ethics within nike - ruc.dk

Hakan Eroglu, Omar Zoheir Kamel and Lauren Tracey Betti Characters: 100,754 Group 21

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Ethics within Nike

Group 21

Department of RUC

SIB, The International Social Sciences Bachelor

Semester and year:

2nd semester, 2016

Group members:

Hakan Eroglu Student ID: 58088

Omar Zoheir Kamel Student ID: 58198

Lauren Tracey Betti Student ID: 57291

Supervisor:

Niklas Aleaxander Chimirri

Characters: 100,754


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ABSTRACT

This project addresses ethics within the business world. The business that is evaluated is the company

Nike, since it is arguably the biggest athletic wear company in the world. This project seeks to

understand how ethics are not the main focus in Neo-liberalism, instead, surplus is- which leads to

the critique of the company. This critic did eventually happen in the early 1990’s where several cases

of labour abuse happened in the company's production factories which led to the introduction of

Corporate Social Responsibility (CSR). The problem with CSR is that many sees it as a business

hiding its issues that are present. We are interested in understanding how businesses outsource their

production to countries where they can get away with abuse of labour, such as low wages, low taxes,

etc. To understand this we drew upon Aloy Soppe’s definitions of business ethics and several

definitions of CSR, since there is no universal definition. From Soppe, we get an understanding of

how ethics are in a firm and, additionally, we use Dahlsrud five dimensions and compare it to Soppe’s

ethical framework within ‘The Ethical Theory of the Firm’ . From these five dimensions, this project

focuses on three: economic dimension, stakeholder dimension, and social dimension.

By the end of the project it will be clear how Nike has evolved from a scandal struck company in the

1990’s, to become a more desirable and produce an even larger amount of commodities for the

population. Furthermore, one realizes that Nike’s ethics have changed positively yet Nike

acknowledges issues still occur though assures they are being solved with time.

Key-words:

Corporate social responsibility, virtue ethics, deontological ethics, teleological ethics, code of

conduct, neo-classical school of thought, neo-liberalism, outsourcing, production, abuse,

deregulation, scandal, Aloy Soppe, Dahlsrud


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Contents

Ethics within Nike ............................................................................................................................................. 1

CHAPTER 1 ....................................................................................................................................................... 4

Introduction ................................................................................................................................................... 4

Problem Area ................................................................................................................................................. 5

PROBLEM FORMULATION ...................................................................................................................... 6

Literature Review .......................................................................................................................................... 6

Delimitation ................................................................................................................................................... 7

Chapter 2: Methods and Theory ........................................................................................................................ 8

Methods ......................................................................................................................................................... 8

Theory and Concepts ................................................................................................................................... 11

Chapter 3 ......................................................................................................................................................... 17

The Nike Case study .................................................................................................................................... 17

3.1 Introduction to the case ...................................................................................................................... 17

3.2 The history of Nike ............................................................................................................................ 17

3.3 The Business Nike ............................................................................................................................. 19

3.4 The Nike Scandals ............................................................................................................................. 20

3.5 Nike’s Corporate Social responsibility and Code of Conduct. ........................................................... 21

3.5 The summarizing of Nike .................................................................................................................. 23

Chapter 4 ......................................................................................................................................................... 25

Analysis ....................................................................................................................................................... 25

Discussion.................................................................................................................................................... 37

Chapter 5 ......................................................................................................................................................... 39

Conclusion ................................................................................................................................................... 39


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CHAPTER 1 Introduction

The aim of this project is to investigate how and why corporations include ethics in their companies

overseas factories. The goal of our project is to use a case study and show what business ethics are

and how they impact the specific scandals within the chosen case and its effects. In order to do this,

we will look at the ethical approach in a multinational corporation and the exploitation of workers

and their working conditions overseas ultimately leading to the critic of the firm.

The case chosen for this project is the corporation Nike, which is one of world's leading shoe and

clothing manufacturer, and how they in the 1990s had issues with labour exploitations in their supply

chain (Nisen, 2013), leading to a discourse about business ethics, which we will further analyse and

study. To counteract the critiques the company faced during the 1990’s, Nike implemented a code of

conduct where they stated the rules that the factories had to oblige to regarding labour conditions and

wages. Furthermore, Nike published in 2001 their first Corporate Social Responsibility (CSR) which

indicated and enlightened the population that exploitation of labourers found the place but where to

change in the nearest future (Csrwire.com, 2016). On the other hand, some scholars believe that CSR

is about how companies manage their business processes to produce a positive impact on society. The

reason for this is that companies have a responsibility and a need to satisfy their stakeholders, whom

for the past decade have been taking an increasing in companies’ activities in terms of its products

and services, its impact on the environment and local communities and how it treats and develops its

workforce. One of the reasons for why there has been an increasing focus on CSR, is the ethical

scandals and corporate governance failures, which have led to decreasing trust in the corporations

(Rowe 442-444, 2006). Although this project is only going to focus on one specific case.

To define the concept CSR, we have chosen definitions from the World Business Council of

Sustainable Development (WBCSD), Dahlsrud, and an academic journal, due to the fact that there

no universal definition of CSR. Besides CSR, we are going to have an ethical value foundation that

is defined by Aloy Soppe in his writing Ethical theory of the firm. Soppe works in the department of

Corporate and Financial Law in Erasmus University Rotterdam, his ethical framework in his theory

draws upon philosophical and sociological aspects, which is the reason to why his definitions of

ethical value are chosen in this project as well as being objective. His theory is written with a

neoclassical school approach, though he criticizes it as being unethical, and he, therefore, takes


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another approach regarding the theory of the firm, which we wanted to gain knowledge upon. The

neoclassical school of thought gave birth to neo-liberalism, which we will discuss further.

Problem Area

The purpose of this project is to examine the issues within a corporation, and to tackle how it is that

Corporate Social Responsibility (CSR) is implemented in such corporation. In order to understand

CSR, we are going to use different definitions because there is no universal definition. According to

Dahlsrud (Dahlsrud, 2008), there are 37 definitions of CSR. Furthermore, we will examine how CSR

has emerged and has received its ethical perspective. In this project, we focus on one case study,

which is the company, Nike. We will examine its historical background, mainly emphasizing on the

exploitation of labour in the early 1990s, and how the company has outlived the crisis. We will also

examine what impact such changes had caused to new policies for labour conditions, etc.

The ethical values are going to be the main focus of this project, which is explained in greater detail

in the theory section on the Ethical theory of the firm drawn upon by Soppe. The ethical values

described in the theory are divided into three different ethics: the virtue ethics, deontological ethics,

and teleological ethics. Soppe separates the ethical values in three giving larger knowledge and

different perspectives to the case and how CSR functions. These values will be described further

down in the theory section of this project. It order to attempt to answer the dilemma of whether

companies use CSR in order to focus on gaining a larger surplus or to become more ethical oriented,

we will use the neoliberalist approach, that originated from neoclassical school of thought, to examine

the company’s purpose. This approach focuses on outsourcing and the main goal is to gain a surplus,

even though this may violate modern society’s ethical values. As well as deregulate and change the

rule of the market. (Martinez and Garcia, 2016)

The problem this project is going to analyse is how corporations have concentrated on gaining as

much surplus as possible yet not considering working conditions, fair wage and other labour related

issues. Companies, like Nike, use a defensive strategy by claiming they don’t have control over their

contractors, and thus denying the accusations towards them. These claims will be elaborated later on

in the analysis and discussion section. It can be argued that outsourcing is the root of this ethical

dilemma, which brings about competition, cheaper labour or taxes within the country whereas in other

countries you gain more surplus. Outsourcing leads to having contractors in other countries, where

the labour issues that occur are of such substandard as poor working conditions, unfair wage and

other labour related issues. Nike outsourced their production and facilities to low-wage countries


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where we see more than 700 factories. Due to a large number of factories, it is claimed to be hard to

keep count of unethical actions which we will further analyse in the project (Teather, 2005).

PROBLEM FORMULATION

Research question:

Why did ethical values get violated when Nike expanded their production to overseas factories?

Literature Review

In spite of the scholars and theories we have chosen, we are aware that we could have focused our

project differently in order for it to lead towards other directions. There are books and scholars we

were contemplating to use before leaning towards a narrower and clear direction that lead us to our

focus point, which we will elaborate on in this section. Previously, we had contemplated focusing on

the ethics of consumption and the clothing industry, ergo, on its effects such as climate change.

Consumerism, fast fashion, and sustainability would have been our main focuses.

The possible concepts we had considered using consisted mainly of, as previously stated, ethical

consumerism. Subsequently, we will add a short description of what we would have done within

consumerism and ethics. The idea was to focus on the consumer's perspective to understand their

need for an increasing desire to consume and also to focus on the effects this had on the planet. It

interested us what exactly it is that triggered the desire to consume, if they are aware of the damage

increasing consumerism causes to our planet- and more specifically- if they care.

The research we would have used was mainly by Professor Robert M Worcester in his ‘Ethical

Consumerism Research’. This article provides information such as research on companies and their

use of CSR, their priorities, 1,970 face-to-face interviews, 4 group discussions, an analysis of ethical

behaviour and an extended research on ‘what influences buying behaviour?’ , which would have been

perfect for our aim of the study. It also researches ‘what are ethical consumers?’, which describes

with research how individuals classify themselves and what is considered ‘ethical’ in consumerism.

This is something we found interesting to study and that we could have used by comparing the

different opinions of people and separating them into groups of different ages, gender, etc.. We had

also thought of mentioning how propaganda and the media influenced consumers and what group

was more influenced by such modern society we live in, in which it is practically impossible to avoid

propaganda and the media’s power towards influencing people. This would have been all achieved

using interviews, as many as possible, in the form of questionnaires targeting consumers of different


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ages (Worcester, n.d.). Thus, studying ethics from the consumers point of view could have further

understood why humans act in such way and what are its effects on the planet.

