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Katie S. Rexrode
Dr. William Abshire
PHIL 320E-01
10 December 2015
Case Analysis
V
When examining the case of “Nike’s Defense of Its Vietnamese Factories,” it is
important to understand that 150 Nike factories are subcontracted out and employee over
450,000 workers. A 1998 investigation of Nike labor practices in Vietnam revealed that Nike has
little control over the internal labor conditions. The contracts that Nike has established span over
50 countries, which incorporate many cultural differences and prevent American business and
management practices from being enforced. The Nike Company has a code of conduct in place
to prevent harassment and abuse of these sorts, but local contractors consistently are in violation
of it.
In this specific case, Nike factories in Vietnam are the focus of investigation, therefore
specific facts about business dynamics in Vietnam are also important to highlight. The single
largest employer in the country of Vietnam is Nike; the factories are run by South Korean and
Taiwanese contractors. The Nike products account for five percent of the country’s total exports.
If Nike shut down Vietnam factories, 35, 000 people would become unemployed in one of South
East Asia’s poorest economies; the rural unemployment of Vietnam is at 27%. As a country,
Vietnam investigates practices of foreign investors very closely and has some of the toughest
laws aimed at protecting workers, including minimum wage requirements, overtime limits and
allowance of strikes.
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The two specific factories discussed were Ho Chi Minh City and Sam Young. A close
investigation of the Ho Chi Minh factory found that the local supervisors were using abusive and
humiliating practices to punish the employees. The statistics from the Sam Young factory state
that workers were paid $1.84 per day, which is equal to $48.00 per month. The minimum wage
in that area and industry is $45.00 per month. This pay would allow workers to meet the basic
needs of food shelter and is a competitive wage compared to other clothing and shoe
manufacturers in the region. The yearly earnings total of $600 at the Sam Young factory is half
the average income in the Ho Chi Minh area, but it is nearly four times the annual earnings of
workers in rural regions. In 2001, 96% of workers claimed that they could not meet basic needs
with their earnings.
In response to all of the negative publicity, Nike created a labor monitoring department
and translated their code of conduct into eleven different languages. The local owners of the Sam
Young factory took action by issuing a 10 point plan, which included an electing new union
leaders, reviewing labor contracts, improving working conditions, and raising wages by eight
cents per day. An issue arose in 1998 when San Francisco activist, Marc Kasky, sued Nike for
false advertisement, stating that deliberate false statements were aimed at misleading the public
as to how workers were treated in foreign factories, to protect their image and maintain sales
numbers. With the California Supreme Court ruling in favor of Kasky, the case was to be up for
review by the U.S. Supreme Court. According to Nike’s website, the U.S. Supreme Court defines
commercial speech as “speech that does no more than propose a commercial transaction.” With a
ruling by the U.S. Supreme Court in favor of Kasky, corporate information would not be so
freely released because of fear of lawsuits and negative press from companies, as Nike is
experiencing.
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A
In the case, it mentions that Vietnamese labor laws are strict to protect workers. It would
be interesting to know of specific examples of Vietnamese labor laws. A Fisher & Phillips
Attorneys at Law site, entitled Cross Border Employer, had some helpful information. While I
could not locate any labor laws specific to the Nike case, these exemplify their employeefriendly labor laws.
Vietnamese employers are required to give twelve annual paid leave days to employees
working twelve months of the year, and a minimum of fourteen days when the employee works
under hazardous, dangerous, or strenuous conditions. Employment contracts may be made orally
or written through the first three months of employment, but after three months, the contract
must be in writing and comply with legal requirements. Paid personal leave is available for a
wedding, the wedding of a child, or the death of a parent, spouse, or child. Women are entitled to
four to six months of maternity leave with full salary pay.
It would also be important to know the legal definition of false advertising. On the US
Legal website, false advertising is legally defined under the Federal Trade Commission (FTC) as
“Advertisements that make representations that the advertiser has no reasonable basis to believe,
even if the representations turn out to be true.” Only the FTC can enforce the law under this
definition. The Lanham Act allows private parties to file a complaint for false advertising. To do
so, consumers and competitors must prove that the advertiser made false statements of fact,
deceived or had the capacity to deceive a substantial segment of the target market, had material
deception, sold the falsely advertised product in interstate commerce, and the plaintiff was
injured or was likely to be injured as a result.
