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An Ethical Audit: Nike Controversy Report


There is little doubt that businesses should aim not only at reaping benefits but also following certain moral standards. However, the actual situation is far from being perfect. Ethics is sometimes violated, and both small and big companies might be involved in these issues. In this context, an ethical audit may be essential because it helps analyze the roots of the problem and identify probable solutions.

The purpose of the present paper is to examine Nike as the company that follows some principles of corporate social responsibility but fails to meet the ethical requirements in relation to its workers from the developing countries. Similar to many large corporations, Nike possesses factories in these regions, but the labor conditions de facto leaves much to be desired: in Indonesia, the employees have to overwork without any compensation.

In this essay, the context of the company’s behavior is given, and the situation is analyzed by means of four concepts, namely the Declaration of Human Rights approach, ethical fading, motivated and indirect blindness, and ethical culture assessment.

Context of Behavior

One of the most recognizable brands all over the globe, Nike is notable for its turnaround in terms of its behavior: the advancement in diversity and child labor rejection are positive tendencies. Still, the company is linked to sweatshops and found guilty of “numerous violations of requirements for reasonable working conditions in their production facilities” (Wong par. 3). While the headquarters and customer bases are situated in America, the vast majority of factories are located in Asia, where the costs of the labor force are significantly lower.

More than that, the workers frequently have to overwork without additional payment. The case of Indonesian workers is illustrative: in 2012, only after a year of difficult negotiations, Nike agreed to pay $1 million in overtime compensation to about 4,500 Indonesian workers because almost 600 thousand hours of overtime at the facility reportedly went unpaid over the previous two years (Ghosh par. 1-2). As a result, it is probable to state that Nike is not always compatible with the requirements of ethics.

The Situation Analysis

The Declaration of Human Rights Approach

First and foremost, one should underline that ethical values are not only connected with people’s consciousness but also institutionalized in different documents, the most remarkable of which is the Declaration of Human Rights. In this section, the main ideas pertaining to work and ethics are analyzed.

According to the text of the declaration, “everyone has the right to work, to free choice of employment, to just and favorable conditions of work and to protection against unemployment” (United Nations 6). In terms of the discussed problem, the most important issue is the definition of favorable conditions. It is hardly possible to consider regular overworking without extra payments fairly. As the people made their choice and started working for Nike, it implies appropriate working conditions.

Another statement put out in the declaration is that “everyone who works has the right to just and favorable remuneration ensuring for himself and his family an existence worthy of human dignity” (United Nations 6). Again, this principle is betrayed: workers were unable to receive what they had earned. Apparently, the consequences of this abuse of people’s rights were severe because the workers had to support themselves and their families.

The declaration also addresses the worker’s right to “form and to join trade unions for the protection of his interests” (United Nations 6). It was Serikat Pekerja National, the trade union representing workers at the PT Nikomas plant in Serang, Banten, province, that managed to obtain the compensation successfully (Ghosh par. 2). Thus, it is a perfect example of the influence of such organizations, and international protection guarantees their progress.

The tendencies pertaining to the international initialization of moral standards are ambiguous. On the one hand, their existence does not prevent companies and corporations from violating human rights – the multiple cases of underpayment, overwork, and lack of proper conditions prove it. At the same time, such documents may guide stakeholders and help them assert their rights by the opportunity to refer to declarations and other manifests as strong arguments.

Ethical Fading

This framework describes four key reasons for the causes of unethical behavior through the lens of psychology: l (Tenbrunsel and Messick 223). Applicable to the Nike executives, these ideas reflect the way the lack of ethical decisions is justified.

In relation to the language euphemisms, the company is likely to use terms that disguise the current state of affairs. For instance, the term “minimum term wages” appears neutral, but the fact that the indexes differ in different countries is unknown. While the minimum wage per hour in the USA was $7.25 in 2013, in Asian countries, it was $1.29 in Indonesia (Wong par. 4). Further, the slippery slope of decision-making ideas accounts for the induction machine when the approaches characteristic of the past appear applicable to today’s world just because they had been perceived as tolerable. In other words, inequality is justified because people tend to think in terms of old relationships.

The third aspect of the framework covers the errors in perceptual causation that can result in misconstrued judgments about moral responsibility (Tenbrunsel and Messick 229). Although the authors describe the focus on individuals rather than systems as one of the main causes of the lack of ethics in companies, it appears that the invert correlation is also possible. To put it bluntly, Nike concentrated on its benefit and the cheap labor market in Indonesia, not the needs of persons who worked for the company.

