To:              Professor Ahmad Kamal

 

From :         Michiru Sugi

 

Subject:        NYU-G-MS-A1

 

Civic and Corporate Responsibilities of Multinational Corporations

Introduction

Globalization means more than simply doing business on a global scale. Corporations who play in the global marketplace should be responsive to the challenges not only in their home nations but also in overseas communities in which they operate. This paper intends to critically examine the problems of the civic and corporate responsibilities of multinational corporations, through the incident of Nike exploiting child Labour at its factories in developing countries.

 

Facts

The followings are some statistics about child Labour today, the United Nations actions against it, and facts about Nike in relation to its use of child Labour in the developing countries:

·          In January 1999, UN Secretary-General Kofi Annan proposed the Global Compact, an international initiative that would bring companies together with UN agencies to support nine principles in the areas of human rights, Labour and the environment.[1]

·          Principle 5 of the Global Compact stipulates, “Business should uphold the effective abolition of child labour”.[2]

·          The International Labour Organization (ILO), a UN specialized agency which seeks the promotion of social justice and internationally recognized human and labour rights, reports that there were 211 million children ages 5 to 14 at work in economic activity in the world as of 2000. About 73 million working children are less than 10 years old.[3]

·          ILO distinguishes between “economically active children” and “child labour.” Child labour is a narrower concept than economically active children, excluding all those children 12 years and older who are working only a few hours a week in permitted light work and those 15 years and above whose work is not classified as “hazardous.”[4]

·          According to ILO, there were about 186 child labourers below the age of 15 in the world in 2000.[5]

·          ILO states protection of children as one of its organizational objectives, and it is stated in the Preamble of the ILO Constitution.[6]

·          Within ILO, there is the International Programme on the Elimination of Child Labour (IPEC), which is a 90-country alliance against child labour.[7]

·          The Convention on the Rights of the Child was adopted at the 1999 Session of the International Labour Conference. The Convention is the first legally binding international instrument that recognizes the human rights of children, defined as persons up to the age of 18 years.[8]

·          According to UNICEF, the Convention has been ratified by 191 countries – every country of the world except for Somalia and the United States.[9]

·          In February 1997, representatives of the soccer ball industry signed a Partnership Agreement with UNICEF and ILO to address the issue of child labour in the factories of South Asia where soccer balls are sewn.[10]

·          According to the soccer ball industry research, conducted 6 months after the signing of the Partnership Agreement, up to 20% of the balls brought to the U.S. continued to be stitched by children under the age of 14.[11]

·          June 1996 issue of Life magazine featured an article about Pakistani children spending most of a day stitching Nike soccer balls for a grand sum of 60 cents.[12]

·          In response to the growing pressure from critics, Nike and its subcontractor established stitching centers in Pakistan. These centers hire stitchers only after they present valid government identification in order to ensure that they meet the country's minimum working age.[13] In addition, the local subcontractor agreed to pay school tuition for former child workers, while hiring their family members who are of legal age to work.[14]

·          In May 1998, Nike announced that it would raise the minimum age for hiring new workers in shoe factories to 18 and the minimum age of new workers in other factories to 16, in countries where it is common for workers as young as 14 to hold such jobs.[15]

·          In October 2000, a BBC TV program uncovered the use of child labour at Nike’s subcontractor factory in Cambodia. After the show was aired, Nike canceled its contract and pulled out of the factory. Another U.S apparel company, the Gap, was subcontracting with the same factory. It pulled their operation as well.[16]

·          Nike’s retreat was a serious blow to Cambodia’s $1 billion garment industry, which accounts for more than 80% of the country’s exports.[17]

·          In January 2001, the Worker Rights Consortium, a nonprofit labour rights group, issued a report stating that Nike had a contract with a factory in Mexico that employed children under the age of 16 for more than 6 hours a day. That is a violation of Mexican laws.[18]

·          In October 2001, Nike chairman, Philip Knight, admitted that Nike employed children as young as 10 making shoes, clothing and footballs in Pakistan and Cambodia.[19]

·          Since 1998, Nike has contributed more than $1.3 million in an effort to organize formal education programs in all contract footwear factories. The education programs are offered at 85% of all Nike footwear factories to date.[20]

·          Nike produces its products in more than 800 contract factories in more than 50 countries.[21]

 

Analysis

As globalization progresses and business influence grows globally, companies should be accountable for the social impact of their operations. Moreover, multinational corporations that produce and sell in global pools should be accountable to the people of the global society, particularly people in the community in which the corporations operate. As the Financial Times reported, Nike’s pull-out caused a severe loss to Cambodia’s major industry. In a developing country where poverty prevails, such an economic loss can further induce unfavorable practices, including child labour. Instead of simply withdrawing from Cambodia, Nike should have taken responsibility for the consequences of their entering into its production pool.

 

As noted previously, Nike has taken some measures in response to the growing criticism about its use of child labour at its manufacturing facilities overseas: it established a monitoring system, raised the minimum age of its workers, and initiated formal education programs in all contract factories. However, the use of child labour at Nike factories is recurring as reported by the Workers Rights Consortium. That is because these measures are only superficial and do not effectively address the underlying issues of child labour. For their measures against child labour to sustain, Nike should take the following steps:

·        Work with the local businesses, government and community in determining the underlying issues that cause child labour; and

·        Through the involvement of the local players, plan, develop and implement programs or support programs, such as those of the United Nations, to address the underlying issues.

Nike should fund the planning, development and implementation of these programs from its substantial marketing budget. Such measures can drastically yet positively change Nike’s marketing and operating strategies, which are well described in a book by Michael Veseth, a professor of economics:

“Nike contracts with local firms to produce its products. It bargains effectively with local businesses and governments and has moved production when cost and labor market conditions have changed. [Nike’s] practice of mobile global capital paying workers a few dollars a day to make shoes that sell for over $100 a pair and are promoted by millionaire endorsers such as Michael Jordan and Tiger Woods naturally draws criticism. It isn’t hard to figure out that the cost of Nike products is determined more by marketing expense than by production costs.”[22]

Nowadays, it is widely recognized that if corporations are socially responsible, it contributes to brand reputation and financial performance.[23] Instead of spending millions of dollars for celebrity endorsement, by becoming socially responsible Nike can effectively market itself as a good corporate citizen, thus building a positive reputation.

 

Conclusion

Globalization is often viewed as simply doing business on a global scale. However, it requires corporations to take a step further as a corporate citizen in the global society.  Multinational corporations, as they benefit from the global economy and resource pools, should be responsible for the social and economic impact of their operations, as well as for the people in the community in which they operate.