Case about Nike and Human Rights. The presentation was prepared for MGT 340

1. Team 4
Brendan Zanetti
Anna Zakrepine
Brief Integrative Case 1.2 pp87-88
Advertising or Free Speech?
The Case of Nike and Human Rights

2. MISSION STATEMENT: TO BRING INSPIRATION AND
INNOVATION TO EVERY ATHLETE* IN THE WORLD.
* IF YOU HAVE A BODY, YOU ARE AN ATHLETE.
Blue Ribbon Sports, the original Nike, Inc., was founded in 1964 by Bill Bowerman
and Phil Knight
Blue Ribbon Sports hired Carolyn Davidson to design their classic "swoosh" logo in
1971 for $35, The Nike swoosh embodies the spirit of the winged goddess who
inspired the most courageous and chivalrous warriors at the dawn of civilization.
Blue Ribbon Sports founded their "Nike" (pronounced NI-KEY), named after the
Greek Goddess of Victory,
Today, Global leader in the production and marketing of sports and athletic
merchandise including shoes, clothing, and equipment;
Known for off-shore manufacturing, accused of using sweatshops.
Nike Inc.

3. “On the playgrounds of
america , every kids’ goal
is to score: in pakistan,
where children stitch
soccer balls for six cents
an hour, their goal is to
survive”
Life Magazine 1996

4. Ban of Nike products in some universities like
University of Oregon;
CEO Phil Knight withdrew his donation of $30
million after the school announced joining the
Workers Rights Consortium;
Nike hired more compliance officers in 2003 to
monitor all the overseas operations to comply
with the its published corporate code of conduct.
Reputation was ruined;
Consequences

5. In 2002, a lawsuit was filed against Nike Inc in California’s
Supreme Court.
The lawsuit was based on the fact that Nike Inc used false
information and misled everyone when publicly denying its
direct participation in abusive labor conditions overseas.
Nike Inc countered by stating their announcements were
protected under First Amendment - Free Speech.
The court stated that Promotion of Company’s Reputation
persuades to purchase its products, and, therefore,
considered Advertising. Hence, all the promotion of the
reputation and the product should be factual.
Marc Kasky v. Nike Inc

6. In 2003, Nike Inc filed appeal to US Supreme Court to decide
whether
1. Nike’s statements about working conditions overseas were
in fact “commercial speech” ;
2. A private individual Marc Kasky has the right to sue at all;
Marc Kasky v. Nike Inc Continued…
Kasky’s supporters: California state and 17 other states, Ralph
Nader’s Public Citizen Organization, CA’s AFL/CIO, and CA’s
attorney general;
Nike Inc’s supporters: American Civil Liberties Union, the
Business Roundtable, the US Chamber of Commerce, other
MNC’s like Microsoft, Exxon/Mobil, and Bush administration.
The case was dismissed as “improvidently granted”.

7. Nike Inc decided to pay more attention to it CSR by donating $1
million to tsunami relief in 2004;
The company advocated fair wages and better working
conditions in its outsourced operations;
Established Nike Foundation which supports Millennium
Development Goals;
In the US Nike Inc has worked with Head Start (2005) and Special
Olympics Oregon (2007);
Created NikeGO to promote physical activity among youth;
Committed to efforts such as Hurricane Katrina relief;
Promotes Literacy with grants made by Nike School Innovation
Nike Inc &
Corporate Social Responsibility

8. 1. What ethical issues faced by MNC’s in their treatment of foreign workers could bring
allegations of misconduct in their operations?
2. Would the use of third party independent contractors insulate MNCs from being
attacked? Would that practice offer MNCs a good defensive shield against charges of
abuse of “their employees”?
3. Do you think that statements by companies that describe good social and moral
conduct in the treatment of their workers are part of the image those companies create
and therefore are part of their advertising message? Do consumers judge companies
and base their buying decisions on their perceptions of corporate behavior and
values? Is the historic “made in” question (e.g. “Made in the USA”) now being
replaced by a “made by” inquiry (e.g. “Made by Company X”, or “Made for Company X
by Company Y”)?
4. Given the principles noted in the case, how can companies comment on their positive
actions to promote human rights so that consumers will think well of them? Would you
propose that a company a) do nothing b) construct a corporate code of ethics c) align
itself with some of the universal covenants or compacts prepared by inter nations
agencies?
5. What does Nike’s continued financial success, in spite of the lawsuit, suggest about
consumers’ reactions to negative publicity? Have American media and NGOs
exaggerated the impact of a firm’s labor practices and corporate social responsibility
Questions for Review

