Connor 2001 - Still Waiting For Nike To Do It (Ge)

Tim Connor
Still Waiting
For Nike To Do It
Nike’s Labor Practices in the Three Years Since
CEO Phil Knight’s Speech to the National Press Club
Published by Global Exchange

ISBN 0-9711443-0-3
May 2001
Global Exchange is an international human rights organization dedicated to

promoting environmental, political, and social justice around the world. Since
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Electronic copy available at: http://ssrn.com/abstract=2496327

Contents
Executive Summary ................................................................................................................. 1
Introduction .............................................................................................................................. 6
Part 1
Knight’s May 12 Promises:
What Have They Meant For Workers?
1. OSHA Standards in Indoor Air Quality ............................................................................. 7
2. Raising the Minimum Age for Factory Workers ............................................................. 11
3. Involving Non-government Organizations in Factory Monitoring,With
Summaries of That Monitoring Made Public .................................................................. 13
4. Expanded Education Programs ......................................................................................... 16
5. Increased Micro-enterprise Loan Program to a Thousand Families Each in the
Countries of Vietnam, Indonesia, Pakistan, and Thailand ............................................. 18
6. Funding University Research and Open Forums on Responsible Business
Practices, Including Independent Monitoring ................................................................. 19
Part 2
Sins of Omission:
What Labor Rights Groups Wish Knight Had Promised
1. Overcoming the Culture of Fear: Protecting Workers Who Speak Honestly
About Factory Conditions ................................................................................................. 22
The June Textiles factory in Cambodia ..................................................................... 25
The Sam Yang factory in Vietnam ............................................................................. 26
Nike and suppression of dissent in Vietnam: the Joseph Ha letter ......................... 27
2. Regular, Transparent, Independent and Confidential Procedures

for Monitoring Factories and Investigating Worker Complaints .................................. 28
An Informed Workplace ............................................................................................. 30
Independent Monitors ................................................................................................. 32
A Relationship of Trust Between Workers and Monitors ........................................ 37
Confidential Procedures for Workers to Complain to Independent Monitors ............. 44
Transparent Reporting ................................................................................................ 45
Regularity of Monitoring ............................................................................................ 48
Overall Assessment of Nike’s Monitoring Program ................................................ 50
Electronic copy available at: http://ssrn.com/abstract=2496327

3. Decent Wages ..................................................................................................................... 52
Nike’s Justifications For Its Wage Policy ................................................................. 56
4. Working Hours ................................................................................................................... 64
Leave ............................................................................................................................ 65
5. Health and Safety ............................................................................................................... 65
Factory Doctors Who Try to Persuade You to Keep Working
When You Are Sick ..................................................................................................... 66
Psychological Stress from Pressured Workplaces Characterized by
Harassment and Intimidation ..................................................................................... 68
6. Freedom to Organize ......................................................................................................... 69
Nike in China—Total Repression of Independent Unions ...................................... 69
Nike in Indonesia—Union Organizers Face Harassment, Discrimination
and Violent Intimidation ............................................................................................. 71
Nike in Thailand—Union Organizers Dismissed and Blacklisted .......................... 73
Nike and the Formosa Factory in El Salvador—Any Worker Who
Tries to Form a Union is Dismissed .......................................................................... 77
Nike and Harassment of Union Officials at the Natural Garment
Factory in Cambodia ................................................................................................... 78
Nike and the Savina Factory in Sadinski, Bulgaria—Workers Conceal
Their Union Membership for Fear of Losing Their Jobs ........................................ 79
Nike in the Dominican Republic—Rejecting the Findings of Its Own Monitor ........ 79
Nike in Bangladesh—Producing in Areas Where Unions Are Illegal .................... 80
Nike and the Kuk Dong Factory in Mexico—Counterfeit Unions,
Wrongful Dismissal and Violent Intimidation .......................................................... 80
Conclusion .............................................................................................................................. 91
References .............................................................................................................................. 96
Appendices
Appendix 1. Correspondence with Nike in preparation of this report ........................... 102
Appendix 2. Nike’s Code of Conduct ............................................................................... 108
Appendix 3. Fair Labor Association (formerly the Apparel Industry
Partnership) Workplace Code of Conduct ............................................................... 109
Tables
Table 1. Has Nike kept its promises? ................................................................................... 10
Table 2. Timeline of events in the Kuk Dong factory in Atlixco, Puebla in
Southern Mexico ......................................................................................................... 83
1
Executive Summary
On May 12, 1998, Nike’s CEO and founder Mr. Phillip Knight spoke at the National
Press Club in Washington, DC and made what were, in his words, “some fairly signifi-
cant announcements” regarding Nike’s policies on working conditions in its supplier
factories.
The announcements received favorable treatment from the press, with a New York
Times editorial suggesting that Nike’s new reforms “set a standard that other compa-
nies should match.”
Nike’s critics were more cautious, expressing concern that Knight’s promises rep-
resented an attempt to sideline their demands for decent wages and rigorous factory
monitoring and replace them with a significantly weaker reform agenda.
This report represents a comprehensive examination of Nike’s labor performance
in the three years since that speech was made. That performance is first assessed against
the commitments Knight announced and is then compared with the human rights stan-
dards and independent monitoring practices labor rights organizations have demanded
of the company.

What Have They Meant for Workers?
Knight made six commitments:
1st Promise: All Nike shoe factories will meet the U.S. Occupational Safety and
Health Administration’s (OSHA) standards in indoor air quality.
Nike was the subject of considerable scandal in 1997 when it was revealed that work-
ers in one of its contract factories were being exposed to toxic fumes at up to 177
times the Vietnamese legal limit. Although Nike claims that its factories now meet
OSHA standards, it gives factory managers advance notice of testing, giving them
considerable scope to change chemical use to minimize emissions on the day the test
is conducted. Nike is also not yet willing to regularly make the results of those tests
available to the interested public. Rights groups have challenged Nike to put in place
a transparent system of monitoring factory safety standards involving unannounced
monitoring visits by trained industrial hygienists.
2nd Promise: The minimum age for Nike factory workers will be raised to 18 for
footwear factories and 16 for apparel factories.
Nike was severely embarrassed on the child labor issue in 1996 when a major story in
Life magazine featured a photograph of a very young Pakistani boy sewing a Nike
soccer ball. Evidence continues to emerge of young persons under the age of 16 em-
ployed in Nike contract factories. In the absence of economic development in their
2 Still Waiting For Nike To Do It
communities, however, excluding children from factories may force them into even
more dangerous and degrading work. Global Exchange believes that payment of a
living wage to adult workers would be by far the most effective means of benefiting
children in areas in which Nike’s goods are made.
3rd Promise: Nike will include non-government organizations in its factory

monitoring, with summaries of that monitoring released to the public.
As far as rights groups are concerned, this was the most important of Knight’s prom-
ises. Three years after it was made, Nike has contracted one non-profit organization to
conduct one audit of one factory and is able to list a number of other NGOs with which
it has held discussions which it claims will improve its monitoring program. What the
company is still unable to say is which NGOs, if any, will be allowed to regularly
monitor factory conditions and when summary statements of that monitoring will be
released.
4th Promise: Nike will expand its worker education program, making free high
school equivalency courses available to all workers in Nike footwear factories.
The education program has expanded, but wages paid in Nike factories are so low that
the great majority of workers cannot afford to give up overtime income in order to
take one of the courses. Payment of a living wage would give Nike workers with an
interest in achieving a high school education the time and the means to do so.
5th Promise: Nike will expand its micro-enterprise loan program to benefit four
thousand families in Vietnam, Indonesia, Pakistan, and Thailand.
It is much cheaper for Nike to give micro-loans to several thousand individuals out-
side Nike factories than to ensure that the 530,000 workers producing the company’s
product are paid a wage that would allow them to live with dignity. Nike’s first re-
sponsibility is to the workers in its production chain. The company should commit to
a living wage before it seeks public relations kudos by funding charitable programs
like this.
6th Promise: Funding university research and open forums on responsible

business practices, including programs at four universities in the 1998–99
academic year.
The company has refused reputable academics access to Nike factories to conduct
research, and that research it has funded seems geared to providing private informa-
tion to Nike rather than stimulating academic debate and increasing knowledge. If
Nike is genuinely interested in investing in credible academic research into respon-
sible business practices, the company should establish an independent committee made
up of reputable and independent academics to determine which research should be
funded.
Executive Summary 3
Sins of Omission: What Labor Rights Groups Wish
Knight Had Promised
The demands which rights groups have made of Nike but which Nike has deliberately
ignored can also be grouped into six categories:
1st Demand: Protect workers who speak honestly about factory conditions.
Nike’s track record in protecting workers who blow the whistle on sweatshop condi-
tions is very poor. The company has turned its back on individual workers who have
been victimized for speaking to journalists, and has cut and run from other factories
after labor abuses have been publicized. Until this changes, Nike workers will have
good reason to keep silent about factory conditions for fear that speaking honestly
may result in them and their fellow workers losing their jobs.
2nd Demand: Regular, Transparent, Independent and Confidential Procedures

for Monitoring Factories and Investigating Worker Complaints.
Activists have repeatedly asked Nike to allow rights groups to educate workers about
their rights and to ensure workers can make confidential complaints to independent
monitors when those rights are infringed.
Instead, Nike has made it the responsibility of each factory to educate workers
about Nike’s code of conduct and to establish a complaint mechanism. This deliber-
ately ignores the interest factory owners have in keeping workers ignorant of their
rights. All independent research indicates that the overwhelming majority of Nike
workers do not understand their rights under Nike’s code and do not believe factory
owners can be trusted to resolve worker grievances.
Rights groups have also called for a factory monitoring program which is inde-
pendent and rigorous. In response Nike has set up an elaborate array of different schemes
for monitoring and factory assessment. While this variety of programs looks impres-
sive in a public relations sense, Nike has deliberately set up each of these programs so
that they fail two or more of the key tests of effective monitoring: independence, trans-
parency, regularity and a relationship of trust with workers.
The quarterly program of S.A.F.E. (Safety, Health, Attitude, People, Environment)
assessments, conducted by Nike staff, is obviously the least independent. There is no
evidence that Nike staff actually interview workers as part of these assessments let
alone attempts to establish a relationship of trust with them.
Nike’s program of annual factory monitoring by PricewaterhouseCoopers also lacks
independence. PwC was selected by Nike, reports to Nike and conducts a monitoring
program designed by Nike. To the extent that independent observation of PwC’s moni-
toring practice has been allowed, it indicates that PwC auditors fail to establish a rela-
tionship of trust with workers and that the quality of their monitoring can be extremely
poor. Dara O’Rourke (an assistant professor at MIT) recently observed several PwC
factory audits first hand and concluded that they had “significant and seemingly sys-
tematic biases” in favor of factory owners and against the interests of workers
(O’Rourke 2000).
While there are elements of the Fair Labor Association’s (FLA) proposed moni-
toring program that represent important improvements on Nike’s current very poor
system, the Association’s ability to ensure that workers’ rights are respected will be
significantly undermined both by the questionable independence of its external moni-
tors and by the long delays between factory monitoring visits—which will on average
occur in each factory only once every ten years.
The Global Alliance for Workers and Communities is an attempt by Nike to shift
focus away from the human rights agenda promoted by the company’s critics. The Alli-
ance deliberately avoids investigating key human rights issues and its research methodol-
ogy does not allow time for researchers to create a relationship of trust with workers.
Nike has vigorously opposed the Workers’ Rights Consortium, a factory monitor-
ing program that is independent, transparent and makes it a priority to build relation-
ships of trust with workers. In contrast, Nike’s monitoring and factory assessment
programs are not independent, lack full transparency and have so far made very little
effort to win workers’ trust so that they can speak honestly about factory conditions
without fear of reprisal.
3rd Demand: Decent Wages

Nike has rejected demands that it ensures that Nike workers are paid a living wage—
that is, a full time wage that would provide a small family with an adequate diet and
housing and other basic necessities. Instead, the company has used statistics selec-
tively and in a misleading fashion to give the false impression that wages currently
paid to Nike workers are fair and adequate. Meanwhile those workers struggle to sur-
vive on wages that are barely enough to cover their individual needs, let alone those of
their children.
4th Demand: Reasonable Working Hours

Independent research indicates that in many factories Nike workers are still being
coerced into working up to 70 hours per week and are being humiliated in front of
other workers or threatened with dismissal if they refuse. Nike workers also frequently
report that it is extremely difficult to obtain sick leave and that the annual leave to
which they are legally entitled is often refused, reduced or replaced with cash without
the worker having any choice in the matter.
5th Demand: Safe and Healthy Workplaces

Nike has made important progress in reducing the use of toxic chemicals in sportshoe
production. Unfortunately, on the few occasions in recent years that genuinely inde-
pendent health and safety experts have been allowed access to Nike contract factories,
they have found serious hazards including still dangerously high levels of exposure to
toxic chemicals, inadequate personal protective equipment, and lack of appropriate
guards to protect workers from dangerous machinery. There is also considerable evi-
dence of workers suffering stress from spending large amounts of time in high pres-
sure and frequently abusive work environments.
Executive Summary 5
6th Demand: Respect for Workers’ Right to Freedom of Association
So far Nike’s promise to protect this right has been largely empty. A considerable
proportion of Nike’s goods are made in countries like China where independent unions
are illegal. Nike has refused to call on the Chinese government to allow workers to
organize and has actively opposed calls for trade pressure to be put on the Chinese
government to encourage it to improve its record in this area.
Nike has abjectly failed to prevent the suppression of unions in a number of its
contract factories, including the PT Nikomas Gemilang and PT ADF factories in Indo-
nesia, the Sewon and Wei Li Textile factories in China, the Formosa factory in El
Salvador, the Natural Garment factory in Cambodia, the Savina factory in Bulgaria
and factories owned by the Saha Union group and the Bangkok Rubber group as well
as the Nice Apparel, De-Luxe, Lian Thai and Par Garment factories in Thailand.
On those few occasions when Nike has taken any steps to advance this right in
specific factories, it has done so grudgingly and after considerable public pressure.
While elements of Nike’s eventual response to the current dispute in the Kuk Dong
factory in Mexico have been positive, Nike’s actions on the issue been characterized
by unnecessary delays, lack of follow through and failure to actively promote the ur-
gent need for a free and fair union election.
Conclusion
Thus far Nike has treated sweatshop allegations as an issue of public relations rather
than human rights. The promises made by Phillip Knight in his May 1998 speech were
an attempt by the company to switch the media focus to issues it was willing to ad-
dress while avoiding the key problems of subsistence wages, forced overtime and sup-
pression of workers’ right to freedom of association.
The projects Knight announced have been of little benefit to Nike workers. Some
have helped only a tiny minority, or else have no relevance to Nike factories at all. The
most significant promise, to allow NGOs to monitor its factories and release summary
statements of that monitoring, has simply not been fulfilled.
Health and safety is the one area where some improvement has occurred. But even
here the company is not willing to put in place a transparent monitoring system involving
unannounced factory visits. On the few occasions when independent safety experts have
been allowed to visit Nike factories, they invariably have found very serious hazards.
The inaction of the last three years shows that rights groups are justified in treat-
ing the company with suspicion and demanding that factory monitoring be both genu-
inely independent from Nike’s control and publicly reported in full. While Nike touts
itself as an “industry leader” in corporate responsibility, Nike workers are still forced
to work excessive hours in high pressure work environments, are not paid enough to
meet the most basic needs of their children, and are subject to harassment, dismissal
and violent intimidation if they try to form unions or tell journalists about labor abuses
in their factories. The time has come for the company to adopt the reforms which
rights groups have advocated. It is indefensible that activists, consumers and most
importantly Nike factory workers are still waiting for Nike to do it.
Introduction
On May 12, 1998 Nike’s CEO and founder Mr. Phillip Knight spoke at the National
Press Club in Washington, DC and made what were, in his words, “some fairly signifi-
cant announcements” regarding Nike’s labor practices. Noting that the controversy
over sweatshop conditions had made his company’s product “synonymous with slave
wages, forced overtime and arbitrary abuse” he announced that Nike would be adopt-
ing new labor policies with regard to health and safety, child labor, independent moni-
toring and workers’ education. He also announced an expansion of Nike’s micro-loan
program to poor families and a new program to fund academic research into respon-
sible business practices. Later he would describe the speech as a “watershed event”
which signaled “a sea change in the company culture” (Emerson 2001).
The announcements received mostly favorable treatment from the US and inter-
national press. A New York Times editorial argued that the new reforms “set a stan-
dard that other companies should match” (New York Times 1998) and the Washington
Post’s E. J. Dionne Jr. called them a “breakthrough for American and international
human rights campaigners” providing evidence that “public shaming and consumer
pressure can have a mighty impact on mighty manufacturers” (Dionne 1998).
Nike’s critics were more skeptical. Campaign for Labor Rights (CLR) opened its
response to Knight’s announcement by suggesting that Nike’s “Asian workers already
enjoy the highest standard of empty promises of any in the industry” (CLR 1998).
While recognizing that some of the new promises “represent a breakthrough”, CLR
and other labor rights groups expressed concern that Knights’ announcement was short
on detail and that he had avoided the key issues of wage levels and workers’ right to
organize. Global Exchange’s Founder and Director Medea Benjamin told the New
York Post: “We see one big gap. A sweatshop is a sweatshop is a sweatshop unless you
start paying a living wage” (cited in Cushman 1998).
These critics had proposed clear reforms to Nike, urging that workers be allowed
to form their own unions, be paid a full-time wage that would meet the basic needs of
a small family, receive appropriate training in their rights and be given access to cred-
ible, independent complaint mechanisms if those rights were abused. They had also
called for transparent, independent and regular factory monitoring by groups with ap-
propriate expertise. They were concerned that Nike’s promises represented an attempt
to sideline these demands and replace them with a significantly weaker reform agenda.
Three years have now passed since Knight made his speech. His company has had
ample time to prove that his announcements were more than a public relations ploy,
that they signaled the beginning of an honest, good faith attempt to confront labor
abuses in Nike’s international production chain.
This report represents a comprehensive assessment of Nike’s labor performance
since those promises were made. First it will consider the extent to which Nike has
lived up to the commitments made in Knight’s speech, then it will assess Nike’s per-
formance against the human rights standards and independent monitoring practices
which labor rights organizations have demanded of the company.
A great deal is at stake. If Nike has genuinely reformed its labor practices then it
7
demonstrates that transnational corporations can be responsive to consumer demands
for better social performance. Nike could set a standard which activists could pressure
other companies to follow, suggesting that globalization need not lead to an undercut-
ting of labor standards, but could instead result in their enhancement. Alternatively, if
Nike’s ‘reforms’ are disingenuous then the company’s tottering credibility must fall
even further and anti-sweatshop campaigners have a great deal of work to do before
they even reach first base.
Part 1
What Have They Meant For Workers?
Knight made 6 key commitments in his May 1998 speech.
1. OSHA Standards in Indoor Air Quality
The Promise:
After four years of extensive research and hard work with our partners
in Asia...we have developed and put into practice water-based cements,
which allow shoes to be cemented without the use of the most harmful
solvents, including toluene. Today we use water-based cements in 80
percent of all our shoe production. We still haven’t figured out a way to
bond the plastic-soled pleated shoes, the baseball, football, and soccer
pleats, but they represent less than 15 percent of our production. And so
what we say, is that with that major breakthrough in footwear manufac-
turing, that by the end of this calendar year, all Nike shoe factories will
meet OSHA standards in indoor air quality.
Philip Knight, National Press Club, 12 May 1998.
The History:
Nike was the subject of considerable scandal in 1997 when one of the company’s own
factory monitoring reports, conducted by accounting firm Ernst and Young, was leaked
to The New York Times (Greenhouse 1997). The report documented serious health and
safety issues in the Tae Kwang Vina factory in Vietnam, including exposure to danger-
ous levels of toxic fumes from organic solvents. Particularly concerning was exposure
to Toluene at between 6 and 177 times the Vietnamese legal limit (TRAC 1997). Tolu-
ene is a chemical solvent that can cause central nervous system depression, damage to
the liver and kidneys and skin and eye irritations. There is also a body of scientific evi-
dence linking exposure to Toluene vapors with miscarriages.1 The leaked report noted that
exposure to Toluene and other chemicals had resulted in “increasing number of em-
ployees who have disease [sic] involving skin, heart, allergic, throat” (TRAC 1997).
Has Nike Done It?

While Nike’s technical innovation in introducing “water-based” cements has signifi-
cantly reduced the need for organic solvents, it has not stopped their use altogether.
According to Nike’s web site, the new procedures have enabled the company to re-
duce usage of those solvents from 340 grams/pair to slightly more than 50 grams/pair
(Crosbie 2000). There is therefore still potential for workers to be exposed to danger-
ous vapors from these chemicals.
In preparation for this report Global Exchange wrote to Nike and asked whether
there has been independent monitoring of air quality in Nike contract factories and, if
so, who had conducted this monitoring and whether the monitoring reports were avail-
able to the public. In response, Nike’s Todd McKean stated that all its footwear factories
have been tested by “independent health and safety experts, contracted through Reliance
Insurance” and where non-compliance was found it has been addressed and the facto-
ries in question retested. McKean claimed that: “All of the factories initially meet
(sic) the requirements that we set for them, although we continue to monitor them to
address those factories that may from time-to-time slip back” (see Appendix 1).
Global Exchange then again asked whether the reports from this indoor air quality
testing could be made available to the public. Nike’s Dusty Kidd replied that the meth-
odology and results of air quality testing were shared in a public forum in Hong Kong
in November 1998, but avoided the question of whether subsequent reports are now
available to the interested public. Sharing air quality results with participants in a one-
off forum is very different from an ongoing program of transparency. If Nike wants
consumers to have confidence that workers in its factories are not being poisoned
from exposure to toxic chemicals then it should release each new round of test results.
Just as important is the need for air quality testing to involve unannounced factory
visits. Workers frequently report to independent researchers that before Nike’s inspec-
tors arrive they are instructed to clean up the factory, and in some cases to adopt health
and safety practices not usually in place (Connor 2000). In August 2000, a worker
from the glue line at a Nike contract factory in Indonesia told Leslie Kretzu and Jim
Keady of the Living Wage campaign that when factory monitors visit she and her
workmates are instructed by factory supervisors to lie about which chemicals they
usually work with. The worker also told Keady and Kretzu that she was infertile and
that her doctor had told her that there is a strong possibility that this has been caused
by exposure to the glue compound the factory is using.2
1
Information regarding the dangers of Toluene is summarised in the Toxicological Profile for Toluene, Up-
dated, published by the U.S. Agency for Toxic Substances and Disease Registry (Atlanta: ATSDR, 1998).
2
Keady J. 2001, pers. comm., April 12.
Knight’s Promises:
What Have They Meant For Workers? 9
Kidd’s letter admitted that factories know in advance that testing is going to take
place, but argued that unannounced visits were unnecessary because Nike’s inspectors
are in the company’s factories each day and are able to observe the solvents in use, the
state of ventilation and the personal protective equipment in use.
The inspectors Kidd described are Nike’s quality control staff who are there to
monitor product quality. To the very limited extent that independent health and safety
experts have been allowed to visit Nike factories and report publicly on their findings,
their reports indicate that if Nike staff do monitor these issues, then they do a poor job.
In March 1999, Dara O’Rourke and Garret Brown completed an independent report
into health and safety conditions in the Tae Kwang Vina factory. O’Rourke is now
assistant professor of environmental and labor policy at MIT and Brown is coordina-
tor of the Maquiladora Health & Safety Support Network. They found that although
the factory had considerably reduced worker exposures to toxic solvents and other
chemicals, exposure levels to a number of those chemicals still contravened both OSHA
and Vietnamese government standards. O’Rourke and Brown also documented a num-
ber of other health and safety concerns in the factory, including excessive noise and
heat, poor ergonomics, misuse of protective equipment and poor tracking of the causes
of illness (O’Rourke and Brown 1999).
When Professor O’Rourke visited another Nike factory on 1 July 2000, this time a
garment factory just outside of Jakarta in Indonesia, he found that workers were being
exposed to the dangerous chemical benzol in contravention of Nike’s stated policies.
Workers at the factory had not been informed that the chemical was dangerous, were
not wearing appropriate safety equipment and were working with the chemical in an
area with inadequate ventilation. Other safety issues in the factory included excessive
noise and lack of appropriate guarding to protect workers from dangerous cutting
machinery (O’Rourke 2000).
Following extensive media scrutiny of conditions at the Kuk Dong factory in
Mexico in 2001, Nike arranged for the independent monitoring agency Verite to con-
duct an audit of that factory. Verite found serious health and safety violations which
Nike’s staff had missed, including (again) use of the dangerous chemical Benzol with-
out appropriate safety equipment or proper training for workers (Verite 2001).
Over the past ten years, independent research has repeatedly found conditions in
Nike factories to be very different from what Nike claims them to be. While Global
Exchange believes health and safety is one area where Nike has made some improve-
ments, consumers cannot have confidence that Nike products are made in a safe envi-
ronment until the company is willing to put in place a transparent system of monitor-
ing factory safety standards involving unannounced monitoring visits by trained in-
dustrial hygienists.
What Should Nike Do?

The standard which Nike has set itself is also flawed. Strong corporate lobbying in the
US has kept OSHA’s permissible exposure limits for volatile organic compounds ex-
tremely weak. There has been virtually no change in these standards since 1968, and
Table 1. Has Nike kept its promises?

In his 12 May 1998 speech to the National Press Club, Nike CEO Phillip Knight made six commitments.
Knight’s Six Promises The History Has Nike done it? What should Nike do?
Adherence to U.S. Leaked 1997 audit showed Nike Gives factories advance Ensure that health and
Occupational workers in Nike supplier notice of testing, allowing safety monitoring in-
Health and Safety Tae Kwang Vina were be- them to change chemical use cludes unannounced fac-
Administration ing exposed to toxic gases on the day the test is con- tory visits. Fully disclose
(OSHA) standards at up to 177 times the Viet- ducted. Nike is not yet will- the methodology and re-
in factory air namese legal limit. ing to regularly release the sults of its air quality test-
quality. results of those tests. ing program.
Raising the 1996 story in Life magazine There is some evidence of When families cannot af-
minimum age for on child labor in the soccer workers younger than this ford to feed their children,
factory workers to ball industry in Pakistan still working in Nike con- enforcing factory age lim-
18 for footwear embarrassed Nike. tract factories. its can force those children
factories and 16 for into even more dangerous
apparel factories. and degrading work. Nike
workers should be paid
enough to provide their
children with food, shelter
and basic education
Involving non- Nike’s reliance on for-profit Nike has held discussions with To be genuinely indepen-
government firms to monitor its factories a number of NGOs which it dent, factory monitors
organizations in has drawn consistent criti- claims will improve its moni- should be selected by an
factory monitoring, cism. As far as rights groups toring program. It will not say independent body such as
with summaries of were concerned, this prom- which NGOs, if any, will be the Workers’ Rights Con-
that monitoring ise to include NGOs in fac- allowed to regularly monitor sortium, in which unions
made available to tory monitoring was the most factory labor standards, or and human rights groups
the public. important announcement in when summary reports will be are strongly represented.
Knight’s speech. released to the public.
Expanded education Nike’s own initiative. The education program has If Nike workers were paid
programs making expanded, but wages are so a full time wage that covered
free high school low that only a very small their basic needs (including
equivalency courses proportion (2%) of Nike basic education), then they
available to Nike workers can afford to give would have the time and
sportshoe workers. up overtime income in or- the means to take after
der to take one of the hours high-school courses,
courses. or choose to improve their
lives in other ways.
Increased micro- Nike’s own initiative. Nike has announced which It is far cheaper for Nike
enterprise loan organizations are imple- to give micro-loans to
program to a menting these programs 5,000 individuals outside
thousand families and that loans have been Nike factories than to en-
each in the made to 5,000 individuals, sure that the 530,000
countries of but has declined to say in workers producing the
Vietnam, Indonesia, which regions they are op- company’s product are
Pakistan, and erating or how much the paid a wage which would
Thailand. program costs. allow them to live with
dignity. Nike should com-
mit to a living wage before
it seeks public relations
kudos by funding chari-
table programs like this.
Funding university Nike had funded some re- Nike held one open forum Set up an independent
research and open search prior to 1998 but that on health and safety in No- committee made up of
forums on respon- research had been heavily vember 1998. The company reputable academics to
sible business criticized for lacking aca- has refused reputable aca- assess funding applica-
practices, including demic rigor. demics access to Nike facto- tions and determine
funding four ries to conduct research, and which should be funded.
programs in United the research it has funded Ensure that the results of
States universities seems geared to providing all research is released
in the 1998–99 private information to Nike publicly.
academic year rather than stimulating aca-
demic debate.
they have failed to keep pace with the last 30 years of research into the dangers these
chemicals can present to workers’ health. In particular, OSHA standards fail to take
into account the impact of these chemicals on women’s reproductive health, espe-
cially important given that women make up 80 percent of the workers making Nike
products.
On March 15, 2000, a number of labor rights groups wrote to Knight pointing out
the inadequacy of OSHA standards and requesting that the company instead adopt the
US National Institute of Occupational Safety and Health (NIOSH) “Recommended
Exposure Levels” (RELs). These exposure levels are based on current scientific re-
search and hence more accurately reflect the dangers these chemicals represent to
workers’ health. The letter noted that the new “water-based” solvents Nike uses are
completely untested and that research is urgently needed to determine their health
impact and to ensure they are used safely. The labor rights groups also requested that
Nike investigate how many Nike workers had been permanently injured by exposure
to toluene and other dangerous gases in the past, so that those workers could be prop-
erly compensated (Bissell et. al. 2000). Nike ignored all of these requests.
If Nike is unwilling to commit to NIOSH standards, at the very least it should
release all information on the health impacts of all the new glues and solvents being
used, fully disclose the methodology and results of air quality tests, and agree to a
transparent monitoring system involving unannounced factory visits by trained health
and safety experts.
2. Raising the Minimum Age for Factory Workers
The Promise:
We have raised the minimum age of all footwear factories to 18. In
all apparel and equipment factories, the minimum age is 16, the same as
it is in the United States. And I really do have to add this, that there
never has been a time in Nike’s history where child labor has been a
problem. And I also say that it really hasn’t been a problem in the
shoe industry as a whole.
Phillip Knight, National Press Club, 12 May 1998.
The History:
Nike was severely embarrassed on the child labor issue in 1996 when a major story in
Life magazine on the exploitation of child workers in Pakistan featured a photograph
of a very young Pakistani boy sewing a Nike soccer ball (Schanberg 1996). Knight
himself added to Nike’s poor image on this issue when, while being interviewed for
the film The Big One, he told filmmaker Mike Moore that it didn’t bother him that
children as young as 14 were employed making Nike products.
Has Nike Done It?

In response to a request for information from Global Exchange in preparation for this
report, Nike’s Todd McKean wrote that, “Our contract factories have largely embraced
these standards and instance of non-compliance appear to be isolated.”
But several recent reports by journalists and non-government organizations have
suggested that there are still workers under the age of 16 employed in Nike’s produc-
tion chain.
In October 2000, the BBC program Panorama investigated conditions at the June
Textiles factory in Cambodia that made clothes for Nike and the Gap. The journalists
interviewed several underage workers in the factory, including one who was twelve
years old. In response, Nike made a commitment to ensure that all underage workers
will be removed from that factory and will receive their base salary while they attend
school until they reach the age of 16. While this will benefit those workers, it raises
questions regarding why the BBC journalists could discover underage workers when
Nike’s monitoring program had failed to do so, and how many other children are work-
ing in other Nike contract factories without being discovered.
In January 2001, the Worker’s Rights Consortium interviewed approximately 30
workers at the Kuk Dong factory in Mexico as well as factory managers and other key
persons and reported that even the factory management admitted that the factory “has
employed children aged 13 through 15 for workdays of nine to ten hours” (WRC 2001).
Nike subsequently arranged for the monitoring organization Verite to audit the fac-
tory, and 12 of the 29 workers interviewed by Verite reported that juvenile workers
younger than 16 years of age are employed at the factory, although Verite could not
find evidence of this in factory files (Verite 2001).
Child labor is, however, a notoriously difficult area to monitor. Poverty is so dire
in many of the areas in which Nike factories are located that young people will forge
age certificates in order to get work. Nike could best contribute to the wellbeing of
children in Nike production areas by ensuring that adult Nike workers are paid enough
to provide for the basic needs of their families.