Delimitation

This project has used the concept of CSR, and since there is no universal definition, we have used

different definitions, but we are aware that the definitions we have chosen to work with do not show

how to use the concept regarding business ethics. We have therefore applied Dahlsrud (Dahlsrud,

2008) five dimensions of CSR to Aloy Soppe’s ethical framework in our theory. Using different

aspects of CSR makes it easier for the reader to get an understanding of what CSR are, since as

mentioned before, that there are no universal definitions, which also contributed to, that we chose to

use Soppe’s theory in our analysis and concentrated more on CSR in the discussion part.

Using only one case study had limited us to only view business ethics from Nike’s perspective. We

are aware that using only Nike in our case study only gives us one company’s aspect on business

ethics and that we have to be careful about generalizing that every company acts like Nike.

Furthermore, we are also aware that if we used another case, we could have got another aspect of

business ethics. Using several case studies would have meant that neo-liberalism would have been

excluded, since the project had to be narrowed down. Additionally, we have chosen to use a case-

based study for this project's methods, we could have used several other variations of the quantitative

methods. One of these methods would be to make an interview approach, from this we would have

gained knowledge of the society's perspective of multinational companies and their production.

Furthermore, we could have seen how they would react and answer after they have gotten some details

described after hearing some of the scandals that occurred. The reason we did not choose this method

is due to how our project aim had changed into focusing on understanding how ethics in the neoliberal

society is, and not focusing on consumerism. We could also have interviewed some of the workers

that work at Nike overseas factories to get an inside view of working conditions.


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Chapter 2: Methods and Theory

Methods

In order to answer our research question about business ethics in Nike, we first have to understand

what ethics are. In order to this, we have chosen to base our theoretical framework on Dahlsrud five

dimensions on CSR and Aloy Soppe’s theory about ethics. Aloy Soppe gives us three different aspects

within business ethics, which we will use in our case study analysis. Soppe first gives us a description

on finance and ethics, which gives us some background knowledge about how finance and ethics

work in a business aspect and the critique of the neoclassical school of thought from an ethical

perspective. He then gives us our analytical framework with his ethical framework, which is divided

into: virtue ethics, deontological ethics, and teleological ethics.

To analyse our case study, we first have to understand what it is we are going to analyse. In order to

do this, we first give a historical description about the corporation Nike. After this, we present two

scandals regarding Nike sweatshop scandals, the first one is about labour abuse in Vietnam, which

occurred in 1997 and the other in Indonesia in 2011.

In our discussion section, we focus on CSR and how it is used by corporations, and we further

examine outsourcing and neo-liberalism.

Qualitative research methods are going to be used in this project. Qualitative research is after

meaning. The data collected through qualitative research is focused on words and texts, as opposed

to quantitative research, where the focus is on numbers and statistics (Hesse-Biber and Leavy, 2011:

4). To analyse business ethics we chose to use a case study, in order to analyse a specific company

regarding business ethics. A case study is a research strategy within the qualitative paradigm, yet it

is not a research method. The reason for this is that a case study is a decision about what one is going

to study and therefore not a methodological decision (Hesse-Biber and Leavy, 2011: 255). It is not

possible to define case study, due to no agreed-on definitions amongst researchers, though some argue

that a case study is a heuristic device because “it is an approach that focuses one’s attention during

learning, construction, discovery, or problem-solving” (ibid.). The purpose of a case study is to

generate an in-depth understanding of a specific topic (Hesse-Biber and Leavy, 2011: 256), which is

the aim we are going for with the case study, to understand business ethics: what it is and how it

affects the business world.

There are three types of case studies: an intrinsic case study, instrumental case study, and multiple

case study (Hesse-Biber and Leavy, 2011: 258). The case study chosen for this project is the


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instrumental case study. In an instrumental case study, a case is studied to generalize or provide

insight into a larger topic (ibid.). Since this project’s larger topic is business ethics, we use Nike in

our case study to show how outsourcing has contributed to Nike being unethical in their production.

To get a critical view on business ethics, the case this project will examine is one which had issues

regarding labour conditions. ‘’The unique contribution of a case study approach is that it provides the

researcher with a holistic understanding of a problem, issue, or phenomenon within its social context’’

(ibid.). As it is quoted, we gain a holistic understanding of the issues that or project focuses on, which

means the total overview of the situation. The aim is not to crucify Nike in our case study, but to get

an understanding of how ethical issues have changed the company’s ethical values and their code of

conduct.

Furthermore, this project will look at how Corporate Social Responsibility (CSR) is implemented in

Nike’s code of conduct and how CSR has developed. To be able to answer our research question, we

are going to gain knowledge about Neo-classical School of Thought, CSR, ethics in business and

collect data about the case study chosen. CSR is a concept which is an essential part of the project.

We are becoming more ethical in our consumption today and the attention to business ethics is

growing. The reason for this is because of several scandals regarding corporations unethical actions

regarding exploitations of the workforce, child labour, and environmental issues. (Valentine and

Fleischman, 2007). CSR is defined as “... the economic, legal, ethical, and discretionary expectations

that society has or organizations at a given point in time” (ibid). This means that society expects the

companies to be socially and ethically responsible, in addition, CSR also gives companies a positive

image towards the public.

From an Epistemological position, we will use Interpretivism. This is because we are reading theories

that are already existent and we are building upon them. Interpretivism is a theoretical approach that

focuses on subjective experience, small-scale, and seeking meaning (Hesse-Biber and Leavy, 2011:

15). The interpretive approach assumes that meaning is constructed through interactions between

humans or between humans and objects. Researchers working from this tradition see experience and

perspective as important sources of knowledge (Hesse-Biber and Leavy, 2011: 17). Interpretivism is

also associated with the hermeneutic tradition, which is about seeking to understand by interpreting

the meaning that interactions, actions, and objects have for people (ibid.). Furthermore, it argues that

the only way to understand social reality is from the perspective of those involved in it (ibid.).

Throughout our project, we have used an inductive method, which is associated with interpretivism.


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We found our topic about business ethics and did research regarding this topic. Afterwards, we found

a theory that defined business ethics, and with this definition, we were able to analyse the case study.

The empirical data used in this project comes from both primary and secondary sources, and the data

is primarily qualitative data. As mentioned before, qualitative data is generally words and texts, which

is also what we have used in this project (Hesse-Biber and Leavy, 2011: 4). Since this project uses a

case study as a research strategy, most of the data collected come from secondary sources like

newspaper articles and academic journals. The primary sources used in this project are the Universal

Declaration of Human Rights from the UN, which is an official UN document, that every country in

the UN has signed for, and one can, therefore, see this as a reliable and trustworthy source. Primary

sources are e.g. interviews, government records, journals, photographs etc., which is basically first-

hand accounts, but, as mentioned before, we chose not to do other qualitative methods like interviews

and focus groups. This is the reason for the lack of primary sources. We use mainly secondary sources

in this project, due to a lot of the data and evidence that has been gathered for the case study has come

from these sources. The sources that were used to describe Nike’s history and the two scandals were

newspaper articles, academic journals, and websites. We have used newspaper articles as a source of

information regarding the scandals used in the analysis. We have also used different academic

journals to give us an insight in e.g. CSR and Nike. These academic journals are peer-reviewed and

are therefore more reliable, but we are aware that information can be interpreted in different ways by

academics.

In the theory, we are going to use the description of the five dimensions of CSR by Dahlsrud

(Dahlsrud, 2008) as a framework. The Ethical theory of the firm builds upon the framework and is

going to be used in the analysis. The reason behind this is is due to the fact that the ethical theory of

the firm and CSR collaborate on their perspectives of the shareholders, which then gives the reader

large knowledge on the subject regarding the ethics of business. Nevertheless, the ethical theory of

the firm described by Soppe elaborates on the ethical values within the business. These values will

become the main argument of the analysis of the Nike Scandal. The chosen Scholar is objective and

acknowledges philosophers within his writings, which will be further elaborated in the literature

review.


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Theory and Concepts

The concept of Corporate Social Responsibility

The reason that the attention towards ethics and CSR is so important today is because of the recent

scandals regarding different corporations: the suggestion that business values are in decline.

Exploitations of the workforce and other questionable practices has obligated corporations to

emphasize on CSR and on business ethics to prevent future scandals. This is something that

companies which have been involved in scandals have learned. The importance of having a good

relationship with stakeholders, the general public, and the press is huge, not only ethically and

morally, but also financially (Valentine and Fleischman, 2007: 657).

To define the concept of CSR is a hard task. There are several definitions of this concept, and we

have therefore chosen to work with two academic journals: “How Corporate Social Responsibility

is Defined: An Analysis of 37 Definitions” and “Professional Ethical Standards, Corporate Social

Responsibility, and the Perceived Role of Ethics”, and a recognized international organization to help

us define CSR.

Like stated before, CSR has many different definitions. Thirty-seven to be exact, according to the

academic journal “How Corporate Social Responsibility is Defined: an Analysis of 37

Definitions”(Dahlsrud, 2008). As stated by this study, there are five dimensions on CSR:

- The environmental dimension

- The social dimension

- The economic dimension

- The stakeholder dimension

- The voluntariness dimension

Out of these five dimensions, the study used a coding scheme on google to examine which of these

five dimensions were used most in different definitions. The stakeholder and social dimension had

the highest scores, followed by the economic dimension (ibid). The dimensions, which this project

will examine are the following: the stakeholder dimension, the social dimension, and the economic

dimension. Therefore, the definition this project will use regarding CSR concerns the stakeholder,

social and economic dimensions. The reason why only three dimensions are chosen is due to the fact

that they go hand in hand with the ethical values which are described by Soppe.


