Nike 海外剥削以及血汗工厂的探讨 - 图文

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Nike’s Oversea Exploitation

And Ethic Discussion

Ethic and Law Paper

Dr. Sue Mota

November 15, 2011

Linhui Liu

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Introduction

With the development of global economy, industries and services were highly diversified in last century. Because more and more companies were established after the Industrial Revolution, more employees were needed and the relationship between employees and employers was changed from personal-relationship to contractual relationship. In the production process, employers pursue the maximum profit which is caused by selling more production and cutting the average cost. However, employees seek maximum payment, safe working environment, appropriate pressure, and good welfare system to protect their rights in the future. This difference of goals between two parties arouses the contradiction between the two parties; and the change to their relationship sharpened it. Because of this, exploitation appeared. Exploitation is that certain persons are being mistreated or unfairly used for the benefit of others (Arneson 1992, p350), and exists in many fields. In this paper, I focus on the economic exploitation which can be concluded as the act of using another person's labor without offering them an adequate compensation.

On employers? aspect, they want to pay the least salaries and to provide the cheapest diet and the shabbiest plant to their employees, because they can reduce their expenses in this way. This is also what employers always do. They have the significant amount of resources to control employees by providing jobs. In result, regulations and legislations were established to protect the weak by the federal government.

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In this paper, I will focus on the law issues in the U.S. about protecting employees? rights, and introduce the Fair Labor Standards Act (FLSA), the Occupational Safety and Health Act (OSHA), and the Employment Retirement Income Security Act (ERISA). The fact of exploitation by the Nike Company which is the lead of the sports products industry will be presented as an example to extend ethic discussion based on the federal law. Moreover, I will also focus on the International laws to protect oversea laborers that are in companies of U.S. Today?s labor market is broader than it was in past 1 or 2 decades. Domestic law issues must be certain to protect all employees which includes they are from other countries. Based on Nike?s exploitation in Asia, I will illustrate the importance of the International protection, what the government did to protect oversea employees, and what other companies can learn from this experience.

Federal Laws to Protect Employees’ Rights

In the past 50 years, the federal government passed the series of legislations affecting employee rights. They are Worker?s Compensation Laws, Social Security Act, Fair Labor Standards Act (FLSA), Equal Pay Act, Occupational Safety and Health Act (OSHA), Employment Retirement Income Security Act (ERISA), and Family and Medical Leave Act (Jennings, 2006, p742). In this paper, I will pay more attention to the FLSA, OSHA, and ERISA and briefly introduce the other laws and acts.

The Fair Labor Standards Act (FLSA) is always called the “Wages and Hours ? Copyright 2011 by Linhui Liu

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Bill”. In another words, it establishes a minimum wage, and also involves laws to regulate child labor, overtime pay requirements, and equal pay provisions (Jennings, 2006, p742).

According to The Fair Labor Standards Act of 1938, as amended (2011),

(a) The Congress finds that the existence, in industries engaged in commerce or in the production of goods for commerce, of labor conditions detrimental to the maintenance of the minimum standard of living necessary for health, efficiency, and general well-being of workers

(b) It is declared to be the policy of this chapter, through the exercise by Congress of its power to regulate commerce among the several States and with foreign nations, to correct and as rapidly as practicable to eliminate the conditions above referred to in such industries without substantially curtailing employment or earning power.

It illustrates that the Congress has the power and enforcement to regulate companies and institutions to give their employees? basic rights which are included in the FLSA. The Congress also establishes the minimum wage; and it is raised not periodically, depending on the development of economic.

All employees in businesses that affect interstate commerce are covered by the FLSA must be paid a minimum wage. However, there are some exemptions:

? Independent contractors

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? Agriculture, fishing, and domestic service ? White-collar management

? Executive, administrative, and professional people

Based on expressions of Jennings (2006), independent contractors are those who work on a job basis, work irregular hours, and are not supervised by the employer. For example, some typists hired and paid on a per-job basis (per paper or per hundred words) are independent contractors. The so-called “white-collar” employees are considered with sufficient training, knowledge, and experience to counter their employer unfairness (p758).

The FLSA also includes regulations to protect covered employees? working hours. It regulates that the working hours for a covered employee are 40 hours per week. It also regulates the wage for the hour worked above 40 hours per week is 1.5 times of the regular wage. Although the pay period for covered employees is different from each company, overtime is calculated on the basis of 40 hours per week.