Many groups involved in the campaign to persuade Nike to improve its labor practices
are uncomfortable with the draconian enforcement of factory age limits. These groups
abhor child labor and believe that children and young people in all countries should have
the opportunity to go to school. However, in the absence of steps to alleviate poverty in
poor communities, preventing children in those communities from working in particular
factories can simply result in them working in other factories or can force them into
even more dangerous and degrading employment, such as prostitution or begging.
In 1996, Nike became involved in a program under which the company’s soccer
ball production in Sialkot in Pakistan takes place in controlled stitching centers with a
minimum age of 16. A number of other soccer ball producers run similar centers in
Sialkot and the International Labor Organization (ILO) is involved in monitoring com-
pliance with age limits. In 1999 the International Labor Rights Fund (ILRF) produced
a report on the program, detailing the way in which many stitching centers were evad-
ing ILO monitors and continuing to employ children. It also suggested that as a result
of the program some children may have moved from production of soccer balls to the
production of surgical instruments (Athreya 1999).
The most effective way Nike could contribute to the welfare of children in the
areas in which its contract factories are located is by guaranteeing a living wage. If
adult workers were paid enough to provide for the basic needs of their children then
those children would not be forced to work from a young age. Other children in the
area would also benefit from the increased wealth in their local community. Unfortu-
nately, Nike has refused to consider a living wage standard.
3. Involving Non-government Organizations in

Factory Monitoring, With Summaries of That
Monitoring Made Public
The Promise:
Number three, we publicly recognize the need for expanded monitor-
ing, to include NGOs, and the need for a summary statement about
this monitoring. We are not ready to announce how that will be done,
but our current guess is that it will include a CPA firm, as well as health
and social auditing by an NGO—one, two, or three. The specifics of
this obviously will come sometime down the road, but we are work-
ing hard to put this into effect.
The History:
Since 1994, Nike has employed selected accounting firms, first Ernst and Young and
then PricewaterhouseCoopers, to monitor its factories. But this reliance on for-profit
firms has drawn extensive criticism from labor rights groups. Organizations involved
in the campaign to persuade Nike to improve its labor practices have consistently ques-
tioned whether for-profit accounting firms selected by and accountable to Nike have
the necessary independence, motivation and expertise to effectively investigate fac-
tory conditions. Those groups have instead argued that local non-profit, non-govern-
ment organizations (NGOs) which workers have some reason to trust should be heavily
involved in factory monitoring and in educating workers about their rights.
Has Nike Done It?

Nike’s Global Director for Labor Practices Mr. Dusty Kidd addressed this question in
a letter to labor rights groups in October 1999 (Kidd 1999). He suggested a number of
ways in which he believed Knight’s promise was being met:

Our labor practices staff has discussed this with a number of individuals in the
NGO community. We have begun working through the process of building trust be-
tween Nike and some in the NGO community who have expressed an interest in this
work... We are also engaged in discussions with others in the NGO community on
enhancing local NGO expertise in areas of monitoring that require considerable train-
ing (Kidd 1999).
Seventeen months after Knight announced that Nike was “working hard” to in-
volve NGOs in monitoring its factories, the company had only managed to reach the
stage of initial discussions. Evidently the process of building trust between Nike and
NGOs takes time. A further 19 months have passed since Kidd sent this letter, and we
are still waiting for an announcement regarding which NGOs, if any, will be involved
in monitoring Nike factories.
Kidd also pointed to Nike’s “active participation in the Fair Labor Association,
which will involve NGO participation and oversight.” The Fair Labor Association’s
monitoring program, which is likely to begin operation soon, is assessed in detail in a
later section of this paper. US NGOs are involved in setting the FLA’s monitoring
standards and in accrediting factory monitors. They are not, however, involved in
monitoring factories, nor in selecting which organizations do that monitoring. FLA-
accredited monitors, which can be for-profit companies, are required to consult with
local NGOs when conducting factory audits. While consulting in good faith with local
NGOs would of course be positive, it falls well short of actually allowing NGOs to
monitor Nike factories, which was what Knight’s 1998 speech seemed to promise. He
suggested, for example, that Nike’s expanded program might include “health and so-
cial auditing by an NGO.”
Finally, Kidd noted that Nike had “begun the process of NGO participation in the
assessment of worker attitudes and issues through the Global Alliance for Workers
and Communities.” Kidd’s use of language here is important. He talks about the
Alliance’s involvement in “assessment of worker attitudes” rather than in factory moni-
toring. The Global Alliance does not aim to monitor labor standards in Nike factories
and has made this very clear when asked by labor rights groups about its position on
particular human rights abuses in those factories. As such, Nike cannot claim that the
Alliance represents involvement by NGOs in its monitoring program.3
In preparation for this report Global Exchange again asked Nike whether any NGOs
had been included in its factory monitoring program and, if so, when summary reports
of their findings would be made available. In response Nike’s Todd McKean suggested
that Phil Knight’s 1998 commitment had been to “the cooperation or inclusion” of
3
The main non-government organization involved in the Global Alliance is the International Youth Foun-
dation, a non-profit group based in the US which works with and for big corporations to promote the
welfare of young people. It has no expertise in labor rights and as such is somewhat different from the
NGOs which Nike’s critics had in mind when they called for Nike to involve local NGOs in the company’s
monitoring program. The Global Alliance has employed local universities rather than local non-govern-
ment organizations to conduct its research and has required university researchers to sign confidentiality
agreements preventing them from publicly discussing the research process.
NGOs. This is much less specific than what Knight actually promised, which was the
expansion of Nike’s monitoring to “include” NGOs. McKean’s list of NGOs that Nike
has cooperated with or included in that process added a few more names to those
provided in Kidd’s letter. McKean also mentioned Espiral, the BSR Factory Monitor-
ing Program, the CESAIS focus group program, and “programs with other small local
NGOs” (see Appendix 1).
It is ironic that McKean mentioned the Business for Social Responsibility (BSR)
Factory Monitoring Program, since the result of that study was a report by Professor
Dara O’Rourke detailing the complete inadequacy of Nike’s monitoring scheme in-
volving the accounting firm PricewaterhouseCoopers (O’Rourke 2000). That analysis
is considered in detail later in this report.
C.E.S.A.I.S. is the social research group of the University of Economics in Ho
Chi Minh City, and it conducts ongoing focus group discussions with workers from
Nike contract factories in Vietnam. Despite a number of requests that it do so, Nike
has refused to release any information regarding what questions workers are asked in
these focus groups and has released no reports on what this research has found. State
owned universities in Vietnam and other communist countries have very little scope to
act contrary to government policy, and since January 1999 the Vietnamese govern-
ment has made it clear that it does not approve of organizations which criticize Nike’s
labor practices.4 Even privately owned, for-profit universities in Vietnam must be very
careful not to act contrary to government policy. As such, working with a Vietnamese
university is very different from working with a non-government organization and
Nike cannot argue that this program amounts to a fulfillment of its commitment to
work with NGOs.
Nike has employed an organization called Espiral to advise it how to improve its
monitoring processes and evidently another organization, Program for Appropriate Tech-
nology in Health (Path) has advised Nike on health issues. Again taking advice from NGOs
is different from allowing them to monitor factories and report on conditions.
Recently Nike responded to the controversy over conditions in the Kuk Dong fac-
tory in Mexico by employing the US non-profit organization Verite to conduct an au-
dit. This was a one-off response to the situation at Kuk Dong, however, and Nike has
given no indication that it intends to involve Verite in its monitoring program in a
systematic way.
As far as rights groups are concerned, this was the most important of Knight’s
promises. Three years after it was made, Nike has contracted one non-profit organiza-
tion to conduct one audit of one factory and is able to list a number of other NGOs
with which it has held discussions which it claims will improve its monitoring pro-
gram. What the company is unable to say is which NGOs, if any, will be allowed to
regularly monitor factory conditions and when summary statements of that monitor-
ing will be released.
4
See the section of this report titled “Nike and suppression of dissent in Vietnam — the Joseph Ha letter”.

Nike should work with international unions and human rights organizations to estab-
lish a program of worker education and factory monitoring by credible organizations
which are independent of (i.e. not selected by) the company. The monitoring organiza-
tions should instead be selected by an independent body in which labor rights groups
have majority representation.
The Workers’ Rights Consortium (WRC) is a monitoring system with these char-
acteristics. It was established by students, academics and unions in the US in coopera-
tion with unions and labor rights groups in Asia, Africa and Latin America. It focuses
on working with local unions and NGOs to conduct worker education programs and
establish effective and independent grievance procedures for workers (WRC 2000).
Unfortunately, Nike has attempted to discredit the WRC and Knight himself re-
sponded to the University of Oregon’s decision to join the monitoring group by can-
celing an expected US$30 million donation to his alma mater (Knight 2000).
4. Expanded Education Programs
The Promise:
Number four, we are expanding our education programs near our

footwear factories. It began this year in Vietnam, and it includes
middle- and high-school equivalency course availability for all work-
ers in Nike footwear factories.
Phillip Knight, National Press Club, 12 May 1998
The History:
Lack of education among Nike workers has not been an issue for activists nor a con-
cern of the press. It is an area that Nike itself has decided to focus on.
Has Nike Done It?

In a recent letter to Global Exchange, Nike’s Todd McKean reported that 85 percent of
Nike’s footwear factories now provide these educational opportunities “and the bal-
ance have programs planned to start in the next several months” (see Appendix 1). He
also indicated that 10,000 workers have participated in these programs. Given Nike’s
own estimate that on any given day approximately 530,000 workers are employed
making Nike clothes and shoes,5 this represents a relatively small percentage (1.9 per-
cent) of the global Nike workforce.
5
Phillip Knight, speech to US National Press Club, 12 May 1998.
A recent (February 2001) report funded by Nike gives an idea why the participa-
tion rate is so low. The report was conducted for the Global Alliance for Workers and
Communities and was based on interviews with workers in nine Nike contract facto-
ries in Indonesia. Although 92 percent of the workers interviewed felt that the avail-
ability of education programs is “quite important”, 88.6 percent of those workers had
never participated in the programs. Workers indicated that the capacity of the educa-
tion classes is limited and that course demands are such that those who participate
miss out on overtime work, which workers depend on for an adequate income (GAWC
2001, pp. 34–5).

Although it is impossible to fault the principle of making education available to people
living in poorer communities, it is also important to critically examine the motivation
of corporations like Nike for adopting some corporate responsibility programs and not
others.
In a public relations sense, education programs present better value for money for
Nike than would a commitment to a living wage. It is considerably cheaper to provide
free education classes for a small proportion of the global Nike workforce than to
ensure that all workers making Nike product are paid wages which would allow them
to meet the basic needs of a small family.6
Payment of a living wage would, however, give workers themselves the opportu-
nity to decide how to improve their lives. According to research which Nike itself has
funded, most Nike workers in Indonesia report that their full time wage is insufficient
to meet their needs, forcing them to rely on overtime income (GAWC 2001, pp. 23–4).
If they were paid a living wage, Nike workers would not be forced to work excessive
hours and those workers with an interest in achieving a high school education would
have the time and the means to do so. Other workers may choose to save so that their
children can get an education. Others still may spend it on other needs. Payment of a
living wage would respect Nike workers’ ability to make up their own mind regarding
what is best for them. It would allow them to live with dignity.
6
Global Exchange’s recent letter to Nike also asked how much the education programs cost Nike (see
Appendix 1), but Nike declined to reveal this. If 530,000 workers are employed making Nike products
each day then a wage increase for each worker of $US2 per day would increase labor costs in Nike’s
production chain by more than $US300 million per year. It is extremely unlikely that Nike’s education
program costs anywhere near this amount.
5. Increased Micro-enterprise Loan Program to a

Thousand Families Each in the Countries of
Vietnam, Indonesia, Pakistan, and Thailand
The Promise
And number five, increased support of our current micro- enterprise
loan program to a thousand families each in the countries of Viet-
nam, Indonesia, Pakistan, and Thailand. These micro-enterprise loans
are used for small businesses, such as pig farming and the making of
rice paper. The limited amount of experience we’ve had in doing that in
Vietnam, has shown that they’ve been extremely well received, and
also extremely successful.
The History
Micro-loan schemes as an approach to development have been popularized by the Grameen
Bank and other development organizations. They are relatively cheap to administer (people
who receive the loans must repay them) and enable people living in poverty to borrow
money without paying the high rates of interest often charged by local money lenders.
Has Nike Done It?

According to Nike’s web site, the program is implemented by the Vietnamese Women’s
Union and the US organization Friendship Bridge in Vietnam, by Opportunity Interna-
tional in Indonesia and by the Population and Community Development Association
in Vietnam.7 Evidently the plan to extend the program to Pakistan has been shelved.
In preparation for this report Global Exchange wrote to Nike asking in which
areas these micro-loan programs were taking place and how much they were costing
Nike (see Appendix 1). Nike’s response evaded these questions, emphasizing instead
that under the program 5,000 people have received loans and started small businesses.
Nike’s reluctance to reveal where these programs are taking place so that their
value can be independently assessed is odd, but it is to be hoped that they are bringing
benefits to the individuals involved.

It is important to note that these programs are not designed to benefit Nike workers
and are not relevant to the debate about whether conditions in Nike contract factories
are decent. While the principle of supporting local communities with micro-loan pro-
grams cannot be faulted, it is curious that Nike chooses to allocate resources to benefit
7
Refer to: nikebiz.com/labor/micro.shtml
5,000 individuals outside its factories when the 530,000 workers producing the
company’s product are unable to provide for the basic needs of their children.
Nike declined to reveal the price of the micro-loans program, but it is likely to be
costing the company far less than would a commitment to a living wage. Nike’s re-
sponsibility is to the workers involved in the company’s production chain. Until those
workers are paid a wage that would allow their families to live with dignity, Nike
should not seek public relations kudos by spending far smaller amounts on micro-loan
schemes and other charitable programs.
6. Funding University Research and Open Forums

on Responsible Business Practices, Including
Independent Monitoring
The Promise:
And number six, we’ll fund industry research—we’ll fund university

research—and open forums to explore issues related to global manu-
facturing and responsible business practices, such as independent
monitoring and health issues. We will begin by funding four programs
in United States universities in the 1998–99 academic year, and we
will have our first public forum in October of this year in Hong Kong.
The History
Nike had funded some academic research before 1998, but that research had been
heavily criticized for lacking academic rigor. In 1997, Nike funded MBA students
from the Amos Tuck School of Business at Dartmouth College to investigate wage
levels for workers making Nikes in Indonesia and Vietnam. The report suggested that
workers’ wages were adequate to meet their needs, but the students’ methodology was
heavily criticized by academics with expertise in conducting research in those coun-
tries. Dr. Peter Hancock of the Centre for Development Studies at Edith Cowan Uni-
versity wrote a damning critique of the methodology used in the Indonesian section of
the report (Hancock 1997), and Dara O’Rourke (now an Assistant Professor at MIT)
was equally critical of the research methods employed in Vietnam (O’Rourke 1998).
Professor David Boje from New Mexico State University was able to obtain the stu-
dents’ original data set and do a re-analysis of the empirical results. His conclusions
were very different from those reached by the students, and suggested that workers in
Nike contract factories were facing serious economic hardship.8
8
For a copy of the Dartmouth students’ report see www.rpi.edu/~huntk/tuck/dartmouth.html . For a copy
of Boje’s analysis of the student’s data see cbae.nmsu.edu/mgt/handout/boje/bnike/index.html .
Has Nike Done It?

At the time Knight made his announcement Nike put information about a grant pro-
gram called “Rising Tides” on its website, and invited interested academics to apply.
In preparation for this report Global Exchange wrote to Nike asking what university
research Nike has funded since Knight made this announcement, who conducted the
research and what the conclusions were.
McKean’s reply was extremely vague. He provided no names of academics Nike
had funded, instead listing only the names of universities “that we have directly funded,
or with whom we have cooperated on research or case studies.” According to McKean,
those universities include Harvard University, Dartmouth University, University of
North Carolina, St. John’s University, Asian Institute of Management and the Univer-
sity of New South Wales. McKean declined to indicate what this research had found or
whether the results had been published, noting only that in broad terms the research
has included “wage studies, research in labor laws, health and safety practices in fac-
tories, studies focused on monitoring practices and the effectiveness of third party
monitoring,” and “that this work has proven invaluable to us as we look at how we
may need to improve our standards or the way we approach this work.”
Of the universities mentioned, Dartmouth’s Amos Tuck School of Business, which
was responsible for the widely discredited Nike wage study in 1997, is being paid by
Nike to do further wage research. At this stage Nike has made no announcements
regarding what these further wage studies have found. According to Nike’s web site,
the University of North Carolina’s School of Public Health is working with the com-
pany to develop a long-term study of health standards and training in footwear facto-
ries. Again there have been no announcements regarding what this research has found.
St. John’s University has received considerable criticism for requiring former assis-
tant soccer coach Jim Keady to wear Nike clothes while working for the university,
despite his moral objections to doing so. Representatives of St. John’s assisted Nike in
arranging for a number of university students to observe PwC’s monitoring program
in March 2000. This program is considered in detail in later sections of this report. It
smacked of a public relations exercise rather than serious academic research, as the
students selected by St. John’s had no background or expertise in factory monitoring
or labor rights.
As for Harvard University, the Asian Institute of Management and the University
of New South Wales, Nike has made no announcements regarding which academics it
is working with from these institutions or what research they are conducting. The
websites of these institutions make no reference to any research program involving
Nike factory conditions.
Late in 2000, Professor David Boje of New Mexico State University, together
with 45 other academics, drafted a proposal to conduct research into Nike’s code of
conduct and conditions in Nike contract factories.9 Boje and the other academics were
not seeking funding, only access to Nike factories to conduct the research. In January
9
See: cbae.nmsu.edu/~dboje/AA/aa_index_links.htm. The author was involved in this proposal.
2001 he was told by Nike’s Amanda Tucker that there was no way he would be given
permission to enter any Nike factories as he was “too biased” against Nike. Tucker
suggested that the 45 other academics should approach Nike directly. Boje believes
that Nike will “permit academic apologists for Nike to do study after study” but that
the company will not allow “critical” study of their factories.10
At this stage, Nike’s relationships with universities seems more geared to provid-
ing confidential information to the company rather than stimulating rigorous academic
debate regarding responsible business practices.
Nike did hold a public forum in Hong Kong in November 1998, which focused on
sharing the company’s new water-based cement technology with its competitors
(Crosbie 2000). In October 1999, Nike’s Dusty Kidd wrote to labor rights groups indi-
cating that Nike was “working on second and third forums, which will involve discus-
sions of women and their rights in the workplace”. Kidd invited the groups to let Nike
know if they would be interested in participating (Kidd 1999). The groups indicated
strong interest (Bissell 2000) but never heard from Kidd again on the issue. To the best
of the author’s knowledge Nike has made no public announcements regarding further
forums.

If Nike is genuinely interested in investing in credible academic research into respon-
sible business practices the company should set up an independent committee to as-
sess funding applications. That committee should be made up of reputable and inde-
pendent academics with appropriate expertise and should have complete discretion to
determine which research should be funded.
10
Boje, D. 2001, pers. comm., 10 April.
Part 2
Sins of Omission: What Labor Rights
Groups Wish Knight Had Promised
Knight’s May 1998 speech was very narrowly focused. His comments on health and
safety were confined to the narrow area of factory air quality, and he deliberately
avoided the key issues of wages, working hours and workers’ right to organize, issues
which are among the most important for workers and rights groups that advocate on
their behalf.
Global Exchange and other labor rights groups advocate a broader reform pro-
gram. We believe that exploitation thrives on powerlessness and we are therefore ask-
ing Nike to take concrete steps that will give workers more power. We want workers’
right to form unions respected so that they can increase their negotiating power by
bargaining collectively. We want the company to increase workers’ economic power
by ensuring they are paid full time wages that are adequate to meet the basic needs of
a small family. These are fundamental rights enshrined in the United Nations Declara-
tion of Human Rights (Article 23: iii and iv).
To ensure that these rights are respected, campaigners have repeatedly asked Nike
to become part of a monitoring system that is genuinely independent, in the sense that
monitors are not selected by Nike itself but rather by an independent body with strong
representation by unions and human rights organizations. Campaign groups have em-
phasized that worker interviews need to be conducted confidentially, away from the
factory and facilitated by organizations or individuals which workers have a reason to
trust. We have argued that workers should be educated about their rights by indepen-
dent groups with appropriate expertise and that there should be confidential mecha-
nisms for them to report to independent monitors when their rights are being abused.
We have asked Nike to ensure that no worker is punished for speaking openly about
conditions in their factory.
This section of the report will assess Nike’s labor practices performance in the
light of these demands.
1. Overcoming the Culture of Fear: Protecting

Workers Who Speak Honestly About Factory
Conditions
Essentially, those critics will hang around restaurants, outside facto-
ries, in the pubs, to get those anecdotes, to tell how dreadful this
whole globalization process is in general, and how evil Nike is in
specifics. We have about 530,000 workers working on Nike shoes and
clothes on a given day. There are going to be incidents. There have
Sins of Omission:
What Labor Rights Groups Wish Knight Had Promised 23
been some in the past, and there certainly will be more in the future.
There are too many workers, too many interactions daily...That there
have been as few as you’ve read about, I think in many ways is re-
markable.
Phillip Knight, Speech to the National Press Club, 12 May 1998
(We) believe that labor abuses are the norm in your suppliers’ facto-
ries and not isolated incidents as Nike has frequently suggested to
the media...We have the resources only to research conditions in a
very small number of [Nike’s] factories and in many countries where
Nike chooses to source production it is difficult and dangerous to
meet with workers...Human rights organizations in several countries
are in contact with workers suffering as a result of labor abuses in
Nike factories but those organizations are unwilling for those con-
cerns to be made public in case those workers are dismissed for pass-
ing on the information.
Letter from Labor Rights Groups to Phillip Knight, 15 March 2000

(Bissell et. al. 2000)
Nike has often sought to represent reports of labor abuses in its suppliers’ factories as
occasional events that are blown out of proportion by the media.
Labor rights groups believe the opposite. They contend that Nike is part of a sys-
tem of global clothing and footwear production that relies on the systematic suppres-
sion of workers’ rights. Like many transnational corporations, Nike contracts out its
production to those factories that can most cheaply, reliably and quickly fill its orders.
Much of this production takes place in extremely poor countries in which workers’
human rights, in particular their right to freedom of association, are brutally repressed
in order to attract foreign investment.
In all those Nike contract factories that have been independently investigated the
dominant culture is one of fear. Workers are afraid to speak out about labor abuses
because of concerns that they will be fired or that their factory will lose orders. As bad
as their jobs are, the fear of unemployment in countries with no social security system
and very high unemployment rates makes them reluctant to openly complain about
their conditions.
Researchers who have interviewed Nike workers have frequently noted this fear.
Thuyen Nguyen of Vietnam Labor Watch produced a detailed report on conditions in
Nike factories in Vietnam in 1997 (Nguyen 1997). He reported that it took two weeks
of secret meetings with Nike workers before they trusted him enough to speak hon-
estly about the conditions they faced.11 According to Dr. Peter Hancock, who con-
ducted extensive interviews with Nike workers in Indonesia in 1996 and again in 1998:
Workers in Indonesia...live in fear of their own state and factory management who
11
Nguyen, T. 1999, pers. comm., 10 September.
can dismiss them without reason. I found that many workers lied about many ques-
tions out of fear of reprisal and it was only after in-depth interviewing of workers that
I found out the reasons for their dubious answers. For example, all the workers I sampled
provided the same answers to questions about working conditions, wages and their
working age. I found after polite and intensive investigation that the Nike workers I
sampled were commonly underage, underpaid and treated illegally (Hancock 1997).
Mike Pierantozzi spent August 2000 in Indonesia interviewing shoe workers for
the Living Wage Campaign. While there he wrote the following:
We sat down with some Nike workers last week. They sang us a lovely song about
Nike... It went something like this:... Nike takes care of me. They take care of my
family. They adhere to the code of conduct, they pay us a generous wage, and they
give us adequate health care. They treat us with dignity and respect.
... this particular group of workers thought we worked for Nike...They thought we
were just another independent monitoring group... They didn’t trust us. And rightfully
so. No monitoring group had ever talked to them as individuals, much less given them
reason to trust. They said when the monitoring groups roll into town, they only talk to
the managers, and if they do speak with the workers, there is always a manager present
at the interview.
After some coaxing and reassuring... the workers opened up a little. But they were
still holding back. They were careful with the words they chose and with the issues
they chose to discuss. I watched them look back and forth at each other nervously with
each question, as if searching each others’ faces for the right thing to say, to do. You
could see the truth wanted to come out. But something was keeping them from giving
the whole story. Fear. They were terrified. Scared we were going to take our video and
run right to their managers. They wanted reassurance that...they weren’t going to end
up unemployed, or worse.
We went home, unsatisfied that we had gotten the whole story. So we had our
interpreter translate a couple of articles ... and we brought this and some other infor-
mation to the same group a few days later. When they realized that we were on their
side they changed their tune. They talked about how they were grossly underpaid.
How they were afraid to speak up about how they were treated for fear of termination,
for fear of the Mafia. And they told us that it’s not just the workers who are afraid, but
that the entire factory is run on fear. The workers are afraid of their line managers. The
line managers are afraid of upper management. And upper management is afraid of the
factory owners, who are afraid that if their factory doesn’t make quota, or has workers
that organize, Nike will take their business to some other poor country where people
will kill themselves for a dollar a day.12
Given the dangers that individual workers face if they speak honestly about con-
ditions in their factories it is crucial that companies like Nike ensure that such workers
are protected from victimization.
The other major fear that workers have is that media exposure of poor conditions
in a particular factory can lead companies like Nike to “cut and run,” leading to large
12
See: www.nikewages.org/journal_mike.html
Sins of Omission:
scale job loss and potential factory closure. Managers frequently warn Nike workers
that speaking negatively about their factory to the press or to monitors will damage
the factory’s future (Connor 2000). Much as they would like to work in factories with
decent conditions, widespread unemployment in Asia and Latin America makes work-
ers desperate for whatever job they can get. Fear of unemployment can keep them
silent about labor abuses even in circumstances where it is not possible for the factory
owner to know which worker has spoken to the press. Instead of leaving factories once
labor conditions are out in the open, Nike should work with the factory to bring about
improvements. Cutting and running sends a clear message to other Nike workers—
keep quiet about labor abuses in your factory or your job will also be in danger.
Unfortunately Nike has done just the opposite of what is needed. The company has
cut and run from some factories following negative press reports and in other cases has
ignored the plight of individual workers who have been victimized for speaking out.
The June Textiles Factory in Cambodia

In October 2000, the BBC’s flagship documentary program Panorama screened an
investigation into the operation of Nike’s code of conduct. The report focused on the
June Textiles factory in Cambodia. The journalists interviewed workers from the fac-
tory who told of being forced to work seven days per week and one worker described
how she had been sworn at and had her hair pulled by a supervisor when she refused
overtime. The workers reported that their full-time wages were barely adequate to
cover rent and food. As mentioned previously, journalists also interviewed several
underage workers in the factory, including one who said she was twelve years old
(BBC 2000).
Nike knew in advance what the BBC journalists had found. Several weeks before
the documentary was screened it announced that it was ending its relationship with
June Textiles, citing failure to meet the standards in the company’s code. Nike’s with-
drawal from the factory had the potential to cause significant job loss at June Textiles,
and to anti-sweatshop activists it looked very much like an opportunistic attempt to
minimize negative publicity associated with the BBC story. Anti-sweatshop groups
urged Nike to instead stay at June Textiles and work with the factory to improve con-
ditions. Nike responded by claiming that its monitoring program had already discov-
ered labor abuses at the factory and it had been on probation at the time that the BBC
journalists conducted their interviews. Labor rights groups have asked Nike to release
the factory monitoring reports for June Textiles so that the company’s claims can be
verified,13 but this request has been ignored. Nike’s reluctance to provide evidence to
back up its story raises suspicion that the company’s primary motive in leaving June
Textiles was to protect its image.
Workers from a number of other Nike contract factories in Cambodia were willing
to talk to the BBC journalists off the record about sweatshop conditions in their facto-
ries, but only the workers at June Textiles were willing to be interviewed on camera
13
See for example Appendix 1.
and to have their factory named (BBC 2000). Nike’s reaction to the report suggests
that the caution of workers in the other factories was well justified. As long as workers
have evidence that speaking openly will put their jobs in danger they will good reason
to keep quiet about labor abuses.
The Sam Yang Factory in Vietnam

At the time that Knight made his 1998 speech, Vietnam Labor Watch and other labor
rights groups were vigorously lobbying his company to take action to protect a worker
at the Sam Yang factory in Vietnam who had suffered severe harassment after speak-
ing to US journalists about factory conditions.
In February and March 1998, the sports channel ESPN interviewed several work-
ers from the factory, including Ms. Lap Nguyen. The workers described violence by
security guards towards workers and other problems at the factory.
Ms. Lap was a section leader with three years experience who had received fac-
tory awards for her skill and commitment, but this did not protect her from retribution
for speaking to the journalists. While working overtime on Sunday, March 29, she
became sick and took one and a half days sick leave. On her return to the factory, she
presented her supervisor with the doctor’s certificate, but her supervisor shouted at
her and demoted her from team leader to sewer on the grounds that “section leaders
can’t take sick days.” In the next few days, she was switched from one job to another
and deliberately humiliated in front of other workers. She was also interrogated about
her interview with ESPN three times. She was then demoted to cleaning the toilets.
Eventually she was asked to sign a letter of resignation and decided that she could no
longer take the harassment and intimidation and signed.14
Ms. Lap then appealed her case to the Salaried Labor Court in Ho Chi Min City.
The court heard her case in July 1998. Although the factory manager did not appear at
the first court date, he did appear for the rescheduled date, where a settlement was
reached. As part of the settlement, he made a formal apology to Ms. Lap for the ha-
rassment that she received at the hands of his subordinate, Ms. Bek (Lap’s supervisor).
Despite this apology he asserted his right to hire and fire at will. Ms Lap contested
this, but the factory refused to rehire her. The settlement between Ms. Lap and the
factory was recorded in an agreement authenticated by the court, which she and the
factory manager signed. Some weeks after the court settlement she received a cash
payment of approximately 700,000 dong ($US50) from the factory to satisfy its out-
standing financial obligations to her.15
Nike claims to have investigated Ms Lap’s case and determined that she was fired
because of “work performance issues” (Kidd 1999). Given that before she was inter-
viewed by ESPN the factory had singled out her work performance for special praise
and that the factory manager has formally admitted that she was harassed and victim-
14
Please see the following URL for a transcript of an interview with Ms Lap Nguyen conducted by Thuyen
Nguyen (no relation) of Vietnam Labor Watch: www.maquilasolidarity.org/campaigns/nike/lap.htm
15
This information is based on an interview which Vietnam Labor Watch conducted with Ms. Lap in May
2001 (Nguyen, T. 2001, pers. comm., May 7).
Sins of Omission:
ized, this would seem extremely unlikely. Nike has refused to either release the report
of its investigation or provide the evidence on the basis of which it has determined
that Ms Lap’s testimony is untrustworthy.16
In December 2000 the ESPN journalists who interviewed Lap Nguyen went back
to Vietnam for its tenth anniversary episode to find out what had happened to her.17
She told them that after the factory complained of her attempt to take medical leave
she was diagnosed with tuberculosis. She is currently unemployed.
In May 2001 a representative of Vietnam Labor Watch met with a security guard
who had recently been fired from the Sam Yang factory. He claimed that Nike recently
sacked the two key managers at Sam Yang and replaced them with Nike direct hire
staff, who are Vietnamese nationals, so that Nike is now directly managing the factory.
He told her that workers are now hired for three months only and then fired so new
staff can be hired and that workers at the factory must pay a company middle man
almost a month’s salary, 500,000 VND ($US30) just to get hired for the three months.
For reasons detailed in the following subsection of this report, it is extremely difficult
for Vietnam Labor Watch to conduct further interviews to substantiate the guard’s
story. Nike should allow independent monitors into the factory to investigate whether
conditions at Sam Yang have improved since Ms. Lap was fired.
Ms. Lap’s case sends a clear message to other workers at the Sam Yang factory—
keep quiet about labor abuses or suffer the consequences. Nike should either present
evidence that she was treated fairly or else ensure that she is offered a job back at Sam
Yang or another Nike contract factory in Vietnam.
Nike and Suppression of Dissent in Vietnam: The Joseph Ha Letter