9. Advertising or Free Speech?
The Case of Nike and Human Rights
Brief Integrative Case 1.2 pp87-88
1. What ethical issues faced by MNC’s in their treatment of foreign workers could bring allegations of
misconduct in their operations?
There are a good number of ethical issues MNC’s might face that could bring allegations of misconduct. Even in recent time we have seen a number of MNC’s that
have come under fire for a number of reasons. Some popular topics include deplorable and substandard working/living conditions, long hours, sub-par wages, etc.
Take for example the recent Foxconn (Apple iPhone manufacturer) revelation about how workers are treated and expected to work/live or the recent Bangladeshi
factory tragedies. They are both prime examples of the ramifications MNC’s face by not completing due diligence and making the wrong choice when it comes to an
ethical concern.
In today’s business world, most public companies have “bosses” to answer to—their shareholders. What do shareholders want? They want to see returns on their
investment through profits and efficiently run companies. It is no secret that the cost of doing business is increasing in all areas. In an effort to maximize profit,
reduce waste, streamline for efficiency...these companies search out the most cost effective solution to creating/servicing their goods/services which ultimately has
lead them to outsourcing. When you combine outsourcing with the company objectives of cost-cutting and profit maximization, you come to an interesting crossroads.
Costs can only be cut down so far before you reach an area where comprises are made. Combine company objectives with a foreign countries relaxed laws and
regulations, you have an optimal environment to do business in—from a business perspective. It’s almost as if that particular combo is a breeding ground for ethical
misconduct by an MNC. Why? Because it’s easier to commit wrongdoing and get away with it there than it would be in the MNC’s home country. This does not make
such practices acceptable.
http://www.cnn.com/2013/10/24/opinion/bangladesh-garment-workers/
http://www.dailymail.co.uk/news/article-2207759/2-000-Foxconn-staff-riot-iPhone-5-sweatshop-China-guard-beats-worker.html

10. Advertising or Free Speech?
The Case of Nike and Human Rights
Brief Integrative Case 1.2 pp87-88
2. Would the use of third party independent contractors insulate MNCs from being attacked? Would
that practice offer MNCs a good defensive shield against charges of abuse of “their employees”?
Human rights issues are among the most important ones to consider for MNCs these days. There is no universal standard on what is considered right or
wrong because all the countries are different. Their standards, culture and other factors all play a major role in deciding whether the MNC treats the
employees right or wrong. If the Multinational company decides to outsource some jobs to a third world country, it may face various difficulties. Labor
policies are different in each nation, especially the difference is seen between the developed and underdeveloped countries. Some companies use such
labor for economical reasons. In recent years the issues of abusing the employees (long working hours, low wages, and child labor) have come to public
attention and this is why some companies use third party independent contractors. This practice will not prevent the MNCs from being attacked by public
activists (NGOs) if any information about workers’ abuse will emerge. Reputation plays a very important role in the company’s overall image. It helps
increase sales of certain products and establish loyal consumer base. Once the image is ruined by associating with any of the human rights issues, it is
really hard to correct. One example is using child labor in certain nations. It may be a norm in that society because the survival of a whole family may
depend on it but multinational company should not engage in these practices. They should be advocates against this and promote better working conditions
for adults. In the case of Nike Inc. and child labor in Pakistan the company should have never get involved in such practice. It ruined its reputation. On the
contrary, MNCs may also use third party independent contractors as a defensive shield against charges of abuse of “their employees”. I believe, this may
help them win the case in court depending on the labor regulations but the connection to the company will only worsen their image and be considered
unethical.

11. Advertising or Free Speech?
The Case of Nike and Human Rights
Brief Integrative Case 1.2 pp87-88
3. Do you think that statements by companies that describe good social and moral conduct in the treatment of
their workers are part of the image those companies create and therefore are part of their advertising message?
Do consumers judge companies and base their buying decisions on their perceptions of corporate behavior and
values? Is the historic “made in” question (e.g. “Made in the USA”) now being replaced by a “made by” inquiry
(e.g. “Made by Company X”, or “Made for Company X by Company Y”)?
Absolutely, good social and moral conduct of an MNC is considered a part of their advertising message. An MNC offering a great product/service is the base of what
consumers are looking for in today’s market. Is doing the bare minimum enough anymore? No. It is safe to say that consumers are now looking to these companies
and wondering what “added value” do you bring to me, the country...the world? What do you do besides make something and turn a profit on it? MNC’s better have a
good answer and track record to prove that they live up to these standards. In addition, some, not all consumers base their buying decisions based on how ethical and
socially responsible they are.
For example, two industries/companies to light when you think about how intertwined an MNC’s CSR policy and track record is with its advertising message. Those
two are Banking (Bank of America), and Oil companies (BP). Not too long ago, Bank of America launched campaigns outlining how they give back and contribute to
the communities they do business in. So, there was one for each major market (NYC, BOSTON, LA, etc.) and they outlined the specific projects or initiatives they
contributed to. Why do this? Because studies showed BOA that the perception of the company was that it didn’t care about anything except making money, got
bailed out, and steals people’s homes. They wanted to appear to the public as if they are more than just a bank.
Similarly, you will see the same thing in BP, after the oilrig accident in the Gulf. Not long after that incident, BP rolled a campaign touting that they “accept
responsibility” and are going to work tirelessly and devote vast amount of resources to ensure the Gulf community gets back to some level of normalcy. After that, you
soon had representatives of the bordering Gulf States that outline the benefits of coming to each one for vacation and how BP made the recovery possible. The CSR
message companies create and promote are very much a part of their advertising message because today’s consumers demand it.
http://about.bankofamerica.com/en-us/partnering-locally.html#fbid=q04a2Er5oaX
http://www.bp.com/en/global/corporate/gulf-of-mexico-restoration/committed-to-the-gulf.html

