A Caution to students:

Use the following report as a "sample" not a "model." In other words, read each section of the report to see how it works to build a convincing case for readers, but do not try to imitate each step and transition. This report addresses an entirely different problem. The specific structure and content of your report must evolve from your specific project if you are to convince your readers to act on your recommendations.

EXECUTIVE SUMMARY

After researching and analyzing the negative publicity Nike has received regarding labor practices in their overseas production factories, Murray and Associates recommends that Ariel do the following:

• Create a code of conduct much like Nike's.
• Support and implement the provisions of the Apparel Industry Partnership.
• Institute a regulated grievance process.
• Conduct periodic external reviews.
• Train managers in human resources and cross-cultural communication.
• Allow human rights groups to inspect factories periodically so they can publicize Ariel's efforts to provide a healthy work environment.
• Survey the attitudes and opinions of employee's, anonymously, on a regular basis.
• Hire a public relations firm to publicize a socially responsible corporate image.

To form these recommendations, Murray and Associates gathered information from various websites published both by Nike and by Nike's critics. In addition analysts assessed the interests of Ariel's stakeholders related to the problem of negative publicity and determined which interests should receive the most attention. Stakeholder needs and interests should be given priority in the following order:

• Employees' needs and interests must be met first to avoid negative publicity.
• Managers' needs and interests must be met second.
• Stockholders' needs will best be served by focusing on the needs of the above groups.
• Citizens' needs can best be met by publishing accurate information.

To demonstrate the relevance of stakeholder interests for our analysis and recommendations, Murray and Associates organized research findings in this report according to the perspectives of the four groups of stakeholders listed above. 

INTRODUCTION

Negative publicity directed at the NIKE Corporation has spread throughout the media because of to alleged poor treatment of workers in Asian factories. Much debate exists whether the alleged poor treament of workers has not actually occurred, yet this debate has not eliminated the negative criticism. Recently, the demand for Nike shoes and apparel has declined in the U.S., and the decline, in part, may be attributed to the negative publicity Nike receives for its overseas operations.

Negative publicity can drastically affect the success of a company. Because Ariel is a new company, it is especially important that their image remain as spotless as possible. By maintaining strong public approval for their labor practices in overseas factories, Ariel can gain a competitive advantage over their two major competitors, Nike and Reebok, with consumers who are influenced by publicity on ethical issues.

Our research focuses on how Nike has attempted to solve the problem of negative publicity and improve their labor practices in overseas factories. Ariel can use the experience of Nike and the independent reviews Nike has received from on-site inspectors to combat the problems before they start.

METHODS

To research and analyze this problem, Murray and associates:

• Obtained information from various web sites about the negative publicity Nike has received. The following websites were the most informative:

• Cross-referenced the information obtained in order to check its reliability.
• Gained perspectives about different groups of stakeholders from class readings, lectures, various reports set up on the web, and informal interviews.

FINDINGS

It is important to note that our findings include much information obtained from websites. Murray and Associates has made no attempt to verify the accuracy of information obtained either from the websites critical of Nike's labor practices or from Nike's own websites. The fact that negative publicity continues to proliferate on the web constitutes the problem itself for the purposes of our research.

Since the findings differ dramatically depending upon the point of view of the website, we have organized findings from the perspective of four groups of company stakeholders: employees, managers, stockholders, and citizens.

From The Perspective of Nike Employees:

• Workers only make twenty cents an hour.
• They work, in some cases, more than 12 hours a day and receive no overtime pay.
• Children below the age of 14 often work long hours as well.
• Employees are not allowed to go to the bathroom more than once in an eight hour shift or drink water more than twice in an eight hour shift.
• Workers sometimes work until exhaustion.
• Verbal abuse, sexual harassment, and corporal punishment occur.
• Medical services and other support services are nearly non-existent. Only one doctor works two hours a day and serves 6000 employees in a factory open 20 hours a day.
• Bad relationships exist between factory managers and employees.
• Grievance procedures exist but are rarely used for fear of reprisals.
• Employees in factories owned and operated by home companies occasionally experience similar difficulties, but Nike employees expected that the conditions in a U.S. company would be different.

From The Perspective of Nike managers:

Nike managers believe they are addressing the problems because they:

• Use independent monitors.
• Initiate regular meetings to discuss workplace issues in the factories.
• Ensure that subcontracted factories are monitored by labor groups.
• Enforce Nike's Code of Conduct.
• Arrange independent assessment of the Code of Conduct.
• Discuss wage standards with other organizations.
• Encourage other businesses to sign on to the Apparel Industry Partnership.
• Update interested parties of progress.
• Feel the wage is comparable for the job performed.
• Insist they do not use child labor.
• Believe they have safe factories: well-lit, well-ventilated and have free or subsidized food and medical care.

From The Perspective of Nike Stockholders:

 Stockholders are primarily interested in monetary gain:

• The more money that Nike makes, the more money they will get back in dividends.
• If bad publicity eventually affects the profitability of the company, stockholders become concerned about the bad publicity.
• Some stockholders have reached this point already, and are requesting that Nike solve the problem.

