This paper looks at the ethical challenges in managing labour standards within global sporting companies.

1. Ethics of Sweatshops:
Managing Global Labor Standards in
the Sporting Goods Industry.
JENIFER KESIK

2. 2
Introduction
For more than ten years concerns surrounding global labour practices in the sporting apparel
industry have been under a lot attention from the public (Arnold and Hartman 2003; Young
2004). Since mid- 1990 a number of multinational sport companies such as Nike and Adidas
Group havestarted to be criticizedby the press for proving seriously poor working conditions in
its overseas factories (The Guardian 2010; Mail Online 2011). It has been brought to the public
attention that the majority of sporting goods especially shoes and athletic apparel are produced in
so called “sweatshops” where workers are made to work extremely long shifts for very little
wages and have their human rights violated.
The problem of sweatshop labor raised a significantly importantethical dilemmaand made
many sport corporations weight improving work environmentfor their employees against
maximizing profits. The following case study carefully analyses the problem of
sweatshopslooking specifically at the examples of sport organisationsand raises both ethical and
economic inquests. Moreover this case study attempts to propose different ways in which
businesses can respect their employees while at the same time stay economically profitable and
maintain their competitiveness in the industry.
Discussion
First of all the term “sweatshop” needs to be defined. In the past, afew different criteria have
been used in order to decide whether a workplace or a factory is a “sweatshop”. The United
States General Accounting Office (GAO) referreda sweatshopto a “workplace that violates more
than one federal or state labour law governing minimum wage and overtime, child labour,
industrial homework, occupational health and safety, workers compensation, or industry
regulations”(Ross 2004). Others however arguedthat violation of just a single labor practice such
as providing low wages which does not allow workers to cover their basic cost of living is
sufficient to describe a workplace as a “sweatshop” (Rosenbaum and Schilling 1997).

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In the highly competitive economy producers of athletic apparel are on a constant search for
less costly methods of manufacture (Frenkel 2001). In order to maximize its profits,
multinational sport apparel giants locate their factories in less developed countries such as
Indonesia and China where legal protections for workers are minimal, health and safety is not an
issue and tax rates are almost non-existent in order to attract foreign investment (Zwolinski
2007).As a result sport organisationsdo not break any local labour standards and if appliedto the
earlier mentionedlegal definitions,it could be argued that those workplaces should not be referred
to as sweatshops.
Another important circumstance that needs to be noticed is that most of the time
multinational sport apparel enterprises are not directly responsible for the treatment of
sweatshops’ workers (Sollar and Englander 2007). The Majority of those sport organisatons
usually direct the work to independent contractorswho as stated in the employment law are
allowed to “perform the tasks according to their own methods and are not under the principal’s
control regarding the physical details of the work” (Kaufman 1997). As a result of this,
independent contractors take a great control of how the factories are being run.
Sweatshops practices
Although mangers of the overseas sweatshops comply with the local law, sweatshops’
workers receive wages below living level, work long shifts and usually are not paid
overtime(Powell and Zwolinski 2012).For example one of the contacted factories of Nike paid
their workers as little as $2 per day while living cost was $4 per day. Secondly workers of
sweatshops are usually exposed to ahazardous working environment that could be dangerous for
their health or safety.In 1997 Nike became the subject of health and safety controversy when it
came to light that workers in one of Nike’s contract factories were exposed to very dangerous
toxic fumes (Connor 2001).
Moreover it has been proven that in some factories workers are humiliatedin front of others
and very often are an object of serious mental and physical abuse including kicking, slapping in
the face and name calling (Mail Online 2011).The report published by Global Exchange (Connor
2001) demonstrated that in some Chinese factories of Nike, workers were not allowed to talk