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L
In the case, Nike’s upper level managers are operating at a Kohlberg stage five. At stage
five, the main focus is on upholding contracts and laws. In the Vietnam factories, the employees
are paid slightly above minimum wage and are working under contract, as the Vietnamese labor
laws state that they must do. The theory of less restrictive contractarianism is when contracts are
followed strictly by only doing what is stated, nothing more. Less restrictive contractarianism is
exemplified because the managers are following the contracts from afar, with little control, and
operating by doing what they believe is legal. Their actions exemplify distributive justice,
because they believe that the wages being paid to Vietnamese workers, depending on the area,
allow them to gain access to a proper share of the necessities to live, including food, water, and
shelter. Schlossberger’s Dual Investor Theory is used by Nike upper level management, as well.
This theory outlines that businesses exist to serve investors, which is by making a profit, and
serve society through providing products to customers, jobs for employees, orders from
suppliers, and an overall benefit to the communities in which the company exists.
After the allegations were made against the Nike Company, the upper level management
began working from different principles and theories than above. They are operating on the
theory of egoism when they treated the negative press as more of a public relations issue than a
human resource issue. Nike is concerned with preserving their image as a socially responsible
company to avoid losing any sales from the active public who are concerned about mistreatment
of Vietnamese factory workers. The principle of benevolence is demonstrated, because Nike
actively responded by translating the code of conduct into eleven different languages, replacing
managers in the Vietnam factories, holding union elections, and giving most workers raises. Nike
management acts on the principle of substantive justice by promoting positive social
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relationships and a healthy community for employees. John Rawls’ principle of communitive
justice is demonstrated, because Nike is using this opportunity to make efforts to ensure that
workers in all of their 150 factories in fifty different countries are treated with inherent dignity
and worth, respect.
The local supervisors of the Vietnamese factories are operating on the principle of utility
meaning that their actions are judged by the bottom line. Consequences are primary, so that if
abusive punishments used by managers result in greater productivity, they will continue to be
used. These actions represent the principle of double effect, because there are two consequences.
The positive is that greater production goals are met, but it results in not showing care in the
relationships with employees in the factory. The supervisors are acting at Kohlberg stage four
because they working to avoid censure from Nike’s upper level management in order to keep the
factory open. John Rowan states that employee rights should focus on employees as persons,
having goals and interests. The local supervisors violate Rowan’s principle by treating the
factory workers as means to meet production goals and allowing harassment and being abusive
to workers. The supervisors are working under less restrictive contractarianism, because they
follow the Vietnamese labor laws as a contract with no further ethical commitment.
Marc Kasky brings the charges against Nike for false advertising acting from Kohlberg’s
stage six, meaning he is upholding his own principles and showing mutual respect for all
persons, consumers and workers alike. He is also acting from Gilligan stage six by showing care
in abstract relationships with all consumers and the Asian workers, of which he does not
personally know. Kasky is operating on the principle of justice; the reason is that he wants to
ensure the consumers of Nike products are not being lied to and that workers in Nike factories
are being treated appropriately, as well. He is acting out of integrity, because his personal
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commitment to moral life caused his to bring the case against Nike for lying to society of the
improvements in the Vietnamese factories. However, his actions are in violation of act
utilitarianism, because by bringing the case to court against Nike, it could cause other companies
to no longer release similar information to the public. Nike could also decide to cease production
in Vietnam, leaving 35,000 Vietnamese without jobs. Neither of these options would result in the
greatest good for the greatest number, more harm than help may come from his actions.
U
Kasky and Nike’s upper management are in ethical conflict when considering the
accusations made by Kasky and management’s responses. Nike managers are acting from stage
five Kohlberg, while Kasky is acting from stage six. Nike is concerned with upholding the
contract and following the rules, while Kasky has the general interest of all Nike stakeholders
and Vietnamese factory workers in mind.
The principle of utility, specifically act utilitarianism, is in conflict with itself. The
greatest good for Vietnam would involve maintaining the factories with some improvements to
working conditions. Although, to bring too much negative publicity against the Vietnam
factories would not result in the great good, as Kasky is working for. If Nike chose to shut down
the Vietnam factories, in hope of eluding damage to their image, the Vietnam economy would
suffer.
In response to poor working conditions, Nike upper management reacted with
benevolence by actively responding to the needs of Vietnamese factory workers and improving
condition. However, local supervisors continue to act according to non-malevolence, because
they are ignoring the ethical principles to ensure the job gets done, regardless of how workers are
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treated. While Nike management acts on the principle of substantive justice, this is in conflict
with the principle of non-malevolence.
E1
The Supreme Court should rule in favor of Nike and protect the right of free speech for
corporations to defend themselves and their practices.