Since January 1999, it has been extremely difficult to obtain independent information
about conditions in any Nike contract factory in Vietnam. In that month Nike vice-
president Joseph Ha sent a letter to Vietnamese labor officials claiming that Nike’s
critics had a secret agenda to overthrow the Vietnamese government and “create a so-
called democratic society on the U.S. model”. Vietnam Labor Watch, the main rights group
monitoring Nike factories in Vietnam, vigorously denied this allegation and labeled Ha’s
letter “a crude attempt to stop the on-going cooperation between Vietnam Labor Watch
and labor organizations in Vietnam...[by attempting to] paint anti-Nike activists as
Americans harboring a hidden agenda to change Vietnam’s political system.”18
Ha’s letter was published in the official Laodong newspaper, indicating that the
Vietnamese government endorsed his comments and regarded cooperation with Nike’s
critics as an act of treachery. Since then it has been politically dangerous for Vietnamese
citizens to talk to outside organizations about conditions in Nike factories, and people
who were formerly happy to pass on such information are no longer willing to do so.
16
Nike also claims that the Vietnamese Labor Bureau investigated Ms. Lap’s case and found it to be
without merit. For reasons detailed in the following subsection, Nike’s critics do not have confidence that
the Vietnamese government would carry out such an investigation in an objective manner.
17
See www.cs.earlham.edu/~hyrax/labor.html for a transcript of the program.
18
See: www.saigon.com/nike/pr14.html
The human rights groups in the Fair Labor Association (of which Nike is also a
member) wrote to Nike calling on the company to “undo the damage this [letter] has
done to factory monitoring in Vietnam.” The FLA wrote of the letter: “It has served to
undermine the fragile cooperation between Vietnamese Nike workers and NGOs seek-
ing to assist them to secure the rights your company pledged to afford them by adopt-
ing your Code of Conduct...In Vietnam, it has created a cloud of unfair suspicion over
all organizations that engage in much-needed advocacy for universal human rights.
And the expression of anti-democratic and authoritarian values by a senior Nike offi-
cial raises serious questions about Nike’s commitment to the principles embodied in
the Fair Labor Association.”
One of those human rights groups, the International Labor Rights Fund, proposed
to Nike that it should invite representatives of Vietnam Labor Watch to visit its facto-
ries in Vietnam, in order to send a clear signal to Vietnamese authorities that Nike did
not regard the company’s critics as political subversives. Nike refused to do this.
Nike instead claimed that Ha’s letter was a personal one and did not represent the
views of the company. According to Nike’s director of labor practices, Dusty Kidd,
Nike sought to clarify the company’s position to the Vietnamese government by send-
ing another letter and asking the Laodong newspaper to publish it, but the paper re-
fused to do so (Kidd 1999). Nike officials have been asked several times to provide a
copy of that letter (in both English and Vietnamese) and evidence that Laodong re-
fused to publish it, but the company has ignored these requests. Until Nike is willing
to release this information, rights groups have good reason to suspect that the com-
pany vice-president’s letter did represent Nike’s position and that the company ap-
proves of the resulting suppression of independent information. As long as it is re-
garded as a traitorous for Vietnamese citizens to pass on information about conditions
in Nike contract factories, it will be very difficult to find out whether workers’ rights
are being respected there.
Nike’s track record in protecting workers who blow the whistle on labor abuses is
very poor. Until this changes, Nike workers will have good reason to be afraid of what
might happen to them should they speak honestly about conditions in their factories.
2. Regular, Transparent, Independent and

Confidential Procedures for Monitoring Factories
and Investigating Worker Complaints
The key test of a company’s commitment to ethical practice is the extent to which it is
willing to allow independent and transparent monitoring. Promises are easy to make.
It is monitoring that indicates whether they have any meaning.
Global Exchange and other rights groups have asked Nike to ensure that workers
are aware of their rights and are able to make confidential complaints to independent moni-
tors when those rights are infringed. They have also asked for a monitoring program which
is regular, independent and transparent and which works to establish relationships of trust
Sins of Omission:
with workers so that they can speak honestly about conditions without fear of retribution.
Nike claims to have “the industry’s most elaborate system of internal and external
monitoring.” (Nike Inc. 2000a). While Nike’s system is certainly elaborate, Global
Exchange and other rights groups have very serious reservations about its effective-
ness. Putting together a range of different programs may look good in a public rela-
tions sense, but it will be of very little benefit to workers unless at least one of those
programs operates to discover and rectify labor abuses.
Since 1994 professional accounting firms, first Ernst and Young and then
PricewaterhouseCoopers have conducted annual audits in each factory, assessing perfor-
mance against Nike’s code of conduct.19 This is supplemented by quarterly S.H.A.P.E.
(Safety, Health, Attitude of Management, People, Environment) assessments by Nike staff.
Nike is also a member of the Fair Labor Association (FLA). The FLA began its
life in August 1996 as the White House Apparel Industry Partnership. The then US
Secretary of Labor, Robert Reich, convinced Nike and a number of other US apparel
and footwear companies to join a number of trade unions and NGOs to negotiate a
code to promote humane working conditions in the US and overseas. In April 1997 a
Workplace Code of Conduct was agreed to and the companies still involved in the
Partnership became the initial signatories.20
It took a further 18 months of “difficult” 21 negotiations before, in November 1998,
a sub-group of the Partnership comprising four of the companies (Liz Claiborne, Nike,
Patagonia and Reebok) and four of the human rights groups (the International Labor
Rights Fund, the Lawyers Committee for Human Rights, the Robert F. Kennedy Me-
morial Center for Human Rights and the National Consumers League) negotiated a
preliminary agreement on establishing the Fair Labor Association to oversee monitor-
ing of the code. Two US unions in the apparel and retail sectors (UNITE and RWDSU)
and the Interfaith Center for Corporate Responsibility (ICCR) had been involved in
the negotiations up until November 1998 but rejected the proposed monitoring system
as unacceptably weak and pulled out of the process.
In July 2000 the FLA released its “Benchmarks and Guidance” document which
provided some further clarity regarding how the monitoring program will work. In
2001 the FLA has approved Nike and six other companies to participate in its program
and has accredited three non-profit organizations to be “independent external moni-
tors.” It is not yet clear how many other organizations will be approved as monitors,
which monitors Nike will select, or when the process of “independent, external” moni-
toring will begin.
Nike has also joined with the International Youth Foundation, the World Bank and
clothing company Gap Inc. to form the Global Alliance for Workers and Communities
(GAWC 2001). The Alliance is not monitoring whether human rights and labor stan-
dards are respected in Nike contract factories. Instead it represents an attempt by Nike
and Gap to switch the focus to a development model that sits more comfortably with
19
See Appendix 2 for a copy of Nike’s code.
20
See Appendix 3 for a copy of this code.
21
See (Harvey 1999).
their corporate priorities. The Alliance is currently working with a relatively small
number of Nike’s more than 700 contract factories22 and is conducting a program “iden-
tifying workers’ aspirations and developmental needs” (GAWC 2001). The Alliance
will then put in place training and development programs to assist workers to improve
their “life skills, work environment and communities” (Nike 2000c). Nike will spend
$US7.7 million on the Alliance over a five year period.
Given that the Alliance’s factory assessment program deliberately avoids key hu-
man rights issues including workers’ right to freedom of association,23 it is inappropri-
ate for Nike or the Alliance to refer to it as evidence of the acceptability of conditions
in Nike factories. Unfortunately this has not stopped them from doing so. In Septem-
ber 2000 the Alliance’s Director, Kevin Quigley, told the Associated Press that conditions
at Nike factories had improved in the previous three years and that criticisms about “sweat-
shop”-type conditions were outdated (Hughes 2000). In the same month Nike’s general
manager in Vietnam, Lalit Monteiro, told the Associated Press he hoped that the Alliance’s
report on factories in Thailand and Vietnam “will cause some to reconsider their criti-
cisms” and that the report “gives people a chance to make up their minds based on how the
workers feel and what they want” (Tran 2000). At the press conference in which the Glo-
bal Alliance report on Indonesia was released Nike spokesperson Maria Eitel said that the
Global Alliance process brings the “concerns of workers...to Nike...in a form and meth-
odology that allows us to address them aggressively and comprehensively” (Nike
2001d). Evidently a methodology which deliberately avoids asking workers whether
they are allowed to form unions is comprehensive enough for Nike’s purposes.
This section will analyze Nike’s monitoring program in the context of the criteria
that rights groups have established for effective factory monitoring. Given that Nike is
referring to the Global Alliance in the media as if it were measuring the acceptability
of factory conditions, that initiative will also be considered. Analysis will focus on
how effectively Nike’s program protects workers’ right to organize, a right which has
been part of the company’s code of conduct since 1997 and which for many workers
and labor rights groups is the most important element in that code.
An Informed Workplace
Making sure workers are aware of their rights is the first step in ensuring that those
rights are protected. Campaign groups have urged Nike to allow local unions or rights
groups to visit factories and educate workers about their rights under local law and
22
The Alliance is working with 21 Nike contract factories in Thailand, Vietnam and Indonesia. It is not yet
clear how many factories it will work with in China.
23
In a meeting in June 2000 the director of the Global Alliance, Kevin Quigley, told me that the Alliance
will not be monitoring the protection of workers’ right to organize or other labor standards in Nike contract
factories (Quigley K., pers. comm., 1 June 2000) but will instead assess workers’ needs and life aspirations
and set up training and development programs to help them meet those needs and aspirations. For the
Global Alliance assessment of Indonesian factories Nike asked researchers not to conduct interviews with
union representatives in order to “avoid confusion between the role of GA versus Nike’s compliance staff”
(GAWC 2001).
Sins of Omission:
relevant codes of conduct. Nike has instead focused on providing factory managers
and supervisors with training in its code, and has made it the responsibility of factory
owners to provide training to workers (Nike 2000b).24 This deliberately ignores the
direct interest which factory owners have in keeping workers’ ignorant of their rights.
If workers organize unions it gives them the power to take industrial action and press
for higher wages, which could significantly increase the factory’s costs. Making it the
responsibility of factory owners to ensure that workers understand they have the right
to form unions is thus completely irrational and it is not overly cynical to suspect that
in giving factory owners this responsibility Nike is being deliberately obtuse.
Nike does have a policy that its code of conduct should be posted prominently in
all its suppliers’ facilities and that workers should each have a copy of a small pocket
card which summarizes the code. Investigations by journalists and activist groups have
suggested that that in some factories workers do not receive the pocket cards (Devick
and Bruyns 2000, NLC, 1998), and in those factories where they do, reference to union
rights in Nike’s code is often translated using language that workers cannot under-
stand (Austermuhle et. al. 2000 pp. 9,12,22,40).
When I interviewed workers from three Indonesian Nike contractors in March
2000 they told me that workers regard the Nike code poster and pocket cards as some-
thing the factory does to keep Nike happy but that they had no relevance to factory
conditions.25 Research conducted in Thailand by Junya Yimprasert and Christopher
Candland suggested that Thai Nike workers have the same attitude (Yimprasert and
Candland 2000).
In March 2000 Nike allowed a number of US students to observe
PricewaterhouseCoopers’ audits of factories in eleven countries. The students reported
that in almost all of the Asia and Latin American factories they visited the workers
didn’t understand their right to freedom of association (Austermuhle et. al. 2000). In
each case Nike’s disingenuous response was to advise “factory management to con-
duct further training to ensure workers fully understand their rights” (Nike 2000b).
S.H.A.P.E.
As part of the quarterly SHAPE audits, Nike staff check whether the code and local
labor laws are prominently posted in the appropriate languages and whether there are
documents detailing training for workers in these rights (Nike 1999). There is no evi-
dence, however, that Nike staff interview workers to find out whether the documented
training actually explained to them what their rights are.
24
There are two exceptions to this. Following the recent controversy at the Kuk Dong factory in Mexico
Nike arranged for the International Labor Organization to conduct training for workers in their union
rights. Nike has arranged for similar ILO training for in Indonesia, but this program was only for union
organizers, not all workers. The program at Kuk Dong was a one-off initiative which has not been ex-
tended to other factories.
25
The cards and poster provide workers with no independent party to whom they could complain to if the
code is not met. The card does tell workers to contact their factory supervisor or staff representative for
more information, but few Nike factories have independent unions and workers said that going to factory
supervisors with complaints would be completely useless.
PricewaterhouseCoopers
Nike has so far refused to release the list of questions that PwC auditors ask workers,
but the small amount of information that Nike has made available under its “Transpar-
ency 101” program suggests that ensuring that workers understand their rights is a low
priority. Under that program Nike has released two “compliance grids” summarizing
the results of PwC audits of 53 factories in North America and 22 factories in Central
and South America. Unlike “Management Knowledge of Code”, workers’ knowledge
of Nike’s code does not even appear on the grid.
Nike has also released PwC reports for 11 factories. Two of these reports mention
that workers do not properly understand Nike’s code but this information seems to
have been discovered incidentally while asking other questions. There is no indication
that PwC auditors systematically ask workers whether they understand their rights
under the code.
Fair Labor Association

The FLA also makes it the responsibility of “contractors and suppliers” to “inform
their employees about the workplace standards orally and through the posting of stan-
dards in a prominent place.” There is also a vague requirement that factory owners
“undertake other efforts to educate employees about the standards on a regular basis”
(FLA 1999).
It will be up to the FLA’s external monitors to verify that these procedures have
taken place. How effectively they do this will depend on their independence and pro-
fessionalism and on the regularity of their monitoring visits—issues which are consid-
ered below.
Global Alliance
As it is not a monitoring system, the Alliance does not investigate whether workers
understand their rights under Nike’s code.
Independent Monitors
Where factory monitors are selected and paid by a company, they have a direct incen-
tive to conduct their investigation in a manner that will serve the company’s interests
rather than those of workers. For this reason campaigners have argued that factory moni-
tors should be independent of Nike’s control and influence and should instead be selected
by an independent body with at least majority representation by unions and rights groups.
It is not necessarily inappropriate for companies such as Nike to pay for the monitor-
ing, but the company should not be able to influence which monitor is selected.
S.H.A.P.E.
The least independent of the various layers of monitoring of Nike’s code are the
S.H.A.P.E. inspections, which are conducted quarterly in each factory by Nike staff.
Sins of Omission:
When staff responsible for ensuring quality of product and speed of delivery are also
asked to monitor labor standards there is a significant conflict of interest. If ensuring
that a particular labor standard is met in a factory might increase costs or slow produc-
tion then the temptation will be very strong for them to discount that standard in favor
of Nike’s interest in cheap and speedy fulfillment of orders. Nike also has final control
over what is considered during the SHAPE assessments and has left out key issues
such as wages, working hours and whether or not workers are allowed to organize.26
Nike has vigorously promoted the program of annual factory audits by PwC as “inde-
pendent monitoring” (Nike 2000b). In his May 1998 speech Knight said:
We’ve been criticized for using a firm that we are paying for this
review. And I think this is really pretty funny. The only reason that a
CPA firm has for its very existence, is its independence, and if in fact
that it was not independent, we’d have a problem much bigger than
Nike foreign factory relations: the whole New York Stock Exchange
is built on a fraud.
Phillip Knight, National Press Club, 12 May 1998
It is of course true that when a CPA firm conducts a financial audit and publicly de-
clares whether a company’s financial records meet auditing standards then that firm’s
public reputation for independence is on the line. The factory auditing PwC provides
for Nike is significantly different from a financial audit, however, and there is reason
to believe that both Nike and PwC are treating it as a private rather than a public
service, more akin to PwC’s private consultancy work. Unlike financial audits, the
standards and procedures associated with factory audits are yet to be properly estab-
lished and hence it is Nike which has control over the procedures which PwC follows.
The factory monitoring program also differs from financial audits in that PwC is not
required to indicate publicly whether the factory conditions are acceptable; the com-
pany only makes private reports direct to Nike.
Independent research suggests that the quality of PwC’s factory monitoring is
patchy at best. In September 2000 Dara O’Rourke, an assistant professor at MIT, re-
leased a report based on direct observation of PwC’s monitoring of factories in China
and Korea and on an assessment of PwC’s findings for a factory in Indonesia 27
(O’Rourke 2000). He noted that the PwC auditors knew he was observing them and
26
As part of a SHAPE inspection Nike staff have to determine whether or not there is a worker-manage-
ment communication system. While a union is given as an example of one possible kind of communication
mechanism there is no evidence that Nike staff actually ask workers whether they are prevented from
organizing.
27
The Indonesian factory produced for Nike and Reebok. It is not clear from the report whether or not the
Korean and Chinese factories produced for Nike, but in any case O’Rourke’s analysis gives insight into the
independence of PricewaterhouseCoopers’ factory auditing.
hence their audits were likely to have been more rigorous than usual. Despite this,
their auditing methodology and practice were radically flawed. The report commented
that “the most striking finding from analyzing PwC’s monitoring protocols is not what
they found, but rather what their monitors missed in their factory audits” (O’Rourke
2000). What they missed included hazardous chemical use and other serious health
and safety problems, barriers to freedom of association and collective bargaining, vio-
lations of wage and overtime laws, and timecards which appeared to have been falsi-
fied (O’Rourke 2000).
The PwC auditors reported that both factories were “in compliance with Freedom
of Association and Collective Bargaining standards”, but they made no serious at-
tempt to investigate these standards. The Korean PwC auditor ignored the relevant
questions in the questionnaire:
The auditor skipped entirely the sections on Freedom of Association

and collective bargaining, and often omitted questions on discrimi-
nation, forced labor, and child labor (O’Rourke 2000).
In the Chinese factory:
The PwC auditor did not explain what a union is, or what role workers
might play in it. Because the factory has a management run union, the
PwC auditors found no problems on freedom of association. Questions
regarding collective bargaining were skipped entirely (O’Rourke 2000).
Professor O’Rourke noted that “Factory managers have incentives to cover up or hide
problems”, and that PwC auditors give them “ample opportunity to do just that”. In both
Korea and China the PwC auditors advised the factory owner how they could circumvent
local overtime laws (O’Rourke 2000, pp. 11–13). O’Rourke concluded that:
These problems go beyond the level of poorly trained auditors and

flawed audit protocols. The significant and seemingly systematic biases
in PwC’s methodologies call into question the company’s very ability
to conduct monitoring that is truly independent (O’Rourke 2000).
The sixteen US students that Nike sent to observe and report on PWC monitoring in
March 2000 also provided some important insights into the quality of that monitoring.
Again, the PwC auditors knew they were being observed, so the quality of their audit-
ing is likely to have been higher than usual. The students were selected by representa-
tives of St. John’s University, which was itself under fire on the Nike sweatshop issue
for insisting that one of the University soccer coaches, Jim Keady, wear Nike gear
even though he objected on moral grounds. This was not therefore a selection panel
likely to choose students who they could expect to be critical of Nike and PwC. The
students who were selected tended to have a limited background in labor rights or
monitoring issues and their report reflected this.
Sins of Omission:
Nike has made much of the fact that in the introduction to that report the students
refer to PwC’s monitoring as “effective and well-designed” and “rigorous”
(Austermuhle et. al., 2000, p. 4). While this is true, many of the observations which
the students make in the body of the report dramatically undermine this assessment, and it
is unlikely that they would have been so positive had they had a deeper understanding of
monitoring issues. With regard to union rights, for example, the students reported that in a
number of countries questions about workers’ union rights are phrased in language work-
ers cannot understand28 (Austermuhle, 2000 pp. 7,9,12,22,40,46). They noted that PwC
auditors do not interview union leaders to ask if their members are suffering any discrimi-
nation—an obvious component of any serious investigation into whether those rights are
protected (Chakravarty 2000, p. 9). Shubha Chakravarty, the student who observed PWC’s
monitoring in Bangladesh and Indonesia concluded that although Nike’s Code of Con-
duct “supports freedom of association and collective bargaining...I did not see evi-
dence of any systematic investigation into these rights” (Chakravarty 2000, p. 8).
Subsequently some of the students involved in this program have questioned Nike’s
motivation in allowing them to observe the PwC monitoring program. Martin
Austermuhle of Penn State University observed a PwC audit of the Kuk Dong factory in
Mexico, which in the early months of 2001 became the subject of media scrutiny because
of very poor working conditions.29 At the time of that media coverage he wrote:
I cannot deny that all the student monitors who went on that trip
praised Nike, but then again, we have to look at the situation com-
prehensively. All the student monitors had no real background in
monitoring, labor conditions, or the understanding necessary to carry
out audits. We were sent to factories that expected us, and made to
believe that the factories we saw were representative of all factories.
Needless to say, much of what we said was based on not enough info
and a tight schedule. I did say that Nike was doing a good job then,
but I know that the trip was essentially a PR move for situations like
the one we are experiencing today.30
Despite Nike’s claim that PwC’s monitoring program is independent, it is more

accurate to describe it as “company controlled monitoring” (Eijk and Zeldenrust 1997,
p. 32) since PwC is selected by and accountable to Nike and implements a monitoring
program which Nike has designed. The only Nike factory audit by a CPA firm that has
been leaked to the press in its entirety, a 1996 audit by Ernst and Young, ended with
comments that encapsulate the relationship between Nike and its ‘independent’ moni-
tors: “The procedures we have performed were those that you specifically instructed
us to perform. Accordingly, we make no comment as to the sufficiency of these proce-
dures for your purposes” (TRAC 1997).
28
In response Nike indicated that it would work with PricewaterhouseCoopers to redraft these questions,
but is yet to release the questions so that this can be verified (Nike 2000b).
29
There is a detailed analysis of the situation at Kuk Dong in section 6 below (on Freedom of Association).
30
Cited in email from Eric Brakken, staff person of United Students Against Sweatshops, 19 Jan 2001.

Under the FLA’s monitoring program participating companies will select “indepen-
dent external” monitors from a pool of monitors which have been accredited by the
FLA. In a prize-winning article in the Journal of Law and Policy in International
Business, Robert Liubicic argues that such an arrangement renders monitors “neither
independent nor external”, since “third-party agents, operating for profit and paid by
the MNCs they are charged with monitoring, are subject to...vested interest problems”
(Liubicic 1998).
Human rights groups involved in the FLA disagree. In research interviews Pharis
Harvey of the International Labor Rights Fund and Jim Silk of the Robert F. Kennedy
Center for Human Rights recognized that in an ideal system “independent” monitors
would not be selected and paid by the companies whose performance they are moni-
toring. They nonetheless argued that if companies are not willing to accept such a
system then one in which monitors must be accredited and overseen by a group like
the FLA (which includes significant representation of human rights groups) is an ac-
ceptable and workable compromise.31
While the FLA’s monitoring procedures and accreditation requirements for inde-
pendent monitors are relatively stringent, there are still significant grounds for con-
cern that companies wary of having to deal with a unionized workforce may act in bad
faith and may seek to employ independent monitors who have the skills to pass the ac-
creditation procedures but are not motivated to rigorously investigate whether workers’
rights to form unions are protected and other labor standards upheld. Although the FLA
has thus far only accredited non-profit monitors, it is likely that for-profit monitors will
also be accredited, and companies are more likely to favor commercial auditing firms over
local NGOs because the former are likely to be less familiar with or committed to labor
rights (MSN 2001). The poor auditing practices of Nike’s current “independent” monitor,
PricewaterhouseCoopers, does not instill confidence that Nike will be seeking to se-
lect a motivated and rigorous monitor under the FLA’s external monitoring program.
FLA staff will oversee the monitoring program, but they will conduct no factory
investigations of their own. Hence if an investigation has been poorly conducted it
will only become apparent to FLA staff if the paperwork appears unacceptable or else
a local group makes a formal complaint to the FLA about the factory.
It will not be possible to comment authoritatively on the effectiveness of this
monitoring until Nike has selected an FLA accredited monitor and the FLA’s monitor-
ing program has begun. Nonetheless, Nike’s right to select which accredited monitor
will visit its suppliers’ factories gives rights groups good reason to be skeptical about
the independence of this program.
Global Alliance
The Global Alliance has limited independence from Nike. The NGO that Nike se-
lected to work with on the project, the International Youth Foundation (IYF), has no
expertise in labor rights. Its background is in working with large corporations to con-
31
Harvey, pers. comm. 1 Oct. 1998; Silk J., pers. comm., 6 Oct. 2000.
Sins of Omission:
duct development programs for young people. Although the money that Nike has put
into the Alliance is held by a separate trust so that Nike cannot withdraw it, one of
Nike’s vice-presidents, Maria Eitel, sits on the Alliance’s Operating Council, giving
the company an important role in governance of the project.
The local universities the Alliance has selected to conduct its factory assessments
must follow a research process determined by the Alliance. The author has spoken
with one of the data collectors involved in that research program.32 According to that
person, many of the questions in the Alliance’s survey were of little relevance to work-
ers’ situation and many workers found them confusing. The university research center
raised this with Alliance staff but the Alliance was not willing to replace them with
questions that were more relevant to the issues workers face. While interviewing work-
ers, some of the data collectors wrote down additional comments made by workers
about problems in their factories. The Alliance did not include these comments in its
public report because they went outside the scope of the questions asked in the survey.
The Alliance cannot therefore claim that the university centers conducting its research
are independent from the Alliance’s control.
A Relationship of Trust Between Workers and Monitors

The section of this report titled “Overcoming the Culture of Fear” has already consid-
ered the dangers Nike workers face when they speak honestly about labor abuses in
their factories. Before Nike representatives or PwC monitors visit, Nike workers are
commonly warned not to speak about problems in their factory for fear of endangering
orders.33 And in most cases workers know they have little effective legal protection if
they are fired or discriminated against for telling monitors what is really going on.
Independent researchers with experience in interviewing factory workers in industri-
alizing countries argue that it is crucial that monitors put in the time and energy needed
to create a relationship of trust in which workers have confidence that any information
will remain confidential and that reporting on labor abuses will not lead to loss of
orders and loss of jobs (Hancock 1997, O’Rourke 2000, Bissell et. al. 2000). In the
absence of this trust, workers will commonly pretend that they are happy with factory
conditions in order to protect themselves and their fellow workers.34 For this reason
rights groups have questioned the credibility of the largely positive reports on factory
conditions released by Nike and the Global Alliance.
Since at least 1995, anti-sweatshop groups have attempted to persuade Nike that
workers need to be interviewed confidentially in safe venues away from factory sites
and that these meetings need to be facilitated by organizations or individuals which
32
That data collector asked not to be named for fear of losing future research contracts and out of concern
that public statements would result in being sued for breaching the Alliance’s confidentiality agreement.
The author subsequently verified with Kevin Quigley, director of the Alliance, that researchers were free
to comment on the Alliance’s research program, but was not able to inform the data collector of this before
the report went to print.
33
See for example Connor 2000 and Chakravarty 2000.
34
See the section entitled “Overcoming the Culture of Fear” above.
have earned workers’ confidence. Stanford University student Shubha Chakravarty

was allowed by Nike to observe PwC interviews with Nike workers in Bangladesh and
Indonesia in March 2000. She also independently arranged with local independent
NGOs to meet with workers from the same factories at confidential venues away from
the workplace. Her comments on the contrast are significant:
The difference in their eagerness to talk was astounding. Quite liter-

ally, the women spoke more loudly outside of the factory. They were
much less scared and nervous. Inside the factory, I got the sense that
the workers were uneducated about their rights and did not know
what to complain about; I sometimes concluded that they were con-
fused by some of our questions. Outside of the factory, workers were
not only aware of what needed improvement in their factories, but
they were also very eager to share their complaints with me
(Chakravarty 2000, p. 2).
S.H.A.P.E.
It is not clear from the material Nike has released regarding the SHAPE investigations
whether Nike staff interview workers at all, let alone whether those interviews are
conducted confidentially.
The monitoring program Nike has set up is not conducive to establishing a relation-
ship of trust between workers and PwC auditors. Those auditors commonly spend only
one day each year at each factory.35 Whereas factory managers know in advance when
the monitors are coming and frequently warn workers not to criticize factory condi-
tions (Chakravarty 2000, p. 2), little attempt is made to explain to workers the signifi-
cance of the monitoring visit. In the audits in Korea and China which Professor
O’Rourke was allowed to observe there were no opening or closing meetings with
workers, no protocol to explain the program to them and no strategy to help them
collect accurate and verifiable information (O’Rourke 2000).
In some cases PwC auditors do not interview factory-line workers at all. In March
2000 the author interviewed workers from three Nike contract factories in Indonesia,
each of which had been supplying Nike for at least five years. In two of those factories
workers insisted that PwC limiting their interviews to factory supervisors and did not
speak to line workers. This extract from one of the interviews is typical:36
Worker (through interpreter) — PricewaterhouseCoopers? Once a

year they visit—always accompanied by supervisors. Only ask things
to supervisors, never to workers.
35
Unless it is determined that a follow up audit is needed.
36
For fear of reprisal the worker interviewed here asked that both her name and the name of her (Nike
contract) factory be kept confidential.
Sins of Omission:
Tim Connor — What is workers’ attitude to PricewaterhouseCoopers?
Do they think they could trust them?
Worker (through interpreter) — They don’t feel anything because

they’ve never been asked. Anytime any visitors want to come, they
are informed that tomorrow there will be some people come here, so
be careful, it is for our own company’s progress, so be careful and
then they are told to clean up everything.
Connor — What does the company mean by careful?
Worker (through interpreter) — Don’t say anything bad because it is

for the company’s progress.
Connor — So if they say something wrong it might damage the

company’s progress?
Worker (through interpreter) — Yes. And they’ve never been asked,

just the supervisors, and it’s impossible that the supervisors tell the
bad things.
(Connor 2000)
Independent research suggests that when PwC auditors do interview line workers in
most cases they make little attempt to establish a relationship of trust. The US students
Nike allowed to observe PwC’s monitoring in March 2000 reported that in some coun-
tries worker interviews averaged only five minutes in length (Austermuhle et. al. 2000,
p. 29). The student who visited Bangladesh and Indonesia, Shubha Chakravarty, noted
that the monitors’ expertise is usually in accounting and they tend to lack the skills
needed to establish a rapport with workers (Chakravarty 2000). The PwC monitors
Professor O’Rourke observed in Korea were also young accountants with limited train-
ing in social auditing. His description of the interviews in the Chinese factory gives a
sense of the lack of empathy:
Each interview was based on a standard survey instrument. Inter-

views last 7–10 minutes per worker. By the end of the 3.5 hours of inter-
viewing, the PwC auditor was extremely tired and asked the questions in
a rote fashion. The auditor seldom looked up at the workers while read-
ing the questions and recording the answers. The auditor did not at-
tempt to build rapport with workers. She did not ask where they were
from or how long they had been in the factory, or even which section of
the plant they worked in...[she] answered some of the questions in the
survey without asking the worker, assuming she knew the answer with-
out asking. She did not follow-up on uncommon answers. She never
supplemented the survey with additional questions... (O’Rourke 2000).
The PwC auditors Professor O’Rourke observed also failed to find interview venues
that would make workers feel comfortable and give them confidence that they could
speak confidentially. In the Chinese factory the interviews were conducted in a
manager’s office and in the Korean factory the interviews were conducted in a hall-
way just outside the manager’s office. Karim Chrobog, the US student who Nike al-
lowed to observe PwC monitoring in the Dominican Republic also commented on this
problem:
The interviews in the first plant were conducted in the office of the
company president. Hence, some of the workers were visibly uncom-
fortable in this setting. The interview conditions in the second plant
were even more troubling. The interviews were conducted in a room
that served both as a document storage facility and as a corridor to
get to the company president’s office. This resulted in the administra-
tive staff constantly entering the room to fetch or return documents,
and the management repeatedly interrupting us. Naturally, the work-
ers seemed highly uncomfortable and appeared reticent to speak
freely...some of the workers in the second plant appeared highly in-
timidated during their interviews, and some expressed fear of the
Korean management. In addition, in both plants at least two workers
were interviewed at a time, often while supervisors were present or
also being interviewed (Austermuhle et. al., 2000).
In its response to the students’ report Nike noted that following the students comments
“PwC has emphasized to monitoring teams that extreme care should be exercised in
the selection of the interview location and that privacy should be ensured” (Nike 2000b).
It reflects badly on the monitoring program that Nike and PwC did not think to empha-
size this to monitors before the students brought it to their attention.
A more widespread problem is the failure to keep the identities of workers who
are interviewed secret from their managers and supervisors. The students reported that
in every factory audit which they observed, factory managers knew or could easily
find out which workers were interviewed (Austermuhle 2000, pp. 5–6, 18–19, 38, 52).
Professor O’Rourke reported that in China and Korea the PwC auditors asked the
managers to help them select workers to be interviewed, had the managers collect the
workers’ personnel files, and then had them bring the workers into the office for the
interviews (O’Rourke 2000).
The problem with managerial staff knowing which workers are interviewed is that
they can then call them up when the auditor leaves and cross-examine them in an
attempt to discover whether any of them made critical or negative comments. An ex-
ample of this was cited by workers from the third Indonesian Nike contract factory the
author researched in March 2000, PT ADIS.37 Workers from that factory said that in
1999 either Nike staff or PwC auditors (they were not sure which) had visited the
37
Now known as PT ADF.
Sins of Omission:
factory and had interviewed three line workers, but the factory supervisor knew which
workers were interviewed and called them aside afterwards to try and discover what
they said:
Tim Connor — Do you think the workers would have been confident
to tell...the person from Nike about problems in their factory?
Worker from PT ADIS (through interpreter) — Probably they don’ t

dare ‘cause the interview was happening inside the factory and they
are afraid after that if anything happen the supervisor will call them.
Connor — So they don’t trust Nike to keep it confidential?
Worker from PT ADIS (through interpreter) — It is not that we don’t

trust Nike. We are just afraid that after the interview the supervisor
will call and ask and there will be questions. So after that, it was
true. The supervisor called the three of them...
In response to the students’ report Nike argued that it is impossible to conceal the
identity of employees selected for interviews from management because they must be
excused from the production floor (Nike 2000b). The obvious solution would be to
work with local non-government organizations to arrange confidential interviews af-
ter hours away from the workplace. The students who visited Nike contract factories
in Asia made this one of their recommendations (Austermuhle et. al., 2000, p. 39).
Nike’s response to the students’ report made no reference to this recommendation,
although the company did repeat its familiar litany that it is “working hard on” involv-
ing NGOs in its monitoring program38 (Nike 2000b).
Finally, the PwC monitoring scheme has failed to put in place a mechanism to
protect workers from being disciplined or fired for reporting problems to PWC moni-
tors or to other researchers. The student who Nike allowed to observe PwC’s monitor-
ing in Bangladesh and Indonesia, Shubha Chakravarty, reported that “it was evident to
me in every worker interview that workers do not feel comfortable voicing complaints
against management; in one Bangladeshi factory, workers openly admitted that they
felt they would be fired if they complained” (Chakravarty 2000, p. 8). Workers in one
of the factories in Bangladesh took considerable risks by telling her and the PwC audi-
tors that “managers often screamed at workers who made mistakes or arrived late at
work” and that they had “seen managers hit and kick workers” (Chakravarty 2000, p.
10). Subsequently in independent interviews Bangladeshi Nike workers asked her
38
Nike also responded to the Global Alliance report on Indonesia with a remediation plan which included
a promise to improve its social monitoring using local organizations with specific expertise in women’s
issues (Nike 2001e). It remains to be seen what will eventuate from this. Nike has been promising to
involve local NGOs in its monitoring program since early 1998 but so far these promises have come to
nothing. From the comments in the the remediation plan it sounds like it is only intended that local womens
groups will only help to monitor sexual harrasment in Indonesia, whereas rights groups believe local NGOs
should be involved in all aspects of worker interviews in all countries.
“whom they should contact if they were disciplined or fired for having spoken with
me (if they were discovered), and I was disturbed to realize that I had absolutely no
answer for them” (Chakravarty 2000, p. 8).

