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Nike Shoe Plant in Vietnam Is Called Unsafe for Workers 

STEVEN GREENHOUSE / New York Times 8nov97

[Below is a critique of Nike's Labor and Environmental Auditing in Vietnam as performed by Ernst & Young by CorpWatch]

Undermining Nike's boast that it maintains model working conditions at its factories throughout the world, a prominent accounting firm has found many unsafe conditions at one of the shoe manufacturer's plants in Vietnam.

In an inspection report that was prepared in January for the company's internal use only, Ernst & Young wrote that workers at the factory near Ho Chi Minh City were exposed to carcinogens that exceeded local legal standards by 177 times in parts of the plant and that 77 percent of the employees suffered from respiratory problems.

The report also said that employees at the site, which is owned and operated by a Korean subcontractor, were forced to work 65 hours a week, far more than Vietnamese law allows, for $10 a week.

The inspection report offers an unusually detailed look into conditions at one of Nike's plants at a time when the world's largest athletic shoe company is facing criticism from human rights and labor groups that it treats workers poorly even as it lavishes millions of dollars on star athletes to endorse its products.

Though other American manufacturers also have problems in overseas plants, Nike has become a lightning rod in the debate because it is seen as able to do more since it earned about $800 million last year on sales of $9.2 billion.

Critics of Nike's working conditions, who had been given a copy of the internal report by a disgruntled employee, made it available to The New York Times and several other reporters, prompting the company to call a news conference yesterday to address the allegations.

''We believe that we look after the interests of our workers,'' said Vada Manager, a Nike spokesman. ''There's a growing body of documentation that indicates that Nike workers earn superior wages and manufacture product under superior conditions.''

He and other Nike officials said the company had carried out ''an action plan'' to improve working conditions since the report was issued last January, 17 months after the factory opened. The company said it had sharply cut overtime, improved safety and ventilation and reduced the use of toxic chemicals.

The company also asserted that the report showed that its internal monitoring system had performed exactly as it should have.

''This shows our system of monitoring works,'' Mr. Manager said. ''We have uncovered these issues clearly before anyone else, and we have moved fairly expeditiously to correct them.''

While Nike has often been attacked over low pay and long hours, the Ernst & Young report pushed hard on a relatively new front for Nike's critics: air quality in its factories. Ernst & Young found that toluene, a carcinogen, was in the air at different sites in the factory studied at 6 to 177 times the amount allowed by Vietnamese regulations, which itself is about four times as strict as American toluene standards. Extended exposure to toluene is known to cause damage to the liver, kidneys and central nervous system.

The fact that such conditions existed in one of Nike's newer plants and were given a withering assessment by Nike's own consultants made for yet another embarrassing episode in a continuing saga.

Only five months ago, the company had taken out full-page newspaper ads excerpting Andrew Young, the civil rights advocate and former United Nations representative, who had inspected 15 factories last spring at Nike's behest. After completing his two-week tour covering three countries, he informed Nike it was doing a ''good job'' in treating its workers, though he allowed it ''should do better.'' Mr. Young was widely criticized by human rights groups and labor groups for not taking his own translators and for doing slipshod inspections, an assertion he repeatedly denied.

Like many American apparel makers, Nike uses many subcontractors in Asia, with some 150 factories employing more than 450,000 workers. And like many, that tricky relationship is often offered as a reason for the difficulty in imposing American-style business practices on factories in that part of the world.

The Tae Kwang Vina factory, which was inspected by Ernst & Young, is one of Nike's larger plants. It has 9,200 workers and makes 400,000 pairs of athletic shoes each month at Bien Hoa City, some 25 miles northeast of Ho Chi Minh City, formerly Saigon.

The Ernst & Young report painted a dismal picture of thousands of young women, most under age 25, laboring 10 1/2 hours a day, six days a week, in excessive heat and noise and in foul air, for slightly more than $10 a week. The report also found that workers with skin or breathing problems had not been transferred to departments free of chemicals and that more than half the workers who dealt with dangerous chemicals did not wear protective masks or gloves.

In plain, unemotional language, the report detailed problem after problem.

''Dust in mixing room exceeded the standard 11 times,'' the report said. And, it added, ''There's a high rate of labor accidents caused by carelessness of employees.''

