Vietnam quickly became one of Nines first producers, and Nikkei became Vietnam biggest employer, with “Twenty thousand young Vietnamese workers currently churn out a million pairs of Nines every month” (Nikkei does it to Vietnam, March 997) – The accusations Nines position as a leader in the sports apparel market, the notoriety of its brand and products, its profitability and its visibility allowed actors of the social and human rights defense to make Nikkei a symbol of the lack of ethics in their Vietnamese factories. Therefore, in 1 995, investigations began in different factories in Vietnam, and reports were not in favor of Nikkei.
In 1 997, health and safety issues were reported during an audit made by Ernst and Young in one of the factories of Vietnam, Ate Kiang Vain. The research wowed that the concentration of toluene (toxic chemical targeting the nervous system, skin, eyes and respiratory system) in some part of the factories exceeded, sometimes by more than 100 times, the acceptable amount, and the required equipment wasn’t provided by Nikkei, violating it’s code of conduct (Locke, 2001). Furthermore, other reports from another factory from Ho Chi Mini City said that Nikkei code of conduct was not respected.
The work conditions are again targeted, but this time as unethical behaviors between the supervisors and their employees. The supervisors are accused of sexual harassment, verbal ND physical abuse, which is denied by the accused firm. Nikkei defends itself by saying they do not have full control about what is going on in their factories as they are using subcontractors, but do not tolerate this kind of behavior and will make sure it is stopped. What we can ask ourselves is whether Phil Knight, Nikkei founder and CEO, was aware of these kinds of practices, and if he just waited for the press to talk about it before responding and taking actions.
Another complain with the Nikkei industry in Vietnam is the salaries: even though the average monthly salary is above Vietnamese minimum wage, a basketball shoe will cost Nikkei $1. 50, only one per cent of the retail price. What is important to note is that, compared to countries such as China or South Korea, the Vietnamese government pays much more attention to the protection of employees, ensuring a minimum wage, limiting the overtime and allowing strikes. By deciding to have Vietnamese factories ran by South Korean and Taiwanese subcontractors, the American company needed to analyses the culture differences between those countries.
Such differences can be analyses through Hypotheses measures (see figure 1). Therefore, some practices that could have being common or acceptable in some Asian countries, might be seen as abusing or humiliating practices in Vietnam. Even though Nines code of conduct is reported as “fine”, it doesn’t necessary mean it is perfectly respected by everyone, as it does not correspond to every different cultures Nikkei is working with. In 2002, Nikkei was the most cited brand when making reference to a non-ethical brand (See figure 2) (Gammas Et. AY, 2005), and had to respond to those accusations. Nines response Following those accusations, Nikkei didn’t have a choice but to react. Indeed, with the growing mention in press articles and pressure from sports team to drop the Nikkei equipment, Knight had to respond. He kept the same speech, insuring the problem was not “typical of Nikkei factories” but came from the fact that Nikkei was not the one dealing directly with the factories. Therefore, Philip Knight made some changes such as putting a new manager, improve the work conditions and raise salaries. However, this couldn’t be done in every factory, and Knight had to make some promises.
On the 1 12th of May 1998, Nines CEO publicly announced to the press that mom changes would occur in Nines factories. It was well received by the press and the workers (Tim Connors, May 2001), and the New York Times even said other companies should have the same standards as Nikkei. The six promises were made to improve the work condition and safety, such as a minimum age raise and higher facilities air quality standards, but also to give employees some advantages such as benefiting from free high-school education and expansion of micro-enterprise loans.
Nikkei also started to get involved in non-profit organizations, such as the United Nations Global Compact, promoting “corporate citizenship among multinational companies. ” Despite all that, it did not prevent anti advertisement to appear, television reports to be made as well numerous websites. Even a cinematographic film called “the big one” was released in 1998, showing the working conditions in Nikkei subcontractors. (Gammas Et. Al. ). Nikkei then decided to make every report from Porterhouses Coopers (PWS) audit missions public in each of its 400 subcontractors.
Clearly, the promises were well received by the press, but is it really what the workers were looking for? Has their situation really changed? Eke said by Bullet in 2000, “every social movement needs a visible villain, especially when working with the news media, and the anti-sweatshop activists couldn’t have asked for a better one than Phil Knight, the founder of CEO of the largest sports-shoe business in the world, Nikkei”. Making ethical decision in business is often multidimensional and complicated. II – Kayaks accusations Shortly after the accusations and the response, Nikkei was taken to court.
In 1998, Mark Sky, a San Francisco resident, filed a lawsuit in California for else advertising, going against Californians Unfair Trade Law and the False Advertising Law. Sky, pretending to act as a representative of the citizen Of the State of California, supported the fact that, during its public relation campaign, Nikkei made a series of false or misleading declarations. Sky wanted to prove that by doing all those declarations, Knight wasn’t trying to solve the labor problem but to increase his companies’ sales.
If Sky allegations were proved to be right, Nikkei could have had to stop all sorts of advertising and public announcements, but also refund to the Court all the money they have made with their commercial practices. Then follows a couple years of legal battle between Sky and Nikkei. A first judgment said Nikkei wasn’t in the wrong, and this was later confirmed following an appeal from Sky. According to the First amendment of the American Constitution, the company disposes of total freedom of speech, and her speeches are not assimilated with advertising, and therefore Nikkei cannot be accused of false advertising.
During this case, Nikkei had the support of newspapers, such as the New York Times and the Wall Street Journal, as they ere saying most big companies would stop doing public announcement, being scared of getting taken to court, especially after Nikkei said they would NT release their “2002 annual corporate responsibility report” and “declined to participate in several media interviews” (Tom L, 2004). This situation would cease information to circulate, and therefore wouldn’t benefit citizens.
In 2003, the case is concluded with a common agreement between Sky and Nikkei. They both agreed that the money should be spent on ameliorating the working conditions of the workers rather than to lawyers and court. Nikkei agreed on donating money to Fair Labor Association, a non-profit organization created by Nikkei in 1999. Conclusion When entering the Vietnamese market, Nikkei should have had a closer surveillance of how the factories were run by their subcontractors, analyzing more the cultural differences between the countries.
This could have prevented accusations, or a least some of them. Furthermore their first tactic of ignoring the accusations only delayed their intervention and created more polemic. Nikkei reacted well with both the press accusation and the lawsuit. They knew their factories weren’t running in an ethical manner, and they tried to change that. Finally, Kayak’s accusations were unfounded, but his fist goal was not to earn money though a trial. He wanted the situation in Vietnam to be solved.
Even if Nikkei might have used some of the press release to promote its brand, unethical behaviors such as violence and sexual abuse is not what you want people to hear about your organization. The management of a multinational company implies management of diversity and differences between countries, cultures, working environment, norms and legislation, but he actual development of immigration and the movement of consumers’ forces enterprises to face diversity on their domestic market, risking their employees and customers’ dissatisfaction having different characteristics and different expectations.