From The Perspective of Citizens:

• Pro-Nike citizens feel that Nike is a wonderful company that deserves support.
• They advertise their support through the Green Swoosh campaign.
• Anti-Nike citizens are very critical of Nike's labor practices and inhumane treatment of its workers.
• They have attempted to organize boycotts by high-profile atheletes.
• They want fair and adequate wages, union representation, free collective bargaining, social security, and a safe and healthy environment.
• Many citizens do not know the reliability of the information they receive from the press and from webpages. Many have not read the reports from independent inspectors.

More General Findings:

Several independent methods have been used to verify some of these results.

• Nike factories have been inspected by independent or quasi-independent groups such as the International Labor Organization (affiliated with the United Nations) and a group led by Andrew Young, former U.S. ambassador to the U.N.
• Also, new industry standards have been developed by the Apparel Industry itself, and these standards have gained the support of critics. These standards include:
  • (Describe the standards here.)

ANALYSIS

Murray and Associates reviewed the findings in order to establish criteria Ariel needs to follow for setting new policies.

#1: Perceptions matter.

The accuracy of information is irrelevant within an economy that operates as much on perceptions as on truth. Ariel must find ways to manage the perceptions about its labor practices in overseas factories whether or not these perceptions are accurate.

#2: Emphasize the interests of employees and managers first. View their interests, as far as possible, as harmonious rather than antagonistic.

Stakeholder interests vary widely on this issue. While the employees' need improved labor conditions, for example, stockholders appear to be satisfied if company profits remain healthy, regardless of labor conditions.

Employees: The interests of Ariel employee's must be given high priority if the company is to avoid negative publicity and gain a competitive advantage in the current business climate. Employees are the backbone of the company and without them the company would not be able to produce its goods. If they speak highly of the company, then the perceptions of labor conditions will improve. In this sense, the interests of labor and management will overlap.

Managers: The interests of managers follow the interests of the employees because if managers do a good job running the plant the workers will be treated fairly and the production rate will be higher. This will benefit all of the stakeholders.

Stockholders: The interests of stockholders come next because they basically own the company and anything that would affect the company negatively would have a direct impact on them. However, they sometimes focus too strongly on the short term interest (profits) and disregard the long term interests (maintaining a strong corporate image) which will eventually affect the profits and competitive advantage of the company.

Citizens: Citizens' interests, in this case, matter the least because they are often not fully informed on what is really happening. The main impact that they can have is by choosing not to buy the product. Their interests will be met if the interests of employees receive higher priority and if citizen's themselves receive more accurate information about Ariel's ethical labor practices.

#3: To avoid negative publicity, labor practices must exceed national standards as well as industry standards. Only then will the company be recognized as an aggressive leader on these issues rather than a reluctant complier. As standards are continually evolving, this will also help the company adjust even before they need to, thereby reducing cost in the long term.

Doing only what is required by law does not constitute ethical behavior but obedient and efficacious behavior. In the case of the apparel industry, different standards exist in different countries. When Ariel builds a factory in a country within which labor standards fall below U.S. legal requirements, Ariel needs to go beyond what has become customary or legal in the country where the factory is located and look not only to follow but to set new international standards.

#4: The effectiveness of labor standards can best be measured in the attitudes and comments of employees themselves.

If employee's give positive, public accounts of Ariel's labor practices, Ariel will gain a significant public relations advantage over their competitors.

CONCLUSIONS

Past attempts by Nike to solve its problems have not proven successful. Whether true or not, the media continues to report that working conditions are as bad today as before the independent reviews. Nike's defensive policy has not altered perceptions. Ariel therefore needs to avoid defending their policies and instead adopt aggressive policies that eliminate the possibility of negative publicity before it even arises. If Ariel does this, the new, socially responsible corporate image they will produce will, in turn, produce a competitive advantage for them. Consumers who are influenced by publicity on ethical issues will be willing to buy Ariel shoes even if they need to pay a slightly higher price for them.

RECOMMENDATIONS

• Create a code of conduct that exceeds Nike's own.
  This can be implemented at the start up of the company when it is making its mission statement. Ariel needs to involve employees and managers in the process of creating this code.
• Support and implement the provisions of the Apparel Industry Partnership. Ariel can achieve this by setting up factories that meet and exceed all of the conditions of the Partnership.
• Institute a regulated grievance process. Have an independent person be in charge of taking the complaints and be sure that they are dealt with in a timely matter.
• Conduct periodic external reviews. Hire reviewers who have credibility in the eyes of the public and the international press.
• Give managers human resource and cross-cultural commnication training. Require all managers to attend a class before factories open so that they are able to effectively work with employees.
• Allow human rights groups to inspect factories so that they are aware of Ariel's efforts to provide an healthy, productive, and ethical work environment. Any legitimate human rights group must be given access to the factories as long as their investigation does not interfere with productivity.

• Hire a public relations firm to publicize Ariel's socially responsible corporate image. The benefits will greatly outweigh the costs.