Later, the report pointed to two other problems: ''workers' inadequate understanding of the harmful effect of chemicals'' and ''increasing number of employees'' with health problems continue to work with chemicals.

The report also stated that ''more than half of employees'' in several departments who use chemicals ''do not wear protective equipment (mask and gloves) -- even in highly hazardous places where the concentration of chemical dust, fumes exceeded the standard frequently.''

The Transnational Resource and Action Center, a nonprofit group based in San Francisco that often criticizes conditions at American factories overseas, made the report available. The center obtained the report from Dara O'Rourke, an environmental consultant for the United Nations Industrial Development Organization whose job involves inspecting factories in Vietnam and who was given a copy of the report by a disgruntled Nike employee.

Mr. O'Rourke, who is also a research associate at the Transnational Center, said he was making the report public because he wanted to pressure Nike to treat its workers better and because he was convinced that Ernst & Young's inspection report let Nike off easy. Mr. O'Rourke said wages at the plant were the lowest of any of the 50 factories he visited in Vietnam, and that working conditions were well below average.

Tien Nguyen, Nike's labor practices manager in Vietnam, said at a news conference yesterday that as soon as Ernst & Young made its confidential report 10 months ago, the company took numerous steps to improve working conditions.

Mr. Nguyen said that the number of hours worked a week had been reduced to 45, from 65, and that many more fans had been installed. But he acknowledged that the company had done no measurements to determine whether chemical levels were now low enough to meet legal standards.

With the improvements, ''it's markedly better than shoe factories in the United States,'' said Dusty Kidd, Nike's director of labor relations. ''The shoe factories in Vietnam are among the most modern in the world. The factories there are excellent factories, but there are a lot of things they could get better.''

But Mr. O'Rourke, who has visited the Nike factory three times as part of his United Nations duties, said that when he visited Vietnam last month, several workers said the plant was hardly better than in January. He said many workers still failed to wear protective gear, that pay remained low and that managers still yelled at or otherwise harassed workers.

Mr. Young, who made his visits in June, did not inspect this particular plant. And his report, which pronounced the plants to be ''clean, organized, adequately ventilated and well lit'' had few findings in common with the Ernst & Young report.

Was he aware of the Ernst & Young study prior to the trip? Doug Gatlin, who toured the Nike factories with Mr. Young, said they were. ''We didn't see or read all of the reports they did prior to our going,'' said Mr. Gatlin, who nonetheless defended the job they did. Mr. Young could not be reached for comment because he was traveling.

As far as the Ernst & Young report went in shedding light on Nike's practices, some found fault with it, too. Mr. Rourke, for instance, criticized its conclusion that most employees were happy with the wages and working conditions. Mr. O'Rourke said the workers whom Ernst & Young interviewed were scared to speak candidly. Mr. O'Rourke said his interviews found much discontent.

He said the audit also let Ernst & Young off the hook over accidents because it concluded that ''employee carelessness'' caused many injuries. He said a serious health and safety study would have analyzed the underlying causes of accidents, like a lack of training, ''rather than simply blaming the victim.''

Mr. O'Rourke said the Ernst & Young report had so many inadequacies that it showed the benefits of using noncommercial monitors, like human rights groups, to inspect factories.


SMOKE FROM A HIRED GUN:
A Critique of Nike's Labor and Environmental Auditing in Vietnam
as performed by Ernst & Young

Dara O'Rourke / CorpWatch 10nov97

Transnational Resource and Action Center (TRAC)
Presidio Building 1016, 2nd Floor
P.O. Box 29344
San Francisco CA 94129
USA
Tel: (415) 561-6567 (8)
Fax: (415) 561-6493
trac@igc.org 
www.corpwatch.org

About the Author

Dara O'Rourke is a research associate at the Transnational Resource and Action Center (TRAC), and a consultant to the United Nations Industrial Development Organization (UNIDO) in Vietnam. His research focuses on strategies for preventing adverse environ mental and social impacts of industrial activities. He has been conducting research in Vietnam for the last three years. Mr. O'Rourke has worked as a consultant to the United Nations Environment Programme, the World Bank, and the U.S. Environmental Prote ction Agency. Mr. O'Rourke has a Bachelors degree from the Massachusetts Institute of Technology in Mechanical Engineering and Political Science, and a Masters degree from the Energy and Resources Group at the University of California, Berkeley. He is c urrently completing his Ph.D. at Berkeley. About Transnational Resource & Action Center (TRAC) TRAC works to help build global links for social justice, ecological sustainability and corporate accountability. Its web site, Corporate Watch ---www.corpwatch.org---, provides news, information, analysis for the general public about the role corpora tions play in social political, economic and environmental issues in the U.S. and around the world. TRAC is a project of The Tides Center.

