Corporate Ethics Failure of Nike

The report analyses the ethical failures faced by Nike in the sports industry based on its operations. The effects of the ethical failures on the revenues and the reputation of Nike are analysed in detail. The major recommendations that can be provided to Nike in order to face the ethical failures are also mentioned.

Running head: CORPORATE ETHICS FAILURE OF NIKE
CORPORATE ETHICS FAILURE OF NIKE
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Executive Summary
The report is based on the analysis of an organization named Nike. Nike has its operations in
the sports industry and the organization offers different types of sports based apparel and
shoes. The ethical issues that have been faced by the organization based on its operations in
the industry have been analysed on the report in detail. The issue was mainly based on the
development of sweatshops in the sports industry and providing low wages to the employees.
The recommendations have been provided to the organization based on the improvement of
reputation and revenues of Nike.

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Table of Contents
1.0 Introduction..............................................................................................................3
1.1 Background..........................................................................................................3
1.2 Aim.......................................................................................................................3
1.3 Scope....................................................................................................................3
1.4 Methodology........................................................................................................3
Information analysis.......................................................................................................3
Products, revenues and ownership.............................................................................3
Events that the company was criticised for................................................................4
Conclusion......................................................................................................................7
Recommendations..........................................................................................................7
References......................................................................................................................8

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1.0 Introduction
1.1 Background
Nike Inc. is multinational organization of American origin that mainly operates in the
designing, developing, manufacture and overall marketing of apparel, footwear, accessories,
services. The headquarter of the Nike is located in Beaverton, Oregon in Portland based
metropolitan area. Nike has gained the position of largest supplier of the athletic apparel and
shoes. The leadership position that is developed by Nike in the sports in the industry is based
on high levels of revenues that have been gained by the organization (Nike.com 2019).
1.2 Aim
The aim of the report is to analyse the ethical failures that are faced by Nike in the
sports industry based on its operations in the sports industry. The effects of the ethical
failures on the revenues and the reputation of Nike will be analysed in the report in detail.
1.3 Scope
The major issues that will be addressed by the report are based on the changes that
have occurred in Nike due to different ethical issues faced by the company.
1.4 Methodology
The data has been collected with the help of secondary research analysis based on
information that is available in different websites and the articles.
Information analysis
Products, revenues and ownership
The portfolio of the brands that are offered by Nike mainly include, Nike brand,
Hurley, Converse and Jordan Brand. The organization mainly sells the products to different
retail accounts with the help of its retail stores and the internet websites of Nike. The

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effective mix of the distributors is able to support the ways by which Nike is able to offer the
products to its customers in different parts of the world (Nike.com 2019).
The revenues of Nike have increased from the year 2005 to the year 2018. The global
revenues of the organization have amounted to around 36.4 Billion US Dollars in the year
2018.
The ownership of Nike is in the hands of the founder of the organization Phil Knight’s
son and the President and the largest shareholder of Nike. Travis Knight has gained the
position of the biggest shareholder of Nike (Nike.com 2019).
Events that the company was criticised for
Nike had faced major issues in the 1990s based on the use of child labour and
sweatshops for the manufacture of the products. The levels of pressure on the reputation and
revenues of Nike have increased until the year 1998. The co-founder of the organization had
provided commitment towards the development of the practices that are followed in Nike.
However, in the year 2017 the sweatshop based problem has threatened a comeback due to
different demonstrations that had been made by students against the sweatshops of Nike that
are operating in the US (Brenkert 2019). The allegations against the organization have
increased in a huge manner in the last few years due to different accusations that are made by
the students in different cities like, Washington D.C., Boston. The claims that are made
against the company are based on the lack of proper wages and high levels of verbal abuse
that are implemented against the workers in the factories that are located in the cities like,
Vietnam and Hansae. The organization has also been accused of cutting the jobs at Hansae
factory (Dempsey 2017). The access of unions towards the factories of Nike that are located
in Honduras. The independent monitoring based group named, Worker Rights Consortium or
WRC had been developed in the year 2000. The rights of the workers and labour are

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protected by the members of the group. The lack of proper access of the group in the factories
has been able to affect the operations and reputation of Nike in a huge manner (Distelhorst,
Hainmueller and Locke 2016).
The major issue that has been faced by Nike in the operations in different parts of the
world is based on the lack of proper fulfilment of human rights. Globalization has led to the
increase in levels of outsourcing related activities in order to reduce the costs based on
production. The regulatory vacuum that has been developed in the organization has been able
to affect the reputation of Nike in the sports industry (Fernando 2018). The revenues of the
organization have been affected in a huge manner by the ethical failures that had taken place
in Nike. The outsourcing related activities that have been performed by Nike are mainly
based on the proper reduction of revenue levels of the organization in the sports based
industry (Schneider and Gonsalves 2018). The reduction of costs in a proper manner is an
important factor that has an impact on the total revenues that are gained by Nike. The
organization has not been able to maintain its operations in different countries in an effective
manner (Johnson 2017).
The employees can be considered to be a major stakeholder of the organization and is
effective operations in different countries of the world. The workers of Nike in the factories
are also major stakeholders of Nike. The organization has however not been able to provide
high value to the stakeholders or employees. The wages that are offered to the employees are
not considered to be enough for the ways by which the services are provided by them. The
low wage levels have an impact on the lives of the employees and their work process as well
(Businessinsider.in 2019).
Nike has continuously faced major levels of issues based on the ways by which
services of employees have been able to affect the production based process of the