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A definition of CSR has been provided by the World Business Council for, Sustainable Development,

which is a CEO-led organization that urges the global business community to create a sustainable

future for business, society and the environment. The organization was created in 1992 and have over

200 member companies that represent all business sectors, all continents and have a combined

revenue of $US 7 trillion. The organization has strong relationships with stakeholders, which helps

debates and policy changes in favor of sustainable development solutions (usbcsd.org, n.d.).

Their definition of CSR is: "Corporate Social Responsibility is the continuing commitment by

business to contribute to economic development while improving the quality of life of the workforce

and their families as well as of the community and society at large." (Wbcsd.org, n.d.)

WBCSD concentrates on three fundamental pillars regarding sustainable development: economic

growth, ecological balance, and social progress (Wbcsd.or g, n.d.). WBCSD sees CSR as a tool for

companies to use to live up to their responsibilities towards the global citizens and the local

communities in a globalized world, and it is also something that economically pays off for the

companies (ibid). The WBCSD message is: “business is not divorced from the rest of society. The

two are interdependent and it must be ensured, through mutual understanding and responsible

behavior, that business’s role in building a better future is recognized and encouraged by society”

(ibid)

The authors of the journal “Professional Ethical Standards, Corporate Social Responsibility, and the

Perceived Role of Ethics and Social Responsibility” define CSR as: “the economic, legal, ethical,

and discretionary expectancies that society has of organizations at a given point of time” (Valentine

and Fleischman, 2007: 657)

These expectancies are driven by contracts between companies and society, which the companies

honor by addressing the societal challenges and providing assistance when needed to the stakeholders.

Therefore, social responsibility is viewed as a bundle of ideas and actions utilized by companies to

facilitate advantageous relationships with stakeholders and improve welfare (ibid).

From these different definitions, we can conclude that CSR has five dimensions. On the other hand,

from the two definitions provided above, we can conclude that CSR concerns the responsibility from

the companies to be ethical towards their stakeholders and the environment. Additionally, the public


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and stakeholders expect the companies to be ethical and provide for a sustainable future. If the

companies fail to do so, it will affect them negatively on the economic point.

The Neoclassical School of Thought

The term ‘neoclassical’ has been first brought into economics by Thorstein Veblen. This has been the

introduction to an additional school of thought, though such school was not Veblen’s target (Lawson,

2013: 947).

The neoclassical school of thought has the effect on our modern society, where it introduced many

academic analytical tools in economics, it gave many theories and policy stances Thus, it has

presented a set range of ideas, per say, which influences our society (ibid). The theory relates to the

present because of the introduction by Smith and Ricardo, where they focus on social relations and

in social relations of production as well as the concept of outsourcing production to gain surplus(T.

Lawson, p.962).

Where the neoclassical school of thought originated neoliberalism, which will be one of the focuses

later in the discussion part of this project. The neoliberalist approach describes how companies seek

to expand their surplus as a main focus. Some key concepts are Deregulation and The Rule of the

market. Deregulation reduced the government's regulation and immobilizes the environmental safety

within a working place. In contrast, the Rule of the market highlights the profits of ever gaining more

surplus which will be beneficial for everyone. This will be analyzed and discussed later in the project

(Martinez and Garcia, 2016).

Ethical Theory of the Firm

The ethical theory of the firm enlightens in how specific issues can be ethically analyzed, shareholders

is focused on in the property rights as the residual and the residual profit. The company is therefore

set as a direct investment project converting the input into output. From this perspective, the company

is not seen as individual capitalist but rather as an institution producing cash flow, looking at it this

way it removes social responsibility. By implementing this we remove the relationship between

social responsibility and efficiency. (Soppe, 2002: 2).

The introduction of money as a currency into economical transaction distanced humans from the

traditional implications of trade (Soppe, 2002: 2). From this we know how classical trade used to be,


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beforehand you traded commodities between each other instead of buying the commodity, for

instance, a farmer trades some milk for some clothes.

This form went extinct you may say when money became globalized, turning culture into evolving

leaderships whenever economic growth needed to occur. Making money for the sake of money is

now an acceptable way of life. It formerly was seen as a high-class lifestyle with labour just producing

a commodity, now workers have more responsibility in developing more sustainable ways to produce

commodities. Additionally, the securitization process emerged with a focus on the international

financial markets, where banks emerged as not just a saving method but an investment opportunity.

The important factor for this project will be the ‘civil society’ that focuses on social welfare and the

responsibility within. In recent years. Europe particularly experienced a privatization of industries

that used to belong to the public sector. This increased the competition of private industries which

ultimately lead to the control of the public sector (Soppe, 2002:3). Though these industries have

realized that they have more responsibility than just maintaining cash flow, they have social

responsibilities within the community as well.

Throughout the project, we will use the ethical framework of the theory of the firm, which will be

split into three different sections: the virtue ethics, deontological ethics, and teleological ethics.

Virtue ethics:

Soppe draws on Slote ‘’Virtue ethics is described by Slote (1997, p. 177) as all ethics which are not

based on moral laws, rules and or principles” (Soppe, 2002:11)

This signifies that by looking into the virtue ethics we remove the moral of economical aspect and

we use the individual perspective on how to become virtuous.

Aristotle was one of the early scholars that described the importance of practical reasoning, leading

to the Christian perspective of human conduct (Soppe, 2002:12). Furthermore, virtue ethics draws

upon motivations of the individual moral agent. According to Aristotle virtue is defined as a desirable

character trait, for example courage, which lies between two ‘extremes’: rashness and cowardice. The

virtuous agents tries to find a balance in ethical decision-making. The aim is to do the right thing.

(Patel, 2016). Closely related to the practical reasoning is the Aristotelian discussion, who discusses

that the same product with different dimensions needs to be comparable, which is a problem whenever

commensurability is exchanged. Aristotle further argued and divided economic value into Exchange

value and Use value. An important note to consider is that whenever exchange value is introduced


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in the pricing of goods or labour, ethics becomes less relevant in its transaction. (Soppe, 2002:13)

When looking at the neoclassical paradigm of the financial market economy, the use of exchange

values as prices makes it a goal to make money. Solomon further elaborates on Aristotle with the

implementation of six different dimensions within virtue ethics. Firstly, we see the question of

community and how self-interest of members is partially identical to the majority of the group.

Excellence is the second introduction, where it is stated that it is not enough to just do nothing wrong.

Thirdly, role identity, where all ethics are seen as contextual and elaborates on the issue with the

larger theories transcending into context and ends up with vacuity. The fourth element is integrity,

the linchpin of all virtues. Good judgement is the fifth element, which gives careful consideration to

the circumstances with the people involved. Finally, Solomon conveys the concept holism, where he

critiques the tunnelled vision of business, which is abutment by the narrow business curriculum and

the daily rhetoric corporate community (Soppe, 2002:13).

Deontological ethics

Deontological ethics originates from the Greek word deon, which translated to English means duty

(Soppe, 2002: 13). In deontological ethics, actions from humans are motivated by duties and are

‘enforced goodness’. The moral responsibility is both individual and collective (See Appendix Figure

4,2).

Soppe draws upon Kant’s ethical theory in Kant’s Fundamental Principles of the Metaphysics of

Morals (1785), which is the most acknowledged deontological theory. In deontological ethics duty,

rather than virtue, is the fundamental moral category (Soppe, 2002:13). Kant argues that the moral

rules as imperatives express what human beings ought to do either hypothetically or categorically,

which is a key feature within the imperatives of universalizability. Universalizability is that if

someone says that an act is right for one person in a situation, then it must be right for all humans in

that specific situation (ibid.). Thus, if the specific act is acceptable in the society, then it must be right.

Soppe, therefore, asks the question: “What if everyone acted as I do?” (ibid.). Raising the question of

whether if you do something that seems right in the individual's perspective it might not be the correct

act for another. Which leads to an important characteristic of Kantian ethics about human rights and

respect for other persons. Kant defined a human right as: “a moral capacity to bind others” (ibid).

This can be described as humans have a moral obligation to be good towards other humans. These

rights are then divided into: innate, which Kant describe as we belong to everyone and are “by nature”

independent of any juridical act. Kant argues that there is only one fundamental innate right, which


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is the right to be free from the will of others, as long as this is compatible with similar freedom for

all. The second and last right is acquired, which is dependent on some human convention or juridical

act (ibid).

Kant, in his “Metaphysics of Morals”, questions whether ethics (similar to virtues) and the legal

system are based on metaphysical thinking. His answer to this questions is a clear yes. Virtues are

written in terms of duties, based on the legal system of a country (ibid). Duty is necessary because of

the existing legal control of discretion. It is a moral imperative that forces rational human beings, who

are a part of Nature, into the armour of duties (ibid). He, therefore, distinguishes between “duties

towards oneself and duties towards others”. Kant gives the example of a duty to oneself as opinions

on suicide and lying (Soppe, 2002: 14). He further argues that we have social duties, where the first

is to love others: love as a feeling towards well doing and beneficence towards other humans (ibid.).

Teleological Ethics

Teleological ethics (telos = goal) is a theory stating that the consequences of a moral act determine

the act’s worth and correctness. (Soppe, 2002:14)

The perception of ethics in this theory is the rightness or wrongness of an act which is judged with

reference to some defined end results, that is regarded as good or desirable (ibid). Thus, as opposed

to the two other ethics described previously, the ethics in teleological ethics is judged to be either

right or wrong after the act. In the modern viewpoint, the main strength of the teleological approach

is how it processes the reflections of all optional consequences of a given act. This thinking gives the

birth of neutral and objective ethics. (Soppe, 2002:14) Figure 4.2 (see appendix), summarizes the

ethical framework described in the sections above. The teleological approach gives insight on how

human acts consist within the consequences, rather than duties and inner freedom which is seen in

the virtue and deontological ethics (Soppe, 2002:15). Further on we see human behaviour is

determined by rationality in the teleological concept, and wealth is gained by optimizing utility

functions. The teleological approach sees wealth as a collective problem whereas in the virtue ethics

the moral is more individual based.


