practices have not changed significantly since its inception, but the negative publicity only appeared a few years ago. Understanding the motivation behind those making the allegations, and the company's reactions, can help illuminate the reaction in the stock market, as well.
Literature Review and Statements of Proposition
For years, Nike has contracted with athletic shoe manufacturers in Asia to produce Nike shoes. The savings from the low labor costs enable the company to operate profitably even when the transportation and logistical costs of shipping the shoes to their final destination markets are taken into account. No one, including Nike, denies that the workers in the Asian countries are paid less than their American counterparts would receive in absolute terms (Burn, 1997, p. 1014B0971).
The public debate stems from the conditions in which the workers produce shoes for Nike (keeping in mind that these are contracted factories rather than facilities owned outright by Nike). Nike has published a Code of Conduct in which the company: condemns and prohibits child labor; requires that workers receive a fair wage; imposes a limit on the number of days and hours workers
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