Production Coordinated by Sara Wood

Acknowledgments
David Atkin, Jeff Ballinger, Nikki Bas, Robert Bray, Andre Carothers, Thuyen Nguyen, John B. Pike, Amit Srivastava.

Forward

As public scrutiny of sweatshops in the apparel industry continues to grow, one of the central issues under discussion is how the global operations of U.S. corporations such as Nike can best be monitored to certify decent and healthy working conditions.

Indeed, the White House Apparel Industry Partnership, which is due to make a series of recommendations to President Clinton in November, is currently debating two sides of this question. On the one hand, corporations on the task force such as Nike argue that accounting firms like Ernst and Young are best qualified to serve as monitors by carrying out labor and environmental audits. On the other hand, labor, religious and human rights organizations insist that independent, publicly accountable monitors w ould be best qualified to undertake this task.

This debate, however, has been fundamentally flawed by the fact that the public, and most of the members of the task force, have never seen an audit of labor or health and safety conditions produced by an accounting firm.

TRAC is pleased to be able to shed some light on this subject by releasing the first audit of this kind ever to be made public: a confidential Ernst and Young assessment of the Tae Kwang Vina plant, a factory which employs 9,200 workers who produce 400,00 0 pairs of shoes a month exclusively for Nike in Vietnam.

We are also happy to make public the first photos independently taken inside a Nike plant in Vietnam.

Furthermore, we are proud to publish TRAC Research Associate Dara O'Rourke's report, Smoke From A Hired Gun, an analysis and critique of the Ernst and Young audit.

Mr. O'Rourke is a consultant to the United Nations Industrial Development Organization (UNIDO), and has conducted research in over 50 factories in Vietnam. One of them was the Tae Kwang Vina factory, a Nike subcontractor in the Dong Nai province of Viet nam, and the subject of the Ernst and Young audit. Mr. O'Rourke visited this factory three times in 1997. During the visits to the plant, he performed walk-through audits of environmental and working conditions, interviewed management personnel, met wit h Tae Kwang Vina's managing director, and with representatives of Nike Inc. in Vietnam. He also interviewed workers confidentially outside the factory--something that Ernst and Young failed to do.

Ernst and Young found Nike's subcontractor to be in violation of a number of Vietnamese labor and workplace environmental laws. This finding is in contradiction to Ernst & Young's own conclusion that Tae Kwang Vina is in compliance with the Nike "Code of Conduct."

Furthermore, Mr. O'Rourke found Ernst and Young's methodology to be highly deficient, having ignored "most accepted standards of labor and environmental auditing." Mr. O'Rourke's assessment, including his interviews with workers, reveal a far worse situat ion in the Nike plant than Ernst and Young portrays.

Indeed, Ernst and Young's incompetence as a social and environmental auditor, combined with Mr. O'Rourke's own findings inside the plant, present a strong argument against using accounting firms to conduct labor and environmental audits.

We hope these reports will serve as a constructive contribution to the effort to eliminate sweatshops around the world.

China Brotsky, Chair of the Board, Transnational Resource & Action Center (TRAC) Joshua Karliner, Executive Director, Transnational Resource & Action Center (TRAC)

EXECUTIVE SUMMARY

The Ernst & Young Audit

A confidential Ernst & Young audit of labor and environmental conditions inside a Nike factory in Vietnam was recently leaked to the Transnational Resource & Action Center (TRAC). This is the first time that an accounting firm's labor and environmental audit of any apparel company has ever been made public.

The question of whether firms such as Ernst & Young are competent to monitor the shoe and garment industry is currently under discussion by the White House Apparel Industry Partnership.

An examination of the Ernst & Young audit raises serious questions about the legitimacy and competence of accounting firms' as independent monitors of labor and environmental issues.

TRAC is also releasing the first photos taken independently inside a Nike factory in Vietnam.