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Chapter 3

The Nike Case study

3.1 Introduction to the case

The company we have chosen to focus on as a case study for this project is Nike. This is because it

is one of the most well-known multinational company in the world, with an exceptionally high

demand for its products. The structure will proceed as follows: firstly, we will introduce Nike’s

history and origination in order to be fully informed about the company. Subsequently, we will

proceed to research how the company works as a business. Further on we will evaluate examples of

scandals where the company tried to deflect negativity to avoid losing the trust from their consumers,

they used corporate social responsibility (CSR) to do this. Additionally, we will use these scandals in

our analysis section where the Ethical values will be implemented to give different reasons on how

these scandals occurred.

It must be clear that the aim of this study is neither to criticize or encourage Nike’s history but to be

examined in a way to evaluate the company’s behaviours and the explanations of such actions. It is

fundamental to know that athletic footwear encompasses different ‘harmful’ sectors. The reason for

this is that it is an extensive GVC (Global Value Chain) that is associated with different sectors. The

first is the agro-extractive, which includes: leather, crude oil, plastic, rubber, etc., the second is

industrial, which encompasses the shoe manufacturing process. Service is the last sector, which is

referred to as the marketing and retailing of the footwear. (Lim et Phillips, 2008: 144). Regardless,

we will mainly focus on the manufacturing process and all the ethics it encompasses.

3.2 The history of Nike

Nike is a company which was developed by Phil Knight. It all started in the back of his van, which

later turned out to become the multinational company that it is today. Nike originated from the minds

of two individuals: from Bill Bowerman’s idea of lighter and more durable racing shoes and Knight’s

love and passion for athletics. In the early 1960’s, Knight wrote a semester project based on

Bowerman’s idea of lighter running shoes: they wanted to craft the shoes in Japan and ship them into

the United States of America. The plan was set in motion when Knight visited Japan in the 1963

(Xroads.virginia.edu. ,2016).


18

Knight found a shoe manufacturer in Japan that should namely Tiger shoes and started the company

Blue Ribbon Sports in the US. One of the most important years in Nike’s history was 1971, it was

this year Knight changed the company's name from Blue Ribbon Sports to Nike and established the

Swoosh trademark. (Xroads.virginia.edu, 2016). It was also in the 1970’s when Nike became a

worldwide company with sales reaching 270M$, many believe that this was due to the fitness

revolution that occurred in the time-period.

The history of Nike might seem as an issue free company but this changed in the 1990’s where the

Sweatshop scandals began to be open to the public, this will be further elaborated in the project. Thus,

in spite of Nike’s surpass, not all the company’s moves were as positive: CBS documentaries in 1996

came out to the public consisted of information on Nike’s factories with the mere goal of outlining

agreements in order to eliminate such ‘sweatshops’. In response, Nike’s reaction was to defend its

CSR activity and become part of the Apparel Industry Partnership (AIP). The AIP is an agreement,

which contains certain rules to eliminate issues such as ‘sweatshops’ in the United States and

elsewhere. The AIP has a set of certain principles that describe fundamental working conditions

(United States Department of Labour, 1997). Furthermore, Nike denied visits from NGO’s and

Global Exchange to factories or the monitoring firm. This made its image slump, though, in 1997, it

deteriorated additionally: with a visit to its Vietnamese factories. The U.S-Based Vietnam Labour

watch visited and publicized a study promoted by Global Exchange and the New York Times. This

issue encompassed details on the conditions workers suffered such as ‘unsafe heat, exhaustion, poor

nutrition, and beatings‘. Nike suffered consequences resulting from this publication, more

specifically, it suffered from newspapers reports from The Oregonian and Doonesbury, and Anti-

Nike groups, all eager for positive changes (Lim et Phillips, 2008: 147).

In 1998, a highlight for CSR in Nike occurred: Phil Knight became committed to improving the

company’s labour performance. After its fulfilments, the company implemented new CSR guidelines

that stopped numerous critiques, which lead to the introduction of ‘Future Vision’. Future Vision is

a GVC that provides exclusive contractors a relationship and safe footwear orders which lower the

economic competition and motivates the CSR to persist submissive (ibid.). Nike attempted to endorse

its CSR code by hiring Atlanta Major, civil rights leader, and Andrew Young, U.N ambassador. In

1997, it was concluded that Nike was doing better yet it was still not enough. Hence, the protests

continued, which consisted of anti-Nike protests occurring in 50 cities and in 11 additional countries,

as well as strikes in Indonesia and in Vietnam (ibid.).


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Future Vision

Future Vision, by uniting contractors into five different ‘Manufacturing Leadership Partnerships’,

rebuilt the supply chain. This meant that the contractors were not differentiated according to

‘developed, developing, or volume producers (Lim et Phillips, 2008: 148). The company then

authorized the suppliers to perform numerous roles through their subordinate connections with Asia.

Nike then had a collaborative partnership- it portrayed interdependence, compassion, and trust. Thus,

Nike created a GVC characterized by less though with more cable manufacturers which shared duties

in Research and Development (R&D), manufacturing and CSR. (ibid.) Future Vision had another

important characteristic which kept the relationship between Nike and the MLP certain. Such

characteristic consisted of a contract model that gave every MLP a select manufacturing relationship

and furthermore minimum monthly orders. Thus, the extension of partner factories depended on

fulfilling the CSR guidelines, quality, price, and delivery. (Lim et Phillips, 2008: 149) Thereby,

suppliers applied CSR to retain MLP status and compete for labour, the repetition of such decency

grew into a custom and altered their stance positively. So much so that Nike’s new governance model

was aimed to update their CSR. (Lim et Phillips, 2008: 150)

3.3 The Business Nike

Nike is a company, which is known for its outsourcing and fragmentation. It is a company, which has

never owned factories yet has become one of the most important footwear companies in the world.

Hence, it has outsourced labour-intensive productions, which has grown to be vastly profitable.

(Merk, 2015: 116) Despite its profits, its outsourcing has also given the company many problems.

Ergo, the company dodged regulated labour markets of developed countries through the exclusion of

management control over labour forces to third parties (Merk, 2015: 118).

They had first started contracting manufacturers in Japan, though they shifted to South Korea due to

the rising prices. No more than one year later, these two countries were assembling inexpensive, high

end and mass-market shoes. (Lim et Phillips, 2008: 144). In spite of that, these countries began to

raise its prices and improve its democratic reform and labour activism, which lead to the relocation

of Nike’s GVC to Indonesia, China, Thailand, and Vietnam. Even with these changes, Nike continued

with the same Taiwanese and Korean subcontractors. (Lim et Phillips, 2008: 144). In the 1960’s

brands were the owners of the manufacturing sites. The shift began in the 1970’s, were an essential

rearrangement occurred, and Nike, as well as other companies, had started to implement a neo-Fordist

mode of production. This meant that the companies contracted manufacturers that employed low


20

skilled and low wage labour, mainly in Asia. (Lim et Phillips, 2008: 144). ‘Fordist’ factories are

characterized by the mental and manual work occurring in distinct parts of a factory (Merk, 124). As

Braverman explains: “like a hand, watched, corrected, and controlled by a distant brain. “ (Merk,

2015:116). Nike, as well as many different sourcing companies, train and teach their suppliers to

encounter international standards so that one specific model of shoe manufactured in Indonesia turns

out exactly the same as another of the same exact model manufactured in China. Now, in the present

decentralized setting, on a global standing, the same process prevails (Merk, 2015:124).

3.4 The Nike Scandals

Through the first decades of the company, Nike was able to ignore the bad working conditions

resulting from the supply chain. Although, in the 1990’s arose a new problem: CSR. The reports of

substandard working conditions became apparent to organized anti-sweatshops campaigns and soon

also to social media (Merk, 2015: 126). In the 1990’s, Nike began to face a new important issue that

changed many aspects of the company: CSR. Nike had become a huge brand, though the problem

was that its outsourcing was out of hand: Nike depended on the supplier’s actions. The problem grew

in the 1990’s when the suppliers were charged with “wage law violations, child labour, excessive

overtime, physical abuse, and unsafe working conditions. “ (Lim et Phillips, 2008: 145)

Various reports and scandals had displayed violations of ILO (International Labour Organization)

Conventions: ‘ILO Convention n.29, Convention n.98, Convention n.100, Convention n.105,

Convention n.111, Convention n.138’. All named Conventions came out to the public. Examples of

such Conventions are: forced labour, discrimination, minimum age employment, etc. Other issues

found in the Nike reports consisted of long working weeks that could go up to 70 hours, wages even

lower that the national laws permit, the presence of abuse both verbal and physical from management,

unsafe working conditions, the absence of environmental guidelines, short-term contracts and even

the lack of contracts overall. (Merk, 2015:126). Nike’s initial reaction was to deny such accusations

and all responsibility. It assured, “we don’t pay anybody at the factories and we don’t set policy within

the factories: it is their [the subcontractor's] business to run” (Merk, 2015:126). Nike published a 108-

page report, where it listed the 700 factories that produce its footwear and clothing. The report showed

cases of abuses, including forced overtime and restricted access to water. Furthermore, it shows

serious problems, especially in its Asian factories, with ‘abusive treatment’, physical and verbal, in

more than a quarter of its south Asian factories (Teather, 2005).


21

Between 25% and 50% of the factories in the region restrict access to toilets and drinking water

during the workday. The same percentage deny workers at least one day off in seven. In more than

half of Nike's factories, the report said, employees worked more than 60 hours a week. In up to 25%,

workers refusing to do overtime were punished. Wages were also below the legal minimum at up to

25% of factories. (Teather, 2005)

Michael Posner, the executive director of the organization Human Rights First, praised the report and

Nike for its transparency. He argued that the report was an ‘important step forward’(ibid.).

