Executive Summary This ethical report is to correspond to a shot on what are the main ethical in Nike Incorporation, based

on the ecological scanning which using PESTEL in bringing to a close about the dilemmas that Nike facing about. Furthermore, this report also measures all these dilemmas by comparison with business ethical theory which are (Teleology and Deontology talking about the Utilitarian). Besides, in this report also provided a few recommendations to Nike Inc. that can be take an action against the critics. The recommends is: Better wages Ban short-term contracts The right to form trade unions

1.0 Introduction 1.1 Background of the Company (Nike) Nike was initiated in 1958 by Phil Knight, a track runner. His inspiration was to fashion a good American running shoe. Phil Knight and his coach designed a running shoe, and had a shoe manufacturer create it. Then a phase trod by where running became less popular, hence Nike shifted its products to be conventional, be traditional to the newest rage in fitness, and continued doing so. Then, when Nike created basketball shoes, they began to profit enormously. Nike cofounder Bill Bowerman made this observation many years ago and defining how to view the endless possibilities for human potential in sports and fashioned the company in 1972, called Nike. Through suppliers, shippers, retailers and other service providers, Nike somehow either directly or indirectly employed nearly one million people.

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2.0 Ethical Dilemmas Ethical dilemmas were discussed about the Environmental Scanning, and in environmental scanning have mentioning about Political and Economy. 2.1 sweatshops (Nike Sweat Shops, 2012) Any business establishment that makes its employees work under harsh and often hazardous conditions, and pays only minimal or survival wages is to be defined as sweatshops. (sweatshop, 2012) 2.1.1 Social factor It has come to realize that Nike has admitted that its factories are places where physical and sexual abuse, extraordinarily low wages, restrictions of bathroom use and other human rights abuses happen on a regular basis. Similar violations were found and acknowledged by Nike in past reports, and yet the founder of Nike, Phil Knight admitted that 25% of Nikes factories were still not meeting minimum standards. 2.1.2 Legal factor Nike had successfully appealed all minimum wage laws on the books with the governments of these countries year after year, allowing them to pay wages well below the minimum rate. Nike further outwits wage laws by paying new employees a novice rate for several months into an employee's possession. Thus, in late 1997, more than 10,000 workers from Nike's Indonesian factories went on strike to protest low and unpaid wages, and 1,300 workers in Vietnam, the next year, 3,000 Nike workers in China protested. Keeping in mind that all these protests took place regardless of the fact that these sorts of worker strikes are illegal in their countries. Case study In (April, 1997) this report reveals that Nike definitely practices what it preaches the company "does it" big-time to the Asian girls and young women who work in the sweatshops making Nikes. Philip Knight, head honcho of this $8-billion-a-year shoe giant, insists that, he has instituted a code-of-conduct for all his shoe suppliers in Asia, requiring them to treat workers fairly. Mr. Nguyen found that Nike workers average only a buck-sixty a day making shoes that Knight sells here for $180 a pair. As if this poverty wage is not punishment enough, the 15, 16year-old girls in Nike's plants were found to be physically abused, too. While Mr. Nguyen was there, 56 women workers were made to run around the Nike factory in the hot sun, because they
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were not wearing the right shoes. A dozen passed-out from heat exhaustion and had to go to the hospital. 2.2 Child labor (Billybobjoe3, 2009) Child labor illustrates children who are put to work full-time when they are under the maturity age or working illegally. Child labor also work done by kids full time under the age of 15. They prevent kids from attending school, such as unlimited or unrestricted domestic work. 2.2.1 Political Child labor laws first endorsed in 1847, and strengthened repeat over the years. Nike attempted to at hand itself to its shareholders in its first "corporate responsibility report" as a touchy-feely entity established by "skinny runners" and employing young executives who worried about the environment and the level of wages it paid. Late 1995 Nike said it thought it had tied up with responsible factories in Sialkot, in Pakistan, that would manufacture well-made footballs and provide good conditions for workers. Instead, the work was sub-contracted round local villages, and children were drawn into the production process. Now, it persisted, any factory found to be employing a child must take that worker out of the factory, pay him or her wage, provide education and re-hire them only when they were old enough. 2.2.2 Economy The inefficient and the futile governmental policies and the stability problems play a major role in the increase of child labor and it also creates economic instability. For instance; Pakistan has a per-capita income of $1,900 per year -meaning an individual survives on $5 per day. Addition to that, Pakistan has a traditional culture where earning of one individual will be feeding 10 mouths; and with the high rate of inflation it becomes difficult for a low income population to survive. 2.2.3 Legal factors Modeling the example of Pakistan, it is clearly documented that child labor is against the law, but the government carries lack of enthusiasm to do anything about it. Provision for education is very limited, due to the fact that less priority is given to education in the national budgets. Education receives around 3% of the total gross domestic product when compared to over ten times of this amount spent on military. Child labor exists in Pakistan (Sialkot) both in the export
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and domestic sectors. This fact has been well documented and reported by the international media for several years but no action yet taken.