The Ernst & Young audit also sheds light on, and raises questions about the findings of Andrew Young, the former UN Ambassador hired to evaluate Nike's "Code of Conduct."

Ernst & Young on the Conditions inside this Nike Factory

The Ernst & Young report, which Andrew Young claimed to have access to, shows that Nike's "Code of Conduct," even when followed, allows dangerous working conditions to persist in its plants.

Although flawed in a number of ways, the audit notes continuing violations of labor laws on maximum working hours, unprotected chemical exposures, poor treatment of workers, and management control of the trade union.

Among the factory's 9,200 workers who produce 400,000 pairs of mid- to high-end Nike shoes per month, the audit reports high levels of respiratory illnesses in sections with high chemical use.

The audit determined that even though Tae Kwang Vina Company (the subcontractor in question) violates Vietnamese labor and environmental laws, it is at the same time in compliance with Nike's "Code of Conduct."

Tae Kwang Vina is reportedly the most technically advanced of Nike's subcontractors in Vietnam.

TRAC's Findings on the Conditions inside this Nike Factory

Confidential interviews with employees outside of the factory provided information about numerous violations of Nike's Code of Conduct that were not discovered by the Ernst & Young audit, including:

Shortcomings of the Ernst & Young Audit

The audit is missing information regarding occupational health and safety, environment, and general working conditions. The methodology employed by Ernst & Young ignores most accepted standards of labor and environmental auditing. For example, the audit involved no monitoring or sampling of air quality in the factory.

Most of the data came directly from management sources.

The audit overlooks many of the key issues of concern in Nike plants around Asia, including: physical and verbal abuse of workers, sexual harassment, repercussions for attempts to organize, and contract violations.

Relevance to the White House Task Force

This audit highlights how important issues can be covered up or ignored in "independent monitoring." Some form of public disclosure is critical to insuring the quality of auditing.

The audit provides a strong argument against using accounting firms to conduct labor and environmental audits.

The poor quality of this audit argues for truly independent monitoring of Nike plants. Labor, religious, or human rights organizations that pass an accreditation program would be more appropriate auditors.

BACKGROUND -- NIKE IN ASIA

Nike, Inc., the world's largest retailer of athletic shoes, has come under increasing criticism recently over working conditions in its factories in Asia. Labor and human rights groups have reported physical and verbal abuse of workers, hazardous working conditions, pennies per hour wages, and anti-union efforts throughout Indonesia, China, and Vietnam, where Nike employs over 350,000 workers.1 Nike's treatment of its workers stands in stark contrast to the record $795 million in profits it reported thi s year.2

Nike initially responded to public criticisms by claiming no control over the conditions inside the factories making its shoes and clothing. Nike argued that as the company does not own any of the factories producing its products, Nike could not influenc e working conditions or pay.3 Labor rights groups have challenged this claim, demanding that Nike take responsibility for its subcontractors' actions.

Nike has since changed its strategy. First it hired two public accounting firms, Ernst & Young and Price Waterhouse, to perform internal audits of the labor and environmental practices inside its subcontractors. Nike describes the Ernst & Young audits a s "systematic, unannounced evaluations by independent auditors"4 of current working conditions inside their factories.

Second, it hired former UN-Ambassador Andrew Young's consulting firm GoodWorks International LLC, to review the company's "Code of Conduct" and subcontractor compliance. Andrew Young's report, which largely exonerated Nike, was made public and followed u p with a PR campaign. The much more in-depth internal audits however, which Andrew Young claimed to have access to, have remained completely confidential.

These "independent audits" are now central to debates around improving conditions inside the globally dispersed subcontractors of US firms. A White House commission is currently examining the issue of independent auditing.5 Nike and other apparel compan ies in the commission argue that corporations should be able to employ their own accounting firms to perform these audits. Labor, religious, and human rights groups however, disagree, arguing that truly independent auditing is critical to the task of end ing sweatshops around the world. A truly informed discussion of the issue has been limited by the fact that audits by these accounting firms have never been made public.

Until now, without evidence on the quality of accounting firm audits, it was impossible to determine whether these firms could, or would, do an adequate job of labor and environmental auditing. However, just this month, an Ernst & Young audit of one Nike subcontractor - the Tae Kwang Vina Company, a Korean manufacturer operating in Vietnam - was leaked to TRAC. Tae Kwang Vina employs 9,200 workers, and produces more than 400,000 pairs of Nike's mid- to high-end athletic shoes per month. This audit offe rs a rare opportunity to examine the methodology, findings, and recommendations of an industry auditor.