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during work and if they did so they were fined $1.2 to $3.6 and at other Indonesian factory
workers who made mistakes were force to stand in the sun for prolonged period of time (WSWS
2011).
Nike however was not the only company who was accused of breach of labour practices.
Even though the mangers of sweatshops made a lot of positive changes since 1990 when the
majority of sweatshop accusations took place, the problem of unethical labourpractices still
occur. Only recently The Guardian (2012) claimed that Adidas- an official sportswear provider
for the 2012 Olympic Games produced Olympic uniforms in the sweatshop conditions in
Indonesia where workers had to work “65 hour weeks for as little as 34 pence per hour” (The
Guardian 2012).
Ultimately few important questions arise. Can treatment provided for sweatshops workers
bemorally justifiable? And should multinational enterprises be responsible for operations of their
contractors?
Critics of sweatshops
The opinions are conflicting. First of all, critics of sweatshops argue thatlabour practices at
overseasfactories do not meet rules of international labourlaw standards proposed by the
International Labour Organization (ILO 2013). They are against a number of core
ILOconventions including Abolition of Forced Labour Convention, Minimum Age
Convention,Hours of Work Convention and Discrimination Convention (ILO 2013).
Moreover sweatshopsare very distressing for individuals who are affected by them (Powell
and Zwolinski 2012) are against internationally proclaimed human rights within social
institution. The treatment received by workers at sweatshop factories challenges the fundamental
human rights proposed by United Nations Declaration of Human Rights (1949) which states that
everyone has a right to freedom, shall not be held in servitude or be an object to any offensive
forms of treatment. Arnold and Hartman (2003 cited by Radin and Calkins 2006) go further and
notices that these types of labour practices not only breach universal human rights, they also
contradict with basic moral norms which regulate behavior standards in society.

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Critics use deontological ethical theories to justify that sweatshops are morally incorrect
(Meyers 2007). Philosophy provided by Emmanuel Kant proposes a powerful perspective on
human rights and dignity (Radin and Calkins 2006). Individuals in Kantian categorical
imperative are seen to “possess dignity and should be treated as rational beings” (Hartman and
Desjardins 2008) rather than used for certain purposes of other people. According to this 18th
century philosopher following customs and legal or institutional law is not enough to be
considered moral (Hartman et al. 1999). Instead actions can only be referred to as moral and
right if they are performed “out of sense of duty” by an individual who has “good will” (Horn et
al. 2006).
Anti- sweatshops activists also call attention to the fact that treatments received by workers at
overseas factories interfere with socially accepted values such as: dignity, justice, fairness,
equality, respect and responsibility (Meyers 2007) as well as break the “golden rule” which
states that “one should treat others as one would like others to treat oneself”. Critics of
sweatshops argue that businesses which use sweatshops labour have a very egoistic approach to
the problem and act merely in their own interest ignoring the needs of employees. At the same
time critics of sweatshops claim that this behavior damages the psychological contract between
workers and employer-the deal between employee and employer which is based on perceived
fairness, trust and specific promises made by both parties (Kaufman 1997).
Defenders of sweatshops
Contrary to what is thought by the opponents of sweatshops, defenders of this type of
labourpractice offer entirely different view on the sweatshop dilemma. First of all, defenders of
sweatshops underline thatgovernments of less developed countries encourage sweatshop
movement themselves by lowering tax rates and developing favorable regulations (Young 2004).
Economistsargue that sweatshops are crucial for the economic development (Hartman et al.
1999). According to Paul Krugman(1994) sweatshops are beneficial to the workers in the
developing countries and provide them with work opportunities that would not be available
otherwise. Scholars also stress out that sweatshops are not purely empowered by the desire to

6. 6
harm poor people from the developing countries (Radin and Calkins 2006) and workers
undertake available jobs voluntary (Powell and Zwolinski 2012; Mayers 2012; Chartrier 2008).
The “growth of this kind of employment is tremendous good news for the world’s poor” (Arnold
et al. 2005) and economists point out that sweatshops offer population of less developed
countries much better prospects than other available alternatives.Jeffrey Sachs from Harward
University contributes to this debate by adding that the problem is "not that there are too many
sweatshops, but that there are too few” (Samuelson 2010).
Defenders of sweatshops similarly to those who criticize sweatshop labour practices refer to
ethical theories to support their argument. They draw its support from the utilitarian theory
which states that themost reasonable and ethically justified decision is the decision that results in
the best consequences for the greatest number of people and which consequences are better than
other available options (Hartman and Desjardins 2008).
Mutually beneficial exploitation?
On the basic grounds of utilitarianism it is articulated that closing down sweatshops
would have a very adverse effect on employees who would losetheir jobs. The end of sweatshops
would mean that workers would be forced to live in even worse conditions compared to what
they are used to and it would be significantly harder for them to support their families. This
would also have a negative influence on the economic development of a whole nation who
would automatically loose foreign investment (Zwolinski 2007).
Mayers (2007) notices that sweatshopsdo not actually harm workers in the long term.
Instead the sweatshop movement expresses utilitarian qualities and brings “better overall
consequences” for all people affected (Hartman and Desjardins 2008). As a result of this it could
be argued that sweatshopsare a form of “mutually beneficial exploitation”which provides all
stakeholders: employers, contractors, workersas well as consumers with some advantages.
Employersprofit from the access of cheap labour, contractors benefit from external investments,
consumers enjoy low prices on sporting goods and workers can earn wages. This situation is
normally acceptable (Mayers 2007).