A number of aspects of the FLA’s external monitoring procedures in this area are ex-
tremely positive. Independent external monitors will be expected to make both unan-
nounced and announced factory visits, to work with local groups likely to have work-
ers’ trust when arranging and conducting confidential interviews and to consult with
any legally constituted union representing employees in monitored facilities [FLA,
1999 #265].
Global Exchange and other rights groups are concerned that these positive ele-
ments in the FLA’s monitoring scheme are likely to be dramatically undermined by
other aspects of that program, in particular Nike’s power to select which FLA accred-
ited monitors visit its factories. The FLA’s procedures leave a great deal to the monitor’s
discretion, making the independence of monitors particularly important. Whereas cam-
paign groups would argue that offsite interviews are always needed, the FLA leaves
this decision up to the individual auditor. There is good reason to suspect that Nike
will avoid selecting auditors who will rigorously use this discretion to the benefit of
workers. As discussed below the other very significant limitation on the FLA’s exter-
nal monitoring program is that on average external monitors will only visit each fac-
tory once every ten years.
Global Alliance
The Alliance has so far arranged for university researchers to complete factory assess-
ment programs in Thailand, Vietnam and Indonesia and they are currently conducting
a fourth assessment program in China. The primary research method for these factory
assessments has been one-hour interviews conducted inside the factory, although fo-
cus group discussions are also held.
Independent research suggests that in Thailand at least the Alliance researchers
failed to establish a relationship of trust with workers. In September 2000 the coordi-
nator of the Thai Labor Campaign, Junya Yimprasert, released a report based on inter-
views with workers from the Lian Thai factory, one of the factories which the Alliance
researchers had investigated. Workers at Lian Thai told her that:
The factory personnel staff introduced the researchers to all of the

workers that were selected. Since the workers had to give their names
in the questionnaires, they did not dare to give criticisms39 (Yimprasert
2000).
39
In the course of an extensive email correspondence the author has raised this finding (that workers were
required to give their names) with the director of the Global Alliance, Kevin Quigley, on a number of
occasions and requested a response. On each occasion these requests have been ignored.
Sins of Omission:
The Alliance’s factory assessments in Indonesia began at about the same time that
Yimprasert’s report was released and the methodology applied may have been influ-
enced by her research. The Alliance’s Indonesia report was released in February 2001
and the methodology section makes it very clear that “All of the interviews were con-
ducted without the name or identity of the respondents” (GAWC 2001, p. 14). It may be
that this partially explains why the Alliance report on Indonesia is much more critical than
the Alliance reports on Nike contract factories in Thailand and Vietnam.40 Whereas the
latter reports were largely upbeat the Indonesian report found evidence of inadequate
wages, forced and illegal overtime, denial of sick leave, menstrual leave and annual
leave and unacceptable levels of sexual harassment and verbal abuse (GAWC 2001).
Even with workers’ names concealed, a one-hour interview conducted inside the
factory will in many cases not be long enough for researchers to convince workers that
speaking critically will not bring negative consequences. Some of the focus group
discussions were conducted outside the factory, but they were not facilitated by orga-
nizations that workers’ knew or had any reason to trust. Cath Dwyer, a journalist with
the Australian government’s youth radio network, Radio jjj, interviewed Indonesian
Nike workers in January and February 2001 as part of her research for an ethics fel-
lowship. She spoke to workers from factories that had been assessed by the Alliance
and they told her that they were confused about the Alliance’s nature and goals and
were extremely unsure how to respond to it. She described the workers’ attitude to-
wards the Alliance as “very distrustful”.41
This lack of trust is likely to have led many workers to avoid making negative
comments about factory conditions when interviewed by the Alliance’s researchers.
As mentioned previously, the author has spoken with a data collector who was in-
volved in one of the Alliance’s worker assessment programs. According to that re-
searcher, many of the workers interviewed were extremely “concerned and defensive”
and appeared to deliberately avoid criticizing the factory. Evidently younger workers
were “not so scared” and were more willing to voice criticism, but most workers who
had been at the factory longer seemed afraid to do so. Workers who had children were
particularly careful about what they said, perhaps because they were concerned about
how losing their job might affect their ability to support their families. Although workers
in these interviews were not required to write their names on the survey form itself, at
the end of each interview they were required to sign a separate form excusing them
from work on the factory floor for the period of the interview. This may well have
raised workers’ suspicions that the Alliance researcher might keep their survey form
and their leave form together, allowing factory management to trace criticism to par-
ticular workers.42
As with any factory investigation, the Alliance’s research would be far more likely
40
The Alliance’s research partner in Indonesia, the Center for Societal Development Studies of Atma Jaya
Catholic University, has considerable experience in researching labor rights issues and this may also have
contributed to the more critical nature of the Alliance report on Indonesian Nike factories.
41
Dwyer C. 2001, pers. comm., 24 April.
42
Although this occurred at the end of each interview it is likely that most workers would have learned of
it in advance from workers who had already been interviewed
to generate accurate data if it worked with local NGOs and unions to establish rela-
tionships of trust with workers in order to give them confidence that they can tell the
truth about factory conditions without generating negative consequences for them-
selves or their fellow workers.
Confidential Procedures for Workers to Complain to Independent

Monitors
A reliable, confidential and independent grievance process can be a powerful means
for ensuring compliance with corporate codes of conduct. If workers can make com-
plaints which initiate confidential but thorough investigations and if appropriate in-
formation from the reports of those investigations is released to the public, then it puts
significant pressure on companies and their suppliers to ensure that human rights and
labor standards are protected.
Rights groups have argued that workers should be able to make complaints to
credible independent organizations. Nike’s initial response was to focus on proce-
dures that allow workers to complain to their factory managers.43 More recently the
company has promised to put in place grievance procedures which allow workers to
make complaints to Nike itself (Nike 2001e). These are both poor alternatives to inde-
pendent complaint mechanisms. Workers do not have good reason to trust that either
Nike or their factory manager will handle a complaint appropriately.
S.H.A.P.E. and PricewaterhouseCoopers

Both the SHAPE and PWC auditing procedures specify that factories need to have
confidential procedures by which workers can make complaints to factory manage-
ment. This may be useful in the case of minor complaints that the factory would be
happy to rectify. In the case of major issues such as denial of workers’ right to orga-
nize it is of no use to workers to have a confidential means of complaining to the very
management which is preventing them from forming a union.

The Fair Labor Association’s principles of monitoring require participating compa-
nies to develop “a secure communications channel...to enable Company employees
and employees of contractors and suppliers to report to the Company on noncompli-
ance with the workplace standards, with security that they shall not be punished or
prejudiced for doing so” (FLA 1999). Again, workers have limited reason to trust that
companies like Nike will handle their complaints appropriately and hence this kind of
grievance procedure is of limited use.
What is needed is an accessible mechanism for workers to complain to a genu-
43
The exception to this is Nike supplier factories located in the US. Evidently workers in these factories
have for several years had access to a free phone number which they can use to call Nike to complain of
Code violations (Chakravarty, S. 2000, pers. comm., 26 March).
Sins of Omission:
inely independent body. The FLA does have a third party complaint procedure that
theoretically allows workers and others to make a complaint directly to the FLA itself.
The description of that complaint procedure in the ‘FLA Charter Agreement’ (FLA
1999) suggests that it is designed for US lawyers rather than Chinese factory workers.
Any complaint must contain “sufficiently reliable, specific and verifiable evidence or
information about the Alleged Noncompliance”—and if it doesn’t the FLA will send it
back without investigating it. If the evidence does meet these criteria, it will be passed
on to the company who, in cooperation with its accredited independent monitor, will
be given 45 days to prepare a report for the FLA’s Executive Director. If this report
fails to convince the Executive Director that any non-compliance has been addressed
then he or she may appoint a mutually acceptable (that is acceptable to the company
and the Executive Director) accredited independent monitor to investigate.
The Maquila Solidarity Network in Canada argues that this complaint procedure
is particularly inappropriate for situations in which workers union rights are being
suppressed:
Given the lengthy and bureaucratic nature of this process, it is un-

likely that the FLA mechanism for reviewing complaints will be an
effective tool for workers or their advocacy groups, particularly in
cases in which violations of workers’ rights require immediate reso-
lution, such as firings of workers for union organizing. As well, re-
ports on violations of freedom of association, in which the violations
are more difficult to quantify and the facts are often in dispute, are
less likely to meet the FLA’s requirements for “reliable, specific and
verifiable” information than are more measurable issues like factory
lighting or air quality. (MSN 2001)
In personal correspondence Pharis Harvey of the International Labor Rights Fund has
indicated that although its description in the FLA charter agreement sounds bureau-
cratic, it is intended that the FLA’s complaint procedure will be set up in such a way
that it will be accessible for workers on the factory floor. It remains to be seen how
effectively the existence of this procedure will be explained to them and whether they
will have confidence in whatever systems are put in place to enable them to access it.
Global Alliance
As it is not a factory monitoring program the Global Alliance does not involve estab-
lishing a worker grievance procedure.
Transparent Reporting
Transparency is a key element of any effective code of conduct. If the methodology of
a monitoring process is made public it makes it possible to assess that program’s likely
worth in discovering labor abuses. If the addresses of the factories investigated are
also released it makes it possible for other researchers to independently investigate

conditions in a sample of factories, allowing a fuller evaluation of the monitoring
program’s effectiveness. If the monitoring reports on each factory are released on a
regular basis it informs the public whether those problems which the monitoring pro-
cess has discovered have been fixed rather than ignored.
S.H.A.P.E.
Nike has released very little information regarding the methodology required of Nike
staff conducting SHAPE audits.44 In 1999 the company did make available a copy of a
SHAPE inspection form (Nike 1999) and from this we know what kind of questions
are considered. As noted previously, key issues such as wage levels, working hours
and whether workers are free to organize are not considered.
More recently under its “Transparency 101” program Nike has made available
copies of the reports on SHAPE inspections of eight factories in South and Central
America.45 These forms give very limited information. Nike staff effectively give yes/
no answers to each of the 76 items in the inspection form and only occasionally make
additional comments. With only 8 reports released and no commitment to release fu-
ture reports for these factories it will not be possible to track whether or not the prob-
lems identified in these SHAPE inspections are fixed.
Nike has also released summaries of the SHAPE findings for 22 factories in South
and Central America. These summaries only reveal what percentage of affirmative
answers Nike staff gave to questions in each section of the form. Thus we are informed
for example that Factory number 2 in El Salvador scored 72% on Safety, 47% on Health,
28% on Attitude of Management, 100% on People and 5% on Environment. We are not
told what the particular problems there were with management attitudes or with impact on
the environment at that factory, and unless Nike decides to release information about
this factory in future we will not know whether these percentages improve.
Nike’s “Transparency 101” program has also involved the release of information re-
garding PwC’s monitoring, but again the scope of this “transparency” is very narrow.
Nike has more than 700 suppliers, but so far only 11 PwC factory reports have been
released. 46 Reports for three factories in North America were released in June 2000,
and eight more reports from Central and South America were released early in 2001.
These “full reports” provide very limited information about PWC’s methods. There is
no information regarding how workers are selected for interviews, how workers’ confi-
dentiality is protected, how much time is spent interviewing each worker or whether any
steps are taken to ensure that workers are not subsequently discriminated against for re-
vealing problems in the factory. The reports indicate neither which questions PwC moni-
44
As noted above it is not even clear whether Nike staff interview workers as part of the SHAPE audits.
45
This is part of Nike’s “Transparency 101” program and the reports can be found on the company’s
website: www.nikebiz.com/labor.
46
Nike claims that eventually it will release information regarding all of its more than seven hundred
factory suppliers.
Sins of Omission:
tors ask workers nor how workers answer them, only brief summaries of the monitors’
overall impression of what all the interviewed workers said on each issue are included.
The name and address of the factory are concealed so it is not possible for independent
researchers to check PWC’s findings. And since there is no commitment to release
future PwC reports from these particular factories, it will not be possible to verify
whether those problems which are identified are rectified.
In addition to the full reports, Nike has released tables indicating the number of
“non-compliances” with Nike’s code found by PwC in each supplier country in the
Americas in the course of 75 monitoring visits. Thus the tables indicate that PwC
found one factory in the Honduras where there was a problem with child labor, 22
factories in the US where there was a problem with “documentation and inspection”
and so on. These tables give even less idea of the extent and nature of the problems
PwC discovered in each factory.
The first round of Nike’s “Transparency 101” program also involved releasing a
list of “action plans” that factories were being asked to implement as a result of PwC’s
monitoring of 53 North American factories. These “action plans” were not included in
the information subsequently released regarding PwC monitoring of factories in Cen-
tral and Southern America. While the action plans for North America only gave a
small amount of information regarding what problems each action plan was supposed
to address, it is disappointing that in this respect Nike is going backwards, towards
less rather than more transparency.
Nike has not said how it selected those particular 53 North American factories to
be included in the Transparency 101 program from among the 167 factories 47 that
supply the company in North America. Nor has Nike explained why it can’t regularly
release all of the SHAPE and PwC reports for all of its 700 suppliers, so that research-
ers can track whether the problems identified by this monitoring are resolved.
Nike’s program to allow students to observe PwC monitors (discussed above) gave
important insights into the limitations of PwC’s methodology. Unfortunately the pro-
gram to allow students to observe the monitoring was a one-off so we have no way of
verifying whether the recommendations the students made have been properly acted
upon. The students noted for example that in many countries PwC auditors asked work-
ers about their right to freedom of association using language workers could not un-
derstand. Nike promised to redraft these questions to make them comprehensible (Nike
2000b), but until the list of questions is made public or else further independent scru-
tiny of PwC’s practices is allowed, we will not be able to verify whether or not this
promise has been fulfilled.
Nike’s “Transparency 101” program falls well short of the kind of transparency
which rights groups have demanded. Nike has refused to release all but a small per-
centage of the addresses of its suppliers’ factories and the information it has released
regarding its monitoring system has been extremely limited and of little value in as-
sessing the effectiveness of that system.
47
Nike 2000.

While the FLA’s proposed monitoring system has greater transparency than Nike’s
current program, it still falls short of full transparency. Companies participating in the
FLA are allowed to keep secret the addresses of their supplier factories and they will
have some ability to influence what information from factory reports makes its way
into the public domain.
When an accredited FLA auditor completes a factory assessment it must submit a
standardized compliance report to the relevant participating company. The company is
then expected to work with the supplier to ensure that conditions are brought into
compliance with the FLA code. The accredited auditor will then verify that compli-
ance has been achieved. Within 60 days of first submitting a compliance report to the
company, the auditor must submit a report to the FLA Executive Director, including a
description of instances of serious violations of the Code and steps taken to correct the
problem and prevent its recurrence. These reports will all remain confidential docu-
ments (FLA 1999).
Every 12 months Nike and each of the other participating companies will be re-
quired to provide the FLA with a standardized report describing what it has done to
implement the FLA Code and to address instances of serious noncompliance. The staff
of the FLA will then use the company’s annual reports and the auditor reports to pre-
pare a standardized annual public report, which will have to be approved by the FLA
Board before it is released to the public. The report will exclude information consid-
ered proprietary or confidential but will include summaries of any “significant and/or
persistent patterns of noncompliance” found and an assessment of what was done to
rectify them.
This process gives considerable discretion to FLA staff and to FLA board mem-
bers (almost 50% of whom are corporate representatives) to determine what informa-
tion will be made available to the public.
Global Alliance
The Global Alliance has made transparency one of its goals and it has released a consid-
erable amount of information regarding the interview methodology employed by its re-
searchers and the data produced by that research (see for example GAWC 2001). It has
not, however, released the names and addresses of the factories which it works with.
Regularity of Monitoring
Even when factory monitoring visits are highly effective, long delays between those
visits can allow labor abuses to go unchecked for sustained periods of time, particu-
larly where there is no union in a factory and no independent grievance procedure.
S.H.A.P.E.
The regularity of the S.H.A.P.E assessments, which occur quarterly, is a positive fea-
ture of this program.
Sins of Omission:
PwC’s auditors generally spend one day in each Nike factory each year. Twelve month
gaps between monitoring visits might be justifiable if those visits were supplemented
by accessible independent grievance procedures which workers could use to ensure
that urgent issues are dealt with quickly. In the absence of such grievance procedures,
annual visits leave serious factory issues unaddressed for far too long. As mentioned
previously, the student who was allowed to observe PwC’s monitoring of Nike con-
tract factories in Bangladesh, Shubha Chakravarty, was told by workers in one factory
that workers were hit and kicked by factory supervisors. She noted that:
In the previous audit of this factory (one year earlier), there had also
been a finding of physical abuse of workers. The first year’s finding
was directed at upper-level Korean managers, while this year work-
ers complained exclusively about lower-level Bangladeshi manag-
ers. As a result, this year’s finding will not count as a repeat finding.
(Chakravarty, p. 10).
When workers are being hit and kicked by factory managers (irrespective of their
level of seniority) a year is too long to wait for another monitoring visit.

Perhaps the most significant problem with the FLA’s monitoring scheme is the length
of time between factory monitoring visits by FLA accredited monitors. Up to 15 per-
cent of a participating company’s suppliers may be “de minimis”—facilities that are
exempt from monitoring altogether.48 Only 30 percent of the remaining facilities must be
externally monitored in the first three years, and after that only ten per cent of suppliers’
facilities must be monitored each year. This can be increased to 15 percent of facilities per
year or reduced to five percent by the agreement of two thirds of the NGO representatives
and two thirds of the corporate representatives on the FLA board (FLA 1999). But it is
unlikely that two thirds of the corporate representatives would vote to increase inspection
requirements. Hence if a factory has recently successfully passed an FLA external moni-
toring audit, the owner can have reasonable confidence that the facility will not be subject
to independent external monitoring again for something in the order of 10 years.
If there are particular issues at a factory, the FLA may direct that another monitor-
ing visit takes place before 10 years pass, but this will count towards the company’s
10 percent of facilities for that year (FLA 1999), making it even longer before other
factories are monitored.
Nike and other participating companies also have some influence over which fac-
tories are likely to be monitored. They will send the FLA lists of factories that they
believe should be given priority in terms of inspections by independent external moni-
48
De Minimis facilities are defined as factories in which the participating company produces in for less
than 6 months of a 24 month period or for which the participating company’s production accounts for less
than 10% of overall annual production (FLA 1999).
tors. The executive director of the FLA may ignore these lists, but subject to provisos
regarding the proportion of factories on the company’s lists which are likely to be at
risk of non-compliance, there is a general presumption in favor of them (FLA 1999).
Global Alliance
As the Global Alliance is primarily a training and development program, its factory
assessments will not be conducted on a regular basis. They are one-off programs to
assist with the design of training and development activities. The exception to this is
in Indonesia, where Nike has asked the Alliance to conduct another assessment within
12 months (Nike 2001e). The scope of this second assessment is not yet known.
Overall Assessment of Nike’s Monitoring Program

It is instructive to contrast Nike’s monitoring and factory assessment program with
the Workers’ Rights Consortium (WRC), a monitoring program Nike has strongly op-
posed. The WRC was established by student activists in cooperation with unionists
and supportive academics in order to monitor factory conditions in the production of
collegiate licensed apparel by Nike and other companies.
The WRC is fiercely independent of corporate influence, refusing to have any
corporate representation on either its Advisory Council or its Governing Board. The
Advisory Council is made up of academics, trade union leaders, and representatives of
labor rights and religious groups from the US, Asia, Latin America and Africa. Under
the WRC’s program companies like Nike have no power to influence which monitors
are selected to visit their factories (WRC 2000a).
Working with local unions and labor rights organizations to build relationships of
trust with factory workers is a priority of the WRC program (WRC 2000a). The WRC
plans to work with such groups to ensure that workers in factories covered by the
WRC code receive appropriate education and training regarding their rights under the
code. Rather than conducting regular monitoring visits, the WRC’s primary focus is
on working with local organizations to establish reliable and independent grievance
procedures for workers and investigating any complaints workers make. An agency is
to be formed which will in certain circumstances “coordinate proactive investigations
with local, independent non-governmental organizations and human rights groups with
experience in the region” (WRC 2000, p. 2). The nature and methodology of these
investigations is in the process of being developed, but they must include both on-site
inspections and off-site worker interviews and factory owners will not be warned in
advance (WRC 2000, pp. 4–5).
The WRC is committed to “maximum” transparency. Companies will be required
to release not only the addresses of each factory, contractor and sub-contractor but
also all objective measures of working conditions covered by the code (WRC 2000, p.
4). Undertaking such programs on a limited budget will be a considerable challenge,
but the WRC has begun building relationships with the key non-government organiza-
tions interested in labor rights in regions where it will be monitoring factories.
Sins of Omission:
As discussed in section three of the first part of this report, Nike has been highly
critical of the WRC. Nike’s founder and director Phillip Knight cancelled an expected
$US30 million donation to the University of Oregon when he learned that the Univer-
sity had joined the WRC. In his statement on the issue he said that “...the university
[has] inserted itself into the new global economy where I make my living. And in-
serted itself on the wrong side, fumbling a teachable moment” (Knight 2000).
In contrast to the WRC, Nike’s various monitoring programs all fail two or more
of the key tests of effective monitoring: independence, transparency, regularity and a
relationship of trust with workers.
The quarterly program of S.A.F.E. (Safety, Health, Attitude, People, Environment)
assessments, conducted by Nike staff, is the least independent. Where staff usually
responsible for negotiating price, quality and deadlines for production are also given
the responsibility of monitoring labor standards, there is a significant conflict of inter-
est (Liubicic 1998). In any casem, many of the key issues of concern to workers, in-
cluding wages, working hours and whether they are allowed to form unions, are not
even considered during the SHAPE assessments.
Nike’s factory monitoring program involving PricewaterhouseCoopers also lacks
independence. PwC is selected by Nike, reports to Nike and conducts a monitoring
program designed by Nike. To the extent that independent observation of PwC’s moni-
toring practice has been allowed, it indicates that PwC auditors fail to establish a rela-
tionship of trust with workers and the quality of their monitoring can be extremely
poor, demonstrating a strong bias towards the interests of management at the expense
of those of workers. PwC monitoring also fails the transparency standard.
While there are elements of the Fair Labor Association’s (FLA) proposed moni-
toring program which represent important improvements on Nike’s current very poor
system, the FLA falls well short of what is needed. The Association’s ability to ensure
that workers’ rights are respected will be significantly undermined both by the ques-
tionable independence of its external monitors and by the long delays between factory
monitoring visits—which will on average occur in each factory only once every ten
years.
Although spokespeople for the Global Alliance for Workers and Communities have
been very clear that it is not a factory monitoring program, this has not stopped both
Nike and the Alliance from using the Alliance’s factory assessments as evidence that
sweatshop allegations are outdated. The Alliance deliberately avoids investigating key
human rights issues and its research methodology does not allow time for researchers
to create a relationship of trust with workers. As such, both Nike and the Alliance
should cease referring to these factory assessments as a measure of whether condi-
tions in Nike contract factories are decent.
In short, whereas the Workers’ Rights Consortium is independent, transparent and
makes it a priority to build relationships of trust with workers, Nike’s monitoring and
factory assessment programs are not independent, lack full transparency and have so
far made very little effort to win workers’ trust so that they can speak honestly about
factory conditions without fear of reprisal.
3. Decent Wages
Nike has rejected calls that it adopt a living wage standard, and instead insists that legal
minimum wages are acceptable. Meanwhile Nike workers struggle to survive on wages
which are barely adequate to cover their individual needs, let alone those of their children.
Nike is an extremely successful company. In the 2000 financial year the company’s
net income was $579 million. It spends tens of millions of dollars on individual con-
tracts with sport stars such as Tiger Woods and Michael Jordan.
Rights groups have argued that if any company can afford to ensure workers are
paid enough to feed their children, Nike can. They have called on the company to ensure
that full-time wages in its suppliers’ factories are adequate to meet the basic needs (food,
shelter, clothing, transport, basic education, basic health care) of a small family. This de-
mand is in line with the Universal Declaration of Human Rights49 which states that:
Everyone who works has the right to just and favorable remunera-
tion ensuring for himself and his family an existence worthy of hu-
man dignity... (Article 23 (3)).
Nike does not see it that way. The most it has been willing to commit to is ensuring
that workers are paid the relevant legal minimum wage or the local industry standard,
whichever is higher.50
Nike’s lax monitoring system means that at times wages fall below even this stan-
dard. The Kuk Dong factory in Atlixco in Southern Mexico is bound by Mexican law
to pay sewers at least 46.30 pesos ($US4.95 ) per day. Late in 1999 management at the
Kuk Dong factory signed a contract with a counterfeit union saying that it need only
pay 38 pesos ($US4) per day (Justiniani, 2001). This agreement was in place when
PricewaterhouseCoopers monitors audited the factory in March 2000, but they either
failed to notice it or else took no action. The factory then received considerable media
coverage in January 2001 when workers organized a demonstration to protest low
wages and other factory issues. Following the demonstration a number of independent
investigations were conducted which highlighted the illegally low nature of those wages
(Justiniani 2001, WRC 2001). One of those studies was conducted by the Workers
Rights Consortium (WRC), which reported that:
Many workers at Kukdong are not paid the minimum wage mandated
by Mexican law for the occupation of seamstress. The Kukdong wages
are grossly insufficient to meet the barest needs of a family of three.
(The Kukdong General Manager conceded that it would be difficult
even for a single person to live on the wages of a Kukdong worker.) A
worker with one dependent would fall below the commonly recog-
nized line of “extreme poverty”. Kukdong wages compare unfavor-
49
Refer to: www.un.org/Overview/rights.html
50
This commitment is in the FLA code, which Nike has signed (FLA 1999).
Sins of Omission:
ably to wages earned by similarly situated workers in the apparel
and textile industry in this region of Mexico (WRC 2001).
Nike responded to this report by questioning the WRC’s independence and by arrang-
ing another audit by the US monitoring agency Verite. Before Verite had visited the
factory, Nike put out a press release suggesting that Kukdong workers earned “more
than the government wage for the region” and as evidence included copies of two Kuk
Dong pay stubs (Nike Inc. 2001b).
The Verite audit confirmed that in Mexico garment workers should be paid a mini-
mum of 46.30 pesos (US$4.95) per day and reported that approximately one-third of
the sewers on factory lists provided to Verite by the Kuk Dong company are paid a
daily base wage below that legal minimum (Verite 2001). Nike responded to Verite’s
report by putting together a “remediation plan” for the factory (Nike 2001). Although
Nike had promised to take Verite’s findings “very seriously” (Nike 2001c), the
remediation plan ignored Verite’s finding that the wages are illegally low. It did specify
that overtime work should be paid according to Mexican labor law, but it did not indi-
cate that normal full-time work should be paid according to the legal minimum for
sewers. Instead it states that the factory should “establish regular and overtime wages
and communicate to workers at time of hire in accordance with the collective bargain-
ing agreement currently in place” (Nike 2001). This is of course the agreement which
Kuk Dong signed with the counterfeit union in December 1999 which allows the fac-
tory to pay the illegally low rate of 38 pesos ($US4) per day.51 It is disturbing that even
after considerable public scrutiny of conditions at Kuk Dong Nike is still unwilling to
enforce its weak wage standard in the factory.
Kuk Dong is not unique among Nike suppliers in paying illegally low wages. On
November 22, 2000, Rainy Hutabarat of the Urban Community Mission in Jakarta,
Indonesia testified to members of the European Parliament that PT Tuntex, which supplied
both Nike and Adidas, was paying illegally low wage rates for overtime hours (Osborn
2000). When the Urban Community Mission conducted its first round of research in 1999,
full time wages at Tuntex were below the legal minimum. When this finding was pub-
licized, the full time wages were raised to the level of the legal minimum, but as of
September 2000 the factory was still paying illegally low overtime rates.
Even when wages in Nike factories do meet the local legal minimum, it does not
follow that they are adequate to meet workers’ basic needs. Industrializing countries tend
to keep legal minimum wages as low as possible in order to attract foreign investment.
Companies like Nike have reinforced this practice by regularly moving production to es-
cape high wages and to find sites where wage costs are low and supply is reliable52 (Connor
51
In preparation for this report the author wrote to Nike asking which minimum wage Nike is requiring of
Kuk Dong— the minimum specified in the collective agreement, or the legal minimum documented by
Verite in their report? Nike declined to respond.
52
Nike has occasionally countered this argument by pointing out that it still has shoe factories in relatively
high wage countries like Korea and Taiwan. The company has declined to indicate what proportion of its shoes
are produced in these countries, but the proportion is likely to be small. Recent research by Junya Yimprasert
indicates that sportshoe factories producing for Nike and other companies in Taiwan extensively employ
migrant workers from countries like Thailand and pay them very low wages (Yimprasert 2000a).
and Atkinson 1996). Nike has not been above using veiled threats to leave in order to put
pressure on governments to keep minimum wages low. In April 1997 the Associated Press
quoted Nike spokesperson Jim Small responding to an increase in the Indonesian mini-
mum wage by warning that Indonesia may be “pricing itself out of the market”.
Keeping minimum wages as low as possible often means too low to meet the basic
needs of a single worker. In Indonesia the government specifically acknowledges this
by regularly releasing estimates of what salary would be needed to meet the minimum
physical needs of a single adult in each region. Labor rights groups argue that these
figures significantly underestimate a minimum needs wage, but even so the govern-
ments’ minimum needs estimate is frequently significantly higher than its own legal
minimum wages, making it clear that even government officials recognize that work-
ers cannot meet their basic needs on the minimum wage.53
Research in other countries confirms the inadequacy of legal minimum wages.
Nike workers at the Lian Thai factory in Bangkok in Thailand only receive the mini-
mum wage of 162 Baht for working an 8 hour day and say they need about 200 Baht
just to cover the basics needs of one person (Bissell et. al. 2000, app. 3). Candland and
Yimprasert report that factories owned by Nike supplier Bangkok Rubber located in
Ayuttaya Province, just outside of Bangkok, need only pay a regional minimum wage
of 130 baht (US$ 3.50) per day. This is significantly lower than the Bangkok mini-
mum even though living costs are similar in the two areas. Although living costs in
Thailand have risen dramatically in the last several years, legal minimum wage levels
have remained static (Yimprasert and Candland 2000).
Research conducted by the Interfaith Center for Corporate Responsibility in 1998
indicated that wages in Nike shoe factories in Vietnam were barely adequate to pro-
vide a nutritious diet. According to that research, a worker who bought food from the
cheapest local market would still have to work for more than a full day to earn enough
to buy one kilogram of chicken, and for half a day to buy a dozen eggs (ICCR 1998).
What this means in human terms is that Nike workers must work excessive over-
time to meet their own needs and have any chance of saving money (Yimprasert and
Candland 2000). Even then their living conditions are often extremely difficult. BBC
journalists visited workers from Nike supplier June Textiles in October 2000 and re-
ported that workers “can only afford to live four to a room in rat infested dormitories
without running water” (BBC 2000). They interviewed a 12 year old worker, Sun Thyda,
who was trying to save money to send back to her parents but was unable to; after rent
and food there was nothing left (BBC 2000).
In August 2000, former US professional soccer player Jim Keady and fellow US
activist Leslie Kretzu vividly illustrated how difficult it is to live on Nike wages. The
pair traveled to Tangerang in Indonesia and spent a month trying to live on the full
time wages paid to Nike workers in the area. In the process Keady lost 25 pounds and
the experience left them both hungry and exhausted. Keady and Kretzu also docu-
53
On 22 February 2000 the Jakarta Post noted that the legal minimum wage in Jakarta was only 81 percent
of the government’s estimate of what is needed to meet the subsistence needs of one person. On 11 Febru-
ary 2000 the same paper had cited the Minister of Manpower, Bomer Pasaribu, as saying that in some
provinces the legal minimum wage only covers two-thirds of the basic needs of a single worker.
Sins of Omission:
mented prices of basic items in the cheapest local market and compared them with the
wages Nike workers were receiving. They documented that a kilogram of sugar costs
the equivalent of a third of a worker’s daily basic wage and one (uncooked) chicken
costs the equivalent of a full day’s basic wage.54
A number of Nike factories have also adopted a piece-work system, so that work-
ers do not receive a full day’s pay unless they meet their work quota, and the quotas
are often extremely high. This process has been facilitated by Nike’s own policy of
setting the number of Standard Allotted Minutes (SAMs) it will allow for sewing each
part of an item of apparel. Charles Kernaghan of the National Labor Committee found
a copy of Nike’s Standard Allotted Minutes in a garbage dump outside a Nike factory
in the Dominican Republic and released them to the press in April 2001. The full
allocation for sewing a child’s sweatshirt was 6.6 minutes. The time allowed to stitch
both shoulder seams was 30.35 seconds. Kernaghan calculated that the labor cost of
the shirts, which sell in the US for $22.99, was 11 cents (Skenazy 2001).
The pressure of trying to meet quotas means that workers must often work more
than a standard day just to receive standard pay. This is from a November 1999 report
by Piya Pangsapa and Karuna Durian on a confidential interview with a worker from
Nike supplier Par Monthinee in Korat in northern Thailand:
A piece-work system has come to replace the former system of over-

time. It has made the workload heavier and more stressful since fewer
employees are now expected to carry the same workload. This kind
of subcontracting system forces workers to work without taking bath-
room breaks, snack breaks, breaks to drink water and so on which in
turn leads to many health problems for the workers such as bladder
and kidney problems and urinary tract infection. Overall physical
exhaustion from this system of production has also caused some work-
ers to actually cough up or vomit blood while they work and some
suffer from repetitive strain injuries.
(Bissell 2000, App. 1)
In September 2000 a worker from Nike supplier PT Nikomas Gemilang in Indonesia,