Nike joined a group called the Fair Labour Association, which is a group that includes other footwear

and clothing makers, NGOs and universities. The group conducts independent audits designed to

improve standards across the industry. Nike said in a statement in the report, that it needed further

cooperation with other companies in the industry (ibid.):

"We do not believe Nike has the power to single-handedly solve the issues at stake,”

3.5 Nike’s Corporate Social responsibility and Code of Conduct.

In 2001, Nike published their first corporate social responsibility report, which was aimed to assess

and impact on how the corporation runs the business. The report included detailed efforts on

developing environmental sustainability, managing global labour compliance and the company's

involvement in local communities. (Nike Inc., 2001)

We have only chosen the first CSR report in this project because it started Nike’s ethical development.

Philip Knight focuses very much on two areas in the report, natural environment, and labour

compliance. They have since 1998 had sustainable goals for the environment, the company’s factories

was to reduce pollution and produce re-manufactured materials in their products. To aid in the

monitoring of their environmental issues, Nike was one of only four companies that joined World

Wildlife Fund’s Climate Savers program (Nike Inc., 2001)

Additionally, Nike developed a special team of employees whose sole purpose was to monitor labour

conditions in their contract factory sites throughout the world, they also monitored wage and the

health issues that appeared in the scandals. In this area, Nike joined the Global Alliance for Workers

and Communities with a five-year commitment and 7.8 million$ investment. (Nike Inc., 2001).

When referring to CSR, athletic footwear is a good example for studying conflict because of the

change there had been from the 1960’s to the 1970’s. There had been a shift in the sector, a change


22

from direct ownership of factories, which later converted into a decentralized and market-oriented

which lead to a tough successful CSR fulfilment: this can be seen in the relationship between Nike

and its cooperation with its suppliers (Lim et Phillips, 2008:144). Then, Nike started to be publicly

critiqued by this code. Its first significant critique came in 1992 from Harper’s Monthly article by

Jeff Ballinger. Ballinger then publicized information of a young female Indonesian employee of a

Korean-based subcontracted of Nikes’. Ballinger explained how she earned 14 cents per hour and

worked six days a week: ten and a half hours per day. There had been also other reports on the course

at that time: such ones that assured physical abuse and the subjection to toxic substances. (Lim et

Phillips, 2008:145).

Nike’s code of conduct in 1992 included rules that demanded subcontractors to obey with local laws

that supervised wages and working conditions and took note of compliance. At that point, contractors

were obliged to use environmentally safe practices. They also had no right to discriminate for ‘race,

gender, religion, age, ethnic origin, or sexual orientation. (Lim et Phillips, 2008: 146). Creating the

code of conduct resulted as an easy task, though implementing it had not become one of such. The

reason was Nike’s market-oriented GVC. There were three different types of independently owned

and operated factories were present in the production system. These three consisted of:’ developed

partners’, ‘volume producers’, and ‘developing sources’. (Lim et Phillips, 2008: 146).

‘Developed partners’ were the factories that prevailed with advanced technology and modern

manufacturing skills. They were accountable for producing Nike’s latest and inexpensive products

for cheap retail prices. (Lim et Phillips, 2008: 146)

‘Volume producers’ consisted of the factories which were characterized by large size and large

capacity. These factories were mass producers, capable of producing from 70,000 to 85,000 pairs of

shoes per day. (Lim et Phillips, 2008: 146)

‘Developing sources’: these factories were located in Thailand, Indonesia, China. They branched out

Nikes gathering into areas with even lower labour costs. They had only basic manufacturing skills,

yet they effectively stimulated the responsibility of their production capability. (Lim et Phillips,

2008: 146)

Nike took advantage of the three separate subcontracting system. It put the three factories in

opposition to each other and ended relations with such suppliers that were unsuccessful in meeting

product performance and price guidelines. (Lim et Phillips, 2008:146)


23

In spite of economic excellence, the subcontracting system condemned Nike’s code of conduct. This

was because the buyer was reasoning the possibility of not buying if suppliers price was high and

thus this pressure made the code of conduct be less imposed. Nike was also unsettled about the option

of the subcontractors to switch to another buyer in order to attain a superior economic agreement.

(Lim et Phillips, 2008:146). Due to all this, Nike did not enforce correctly its code of conduct: this

brought, even more, critiques and public pressure increased. Nike received critiques from the New

York Times and even faced criticism from the Interfaith center of Corporate Responsibility, the

General Board of Pension, and Health Benefits of the United Methodist Church. (Lim et Phillips,

2008:146)

3.5 The summarizing of Nike

With the case of Nike, we can conclude that it has issued decisions in order to solve problems such

as a negative image to the public and criticisms towards their actions. It is shown how as corporate

transparency grows, the company is obliged to change and make certain ethical decisions, which are

mainly between society and business. (DeTienne and Lewis, 2005:373)

There have been many changes in the company’s supply chain, for instance, Nike has upsized its

supplier issues to ‘working conditions, environmental protection, and community welfare’. Despite

the fact that it had decided on a CSR code of conduct, it had not easily or rapidly implemented it,

which is because it used a market-oriented manufacturing system. Nike’s solution was to change from

an ‘arm’s-length’ contracting to a ‘collaborative partnership’, which indicates that social legitimacy

results in adjustments in the GVC. The partnership implemented a relief to the suppliers that suffered

from price pressure and worries about being substituted for cheaper competitors. (Lim et Phillips,

2008:152). On the other hand, contractor’s also had positive changes because of the certainty of

minimum orders which meant that community morality was introduced, something that is an

indication of a solid and a correct implementation of the CSR code dedication. (Lim et Phillips,

2008:153).

Positive changes

The contractors had gone from ‘conditional morality’, because they followed CSR for order and

supplier purposes, to implanting a ‘community morality’ where CSR is contemplated as virtuous

itself. Nike had cleared their bad image by its adjustments, this was done mainly by Future Vision

and through the changed within the contractor base towards CSR commitments.


24

The abundant CSR improvements can make us reconsider what are the real reasons for such change,

and weather they are purely due to Nike’s monitoring and restrictions of its suppliers. Though we can

prove that external, third-party, and internal monitoring take place, it is not enough to completely

justify such shift in supplier behaviour or even for the contractor’s extra CSR codes. Nike is now a

company in which two inspections per year, in each active factory, is accepted to monitor, track, and

assist. (Lim et Phillips, 2008:152).


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Chapter 4

Analysis

In this section, we are going to analyse the Nike sweatshop scandal that occurred in the 1990’s. The

reason behind our choosing of Nike is due to its importance in the multinational globalized society

and it becoming one of the leaders in ethical value (Csrwire.com. 2016). The analysis will be

structured with a brief introduction to the scandal and its history within Nike, next, we will implement

the concepts that are presented in CSR and the ethical theory of the firm. Even though CSR has five

different concepts or dimensions there are only three that are valuable for this project. Thus, the

analysis will be split into three different sectors with different outcomes.

The scandal started with an inspection that happened in January for Nike’s internal use only. There

were reported many unsafe conditions at one of the shoe factories in Vietnam. Ernst & Young, who

were the accounting firm, wrote that workers at the factory near Ho Chi Minh City reported that

employees were forced to work 65 hours a week, which is for more than Vietnamese law allows, for

only 10 $ a week. It also found that the employees were exposed to carcinogens that exceeded local

legal standards by 177 times and 77 % if the employees suffered from respiratory problems

(Greenhouse, 1997). Nike is not the only American manufacturer who has problems in overseas

plants, but they are the only one able to do something significant about it since it earned about 800

million $ on last year's sales. (1997) (ibid)

A Nike spokesman, named Vada Manager, said after several allegations that: ''We believe that we

look after the interests of our workers. There is a growing body of documentation, that indicates that

Nike workers earn superior wages and manufacture product under superior conditions.'' (ibid). He

and other Nike officials said that the company had taking actions to improve working conditions. It

had cut overtime, improved safety and ventilation and reduced the use of toxic chemicals. ''This shows

our system of monitoring works,'' Mr. Manager said. ''We have uncovered these issues clearly before

anyone else, and we have moved fairly expeditiously to correct them.'' (ibid). While Nike has been

heavily critiqued over working conditions such as low pay and working long hours, the report from

Ernst & Young report showed another front for Nike’s critiques: air quality in its factories. The report

showed, as mentioned before, that carcinogen was in the air at different factories at 6 to 177 times the

amount allowed by the Vietnamese regulations, which is actually 4 times more strict as American

standards. Extended exposure to carcinogen is known to cause damage to the liver, kidneys and

central nervous system (ibid).


26

Twenty-five miles northeast of Ho Chi Minh City is the Tae Kwang Vina factory, which was also

inspected by Ernst & Young. The factory is one of Nike’s biggest plants at that time, and it has 9,200

workers and makes 400,000 shoes each month. The report shows that thousands of young women,

most under the age of 25, worked 10,5 hours each day, six days a week, in excessive heat and in foul

air, for only a little over 10$ a week. Furthermore, the report showed that workers with skin or

breathing problems were not moved to another department free of chemicals, and more than half of

the employees who dealt with these dangerous chemicals did not wear protective gloves or masks,

even in highly hazardous places. The workers did not know that the chemicals they were working

with were dangerous (ibid).

Dara O’Rourke, an environmental consultant for the United Nations Industrial Development

Organization, made the report available. His job involves inspecting factories in Vietnam. The reason

for making the report public was that he wanted to pressure Nike to treat their workers better, and

because he thought that Ernst & Young let Nike off easy. After his own inspection, Rourke said that

the wages at the plant were the lowest of any of the 50 factories he visited in Vietnam and that working

conditions were well below average (ibid). Tien Nguyen, Nike’s labour practices manager in

Vietnam, told the press at a news conference that as soon as Ernst & Young’s report got published,

the company had taken steps to improve working conditions. For instance, the number of working

hours were reduced from 65 to 40 hours per week, and many more fans were installed to prevent

hazardous working conditions. Mr. Nguyen also acknowledged that the company had not done any

measures to determine if the chemical levels were low enough to meet the legal standards (ibid).