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However this brings this debate back to the discussed earlier concept of morality
andperceived fairness.While it is true that workers of sweatshops undertake their jobs on a
voluntary basis, it has to be emphasized that those poor people are in desperate circumstances
and frequently find that other potential job opportunities are much worse than work in the
sweatshops. Thus it is clear that one party- in this case workers of sweatshops are being taken
advantage of and simply used as disposable instruments to profit maximization rather than
treated as independent and rational human beings.This corresponds back to the Kantian concept
of categorical imperative and enables the author to make a determination that “mutually
beneficial exploitation” which takes place at sweatshops cannot be morally permissible.
Ultimately the first question of this case study is clarified. However the second question
whether multinational enterprises owe responsibility for operations of their contractors still
remains unsolved.
Corporate Social Responsibility
In order to answer the second inquest of this ethical case studyit may be worth to deliberate
theviewpoint of Iris Youngfrom University of Chicago. Young (2004) provides an important
point to the sweatshop debate by saying that within the society some people have more power
than others, “not only over the conditions of their lives but over decisions and processes that
affect others”. In case of sweatshops, multinational companies possess extensive authority over
their contractors and are primary decision makers especially in the matter of price of the goods
produced, quality and quantity as well as the finishing date (Arnold and Bowie 2007). At the
same those companies caneasily influence other stakeholders’ ethical principles.
It could therefore be proposed that in the discussed earlier examples of sport organisations,
they are the companies themselves who are responsibleover the actions of other stakeholders
including external contractors and workers. As a result of this,multinational sport enterprises
should apply the concept of corporate social responsibility (CSR) to its operations overseas. This
would mean that apart from maximizing firm’s profits, companies should focus on “all the
positive and negative impacts” (Mark- Herbert and Schantz 2007) and aim to fulfill the broader

8. 8
societal obligations (Freeman and Gilbert 1988) especially those in regards to improving
treatment of the workers in its overseas factories.
Following the concept of CSR the second inquest of this case study whether multinational
sport organization should be held accountable for the actions of their contractors can be
answered positively. Although the managers of sport organisationsvery often do not directly
employer workers of their oversees factories, it is absolutely crucial that those sport
organisationstake responsibility for the labour practicesof their contractors and remember that
those actions not only impact the future and profits of the company itself, but have a huge
influence on the quality of lives of sweatshops’ workers.
Conclusion
To conclude this debate, the problem of sweatshops receives conflicting arguments from
both critics and defenders of this type of labour practice. Throughout this case study the duality
of the problem has been adequately demonstrated. Two important conclusions have been
reached. Although sweatshops are a form of “mutually beneficial exploitation” and provide
better consequences for the majority of people expressing utilitarian values, it has been
concluded that sweatshop labour practices are against Kantian concept of categorical imperative
and therefore cannot possibly be morally justified.The author of this case suggests that although
boards of directors of the multinational sport companies should act in the company interest, the
moral principles cannot be detached from this process. Limiting the company to just following
the rules is not sufficient in these circumstances.
In regards to whether multinational companies should be held accountable for the actions
of their contractors, the author established that because of the higher power and influence that
those organisations possess, it is their responsibility to influence the actions taken in the
sweatshops. There are number of ways in which multinational sport organizationscan findright
balance between respecting workers’ basic moral rights, providing better working environment
as well as ensuring that the company is staying economically profitable. First of all

9. 9
importantethical principles must be embraced by the company through creating a culture of
shared responsibility. Secondly, correct ethical behaviorssuch as respecting human rights of
employees need to be clearly communicated to the external contractorsthrough learning
programs and specially designed ethical trainings. At the same time sport organisationsneed to
review their codes of conduct and monitor whether they are being followed.Finally it has to be
remembered that good intentions and slogans that highlight values of respect and fairness are
completely worthless unless they are effectively implemented.

10. 10
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