June 6, 1996.
hinder the AFL-CIO’s goals? Are the students 15. Del Jones, 1B.
being “used” by the AFL-CIO? 16. Garry Trudeau, “Sneakers in Tinseltown,”
7. Regarding the Kasky v. Nike, Inc. case, is Time (April 20, 1998), 84.
Nike’s defense of its practices commercial 17. William J. Holstein, “Casting Nike as the Bad
Guy,” U.S. News & World Report (September
speech or political speech? What are the long-
22, 1997), 49.
term
implications of your decision, not only for 18. Verena Dobnik, “Nike Shoe Contractor
Abuses Alleged,” Atlanta Journal-Constitution
Nike but also for business in general?
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8. Conduct your own personal research on 19. Simon Beck, “Nike in Sweat over Heat
Nike’s response to sweatshop-type situations. Raised by Claims of Biases Assessment,”
What are they doing now? South China Morning Post (July 6, 1997), 2.
20. Matthew C. Quinn, “Footwear Maker’s
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2. Ibid. (June 15, 1997).
3. ABC News website, http://abcnews.go 22. Simon Beck, 2.
.com/sections/business/DailyNews/ 23. Bill Richards, “Nike Hires an Executive from
nike010402.html. Microsoft for New Post Focusing on Labor
4. Ibid. Policies,” Wall Street Journal (January 15,
5. Bien Hoa, “Job Opportunity or Exploitation,” 1998), B14.
Los Angeles Times (April 18, 1999). 24. Philip Knight, 640.
6. Philip Knight, “Global Manufacturing: The 25. Patti Bond, “Nike Promises to Improve Fac-
Nike Story Is Just Good Business,” Vital tory Worker Conditions,” Atlanta Journal-
Speeches of the Day, 64(20): 637–640. Constitution (May 13, 1998), 3B.
7. Ibid., 637–640. 26. Allan Wolper, “Nike’s Newspaper Tempta-
8. These data were presented on an earlier Nike tion,” Editor & Publisher (January 10, 1998),
website that is no longer available. The site 8–10.
was: http://www.nikebiz.com/labor/faq 27. Gregg Krupa, “Antisweatshop Activists
.shtml. Score in Campaign Targeting Athletic Re-
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balance.com/corporate/aboutus/corporate_ 28. UNITE webpage, http://www.uniteunion
about.php, retrieved September 21, 2007. .org/research/history/unionisborn.html.
10. New Balance website, http://www.new 29. Krupa, F1.
balance.com/. 30. UNITE webpage.
11. David Bauman, “After the Tears, Gifford 31. Wolper, 8–10.
Testifies on Sweatshops—She Turns Lights, 32. Wolper, 8.
Cameras on Issue,” Seattle Times (July 16,
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854 Case 22 | Nike, Inc., and Sweatshops
33. Jodie Morse, “Campus Awakening,” Time
(April 12, 1999), 77–78.
34. Krupa, F1.
35. Morse, 77–78.
36. Ibid.
37. USAS website: http://www.studentsagainst
sweatshops.org//index.php?option=com_
content&task=view&id=16&Itemid=66,
retrieved September 21, 2007.
38. Fair Labor Association website: http://www.
fairlabor.org/participants/companies, re-
trieved September 21, 2007.
39. http://www.fairlabor.org/conduct, retrieved
September 21, 2007.
40. Ibid.
41. Worker’s Rights Consortium website,
http:// www.workersrights.org/as.asp,
retrieved September 21, 2007.
42. Nike website, http://www.nikebiz.com/
labor/index.shtml.
43. Philip Knight Press Release (April 24, 2000)
found at: http://www.nike.com/nikebiz/
news/pressrelease.jhtml?year=2000
&month=04&letter=g, retrieved October 14,
2007.
44. Louise Lee and Aaron Bernstein, “Who Says
Student Protests Don’t Matter?” BusinessWeek
(June 12, 2000), 96.
45. Ravina Shamdasani, “Soul Searching by
‘Shoe Geeks’ Led to Social Responsibility,”
South China Morning Post (May 17, 2001), 2.
46. Greg Bolt, “University of Oregon Ends
Relationship with Antisweatshop Group,”
Register Guard (March 6, 2001).
47. Hank Hager, “Frohnmayer: It’s a Very
Happy Day for Us,” Oregon Daily Emerald
(September 27, 2001).
48. Ron Bellamy, “Nike CEO to Resume Dona-
tions to University of Oregon,” Register Guard
(September 26, 2001).
49. William McCall, “Nike Releases First Corpo-
rate Responsibility Report,” Associated Press
State & Local Wire (October 9, 2001).
50. Ibid.
51. Adam Liptak, “Nike Move Ends Case Over
Firm’s Free Speech,” New York Times (Sep-
tember 13, 2003).
52. For a more thorough discussion of this
controversy, see David Hess and Thomas
Dunfee, “The Kasky-Nike Threat to Corpo-
rate Social Reporting,” Business Ethics Quar-
terly (January 2007), 5–32; and Don Mayer,
“Kasky v. Nike and the Quarrelsome Ques-
tion of Corporate Free Speech, Business
Ethics Quarterly (January 2007), 65–96.
53. http://www.srimedia.com; for detailed
coverage of this case and its implications,
see http://www.reclaimdemocracy.org/
nike/.
54. William Baue, “Gap and Nike Engage Stake-
holders for Assurance Statements on Sustain-
ability Reports,” Nike website: http://www
.nike.com/nikebiz/nikebiz.jhtml?page=59
&item=tppr&year=2005&release=07a, re-
trieved September 22, 2007.
55. Educating for Justice: http://www.educa
tingforjustice.org/nikewages/sweat.html,
retrieved September 21, 2007.
56. Nikebiz.com, Company Overview, Awards
& Recognitions, Corporate Social Respon-
sibility: http://www.nike.com/nikebiz/
nikebiz.jhtml?page=3&item=awards, re-
trieved September 22, 2007.