Julianto,55 reported that in his factory:
Workers are under constant pressure to reach quotas—which are much

too high. If they don’t reach the quota they have to stay behind until they
finish and they receive no extra pay. Workers are often punished for fail-
ing to reach quotas by being made to clean the factory and the toilets or
are humiliated by having to stand in front of other workers while they
work (Julianto 2000).
54
Refer to: www.nikewages.org/
55
Like many Indonesian Julianto only has one name.
Those Nike workers who have children find it particularly difficult to cope finan-
cially. In October 1998 the National Labor Committee arranged for a visit to the US by
a worker who had just been fired from the Formosa factory in El Salvador. Julia Pleites
reported that when she was working in the factory she could afford to buy milk for her
daughter only once every month, even though she was working 12 hours a day and
living in one tiny room with her mother and her daughter.56
The recent Global Alliance for Workers and Communities report on Nike factories
in Indonesia found that many Nike workers have to leave their children with relatives
in their villages (often hundreds of kilometers from the factory) because they cannot
afford for one of the parents to stay home and look after them and the factory does not
provide childcare (GACW 2001). This means that those workers only get to see their
children a couple of times a year, assuming that the factory allows them to take their
annual leave. Nike’s response to workers’ suggestions that the factory should provide
child care is to leave the decision up to the individual factory. To the best of the author’s
knowledge not one of Nike’s Indonesian suppliers has decided to provide it.
It may be that inability to access child care has lead to even more dire conse-
quences. The most heart-rending story in the Alliance’s Indonesia report is that of the
Nike worker who killed her newborn baby and left it in a dumpster outside the factory.
In focus groups workers also mentioned two other incidents of newborn babies being
found dead in dormitory bathrooms with the cause of death unknown. The report notes
that lack of economic means to bring up a child is a common cause of infanticide in
Indonesia. It is unsurprising that “over half” of the workers who participated in focus
groups as part of the Global Alliance study said their wages are “low and not suffi-
cient” (GACW 2001). Even though Nike itself paid for this study, the results did not
persuade the company to adopt a living wage standard.
Nike’s Justifications For Its Wage Policy

Nike has put forward a number of arguments defending its decision to reject a living
wage standard.
There is no widely accepted definition of a living wage

There is no common, agreed-upon definition of the living wage. Defi-
nitions range from complex mathematical formulas to vague philo-
sophical notions. Using a whole range of studies and inputs, Nike
will endeavor to ensure that factory workers making Nike products
earn a fair compensation package, mindful always of the need to bal-
ance creation of jobs and fair compensation.
From Nike’s website57
56
Refer to: www.nlcnet.org/nike/julia.htm
57
Refer to: nikebiz.com/labor/faq.shtml
Sins of Omission:
A wide range of formulas exist for calculating a living wage. Nike’s critics are not tied
to any particular formula, but they are committed to a process that involves consulta-
tion with Nike workers themselves, local labor rights organizations and academics
with appropriate expertise. This consultation process would determine which is the
most appropriate formula for calculating a living wage across the various regions where
Nike products are made. Nike should commit in principle to a living wage so that this
process of consultation can begin.
If Nike is indeed committed to ensuring that workers receive a “fair compensation
package,” then as a first step the company should publicly reveal what research pro-
cess it has used to determine what constitutes a fair wage in each region where its products
are produced. It should then require its suppliers to meet this fair wage standard rather than
the current manifestly inadequate legal minimum wage standard. This would be a positive
way to initiate a discussion with workers regarding whether Nike’s conception of a “fair
wage” is adequate to enable them to meet their families’ basic needs.
Nike should not use the variety of possible formulas for calculating a living wage
as a justification for maintaining wage standards that are manifestly inadequate.
Raising wages will hurt workers

Why couldn’t Nike pay 22 cents for that sweatshirt and double its workers’ wages?
[Nike spokesperson Vada] Manager contends this would lead to disaster—for the work-
ers! “If you exponentially increase labor costs, that impacts on the cost of production,
which then means the retail cost may increase, which then reduces the amount of [items]
sold”—and leads to worker layoffs (Skenazy 2001).
If raising workers’ wages to a living wage level resulted in substantial increases in
production costs and if those increases lead to increased retail costs (rather than being
absorbed by Nike as reduced profits or reduced expenditure on advertising and pro-
motion) then it is conceivable that the increased price may lead to less sales and as a
result some workers may lose their jobs.
But would increasing workers’ wages lead to a big jump in production costs? Ac-
cording to figures in Nike’s website58 the average breakdown for a Nike product that
sells for $65 looks roughly like this:
Consumer pays: $65

Retailer pays: $32.50 to Nike, and then doubles the price for retail.
Nike pays: $16.25 and then doubles the price to retailers for shipping,
insurance, duties, R&D, marketing, sales, administration and profits.
The $16.25 price paid the factory includes:

Materials: $10.75
Labor: $2.43
Overhead + Depreciation: $2.10
Factory Profit: $0.97
58
Nike workers have argued that wages paid in Nike factories can be as low as half what
they would need to meet the basic needs of a small family (Julianto 2000). So if all
labor costs in the factory were doubled and those costs were passed on to Nike, then
Nike would pay an extra $2.43 for the product. There is no obvious reason why Nike
need pass any more than this on to its retailers—paying workers better should not
increase costs for shipping, insurance and marketing. So if the retailer paid Nike $35
for the shoe and then doubled the price for retail, the $65 shoe would become a $70 shoe.
It may well be that consumers would be willing to pay the extra $5 for the assurance that
workers who made the shoe were not being exploited. Even discounting that possibility,
the number of Nike workers who lose their jobs because of reduced sales may well be
offset by the number of small traders and tradespeople who gain jobs in areas where
Nike’s products are produced: On a living wage the Nike workers who keep their jobs
would be able to afford to buy nutritious food for their families and purchase the nec-
essary items to clothe and house them adequately.
Cost increases are, however, likely to be substantially less than this. Nike’s figure
for labor costs includes all people employed at a factory, including often-substantial
wages paid to supervisors and expatriate managers. As noted above in Nike’s own
documentation on the “Standard Allotted Minutes,” the amount of time workers are
expected to spend on the production of each item of clothing reveals the production
line labor cost for each item. Using this documentation, Charles Kernaghan of the
National Labor Committee has calculated that for a sweatshirt that sells for $23 the
cost of production line labor is only 11 cents (Skenazy 2001). Doubling those labor
costs to 22 cents could increase the price of the shirt to $23.22, hardly enough to drive
consumers away, particularly when it has the added attraction of being made by a
worker paid a living wage.
Nike workers are paid wages above the legal minimum

Nike sets the cash wage for entry level workers using the standards
set by local governments or trade unions in each country. In most
cases, though, Nike’s entry level contract workers make at least 25
percent more in cash and allowances than the local governments in
each region require.
From Nike’s web site59
Nike makes this claim, but it has failed to release comprehensive factory data to back
it up.60 Independent research discussed above indicates that in many Nike factories work-
ers are only paid the relevant legal minimum—and even when they are paid above that
level their wages are still barely enough to meet the minimum physical needs of a single
59
60
The Global Alliance has released some factory wage data for the Nike factories it works with, but it
records “unverified workers’ perceptions” of basic monthly salaries, rather than properly checked wage
figures (GACW 2001). The Alliance also works in a relatively small number of Nike factories which have
agreed to part of its program, so its wage figures may not be typical of Nike factories as a whole
Sins of Omission:
adult and significantly below what would be needed to meet the minimum needs of a
small family.
Recent wage rises for Nike workers in Indonesia have been very significant
Nike has substantially improved the work and home life of its work-
ers by... raising wages in Indonesia over 70% for footwear workers
during the last 20 months
Nike Press Release, April 200061
Nike’s frequent use of this statistic is deliberately misleading. Over the course of the
relevant period (during the Asian Economic Crisis) inflation in Indonesia was sub-
stantially higher than 70 percent, and the real value of Nike workers’ wages actually
declined. Research by Dr Peter Hancock of the Center for Development Studies at
Edith Cowan University indicates that in Banjaran in West Java (an area where Nike
factories are located) the Asian Crisis caused prices of basic items such as food, cook-
ing oil and transport to increase by 100–200 percent between 1996 and 1999. During
that period the price of rice in the largest open market near Banjaran more than doubled
from 1,008 Rp per kilo to 2,320 Rp per kilo (cited in Bissell et. al. 2000). The crash in
the value of the Indonesian rupiah during the same period also meant that in US dollar
terms Indonesian wage costs fell dramatically and so the cost to Nike of the wage
increases was negligible.
Nike workers’ wages are above national GDP per capita

In countries where the per-capita income is only a few hundred dol-
lars each year, a salary of $50–60 per month is actually a good in-
come. One must always remember to judge salary and income status
by the local environment. If you don’t judge American or French liv-
ing standards in terms of rupiah or dong, it also makes little sense to
try to measure Indonesian or Vietnamese standards in dollars or
francs.
Again, it is highly misleading to compare Nike workers’ wages in Indonesia or Viet-

nam with the Gross Domestic Product per capita in those countries. Most of the pro-
duction and consumption of the great majority of Vietnamese and Indonesian citizens
still occurs outside the formal economy, either as subsistence farming or as part of the
informal economy, and hence that production and consumption is not calculated as
part of the Gross Domestic Product. Nike factories are commonly situated in over-
crowded industrial areas close to industrial transport facilities and hence living costs
61
Refer to: nikebiz.com/media/n_existing.shtml
62
are dramatically higher than they are for the bulk of the population who still live in
rural areas. A subsistence farmer living on land owned by her family or community
may make almost no income in the formal economy but still have a higher quality of
life than a Nike worker living in a shared rented room in a Jakarta slum and paying
city prices for basic food items.
While it is true that jobs in factories producing for Nike and other big corpora-
tions are sought after in many countries, that is not because those factories pay good
wages. It is because poverty in those countries is so extreme that a significant sector of
the population will take whatever work they can get, even it means having to work 60–
70 hours a week in order to meet their basic needs and save very small amounts of
money.
Nike workers in Vietnam are paid more than doctors and teachers
Nike’s presence in Vietnam is in many respects critical to the country’s
economy. The company is Vietnam’s largest private employer, and
factory jobs pay about twice that of teachers and considerably more
than that of a young doctor.
Los Angeles Times, April 18, 1999, p. C163
Nike has promoted this statistic to the media on a number of occasions. The company
claims this information is based on a comparative wage study it has conducted in
Vietnam, but has declined to publicly release that study.
The author suspects that to make this comparison Nike has included the income
Nike workers gain by working excessive overtime and has compared this with the
base wage paid to doctors and teachers employed by the Vietnamese government. It is
true that Vietnam is not a full market economy and that standard wages paid to doctors
and teachers employed by the government are extremely low. Almost invariably gov-
ernment doctors and teachers supplement their income by taking on private students and
patients, and by doing so they are able to earn wages substantially higher than those
paid in Nike factories.64
Workers receive other benefits which supplement wages

In addition to salary and meal and transportation allowances, most
footwear workers also receive overtime pay, production, attendance
and holiday bonuses, non-cash education subsidies and health care
services.
Nike press release, 14 March 200065
In some Nike contract factories workers are provided with subsidized accommoda-
63
Cited in Nike’s website: nikebiz.com/labor/prlabor.shtml
64
Source for this information is Thuyen Nguyen, coordinator of Vietnam Labor Watch.
65
Refer to: nikebiz.com/media/n_indo.shtml
Sins of Omission:
tion, transport and food. This of course should be factored into any calculation of
whether a wage package is adequate, but on its own it should not be presented as
evidence that compensation is sufficient. Nike’s critics have asked the company to
detail what benefits are available in each facility and how much they cost the factory,
so that their benefit to workers can be properly assessed (see for example Connor and
Atkinson 1996). Nike has declined to provide this information.
Independent research indicates that the benefits provided by Nike factories are
usually of very poor quality. At the Kuk Dong factory the offer of free breakfasts and
lunches is made as a way of enticing workers to the factory, to compensate for the very
low wage. Workers from the factory told researchers from the Workers Rights Consor-
tium that in light of their severe poverty they regarded the promise of free meals as a
significant part of employment (WRC 2001). The very inferior nature of food pro-
vided was a major factor in motivating workers to organize a strike at the factory in
January 2001. The WRC reported that:
On more than one occasion, workers developed rashes, fevers, and

stomach disorders after eating rancid meat or other unhealthful food
in the factory cafeteria (WRC 2001).
In those factories where accommodation is provided it also leaves much to be desired.

According to Julianto, a worker from Nike contract factory Nikomas Gemilang in In-
donesia:
Nike says accommodation is provided for workers. What they don’t

say is that workers are crammed 12 to a small room and sleep on
wooden floors without a pillow or even a mat to sleep on (Julianto 2000)
Accommodation provided by Nike factories generally involves workers living 10 to

14 to a room in small dormitories with no privacy, no personal space, no capacity to
conduct private relationships and with their “home life” extensively regulated by the
factory. Workers should certainly be free to choose to live in this manner. But Global
Exchange believes Nike workers’ wages should at least be high enough to give them
the option, should they want it, of renting a small basic room of their own with some
privacy and some control over their personal life.
Attendance bonuses are generally very low—in the order of $US1 per month in
Indonesian factories—and operate as a further form of control over workers’ lives.
Under Indonesian law female workers are eligible for two days unpaid menstrual leave
each month. Nike workers generally cannot afford medication to help them get through
a bad menstrual period, and the strenuous nature of factory work means that they will
often need to take this leave, particularly if (as is commonly the case) it is very diffi-
cult to get permission for medical leave in their factory. In a number of Nike contract
factories in Indonesia, workers who take this leave lose their attendance bonus for that
month (Connor 2000), so the attendance bonus operates as a disincentive to take leave
to which they are legally entitled.
The other benefits listed by Nike are also less positive than they sound. Produc-
tion bonuses, where they exist, operate as a further pressure to work harder and risk
injury. As discussed in the first section of this report, where educational opportunities
are made available most workers cannot afford to miss overtime income by taking
them. Factory medical clinics often operate as a further form of control over workers,
with factory doctors often putting the factory’s interests over that of the worker and
seeking to dissuade workers from taking sick leave (Connor 2000). In Indonesia and
other countries holiday bonuses are required under labor regulations and do not repre-
sent an additional benefit over and above what factories are legally obliged to pay.
While workers can raise their income significantly by working overtime, Nike’s crit-
ics do not believe that overtime wages should be included in the assessment of whether
wages are adequate as they do not believe that Nike workers should have to work 60–
70 hours per week in order to meet their basic needs.
Payment of a living wage would be far superior to these various “benefits” as it
would give workers the freedom to make their own meals, choose to live in their own
room, choose to see a doctor who is independent from factory control, choose which basic
educational opportunities they would like to pursue and take leave to which they are
legally entitled.
Legal minimum wages are adequate for entry level jobs

Steve Cannane:
One of the things that comes out of the [Global Alliance] report is
that the workers actually want more money...their pay still isn’t suffi-
cient to meet the growing cost of living.
Maria Eitel:
Yeah, what’s important to analyze is what do we mean in terms of
“meet the needs”, and these are entry level jobs, much like entry
level jobs in other economies, that are wages that support an indi-
vidual, they’re not structured to be wages that support an extended
family. So it’s depends on how you look at it and how you analyze
that wage...
Nike’s Maria Eitel interviewed on ABC radio 2jjj66
There is nothing intrinsic about factory work that means it should not be performed by
adults with some experience in the labor market and that they shouldn’t be paid enough
to provide for a small family. In the past, when much more clothing and footwear
production occurred in unionized factories in industrialized countries, workers were com-
monly paid enough to meet the basic needs of their children. Given that the relative
cost of living is much lower in countries where the bulk of Nike’s production now
takes place, it is hard to understand why Nike cannot now afford to ensure that a living
wage is paid in those factories.
66
Refer to: www.abc.net.au/triplej/morning/features/s251857.htm
Sins of Omission:
Experienced Nike workers are paid substantially more than entry level
workers
In the countries where we have studied wage issues in detail, the
typical profile is as follows: approximately 35% of workers are mini-
mum wage earners, usually in their first year of employment. The
remaining 65% of the workforce earns substantially more than mini-
mum wage. With other bonus incentives and related cash allowances
added on, the typical minimum wage earner is actually taking home,
in cash between 15% and 40% more than the minimum wage, before
overtime is calculated.
Again, Nike makes this claim without providing evidence for it. Independent research
indicates that lack of seniority pay is a major grievance for Nike workers. In Decem-
ber 1999 the Urban Community Mission released a report based on a survey of 4,000
workers from 13 Nike contract factories in Indonesia. The survey indicated that the
basic monthly wage of the great majority (84 percent) of the shoe workers interviewed
was concentrated in a narrow band between 251.000 ($US25) and 300.000 rupiah
($US30) per month, even though the length of service of workers who earned wages
within that band varied from one month to fourteen years (UCM and PFC 1999)
Research shows that Nike wages are adequate

Continued research into the well-being of the people making our prod-
ucts reveals that minimum wage earners are usually able to meet their
basic needs as well as to assist in supporting other family members
or building modest savings.
Again, Nike makes this claim but provides no evidence to support it. If anything, what
little information Nike has recently released on the issue suggests the opposite—that
workers trying to survive on a minimum wage alone (i.e. without overtime) are unable
to support anyone or save any money. The recent Global Alliance report on Indonesia
reported that “more than half” of the focus group participants indicated that their be-
fore-overtime wage was too low to meet their living costs (GAWC 2001).
Even with overtime pay included, most workers struggle to have any discretion-
ary income. The eleven PricewaterhouseCoopers reports that Nike has released indi-
cate that PwC auditors ask workers what percentage of their salary (including over-
time pay) they are able to save or spend supporting others.69 For the eight factory
reports from Central and South America, the percentages of workers interviewed who
67
68
Refer nikebiz.com/labor/faq.shtml
69
These reports were released as part of Nike’s Transparency 101 program and can be found on Nike’s
website: www.nikebiz.com
spend all of their income on their own needs and cannot afford to use any of it either as
savings or to support others are: 66%, 90%, 56%, 79%, not listed, 90%, 52% and 48%.
In the seven factories reporting, an average of 68 percent of the workers—more than
two-thirds of them—said they were unable to save or support others. If Nike genu-
inely believes that these wages are adequate, then it is not reading its own research.
4. Working Hours
As with wages, Nike’s code of conduct has a weak standard in terms of working hours.
Nike requires that compulsory work hours be no more than 60 per week, or less if
local law requires it.70
Although wages are so low that Nike workers will frequently choose to work more
than 60 hours just to make ends meet, factory work is arduous and Global Exchange
and other rights groups do not believe that factory owners should have the right to
impose such a long working week. Workers should have the flexibility to refuse over-
time if other issues in their lives mean that they need to do so.
One of the questions in the 1999 Urban Community Mission study asked Indone-
sian Nike workers what their major complaint was with conditions in their factory.
Being compelled to work excessive overtime was overwhelmingly the issue which the
largest number of Nike workers identified—1,555 of the 4,000 workers interviewed
gave it as their most important complaint (UCM and PFC 1999).
Independent research into conditions in Nike factories has found considerable evi-
dence of workers being required to work more than the 60-hour limit. In March 2000
the author interviewed workers from three Nike contract factories in Indonesia, PT
Nikomas Gemilang, PT ADIS71 and a third factory which workers asked not be named
for fear of reprisals. At the Nikomas Gemilang factory workers were frequently being
required to work more than 70 hours per week. In some sections they were working
from 7:00 a.m. until 10:00 p.m. Monday to Friday with only two breaks and then
working half days on Saturdays and also on Sundays. Workers who refused overtime
were humiliated in front of other workers:
Nikomas Worker (through interpreter)—Workers [are] often required

to work more than 70 hours per week … If female workers refuse they
are generally shouted at or scolded. In some cases they have been
forced to stand in front of all the other workers for a day to humiliate
them, or can be forced to wash the toilets (Connor 2000).
Supervisors were also punished by being made to stand all day in front of workers if
their work group did not reach its targets.
Workers from the two other Indonesian Nike factories investigated in March 2000
reported that if they refuse overtime, they receive a warning letter, and if they receive
70
This commitment is part of the Fair Labor Association Code which Nike has signed (FLA 1999).
71
Now known as PT ADF.
Sins of Omission:
three warning letters then they are dismissed. This system of three warning letters and
then dismissal was also operating in the June Textiles factory in Cambodia when it
was investigated by BBC journalists in mid-2000. The journalists spoke to workers
who were being required to work from 6:15 a.m. in the morning until 10pm at night
and were not allowed to take Sundays off (BBC 2000).
In October 1998 a recently fired Nike worker from the Formosa factory in El
Salvador, Julia Pleites, reported that workers at Formosa were required to work from 7
a.m. in the morning until 6:30 p.m. or 7 p.m. at night almost every day and were
denied the entire day’s pay if they refused to work overtime (NLC 1998)
Leave
In addition to being forced to work overtime, Nike workers frequently report that their
annual leave is refused, reduced or replaced with cash without the worker having any
choice in the matter. In all three Indonesian Nike contract factories investigated by the
author in March 2000, workers were allowed to take Moslem religious holidays but it
was very difficult for them to take any other annual leave, even though they were
theoretically entitled to 12 days annual leave each year. Line supervisors put a great
deal of pressure on workers not to take leave on days other than religious holidays.
This is because supervisors are required to meet particular work targets and no allow-
ances are made if one of their workers takes leave (Connor 2000). In the recently
released Global Alliance study on Indonesia, Nike workers reported similar issues in
seven of the nine factories investigated (GAWC 2001, p. 25). There have also been
reports of Nike contract factories making it difficult for workers to take maternity
leave and sick leave (See WRC 2001, Yimprasert and Candland 2000).
In short, Nike’s monitoring system is failing to discover widespread flouting of its
60-hour limit on compulsory working hours. Until this monitoring system improves
and wages are raised to a decent level, workers in many Nike factories will continue to
be virtual slaves with no time to do anything but factory work.
5. Health and Safety

Health and Safety is one of the very few areas where independent researchers have
found any significant improvements in Nike factory conditions. The company has made
important progress in reducing the use of toxic chemicals in sportshoe production and
has participated in some useful training programs.
Yimprasert and Candland’s report on sportswear factories in Thailand producing
for Nike, Reebok and Adidas includes the following passage:
One place where corporate codes of conduct have had a positive im-
pact is in the area of occupation health and safety. The transnational
corporations are particularly serious about fire safety. With every
visit human rights coordinators must check fire exit and extinguish-
ers (Yimprasert and Candland 2000).
As noted earlier, when Professor O’Rourke and Garret Brown were allowed to visit
the Tae Kwang Vina factory in Vietnam they noted important health and safety im-
provements, although exposure to dangerous chemicals was still illegally high and
excessive noise and heat, poor ergonomics and misuse of protective equipment con-
tinued to be issues at the factory (O’Rourke and Brown 1999).
Certainly that information which Nike has released regarding the PwC monitor-
ing visits and the SHAPE assessments conducted by Nike staff suggest that health and
safety is by far the biggest priority of these monitoring programs.
Despite this focus, Nike’s failure to establish a transparent and rigorous monitor-
ing system involving unannounced visits by health and safety experts means that vari-
ous serious safety issues continue to go unaddressed. On those few occasions when
independent experts have been allowed access to Nike factories, they have always found
evidence of serious hazards. As noted earlier in this report (in the section analyzing
Nike’s promise to improve factory air quality) examples of this include Professor
O’Rourke’s assessment of conditions in a Nike contract garment factory just outside
of Jakarta in Indonesia on 1 July 2000 (O’Rourke 2000) and Verite’s assessment of
health and safety conditions at the Kuk Dong factory in Mexico in 2001 (Verite 2001).
Yimprasert and Candland found similar issues with inadequate safety equipment
and exposure to dangerous chemicals in the Thai sportswear factories they investi-
gated. They concluded:
Many manufacturers still seem to think that it is acceptable for work-

ers in stitching lines to have their hands cut by sewing needles, for
workers in the pressing line to be struck by heavy machines, and
workers in assembly lines to have solvent spit into their eyes. Every day,
workers complain of rashes, headaches, stomachaches, and nausea.
Medical check-ups attract queues of hundreds of workers. Serious
accidents are also common. Most management turns a blind eye as
they do with many other such occupational health and safety issues
(Yimprasert and Candland 2000).
When Julianto,72 a recently fired worker from the Nikomas Gemilang factory in In-
donesia, visited Australia in September 2000 he reported that serious accidents among the
factory’s 23,000 employees were very common. Almost every week at least one worker
loses a part of his or her finger in the cutting machines or the hot press (Julianto 2000).
Factory Doctors Who Try to Persuade You to Keep Working When

You Are Sick
Nike has frequently argued that access to free health care is one of the positive aspects
of working in a Nike contract factory. Nike’s critics argue that, in fact, where factory
clinics are in place, one of their primary functions is to reinforce factory control over
72
Like many Indonesians he only has one name.
Sins of Omission:
workers by preventing them from taking sick leave. Even the recent Nike-funded re-
port by the Global Alliance on Nike contract factories in Indonesia recorded that between
60 and 90 percent of focus group respondents said it was very difficult to obtain sick leave
or access to medical care and that often a worker must collapse or be severely ill before
they are allowed such leave (GAWC 2001, p. 43). More than half of the workers in those
groups reported that the factory clinics “stock only the cheapest generic medicines
and tend to distribute the same drug regardless of the illness” (GAWC 2001, p. 44).
A worker from the Kuk Dong factory described her attitude to the factory clinic in
a recent interview:
My feet are getting varicose, and I have a strong pain in my hips. When
I felt sick, I used to go to see the nurse, but now I don’t. There is another
nurse now, and I saw the way she treated a co-worker who was very sick.
My supervisor asked me: ‘Bring Nancy to the nursery, because she feels
terrible.’ So I brought her, and the nurse didn’t believe she was sick. She
(the nurse) told her: ‘You are always sick. Am I going to believe it?’ So
the nurse didn’t help her, and my co-worker had a fever for three days
(quoted in Behind the Label 2001).
When the author interviewed workers from the PT Nikomas Gemilang and PT ADIS
factories in March 2000 they described how management at both factories were dis-
couraging workers from taking menstrual leave, which they are legally entitled to under
Indonesian law. In both factories workers were being required to subject themselves to
humiliating physical examinations in the factory clinic in order to prove they were men-
struating before the factory would allow them to take this leave. This is from the audio
tape of an interview with a female worker from the PT Nikomas Gemilang factory:
Tim Connor: What happens if workers try to take menstruation leave?
Worker (through interpreter): Intimidation. The workers can’t just

leave like that, they have to go to the clinic to get proof. The clinic is
already in Nikomas. If they don’t prove they can’t take.
Connor: So it’s quite a humiliating process?
Worker (through interpreter): Yes.
Connor: If they do prove it can they take the leave?
Worker (through interpreter): Yes. The workers have to take off their pants.
Connor: Are they male or female doctors?
Worker (through interpreter): Some women, some men.