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organization. The lack of proper stakeholder value is considered to be an important issue that
has an impact on the ways by which Nike can maintain its operations in the sports industry in
a sustainable manner. The organization has thereby faced major ethical issues based on the
revenues that can be gained and the proper maintenance of its reputation as well (LeBaron,
Lister and Dauvergne 2017). After the sweatshop issue that had occurred in the factories of
Nike in 1990s, the company had made a commitment towards proper improvement of the
working conditions of the employees and increasing the levels of wages that are provided to
them as well. However, in the year 2017 the issue had again come into focus after the protests
that had started taking place in the US. Nike has thereby not been able to maintain the
commitment that was made by the organization in the sports based industry (Murphy,
Laczniak and Harris 2016).
The organization has not been successful in the proper development of reputation in
the sports industry due to the lack of proper levels of support from the management. The
organization had failed to maintain the commitment that had been made based on the proper
improvement of the working conditions in the organization (Russell, Russell and Honea
2016). Nike had again started facing major levels of issues related to the reputation that had
been developed by the organization in different parts of the world. The occurrence of the
events has been able to affect the levels of reputation of Nike in the sports industry. The
organization has not been successful in the development of its position on a global basis
(Néron 2016). The different events that have taken place in the sports industry have an impact
on the development of the revenues of Nike. The protests that have been developed by Nike
have been able to affect the employee base and the customer base of Nike as well. The lack
of proper fulfilment of corporate social responsibilities has been a major drawback for the
operations of Nike and image of the organization as a whole (Russell, Russell and Honea
2016).

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Steps taken by Nike – The major steps that had been taken by Nike in order to
maintain its reputation after occurrence of the issue was based on development of effective
advertisements and promotions with the help of celebrity endorsements. The CEO of the
organization, Phil Knight had also addressed the loyal customers of Nike in America in order
to regain their trust. This had led to the proper development of the reputation or image that
had been damaged due to the sweatshop issue.
Conclusion
The report can be concluded by stating that the ethical issues that have been faced by
Nike have a major impact on the operations of the organization in the highly competitive
sports industry. The ethical failures are related to the lack of proper value that can be
provided by the organization to the employees who are a part of different factories of Nike
that operate in different countries. The ethical issues faced by Nike have a major impact on
the revenue levels and the global image that has been formed by the organization. The
customer base of Nike has also been influenced in an adverse manner due to the lack of
effective wages that can be offered to the workers.
Recommendations
The major recommendations that can be provided to Nike in order to face the ethical
failures are as follows,
The development of regulations that can help the organization to provide value
to the workers and forming a positive working environment.
The wage rules need to be developed in such a manner that can fulfil the needs
and demands of the workers.
The organization needs to clean up its image with the help of proper
advertisements that can be developed by Nike in the global sports industry.

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References
Brenkert, G.G., 2019. Mind the gap! The challenges and limits of (Global) business
ethics. Journal of Business Ethics, 155(4), pp.917-930.Mind the gap! The challenges and
limits of (Global) business ethics. Journal of Business Ethics, 155(4), pp.917-930.
Businessinsider.in 2019. How Nike Solved Its Sweatshop Problem. [online] Business Insider.
Available at: https://www.businessinsider.in/How-Nike-Solved-Its-Sweatshop-Problem/
articleshow/21122639.cms [Accessed 18 May 2019].
Dempsey, A.L., 2017. Evolutions in Corporate Governance: towards an ethical framework
for business conduct. Routledge.
Distelhorst, G., Hainmueller, J. and Locke, R.M., 2016. Does lean improve labor standards?
Management and social performance in the Nike supply chain. Management Science, 63(3),
pp.707-728.
Fernando, M., 2018. ETHICS, VALUES AND RESPONSIBLE LEADERSHIP. Leadership:
Regional and Global Perspectives, p.99.
Johnson, C.E., 2017. Meeting the ethical challenges of leadership: Casting light or shadow.
Sage Publications.
LeBaron, G., Lister, J. and Dauvergne, P., 2017. Governing global supply chain sustainability
through the ethical audit regime. Globalizations, 14(6), pp.958-975.
Murphy, P.E., Laczniak, G.R. and Harris, F., 2016. Ethics in marketing: International cases
and perspectives. Taylor & Francis.

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Néron, P.Y., 2016. Rethinking the ethics of corporate political activities in a post-citizens
united era: Political equality, corporate citizenship, and market failures. Journal of Business
Ethics, 136(4), pp.715-728.
Nike.com 2019. [online] Available at: https://www.nike.com/in/ [Accessed 18 May 2019].
Russell, C.A., Russell, D.W. and Honea, H., 2016. Corporate social responsibility failures:
how do consumers respond to corporate violations of implied social contracts?. Journal of
business ethics, 136(4), pp.759-773.
Schneider, A.J. and Gonsalves, M.J., 2018. The role and relationship of science and ethics in
the evaluation of fairness in sport. Sport in Society, pp.1-17.