12. Advertising or Free Speech?
The Case of Nike and Human Rights
Brief Integrative Case 1.2 pp87-88
4. Given the principles noted in the case, how can companies comment on their positive actions
to promote human rights so that consumers will think well of them? Would you propose that a
company a) do nothing b) construct a corporate code of ethics c) align itself with some of the
universal covenants or compacts prepared by international agencies?
Corporate social responsibility is an important factor to consider for MNCs today. The companies are expected to act in a way that would benefit the
society not only in what is required by law but also in some extra actions. There are various ways how companies can comment on their positive actions to
promote human rights so that consumers will think well of them. We believe as long as the message they convey consists of factual information and is
truthful, it will help the consumers think positively of them. When choosing from the above options in order to have a positive image MNCs should definitely
construct a corporate code of ethics and maintain certain agreements on a global scale. The examples are U.N. Global Compact, The Global Reporting
Initiative, and the social accountability “SA8000” standards. Under these codes of conduct and agreements MNCs need to maintain the minimum level of
social standards in the workplace and communities in all of the MNC’s operations domestic or overseas. However, if the MNC aligns itself with some of the
universal covenants or compacts prepared by international agencies, it will firstly save time in doing a research of what is right or wrong in any given region.
In addition, the association with a well known international agency that supports human rights will only help the company’s image and people will have a
better perception of it. So the last two options in combination will help promote human rights so that consumers will think well of MNCs.

13. Advertising or Free Speech?
The Case of Nike and Human Rights
Brief Integrative Case 1.2 pp87-88
5. What does Nike’s continued financial success, in spite of the lawsuit, suggest about consumers’
reactions to negative publicity? Have American media and NGOs exaggerated the impact of a firm’s labor
practices and corporate social responsibility on its sales? How should managers of an MNC respond to such
negative publicity?
Nike’s continued success would suggest that while it’s important for some people to know how socially responsible they are, it’s not imperative to all of its customers how
responsible they are. The amount of people who actually follow and live by, make decisions on how socially responsible a company is, is relatively small. These individuals make
up a very small portion of Nike’s customer base. If Nike’s customer base is somewhere in the billions (assumed) of numbers of people, and only 1 million are out opposing Nike as
whole, you’ll find that the activists and negative publicity will fall on deaf ears or fade very quickly. It’s not large enough of a movement (the opposition) to make a meaningful impact
on Nike’s bottom line. The reality is, Nike has built an incredible brand and reputation for itself. These faux pas PR issues come and go in the blink of an eye because it’s headline
news for a week, tops, and then no one hears about them again. Nike creates and manufactures great products. However, when you go to the store and you look at one of their
products, more than likely you aren’t looking at it and immediately thinking about all the questionable and horrible things some people endured to make them. You are probably
thinking about whether or not it is comfortable, functional, and affordable. That’s the reality of buying a Nike product.
Have the media and NGO’s exaggerated the impact of CSR on it’s sales? Well that depends on how you look at the situation and what the claimed impact is. If you were to say
that the negative PR would hurt Nike’s sales, you’d be lying. If it does negatively impact sales, it’s short lived. People remember for a moment and then forget for long periods of
time. If you were to say that it positively impacts sales, you’d be lying. No one goes out and buys a product from a company that is notorious for having terrible CSR policies and
track record just for that reason alone. The point here is that negative publicity isn’t going to impact sales in any measurable way for a long period of time. Positive publicity would
though, most likely. The only way to hurt Nike’s bottom line is to get ALL of their customers to turn on them and stop buying, which will never happen. Nike is enjoying a “too big to
fail” attitude.
The managers of an MNC that come under fire should and usually do mitigate risk and losses through tactful PR maneuvers. You’ll find that they almost never ignore an immediate
PR issue. Typically, they address the issue in a roundabout way by touting their positive stance on the issue and supplying facts or details about related positive things they have
done in the past. It appears to be a tried and true method of dealing with negative PR issues. It gives the MNC a chance to express its view and position on the issue and not admit
to any wrongdoing while promoting the positive attributes of the company. It’s a win-win for the company but leaves the general public hanging and wondering what the truth is, if it
is ever discovered.