The issue of menstrual leave in its Indonesian supplier factories was first raised with
Nike by the Interfaith Center for Corporate Responsibility in March 1998 (ICCR 1998,
pp. 9, 22). Nike had not addressed the issue by March 2000, and the recent report by
the Global Alliance for Workers and Communities indicated that it is yet to bring this
practice to an end (Nike 2001e)
Psychological Stress from Pressured Workplaces Characterized by

Harassment and Intimidation
Another significant health and safety issue that workers face is the considerable stress
they suffer from spending large amounts of time in high pressure and frequently abu-
sive work environments.
The Urban Community Mission survey of 4,000 Nike Indonesian workers in 1999
confirmed that this was a major issue when 57 percent of Nike sportshoe workers and
59 percent of Nike clothing workers reported that they had seen workers being shouted
at or subject to cruel treatment by their supervisors. The punishments include wage
deductions, having their ears pulled, being pinched or slapped on the buttock, being
forced to run around the factory or having to stand for hours in factory yards (being
“dried in the sun”). The verbal abuse included the Indonesian equivalent of phrases
like “Fuck You!” “You Whore!,” and “You Dog!” (UCM and PFC 1999).
When the UCM survey was released Nike tried to discredit it rather than address
the issues it raised. But two years later a Nike funded study by the Global Alliance for
Workers and Communities came up with very similar findings. That report indicated
that 57 percent of the Indonesian Nike workers interviewed had seen fellow workers
being subject to verbal abuse by their supervisors and 30.2 percent of workers had
experienced it directly. In addition, 25.7 percent of workers had observed other work-
ers receiving inappropriate sexual comments and 15.8 percent had observed inappro-
priate sexual touching. 13.7 percent had seen other workers being physically abused
by their supervisors. Two workers in each of two different factories reported that work-
ers’ job security or chance of promotion can be related to sexual favors (GAWC 2001).
During the author’s March 2000 field research in Indonesia workers from PT
Nikomas Gemilang indicated that every day workers at the factory, particularly the
female workers, were shouted at by supervisors and were called “dog”, “monkey” or
“pig”. This verbal abuse was particularly extreme when high quota targets had to be
met and there was pressure on supervisors to make workers produce quickly. Verbal
abuse was much less common in the other two factories investigated.
According to a number of different sources, verbal abuse is also common in the
Formosa factory that was until recently a Nike supplier in El Salvador. According to
Julia Pleites who worked in the factory:
Everything is by piece rate. The supervisors scream at you to go faster. If

they think you are working too slowly, they come up to you and smash
your table with their hand, yelling at you to work faster (NLC 1998).
Sins of Omission:
The independent monitoring organization Verite conducted an audit of the Formosa
factory in El Salvador which confirmed that workers were being taken aside and shouted
at by supervisors if they worked too slowly (Verite 1999).
In response to the controversy over conditions at the Kuk Dong factory in 2001,
Nike paid Verite to investigate conditions at that factory. Twenty one of the 29 work-
ers interviewed “reported incidents of abuse and harassment at the factory.” Examples
of the harassment included a “sewing supervisor [who] slaps the female workers and
pulls their hair” (Verite 2001).
As mentioned previously, the student Nike sent to observe its monitoring in Indo-
nesia and Bangladesh, Shubha Chakravarty, reported that in one Bangladeshi factory
managers often screamed at workers who made mistakes or arrived late at work and
that managers hit and kicked workers (Chakravarty 2000, p. 10).
One of the young Nike workers from the June Textiles Factory interviewed by the
BBC in 2000 reported that when she refused to do overtime, her supervisor swore at
her and pulled her hair (BBC 2000).
These and numerous other independent reports suggest that Nike contract facto-
ries are not healthy work environments. Unless and until Nike adopts a rigorous and
effective monitoring program, workers will continue to be subject to harassment and
abuse and suffer from exposure to dangerous chemicals and other serious hazards.
6. Freedom to Organize
The right to freedom of association is enshrined in article 23 of the Universal Declara-
tion of Human Rights. Global Exchange believes that this right is fundamental and
inalienable. If all Nike workers were allowed to select their own representatives and
negotiate collectively, then they would have more power to resist abusive and humili-
ating treatment and also to raise their wages.
In 1997 Nike made a public commitment to respect this right.73 This section analyzes
Nike’s response to independent reports of union repression in its suppliers’ factories since
1998. It raises serious doubts as to whether this commitment was made in good faith.
Nike in China—Total Repression of Independent Unions

The most significant country in this respect is China, which has an authoritarian po-
litical system that allows no civil society organizations to exist without government
permission (AI 2000). Any unions independent of the official Communist Party union
are implicitly outlawed and attempts at genuine union organizing are harshly repressed.
Under the National Security Law, workers who attempt to form unions can be detained
and imprisoned or sent to forced labor camps.
73
This commitment is in the Apparel Industry Partnership Workplace Code of Conduct, which Nike signed
in April 1997 (AIP 1997). Nike’s code of conduct also refers to this right. A previous section of this report
concluded that the company’s factory monitoring program does not represent a serious effort to live up to
this commitment.
In February 2001 China ratified the International Covenant on Economic, Social and
Cultural Rights (ICESCR), but the official Xinhua news agency made it clear that this step
would in no way change China’s existing labor laws. Amnesty International described this
restriction on the right to form trade unions as “very disappointing” and noted that:
Many individuals are currently imprisoned solely for exercising and

promoting the economic, social and cultural rights enshrined in the
covenant. These include the right to organize free trade unions, the
right to strike, or simply for speaking out and organizing around live-
lihood issues. Some have been sent to re-education through labor
camps or forcibly detained in psychiatric hospitals (AI 2001).
Amnesty International and other non-government organizations have documented nu-

merous cases where workers in China have been subject to imprisonment and torture
for independent union activity and it is likely that these cases represent only a fraction
of the Chinese workers who have suffered in this way ( See AI 2001, AI 1997a;
Kernaghan 1998, pp. 83–85; ICFTU 1998a; ICFTU 1999).
With such blanket repression of union rights in China, companies like Nike can
source production in the country with confidence that there will be minimal interrup-
tion to orders as a result of industrial action. Nike has ordering relationships with
some 59 Chinese factories (Nike Inc. 2000), including the giant Yue Yuen shoe factory
complex in Dongguan, which employs more than 40,000 workers. It has been esti-
mated that China accounts for 40 percent of the production of Nike sportshoes (UNITE
et. al. 2000). In other countries Nike workers are frequently warned by factory owners
that if they engage in industrial action, their factory will lose orders and Nike will
move that production to China (Connor 2000).
There has been a history of union rights being suppressed in Chinese factories
producing for Nike. A 1997 report by the Hong Kong Christian Industrial Committee
and the Asia Monitor Resource Center indicated that those factories either had no
union or else had a branch of the national communist party union which was con-
trolled by factory management. In the Wellco factory in Dongguan there were separate
wildcat strikes in 1997 by workers in the assembly production department and the
quality control department and the factory responded by instantly firing all the work-
ers who went on strike (AMRC and HKCIC 1997).
With so much of the company’s production coming from China, Nike has a direct
interest in minimizing political interference in trade with the country. Nike has been
actively involved in lobbying to ensure that the US government does not use trade
policy to pressure China to respect workers’ rights. During the Clinton administration’s
first term in office Nike was part of a coalition of transnational corporations that suc-
cessfully dissuaded Clinton from acting on his election promise to link trade with
China to human rights improvements (CMD 1997). In 2000 Nike executives made
donations in support of David Dreier, the Republican whip involved in the successful
push for China to be given Permanent Normal Trade Relations (UNITE et al. 2000).
Sins of Omission:
Despite repeated requests from labor rights groups, Nike refuses to make public
statements calling on the Chinese Government to allow workers to form unions in
Nike contract factories. According to Maria Eitel, Nike’s Vice-President for Corporate
Responsibility, in countries like China where it is illegal for workers to organize, Nike
instead seeks to establish “parallel means of workers expressing views and concerns
to management and means by which grievances can be addressed...[including] worker-
management committees [and] worker-management periodic open meetings” (cited in
Connor 2000a). Nike refuses to indicate either in which factories these committees are
supposed to be operating or whether workers’ representatives on these committees are
elected by workers themselves.
In April 2000 the National Labor Committee released reports on a number of fac-
tories producing for Nike, including the Sewon factory in Jiaozhou City and the Wei
Li Textile factory74 in Guangdong Province. The report noted that there is no union at
Sewon and that workers who attempted to organize one would put themselves in dan-
ger of arrest and imprisonment without trial. There was a ‘workers’ committee’ at Wei
Li but the ‘workers’ representatives’ on the committee were selected by factory man-
agement and not by workers themselves (NLC 2000). In its reply to the report Nike
indicated that “Wei Li Textile and the Sewon factory are current partners that we are
proud to work with” (Nike Inc. 2000a). No response was given to allegations that the
“workers committee” at Wei Li is controlled by management and that workers’ right to
freedom of association is not respected at Sewon nor at any other Chinese factories
producing for Nike.
For Chinese workers making Nike clothes and shoes, the company’s stated com-
mitment to protect their freedom to associate has proved meaningless. Instead the com-
pany has actively opposed attempts to pressure the Chinese government to allow this
right to be exercised.
Nike in Indonesia—Union Organizers Face Harassment,

Discrimination and Violent Intimidation
Nike has taken one very positive step to support the right to freedom of association in
Indonesia. In September 1998 Haryanto (like many Indonesians he only has one name)
was fired from the PT Lintas factory for his involvement in independent union activ-
ity. In October 1999 Campaign for Labor Rights (a NGO based in the US) arranged for
Haryanto to tour the US to speak at universities about conditions in his factory. While
he was in the US his mother received an anonymous phone call warning her that if her
son valued his life he should stop criticizing the factory. On his return, however, Nike
arranged for him to return to work at PT Lintas and has ensured that he subsequently
did not receive any further discrimination or harassment for his union involvement. At
the time rights groups expressed the hope that this would be a turning point in Nike’s
attitude toward union rights.
Unfortunately, they were overly optimistic. In September 2000 Oxfam-Commu-
74
Also known as the WDI Supercap factory.
nity Aid Abroad released a report documenting extensive repression of union rights in
Nike contract factories in Indonesia75 (Connor 2000). Based on taped interviews with
union organizers at the PT Nikomas Gemilang factory in Serang and two other Nike
contract factories, the report documented how attempts by workers to set up new inde-
pendent unions were being vigorously repressed. Workers involved in new unions re-
ported receiving death threats and other threats of violence, being subject to more
scrutiny and harassment than other workers and being discriminated against in promo-
tion and job opportunities. They believed that most workers would have been inter-
ested in joining independent unions were it not for this harassment and intimidation.
Some workers reported that they had been called away for private interrogation by
factory managers and Indonesian soldiers, with warnings that if they don’t stop orga-
nizing workers and publicizing conditions in their factory they would be attacked by
‘Preman’, the Indonesian term for hired hit men. All of the workers interviewed took
these threats seriously and one worker indicated that he was afraid for his life (Connor
2000).
Oxfam-Community Aid Abroad also arranged for a worker from the Nikomas
Gemilang factory to visit Australia in September 2000. Mr. Julianto (like many Indo-
nesians he only has one name) had helped to organize a workers demonstration at the
factory in December 1999, calling for better pay and conditions. He was subsequently
subject to such extreme intimidation and harassment that he was unable to continue
working at the factory. In his own words:
After the demonstration ended most of the workers who organized it

were called by the company and were threatened that if they contin-
ued to organize workers they would have to resign or else they would
be attacked by hired thugs. I was called away from my work and taken
into an office and there were two managers and a soldier from the
Indonesian army there. They were very angry. They shouted at me
and slammed the table. They told me that we had to disband the work-
ers committee. I told them that we did not want to. And then they said
if you organize another demonstration we will take you to the police
or you will be visited by hired thugs. The same thing happened to my
friends (Julianto 2000).
On the day this report was released (September 4, 2001) Nike announced that it would
investigate all of the allegations. The company subsequently ignored inquiries from
Oxfam-Community Aid Abroad as to whether this promised investigation had taken
place and, if so, what it had discovered.
A recent incident demonstrates that Indonesian Nike workers have good reason to
take threats of violence seriously. Rakhmat Suryadi is a worker and union official
from the PT Nikomas Gemilang factory. According to local Indonesian NGOs, on 21
March 2001 as he made his way to the factory gates to begin work, Mr. Suryadi was
75
I was the author of that report.
Sins of Omission:
attacked from behind by persons unknown and suffered machete wounds to his head
and legs. He required 18 stitches in the back of his head and was hospitalized for a
week before he was able to return home. Those involved in the attack said nothing to
him and made no attempt to rob him (Forum Anti Kekerasan 2001).
The Urban Community Mission (a local Indonesian NGO) reports that Mr. Suryadi
had been very active in advocating for workers’ rights. He played an important role in
recent campaigns to persuade the government to increase the legal minimum wage in
West Java. His union work also involves representing workers at other factories as
well as PT Nikomas, and early in 2001 he had been involved in representing workers
in a dispute at the nearby PT Spindo Mills factory (Forum Anti Kekerasan 2001).
On 23 February 2001, he was quoted in the Indonesian newspaper Kompas de-
scribing labor abuses in Nike contract factories. Commenting on the Global Alliance
for Workers and Communities’ report into conditions in those factories (which had
just been released), he told the Kompas journalist that it was normal for obscene words
to be hurled at Nike workers by their supervisors and that there is also sexual harass-
ment, toward both male and female workers. He claimed that the factory owners did
not care about the fate of their workers because they only placed importance on maxi-
mizing production. He urged workers to be brave enough to demand their rights.
After investigating the attack on Mr. Suryadi, police have arrested five people
who are suspected to have been involved.
At this stage there is no evidence that Nike’s supplier PT Nikomas had anything to
do with the assault. Nonetheless, in the context of a history of violent threats by man-
agers against unionists at Nikomas, this attack can only increase Nikomas’ workers
fear that getting involved in union activity could put them in danger.
Nike staff should directly communicate to all workers at Nikomas and other Nike
factories the company’s commitment to ensuring that they are free to organize unions
without fear of retribution. Nike should work with local labor rights NGOs and unions
to ensure that those workers understand their union rights. The company should also
establish a confidential procedure for workers to notify independent organizations if
they receive any threats or discrimination for union activity. Workers producing Nike
products should be able to freely organize unions for better conditions in their facto-
ries without fear that doing so may result in them being attacked by hired gangs with
machetes.
Nike in Thailand—Union Organizers Dismissed and Blacklisted

Until relatively recently, very little was known about working conditions in Nike con-
tract sportshoe factories in Thailand. In December 2000 this was rectified by the comple-
tion of a major new report on the Thai sportshoe sector by Junya Yimprasert and Chris-
topher Candland.76 Until now their report has not been promoted to or covered by the
international media.
76
Junya is the coordinator of the Thai Labor Campaign and Christopher is Assistant Professor of the
Department of Political Science at Wellesley College.
Sportshoe factories
Two business conglomerates own Nike contract factories in Thailand—the Saha Union
Group (which owns Union Footwear, Union Shoes, and Unisole) and the Sahapathanapibul
Group (which owns the Bangkok Rubber Group and Pan Asia Footwear). According to
Yimprasert and Candland, there are no unions in the entire Thai sportshoe sector be-
cause factory owners have crushed all attempts by workers to organize:
The Saha Union group is infamous in Thailand for its virulent anti-
union activities. Several groups of workers in the Saha Union group
who attempted to organize a union were dismissed as soon as the
company learned of their intention to form unions. ...
Many workers in the footwear industry become terribly frightened when asked about
union activities. In one interview with Bangkok Rubber workers, workers pretended
that they did not know what a union was, and became afraid to talk to us. Later, they
told us of their experience of seeing fellow workers dismissed and blacklisted for
attempting to organize a union (Yimprasert and Candland 2000).
Clothing factories
There is also considerable repression of union rights by Nike clothing contractors in
Thailand, although unions do exist in some of these factories. In 2000 a film crew
from RTBF, the Belgian National Broadcaster, recorded a documentary on codes of
conduct in Thailand (Devick and Bruyns 2000). They interviewed workers from a
number of factories producing apparel for Nike.
At the Nice Apparel factory in Bangkok which produces for Nike, Adidas, Reebok
and Puma, Nike personnel told the journalists that they should not ask the workers
anything about unions as it was a “sensitive issue”, and will “upset the management of
the factory”. When they interviewed the manager of the factory he told them that “these
associations have no impact on the company’s strategy”, and that he doesn’t negotiate
with them (cited in Devick and Bruyns 2000).
A woman who worked at the De-Luxe Company, which produces for Nike, Adidas
and Reebok, was also interviewed:
Worker — If we don’t do overtime, then we get into trouble. We must

go and see the manager. And if we really can’t do it, then we’re sacked.
Interviewer — Is it allowed to form trade unions, to organize meet-

ings?
Worker — No, it isn’t. We are already afraid for our job when we say
what we think.
(interview in Devick and Bruyns 2000).
At another Nike supplier, Lian Thai, there is a trade union, but the factory manage-
Sins of Omission:
ment instructed the union not to speak to the documentary makers. Esther De Haan of
the Clean Clothes Campaign in the Netherlands interviewed union officials at Lian
Thai in November 1999. They described to her very serious labor issues, including
that at times workers were required to work right through the night.77 They did say that
it had become easier for them to operate the union at the factory, but that there were
still considerable difficulties. The management evidently threatens that if the union
takes industrial action they will cut overtime altogether and sub-contract out any extra
production. Wages at the factory are very low and hence workers rely on working
overtime to make something of a living. This leaves very little room for the union to
negotiate.
Yimprasert and Candland report that one of the union officials has been driven
from the factory in suspicious circumstances:
The company accused the union treasurer of stealing a T-shirt from

the company, reported her to the police, and had her imprisoned. The
union collected 100,000 baht from workers for her bail. The case is
still pending. The chairman of the union reported that the treasurer,
who has worked in the position for several years, has an impeccable
reputation. Usually the company fines or fires alleged thieves, but
does not bring these cases to court. Lian Thai union committee mem-
bers believe that the company wants to show its power over the union.
The company knows that the union’s resources can be easily exhausted
in a legal defense (Yimprasert and Candland 2000).
The Lian Thai case demonstrates that even when workers are able to establish their
own union, their employer can use a range of techniques to undermine legal union
activity. Nike should ensure that the case of the union treasurer at Lian Thai is inves-
tigated by a credible and independent monitor and that she is reinstated if the resulting
report determines that she was dealt with unfairly.
In the case of the Par Garment factory in Rangsit, Nike used the classic technique
for avoiding a unionized workforce—move to another factory. Nike was a customer at
the factory at Rangsit up until 1997. There was a union at the factory but its freedom to
operate was severely hampered. A Par Garment worker described the situation to the
journalists from RTBF:
Worker: It was difficult; when we met, there were cameras watching us.
They prevented us from communicating with each other, they didn’t
let us talk together, they put us in different groups at work, they for-
bade us to talk.
(interview with Par Garment worker in Devick and Bruyns 2000).
Late in 1997 the Par Garment company attempted to crush the factory union by clos-
77
See www.caa.org.au/campaigns/nike/appendix_15_March_2000.html#Appendix3
ing down the factory at Rangsit and moving the production to other Par Garment fac-
tories. This lead to a sit-in protest by workers at the factory to prevent the factory from
being sold. In April 1998 the Thai government stepped in and mediated a settlement
and the factory reopened, but shortly afterwards all the union officials who organized
the protest were fired and a number were blacklisted and were unable to get jobs in
other factories. One of the factories which refused to employ them was the De-Luxe
Company discussed above.
When the factory at Rangsit re-opened Nike did not resume its orders. According
to Young Christian Workers (a local Thai NGO), management of the factory repeat-
edly told the workers that Nike did this because the union members tainted the image
of Par Garment to the press. This reasoning was then used to hold the union members
responsible for workers being laid off following the loss of the Nike contract.
Meanwhile Nike continued to order from Par Garment subsidiaries, including the
Par Monthinee factory in Nakorn Rachasima (Korat). Those factories were not union-
ized and conditions were extremely poor.78
In March 2000 a number of labor rights groups wrote to Nike alleging that the
company had failed to live up to its code of conduct in the Par Garment case. They
urged Nike to restore its ordering relationship with the factory at Rangsit and to work
to ensure that all workers in the factory are freely allowed to engage in union activities
(Bissell et al. 2000). Nike ignored this letter.
In May 2000 Junya Yimprasert interviewed workers from the factory at Rangsit
and learned that an order for Nike apparel had arrived that week, subcontracted from
another factory. Par Garment, like many clothing manufacturers in Thailand, both sub-
contracts extensively and takes orders from other factories in order to give it greater
flexibility. Yimprasert reported that conditions at the factory at Rangsit continue to be
extremely poor:
The Par Garment workers remaining in the factory have no job secu-
rity since they are working under constant fear of uncertainty, not
knowing when they will be laid off. They also work under deterio-
rated conditions in a poor working environment with cracked walls,
no fire alarm system, no emergency lights, locked emergency exits,
an electricity controller that occasionally explodes, dirty toilets, and
the constant stench of animals near the factory area that permeates
into the work area. Being confined inside a solid block building with
poor ventilation makes the work environment unbearably hot, dusty
and stuffy. The factory does not even provide clean and cold drinking
water to the workers (Yimprasert and Kaewleklai 2000).
The Par Garment episode illustrates Nike’s failure to respect workers’ right to form
independent unions. Companies like Nike should not cut orders from garment facto-
ries when workers try to stand up for their rights. This punishes those workers and sends
78
See www.caa.org.au/campaigns/nike/appendix_15_March_2000.html#Appendix1
Sins of Omission:
a clear message to workers in other factories that trying to form a union will lead to a
loss of orders and will put their jobs in danger. Nike should re-establish a proper busi-
ness relationship with the Par Garment company and ensure that workers’ right to
organize is respected.
Nike and the Formosa Factory in El Salvador—Any Worker Who

Tries to Form a Union is Dismissed
Sweatshop conditions at the Formosa factory, which produces for both Nike and Adidas,
first came to public attention in mid-1998 when a European television station did a
story exposing labor abuses in the factory (Carisch et. al. 1998). In June 1999 Adidas
responded to lobbying from European organizations involved in the Clean Clothes
Campaign and employed the monitoring organization Verite to conduct an audit at
Formosa. The audit found evidence of systematic humiliation and verbal abuse of
workers by factory supervisors, as well as instances of physical and sexual harass-
ment. Verite also found that workers’ right to organize was strongly repressed in the
factory and that any worker who tried to form a union was dismissed (Verite 1999).
In September 1999 a number of labor rights organizations wrote to Nike asking
the company to “directly communicate to the workers at the Formosa factory Nike’s
unequivocal support for their right to organize and commit your company to doing all
it can to protect them from discrimination and dismissal for trying to organize a union.”
In his reply Nike’s Director of Labor Practices Dusty Kidd ignored this request, say-
ing only that “we have a copy of the report by Verite, which indicates there are con-
tinuing issues to deal with” and that “Nike is working with the management of that
factory to make it a better workplace.”79 Kidd also seized on an earlier claim by the
National Labor Committee that Nike had cut orders from Formosa. This claim had
been based on evidence from workers at Formosa that they had stopped producing
Nike gear, but this turned out to be a seasonal fluctuation in orders rather than a com-
plete end to the ordering relationship. Kidd wrote:
Nike would like the record corrected here: Nike has been a customer
of Formosa for a number of years, has not left that factory, and has
no intention of doing so. We will continue to work with its manage-
ment to make that workplace better, including frequent on-site visits
by our labor practices manager for Latin America, who is a native
Spanish speaker. It is critical we work to improve factories rather
than leave them.80
Labor rights organizations wrote to Nike again in March 2000 and repeated their re-
quest that Nike communicate directly to workers at Formosa that the company will protect
them if they try to organize a union (Bissell et al. 2000). Nike ignored this letter.
79
See www.nikeBiz.com/labor/cleancl_let.shtml
80
See www.nikeBiz.com/labor/cleancl_let.shtml
In February and May 2000, Christian Initiative Romero (a non-government orga-

nization which is a member of the German Clean Clothes Campaign) commissioned a
number of ex-maquila workers to interview workers at Formosa. According to that
research, unions were still not permitted. Workers were also still given pregnancy tests
in their first few weeks of employment and if they tested positive were not given
contracts.
In January 2001 Christian Initiative Romero again investigated conditions in
Formosa. The factory was still producing for Nike and conditions were still extremely
poor. Workers were still being forced to work overtime in peak periods and were shouted
at by supervisors when they worked too slowly. Both access to drinking water and
access to factory toilets during work hours was being strictly controlled.81
In April 2001 Christian Initiative Romero received word from contacts in El Sal-
vador that Nike had quit the factory the month before. As a result, 40 percent of the
work force at Formosa lost their jobs just before Easter. Many received as little as 50
percent of the redundancy payments to which they were legally entitled under Salva-
doran law.82
The Formosa case again demonstrates Nike’s failure to match its rhetoric with
transparent action to protect workers’ rights.
Nike and Harassment of Union Officials at the Natural Garment

Factory in Cambodia
In September 1999 the Cambodian Labor Organization (CLO) released a report on the
Natural Garment Factory in Phnom Penh. It described how, during a period when the
factory was producing for Nike (April to July 1999), the president of the factory union,
Miss Ken Chheng Lhang, suffered extensive harassment for trying to defend workers’
right to have one day off in every seven. Miss Lhang was refused a time card, prevent-
ing her from working for several days. The factory criticized her for constantly mak-
ing complaints to the labor ministry and put pressure on her to resign. The report also
documented how on July 6, 1999 factory supervisors manufactured a problem with the
work of the union treasurer, Chab Kunthea, as a pretext for firing her. The report con-
cluded that “the case of Natural Garment demonstrates once again that the US foot-
wear and apparel giant, Nike, is failing to take any pro-active steps to monitor or
enforce compliance with its much-touted code of conduct, which provides that work-
ers have the right to freely associate”.83
In March 2000 labor rights groups raised the case with Nike (Bissell et. al. 2000).
They called on the company to ensure that Kunthea is reinstated and that all harass-
ment of union organizers at the factory is brought to an end. Nike made no response to
this request.
81
Pflaum, M. 2001, pers. comm., 12 April.
82
Pflaum, M. 2001, pers. comm., 25 April.
83
For a copy of this report see See www.caa.org.au/campaigns/nike/appendix_15_March_2000.html
Sins of Omission:
Nike and the Savina Factory in Sadinski, Bulgaria—Workers
Conceal Their Union Membership for Fear of Losing Their Jobs
In April and November 1999 representatives of the German and Bulgarian Clean Clothes
Campaigns interviewed workers from the Savina factory in the Sandanski region.84 At
that time the factory was producing sportswear for both Nike and Adidas. They were
told that workers had managed to establish a union (KT Podkrepa) and that following
a strike at the factory in the Spring of 1999 they had negotiated a 9 hour work day, less
half an hour for lunch. Unfortunately, work quotas at the factory were still “murder-
ously high” and workers’ pay depended on fulfilling their quota.
The formation of the union had not been welcomed by factory management. The
factory owner, Hristos Karanidis, angrily told one of the researchers that he was con-
sidering closing the factory and leaving Bulgaria because of the union presence. The
researchers noted that many of the workers’ concealed their union membership from
Karanidis for fear of losing their jobs.
In March 2000 labor rights groups wrote to Nike requesting that the company
ensure that workers in the Savina factory were freely able to organize (Bissell et.al.,
2000). Nike ignored the letter.
In mid-2000 the Bulgarian Gender Research Foundation, Bulgarian Trade Union
and the government labor inspector visited the Sandanski area accompanied by a Ger-
man representative of the organization Terre des Femmes. They found that following
negative publicity both Adidas and Nike had cut and run from the Savina factory. The
researchers reported that employers in the region had become even more repressive
towards trade unions and that there was no longer a union at Savina or at any other
factory in the area. The case is yet another example of Nike’s failure to support work-
ers’ right to freedom of association.
Nike in the Dominican Republic—Rejecting the Findings of Its Own

Monitor
When US student Karim Chrobog was allowed by Nike to observe PWC’s monitoring
of factories in the Dominican Republic in March 2000, workers at both factories he
visited told him “that past attempts to form or join a union have led to the immediate
dismissal of workers” (Austermuhle et al. 2000, p. 18). They also reported that man-
agement annually fires the majority of the work force in order to avoid paying legally
required seniority benefits. In its response to Chrobog’s report, Nike indicated that the
company will address the latter problem but made no mention of the union repression.
In January 2001 Nike made public the PricewaterhouseCoopers report for a fac-
tory in the Dominican Republic. The auditors noted that “According to the 25 inter-
viewed employees, management does not accept that employees create or join a union.”
In its response to the report Nike rejected the testimony of the 25 workers, claiming
84
For a copy of their report see the following page on the Clean Clothes Campaign site -
www.cleanclothes.org/companies/savina99-11.htm
that “management does NOT prohibits (sic) Unions or attempts to form one, as long as
the Union is formed according to law factory will recognize and respect it”.
In order to rectify the workers’ “misunderstanding” Nike indicated that “manage-
ment will reinforce worker training on local labor rights so workers understand their
rights to organize and if they choose to form a Union they can follow the government’s
procedures … .” Education on labor rights is of course desirable, but it is nonsensical
for Nike to make it the responsibility of factory management to provide this training.
This is the same management workers say won’t let them form a union. If Nike were
genuinely committed to ensuring that union rights are protected at this factory, it would
ensure that an independent labor rights group was allowed to provide workers with
training in their rights and the company would keep in regular contact with those work-
ers to ensure that receive no discrimination for trying to form a union.
Nike in Bangladesh—Producing in Areas Where Unions Are Illegal

The US student who Nike allowed to observe PwC’s monitoring in Bangladesh, Shubha
Chakravarty, also reported on repression of union rights. According to Ms. Chakravarty,
one of Nike’s suppliers in Bangladesh not only has located its factory in the Export
Processing Zone where unions are illegal, but is one of the companies most actively
involved in lobbying the Bangladeshi government to ensure that unions remain illegal
in that zone.85 Chakravarty also reported that Nike’s monitors in Bangladesh are tak-
ing no steps to ensure that workers’ right to organize is protected. She wrote:
In countries or regions where unionization is not allowed, such as

the Export Processing Zone (EPZ) in Dhaka (where one of my facto-
ries was located), PwC monitors do not ask the interview questions
related to unions or freedom of association...Even in the Bangladeshi
factory that was not in the EPZ, workers were rarely questioned about
unionization; PwC auditors felt that unionization was almost a non-
issue in Bangladesh, since so few garment factories are unionized
(Chakravarty 2000, p. 9).
As with China, Nike appears to have no problem with its goods being produced in
areas where workers who try to form unions are thrown into jail.
Nike and the Kuk Dong Factory in Mexico—Counterfeit Unions,

