Overall Finding:   It is my sincere belief that NIKE is doing a good job in the application of its Code of Conduct. But NIKE can and should do better.

     Background.   Six months ago, the leadership of NIKE, Inc. contacted GoodWorks International, LLC. NIKE asked GoodWorks to make an independent assessment of NIKE's Code of Conduct and NIKE's effectiveness in applying the Code to factories where NIKE apparel and footwear products are manufactured.

     GoodWorks insisted that there be no conditions or limits on travel; that it be allowed to visit any factory and talk with any worker without the presence of management; that it have access to any confidential audits; and that NIKE would make the report public. GoodWorks visited twelve factories in three countries, met with NIKE personnel, and met with members of important international and United States non-governmental organizations.

     Wage and Living Standards.   NIKE asked GoodWorks to evaluate its Code of Conduct. GoodWorks never desired or intended to address the issue of wages and living standards because "such an exercise was well beyond the technical capacity of our small firm. While it is tempting to criticize a few highly visible and successful companies for paying 'low wages' meaningful reform can only be achieved through national law or international standards that enforce a 'level playing field' for all companies, not just a few," wrote Young.

     What is a "NIKE Factory?"   Factories visited by GoodWorks in Vietnam, Indonesia and China are totally owned and operated by Asian companies who have contracts with NIKE (and others).

     While NIKE does not have technical or legal ownership of these factories or even direct control of the management, it has enormous leverage because of the factory's dependence on huge NIKE contracts. This is one of the great challenges for NIKE and others in the industry who produce in these same factories but must rely on absentee owners and a large number of expatriate managers to implement and enforce work standards established by corporate leadership halfway around the world.

     For instance, one of the factories we visited in Vietnam is owned by a Taiwanese company, the plant manager is a Taiwanese and most of the line managers are Taiwanese. The lack of indigenous management in these factories tends to undermine communication between manager and workers.

Findings

1. Factories we visited that produce NIKE goods were clean, organized, adequately ventilated and well lit. They certainly did not appear to be what most American would call "sweatshops."
   
   
2. I found no evidence or pattern of widespread or systematic abuse or mistreatment of workers in these twelve factories.
   
   
3. Generally speaking, these twelve factories are controlled by absentee owners, managed by expatriates who, in Vietnam in particular, do not speak the local language fluently and are overseen by a relatively small number of NIKE technical supervisors focused largely on quality control.
   
   
4. The concept of "workers' rights" is not a well-developed or well-understood principle in the three Asian countries where NIKE and its major competitors produce shoes and apparel.
   
   
5. Some system of third-party monitoring is necessary because of the ownership structure of these Asian factories.
   
   
6. In some factories, workers are offered housing as an additional benefit but it is entirely voluntary. By Western standards, the rooms are small and the furnishing sparse. The workers I talked with said that it was "better than their home."
   
   
7. There needs to be a better system to enable individual factory workers to file a complaint or grievance and know that it will be seriously considered and/or investigated without fear of retribution.
   
   
8. The NIKE Code of Conduct should be the basis of the relationship between NIKE, the plant ownership and management and the workers. The Code is not visible on the factory floors and now well understood by the workers.

Recommendations

1. NIKE should continue its efforts to support and implement the provisions of the Apparel Industry Partnership, which resulted in the first major agreement -- across industry lines -- to set voluntary, global standards and goals for international labor practices.
   
   
2. NIKE should take more aggressive steps to explain and enforce the Code of Conduct.
   
   
3. NIKE should promote the development of "workers' representatives" in the factories to effectively represent the workers' individual and cumulative interests.
   
   
4. NIKE should insist that the factories that manufacture its products create and enforce a better grievance system within the factory.
   
   
5. NIKE should expand its dialogue and relationship with the human rights community and the labor groups within the countries where they produce goods and with their international counterparts.
   
   
6. NIKE should consider some type of "external monitoring" on an ongoing basis to ensure effective application of the Code of Conduct. It is important that NIKE's professional audits conducted by Ernst & Young and Price Waterhouse be continued. It should consider establishing an "ombudsman" in each major country with manufacturing facilities. NIKE also might assemble a small panel of distinguished international citizens to monitor factories.