If a company or institution violates the FLSA, the corporation is liable and officers of the corporation can be held individually liable for the corporation?s violations. The fines of violation are a maximum $10,000 for the first time; and $10,000 fine and or six-month imprisonment for the second time. Employees cannot be fired for reporting violations. (Jennings, 2006, p744)

As an amendment to the FLSA, the Equal Pay Act of 1963 “makes it illegal to pay different wages based on gender to men and women who are doing substantially ? Copyright 2011 by Linhui Liu

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the same work” (Jennings, 2006, p745). This act protects women from being discriminated in workplaces.

To keep workers working in a safe workplace, the Occupational Safety and Health Act (OSHA) was passed by Congress in 1970. It protects thoroughly every employee whose employer has one or more employees in the U.S. There were three agencies established to enforce the worker safety standards: the Occupational Safety and Health Administration (OSHA), the Occupational Safety and Health Review Commission (OSHRC), and the National Institute for Occupational Safety and Health (NIOSH). The OSHA is a part of the Department of Labor, and it is responsible to improve safety standards and enforce them by inspections, citations, and court actions. Both OSHA and OSHRC pay more attention to the common issues of equipment use and protective gear. NIOSH usually focuses on workplace safety issues (Jennings, 2006, p745).

The duties and responsibilities of OHSA are:

? Post employee rights and promulgate work place safety

regulations

? Require protective gear ? Keep records of injuries

? Report fatalities and hazards may cause employees injury ? Post OSHA citations ? Inspections

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For example, under the website of OHSA (2011), the employees? rights are presented:

Workers' rights under the OSH Act

Workers are entitled to working conditions that do not pose a risk of serious harm. To help assure a safe and healthful workplace, OSHA also provides workers with the right to:

? ? ?

Ask OSHA to inspect their workplace;

Use their rights under the law without retaliation and discrimination; Receive information and training about hazards, methods to prevent harm, and the OSHA standards that apply to their workplace. The training must be in a language you can understand;

? ? ?

Get copies of test results done to find hazards in the workplace; Review records of work-related injuries and illnesses; Get copies of their medical records;

According to the website of OHSA?s statistics (2011), the “established injury and illness data” and “the workplace injury, illness and fatalities statistics” for every state in the U.S. can also be found. For example the following table is the data of the highest incidence rates of total nonfatal occupational injury and illness cases, 2010:

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The incident rate for different industry can be figured out easily.

OSHA inspections are efficient tools to enforce. “Inspectors can enter the workplace ?without delay and at a reasonable time? to inspect” (Jennings, 2006, p747). The following aspects are the priorities on inspections:

? Hazards or conditions that could cause death ? Employee complaints

? Investigations of fatal accident sites ? Particularly hazardous industries

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? Random inspections incorporating an emphasis on certain types of

industries (roofing, lumbering, meat packing, transportation [car, truck] manufacturing, and longshoring) (Jennings, 2006, p747)

The penalties for various types of OSHA violations are different, it is illustrated in detail by Jennings (2006, p747). The summary of OSHA penalties is as follows:

Type of offense Willful Description Employer aware of danger or a repeat violator Violation is a threat to life or could cause serious injury No threat of serious injury Failure to post rights Citation not followed Penalty Up to $70,000 (not less than $5,000) and/or six months imprisonment $7,000 $7,000 Serious Nonserious De minimis Failure to correct Up to $7,000 Up to $7,000 per violation $7,000 per day Employee impairment and testing issue is another component of the Occupational Safety and Health Act. This issue is concerned of the safety problem caused by impaired coworkers in the workplace. However, it is not the main aspect what will be discussed in this paper.

Another problem of workers is how they can get money when they retire. Based on the Federal Insurance Contribution Act (FICA), every people, both employer and ? Copyright 2011 by Linhui Liu

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employee must contribute the Social Security system which requires people who are able to work to save money to afford the people who are retired and disabled. In order to protect the funds from being misused Employment Retirement Income Security Act (ERISA) was passed by Congress in 1974. It is a federal law that sets minimum standards for pension plans in private industry (Jennings, 2006, p752).

According to Jennings? (2006) illustration, ERISA covers all the employers and organizations representing employees in interstate commerce. ERISA includes any medical, retirement, or deferral-of-income plan. Covered employees have the right to receive an annual statement showing their current financial situation in any of included plans.

Based on state laws, the amount of unemployment compensation should be paid to unemployment workers by the federal government. This is not concerned in this paper.

