EXECUTIVE SUMMARY

The essay puts light on the critical issues related to the management practices by correlating
those with the standard organizational theories. Here, the main structure of the essay relies on
choosing questionable management practices by considering a real world scenario. That’s
why the case study of NIKE has been taken into account here for the critical analysis. The
case study is based on sustainability and labor practices throughout the fifteen year journey of
NIKE. Major corporate responsibilities undertaken by NIKE under which, innovation, labor
practices, FLA (Fair Labor Association), labor targets and performance etc come to
consideration. While in this essay, two of the major management practices, known as labor
practices and sustainability growth in terms of innovative products are the core issues of
discussion. These management practices have been critically analyzed by comparing their
standards with the ideal criteria of two of the organizational theories, that are- agency theory
and organizational theories related to the dimensions of ethics and morality. The questionable
practices come under the sustainability and labor practices are critiqued more often after
considering the perception of the public towards those. Some of the quick-fix solutions are
also given in the essay so that NIKE can implement the practices for greater sustainability as
well as robust and effective labor practices so that ultimately the sustainability and CSR
index will be higher and the public will appreciate these concerns of such an illustrious
multinational brand that deals within the footwear, accessories, apparel and equipment
industry. At first the chosen issues have been analyzed and then impactful recommendations
that can actually change the perceptions of public towards the sustainability and labor
practice issues of NIKE towards a better spectrum.

BACKGROUND

For better understanding, the sustainability and labor issues related case study of NIKE has
been analyzed here in this essay. NIKE is an American corporation which is quite popular for
its unique design and development along with manufacturing, marketing and sales of
products in the industry of apparel, accessories, footwear, equipment and other services. Phil
Knoght and Bill Bowerman are the founders of NIKE and the headquarters of this giant
company is at Washington County in the United States. NIKE is viewed as the top supplier of
athletic shoes as well as apparel. Along with this, the company is also considered as the top
sports equipment. There are around 63,600 employees working for the company according to
the 2015 annual report of NIKE. The annual revenue of the company in 2015 was
approximately US$30.601 billion.

The questionable practices that have been taken into account here are- the FLA practices and
sustainability growth practices linked with the sustainable management of NIKE. The first
corporate responsibility report of NIKE was published in the year 2002 but later on the 2004
report stated more transparency in sustainability and labor practices. By keeping an eye on
the factors that needed change, NIKE followed some change management when it came to
the management practices and in the year 2007 the company experienced some positive
changes with a wider-scale of impactful sustainable strategies. The company focused on the
monitoring and control mechanisms of it to achieve effective outcomes in the strategic
change management related to FLA and the sustainability growth strategies. The company
therefore formulated the new codes of conduct so that the poor working conditions in the
overseas sites which were the public perceptions back then can be resolved properly. With
the problem of moving factories, the offshore practices of the company were continuously
criticized by the press and pay scales related to some of the Asian line workers in comparison
with the athletes were also considered in the case studies as per the public scrutiny. Mainly
the Chinese and the Indonesian factories were the sources of these issues and therefore NIKE
moved its majority of production towards the Oregon headquarters to mitigate the
sustainability and labor related questionable practices.

ISSUES AND ANALYTICAL STUDY

The “stitched in time” management practices of NIKE have been always under the radar of
controversial activities from the perspective of public. So, thinking about the growing
response of ongoing criticism, the company restructured and again formulated its code of
conduct especially lined with the contractors. During the first-time formulation of it, NIKE
wants to apply it in all the factories. The code of conduct was based on several past
recommendations related to minimum wages (especially in the host country), maximum level
of mandatory working period of at least 60 hours each week, the environmental standards,
minimum age of the labors which is 16 years, safety and health issues and ban related to
forced labor. In 2998, NIKE got its membership in FLA (Fair Labor Association) which is a
body of US Department of Labor, White House as well as the apparel and accessories
industry. The government entity keeps focusing on the safeguarding of factory working
conditions that have been contracted to all the companies of the US. FLA has its own
voluntary code of conduct which states the label “No Sweat” which is mandatory for all the
goods. Minimum wages along with the international investment competition especially in
case of poor nations have been mentioned here by thinking about minimum wage which is
quite low for supporting their families.

Whereas, the Agency Theory puts light on organizing best possible relationships between the
two parties, that are- the labors and the employer (NIKE). In this kind of relationship, NIKE
has hired them to do the daily works so that all the organizational tasks can be performed.
According to agency theory, both these parties are valuable for the company’s sustainable
growth and therefore, the principal party has to keep the labors motivated by considering all
the above-mentioned environmental, financial and non-financial factors, such as- wage, work
environment, work duration, safety issues and no forcible attempts. In this case, the self-
interests of the labor have to be comprehended because if the company goes against it, then
NIKE’s loss will be higher. The critics always argue over the matter of human rights
violations in companies like NIKE that are under the UN endorsement but the companies are
just doing nothing to mitigate these conditions that are in harmony with the agency theory.