S1
By the Supreme Court ruling in favor of Nike, it will uphold the idea that corporations
have free speech rights to defend themselves and their practices without fear of being sued. This
ruling will support the principle of act utilitarianism. The reason is that long-term corporations
will not have to be secretive with information about the company and its practices. With an open
line of communication many lawsuits can be avoided and all stakeholders and shareholders will
have appropriate access to information from the corporations. Also, the public audience would
be able to feel confident in purchasing Nike products once again. If Nike customers were to
begin to boycott the brand for this reason, many factories may have to be shut down because of
lost sales. The shutting down of factories, especially in Vietnam, would be detrimental to the
economies in which they operate. 35,000 Vietnamese would lose their jobs and the economy
would lose five percent of its exports. In order to produce the greatest good for the greatest
number, the courts should rule in favor of Nike in this case.
This resolution would place the Supreme Court and Nike operating at Kohlberg’s stage
five. The contract would be upheld by the highest judicial court in the United States to protect
the rights and speech of organizations. The ruling would protect corporations and company
executives from the constant fear of being sued for speaking out to defend themselves. Although
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the statements made may not always be completely factual, protection of this right would
demonstrate the government upholding their laws to protect businesses operating in the U.S.
Both principles of substantive and commutative justice would be demonstrated with this
resolution, as well. Substantive justice is concerned with the promotion of a healthy community
and end result. This could apply to the community of shareholders and stakeholders in all
varieties of corporations and the result of sharing information with these audiences. All persons
should have access to direct information from corporations and their executives regarding
business practices, product information, and defense of statements made by other media.
Commutative justice indicates to use the veil of ignorance and unbiased fairness to view the
solutions. This ruling would be equally beneficial to Nike and all other business that produce a
good or service to serve society and its stakeholders. At some point, all types of businesses could
be questioned on their management practices or production means. This resolution would allow
all companies to respond honestly and openly to questions and to defend themselves when false
statements are made. Commutative justice would encourage equal treatment and fairness to all
companies put in similar situations.
C1
This resolution is not acting from the highest ethical stage of Kohlberg, stage six, because
this ruling could in some ways permit corporations to give false information to the public in
hopes of upholding their image. This is what Nike is accused of doing. In violating the highest
Kohlberg stage of ethical development, it does not promote mutual respect for all persons.
This decision violates the principle of duty ethics, which states that ethical persons are to
act in accordance to their moral duty without thoughts of self or group interest. Morally, this
ruling is not sound because it may encourage companies to tell extra information or not the
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complete truth to sound more responsible to stakeholders and shareholders. The companies
would be speaking out of the best interest of the group when cases like the Vietnam factory
conditions arise in the mass media. However, the statements made in response would be focused
on the interest of the company and maintaining socially responsible image among customers,
society, and shareholders.
Kasky’s actions, which were motivated by duty ethics, would also be violated. When
Kasky decided to act and speak out against Nike’s false advertising, he acted out of the moral
duty that all stakeholders and shareholders in the Nike Company should be given honest
information about the conditions in Vietnamese factories. Kasky did not act out of self-interest;
he acted because he was concerned for the greater society and Vietnamese employees of Nike.
Also, he hoped to encourage Nike to act morally and not lie about the Vietnam factory working
conditions and the impact of their improvements or lack thereof. While Kasky operated strongly
from the principle of virtue ethics, this resolution is in violation of his efforts.
This resolution would also be in violation of prima facie duties, similar to the “common
sense notions of right and wrong” under the explanation of Sir W. D. Ross. He states that the
duties include fidelity, reparation, gratitude, distributive justice, beneficence, self-improvement,
and nonmaleficence (Ross 32). Specific to this resolution, fidelity and reparation are violated.
Fidelity is the requirement to be honest, which will not always be the case when corporations are
allowed free speech in the media and publications. Reparation says that when someone is
wronged, there is a moral obligation to make up for it or work to repair things. The resolution
does not enforce working to make up or change things, but reporting that the company did, even
without evidence. In these ways, the prima facie duties principle direct goes against what this
resolution is calling for.
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E2
Nike should educate Americans on the Vietnamese living and working conditions and
how their factories are crucial to so many families.
S2
This resolution is supported by the principle of utility. The bottom line is that 35,000
Vietnamese citizens need the jobs that they have in Nike factories to survive and provide basic
necessities for their families. With Vietnam being one of the poor countries in South East Asia,
these factories provide much needed jobs to suffering families. Though the treatment by local
supervisors to employees may not be ethically sound, the bottom line is that the Vietnamese
citizens would have an extremely poor quality of life and be living on the streets if the jobs in the
Nike factories were to be removed.