Nike’s exploitation

After the early issue of clothes produced in Guatemala?s sweatshops, which were sold in Wal-Mart was exposed, CBS reported conditions in Nike subcontractors? factories in the South Asia (Jennings, 2006, p780). Sweatshops (2011) refer to the working environment which is dangerous and harmful to workers who work there. Under such working conditions, workers work long hours, sometimes 14 hours a day, and with limited or no protective gears. They ? Copyright 2011 by Linhui Liu

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are always abused by employers and provided low wages which is impossible for them to live in their residence.

Nike has used \South Korea and Taiwan at that time. With the economies developed in South Korea and Taiwan, workers could make more products with their improved abilities, and require more salaries. As a result, they moved on to higher paying jobs which could also provide a comfortable working conditions. At the same time, labor unions also gained more influence in South Korea and Taiwan. Because of the increased labor cost in these countries and districts, Nike established factories in Indonesia, China, and Vietnam where provided cheaper labor, and prohibited labor unions (“Nike, Adidas Officials Discuss Sweatshop Issues” , 2001).

During the 1990s, Nike was seriously protested and criticized for their behaviors. On October 18, 1997, international protests against Nike were erupted in 13 countries and 70 cities. 5 days before that, 6,000 Nike workers went on strike in Indonesia and 1,300 followed in Vietnam. On November 8 the same year, Ernst & Young ran a report about unsafe conditions in a factory near Ho Chi Minh City (the city of Vietnam) based on inspection and disclosed it in the New York Times (1997). The report said:

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Workers at the factory near Ho Chi Minh City were exposed to carcinogens that exceeded local legal standards by 177 times in parts of the plant and that 77 percent of the employees suffered from respiratory problems.

Employees at the site, which is owned and operated by a Korean subcontractor, were forced to work 65 hours a week, far more than Vietnamese law allows, for $10 a week.

At the beginning, they did not give any explanation about producing in sweatshops. However, Tom McKean (2001), the Nike director who represented Nike Inc., showed the initial attitude in 2001 as \We don't control what goes on there.' Quite frankly, that was a sort of irresponsible way to approach this.”

As the social pressure increasing, Nike began to take action to improve the situation. During the 1990s, Nike established a code of conduct for all their plants. It took Nike about 10 million dollars a year to follow the code, and to persist in regulation for fire safety, air quality, minimum wage, and overtime limits (“Nike, Adidas Officials Discuss Sweatshop Issues” , 2001). Moreover, by 2000, Nike was still criticized by college groups were led by students. To save their being lost reputation, Nike sent 9 letters about their explanation of their behavior to various persons including colleges? professors, student leaders, and athletes they sponsored. However, because of these

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claims made by Nike, it settled a case about free speech rights. The discussion on this case will not be included in this paper.

Recently, Nike has made more efforts to adhere the current code of conduct. They developed a program which is constituted by 97 staffs to randomly inspect hundred of their factories each year. Nike also gave the Fair Labor Association the privilege to randomly inspect any factory that produces Nike products (Bernstein, 2004).

Nike has inspected about 600 factories since 2002. Each inspected plant is given a score of 1 to 100 based on its benchmark to measure the condition of plants. The given score is then associated with a letter grade, A through D. Under this inspection system, most audited firms received B and some of them get A. Once a factory receives a grade of D or lower, Nike warns to stop producing in that factory until the conditions are significantly improved. Nike expanded their monitoring process to include environmental and health issues in 2004 (Bernstein, 2004).

Ethical discussion

According to the issue about Nike?s sweatshops, the problem about how to balance the cost of labor and the human based management is exploded to public. In nowadays, with the high speed of global economic developing and high saturation of the market, the degree of competition among enterprises is higher and higher in the past 30 years. More and more new companies were established and the most of them ? Copyright 2011 by Linhui Liu

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were collapsed. Based on the analysis of Scott Shane (2008), there were 75% of companies established during the year of 1992 survived in 1993. However, in 1997, as five years passed, more than 50% of them collapsed. Under this high competition business environment, companies compete for ideas for innovation, that means diversified products, and low-cost raw materials and labors. As mentioned previously, the contradiction between companies or employers and employees is aroused in modern business. When labor force is very rich, and the rights and interests of the employees cannot be fully guaranteed, business owners will expose the nature of profit, and exploit workers at the greatest degree. Under this situation, laws, regulations, mechanism of inspection, and penalty system should be established and enforced efficiently. Although, in the U.S., the federal laws about employee rights protections seem completed, how to protect employees in other countries, who work in American companies, is other significant important problem.