Wrongful Dismissal and Violent Intimidation
Unlike most attempts by workers to establish their own organizations in Nike contract
factories, the recent push to form an independent union at the Kuk Dong factory in
Mexico has been subject to extensive independent scrutiny. No less than three inde-
pendent monitoring reports on the factory have been published in 2001 and numerous
85
Chakravarty S. 2000, pers. comm., 22 March.
Sins of Omission:
demonstrations have been held on university campuses across the US in support of the
new union. This makes the case particularly important and worthy of careful analysis.
If Nike is not willing to protect workers’ right to freedom of association at Kuk Dong,
then it will not be willing to do so anywhere.
In Mexico, a number of the established unions have close ties with the former
ruling party, the PRI. The primary purpose of these unions is not to represent workers’
interests but to exert political control over them and use their union fees to further the
interests of the party. It is common for such unions to negotiate deals with factory
owners allowing them to operate in particular factories and to use violence and coer-
cion to force workers to become members and to prevent than freely choosing who
will represent them.
One such union is Confederacion Revolucionaria de Obreros y Campesinos (CROC)
which operates in a number of Mexico’s maquilas. CROC is controlled by the PRI and
hence has close links with local labor authorities and with a number of Mexican gov-
ernment representatives, including the governor of the State of Puebla in Southern
Mexico, Melquíades Morales Flores (Boje, Rosile. and Carrillo 2001). CROC’s pres-
ence in factories is used to further the PRI’s political agenda rather than to serve work-
ers interests, and the union is notorious for its use of intimidation and bullying tactics.
On March 4, 2001, for example, CROC was involved in intimidating workers during a
union election at the Duro bag factory in Rio Brava. With the full cooperation of the
factory owner and local government officials CROC brought automatic weapons into
the factory, tore down all advertising for the independent union, physically accompa-
nied each worker into the voting area, told them how to vote and took notes on how
each worker voted (Pitkin 2001).
The Korean-owned Kuk Dong factory is located in Puebla, in the small city of
Atlixco, and has been producing college licensed sweatshirts for Nike since March
2000. The shirts are licensed to carry the logos of a number of US universities, including
Michigan, North Carolina, Oregon, Arizona and Indiana. Nike is Kuk Dong’s primary
customer, although Reebok also orders from the factory and purchases approximately
15 percent of production.
Late in 1999, before the factory had even opened its doors, it signed a collective
contract with the CROC union. According to a report by widely respected independent
labor lawyer, Arturo Alcalde Justiniani, Kuk Dong selected CROC to represent work-
ers at the factory in accordance with the common practice of “choosing the leaders
that would benefit their own business.”86 CROC’s union delegates at the Kuk Dong
factory have been selected by the CROC hierarchy rather than by workers at the fac-
tory, and from the outset CROC’s attitude has been one of “absolute subordination to
the company instead of representing the interests of the workers” (Justiani 2001). The
agreement states that the factory need only pay “the most minimum salaries valid in
the local region” and gives CROC the right to fire and discipline workers who engage
in what would otherwise be legal union activities. Justiniani’s expert opinion is that
86
Justiniani was asked to conduct this investigation by the International Labor Rights Fund, a member of
the Fair Labor Association (FLA). Nike is also a member of the FLA.
the agreement is illegal and invalid because it does not incorporate a salary structure
(Justiani 2001).
In March 2000 Martin Austermuhle of Penn State University accompanied Nike’s
monitor PriceWaterhouseCoopers (PWC) on an inspection of Kuk Dong. Austermuhle
made some positive comments about the factory but noted that: “The workers had no
real idea of their rights to organize collectively, and if they did, they seemed scared to
exercise those rights due to fear of dismissal. If Nike truly wants to improve labor
conditions...an important step is in educating workers in their most basic rights.” Pre-
dictably, Nike responded by making it the responsibility of the factory to provide work-
ers with more education in union rights, deliberately ignoring the fact that the factory
had recently signed a contract with an undemocratic union in order to radically curtail
those very rights.87
Austermuhle noted that management took down the names of the workers he in-
terviewed, and that may explain why they didn’t tell him that wages at Kuk Dong were
well below the prevailing industry wage in Mexico (Justiani 2001). Wages were so
low that workers were reliant on eating the food served in the factory cafeteria even
though it was occasionally rotten or rancid and was commonly of very poor quality.
On December 15, 2000 frustration with this and other issues lead five relatively senior
workers (Marco Santiago Perez Mesa, Marcela Muñoz Tepepa, Josefina Hernandez
Ponce, Mario Nicanor Sefina, and Eduardo Sanchez Velasquez) to protest by refusing
to eat the factory food. Several weeks later those five workers were dismissed as pun-
ishment for this protest.
In response, workers at the factory put a list of demands to Kuk Dong, including
the reinstatement of the dismissed workers, a change of union, and better wages and
factory food. On January 9, 2001 these negotiations between the factory and the work-
ers broke off and approximately 650 of the 860 workers at the factory staged a work
stoppage to press their demands. They picketed the factory for two and a half days,
during which time a number received anonymous threatening letters.
At around 10:30pm on Thursday January 11, 2001, the governor of Puebla sent
200 police in full riot gear to attack the 300 workers then guarding the factory. Ac-
cording to workers interviewed by United Students Against Sweatshops, the leader of
the CROC union and other CROC representatives were at the scene and pointed
out strike leaders to police (WRC 2001). When the workers saw the police offic-
ers approach, they threw their arms up in the air to indicate that they would not
fight, and they attempted to leave through the exits. Instead police surrounded
and cornered them and violently drove workers out of the factory one by one. A
number of workers were beaten severely with police clubs and at least four work-
ers were hospitalized as a result of injuries sustained. Evidently two of the women
guarding the factory were pregnant and lost their babies as a result of being hit
87
Nike also promised to work with PricewaterhouseCoopers to “re-word the employee interview question-
naire in order to ensure that all workers readily understand their rights of free association and collective
bargaining”. The PwC questionnaire is not a public document so it is not possible to verify whether this oc-
curred. In any case, given that Nike apparently responds to workers ignorance of union rights by asking factory
owners to provide “further training” it is hard to see how the PwC audits will lead to any positive change.
Sins of Omission:
Table 2. Timeline of events in the Kuk Dong factory in Atlixco,
Puebla in Southern Mexico
December 9, 1999 Before workers are employed at the factory, management at Kuk Dong Interna-
tional signs an illegal collective contract with the (yellow) CROC union. The
contract states that the factory need only pay “the most minimum salaries valid
in the local region” and gives CROC the power to fire workers for independent
union activity.
March 2000 Kuk Dong begins producing sweatshirts for Nike. Martin Austermuhle of Penn
State University accompanies PriceWaterhouseCoopers (PWC) on an audit of
Kuk Dong for Nike. He recommends that workers receive training in union rights
as they “seemed scared to exercise those rights due to fear of dismissal.” Nike
ignores this recommendation.
September 2000 The CROC union starts to have a major presence in the factory. Workers are told
to sign in support of the union or else they will be fired. Dues are deducted
anyway from workers who do not sign.
December 15, 2000 Five workers refuse to eat the food served in the factory. This protest reflects
ongoing concerns that food is poor and occasionally rancid. Since wages at Kuk
Dong are well below the industry standard, workers are forced to rely on food
provided by the factory.
January 3, 2001 The five workers are dismissed from the factory for their December 15 protest.
As a result, workers at the factory deliver a list of demands to Kuk Dong, in-
cluding the reinstatement of the dismissed workers, a change of union, and bet-
ter pay and working conditions.
January 9 Negotiations break off and approximately 650 of the 900 workers stage a work
stoppage to press their demands, picketing the factory for two and a half days.
January 11 At around 10:30pm police in full riot gear accompanied by CROC “enforcers”
attack the 300 workers guarding the factory. Workers are beaten with police
clubs. At least 4 workers are hospitalized and two pregnant workers involved in
the picket have miscarriages as a result of police violence.
January 13 Workers agree to return to work and the factory agrees to rehire all workers
except the five originally dismissed.
January 15–25 Workers who were active in organizing the strike are not allowed to return to
work. The company presses criminal charges against a number of workers. Stu-
dents across the US hold protests in support of the workers. The issue is covered
by Associated Press, the Financial Times, the Oregonian and by numerous Uni-
versity newspapers. Mexican labor Lawyer Arturo Alcalde Justiniani conducts
an investigation at the factory on behalf of the International Labor Rights Fund
(ILRF). The Workers Rights Consortium (WRC) also sends a fact-finding del-
egation to the factory.
January 24 Reebok’s Doug Cahn presses Kuk Dong to allow workers to hold a free and fair
election to determine who will represent them.
January 25 The WRC reports that there is “substantial, credible evidence” of serious labor
rights violations at the factory. Nike’s Vada Manager questions the WRC’s ob-
jectivity. Justiniani’s report recommends that all workers dismissed as a result
of the dispute be rehired “without any exception” and that a union election be
held which is “free, universal and by secret ballot” so that workers can decide
whether CROC should represent them. ILRF urges that this should take place
quickly. Nike instead decides another investigation is needed.
Table 2. continued
January 29 Following a meeting between Kuk Dong, Reebok and the International Labor
Rights Fund, Kuk Dong agrees to send cars into the local area with loud speak-
ers encouraging workers to return to work.
January 30 A letter to Nike from the coordinating committee of United Students Against
Sweatshops alleges that “the workplace has become a place of terror” and urges
Nike to insist that Kuk Dong allow workers to elect who will represent them as
soon as possible.
February 5–7 Nike arranges for Verite to conduct another factory investigation. Verite ob-
serves returning workers being forced to sign agreements accepting CROC as
their representative. A factory manager tells Verite that workers who are known
to “give headaches” will not be accepted back.
February 9 Nike’s Dusty Kidd writes to Kuk Dong asking the factory to take steps to ensure
that workers involved in the strike are allowed to return to the factory.
February 13 CROC lodges 21 counts of unfair labor grievances with the local labor and rec-
onciliation board. CROC alleges that Kuk Dong has interfered in CROC’s inter-
nal affairs by ordering the reinstatement of workers fired during the strike.
February 16 Nike announces that CROC and managers at Kuk Dong have agreed to take a
number of steps to welcome former workers back to the factory.
February 19 39 workers involved in organizing the strike in January return to work. Nike
and Reebok are involved in negotiations to ensure they are reinstated.
February 27 Nike arranges for a representative of the International Labor Organization-

Mexico to conduct training in freedom of association rights at the factory. Workers
report that the trainer repeatedly endorses CROC during the training.
March 14 Nike releases Verite’s report and Nike’s “remediation plan” for Kuk Dong. Like
the ILRF report released seven weeks earlier, Verite recommends that all work-
ers be allowed to return to work and that a union election be held “on the earli-
est possible date”. Nike’s remediation plan makes no mention of the urgent need
for an election.
March 18 Workers at the factory hold a meeting to fulfill the legal requirements for form-
ing a new independent union - SITEKIM.
April 4 A local Mexican labor rights group (Centro de Apoyo al Trabajador or CAT)
reports that with the factory’s cooperation CROC is using intimidation and mis-
information to dissuade workers from joining SITEKIM and that Kuk Dong is
attempting to coerce some independent union leaders into becoming “trusted
employees,” making it illegal for them to engage in union activity.
April 19 CAT reports that security guards at Kuk Dong have been illegally interfering
with attempts by independent union members to disseminate information to work-
ers about the union. Strike leader Santiago Perez continues to be locked out
from the factory. At this stage neither Kuk Dong nor Nike have made any state-
ment regarding whether, and if so when, a union election might take place.
Sins of Omission:
with shields, clubs, and fists during the attack (Boje, Rosile. and Carrillo 2001).88
In response to this attack, United Students Against Sweatshops organized protests
outside Nike stores across the US. Regular protests in solidarity with workers at Kuk
Dong continued to be organized in the ensuing months.
Following the violence, on Saturday, January 13, representatives of the striking
workers signed an agreement with Kuk Dong management and the local labor board in
Atlixco saying that they would return to work. The company committed to permit all
striking workers to return to the factory except for the five workers whose dismissal
had initiated the protest.
In the following weeks some workers were admitted back to the factory but some
of those who were most active in the strike were refused based on a list that the repre-
sentatives of the company and CROC kept with them at the factory entrance. Some of
the strike organizers were allowed back into the factory, but in new office positions
where they had no contact with other workers.
On January 17 a number of workers who had been reinstated were told they had
been dismissed. Subsequently all workers were required to accept CROC as their bar-
gaining representative before they returned to work. Lawyers for the company, with
the support of local labor officials, put pressure on the rejected workers to agree to
voluntary dismissal and accept compensation. The company also pressed criminal
charges against a number of workers for damage caused to the factory and for illegal
deprivation of freedom of movement. A number of these workers went into hiding and
police searched workers’ houses for them. Another 30 armed riot police were consis-
tently stationed at the factory, successfully creating a climate of fear in which many
workers were afraid to try and return to work.
During this period, both the International Labor Rights Fund (ILRF) and the Work-
ers Rights Consortium initiated investigations into the situation. Both reported on Janu-
ary 25. The WRC found “substantial, credible evidence” of serious labor rights viola-
tions at the factory, including employment of children aged 13 to 15, violence against
workers by managers and payment of wages below the Mexican legal minimum. The
WRC report urged Nike and Kuk Dong to work with the WRC to ensure that all work-
ers were allowed to return to work safely. It also called for a constant independent
monitoring presence at the factory. Nike’s Vada Manager responded by questioning
the objectivity and veracity of the WRC report and urging the appointment of an inde-
pendent investigator.
The ILRF investigation was conducted by the Mexican labor lawyer mentioned
above, Arturo Alcalde Justiniani. At the time Justiniani was conducting his investiga-
tion he was described by Nike as “an expert in local labor law” and by the Fair Labor
Association, of which Nike is a member, as “a well-respected Mexican labor lawyer,
identified with the democratic trade union movement in Mexico.” His report urged
that all workers dismissed as a result of the dispute be rehired “without any exception”
and that an election be held which is “free, universal and by secret ballot” so that
88
This information is based on taped interviews by Professor David Boje of New Mexico State University
with two workers and a labor lawyer who were present at the time that the attack occurred (Boje, Rosile. &
Carrillo 2001 and Boje D. 2001, pers. comm., April 16)
workers can choose which union will represent them (Justiniani 2001). Bama Athreya
from the ILRF emphasized that this needed to happen quickly. With regard to freedom
of association, she noted, “justice delayed is justice denied.” (Athreya 2001).
The same point was made in a January 30 letter to Nike from the coordinating
committee of United Students Against Sweatshops. The letter alleged that “the work-
place has become a place of terror, with riot police stationed inside of the factory
where there have been multiple reports of management screaming at and belittling
workers for their attempts to come together to assert their rights.” The students de-
manded that Nike insist Kuk Dong implement the recommendations made by Justiniani
and the Workers Rights Consortium as soon as possible, before fired workers were
forced to take up other jobs and before CROC could intimidate workers further.
Nike did not see it that way. Apparently finding two independent reports insuffi-
cient, the company appointed the non-profit monitoring organization Verite to con-
duct another factory investigation. Verite’s investigations were conducted on Febru-
ary 5–7 but were not publicly reported on until March 14, six weeks after Justiniani
and the WRC had made their recommendations. On the right to freedom of association
Verite’s recommendations were almost identical to those in the earlier reports. Verite
found that: “18 of 29 workers interviewed reported that the factory does not permit
workers to form and join unions of their choice...[and that] most workers at the factory
either do not want the CROC as their union or want no union.” Verite recommended
that all workers who still wanted to return to work should be reinstated uncondition-
ally and that workers should be allowed to hold an election to choose the union of their
choice “on the earliest possible date deemed to be legally permissible and practically
feasible.”
Nike did take some steps to encourage Kuk Dong to reinstate the fired workers,
but in doing so it gave inappropriate legitimacy to the CROC Union. On January 30
Nike’s Dusty Kidd wrote to universities supplied by Kuk Dong indicating that “since
January 29th, two independent observers have been on-site at the factory working
solely to facilitate workers safe and fair passage back to their jobs.” However, the
letter went on to mislead university administrators by suggesting that “Mexican labor
law, and the current collective bargaining agreement signed by Kukdong and the CROC
union, requires that in order for workers to return to their jobs at the factory, they must
recognize CROC as their representative union.”89 According to Mr. Kidd, workers only
had the right to choose who would represent them after they had returned to work. In
saying this Nike gave false legitimacy to an illegal and invalid “collective bargaining
agreement” negotiated before production began at the factory by a violent and unrep-
resentative union which subsequently forced workers to become members.
Nike and Kuk Dong later gave further support to CROC on February 6 when they
arranged for a representative of CROC to provide training to all workers on the “pro-
visions of the collective bargaining agreement currently in place.” (Nike 2001). Verite’s
auditors were present at Kuk Dong at the time and reported on the event. Far from
89
Even if the collective bargaining agreement had been a legitimate one, Mexican labor law would only
have required new workers to accept CROC as their bargaining agent, not workers returning from a strike.
Sins of Omission:
being a training session as Nike has suggested, the talk was a request for workers to
support the CROC union. The speaker from CROC also demanded that workers cease
publicizing problems at the factory:
The factory has acquired a very bad reputation because of the media
reports that have been circulating worldwide and through [the]
Internet giving a lot of false information about what is happening here...So
we ask you to tell the truth about what is going here and dismiss all the
allegations according to which you are being beaten, the food you
eat is rotten, etcetera. If this goes on, Nike, Reebok and other clients
will stop using the factory and we will stay unemployed. (CROC Sec-
retary General, Jaime Sanchez Juarez, cited by Verite 2001a)
Verite also observed workers attempting to return to work on that day and reported
that they were being required to sign a document accepting CROC as their representa-
tive and committing them to respect decisions made by that union at all levels includ-
ing state and national. Those workers willing to sign the forms were told they would
receive a telegram within a week indicating whether they would be allowed back to
work. A factory manager told the Verite team that from that day on returning workers
would be treated as newcomers and would be assessed and judged suitable for re-
employment accordingly:
When asked which criteria would apply, management told me that

the Korean supervisors knew their people and would pick the “good”
workers and not the “bad” ones (a good worker being one who “does
not give headaches” and who is efficient). (Verite 2001a)
On February 9, Nike’s Vice President for Corporate Responsibility, Dusty Kidd, sent a
letter to the President of Kuk Dong, asking that the factory reinstate all workers who
wish to return at their previous level of seniority, take special measures to welcome
back the five workers originally dismissed and publicize the fact that the company had
dropped the charges against workers involved in the strike. On February 16 Nike put
out a press release announcing that “in conversations with Nike, the factory manage-
ment, in concert with the CROC union (which represents the Kukdong workers) has
agreed” to take a number of steps to welcome former workers back to the factory.
Nike was apparently unaware that three days earlier CROC had lodged 21 counts
of unfair labor grievances at Kuk Dong with the local government’s labor and recon-
ciliation board. CROC alleged that Kuk Dong had interfered in CROC’s internal af-
fairs by ordering the reinstatement of workers fired during the strike. Supporters of
the fired workers expressed alarm that CROC might intimidate workers at the factory
into striking in support of these grievances but so far this has not occurred.
On 19 February, 39 Kuk Dong workers, including two of the five whose illegal
firings lead to the original strike, returned to the factory to demand their unconditional
reinstatement. In negotiations involving Nike, Reebok, CROC and the Korean House
of International Solidarity, all workers except those whose firing had lead to the initial
stoppage were reinstated unconditionally. The originally fired workers were allowed
to return to work, but as operators rather than supervisors and were required to sign
individual contracts with the company.
On February 27, Nike arranged for a representative of International Labor Orga-
nization (ILO) Mexico to conduct training in freedom of association rights for all
workers. But according to workers interviewed by USAS the ILO representative re-
peatedly indicated his support for the CROC union (Pitkin 2001a).
On March 18, workers at the factory held their own meeting to meet the legal
requirements for forming a new independent union—SITEKIM, Sindicato
Independiente de Trabajadores de la Empresa Kukdong International de Mexico or the
Independent Union of Workers at the Company Kukdong International of Mexico.
CROC positioned three people with video cameras to tape the workers entering the
meeting.
On March 22, Campaign for Labor Rights reported that although the new union is
being allowed to represent its members, it is not being given the same access to fac-
tory resources (such as the factory loud speaker system) to which CROC has access
(Pitkin 2001a). Apparently CROC is also intimidating independent union leaders—in
one case a CROC “enforcer” has repeatedly been driving his car around the home of
an independent union leader, although he lives nowhere near her place (Pitkin 2001a).
On April 4, David Ernesto Alvarado of Centro de Apoyo al Trabajador (CAT)90
reported that some leaders of the independent union and other workers are being coerced
by Kuk Dong management to sign papers accepting the status of “trusted employees,”
which would make it illegal for them to participate in union activity (Alvarado 2001).
Alvarado also reported that CROC has been making announcements over the fac-
tory loudspeaker and distributing literature claiming responsibility for persuading Nike
and Reebok to stay at the factory and suggesting that efforts to gain recognition for an
independent union could drive Nike and Reebok away. CROC has also distributed
literature attacking the independent union SITEKIM and on at least one occasion CROC
union representative Jose Luis Ruiz shouted at an employee who put one of these
flyers down on a table instead of reading it. While CROC representatives are allowed
to freely make announcements and distribute literature during work hours, SITEKIM
members have been expressly forbidden from doing so.
On April 4 and again on April 11, Alvarado reported that many workers are still
being refused the right to return to the factory. This includes Santiago Perez, one of
the five leaders whose firing prompted the strike in January, and Martina Morales, a
former line supervisor who played a leadership role in that industrial action. These
and other workers attempting to return are being told that the factory is already at full
capacity, even though new workers continue to be hired (Alvarado 2001a).
Although Nike has taken positive steps to assist some of the fired workers to re-
turn to work, the company has side-stepped recommendations from both the Interna-
tional Labor Rights Fund and the monitor which Nike endorsed, Verite, that a secret ballot
90
CAT is an organization of Mexican workers, students and labor activists established to support Mexican
workers trying to assert their right to freedom of association.
Sins of Omission:
union election needs to take place in the factory as soon as possible. Such an election is
crucial, since it would give workers the power to force CROC out of their factory.
In its public statements Nike has suggested that it is up to workers, if they want to,
to initiate the legal procedures which would lead to an election (Nike Inc. 2001b).
Unfortunately, the close relationship between the CROC union, the managers of the
Kuk Dong factory and local police and local government authorities makes it tremen-
dously difficult for workers at Kuk Dong to ensure that a free and fair election takes
place. The recent case of the “election” at the Duro bag factory demonstrates how
effectively such an alliance can prevent workers from freely deciding who will repre-
sent them. There needs to be urgent and consistent pressure from Nike and Reebok on
managers at Kuk Dong and on local authorities to ensure that a fair and open election
by secret ballot takes place. Reebok’s Doug Cahn has publicly called on Kuk Dong to
allow such an election as soon as possible, but Reebok needs to follow through this
statement with consistent pressure on the company. Nike has made no public demands
of Kuk Dong or of local Mexican authorities with regard to the need for an election.
Research by Professor David Boje of New Mexico State University indicates that
ten other factories in the region produce for Kuk Dong under sub-contracts, and that
conditions in these factories are significantly worse than in the Kuk Dong factory
itself (Boje, Rosile. and Carrillo 2001). There is considerable danger that if the inde-
pendent union is successfully established at the Kuk Dong factory, then factory man-
agement will punish workers by moving more production to these subcontractors and
that as a result workers at Kuk Dong will be laid off. Independent and transparent
monitoring of these ten factories is urgently needed to ensure that this does not occur.
When assessing the steps which Nike has taken in this case, it is important to
remember that in 2001 Kuk Dong has been subject to more independent scrutiny and
protest action than perhaps all of Nike’s other 700 suppliers put together. We are not
observing Nike’s ordinary monitoring procedures at work here, but rather Nike’s re-
sponse to a well organized and resource-intensive campaign highlighting labor abuses
at a particular factory.
Nike’s ordinary monitoring procedures took place at Kuk Dong in March 2000,
when PricewaterhouseCoopers (PwC) visited the factory. PwC either failed to notice
that Kuk Dong had negotiated an illegal agreement with a counterfeit union that radi-
cally restricted workers’ union rights, or else they reported this to Nike and Nike ig-
nored it. Martin Austermuhle, a student who was allowed to observe PwC’s March
2000 audit of Kuk Dong, reported to Nike that workers at the factory were either
ignorant of or afraid to exercise their union rights and recommended that they receive
training in these rights. Nike ignored this recommendation. Workers at Kuk Dong only
received training in freedom of association and collective bargaining a year later, on
February 27, 2001, following three publicly reported independent factory investiga-
tions, six weeks of extensive protests in the US and considerable media scrutiny of the
situation at Kuk Dong.
After sustained pressure from United Students Against Sweatshops, Nike repre-
sentatives did take steps to ensure that some of the workers dismissed for their in-
volvement in the strike in January were allowed to return to work, but they did so only
after extensive and unnecessary delays. These delays meant that by the time there was
significant progress in facilitating workers’ return it was too late for many workers—
they had been forced to return to distant villages or to find other employment. By mid-
April only approximately half of the 650 Kuk Dong workers involved in the strike in
January had returned to work and many who wanted to return were still being refused.
Nike should take steps to ensure that Santiago Perez and Martina Morales and other
workers who wish to return are allowed to do so as soon as possible.
The situation within and outside the factory continues to be tense and the CROC
union, with the cooperation of security guards and factory owners at Kuk Dong, is
using intimidation and misinformation to attempt to drive the new independent union
SITEKIM from the factory. A properly conducted union election by secret ballot is
urgently needed, so that workers can decide whether or not the CROC union should
have any presence in the factory at all. Although Nike’s own monitor Verite empha-
sized that such an election should take place “on the earliest possible date,” Nike’s
remediation plan for the factory makes no direct mention of this recommendation and
Nike has so far declined to use its influence with Kuk Dong to support workers’ call
for an election.
Nike should cease referring to the CROC union as the representative of the Kuk
Dong workers, cease giving inappropriate legitimacy to CROC’s illegal “collective
bargaining agreement” and cease encouraging CROC to provide “training” in that agree-
ment to workers. Instead Nike should work with other buyers, factory management,
independent observers and members of both unions at the factory to ensure that the
necessary conditions detailed by Verite and others are met for a secret ballot union
election to take place in the factory as soon as possible.
It is absolutely imperative that Nike does not “cut and run” from Kuk Dong, but
instead works with the factory to ensure that the above steps are taken. If Nike were to
leave the factory, it would represent the strongest indication yet that the company’s
stated commitment to respecting workers’ right to organize is a cruel joke.
Extensive independent research (much of it contained in this report) indicates that
repression of union rights at Kuk Dong is no different from repression of those rights
at other Nike factories in Asia and Latin America. What is different at Kuk Dong is
that workers have taken great risks to seek to assert their rights and anti-sweatshop
campaigners in Mexico, the US and Europe have worked hard to support them.
91
Conclusion
Even as he announced factory reforms in his speech on May 12, 1998, Phillip Knight
refused to concede that Nike had a sweatshop problem. “We don’t have abusive labor
conditions in our factories,” he told journalists “and really never have” (Ramjug 1998).
He criticized Doonesbury cartoonist and Nike critic Gary Trudeau for having no inter-
est in finding out the truth and claimed that “one of the few absolutes of this business”
was that conditions in those factories today were “far, far better” than conditions in
Japanese shoe factories when Nike had first started out 26 years before.
This begged the question: If Nike didn’t have an issue with conditions in its sup-
pliers’ factories, why was Knight announcing labor reforms? What problem were those
reforms designed to address? Knight himself hinted at an answer. In replying to ques-
tions at the end of his speech, he noted that Nike had arranged for Tiger Woods’ father
Earl Woods to visit some Nike factories in Thailand and that on his return Mr. Woods
Senior had commented that “Your problem isn’t with factories; your problem is with
public relations.” Knight agreed, commenting that Woods “just basically confirmed
what we already know—those are really quite good factories.”
A recent (12 March 2001) Newsweek article fills out the story. Titled “Swoosh
Wars,” the article details how Knight himself decided in late 1997 that Nike needed to
seize the initiative in its public relations battle with anti-sweatshop protestors. Work-
ing from a “war room” in Nike’s head office in Beaverton, a team of Nike executives
formulated a plan to set the “industry standard” for sweatshop reform and to promote
it aggressively. Knight’s speech to the National Press Club was the public launch of
this new approach and from then on the “war room team” became a standing opera-
tion. Following a Nike tradition of employing people with expertise in public relations
to work on human rights issues,91 Knight employed “longtime Washington operative”
Vada Manager to provide “political insight and strategy.” Manager was given “broad
power to assemble ‘virtual teams’ of executives and outside consultants to respond to
any challenge.” The article documented how Manager used “direct intelligence” from
student networks to arrange for a strong “security and police presence” to thwart a
planned series of demonstrations at Nike stores across the US. The article quoted
Manager as saying “Nike approaches this as it approaches everything, as competition.
And we aim to win” (Emerson 2001).
If Nike had taken effective steps to ensure respect for human rights in its contract
factories, this approach might be justifiable. Sweatshop allegations represent a major
threat to the value of a company’s brand and if those allegations are false a company
has every right to vigorously contest them. But do Nike’s labor practices match their
spin? They talk the talk, but do they walk the walk?
Recently Nike’s claim that conditions in its suppliers’ factories are “really quite
good” was dramatically called into question by research the company had itself paid
91
Nike’s Global Director for Labor Practices Mr. Dusty Kidd was originally employed to do public rela-
tions work for Nike. The company’s Vice-President for Corporate Responsibility, Ms. Maria Eitel has
previously worked in this capacity for the Microsoft Corporation and for former President Ronald Reagan.
for. In February 2001, a factory assessment program conducted by the Global Alliance
for Workers and Communities and sponsored by Nike forced the company to admit
that serious labor abuses do exist in its suppliers’ factories in Indonesia. Researchers
employed by the Alliance found evidence of inadequate wages, forced and illegal over-
time, denial of sick leave, menstrual leave and annual leave and unacceptable levels of
sexual harassment and verbal abuse. By its own admission, the Alliance’s factory as-
sessments do not attempt to investigate human rights issues, and the organization’s
research methods are unlikely to have discovered the full extent of labor abuses in
those factories. Nevertheless the report forced Nike to briefly interrupt its campaign
to discredit the considerable body of independent evidence indicating that workers
making its product are exploited and that their human rights are abused.
Unfortunately, this admission did not lead Nike to embrace the independent and
transparent human rights monitoring advocated by its critics. Anti-sweatshop activists
have proposed a clear agenda for action, demanding wage levels that would allow
workers and their families to live with dignity, respect for workers’ right to freedom of
association and transparent, independent and regular factory monitoring by organizations
committed to establishing a relationship of trust with workers. Measured against these
criteria, Nike’s program fails badly. The company has dodged the wage issue; failed to
keep its word on freedom of association; put in place monitoring programs that lack
independence, regularity or full transparency; and selected monitors who have failed
to create a relationship of trust in which workers can be confident that they will be
protected from victimization or job loss if they tell the truth about factory conditions.
Even measured against Knight’s May 1998 promises, the company’s performance
has been poor. Three years after Knight announced that Nike was “working hard” to
involve non-government organizations in factory monitoring, the company has only
arranged one factory audit by one non-profit organization—and that audit followed
substantial media scrutiny of conditions in the factory. Despite promising to meet OSHA
air quality standards in all its factories, Nike gives factory owners advance notice of
testing, giving them the opportunity to change chemical use to minimize toxic emis-
sions on the day the test is conducted. Evidence continues to emerge of young people
under the age of 16 employed in Nike contract factories, and in any case, payment of
a living wage to adult workers would bring much greater benefit to children in Nike
production areas than enforcement of factory age limits. Knight’s promised education
schemes have only benefited a tiny minority of Nike workers and the micro-loan pro-
grams were never intended for workers, representing instead an attempt to distract
attention from factory conditions. The program to fund academic research seems pri-
marily geared towards funding research that serves Nike’s public relations agenda
rather than stimulating rigorous academic debate on responsible business practices.
Thus far Nike has treated the sweatshop issue as an issue of public relations rather
than human rights. The only area in which the company has made any significant
progress, health and safety, is the area with the potential to do the most damage to the
company’s image. The 1997 New York Times front page story revealing that Vietnam-
ese Nike workers were being exposed to toxic gases at up to 177 times the Vietnamese
legal limit (Greenhouse 1997) represented a nightmare for Nike’s image builders. A
93
major fire in a Nike contract facility has the potential to be far worse. It is not too
cynical to interpret the company’s focus on air quality and fire safety as a response to
the media-sensitive nature of these issues. Unfortunately, Nike’s refusal to adopt an
independent, rigorous and transparent monitoring system means that even in this area
advances have been limited. On the few occasions that genuinely independent health
and safety experts have been allowed access to Nike factories, they have found serious
hazards including dangerously high exposures to toxic chemicals, inadequate personal
protective equipment, poor ergonomics, excessive noise and lack of appropriate guards
to protect workers from dangerous machinery.
In other areas of key concern to workers and human rights organizations, Nike’s
overriding preoccupation has been with image management. It has used statistics se-
lectively and in a misleading fashion to make the wages paid to Nike workers seem far
better than they are. It has consistently attempted to undermine the credibility of its
critics by painting them as either uninformed or as motivated by political agendas
tangential to the sweatshop issue. It has turned its back on Nike workers who have
suffered intimidation, harassment and dismissal for telling journalists about labor
abuses, knowing that their example would dissuade other workers from speaking out.
It has put in place an elaborate “monitoring program” which looks good on paper
but which operates to conceal systematic repression of workers’ right to freedom of
association.
It has arranged for its staff to conduct quarterly “factory assessments” which de-
liberately avoid key issues like wages, working hours and union rights.
It has employed an accounting firm, PricewaterhouseCoopers, to make annual fac-
tory monitoring visits and has played on that firm’s reputation for independence in
conducting financial audits. It has made this comparison in the full knowledge that
Nike’s factory monitoring program is radically different from financial auditing—it
doesn’t involve publicly agreed upon assessment practices but rather confidential pro-
cedures designed and controlled by Nike; it doesn’t involve public declarations that a
firm’s accounts are acceptable, but rather private reports to Nike alone, released only
at the company’s discretion.
It has attempted to draw the focus away from the human rights agenda advocated
by its critics by putting substantial resources into the Global Alliance for Workers and
Communities, a program that avoids investigating workers’ right to freedom of asso-
ciation and other labor standards and instead works in a relatively small percentage of
Nike’s contract factories to assess workers’ “needs and aspirations” and put in place
“development and training” programs to help them meet them.
It has, in cooperation with other companies, spent almost five years wrestling
with the unions and rights groups involved the Fair Labor Association in an attempt to
persuade them to lend their credibility to a weak and circumscribed monitoring sys-
tem. The unions and religious groups originally involved in the FLA negotiations aban-
doned the process in 1998 because of the companies’ refusal to make genuine reforms,
and those rights groups still involved have been forced to make very substantial con-
cessions. When the FLA’s monitoring system eventually begins operation, it will have
a number of significant advantages over Nike’s current very poor program. But these
advantages will be undercut by the questionable independence of FLA monitors and

the extended delays between external monitoring visits, which will on average occur
in each factory only once every ten years.
Rather than expose this monitoring program to expert independent scrutiny, Nike
has instead sought to use publicity stunts to shore up its credibility. Thus in 2000 Nike
didn’t allow academics and human rights experts with appropriate expertise to ob-
serve PricewaterhouseCoopers monitors in action; it sent US students with no back-
ground in the issue. To the extent those students made constructive and useful sugges-
tions Nike either ignored those recommendations or promised to act on them but has
prevented independent assessment of whether those promises have been kept.
On those few occasions when Nike has taken steps to protect human rights in
individual cases, it has only done so grudgingly and as a result of sustained public
pressure. The current dispute at the Kuk Dong factory in Mexico illustrates Nike’s
approach. The company’s standard monitoring of the factory in March 2000 failed to
reveal illegally low wages, poor safety standards and systematic suppression of work-
ers’ union rights. It was only in 2001, when workers at the factory took considerable
risks to bring conditions at the factory to public attention and US students put consid-
erable effort into keeping them there, that Nike was moved to respond. While ele-
ments of that eventual response have been positive, Nike’s actions on the issue have
been characterized by unnecessary delays, lack of follow through and failure to ac-
tively promote the urgent need for a free and fair union election.
Nike’s response to labor issues continues to do substantial damage to the company’s
credibility. The promises made by Phillip Knight in his May 1998 speech represented
a limited and partial response to labor abuses in Nike factories. They were an attempt
by the company to take the initiative by switching the media focus to issues it was
willing to address while avoiding the key problems of subsistence wages, forced overtime
and suppression of workers’ right to freedom of association. Given that these promises
have brought very little benefit to workers, rights groups are justified in treating the com-
pany with suspicion and demanding that factory monitoring be both genuinely indepen-
dent from Nike’s control and publicly reported in full. Nike has mislead consumers
and let down the workers who make its product and who continue to suffer extreme
injustice while Nike touts itself as an “industry leader” in corporate responsibility.
Global Exchange’s recommendations regarding each of Knight’s May 1998 prom-
ises are summarized in Table 1. If Nike genuinely wants to ensure that conditions in its
suppliers’ factories are decent, it should go beyond those promises and take up the
solutions which labor rights groups have proposed. That is, Nike should:
• Make a public commitment to, at minimum, a full time wage that would allow
workers to provide themselves and their families with an adequate diet and hous-
ing and to pay for basic necessities. Work with international unions, labor rights
groups, academics and workers themselves to determine what that wage would
equate to in each area in which Nike’s goods are produced.
• Publicly release the names and addresses of all its suppliers’ factories.
95
• Regularly release information regarding the value of orders from each of these
factories and identify which of these factories have democratic unions. This would
allow labor rights groups to verify that workers are not being punished for orga-
nizing by having orders from their factories moved to non-union factories.
• Send a clear and unequivocal message to workers making Nike products that the
company will ensure that their right to freedom of association is respected. As a
first step, Nike could demonstrate that this commitment is genuine by bringing
to an end those examples of abuse of that right documented in this report. That is,
the union repression occurring in: the Kuk Dong factory in Mexico, the Nikomas
Gemilang factory in Indonesia, the Sewon and the Wei Li Textile92 factories in
China, the Formosa factory in El Salvador, the Natural Garment factory in Cam-
bodia, the Savina factory in Bulgaria, and factories owned by the Saha Union
group and the Bangkok Rubber group as well as the Nice Apparel, De-Luxe,
Lian Thai and Par Garment factories in Thailand.
• Publicly call on the Chinese government to allow workers in Nike factories in