In the Sam Young factory, Nike pays a monthly wage of $48.00. This is $3.00 or about
7% higher than the law states is the minimum wage. This fact is showing that the Nike Company
is acting on distributive justice. While they are acknowledging the minimum wage law, it is also
recognized that the minimum wage may not be able to provide basic needs to employees and
their families, so there is a slight increase. Although Nike managers have little direct control of
all of the foreign factories, they do not only do as the law says. The eight cent increase in wages
after the publicity also exemplifies that Nike upper level managers operate on the principle of
distributive justice.
This resolution would allow Nike upper management to act on the principle of feminist
ethics. Feminist ethics means that people are treated subjectively, rather than objectively. It is
obvious that the employees in the Vietnam factories have responsibilities outside of the
workplace. The division between employee and householder is to be broken. By educating
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Americans on the Vietnam living conditions, they will realize that this could be the most stable
aspect of each of their lives. The conditions in the factories may be horrible compared to
American standards but wonderful compared to the other factories and conditions in the cities
and rural areas of Vietnam. By choosing this resolution, Nike upper management and Americans
buy their products would realize that the jobs in Nike factories are what allows the Vietnamese
people to fulfill the needs of their needs and those of their families.
This resolution would be acting from ethical stage six of Kohlberg and Gilligan’s stage
six. Kohlberg stage six would be demonstrated, because the Nike Company would be showing
respect for its stakeholders by educating them and respect for all factory workers by defending
their jobs and quality of life. This would uphold the conscience of customers buying Nike
products knowing that the person who worked in the factory making the shoes was able to keep
their family warm, dry, and fed because of the job that the Nike factory provided. This ties in
with Gilligan stage six by showing care in abstract relationships. Although the consumers
purchasing Nike shoes and clothing do not personally know or see the Nike employees, they care
and will be satisfied to know that the employees are being paid a living wage. This resolution
satisfies the desire of stakeholders to know that the Nike factory employees are able to take care
of themselves and their families.
This resolution is supported by the theory of more restrictive contractarianism. This means
that the information is viewed without swayed or biased opinions. The veil of ignorance is used
so that roles can be randomized and preference is given to the party whose well-being is being
examined. The reason that this principle applies is that with the information given to American
stakeholders in Nike, they will be able to apply the veil of ignorance and view the importance of
the jobs in Vietnam factories as the actual employees do. These employees need the jobs with
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Nike in order to maintain an average quality of life and are thankful for the jobs they have, even
though some of the conditions are not desirable in comparison to American factories.
C2
This resolution is acting from a level two, stage three Kohlberg. Because this is a low
ethical level, this is a conflicting argument against this resolution. Stage three is actions to obtain
approval, to fit-in. Nike would spread this awareness of Vietnam conditions to obtain approval of
their stakeholders, most importantly customers. If educational media was shared about the
scarcity of jobs in Vietnam, Nike customers would approve of the factories and be more driven
to purchase Nike products, instead of boycotting them.
This resolution results in the principle of double effect. The positive consequence of
Vietnam employees working in Nike factories is that a living wage is made and allows for basic
necessities to be fulfilled. The negative consequence is that some local supervisors are abusive
and harassment is happening inside factories and not being properly addressed. This resolution
would produce a more positive image for Nike factories in all fifty countries, but it does not
address putting an end to the abuse or harassment.
Substantive justice is also violated when examining this resolution. The goal of mending
and supervising the creation of a healthy community in the Vietnam factories is not of
importance in this option. Rather, the Nike Company would work to focus stakeholders on how
poor the quality of life would be if Nike factories were not present in the area. The facts that five
percent of exports would be lost and 35,000 workers would be out of jobs are highlighted in
order to dim the facts that a healthy community free of harassment and abuse is not present.
The resolution is in violation of Rowan’s definition of employee rights in the workplace.
This educational outlet in order to help consumers understand Vietnam living and working
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conditions would not be focusing on employees as persons, but rather as a generalized group.
The goals and interests of the factory workers would not be considered. The main problem here
comes from the fact that Nike’s Vietnamese, and workers in other countries, are treated as means
to reach a further goal of making profit for the corporation as a whole.
E3
Nike should raise the wages of all Vietnam factory workers by 10%.
S3
This resolution is supported by the principle of distributive justice. With an increased
wage of approximately $4.80 per month in the Sam Young factory, employees would be better
equipped by their employer to supply basic needs to themselves and their families. As the 2001
study shows, 96% of employees said that the current wage was not enough to meet basic needs.