Based on Nike?s issue, there are three reasons why it moved its factories to China, Indonesia, and Vietnam. They are:

? Labor laws in these countries are poorly

enforced

? Cheap labor is abundant

? Local laws prohibit workers from forming

independent trade unions

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According to an income report of the U.S. (2011), the average annual wage per employee in the United States is $46,751 in 2010. Based the income report of China (2011), the same year, the average annual wage per employee work in government controlled companies and institutions are ￥37147 which equal to $5837; and the it of people work in private companies are ￥20759 which equal to $3262. Under these data, the cost of labor in China is about 7% to 12% of it is in the U.S. This significant reduction of labor cost attracts big manufactures like Nike, the Gap, and Mattel to move from the U.S. to China.

Continue to take China for example, based the illustration on the War on Want, which is an organization to fight for “poverty in developing countries.”

With a 9% annual growth rate in GDP over the last decade, China has the world's fastest growing economy. Despite its rapid growth, more than 482 million people - 36% of the population - still live on less than $2 a day, many of them in rural areas. To escape extreme poverty, many Chinese migrants from the countryside have moved to industrial cities, such as Guangdong in the south of China, which offer the promise of better paying jobs. Today there are approximately 136 million migrant workers in China. (“Sweatshops in China”, 2011)

In China, such countryside migrants are called “Peasant workers”. They constructed the Bird?s Nest stadium and the Water Cube in Beijing to hold the Olympic Games in 2008, so that to show the country?s best aspect to foreign ? Copyright 2011 by Linhui Liu

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visitors. They produced goods for Nike, Adidas, Gucci, and most every famous brands, so that to make the label of “Made in China” all around the world. They contributed the increased profit of companies and the GDP growth of China, as well as it of the world. However, most of these “peasant workers” have low educational level and do not know how to protect their rights in workplace. That is another reason for big manufactures to enter China.

American importers such as Nike, Walt-Disney, and Dell experienced long time criticism of conditions at their Chinese suppliers with labor rules and inspections (Bernstein, 2004). Generally, in order to protect oversea employees? rights, the federal government has made many efforts. The National Retail Federation (NRF) has the following statement of Principles on Supplier Legal Compliance.

? We are committed to legal compliance and ethical business practices in

all of our operations.

? We choose suppliers that we believe share that commitment. ? In our purchase contracts, we require our suppliers to comply with all

applicable laws and regulations.

? If it is found that a factory used by a supplier for the production of our

merchandise has committed legal violations, we will take appropriate action, which may include canceling the affected purchase contracts, terminating our relationship with the supplier, commencing legal actions

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against the supplier or other actions as warranted.

? We support law enforcement and cooperate with law enforcement

authorities in the proper execution of their responsibilities.

? We support educational efforts designed to enhance legal compliance on

the part of the U.S. apparel manufacturing industry (Jennings, 2006, p782)

And the U.S. Department of Labor has the following recommendation to regulate all industries or some specified ones like apparel industry.

? All sectors of the apparel industry, including manufacturers, retailers,

buying agents and merchandisers, should consider the adoption of a code of conduct

? All parties should consider whether there would be any additional

benefits to adopting more standardized codes of conduct [to eliminate confusion resulting from a proliferation of different codes with varying definitions of child labor].

? U.S. apparel imports should do more to monitor subcontractors and

homeworkers [the areas where child labor violations occur]. ? U.S. garment importers-particularly retailers-should consider taking a

more active and direct role in the monitoring and implementation of their codes of conduct.

? All parties, particularly workers, should be adequately informed about ? Copyright 2011 by Linhui Liu

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codes of conduct so that the codes can fully serve their purpose (Jennings, 2006, p782).

In another aspect, to improve current situation, the federal government also need to raise the penalty level and enhance the inspection. As the previous statement, Nike reduced as much as 88%-93% labor costs to produce goods in China. Despite some logistics cost should be considered, the total profit in Chinese market is significantly increased. The reason is that their products? price keeps unchanged or even increased in Chinese market. For example, the price of the same basketball shoes-LEBRON 9 which are popular both in China and U.S., is $170 (Nike Inc U.S., 2011) in the United States. However, in China, they are sold at ￥1599 (Nike Inc China, 2011) which equals to $250. Higher prices and significant lower labor cost contribute the significant higher profit Nike earns in China than it earns in any other directs. The following tables are included in Nike?s 2010 financial report. They showed Nike?s revenues and earnings before interests and taxes (EBIT) in different districts.