Nike’s director of labour relations, Dusty Kidd, said that ''it's markedly better than shoe factories in

the United States. The shoe factories in Vietnam are among the most modern in the world. The

factories there are excellent factories, but there are a lot of things they could get better.'' (ibid)

Mr. O’Rourke, who visited the factory three times as part of his United Nations duties, said that many

workers still failed to wear protective gear, that the wages remained very low and that the managers

still harassed the workers. He also critiqued the Ernst & Young report, which concluded that most

employees were happy with the wages and working conditions. He argued that the workers whom

Ernst & Young interviewed were scared to speak the truth, and the interviews the conducted found

much discontent (ibid).


27

Indonesia

Workers in Indonesia, who produce Converse sneakers, say that their supervisors throw shoes at them,

physically and verbally abuses them. Nike admits that such abuses occur among some of the

contractors, but says there is little that they can do to stop it (The Huffington Post, 2011).

Dozens of workers were interviewed by the Associate Press and these interviews showed that Nike

has far to go to meet the standards the company set for itself a decade ago to end its reliance on

sweatshop labour. One female worker, who stayed anonymous out of fear, said that they were

powerless and that their only choice is to stay and suffer, because if they speak out about the abuses,

they will get fired (ibid).The factory has around 10,000 workers, who are mostly females, and they

only earn around 50 cents per hour. That salary gives them enough to buy food and bunkhouse-type

lodging, but little else. Some of the workers said that they are being hit and scratched in their arms.

Others said that they were fired after filing complaints (ibid).

“They throw shoes and other things at us,” said a 23-year-old woman in the embroidery division.

“They growl and slap us when they get angry” (ibid)

Mira Agustina, a 30-year old woman who was fired in 2009 for taking a sick leave, even though she

had a doctor’s note said in an interview that it was a horrible job, “Our bosses pointed their feet at

us, calling us names like dog, pig or monkey.” (ibid)

At another factory located in outside Jakarta, another Taiwanese contractor making Converse shoes,

a supervisor ordered six female workers to stand outside in the blazing sun because they could not

meet their goal of completing 60 dozen pairs of shoes. “They were crying and allowed to continue

their job only after two hours under the sun,” said Ujang Suhendi, 47, a worker at a warehouse in the

factory (ibid). The company own inquiries found workers at two factories, who were subjected to

some serious physical and verbal abuse including the aforementioned punishment, where workers

were forced to stand in the sun, according to a Nike executive who oversees the company’s efforts to

improve working conditions (ibid). An internal report from Nike showed that almost two-thirds of

168 factories making Converse products worldwide fail to meet Nike’s own standards for contract

manufacturers. Twelve of them are in the serious category, where problems like illegally working

hours and denying access to Nike inspectors occur. Nike claimed that they were not aware of the

physical abuse occurring at those factories. Ninety-seven of the factories are in a category where no

progress is made regarding improving problems ranging from isolated verbal harassment to paying


28

less than the minimum wage. Furthermore, six factories have not even been audited by Nike. Nike

defended itself by blaming the pre-existing licenses to produce Converse goods and argues that it

prevents the parent company from inspecting factories or introducing its own code of conduct (ibid).

About the license agreements Nike stated:

“We have been working every time we can to renew those agreements or change those agreements

or to cease those agreements and to ensure that when we do new agreements we get more ability to

influence the licensee and their subcontractors much more directly” (ibid)

This statement is critiqued by some corporate experts, who also question whether Nike is doing

everything they can:

“I simply find it impossible that a company of the size and market power of Nike is impotent in

persuading a local factory in Indonesia or anywhere else in meeting its code of conduct,” (ibid) -

Prakash Sethi, a corporate strategy professor at Baruch College at the City University of New York.

Critiques further argue that companies that outsource their manufacturing to the lowest-cost countries,

keep prices down but allows apparel, electronics and toy companies to reduce their accountability for

the bad working conditions that occur in those factories. Even if the concern about sweatshop labour

has increased, some of the contractors just move their operations to more remote areas, which is

further away from international and local watchdogs. An example of this can be seen in Pou Chen,

which is the largest Converse factory, and it is located in a hilly city where the minimum wage is way

below the national average. This place can only be reached by car, which takes around five hours

across bumpy, wimpy roads (ibid). After years of critique over sweatshop labour at factories abroad,

Nike, in 2005, became the first major apparel company to disclose the names and locations of its

factories abroad. Nike has not published the locations of its factories making its Converse products

yet, though had planned to do this by the end of 2011 (ibid).

Nike Report

After the scandals in the 1990s that led to protesting against Nike from its consumers, the CEO Phil

Knight made a public speech in 1998 promising change (Newell, 2015). A report by Tim Connor

(Connor, 2001) looked at the promises made and if they were accomplished. Phil Knight promised

six main improvements (Connor, 2001: 1-2):


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All Nike shoe factories will meet the U.S. Occupational Safety and Health Administration’s

(OSHA) standards in indoor air quality

The minimum age for Nike factory workers will be raised to eighteen for footwear factories

and sixteen for apparel factories

Nike will include non-government organizations in its factory monitoring, with summaries of

that monitoring released to the public.

Nike will expand its worker education program, making free high school equivalency courses

available to all workers in Nike footwear factories

Nike will expand its micro-enterprise loan program to benefit four thousand families in

Vietnam, Indonesia, Pakistan, and Thailand.

Funding university research and open forums on responsible business practices, including

programs at four universities in the 1998–99 academic year.

Besides these six improvements, labour right groups had made some demands to Nike, which the

company ignored. These demands can be divided into six categories (Conner, 2001: 3-6):

1st demand: Protect workers who speak honestly about factory conditions

Nike has a bad reputation on protecting workers who blow the whistle on bad working conditions in

Nike’s factories overseas. This has resulted in many workers keeping silent fearing that they will lose

their jobs (Connor, 2001: 3).

2nd demand: Regular, Transparent, Independent and Confidential Procedures for Monitoring

Factories and Investigating Worker Complaints.

Activists have asked Nike to allow rights groups to educate workers about their rights and to ensure

workers that they can file complaints without getting fired. In spite of this, Nike gave the

responsibility to the factories to educate workers about Nike’s code of conduct. The problem with

this is that a majority of Nike workers do not understand their rights under Nike’s code of conduct,

and they do not trust the factory owners which this is something all independent research has shown

(Connor, 2001: 3).

3rd Demand: Decent Wages

Nike has rejected that they pay workers a living wage, which includes providing for a small family

with adequate diet and housing and other basic needs. Nike uses instead statistics selectively and


30

gives a misleading impression that the current wages it pays to its workers are fair and adequate, even

though that many workers struggle to survive on these wages, which are barely enough to cover their

individual needs, let alone those of their family (Connor, 2001: 4).

4th demand: Reasonable Working Hours

Nike workers are still being forced to work up to 70 hours per week, and if they refuse to do so, they

are being humiliated or threatened with being fired. It also reported that it is extremely difficult to

obtain sick leave and their annual leave is often refused (Connor, 2001: 4).

5th demand: Safe and Healthy Workplaces

Nike has made some important progress in reducing toxic chemicals use in the production. Although

there have been few occasions where independent health and safety experts have access to Nike

factories. There has been found serious hazardous working environments with high level of exposure

to toxic chemicals, and lack of protective equipment. There is also evidence that workers suffer stress

from spending large amount of time in high pressure and frequently abusive work environments

(Connor, 2001: 4)

6th demand: Respect for Workers’ Right to Freedom of Association

A big part of Nike’s production are made in countries like China, where independent unions are

illegal. Nike has refused to put pressure on China’s government to allow workers to organize.

Furthermore, Nike has failed to prevent the suppression of unions in some of its own contract

factories. Nike has on few occasions taking steps towards these rights, but only because of massive

public pressure (Connor, 2001: 5).

Tim Connor argues that Nike has treated the sweatshop allegations as an issue of public relations

rather than a human rights issue. The promises made by Knight was an attempt from the company to

change the media focus to issues the company was willing to address, instead of issues regarding

forced overtime and suppression of workers’ right. The projects announced by Knight had only a little

benefit to the workers. One of the most important promises was to allow NGOs to monitor factories

and release these to the public has not been fulfilled. One area where there has been some

improvement is health and safety. A problem with this area is that the company does not allow

transparent monitoring involving unannounced factory visits, but when experts have been allowed to

visit the factories they have found serious hazards. Even if Nike calls themselves “industry leader” in

CSR, they still exploit their workforce and there still occurs labour abuse in some of their factories.


31

There are many promises, but Nike has overall failed to withhold these promises three years after

they made them (Connor, 2001: 5).

Virtue Ethics:

Virtue ethics is characterized by the incentives of a person’s moral agent, which means that it is

focused on the rationality in striving towards moral greatness. As said earlier, Aristotle’s was an

ancient developer in this specific ethics, and according to Aristotle’s Virtues Ethics, it is based on

appealing character traits such as courage, which is amidst two opposite others as rashness and

cowardice (Patel, 2016).

The aim of such ethics is to continually enact the right actions, this includes actions towards people,

to the right degree, time, and way.

The approach comes from Aristotle’s belief that people are appealed to perform the right action, yet

one does not involuntarily initiate such tendency, though “you are what you do”. (Soppe, 2002: 12)

Thus, one does the right action because it wishes to be virtuous, it does not happen randomly. Another

trait of such ethics is that the moral agent comes out of a ‘relevant moral community’, this means that

it is of value to consider the moral agent of where the individual performs because an individual’s

ethos comes from such surroundings (Patel, 2016). There are two types of virtue ethics, and both are

relatable to the analysis of the scandals. The first is intellectual and the second moral. Intellectual

refers to the abilities of the mind, for example, the capacity to understand, reason, judge, etc.