Finally, the constrained representation of ourselves is included in the list of mechanisms that make a substantial impact: any person perceives the world from his/her own perspective (Tenbrunsel and Messick 231). It means that Nike’s leaders failed to get into workers’ shoes and consider the situation from their point of view.

Overall, it is possible to explain the problems connected with ethics by natural inclinations. One of the most successful and experienced corporations in the world, the company should have overcome the ethical fading.

Motivated and Indirect Blindness

According to the model of five barriers to an ethical organization, motivated blindness often takes place. As the term implies, a person appears to be blind to situations that demand adherence to the rules of morality because there is some motivation. People might disregard their own unethical behavior or that of other individuals when it is in their interest to remain ignorant (Bazerman and Tenbrunsel 49). It was probably one of the causes of unethical decisions to make workers overwork because the leaders wanted more products without taking into account the people’s needs: the potential income became more important.

Another tendency is indirect blindness that occurs when third parties are engaged in some activities. The implementation of decisions is associated with this problem: a subordinate employee might only perform what is expected of him/her without considering the moral issues and analyzing the possible consequences of the unethical measures. In this regard, those who did not question the Nike policy concerning the overtime working and compensation were influenced by indirect blindness.

Both types of blindness are indicators for partners and customers. It partially explains why such cases sometimes result in favor of ordinary workers. Companies that want their clients to be loyal to the brands and look for partners should not only be a financial success but also demonstrate that they have a good reputation among the intended users and target companies. Consequently, Nike and the Indonesian workers managed to come to an understanding. From an ethical point of view, it was the right decision, and it probably will help avoid some future problems.

Ethical Culture Assessment

In the context of ethical culture, one of the most essential ideas is that the entire cultural system that incorporates formal and informal subsystems should be taken into consideration as long as a company aims at being a success (Trevino and Nelson 90). It means that cultures that do not draw attention to ethical issues are subject to changes; otherwise, they will hardly be able to hold their positions and develop.

Based on the idea that every person is essentially good, this approach promotes ethics as the formula for success and encourages the process of problem-solving in two dimensions, formal and informal, that can make a significant impact on a company (Trevino and Nelson 90). It is vital to demonstrate that the theoretical principles correlate with the actual policies and practices of a company: for instance, the value of diversity will remain unproven until there are enough minority managers and leaders.

Today, Nike has improved the situation and enhanced its image. As it is stated, the minority has become the majority within the company: white people add up to 48% of all employees while 52% are minorities (Frauenheim par. 1).

Overall, the company has taken many steps to improve the situation, analyzed the results of the audits, and treated the unethical behavior as a signal to investigate itself (Trevino and Nelson 91). As a result, ethical culture changes have brought positive novelties. Nevertheless, the information about the wages of workers is not accessible.


To sum it up, the analysis of Nike demonstrates that the company’s activities and ethical considerations are controversial. On the one hand, the recent past is marked with the tension between the company and the Asian workers because Nike did not provide proper compensation for overworking. However, the company has reviewed its culture and introduced innovations that have helped Nike revive its image. Diversity is one of the most illustrative examples: now more than half of staff members are minorities. One can say that Nike still has much work to do, but the company appears to be headed in the right direction.

Works Cited

Bazerman, Max, and Ann Tenbrunsel. . 2011. Web.

Frauenheim, Ed. . 2016. Web.

Ghosh, Palash. . 2012. Web.

Tenbrunsel, Ann E., and David M. Messick. “Ethical Fading: The role of Self-Deception in Unethical Behavior.” Social Justice Research 17.2 (2004): 223-236. Print.

Trevino, Linda, and Katherine A. Nelson. Managing Business Ethics. Hoboken: John Wiley & Sons, 2010. Print.

United Nations. . n.d. Web.

Wong, Annabelle. Two Faces of Economic Development: The Ethical Controversy Surrounding U.S.-Related Sweatshops in Developing Asian Countries. 2013. Web.

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1. IvyPanda. "An Ethical Audit: Nike Controversy." October 8, 2020. https://ivypanda.com/essays/an-ethical-audit-nike-controversy/.


IvyPanda. "An Ethical Audit: Nike Controversy." October 8, 2020. https://ivypanda.com/essays/an-ethical-audit-nike-controversy/.


IvyPanda. 2020. "An Ethical Audit: Nike Controversy." October 8, 2020. https://ivypanda.com/essays/an-ethical-audit-nike-controversy/.


IvyPanda. (2020) 'An Ethical Audit: Nike Controversy'. 8 October.

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