The revenues table (Annual report of Nike, 2010):

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The EBIT table (Annual report of Nike, 2010):

Through the two tables, we can easily calculate the EBIT margin (equals to the EBIT divided by revenues) of Nike in all the 6 districts. Obviously, the EBIT margin of 36.57% in Greater China is the highest and higher than it in emerging markets which is the second highest, by about 12 percentage point.

Nike?s high profit in its biggest market was created by workers who worked in ? Copyright 2011 by Linhui Liu

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sweatshops. The recommendations made by the U.S. Department of Labor seem so weak when they are compared to this great temptation, despite they affect Nike?s reputation. Based on the OHSA, it only covers the employers who own the factory. However, Nike contracted or subcontracted oversea sweatshops which were not owned by it. Under this situation, Nike got excuses and could avoid penalties. In order to protect oversea employees? rights, the U.S. Department of Labor should make more specified regulatory standards about how to select subcontractors for U.S.

manufactures, such as the Principles on Supplier Legal Compliance made by the NRF.

Moreover, based on the regulatory standard established, the penalties for violation should be charged at the certain percentage of its profits earned in local country. These profits should be based on the period passed since the starting date of the contract between the manufacture and the factory?s owner. Penalties up to $70,000 (Jennings, 2006, p749) are tininess to the $637-million-profit (Annual report of Nike, 2010).

It is not only one country?s responsibility to fight against exploitation. Exploitation exists in many countries. Not only U.S. companies exploit overseas workers, but also Japanese, European, and Chinese companies do it as well. Adidas, as a German company, experienced the same issue on sweatshops in Indonesia. Chinese employers who own small sweatshops exploit their works by providing shabby workplaces and wages below the “living wage”. Fujitsu, as a Japanese high technology manufacture, experienced the scandal of “workers jump” (Wenyuan Peng, ? Copyright 2011 by Linhui Liu

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2010) in 2010. Since January, 2010 to May 2010, there were 9 workers killed themselves by jumping from Fujitsu?s employee apartment and 8 of them were died. This issue had public attention in China because the fact of abusing employee existed in Fujitsu?s Chinese factories.

In modern society, exploitation of employees becomes a global issue; and it exists in many countries. It is necessary for countries to enhance their communication with each other. In fact, as an efficient tool, inspection is difficult to enforce for one country to monitor their companies? performance in other countries. For example, in order to inspect the Nike?s factories in China, the federal government would expense a great amount of money for inspectors? trip and to protect them from the unknown dangerous. Under this situation, companies can easily escape from their domestic supervision. So, countries need to enhance cooperation in nowadays to control the exploitation. For example, Chinese government needs to negotiate with U.S. government, in order to establish a unique standard to inspect exploitation. The standard includes how to inspect workplaces, how to determine whether exploitation exists, and the penalty level. After setting the standard, Chinese government can substitute U.S. government to inspect U.S. companies based on the standard negotiated between two governments; and then determines whether the exploitation exists, and reports the results periodically to the U.S. Department of Labor. Once the fact of exploitation is discovered, the U.S. company should be punished under the required penalty level.

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Furthermore, developing labor unions is a good way to protect employees? rights. Establishing labor unions means workers “organized efforts to improve their employment situations (Jennings, 2006, p761).” The following illustration of Jennings (2006) showed the important step of its developing.

Since 1935, the Wagner Act, also known as the National Labor Relations Act (NLRA) gave employees the right to organize and choose representatives to bargain collectively with their employers. Further, it established the National Labor Relations Board (NLRB), which had two functions: to conduct union elections and to investigate and remedy unfair labor practices. There are four forms of union activities are protected under the NRLA:

? Public Advertisements-ads and handbills that explain the

union?s issues and position ? Picketing-picketing an employer

? The Strike-widely used economic weapon of unions ? The Shareholders-contacting institutional shareholders and

board members to put public pressure on corporate officers to work with unions (Jennings, 2006, p768)

However, in some countries, local laws prohibit workers from forming independent trade unions, such as China, Indonesia, and Vietnam. They are mentioned previously.

Finally, companies or employers themselves must enhance their morality, ? Copyright 2011 by Linhui Liu

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especially the firms get benefit from the low-cost labor area. As long as they earned high profits because of the decreasing in labor cost, they have the responsibilities to provide good compensations to the workers, but not only to extract labors from them. Companies with good reputation can make the long-run profit. However, just depending on companies to recognize their responsibility is not enough. Laws and regulations are required to direct enterprises caring their employees. In recent days, Nike made its effort to publicity the “code of conduct” to their oversea employees, despite such conducts was led by the social pressure. Moreover, Nike paid the price for their exploitations.

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