Subsequently, moral virtues are practices, for instance: the practice of being polite- to be polite, one

must perform politeness. Thus, all virtues are only reached with recurrence (Patel, 2016). When

analysing the scandals in Indonesia, it is clear that allowing individuals to function under unsafe

conditions during long periods of up to even 65 hours per week for minimal pay is not the correct

action to take (Greenhouse, 1997). With such high standards in morality, one could not be able to

accept such inhumane conditions such as in the factories in Nike, with the continuous hazard of

chemicals that endanger the individual’s body. Judging the situation from the workers point of view,

if we consider moral community, one can imagine that the workers character is being constantly

challenged. When working on such poor and inhumane conditions, one is not properly practicing a

‘good moral character’ because of the constant negative surroundings.

We can apply virtue ethics to the change Nike has gone through from the company it was 20 years

ago to the one it has become in the present. It has changed its actions such as the code of conduct


32

implemented in 1992. This code, as mentioned earlier, required subcontractors to comply with local

law and became forced to use environmentally safe practices. At the same time, there were not

permitted to discriminate amongst the workers. (Lim et Phillips, 2008: 146) Despite these changes,

one still can argue that it is not sure if the reason for such change in behaviour is due to striving for

morality, as seen in virtue ethics, or to strive for other interests.

The scandal in Vietnam, from a virtue ethics point of view, resembles the scandal in Indonesia. This

is due to the low moral agent present in both scandals, in either case, there is no consideration towards

the worker. Neither of the factories has the capacity of either intellectual nor moral virtues. For

instance, being physically abused in Indonesian factories and being thrown shoes at does not in any

way make anybody a better person (The Huffington Post, 2011). Taking the perspective from another

point and looking at it from Nike’s view, it is clear that denying change for such long periods of time

is also not morally acceptable. Living in ‘fear’ and feeling ‘powerless’ and having no freedom of

speech such as the female Indonesia worker, does not allow virtue ethics to be practiced: and, as

learned, virtue ethics is only present with practice. (The Huffington Post, 2011). Thus, as mentioned

earlier in the theory section, there are six different dimensions within the virtue ethics, which can be

individually analysed to evaluate actions from both the Indonesian and Vietnamese scandal. The first

dimensions are the community where, the self-interest within the community is seen as the labours

voice, whereas the self-interest in each labourer is the same, they want better wages and better

working conditions. Nike deregulates the labours voice by removing their power to unite, it is known

that many factories will fire the labour if they choose to criticize their conditions. (The Huffington

post, 2011). The second dimension is excellence, Soppe describes the second dimension as

excellence, where he argues that it is not enough to do no wrong, you have to do it perfectly (Soppe,

2002: 12). Whenever the scandals appeared during the 1990’s Nike tried to right their wrongs by

implementing their CSR and a more ethical code of conduct, but as we see in the Indonesia case,

scandals still happen. One can then argue that Nike had the right intentions regarding their CSR and

code of conduct, but it did not stop every factory to keep exploiting the labourers, even though Nike

still strives to achieve excellence in every factory. This is seen when they published a 108-page report,

that listed all the factories Nike worked with. Furthermore, the report showed cases of abuses and

other problems with its factories (Teather, 2005). Integrity is the third dimension, which plays an

important role in virtue ethics. The workers have no chance to integrate and become comfortable in

the working environment. Which is seen in the Vietnam scandal, where 77 % of the employees

suffered from respiratory problems, due to hazardous working conditions (Greenhouse, 1997). Nike’s


33

overseas factories do not show integrity when it comes to their workers. This has been clear in the

two scandals, chosen in this project, but as mentioned before, Nike tries to do a better job, when it

comes to their workers by forcing the overseas factories to comply with Nike’s code of conduct. Tien

Nguyen, Nike’s labour practices manager in Vietnam, told the press that the company has taken steps

to improve working conditions, but at the same time told the press that the company had not done any

measures about the hazardous environment in some of the factories (Greenhouse, 1997). Nike tries

to show good integrity by telling the press that they are taking steps towards better working

conditions, but recent scandals like the one in Indonesia shows that Nike does not do enough to

prevent labour abuse, and therefore one can think if Nike has integrity. Good judgment is the fourth

dimension, we so no practice of good judgment in these scandals, there is a lack of empathy and

morality. Though it needs to be acknowledged that Nike as mentioned implemented their CSR to gain

more trust and a better judgment of their factories and their image. Soppe also draws on the Fifth

dimension Holism where he uses Solomon’s criticism of the ordinary business life (Soppe, 2002: 12).

This is also seen as one of the key aspects of the neo-liberalist approach, where gaining surplus

without considering the consequences of outsourcing and it influences the ethics of business. Finally,

Role Identity is the last dimension described in the virtue ethics, but this was not addressed in this

project

Deontological ethics

Deontological ethics describes the rational choice of an act, there is no consideration of the

consequences it might have. Deontological ethics’ key feature is universality, which is that if someone

says that an act is right for one person in a situation, then it must be right for everybody in that specific

situation (Soppe, 2002: 13). Soppe raises the question “What if everyone acted as I do?” (ibid.).

Especially the phrase that was presented by Soppe needs to be acknowledged whenever the

deontological values are presented.

Whenever we use the case of the Ho Chi Minh City factory in Vietnam, there is a clear violation of

the moral judgment. The working conditions and working hours of the labours are not only a clear

violation of the Vietnamese law but it is also in violation of the working ethics that there is in America,

or specifically the Capital Washington DC (Bankrate.com, 2016). The minimum wage in Washington

DC is 10.5$ per hour, whereas in Vietnam the labours get paid 10$ a week. The prices for

commodities is different in each country but there is no morale in paying such a low wage.

Additionally, the working conditions in the factory are very poor, the labour is exposed to toxic


34

chemicals and is not correctly equipped with clothing to prevent sickness. This would again be a large

violation of the American working forces. To disclaim these accusations one of the Nike spokesman

Vada presented an argument where he criticized the allegations that were presented. He argued that

Nike paid their labours superior wage and had better working conditions than elsewhere (Greenhouse,

1997). Which again contradicts the moral where Nike protected themselves by claiming that their

factories were superior than other factories, even if they breached the general working laws. After

extensive heat from the public about these poor conditions for the labours in the Vietnamese Tien

Nguyen publically announced that the working conditions were to improve, where Dusty Kidd Nike’s

director of labour made a more business related statement. Kidd stated that the factories in Vietnam

were more modern and were better than the factories in the United States. The reason behind this

statement was the fact that Vietnamese factories produced a higher quantity of shoes than in the

United States. (Greenhouse, 1997)

If we remove the focus from Vietnam to more present days, the moral judgment is completely lost in

the case of the Indonesian workers. There have been several incidents within the Converse factories

(bought by Nike) where physical abuse is documented. Nike Admits that these abuses occur but they

have stated that the conditions are out of their control. Additionally, the wage issue that occurred in

the Vietnamese factories has moved to Indonesia where workers earn 50 cents per hour. (The

Huffington Post, 2011). These violations of western working morale are very against the

universalizability approach where working conditions should theoretically have been of the same

standard.

Deontological draws upon on its ethics from Kant, who in his theory of ethics focuses on human

rights. Soppe draws from Kant that the only fundamental innate right is the right to be free from the

will of others and this goes for all, which means that all human beings have the same freedom (Soppe,

2002: 13). Looking at the case of worker abuse in Indonesia, where the supervisors in a factory

producing Converse shoes physically and verbally abuses their workers (The Huffington Post, 2011),

shows that the innate freedom the supervisor has, is not the same as his workers. In the article, there

are several examples of workers being subjected to some serious punishments (ibid). This goes

against Article 5 of the ‘Universal Declaration of Human Rights’ by the United Nations (UN General

Assembly, 1948), which says “No one shall be subjected to torture or to cruel, inhuman or degrading

treatment or punishment” (UN General Assembly). Kant's innate human right draws parallel to the

aforementioned Universal Declaration of Human Right, which should be applied to all humans.


35

The last thing Soppe draws from Kant is ‘ethical duties’. Kant distinguishes between duties towards

oneself and duties towards others, which is described in detail in the theory section (Soppe, 2002:

14). Duties towards others are described as a social duty to love others, love is here meant as an

imperative for well-doing and beneficence for others (ibid). In the article about labour abuse in

Vietnam, it is clear to see that Nike’s ethical duty towards its workers are very bad compared to the

universal moral and ethical view the society has (Greenhouse, 1997). Its workers work under terrible

conditions with low wages. Though when the report got published, Nike took steps to improve

working conditions, so one can argue that Nike did this because of its ‘ethical duties towards others

and that they did not know about the bad working conditions before the report was published. As

mentioned before, there is one more duty in Kant’s ethical duties the duty towards oneself. (Soppe,

2002: 14). This can be seen when the CEO of Nike, Phil Knight, made a public speech regarding the

sweatshop issues that Nike was accused of and he promised changes. He acknowledged that there

was a problem and hence told the truth to the public, which is an example of duty to oneself (Newell,

2015)

Teleological ethics

Teleological ethics is a theory that defines and explains ‘right’ actions. A rightness of an action is one

which achieves maximizing happiness.

Nike outsourced their production to low-wage countries to gain more surplus. If you look at this from

a teleological perspective, Nike maximizes its utility because their end-goal is more surplus.

