3.2 Discussion

Sloan faculty members discussed the Nike case with alumni in small groups as they would teach it in the classroom. What follows is a sampling of the responses the alumni offered to the questions posed by the faculty.

Q. What's the problem in this case? Or, to put it more directly, what do you think keeps Phil Knight awake at night?
A. An alumnus started the discussion by expressing the view that perhaps what Nike was facing was a "power of the press" problem. That is, Nike had not considered the media to be as large and powerful a constituency as it proved to be. Taking this view further, the question arose, was Nike's problem actually a big problem or not? As another alumnus pointed out: "We know from the data in the case that Nike took a hit in 1998 at the peak of the criticism, but it wasn't a big hit. Do consumers care? Is it really a problem for Nike? Data from the case show that Nike earnings kept growing." An alumna from the United States voiced the view that the Nike case broadens the definition of the corporation: "We're talking about Nike's suppliers, and considering them as part of the corporation. Did Nike know what its suppliers were doing? They were incompetent if they did not, and it was bad business if they did. In either case, the question broadens the definition of the corporation."
Q. So, if corporations are to be held accountable for meeting some basic standards, whose standards should guide them? Those of the local country? U.S. standards? Some global standards? Internal standards set by each corporation?
A. This point was hotly debated. Some argued that the company should uphold U.S. standards and pay high wages.

To this point an alumnus who runs a company in Eastern Europe said that his company paid twice the standard average wage of the local standard, yet that wage was not enough to allow the employee to travel to America. But if he tried to offer a comparable U.S. wage, his company would go out of business.

Similarly, a Sloan alumna raised the point: "Would we as consumers pay for sneakers made at American labor wages?" Others, like an executive from the software industry, argued that personal standards, rather than global standards, may be the way to go: "The question is, are you doing something you are proud of or ashamed of? Are you doing something you wouldn't be embarrassed about if the press was writing about you? You can't hide behind the letter of things and say ‘it's their country and their standard.’ If you have caused harm, then you are doing wrong."

Along with several others, an alumna from India argued that for certain things like air quality, there must be a global standard, because air quality affects more than just the citizens of one country. She stated this view clearly and simply: "Clean air is a basic human standard."

Another alumnus working in the United States raised the issue: "Is Nike able to decide what is an international norm, what is morally good? It's easy to say ‘don't poison the water or make an unsafe product,’ but I'm not sure I want Nike to be making decisions on human rights."

The standards of the legal minimum age for employment were no easier to define. Some alumni raised the point that Nike should adhere to the U.S. standard of 16 as the youngest legal age for a worker. But an alumnus from Brazil pointed out the difficulty with this argument: "In Brazil, a 14-year-old is not the same as a 14-year-old in the United States. In the United States, 14-year-olds have the alternative of going to school. After school, maybe they play sports or take music lessons. In Brazil, it's better to be working a part-time job at 14 than to be on the streets and be offered drugs. Limiting the worker age to 16 makes sense for the United States, but not for Brazil. You have to think locally."

An alumnus from Pakistan agreed. He had interviewed boys in Pakistan who were making soccer balls for Nike: "In Pakistan, the reality is that the 14-year-old's father may be a drug addict or dead, and his mother may have 10 other children to raise. As a 14-year-old, he represents the family's best earning potential." To deny the 14-yearold the ability to earn wages to provide for the family is age discrimination, taking away jobs. Indeed, the company could be sued for age discrimination. The notion that a 14-year-old is "too young" to work and that working is "not in the best interests of the child" must be informed by knowledge of the local conditions and the true alternatives facing 14-year-olds in developing countries. Sewing soccer balls at 14 may be damaging to the eyes, but what if the alternative is selling one's body?

The alumnus from Pakistan suggested that if Nike employs 14-yearolds, it can have a policy of offering 1–2 hours of education at the start of the day for the youth. This provides education for the employee while making the employee more valuable to the company (increasing literacy and numeracy).

An alumnus from the Philippines echoed this, adding that in the Philippines, having a job at Nike was considered very good: "Nike pays a higher wage. It would be considered low by U.S. standards, but in the Philippines it is good pay, and Nike helps you for education for your kids. Even though the wage doesn't match the first-world wage, it's a job in the third world that people want to get."

An alumnus from Argentina offered the following advice to managers of global companies: "Most of the problems must be solved locally by looking at the local conditions. Many things in Argentina fail because they create corruption, so actions must be looked at from the local situation. Companies can evolve slowly to higher standards in each country as they evolve and grow in that country."

Q. Assuming corporations should be held accountable for not just their own practices but also those of their suppliers and contractors, how should these practices be monitored and controlled?
A. An alumnus from France described how his company, a distributor of bottled water, operates in third-world countries: "We realize that the more people consume water, the more money we make. But at low income levels, most people don't have water. So we have tried to get water to third-world countries, installing a tap. But we've found that we install a tap, and the next day someone steels the tap, and again there is no water. So what we have learned over the years is to work with local NGOs—to work with well-established people, people who are not political dreamers but work on practical issues and are dedicated. We work with them as our intermediary, and this mechanism has worked well for us."

An alumnus who runs a venture capital fund in Europe answered this question as follows: "We ask the question, ‘does management of this firm have the capacity to take care of these issues or not?’ If not, they simply won't get our funds."

Another participant's words captured the feeling that whatever standards and monitoring mechanisms are developed, they will have to be open to change over time: "Setting standards is not just a one-time event. It's an ongoing process, like quality, because values change, the community changes. The theme is one of transparency and an open process."

Professor Richard Locke summed up the case discussion: "As we can see, there are no simple answers to any of these questions—what standards we want to hold firms accountable to depends on our conception of the economic and social responsibilities of global firms. What specific standards should guide corporate practices is both a hard economic question and a hard political question. Effective and trusted monitoring will require substantial institutional innovation. Firms may need to learn how to work with NGOs, local governments, local labor organizations, and other groups. Regardless of how each of us answers these questions, it is clear that defining and meeting the global responsibilities of corporations are defining issues facing managers today, and tomorrow."