Nike’s rise to fame and prominence was not without challenges, however. As the company grew and expanded into regions all over the world, concerns developed in regard to labor and human rights infringements, in addition to allegations of ethical misbehavior. In essence, Nike subcontracted the manufacturing of its shoes in many countries where workers did not enjoy the same rights and working conditions as their counter-parts in the United States; hence, reports of meager working conditions and even child labor began to surface. Even with viable company regulations, the sheer locations of many of these manufacturing plants (in third-world countries) created quite the enforcement issue. To make matters worse, in the 1990s labor rights activists and the media began acts of protest against Nike’s violations, damaging the company’s reputation. Then, in 1996, the ‘big one” hit. Life magazine published an article with photographs of Pakistani children stitching tennis balls for Nike and a few other companies. Needless to say, the stark images dealt a severe blow to Nike’s corporate reputation and sales began to plummet. Customers who had held the Nike banner high began to withdraw their support of the company. Critics led anti-Nike demonstrations all across the United States.
In its haste to address the issues and save the company, Nike put together a plan to protect its image, but fell short of dealing with the source of the problem: labor and human rights violations. Of course, most critics saw right through that sad attempt at recovery and now Nike’s business ethics and social responsibility came into question. In the process of trying to defend itself, Nike faced a lawsuit alleging that it made deceptive claims to the public which “violated California’s unfair competition and advertising laws” (Ferrell, Gatewood, Ferrell, Taylor, 2010). This litigation resulted in Nike paying out around two million dollars in a court settlement.
Since then, Nike has make adequate strides in improving labor conditions in its factories. The company has taken steps to ensure that its subcontractors do not engage in illegal and unethical labor practices. For example “in August 1996, Nike joined the Apparel Industry Partnership, a coalition of companies and labor and human rights groups [….] to draft an industry-wide code of conduct” (Ferrell, Gatewood, Ferrell, Taylor, 2010).
In the area of social responsibility, Nike developed the Reuse-A-Shoe program to recycle worn out shoes (the recycled material was called “Nike Grind”) and later partnered with the National Recycling Corporation to accumulate more than 1.5 million pairs of shoes for recycling every year since 1995.
Additionally, Nike began to repair its reputation through the development of auditing tools to measure improvement, publicly disclosing the names and locations of all its factories to create a level of transparency, and advancing its participation in philanthropy by developing and funding social networks that work with under privileged youth, minorities, young women and youth living in conflict circumstances around the globe, for example (Ferrell, Gatewood, Ferrell, Taylor, 2010). As proof of it ethical turnaround, Nike was ranked number...