Governance is hard work. And it never ends. What makes this case especially troublesome is that Nike's own enhanced monitoring, introduced a decade ago, confirmed the workers' claims. The problem illustrates the difficulty companies have in policing this kind of behavior, even when they are as powerful a brand as Nike.
In this case, the product is made by a subidiary, Converse, which is known for its fashionable 'throw-back' Chuck Taylor high top sneakers. Converse was acquired by Nike four years ago and outsources production to Taiwanese companies producing in Indonesia. The demands of quality, profitability and ethical work practices are sometimes too much for some producers. Or they just do not care. It is worth noting that the company responsible for worker suicides in China was also Taiwanese. That may or may not be a coincidence, but the web of interlocking companies, there far-flung operations, response to differing laws and cultural attitudes all contribute to the problem of lax or confused oversight.
This sort of report contribute's to Nike's brand problem. Students and younger consumers like to wear logos that are considered hot. Nike's dominance reduces its appeal for this demographic. Allegations of abuse make it that much easier for buyers to choose a competitor's products. Nike's culpability in this case is still unclear. What is true - as it is for every company with a problem - is that you own your business partners' abuses and their reputation reflects on yours.
Steven Wright reports in the Huffington Post via AP:
Workers making Converse sneakers in Indonesia say supervisors throw shoes at them, slap them in the face and call them dogs and pigs. Nike, the brand's owner, admits that such abuse has occurred among the contractors that make its hip high-tops but says there was little it could do to stop it.
Dozens of workers interviewed by The Associated Press and a document released by Nike show that the footwear and athletic apparel giant has far to go to meet the standards it set for itself a decade ago to end its reliance on sweatshop labor.
That does not appear to explain abuses that workers allege at the Pou Chen Group factory in Sukabumi, some 100 kilometers (60 miles) from Jakarta – it didn't start making Converse products until four years after Nike bought Converse. One worker there said she was kicked by a supervisor last year after making a mistake while cutting rubber for soles.
"We're powerless," said the woman, who like several others interviewed spoke on condition of anonymity out of fear of reprisals. "Our only choice is to stay and suffer, or speak out and be fired."
The 10,000 mostly female workers at the Taiwanese-operated Pou Chen plant make around 50 cents an hour. That's enough, for food and bunkhouse-type lodging, but little else. Some workers interviewed by the AP in March and April described being hit or scratched in the arm – one man until he bled. Others said they were fired after filing complaints.
"They throw shoes and other things at us" said a 23-year-old woman in the embroidery division. "They growl and slap us when they get angry.
"It's part of our daily bread."
Mira Agustina, 30, said she was fired in 2009 for taking sick leave, even though she produced a doctor's note.
"It was a horrible job," she said. "Our bosses pointed their feet at us, calling us names like dog, pig or monkey." All are major insults to Muslims. Indonesia is the world's most populous Muslim nation.
At the PT Amara Footwear factory located just outside Jakarta, where another Taiwanese contractor makes Converse shoes, a supervisor ordered six female workers to stand in the blazing sun after they failed to meet their target of completing 60 dozen pairs of shoes on time.
"They were crying and allowed to continue their job only after two hours under the sun," said Ujang Suhendi, 47, a worker at a warehouse in the factory. The women's supervisor received a warning letter for the May incident after complaints from unionized workers.
The company's own inquiries also found workers at the two factories were subjected to "serious and egregious" physical and verbal abuse, including the punishment of forcing workers to stand in the sun, said Hannah Jones, a Nike executive who oversees the company's efforts to improve working conditions.
"We do see other issues of that similar nature coming up across the supply chain but not on a frequent level," she said. "We see issues of working conditions on a less egregious nature across the board."
Nike, which came under heavy criticism a decade ago for its use of foreign sweatshops and child labor, has taken steps since then to improve conditions at its 1,000 overseas factories. But the progress it has made at factories producing gear with its premier "swoosh" logo is not fully reflected in those making Converse products.
An internal report Nike released to the AP after it inquired about the abuse show that nearly two-thirds of 168 factories making Converse products worldwide fail to meet Nike's own standards for contract manufacturers.
Twelve are in the most serious category, indicating problems that could range from illegally long work hours to denying access to Nike inspectors. A Nike spokeswoman said the company was not aware of physical abuse occurring at those factories. Another 97 are in a category defined as making no progress in improving problems ranging from isolated verbal harassment to paying less than minimum wage. A further six factories had not been audited by Nike.
Nike blames problems on pre-existing licenses to produce Converse goods that it says prevent the parent company from inspecting factories or introducing its own code of conduct.
It says the situation is further complicated because the license holders themselves usually farm out the production work to a subcontractor. Most of the agreements have come up for renewal in the past five years. But it is only the past two years that it has made a concerted effort to incorporate Converse factories into the monitoring program that applies to Nike factories.
"We have been working every time we can to renew those agreements or change those agreements or to cease those agreements and to ensure that when we do new agreements we get more ability to influence the licensee and their subcontractors much more directly," Jones said.
Some corporate experts question whether the company is doing all it can.
"I simply find it impossible that a company of the size and market power of Nike is impotent in persuading a local factory in Indonesia or anywhere else in meeting its code of conduct," said Prakash Sethi, a corporate strategy professor at Baruch College at the City University of New York.
Critics of outsourcing manufacturing to the lowest-cost countries say it keeps prices down but allows apparel, electronics and toy companies to reduce their accountability for the conditions in such factories. Even as concern about sweatshop labor has grown, some contractors have simply moved operations to more remote areas, farther from the prying eyes of international and local watchdogs.
Indonesia is Nike's third-largest manufacturing base, after China and Vietnam, with 140,000 workers at 14 contract factories. Of those, 17,000 produce its Converse line at four factories.
Pou Chen, the largest of the four Converse factories, is located in a hilly city where the minimum wage is well below the national average. Sukabumi can only be reached by car – a five-hour journey across bumpy, winding roads. The plant started making Converse products in 2007.
The Taiwanese contractor said it fired one supervisor after being told workers had spoken to The AP earlier this year.
Others involved in mistreatment, however, have been allowed to keep their jobs, according to Pou Chen.
Nike says the factory is developing programs to teach managers cultural sensitivity and leadership skills.
It says it also is closely monitoring the PT Amara factory.
After years of criticism over its labor practices at factories abroad, Nike in 2005 became the first major apparel company to disclose the names and locations of hundreds of plants that produce its sneakers, clothes and other products.
It admitted finding "abusive treatment" – either physical or verbal – in many of the Nike plants. The complaints ranged from workweeks that exceeded 60 hours to being forbidden to go to the bathroom.
The Beaverton, Oregon-based company has since invested heavily in training managers and more closely monitoring their activities.
Nike has not published the locations of all factories making products for affiliate companies, which includes Converse, but plans to by the end of the year.
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