Case study At times, 1970 and 80s, there was a significant streamlining of the production of footballs in Sialkot, Pakistan. Changes in raw materials from leather to synthetics and improved machinery for cutting ushered in the possibility of stitching footballs in the home. This resulted, middlemen began outsource stitching to families working from home, leading to increasing rates of child labor. An estimation of 7,000 children between the ages of 7-14 years old were working full time stitching footballs. The media began to report on this issue, which led to negative publicity for the industry around the 1994 Soccer World Cup and the 1996 European Football Championships. Media focus on child labor in the football sector in Pakistan was damaging to major brands and retailers. 2.3 physical abuses (TED Case Studies) Physical abuses in Nike factories reported by CBS news include workers being struck on the head, pinched, or being forced to stand, kneel or run in the hot sun as punishment. There have also been numerous cases of workers being sexually molested by supervisor within Nike factories. 2.3.1 Environmental factor Verbal abuse In Indonesia was reported that 30.2% of the workers had personally experienced, and 56.8% had observed it. And an average of 7.8% of workers reported receiving unwelcome sexual comments, plus 3.3% reported being physically abused. In addition, 73.4% of workers are satisfied with their relationship with direct line supervisors, 67.8% are satisfied with management. 2.3.2 Legal factor The violations of the labor code at Nikes Vietnamese contract factories became apparent, as in the case of the Tae Kwang Vina factory or VT, which employed around 10,000 workers, mostly young rural women. Nike took proactive measures and allowed independent auditing of the sweatshops. In 1999, Nike implemented by its own Code of Conduct in Vietnamese factories.

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Case study Most VT workers were young rural women, used to hard work and poor living conditions, yet they found it difficult to work under VTs extreme conditions. The toxic solvents and glues used in manufacturing caused dizziness, nausea, and respiratory ailments among workers. Accidents were prominent in hazardous sections of the plant. The workers were not allowed to go to bathroom more than once and drink water more than twice during an eight-hour shift. They also experienced repeated verbal and physical abuse. However, pressure from Nike, driven by external NGO and media attention, prompted regular visits by Nikes inspectors as well as independent monitoring. The introduction of Nikes Code of Conduct in 1999 ensured a safer work environment in Nike factories including VT. 3.0 Ethical Theories (Ethical and Morality) Ethical dilemmas, actually tells about the sweatshop and also about the child labor. These dilemmas were dealing with two ethical theories which are teleological and deontological. 3.1 Teleology (Theory of morality that derives duty or moral obligation from what is good or desirable as an end to be achieved. Also known as consequentiality ethics) Teleological theories differ on the nature of the non moral goods that actions ought to promote. Utilitarianism holds that the end consists in the other teleological theories claim that the end aggregate balance of pleasure to pain for all concern of action is survival and growth, as in evolutionary ethics (Herbert Spencer); satisfaction and adjustment, as in pragmatism (Ralph Barton Perry and John Dewey); and freedom, as in existentialism (Jean-Paul Sartre). (Farlex, 2012) Consequentialism theory, measures moral worth of an act by what it creates in the world. Utilitarianism is one such important theory, and it seeks, at its most abstract, to increase the amount of pleasure in the world. A utilitarian theory is teleological in that it seeks the end of moral action in the creation of pleasure. For Plato, that reason should dominate both will and passion in the soul, channeling them into rational ends. In this case it holds that the end of human action is the creation of the rightly ordered souls, which guarantees just and prudent actions in the future. (Johnson, 1998)

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3.2 Deontology (an approach to ethics that focuses on the rightness or wrongness of actions, as opposed to the rightness or wrongness of the consequences of those actions) Deontological moral systems are characterized by a focus upon adherence to independent moral rules or duties. To make the correct moral choices, we have to understand what our moral duties are and what correct rules exist to regulate those duties. Duty theory is more likely to define actions being morally right if it is in accord with some list of duties and obligations. Whereas, The rights theory describes actions as morally right if it adequately respects the rights of all humans. Sometimes also referred to as Libertarianism, the political philosophy that people should be legally free to do whatever they wish so long as their actions do not impinge upon the rights of others. (deontological ethics, 2012) 4.0 Recommendations Better Wages - all workers require a living wage, one that allows them to meet the basic needs of a family after working a full-time working week without overtime. Right to form trade unions - Nike sets up shop in countries and free trade zones where it is illegal or extremely difficult for workers to organize into unions. Without this united structure it is near impossible for individual workers to ask for improved conditions without fear of retribution. Ban short-term contracts - Nike moves its production where it likes when it likes and does not ban or discourage short-term contracts for its workers. The incentives for respecting workers rights Nike should offer meaningful incentives to factories that respect workers rights, particularly workers right to organize trade unions. Without genuine incentives human rights abuses will continue.

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