THE ERNST & YOUNG METHODOLOGY

While their methodology is not explicitly presented, Ernst & Young explain that "the procedures we have performed were those that you [Nike] specifically instructed us to perform. Accordingly, we make no comment as to the sufficiency of these procedures for your purposes." As this statement makes clear, Ernst & Young did not perform an "independent" audit, but rather simply followed Nike's instructions.

The Ernst & Young auditors spent approximately one week in the Tae Kwang Vina factory.6 They relied largely on management information about working conditions, organizational practices, and wages to write their report. They performed no environmental mo nitoring or air sampling of their own. Occupational health and safety information came entirely from secondary sources (largely Vietnamese government agencies). Information on worker perceptions and attitudes came from a survey of 50 employees "randomly selected...from the payroll register."

The Ernst & Young report, taken on its own, is poorly written, fraught with errors, and convoluted in structure. As discussed below, the audit methodology and reporting fail to adhere to the conventions of occupational health and safety, or environmental auditing. Ernst & Young's audit procedures appear simply to be based on Nike's instructions.

ISSUES REVEALED BY THE ERNST & YOUNG REPORT

Despite methodological flaws, the report does come to a number of striking conclusions about the working conditions inside Tae Kwang Vina. These include:

Chemical Exposures

From a "sample of 165 employees from Mixing, P.U., Roller sections, there are 128 employees (77.57%) getting respiratory disease..." (E&Y Page 9. References in this section are to the Ernst & Young Report which is included as an Appendix.) "Dust in the Mixing Shop exceeded the standard 10 times." (E&Y Page 8) This dust includes resins that are potentially very hazardous because they cause respiratory ailments.

Toluene concentrations "exceeded the standard from 6 to 177 times" in several sections of the factory. (E&Y Page 8) Toluene is a chemical solvent that is known to cause central nervous system depression, damage to the liver and kidneys, and skin and eye irritations.

Chemical releases have led to an "increasing number of employees who have disease [sic] involving skin, heart, allergic, [and] throat working in chemical involved sections." (E&Y Page 8) Acetone concentrations "exceeded the standard 6 to 18 times." (E&Y Page 8)

Lack of Safety Equipment and Training

"Personal protective equipment (gloves, masks) are not daily provided. (E&Y Page 4) Workers "do not wear protective equipment...even in highly-hazardous places where the concentration of chemical dust, fumes exceeded the standard frequently." (E&Y P age 6)

"There are [sic] no training on proper handling of chemicals for related employees in daily exposed [sic] to chemicals." (E&Y Page 6)

Working Conditions

Workers are punished or fined for "violating code of section such as talking during working hours." (E&Y Page 3) "40 workers [out of 50] do not read NIKE's Code of Conduct [and] even do not know exactly what NIKE is." (E&Y Attachment II, Page 2)

"48 cases [out of 50] where workers were required to work above the maximum working hours." (E&Y Page 2) It is interesting to note that even with these findings Andrew Young concluded that Nike was doing a "good job." This would indicate that either Andrew Young was not shown all of the internal audits Nike commissioned, or he has a very different view of a "good job" than would most occupational health and safety specialists.

BIASES IN THE AUDIT

The Ernst & Young audit methodology results in biased findings on a number of critical issues. For example, posing a question about pay without guaranteeing protection from repercussions, can discourage candid answers, and is likely to lead to a biased a nalysis. As a consultant to the United Nations Industrial Development Organization in Vietnam, I visited the Tae Kwang Vina plant three times during 1997. I also interviewed workers in confidence away from the factory. My research paints a very differe nt picture than the Ernst & Young audit.

Ernst & Young asserts:
"40 workers [out of 50 interviewed] are satisfied with their salary," which officially starts at $40 per month, although new workers are paid a lower "training wage". (E&Y Attachment 2, Page 2)

TRAC:
This finding highlights one of the problems with Ernst & Young's interview method. In my research, not one of the workers I spoke with at Tae Kwang Vina (including office staff) was "satisfied" with their pay. Ernst & Young:

"46 workers opined that working overtime hours are acceptable while 4 workers do not appreciate working overtime." (E&Y Attachment 2, Page 2)

TRAC:
This statement ignores the deeper rationale for working overtime - base salaries are extremely low. Tae Kwang Vina pays one of the lowest base salary of any of the 50 large factories I have studied in Vietnam.