This would allow the workers equality of condition, that their necessities could be sufficiently
met.
The ethical principle of benevolence is strong in this resolution. Benevolence is the
acknowledgement that respecting persons implies one must actively respond to their needs. In
some cases it is required to help and act on part of those that are not able to help themselves. By
raising the minimum wage, Nike would be actively responding to the needs of Vietnam factory
employees who are committed to producing Nike products, but are not able to completely
provide for their own or their family’s basic needs. Although Nike upper level managers have
little control over conditions in these factories, they could show respect and appreciation by
increasing wages, something that they do have control over.
The principle of retributive justice is also represented in this resolution. Retributive justice
is the action of giving persons what they deserve in alignment with their actions. Because Nike
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seems to be pleased with the production capabilities and skill of Vietnamese factory employees,
they should reward them for their diligent work. A small increase in pay is incomparable to the
amount of pay different if Nike were to relocate these factories to America.
Act utilitarianism is an ethical theory present in this resolution, as well. Vietnam factories
are a unique situation because the country has many labor laws in place to protect its employees;
however, Nike factory supervisors are able to use abusive punishments and harass employees in
the workplace. Because Nike has little control over supervisors, their ability to increase wages
can be used to encourage employees and thank them for their dedication and hard work in the
factories. This change would serve to provide greater happiness for all Vietnam factory
employees.
If Nike upper managers were to choose this option, it would show them operating from a
stage six Kohlberg and Gilligan, as well. First, there would be mutual respect shown for all
Vietnam employees and their families. The moral principles discussed above would be upheld,
and consciously, managers, supervisors, and shareholders would be satisfied to know that the
needs of employees working endless hours for Nike are fulfilled. This resolution is ethically
advanced according to Gilligan stages, also, because care is being shown in the abstract
relationships that Nike upper level managers have with their Vietnamese employees.
C3
This resolution could be taken in violation of procedural justice, because the Vietnam
factories would be treated favorably by Nike upper level management. To demonstrate
procedural justice, fair and consistent application of polies must be followed. To the other 49
countries with Nike shoe and clothing factories, this raise in wages for Vietnam factories may
same unfair and inconsistent with Nike polies.
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There are both negative and positive consequences of this resolution, making this an issue
of double effect. The positive consequence would be increase of wages, and therefore quality of
life of Vietnam factory workers. The negative consequence would be decreases in profit for
shareholder, which could lead to increases in prices for consumers of Nike goods. Since Nike
brand serves a luxury market, this increase in price could have little to no effect on their sales.
Also, because the company is large and successful, their profits could support the wage increase.
It would be insubstantial, in comparison to the profits made by the company.
Conclusion
In conclusion, the best resolution to the Nike case is raising the wages of all Vietnam
factory workers by 10%. This option is supported by the principles of distributive justice,
benevolence, and retributive justice. Nike upper level managers should come to appreciate the
hard work of the Vietnam employees by responding to their needs, providing equality of
condition, and rewarding them with wage increases. Across the other factories, the action of
Nike could violate procedural justice by only raising Vietnam wages. Although they are paid the
least, it would be a positive outcome for Nike to also evaluate the wages of employees in other
factories in different countries. The principle of double effect is strong because with increasing
wages, shareholders profits could decrease and prices of Nike goods could rise. If acting from
the highest Kohlberg and Gilligan ethical stages, this resolution should be chosen over the others.
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Works Cited
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New Jersey, 2004. Print.
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Joseph, Celia. “Vietnam’s Employee-Friendly Labor Laws.” Web Blog Post. Cross Border
Employer. Fisher & Phillips Attorneys at Law. 17 May 2011. Retrieved: 3 December 2015.
Rowan, John and Samuel Zinaich, Jr. eds. Ethics for the Professions. Belmont, California, 2003.
Print.
Rowan, John R. “The Moral Foundation of Employee Rights.” Ethics for the Professions. Eds.
John Rowan and Samuel Zinaich, Jr. Belmont, California, 2003. 90-96. Print.
Schlossberger, Eugene. “The Moral Duties of Organizations: Dual-Investor Theory and the
Nature of Organizations.” Ethics for the Professions. Eds. John Rowan and Samuel
Zinaich, Jr. Belmont, California, 2003. 173-180. Print.
“Sir W.D. Ross.” Ethics for the Professions. Eds. John Rowan and Samuel Zinaich, Jr. Belmont,
California, 2003. 31-34. Print.