On the other hand, for the measurement of effective FSI (Footwear Sustainability Index) as
well as ASI (Apparel Sustainability Index), NIKE always monitor and evaluate, then control
the score of materials sustainability index so that major impacts due to manufacturing of the
product can be mitigated and diminished. Such impacts are waste, energy usage as well as
solvent usage, toxic products etc. During the Business for Social Responsibility meetings,
NIKE always shows the videos and images of happy workers, for example- once it showed
the Vietnamese factory’s happy labors. However, just after two days the New York Times
came with an article about the Vietnamese workers who continuously got exposed towards
carcinogenic substances that were around 177 times more than the safe levels and they were
just paid $10. Along with the wage issue, another issue of working 65 hour per week came to
the front. Therefore, the company again redesigned and restructured its code of conducts
while focusing more on the environmental, humanitarian and social as well as environmental
responsibilities. From that day, NIKE has become more responsible about recycling the
excessive amount of rubbers and plastic coming out of the factories, the company also now
focuses on organic cotton and it claims that around 90% of the shoes are manufactured with
nontoxic glues and solvents as well as cleaners. For instance- the green products, like- Jordan
XX3 that has no chemical adhesives or waste or toxic chemicals.
Here the questionable management practice of NIKE which is about innovation for which the
company overlooks the impacts of strategic innovation on society, environment and human
rights can be compared against the standard ethical and moral dimensions of organizational
theories. Here, NIKE has to explore its relationships present among economic, environmental
and social responsibilities as well as the related influencing sectors. The company therefore
practices and develops critical thinking as well as communication skills so that the labors and
the top management levels can be involved with the participation of ethical business
dialogues.

RECOMMENDATIONS

In case of the wage related management issue, NIKE should go for restructuring its code of
conduct and policy-making style. The public relations exercises have to be more critically
discussed as NIKE is a member of the FLA and it should focus more on its corporate
responsibility to shape its sustainability strategies as well as labor practices. Mandatory time
limits in the code of conduct should mention that no worker can work more than that of 60
hours and wages should be implemented as per their skills and work capacities so that they
don’t have to rely on overtime. The company should also leave its unrealistic style of pay
scale and embrace the phenomenon equality. With this approach, the company can think
about doubling the wages of workers who work in the Asian countries in the NIKE factories
and who face difficulties while supporting their families. The agency theory should be
applied more practically and perfectly towards the management practices so that the
relationships among the brand employer and the labors can be strengthened. NIKE should
also consider about the motivational strategies that is an imperative part of the agency theory
because with this, the deserving labors will get the opportunities to show their actual talents
and according to the talents, they will be promoted and incentivized. While considering the
sustainable growth strategy, NIKE should reshape its management strategies regarding more
inclination towards green products and nontoxic materials. Here, the apparel and shoe brand
has to focus on the ethical and moral dimensions of the organizational strategies, like it did in
1998 by phasing out the utilization of PVC or Polyvinyl Chloride from the manufacturing
option in case of shoes. Like that, it can also think about eliminating the toxic wastes and
chemicals from the equation so that the impacts on environment can be mitigated to a
considerable extent. With this, the company can embrace the Greenpeace which it enrolled
quite a long time ago. Criticism regarding the use of toxic products is a very serious issue
which can negatively affect the management practices and the campaigns of NIKE on a wide-
ranging basis. Hence, NIKE can follow the modern corporate environmental progress as well
as responsibility model while dwelling on the ethical choices and moral obligations of the
company which it should decently follow so that no negative impacts will be there on
mankind.

CONCLUSION

In the essay, various management practices of the apparel and shoes giant NIKE have been
discussed by comparing those with the standard agency theory and the ethical and moral
dimensions linked with organizational theories. The case study which has been taken into
account was mainly based on the sustainability as well as labor practices of NIKE. Moreover,
the current issue of wages, work duration, minimum age for working, safety standards and
the sustainability methods that come under the questionable management practices of this
multinational corporation have been discussed thoroughly. Fact is that, the net profits and
revenue of the company will get hampered but at the same time NIKE can’t just compromise
the factor of social conscience as it is the moral obligation of the company towards the world
of humanity. Therefore, the recommendation of shifting completely towards more green
products when it comes to accessories, shoes, services, sports equipment and apparel is the
key here. The results of these corporate social responsibilities and sustainability factors will
enhance the reputation level of the company which many of the critics have been stating that
it has gone to the downgrade level. NIKE can’t deny the fact of sustainability issues as well
as labor issues, especially in case of work duration, overtime and wage differences, so the
main purpose of this essay is to focus on the related management practices and make policies
that can create a difference in the social and environmental perspectives of the public.