Ernst & Young:
Only "15 workers are not satisfied with the working conditions (hot, stuffy)." (E&Y Attachment 2, Page 2)

TRAC:
The workers I spoke with complained about working conditions, including heat, chemical exposures, poor ventilation, forced overtime, and verbal abuse by managers.

Ernst & Young:
"There's a high rate of labor accidents caused by carelessness of employees." (E&Y Page 7)

TRAC:
A serious occupational health and safety audit would analyze the underlying causes of accidents - such as the absence of training and hazard prevention programs - rather than simply blaming the victims. To attribute accidents to carelessness rather than working conditions without thorough analysis is another example of bias in the audit.

Ernst & Young:
The audit notes that "the workers trade union is still being organized by the management and the workers." (E&Y Page 2)

TRAC:
Workers report that leaders of the trade union were selected and paid by Tae Kwang Vina's management.7

WHAT ERNST & YOUNG MISSED

In my interviews with employees,8 I was given information about numerous violations of Nike's Code of Conduct that were not discovered by the Ernst & Young audit. I was informed that managers of Tae Kwang Vina have:

Violated Vietnamese labor laws on maximum overtime hours. Night-shift workers in the stitching section told me that their "standard" work week is 10.5 hours per day, six days per week. This basic work week can lead to 700 or more overtime hours per year, well over the legal maximum of 200 overtime hours per year.;

Forced overtime. Workers complained that they have no choice in whether or not they work overtime. Workers are told one day in advance that they must work overtime. If they "choose" not to work overtime more than twice, they are likely to be fired .;

Violated Vietnamese labor laws on pay. Tae Kwang Vina is required to pay increasing wages based on workers' skills. Workers at skill level 1 should be paid the minimum wage ($40/month) times a multiplier, skill level 2 should be paid $40 times a hi gher multiplier, etc. One staff member told me the company ignores this legal requirement, giving annual salary increases much lower than required.;

Broken strikes. Tae Kwang Vina management have repeatedly threatened to fire all workers who wouldn't return to work during strikes over the last two years. An office staff member explained that "managers investigate who incited the action, and don 't fire them, but make them change jobs, and treat them very badly until they quit.";

Physically and verbally abused workers. I was told numerous stories about managers hitting workers. Reportedly, in one case the director of security hit a Vietnamese guard. In another case, a manager hit several women workers with a broom while tr ying to force them to leave the factory in a single file line.

Sexual harassment. Several workers told me that a Korean manager allegedly attempted to rape two women workers last year, and then fled the country. This was widely reported in the Vietnamese press.9 Independent monitors on the ground in Vietnam wou ld have been aware of this case and would have followed up on these issues.

Tae Kwang Vina is the most technically advanced of Nike's subcontractors in Vietnam, and according to Nike is no worse on labor or environmental issues than the other four Nike factories in Vietnam.10 In fact, Tae Kwang Vina received the highest score of Nike's five factories in Vietnam in a self-assessment procedure.11

The serious omissions and biases in the Ernst & Young findings point out the weaknesses of using accounting firms to audit labor and environmental practices. These auditors are not trusted by workers, and their findings are never submitted to public scru tiny.

WHAT ERNST & YOUNG SHOULD HAVE ANALYZED

In following Nike's instructions for the audit, Ernst & Young failed to comprehensively analyze labor and environmental conditions inside the Tae Kwang Vina factory. The audit is missing important information regarding occupational health and safety, env ironment, and general working conditions. An audit should be designed to determine normal operating practices within a factory, to evaluate recognized hazards and how they are controlled, and to analyze how new hazards are identified and controlled.12 I n order to do all this, auditors need to be trained in hazard recognition, and must be able to independently assess management actions. Ernst & Young failed to adequately analyze both existing hazards and procedures for resolving new hazards.

