Nike and Child Labor in Pakistan

IMS3310.005-International Business
Team 6- Case Project
November 2015
Adrian Hovelman
Alex Arriaga
Darrell Bowdon
Mike Lester
Morgan Hewett
Sterling Utley
Ryan Gower

When the word child labor is mentioned, people tend to think of ancient history,
as something that no longer is relevant in our present day society. Unfortunately, even

though we have harsher laws and regulations than ever to prevent child labor, it still
very much exists and according to the International Labor Organization(ILO), affects
more than 215 million children who are forced to work as means of survival or to
support their families. Child labor is defined as work that deprives children of their
childhood, their potential and their dignity, and that is harmful to physical and mental
development. Work that interrupts a childs schooling by not allowing them to attend or
forcing them to leave early is also considered child labor. The number one cause of
child labor is poverty and the industries where child labor is most persistent are
agriculture, forestry, and fishing.
Nike is the worlds leading supplier of athletic shoes and apparel. Named after
the Greek goodness of victory, Nike. It was originally founded as Blue Ribbon Sports by
Bill Bowerman and Phil Knight in 1964. Currently employs around 48,000 workers and
had more than $25billion in revenue on 2013
In 1996, Life magazine showed a now famous picture showing Nike involved in
child labor. The photo showed a twelve year old boy, Tariq, stitching together a Nike
soccer ball in Pakistan. Shortly thereafter, it was found that Tariq and other children
were only being paid 60 cents for stitching Nike soccer balls all day. The picture raised
outrage from the public, particularly from activists across North America not only
because it showed child labor, but because it showed him working in such terrible
conditions. This was not the first time Nike had been under scrutiny from the public for
similar situations regarding poor work environments being found in Indonesia, China,
and Vietnam. This led to a huge outrage by the general public across the United States.
People were protesting at Nike outlets holding up signs and expressing their anger at

Nike for what they believed to be an immoral act. Nike soon responded by making a
code of conduct that the companies making their merchandise must follow. Nikes newly
imposed code of conduct requires the following:

Forcer labor is strictly forbidden. The contractor is responsible for

employment eligibility.
Employees must be of age 16 or older.
Contractors cannot discriminate on the basis of gender, race, religion, or

any other status protected by law.

Contractors must respect the rights of employees to freedom of

association and collective bargaining.

Employees must be compensated at least the countrys minimum wage
and provided legally mandated benefits, including holidays and leaves,
and statutory severance when employment ends. There are no

disciplinary deductions from pay.

Contractors cannot subject employees to abuse or harassment either
physically, sexually, or verbally. Employees are to be treated respectfully

and with dignity.

Employees cannot be forced to work over 60 hours in a week. Overtime

hours must be consensual.

Employment complies with the standards of the country they are in.
The workplace must make sure the facility is clean and safe.
Environmental impact of the facility must be minimized.
This code must be fully implemented by the contractor in order to stay in
business with Nike.

After implementing their code of conduct, Nike received high praise by activists
and the general public alike. However, there would still be consequences of this deal. In
2006, a company in Pakistan called Saga Sports was caught violating Nikes Code of

Conduct. Nike felt that after already receiving such backlash from similar incidents, it
could not afford for Sagas Sports violations to go without repercussions. As a result,
they terminated their contract with Saga Sports. Nikes actions led to a lot of praise in
the West as it was viewed as an opposition to the oppressive factory environments
found in the East. However, back in Sialkot, where Saga Sports operates, thousands of
jobs were lost in a country that was already dealing with hardships due to a weak
economy and a civil unrest. An estimated 25,000 people in Sialkot were affected by
Nikes decision to seize business with Saga Sports.
Despite Nikes decision to end its business relationship with Saga Sports, there
have still been numerous reports of Nike being involved with factories and contractors
that violate humane working conditions. Some of these reports include forced overtime,
sexual harassment, children as young as fifteen working 70 hours a week, and
underpaid - all direct violations to Nikes Code of Conduct. Nike makes most of its items
overseas and even during its humble beginnings in 1960s, it started manufacturing
shoes in Japan, which was considered a third world country at that time. Since then,
Nike has gone from nation to nation, leaving when the standards of living became too
high to make manufacturing profitable.
To combat child labor in Pakistan, The Sports Goods Foundation India was
launched by the Federation of Sports Goods Industry and endorsed by FIFA. The goals
of the organizations are to improve the working conditions for adults and removing
children from having to work. Not to stay behind, Nike created the Fair Labor
Association. The Fair Labor Association combined different companies with human
rights and labor representatives to establish independent monitoring of the code of