China to form their own unions.
• Cease its campaign to discredit the Workers’ Rights Consortium (WRC) and in-
stead work with the WRC to ensure that workers in all Nike factories understand
their rights and are able to access a confidential, independent complaint mecha-
nism if those rights are abused.
• Work with international unions and human rights organizations to establish a

program of regular and transparent factory monitoring by organizations with ap-
propriate expertise which are independent of (i.e. not selected by) the company.
This monitoring should include unannounced factory visits and confidential
worker interviews conducted away from the factory and facilitated by organiza-
tions or individuals which workers have reason to trust.
For too long Nike has skirted around the edges of the sweatshop problem rather than
tackle it head on. Compared to ten years ago, workers in today’s Nike contact factories
may be somewhat less likely to be poisoned by dangerous gases or burned to death in
factory fires. But they are still forced to work excessive hours in high pressure work
environments, are not paid enough to meet the most basic needs of their children, and
are just as likely to be subject to harassment, dismissal and violent intimidation if they
try to form unions or tell journalists about labor abuses in their factories. The time has
come for the company to bring an end to evasion and pretence and adopt genuine
reforms. It is indefensible that campaigners, consumers and most importantly Nike
factory workers are still waiting for Nike to do it.
92
Also known as the WDI Supercap factory.
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Appendix 1. Correspondence with Nike

in preparation of this report
Monday, March 19, 2001
Ms. Maria Eitel

Mr. Dusty Kidd
Mr. Vada Manager
Nike, Inc.
One Bowerman Drive
Beaverton, OR 97005-6453
Dear Ms. Eitel, Mr. Kidd, and Mr. Manager,
I am writing to let you know that Global Exchange is interested in

assessing the extent to which Nike has met the promises made by Phil
Knight during his National Press Club Speech in May 1998.
We would be very grateful if you would send us a prompt response to the
following questions (if at all possible by April 5, 2001).
• In his 1998 speech Philip Knight announced that all Nike shoe facto-
ries would meet OSHA standards in indoor air quality by the end of
that year. Has there been independent monitoring of air quality in
Nike factories? Who conducted this monitoring, and are the monitoring
reports publicly available?
• Mr. Knight also announced that Nike was working hard to put into
effect a monitoring program involving NGOs, saying that he recognized
“the need for a summary statement about this monitoring.” Which NGOs
has Nike involved in its monitoring program, and when will summary
statements of this monitoring be released?
• Mr. Knight announced an expansion of Nike’s education programs. What

percentage of workers in Nike footwear and clothing factories are now
able to access middle and high school equivalency courses? What per-
centage of workers takes advantage of these courses? Are these educa-
tion programs available to workers free of charge? How much does this
program cost Nike?
• Mr. Knight announced increased support of Nike’s micro-enterprise

loan program to a thousand families each in the countries of Vietnam,
Indonesia, Pakistan, and Thailand. Has this occurred? In which areas?
How much does this program cost Nike?
• Mr. Knight also made an announcement regarding funding university

research and open forums to explore issues related to global manufac-
turing and responsible business practices, such as independent moni-
toring and health issues. He announced Nike would begin by funding
four programs in United States universities in the 1998-1999 academic
year, and would have the first public forum in October 1998 in Hong
Kong. What university research has Nike funded? Who conducted that
research and what did it conclude? Who attended the open forums and
how many have been conducted? Could you send us copies of the reports
from those forums?
• In March 2000, a number of labor rights groups wrote to Nike with a

several requests and questions (a full copy of the letter can be found
on the internet at www.caa.org.au/campaigns/nike/dialogue/
103
contents_15_March_2000.html). Nike has never responded to this let-
ter. Could you now answer the questions raised in that letter? In
particular, is Nike still a customer of the Formosa factory in El
Salvador, and have conditions in that factory improved?
• In September 2000, Community Aid Abroad-Oxfam Australia released a

report documenting suppression of workers’ right to organize in Nike
contract factories in Indonesia. On the day the report was released
Nike announced it would investigate the claims made in the report. Has
Nike conducted that investigation and would your company be willing to
make the report of that investigation public?
• In October 2000, there was a BBC report into conditions in the June
Textiles factory in Cambodia. Nike responded by announcing that orders
to the factory would be brought to an end. Has that occurred? Nike
also indicated that before the BBC report the factory had already been
on probation after several of Nike’s monitors had indicated labor
problems there. Is Nike willing to make the reports of those monitor-
ing processes available so that this can be verified?
Thank you very much for your time and attention. I look forward to
speaking with you soon.
Sincerely,
Medea Benjamin
Founding Director
April 25, 2001
Ms. Medea Benjamin

Global Exchange
#303 2017 Mission St.
San Francisco, CA 94110
Dear Medea—
Thanks so much for your recent letter. As you know, the work that we do
with our contract factory partners is a work in progress. There are always
more improvements to be made and more work to be done. That also means
that we continually have the opportunity to positively impact the lives of
workers all over the world.
As you note, in May of 1998, Phil Knight made several statements about
Nike’s commitment to corporate responsibility and about the expectations
we have of our contact [sic] factory partners. We believe that these were
significant statements about who we are as a company and where we wanted
to go in raising the standards in not only the factories producing our
products, but in the industry as well. Let me highlight some of the steps
we have taken in the intervening 3 years. You will remember that we
categorized these statements under three headings—Responsibility, Oppor-
tunity, and Transparency.
Responsibility:
Raise minimum age limits:
Nike committed to raising the minimum age of workers in Nike contracted

factories to 18 in footwear factories and 16 in all other factories. Our
contract factories have largely embraced these standards and instances of

non-compliance appear to be isolated. With the aforementioned age stan-
dards governing our contractors, the average age of the workforce is
around 21 years old. As you note, we did make a commitment to end our
relationship at June Textiles in Cambodia. This did happen. A more com-
plete statement about the steps we have taken at June Textiles can be
found on our website www.nikebiz.com.
Improved Health and Safety Standards—Indoor Air Quality to OSHA to Per-

missible Exposure Limits (PELs):
By December 1998 all footwear factories have been tested by third party
independent and health and safety specialists, contracted through Reli-
ance Insurance, and the samples analyzed by an OSHA-certified laboratory.
Any initial instances of non-compliance were addressed and the factories
in question re-tested. All of the factories initially meet the require-
ments that we set for them, although we continue to monitor them to
address those factories that may from time-to-time slip back. To date,
these results have not been posted publicly, but we have shared our
methodology and solvent replacement technologies in an open forum. I will
talk more about that below.
Additionally, we have participated in several other projects to im-
prove the health and safety standards in our contract factories. Although
not a comprehensive list, here are some of the highlights: Electrical
Safety Training—Fall 1998, Ergonomic Testing—fall 1999, participation in
and hosting of NGO Health and Safety Capacity building session conducted
by Garrett Brown in Indonesia—June 200, Electrical Safety evaluations—
2000, Health Care and Health Standards assessments—fall 2—, China Occupa-
tional Health and Safety Capacity Building Project organized by Garrett
Brown and Dara O’Rourke—2001 ongoing.
Opportunity:
Factory Education programs—as you know, the most significant opportunity

that all contract factories offers is the job itself. However, consider-
ing the length of employment of many factory workers and the fact that
many live on site or in the immediate surrounding community, we felt it
was important to explore ways of providing additional opportunities for
workers. Phil Knight committed that by the end of 2001, Nike would not
place orders with any footwear factory that did not provide for after
hour’s education. To date—85 % of our footwear factories do provide this
opportunity and the balance have programs planned to start in the next
several months. More than 10,000 workers have participated in these pro-
grams. Those who have participated see this as a definite advantage for
them, not only while they are at the factory, but also later when they
return to their hometown or move to a different type of employment.
Micro Loan programs— We currently have micro loan programs underway in

Vietnam, Indonesia and Thailand. since 1997, more than 5000 people have
received loans and started small businesses, with only a negligible de-
fault rate. These have ranged from small family sundry shops, to animal
husbandry projects, to the production of rice paper for spring rolls and
the development of rural stitching centers. Some results have been truly
inspiring, including a woman in Indonesia who started a tofu cake business
that now employs literally dozens of people.
Transparency:
Funding research and forums—Since 1997, we have funded approximately 2

research projects per year. These have included wage studies, research in
105
labor laws, health and safety practices in factories, studies focused on
monitoring practices and the effectiveness of third party monitoring, to
name a few. This work has proven invaluable to us as we look at how we may
need to improve our standards or the way we approach this work. The
universities that we have directly funded, or with whom we have cooperated
on research or case studies, include Harvard University, Dartmouth Uni-
versity, University of North Carolina, St. John’s University, Asian In-
stitute of Management and the University of New South Wales. We have also
sponsored and hosted a forum on “Solvent Replacement in the Footwear
Industry” with all major shoe footwear brands in attendance. The forum was
hosted in November, 1998 in Thailand and open to anyone in the industry.
Additionally, several NGOs were invited, including Global Exchange.
Monitoring and transparency—Phil Knight’s commitment to a more transpar-

ent process and the cooperation or inclusion of NGOs in that process has
included our work with the Fair Labor Association, the Global Alliance for
Workers and Communities, Espiral, the BSR Factory Monitoring Program,
which included the participation of Dara O’Rourke, the CESAIS focus group
program, and programs with other small local NGOs. In addition to the
monitoring and workers assessment activities, which have included numer-
ous NGOs, we have also made a significant amount of information public and
transparent on our www.nikebiz.com website. This includes compliance moni-
toring reports, health and safety monitoring reports, Global Alliance
Reports, the recent Kukdong Monitoring report (conducted by Verite) and
Nike’s remediation plan, as well as the locations of all the factories
producing Nike collegiate licensed products. On this latter point we were
the first company to publicly disclose this information before it was
mandated by any university and is now a prerequisite of many companies
that wish to produce collegiate products.
You asked about a letter written to Nike in March 2000 by a group of
stakeholders who had asked for information in the Fall of 1999. We re-
sponded to that earlier set of questions at length. When we proposed a
platform of mutually acceptable dialogue, that suggestion was declines.
We believe companies have an obligation to respond to stakeholders, but in
forums or processes that are sustainable. We have since endorsed prin-
ciples for the Global Compact and CERES, both of which we believe provide
opportunities to exchange information and provide reporting to global
stakeholders who are also parts of those processes.
Regarding the Community Aid Abroad-Oxfam Australia report released in
September 2000, we appreciate any information that can help us make our
monitoring and compliance work better. We evaluate the information based
on its content and its source.
Thank you once again for your ongoing interest in our work and for the
feedback you have regularly provided us over the years. This has been
beneficial to us, as we continue to develop the work that we do to improve
the lives of hundreds of thousands of workers around the world. Take care
and I look forward to talking with you soon. By the way, I never did get
to see any pictures from our visit to YueYuen ... if you have any copies
I would love to see them.
Best regards,
Todd McKean
Director of Compliance
Nike Corporate Responsibility
cc:
Maria Eitel
Dusty Kidd
Vada Manager
Monday, May 7, 2001
Mr. Todd McKean

Nike Inc.
Beaverton, OR 97005-6453
Dear Todd:
As you may know, or may have surmised, Global Exchange is preparing a

complete, rigorously researched review of the commitments made by Phil
Knight three years ago at the National Press Club. The review is an
important part of Global Exchange’s commitment to corporate accountabil-
ity—that is, to ensuring that promises made by companies are fulfilled.
We would like to thank you for your April 25 reply to our requests for
information. Your responsiveness is appreciated. However, we find several
of the answers to be terribly vague. We are hoping you would provide an
elaboration.
For obvious reasons of fairness and completeness we feel that is
important to include Nike’s entire record from the last three years. But
because of deadline pressures we will not be able to include your re-
sponses to the questions below unless we receive them immediately. We are
asking that you respond in the next 24 hours. If there is some reason why
these questions cannot be answered today, please call us today and let us
know why, and when an answer would be available.
Here are our questions:
• Is Nike willing to make all the results and methodology of the company’s
program for testing air quality (including whether the factory is
given advanced warning of the testing) available to the public? If so,
when?
• Which academics (names and positions) has Nike funded to research

responsible business practices? When? What topics did each study in-
vestigate? Have the conclusions been published? If so, where have they
been published?
• Your April 25 response to our letter mentioned an organization named

Espiral. What is Nike’s relationship with Espiral and how does it
represent inclusion by NGOs in Nike’s monitoring program? Your re-
sponse/letter also mentions “programs with other small local NGO’s.”
Which small local NGO’s does Nike work with?
If you have any questions about these queries, please feel free to call
me. I will be working from home on Monday, but you can easily reach me
there at 415-861-1206. I will also be checking my email occasionally,
jason@globalexchange.org.
Thank you once again for your attention.
All Best,
Jason Mark
Communications Director
107
Tuesday, May 8 (email received by Global Exchange )
Dear Mr. Mark,
Todd McKean is traveling this week and I understand you had some addi-
tional questions about our work against the goals Phil Knight laid out for
us three years ago. I also understand you expect something within 24
hours. Let me see what I can do to help with your three questions:
—On methodology and results from indoor air quality testing: That was
shared specifically with the public on Nov. 26, 1998 in Bangkok. I believe
Global Exchange was invited to that forum. The people responsible for
testing, from Reliance Insurance, walked through the methodology in great
detail. We have also discussed it in other public forums. We have also
discussed in some detail with health and safety professionals, including
Garrett Brown, a California OSHA manager, and Dara O’Rourke, a professor
at M.I.T. In that forum we also share testing results. The factory does
know that testing is going to take place. There are basically three
components that determine whether a worker is properly protected against
solvent/vapor exposure: the solvents in use; the state of ventilation;
and the personal protective equipment in use. Because our inspectors are
in factories each day, we are able to observe these three parameters on an
on-going basis. To carry out professional air quality testing requires
close cooperation and training between management, worker and tester.
—On academics, and research, I don’t have a list in front of me but would
be happy to forward to you when I do. We have had research done on wages,
compliance monitoring, health and safety, transfer of business and re-
sponsibility culture, interview-based monitoring and related topics, as
well as a number studies done to try to gauge the overall program of
supply chain responsibility. Institutions and individuals doing that work
I believe were cited by Todd in his earlier message.
—On NGOs and monitoring, the cornerstone of our work in this area is
through the Fair Labor Association. The most recent was through Verite,
which performed a monitoring visit at Kukdong in Puebla, Mexico. Through
the FLA we have also worked with the International Labor Rights Fund, the
Lawyers Committee for Human Rights and others on monitoring protocol.
Nike contracted Espiral to test and develop tools to improve our monitor-
ing processes, specifically in the area of worker interviews. We intend to
share these tools with other monitoring groups and with the FLA, as a
contribution to the training and capacity-building of independent NGO
monitors throughout Central and Latin America. Program for Appropriate
Technology in Health (Path) has helped on health issues and peer education
in factories. A group of Indonesian NGOs, working with Garrett Brown, used
one on our footwear factories as a site for training on health and safety
monitoring, which we expect will eventually make it possible for them to
do that work for companies such as Nike in the future. A similar program
involving NGOs and workers as well as factory managers is about to begin
in China. We have worked with some NGOs who prefer to have that work
remain private.
I hope this helps. Kind regards, DK [Dusty Kidd]

Appendix 2. Nike’s Code of Conduct

NIKE Inc. was founded on a handshake. Implicit in that act was the determination that
we would build our business with all of our partners based on trust, teamwork, hon-
esty and mutual respect.
We expect all of our business partners to operate on the same principles. At the
core of the NIKE corporate ethic is the belief that we are a company comprised of
many different kinds of people, appreciating individual diversity, and dedicated to
equal opportunity for each individual. NIKE designs manufactures and markets prod-
ucts for sports and fitness consumers. At every step in that process, we are driven to do
not only what is required, but what is expected of a leader. We expect our business
partners to do the same. Specifically, NIKE seeks partners that share our commitment
to the promotion of best practices and continuous improvement in:
1. Occupational health and safety, compensation, hours of work and benefits.
2. Minimizing our impact on the environment.
3. Management practices that recognize the dignity of the individual, the rights of
free association and collective bargaining, and the right to a workplace free of
harassment, abuse or corporal punishment.
4. The principle that decisions on hiring, salary, benefits, advancement, termina-

tion or retirement are based solely on the ability of an individual to do the job.
Wherever NIKE operates around the globe, we are guided by this Code of Conduct.
We bind our business partners to these principles.
While these principles establish the spirit of our partnerships, we also bind these
partners to specific standards of conduct. These are set forth below:
1. Forced Labor. (Contractor) certifies that it does not use any forced labor—prison,
indentured, bonded or otherwise.
2. Child Labor (Contractor) certifies it does not employ any person under the mini-
mum age established by local law, or the age at which compulsory schooling has
ended, whichever is greater, but in no case under the age of 14.
3. Compensation (Contractor) certifies that it pays at least the minimum total com-
pensation required by local law, including all mandated wages, allowances and
benefits.
4. Benefits (Contractor) certifies that it complies with all provisions for legally man-
dated benefits, including but not limited to housing; meals; transportation and
other allowances; health care; child care; sick leave; emergency leave; pregnancy
109
and menstrual leave; vacation, religious, bereavement and holiday leave; and
contributions for social security, life, health, worker’s compensation and other
insurance.
5. Hours of Work/Overtime (Contractor) certifies that it complies with legally man-

dated work hours; uses overtime only when employees are fully compensated
according to local law; informs the employee at the time of hiring if mandatory
overtime is a condition of employment; and, on a regularly scheduled basis, pro-
vides one day off in seven, and requires no more than 60 hours of work per week,
or complies with local limits if they are lower.
6. Health and Safety (Contractor) certifies that it has written health and safety guide-
lines, including those applying to employee residential facilities, where appli-
cable; and that it has agreed in writing to comply with NIKE’s factory/vendor
health and safety standards.
7. Environment (Contractor) certifies that it complies with applicable country envi-

ronmental regulations; and that it has agreed in writing to comply with NIKE’s
specific vendor/factory environmental policies and procedures, which are based
on the concept of continuous improvement in processes and programs to reduce
the impact on the environment.
8. Documentation and Inspection (Contractor) agrees to maintain on file such docu-

mentation as may be needed to demonstrate compliance with this Code of Con-
duct, and further agrees to make these documents available for NIKE or its des-
ignated auditor’s inspection upon request.
Appendix 3. Fair Labor Association

(formerly the Apparel Industry Partnership)
Workplace Code of Conduct
(Adopted by Nike in March 1997)
REPORT OF APPAREL INDUSTRY PARTNERSHIP
The members of the Apparel Industry Partnership hereby report to the President and to
the public on:
• The announcement of the attached “Workplace Code of Conduct” as a set of

standards defining decent and humane working conditions;
• The individual determination of each company participating in the Partnership to
adhere to the Code and to implement as soon as reasonably practicable a moni-
toring program consistent with the attached ‘Principles of Monitoring’, by adopt-

ing an internal monitoring program consistent with such Principles and utilizing
an independent external monitor that agrees to conduct its monitoring consistent
with such Principles; and
• The Partnership’s commitment to work together to form, during a six-month tran-
sition period, a non-profit association that would have the following functions
intended to provide the public with confidence about compliance with the Code:
• To determine the criteria for company membership in the association and for
companies to remain members in good standing of the association;
• To develop criteria and implement procedures for the qualification of indepen-
dent external monitors;
• To design audit and other instruments for the establishment of baseline monitor-
ing practices;
• To continue to address questions critical to the elimination of sweatshop practices;
• To develop means to maximize the ability of member companies to remedy any
instances of non-compliance with the Code; and
• To serve as a source of information to consumers about the Code and about com-
panies that comply with the Code.
The association would he governed by a board whose members would be nominated

by companies, labor unions and consumer, human rights and religious groups. The
Partnership would work together during this transition period to further determine the
governance of the association.
WORKPLACE CODE OF CONDUCT
The Apparel Industry Partnership has addressed issues related to the eradication of
sweatshops in the United States and abroad. On the basis of this examination, the
Partnership has formulated the following set of standards defining decent and humane
working conditions. The Partnership believes that consumers can have confidence that
products that are manufactured in compliance with these standards are not produced
under exploitative or inhumane conditions.
FORCED LABOR. There shall not be any use of forced labor, whether in the form of
prison labor, indentured labor, bonded labor or otherwise.
CHILD LABOR. No personal shall be employed at an age younger than 15 (or 14

where the law of country of manufacture allows) or younger than the age for completing
compulsory education in the country of manufacture where such age is higher than 15.
HARASSMENT or ABUSE. Every employee shall be treated with respect and dignity.
No employee shall be subject to any physical, sexual, psychological or verbal harass-
ment or abuse.
111
NON-DISCRIMINATION. No person shall be subject to any discrimination in em-
ployment, including hiring, salary, benefits, advancement, discipline, termination or
retirement, on the basis of gender, race, religion, age, disability, sexual orientation,
nationality, political opinion, or social or ethnic origin.
HEALTH and SAFETY. Employers shall provide a safe and healthy working environ-
ment to prevent accidents and injury to health arising out of, linked with, or occurring
in the course of work or as a result of the operation of employer facilities.
FREEDOM of ASSOCIATION and COLLECTIVE BARGAINING. Employers shall

recognize and respect the rights of employees to freedom of association and collective
bargaining.
WAGES and BENEFITS. Employers recognize that wages are essential to meeting
employees’ basic needs. Employers shall pay employees, as a floor, at least the mini-
mum wage required by local law or the prevailing industry wage, whichever is higher,
and shall provide legally mandated benefits.
HOURS OF WORK. Except in extraordinary business circumstances, employees shall:

(i)not be required to work more than the lesser of: (a) 48 hours per week and 12 hours
of overtime, or (b) the limit on regular and overtime hours allowed by the law of the
country of manufacture or, where the laws of such country do not limit the hours of
work, the regular work week in such country plus 12 hours overtime, and (ii) be en-
titled to at least one day off in every seven day period.
OVERTIME COMPENSATION. In addition to their compensation for regular hours

of work, employees shall be compensated for overtime hours at such premium rate as
is legally required in the country of manufacture or, in those countries where such
laws do not exist, at a rate at least equal to their regular hourly compensation rate.
Any company that determines to adopt the Workplace Code of Conduct shall, in
addition to complying with all applicable laws of the country of manufacture, comply
with and support the Workplace Code of Conduct in accordance with the attached
Principles of Monitoring and shall apply the higher standard in cases of differences of
conflicts. Any company that determines to adopt the workplace Code of Conduct also
shall require its contractors and, in the case of a retailer, its suppliers to comply with
applicable local laws and with this Code in accordance with the attached Principles of
Monitoring and to apply the higher standard in cases of differences or conflicts.
PRINCIPLES OF MONITORING
I. OBLIGATIONS OF COMPANIES
A. Establish Clear Standards
Establish and articulate clear, written workplace standards.

Formally convey those standards to company factories as well as to con-

tractors and suppliers.
Receive written certifications, on a regular basis, from company facto-
ries as well as contractors and suppliers that standards are being met, and that
employees have been informed about the standards.
Obtain written agreement of company factories and contractors and sup-
pliers to submit to periodic inspections and audits, including by independent
external monitors, for compliance with the workplace standards.
B. Create An Informed Workplace
Ensure that all company factories as well as contractors and suppliers inform
their employees about the workplace standards orally and through the posting
of standards in a prominent place (in the local languages spoken by employ-
ees and managers) and undertake other efforts to educate employees about
the standards on a regular basis.
C. Develop An Information Database
Develop a questionnaire to verify and quantify compliance with the work-

place standards.
Require company factories and contractors and suppliers to complete and
submit the questionnaire to the company on a regular basis.
D. Establish Program to Train Company Monitors
Provide training on a regular basis to company monitors about the workplace

standards and applicable local and international law, as well as about effec-
tive monitoring practices, so as to enable company monitors to be able to
assess compliance with the standards.
E. Conduct Periodic Visits and Audits
Have trained company monitors conduct periodic announced and unannounced

visits to an appropriate sampling of company factories and facilities of con-
tractors and suppliers to assess compliance with the workplace standards.
Have company monitors conduct periodic audits of production records
and practices and of wage, hour, payroll and other employee records and prac-
tices of company factories and contractors and suppliers.
F. Provide Employees With Opportunity to Report Non-compliance
Develop a secure communications channel, in a manner appropriate to the

culture and situation, to enable company employees and employees of con-
113
tractors and suppliers to report to the company on non-compliance with the
workplace standards, with security that they will not be punished or preju-
diced for doing so.
G. Establish Relationships with Labor, Human Rights, Religious or Other Local Insti-
tutions
Consult regularly with human rights, labor, religious or other leading local
institutions that are likely to have the trust of workers and knowledge of local
conditions and utilize where companies deem necessary, such local institutions to
facilitate communication with company employees and employees of contractors
and suppliers in the reporting of non-compliance with the workplace standards.
Consult periodically with legally constituted unions representing employ-
ees at the worksite regarding the monitoring process and utilize, where com-
panies deem appropriate, the input of such unions.
Assure that implementation of monitoring is consistent with applicable
collective bargaining agreements .
H. Establish Means of Remediation
Work with company factories and contractors and suppliers to correct instances
of non-compliance with the workplace standards promptly as they are discov-
ered and to take steps to ensure that such instances do not recur.
Condition future business with contractors and suppliers upon compli-
ance with the standards.
II. OBLIGATIONS OF INDEPENDENT EXTERNAL MONITORS
A. Establish Clear Evaluation Guidelines and Criteria
Establish clear, written criteria and guidelines for evaluation of company com-
pliance with the workplace standards.
B. Review Company Information Database
Conduct independent review of written data obtained by company to verify

and quantify compliance with the workplace standards.
C. Verify Creation of Informed Workplace
Verify that company employees and employees of contractors and suppliers

have been informed about the workplace standards orally, through the posting
of standards in a prominent place (in the local languages spoken by employ-
ees and managers) and through other educational efforts.
D. Verify Establishment of Communication Channel
Verify that the company has established a secure communications channel to

enable company employees and employees of contractors and suppliers to
report to the company on non-compliance with the workplace standards, with
security that they will not be punished or prejudiced for doing so.
E. Be Given Independent Access to, and Conduct Independent Audit of Employee

Records
Be given independent access to all production records and practices and wage,
hour, payroll and other employee records and practices of company factories
and contractors and suppliers.
Conduct independent audit, on a confidential basis, of an appropriate sam-
pling of production records and practices and wage, hour, payroll and other
employee records and practices of company factories and contractors and sup-
pliers.
F. Conduct Periodic Visits and Audits
Conduct periodic announced and unannounced visits, on a confidential basis,

of an appropriate sampling of company factories and facilities of contractors
and suppliers to survey compliance with the workplace standards
G. Establish Relationships with Labor, Human Rights, Religious or Other Local Insti-
tutions
In those instances where independent external monitors themselves are not

leading local human rights, labor rights, religious or other similar institutions,
consult regularly with human rights, labor, religious or other leading local
institutions that are likely to have the trust of workers and knowledge of local
conditions
Assure that implementation of monitoring is consistent with applicable
collective bargaining agreements and performed in consultation with legally
constituted unions representing employees at the worksite
H. Conduct Confidential Employee Interviews
Conduct periodic confidential interviews, in a manner appropriate to the cul-

ture and situation, with a random sampling of company employees and em-
ployees of contractors and suppliers (in their local languages) to determine
employee perspective on compliance with the workplace standards
115
Utilize human rights, labor, religious or other leading local institutions
to facilitate communication with company employees and employees of con-
tractors and suppliers, both in the conduct of employee interviews and in the
reporting of non-compliance
I. Implement Remediation
Work, where appropriate, with company factories and contractors and suppli-
ers to correct instances of non-compliance with the workplace standards.
J. Complete Evaluation Report
Complete report evaluating company compliance with the workplace stan-

dards.

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Published by Global Exchange

Global Exchange is an international human rights organization dedicated to

For more information about Global Exchange programs, contact us:

Electronic copy available at: http://ssrn.com/abstract=2496327

2. Regular, Transparent, Independent and Confidential Procedures

Electronic copy available at: http://ssrn.com/abstract=2496327

Knight’s May 12 Promises:

3rd Promise: Nike will include non-government organizations in its factory

6th Promise: Funding university research and open forums on responsible

2nd Demand: Regular, Transparent, Independent and Confidential Procedures

3rd Demand: Decent Wages

4th Demand: Reasonable Working Hours

5th Demand: Safe and Healthy Workplaces

Knight made 6 key commitments in his May 1998 speech.

1. OSHA Standards in Indoor Air Quality

Philip Knight, National Press Club, 12 May 1998.

Has Nike Done It?

What Should Nike Do?

Table 1. Has Nike kept its promises?

2. Raising the Minimum Age for Factory Workers

Phillip Knight, National Press Club, 12 May 1998.

Has Nike Done It?

What Should Nike Do?

3. Involving Non-government Organizations in

Phillip Knight, National Press Club, 12 May 1998.

Has Nike Done It?

ways in which he believed Knight’s promise was being met:

What Should Nike Do?

4. Expanded Education Programs

Number four, we are expanding our education programs near our

Phillip Knight, National Press Club, 12 May 1998

Has Nike Done It?

What Should Nike Do?

5. Increased Micro-enterprise Loan Program to a

Phillip Knight, National Press Club, 12 May 1998.

Has Nike Done It?

What Should Nike Do?

6. Funding University Research and Open Forums

And number six, we’ll fund industry research—we’ll fund university

Phillip Knight, National Press Club, 12 May 1998.

Has Nike Done It?

What Should Nike Do?

1. Overcoming the Culture of Fear: Protecting

Phillip Knight, Speech to the National Press Club, 12 May 1998

Letter from Labor Rights Groups to Phillip Knight, 15 March 2000

The June Textiles Factory in Cambodia

The Sam Yang Factory in Vietnam

Nike and Suppression of Dissent in Vietnam: The Joseph Ha Letter

2. Regular, Transparent, Independent and

Fair Labor Association

Phillip Knight, National Press Club, 12 May 1998

The auditor skipped entirely the sections on Freedom of Association

In the Chinese factory:

These problems go beyond the level of poorly trained auditors and

Despite Nike’s claim that PwC’s monitoring program is independent, it is more

Fair Labor Association

A Relationship of Trust Between Workers and Monitors