Decisions made in the teleological concept regarding wealth distribution are based on rationality and

optimizing utility (Soppe, 2002: 15). Outsourcing to gain more surplus was a rational choice, if you

can produce your products cheaper, why not do it? It is a logical choice. Where Nike failed in this

issue, was their moral responsibility towards their workers and the society, within teleological ethics

the moral responsibility is collective, and one can, therefore, argue that it is not only Nike’s fault but

also other multinational companies and the subcontractors in the low-wage countries. The reason for

this is because in teleological ethics the moral responsibility for the distribution of wealth is a

collective problem because everybody is assumed to be rational (Soppe, 2002: 15). When everybody

is assumed to make rational choices, then one can argue that these choices are the ‘right’ ones. Yet,

the consequences of the outsourcing, which led to labour abuse, were wrong according to the

consumers, the public, and different labour right groups who showed their disagreement with this by

not buying Nike product and demonstrating against the company (ibid). Labour right groups made


36

demands to Nike regarding wages, working conditions and the right to be in a labour union (Connor,

2011). To further this critique Soppe draws on consequentialism which is seen as rightness in actions

regarding their consequences. (Soppe, 2002: 15).

The scandals in the 1990s showed that Nike’s actions were not ‘right’ due to the labour abuse that

occurred in the factories. Nike acts towards their workers are clearly seen in the examples provided

in this project about labour abuse in Vietnam and Indonesia. As mentioned above, the consequences

of outsourcing and the eagerness to gain more surplus lead to the scandals that reduced the popularity

of the company and ‘forced’ them to change their code of conduct into a more ethical correct

approach. This is seen in their goals, which will be described further down in this section. After the

sweatshop scandals in the 1990’s Nike changed their goals to become a more ethical correct company.

These changes were published in their 2001 CSR report, they focused on two distinct areas which

were the National environment and labour compliance (Nike Inc., 2001).

The issues that were presented in the case of the Vietnamese factories, low wages and horrible

working hours, were to be changed during the next period of Nike’s development. Nike implemented

a dedicated team of thirty individuals to ensure that workers around the world had reasonable wages

and humane working hours (ibid.). This was Nike’s goal or telos. If we fast forward to a more present

time, these issues have not changed as we have seen in the case of the Indonesian worker. You may

say that their telos was not achieved in that area, though this might not completely be the truth since

many of the factories may have developed more ethical correct working conditions. Due to the

limitation in sources, there was no clear evidence for this. Additionally, the sweatshop scandals

resulted in many consumers protesting against Nike and Nike experienced a drop in their sales. Nike’s

reputation was bad and therefore the company made a public speech in 1998 promising change

(Newell, 2015). Besides promising change, labour rights groups had some demands to Nike. There

were six demands, which were mentioned and described in detail above about the case study (ibid).

These demands and Nike’s own promises of change can be seen as their new end-goal towards a more

ethical approach to their production. These goals are made after Nike’s former end-goals was seen as

wrong, and therefore, one can argue that the consequences of these new goals give utility to both Nike

regarding a better public image to further sales, and to their workers regarding better working

conditions and wages.


37

Discussion

After analysing the cases with the ethical values, questions on whether Nike was intentionally turning

the blind eye to the contractors rise. In the Indonesian case, Nike acknowledges physical abuse but

say that there is little to do. But are there truly, the consumers would demand them to stop their

cooperation with the subcontractor. From an ethical perspective this would be the best answer, though

not from a business perspective. These factories are the drive behind the large surplus Nike has every

year. This goal to gain an ever increasing surplus is seen when we look at how the business of the

21’st century is. Many scholars believe that neo-liberalism is the economic blueprint, and especially

the last decades where globalization is ever increasing you may say this assumption is correct. Neo-

liberalism is a branch of the neoclassical school of thought. This approach highlights the importance

of free-market and less influence from the government, also know as the Rule of the Market (Martinez

and Garcia, 2016).

An important aspect of the Rule of the Market is that it does not take in consideration of the social

damage, the cases indicated highly that the workers could not form organisations or protest against

their working conditions which are somewhat a goal within neoliberalism. Additionally, eliminating

public good and the term community is also a direct consequence of this approach. Individualism is

very much in focus, you may say that individualism is a two faced dilemma. On one hand you have

the rich people that keep individualizing their surplus granting them more, whilst the poor keeps

continuing in a downwards spiral until they reach conditions presented in the factories and have to

accept them. Furthermore, Nike promised that change would happen and they were working on

improving their labours conditions. This might be a false assumption, because how can a single

company maintain an overview of their factories around the world, and nevertheless, maintain a high

ethical standard that differs in every country. Though the fact that they acknowledge there are issues

and that they are working on preventing these situations in the future Nike presented us with their

CSR in 2001, they have ever since strived to change and improve their ethical position which one can

argue have increased their surplus in this more ethical oriented society.

Another question the analysis could not answer is what is the origination of these issues, we believe

that whenever companies start outsourcing their production abuses occur. If Nike kept their

production of shoes within the United States the possibility to manipulate wages and un-organize

their labours would not have been a possibility. Again, these relate to the neoliberalist approach

mentioned above. This outsourcing crisis is not only a specific issue with Nike but is rather something


38

that keeps occurring and more scandals is revealed to the public. Outsourcing is a key business

approach within the modern society to gain more surplus, whenever you reduce the cost of your

labours and taxes you gain more wealth, pretty simple actually which makes it such an attractive

approach for multinational companies.

The increasing interest regarding business ethics from the company's’ stakeholders have forced

multinational companies like Nike to be more responsible and Nike has therefore concentrated more

on their code of conduct and CSR reports after the sweatshop scandals. One can argue that the scandal

that happened in Indonesia shows that even though Nike has been more active regarding CSR,

problems still occur and therefore CSR does not work as it was intended. The analysis showed that,

when it comes to ethics, Nike failed in the 1990s with the sweatshop scandals and the promises they

made after did not hold. From a critical perspective Nike failed, but if you look at it objectively, Nike

is doing better and the company has taken many measures to be more responsible and transparent.

The company published a big report that listed all its factories that produce its footwear and clothing,

and also the different labour issues that occurred in the different factories (Teather, 2005). Like stated

in our CSR section: Exploitations of the workforce and other questionable practices has obligated

corporations to emphasize CSR and business ethics to prevent future scandals (Valentine and

Fleischman, 2007: 657). Looking at the case study, it is clear to see that the emphasis on CSR and

business ethics, have prevented big scandals for Nike, but is CSR enough? The answer to this is no.

As we mentioned before, Nike published a report listing all its factories, started to make CSR reports

and became more transparent, but it did not prevent the labour abuse that occurred in Indonesia.

Additionally, companies use CSR-reports to show their shareholders and stakeholders that the

company contributes positively to the environment and their workers. These reports indicate to the

society that they acknowledge that issues occur, but they try to solve them so they can keep the

consumers demand rising. There is no corporate law that says a company has to publish a CSR report,

it is something the companies chose to do itself. One reason for this can be, that a company wants to

show its consumers that they actually care about a sustainable future, and if something comes up

regarding business ethics, the company can ‘prove’ with the CSR report, that they actually tried to

prevent unethical issues.


39

Chapter 5

Conclusion

This project sought to answer the question of why abuses happen within Nike’s overseas factories.

The reason as to why this question sought to be answered is due to Nike’s influence and impact on

their business branch which is athletic wear.

The reason these abuses happen, as seen in the entire project, is because of their subcontractors and

factories. Nike outsourced their production to low wage countries, because of low production cost,

which gives the company more surplus. The surplus was the main goal. The high demand for Nike

products with the consumers meant that the factories had to produce a high number of products and

unethical values started to appear. This high demand and outsourcing combination lead to abuse of

labour within the factories whenever the factories produce more the company gain a larger surplus.

To enlighten this issue we took two scandals, which had occurred in Nike’s subcontractor factories,

spread over different time gap. From the scandals, it becomes clear that there was an unethical

approach during the 1990’s which lead to the company's code of conduct and CSR presentations. In

the analysis, the project examined from Soppe ethical framework, which gives different ethical

approaches to the case study. From the first ethical approach, the virtue ethics, there has been no

intent in implementing a moral agent character in order to assist and empathize with factory workers.

Knowing virtue ethics highlights on the well doing of actions, one can conclude efforts have not been

enough to satisfy such ideal approach. We gained knowledge from the six dimensions defined by

Soppe, with integrity as being the most valuable approach since we could conclude that Nike lost

their integrity by outsourcing to low wage countries, but they try to gain it back by forcing the

overseas factories to comply with their code of conduct, and being more transparent by publishing a

report that list all their overseas factories and the challenges regarding labour abuse and bad working

conditions (Teather, 2005). The other dimensions showed that Nike tried to right their wrongs by

implementing CSR and improve wages and working conditions, but that problems still occur within

these issues. From the deontological approach, we can see that there are violations of the moral

judgment in both scandals. The moral judgment consists of low wages, bad working conditions, and

physical and verbal abuse from the factory supervisors. From Kant’s focus on human rights and

ethical duties, it is argued that the factories violate human rights regarding punishment of labours.

Nike’s ethical duties towards others were the reason for they became more transparent and publish a

report that listed all their factories. The last ethical duty, which is duty towards oneself, was seen


40

when the CEO Phil Knight made a public speech, where he acknowledged the things Nike was

accused off.

Finally, concluding what we got from the teleological approach, we have seen that Nike’s telos in the

early stages of they wanted to gain a larger surplus and expand their facilities. The rising demand for

their products gave them an unethical approach that went very well with the neo-liberalist thought

which helped them in their ever expanding company. After the scandals became public to the society,

Nike changed their telos to become more ethical oriented and become a role model for other

companies to prevent crisis and scandals that happened. To help them achieve this telos they used

CSR. The reason why companies use CSR is to show their consumers that they care about the

environment and their workers and to show that they are socially responsible. Furthermore, CSR also

forces companies to be more responsible, it gives more focus on business ethics, and it attracts more

consumers by their new moral and ethical improvements - which eventually leads to more profit for

the company. Thus, the reason why Nike implemented their CSR code was to acknowledge that they

had difficulties with their subcontractors as well as to demonstrate to the public that they are aware

of these issues and are working to correct them.


41

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Appendix

Figure 4.2

ethics within nike - ruc.dk

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