2004 Case*
Nike, the Gap, and other apparel retailers have found it
cost effective to move their manufacturing facilities to
developing countries where labor is cheaper than it is in
the United States (U.S.). While global alliances mean that
the U.S. apparel industry loses jobs to locations in China,
Pakistan, Vietnam, and Latin America where unions have little
power, corporate profit margins can be higher due to lower
costs, thus increasing shareholder value. When it comes
to a company’s economic self interest versus social
responsibility, shareholders welcome a strong return on
their investment, while special interest groups may scrutinize
their approach – creating a challenge for those who
seek to communicate with a company’s multiple audiences.
Nike is currently engaged in a court battle that is a result
of its attempt to communicate with multiple audiences. The
current controversy began when Nike's critics said that
factory employees in developing countries worked in sweatshop
conditions.
The Washington Post reported that workers at nine Indonesian
factories under contract by U.S. sportswear giant Nike say
they have either suffered or have witnessed sexual and verbal
abuse. Nike called the findings “disturbing”
and promised to fix the problems by investigating the abuse
allegations and establishing a “new system that would
allow workers to file grievances.” The company also
said it would take “severe measures against managers
that engage in these practices.” Source: The Washington
Post, JAKARTA, Indonesia, February 23, 2001.
Nike countered these charges in a public relations campaign
that included ads, press releases, and letters to the editor,
and argued that the company pays a living wage, does not
allow abuse, and offers free meals and healthcare to all
factory workers. Following Nike’s campaign, an activist
sued the company, alleging Nike’s statements were
misleading and negligent. Now it’s up to the U.S.
Supreme Court to decide Nike v. Kasky (No. 02-0575) to determine
if Nike's PR campaign is false advertising or free speech.
“The rest of the business community would do well
to follow this case, because a Nike defeat will make everyone
vulnerable. In our media-drenched world, the activists,
trial lawyers and politicians know how to run a campaign
of vilification. But surely when the Founding Fathers passed
the First Amendment, they believed they were ensuring a
healthy public debate, not stacking it.” Source: Wall
Street Journal, Editorial; May 14, 2002.
Assignment: Nike is holding a shareholders' meeting. You
have been asked to write a letter to shareholders in which
you address the issues and describe the progress being made
toward resolution of the conflict. You are encouraged to
conduct research to assist you in developing your response.
The software you use allows each investor’s name/address
to be inserted into your letter automatically, so address
your letter to: Mr. Thomas Michaels, One Sutton Place, Manatee,
FL 34228.
*Adapted from an original case submitted by Gayle Vogt,
PhD, California State University, Fullerton, CA.