conduct. In 1997, the International Labor Organization, UNICEF, and the Sialkot
Chamber of Commerce and Industry all signed the Atlanta Agreement, with the main
goal of combating high rates of child labor in the Pakistani football making industry.
Finally, in 2005, Nike became the first in its industry to publish the complete list of
factories it has contracts with. Today, Nike is taking a more proactive role in ending child
labor by auditing its factories approximately 600 times and giving them a score from 1100.
As Nike demonstrated when cutting ties with Saga Sports after multiple violations
regarding child workers, terminating relationships with suppliers when incidents related
to child labor arise is both ethical and fair for multinational companies. Not all forms of
child labor are bad. In fact, United Nations even states, childrens or adolescents
participation in work that does not affect their health and personal development or
interfere with their education, is generally regarded as being something positive. The
problem arises when the children do not have access to education and depend heavily
on heavy manual labor to survive. Children who are exposed to difficult working
conditions suffer life-long disabilities and have shorter life expectancies. The
government where a child lives should be the one responsible for guaranteeing children
have the basic necessities to survive and learn the necessary skills to help the next
generation.
On the other side of the coin, terminating suppliers because of child labor can be
unethical because by using child labor, companies are giving children living in extreme
poverty a chance to make some money to survive. In certain countries, the
governmental support is minimal and sometimes the government in not involved at all in

eradicating poverty. When this is the case, children and families have extremely limited
options and must recur to child labor to earn a living. Another advantage of suppliers
using child labor is keeping costs down. The average consumer is price sensitive and
any increase in costs can lead to the consumer to seek to buy the same product
elsewhere. As a result, using child labor can keep costs down low enough for Nikes
costumers to remain satisfied.
Another issue when it comes to restricting and forbidding child labor in
undeveloped third world countries is children may in turn be forced towards more
dangerous paths such as sex trade or other criminal activities as a way to earn money
and survive. It has been argued that it is better to have a child working and earning a
living in an honest job than having to resort to stealing and becoming a criminal to
survive. A possible solution to this problem would be not to make child labor illegal in
countries such as Pakistan and India, where child labor is a big problem but to make
laws forcing factories and suppliers to provide an academic education for a couple
hours a day in a school like setting.

Many parents in economically deprived areas allow their children to work in order
to survive. International companies are divided on the subject as to whether they should
support this or not. In countries such as Pakistan, there are many elders and disabled
adults who are not able to work due to fiscal limitations. It is also common for these
people to need urgent medicines and extra care to tend to their medical needs. As a
result, these parents have to depend on their children to work and provide for the family.
These parents encourage their children to work and the children also willingly work to

be able to provide to their families. When an international company does not support
this and does not hire a children even though they have their parents consent and
blessing, they can potentially be signing a death warrant for these families.
International companies can provide kids with a livable minimum earning wage and
work closely with suppliers to form an optimum workplace not only for them, but for the
kids. This would be a win-win situation for both international companies and to child
labor- the only issue would be if customers are willing and ready to pay a slightly higher
price for these goods. However, it can be argued that since child labor is illegal in United
States, then American companies should follow the US laws on child labor and not hire
children even though they have their parents consent.
As stated in the beginning of the essay, the number one reason for child labor is
poverty. International companies can play a huge role rectifying the problems regarding
child labor. The biggest approach that can be made by international companies is not to
stop working or associating with suppliers that use child labor. Instead, they should
focus in turning child labor into child work, which refers to a positive participation of
children in an economic activity, which is not detrimental to their health or mental and
physical development; on the contrary, it is a beneficial work, which strengthens or
encourages the child development. It allows a normal schooling and does not impede
the child from doing leisure activities or resting. Nike has taken some action in
rectifying child labor by signing various agreements to end child labor such as the
Atlanta Agreement, making a code of conduct, establishing a department tasked with
working to improve the life of factory workers, creating the Fair Labor Association, and
posting a complete list of factories and suppliers it works with.

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