NO WHERE TO RUN, NO WHERE TO HIDE -- NEW RULES FOR BUSINESS FROM THE SWEATSHOP DEBATES Professor Nicholas M. Didow Kenan-Flagler Business School University of North Carolina at Chapel Hill

FIVE MAJOR ERAS OF THE UNC EXPERIENCE 1972-1997 -- prelude Spring Semester 1998 -- The Nike Class Summer 1998 - Summer 1999 -- Initial principles and direction using the CLC and FLA Summer 1999 - present -- The search for implementation and monitoring -- FLA vs WRC -- and “living wage” initiatives Future directions

1972-1997 PRELUDE: THE Nike STORY How Phil Knight, with the help of his University of Oregon track coach Bill Bowerman, went from teaching accounting at Portland State University to be CEO of a $9 billion sports marketing empire. Follow your heart. Be lucky. Buy low, sell high.

MAJOR NIKE BRANDS Starter, Team Starter, The Jordan/ Jumpman 23, Asphalt, Tiger Woods, Shaq, Dunkman…

Nike ATHLETIC SHOE BUSINESS STRATEGY OR BUSINESS MODEL Significant product innovation & design “Trickle down” promotion and celebrity endorsements Intensive distribution Premium price point with good margins through channel Manufacturing, or Supply Chain strategy of low cost contract manufacturing in Asia

Nike CONTRACT MANUFACTURING “Contract manufacturing” aka outsourcing, virtual corporation Set the specs, negotiate price and terms of delivery, let other person worry about “stuff” in the middle Cap ex Management and personnel Gov’t regs Migrated from Japan to Korea and Indonesia to China and Vietnam following cheaper labor costs in the supply chain

IT IS NEVER GOOD NEWS WHEN MIKE WALLACE FROM “60 MINUTES” CALLS 1996 BBC: “Branded Nike” 48 Hours: “Nike” 1997 60 Minutes: “There’s no business like shoe business”

“Nike shoes are made in sweatshops, often with child labor.” “Sweatshop” = employment that violates more than one federal or state labor law governing minimum wage and overtime, child labor, industrial homework, occupational safety and health, workers’ compensation, or industry regulation. (from US GAO)

UNC STUDENTS RESPOND Nike Awareness Campaign Students for Economic Justice Students Against Sweatshops (later USAS)

  Workers Making UNC Apparel Are Protesting Against Working Conditions in their Factory UNC:  JUST do SOMETHING!                                                                                  Sweatshop Teach-In Led by the Students for Economic Justice Come learn about what you can do to support workers who make YOUR clothing!!

SPRING SEMESTER 1998 “THE NIKE CLASS”: Economics, Ethics, and Impacts of the Global Economy: The Nike Example Nike overview Production in textile/ sports apparel/ shoe industry History of industry and labor Working conditions history US vs overseas labor standards Sports marketing Globalization of production Gender and culture issues Asia as context Nike in Asia Bringing it home: UNC and corporate partnerships Recommendations

NATIONAL PRESS CLUB May 12, 1998 “Phil Knight has been described in print as a corporate crook, the perfect corporate villain for these times…Nike products have become synonymous with slave wages, forced overtime, and abuse… (Some say) Nike represents not only everything that’s wrong with sports, but everything that’s wrong with the world… I figured I’d just come out and let you journalists have a look at the great Satan up close and personal.” -- Phil Knight

NATIONAL PRESS CLUB May 12, 1998 Phil Knight commits Nike contract mfgrs to --- Expanded monitoring with public disclosure Footwear workers minimum age 18; others 16 OSHA indoor air quality standards Conversion to water-based glues Expanded education programs for workers Increased micro-enterprise loan programs Funding university research and open forums re: global manufacturing issues and responsible business practices

NATIONAL PRESS CLUB May 12, 1998

UNC’s INSTITUTIONAL OBJECTIVES Maintain control over uses of UNC name and logo Derive significant additional revenues from licensing to support general scholarships and athletics Assure that good labor practices are followed in manufacturing of goods that bear the UNC mark, and to use our influence to improve labor practices more generally

UNC INSTITUTIONAL POLICY Implement our Code of Conduct thru Collegiate Licensing Corporation (CLC) Join FLA Help establish and join WRC

FUTURE INSTITUTIONAL DIRECTIONS? Lead by example, what about UNC campus labor practices? Expand to UNC purchases Extend up and down the supply chain Help develop university interests in FLA and WRC Progress in understanding “living wage” issues Expand to towns of Chapel Hill and Carrboro