An Industrial Hygienist who performs worker health and safety compliance inspections for the State of California13 noted that if Tae Kwang Vina had been operating in the U.S., it would have been cited and fined on numerous counts, including:

The Ernst & Young audit failed to examine any of these issues in detail, and ignored exposures to other hazardous chemicals such as Methyl Ethyl Ketone and glues in the plant. The audit also failed to examine why employees with respiratory illnesses were still working in areas of exposure without controls, and why no safety committee exists in a factory with 9,200 workers. The audit should have also examined issues that are common points of concern in Nike plants around Asia, and that have been specifically raised at the Tae Kwang Vina plant. Workers should have been interviewed off-site with guaranteed anonymity regarding physical and verbal abuse by managers, sexual harassment, general working conditions, and pay issues. Lora Jo Foo, Managing Attorney for the Asian Law Caucus and President of Sweatshop Watch, asserts that "it is impossible to do an analysis of minimum w age or overtime compensation without having information on the actual hours worked, and the take-home pay of the workers, both of which were missing from the Ernst & Young audit. A proper analysis would involve unannounced monitoring of working hours, an d interviews with workers away from the factory."14

The environmental section of the Ernst & Young audit similarly misses most of the key environmental issues in this factory. At a minimum the audit should have listed all chemicals used in the plant, noted that burning scrap rubber in the factory's boiler s is violating Vietnamese environmental laws, and proposed alternatives to burning rubber.

A truly independent audit of labor and environmental practices would involve a more complete analysis of the system within the factory which affects working conditions, health and safety, and the environment. This includes: management policies and action s, company organization, worker training, hazard prevention programs, and existing and potential physical and mental hazards. A long-term auditing program would also include comprehensive health studies of workers in hazardous sections of the plant. This type of audit obviously requires well trained auditors that are committed to independent analysis of the conditions inside the factory.

CONCLUSIONS

Dusty Kidd, Nike's Director of Labor Practices, proclaims that Nike will "Assure best practices in every factory where NIKE products are made, regardless of who owns the factory, or the scale and duration of our presence there."15 Furthermore, Nike cla ims that "When NIKE leads, others follow. We're the leader -- always have been, always will be."16 Despite these bold claims, the leaked Ernst & Young audit provides evidence that working conditions can hardly be described as "best practices" in a facto ry which is said to be Nike's most technically advanced plant in Vietnam.

The Ernst & Young audit also presents a strong argument that accounting firms retained by manufacturers are not the appropriate organizations to be conducting audits of labor and environmental conditions. Accounting firms such as Ernst & Young simply do not have the training, independence, or the trust of workers, to perform comprehensive, unbiased audits of working conditions. We agree with a State of California health and safety compliance officer who argues in an industry newsletter that "putting the fox's paid consultant in charge of the hen house" is not the solution.17 It is also clear from the leaked audit that Andrew Young's report on Nike failed to examine many of the critical issues related to labor and environmental conditions in Nike plants.

The information presented in this audit represents only the tip of the iceberg of poor working conditions inside Nike and other US subcontractor factories around the world. For instance, there have been widespread reports in the Vietnamese press about si milar conditions in other Nike plants.18 A recent investigative report from China documents serious problems in Nike and Reebok plants there.19 Nike's Indonesian factories have been criticized for their mistreatment of workers for years.20

If Nike genuinely wishes to improve the conditions inside its plants, it would, as the saying goes, "Just Do It." The company should make public all of the internal audits conducted to date. This would shed light on current conditions in its plants, and increase the public's belief that Nike is making a good faith effort to improve.

Clearly only well-trained, independent auditors can perform the types of audits that are needed in Nike's factories. As The New York Times admits, a better alternative to accounting firms would be "local, truly independent monitors who speak the language , can make unannounced visits and enjoy the trust of a largely young, female...workforce."21 Labor, religious, or human rights groups that pass an accreditation program would be the best candidates for this job.

Endnotes

  1. Dottie Enrico, "Women's Groups Pressure Nike on Labor Practices," USA TODAY, October 27, 1997, Pg. 2B; Jon Frandsen, "Nike Invited to Answer Charges of Third World Exploitation," Gannett News Service, October 24, 1997; Brad Knickerbocker, "Nike Fight s Full-Court Press on Labor Issue," The Christian Science Monitor, September 23, 1997; Jonathan Make, "Critics: Young Report Just Doesn't Do It," Business Journal-Portland, June 27, 1997.
  2. PRNewswire, "Nike Reports Record Fourth Quarter and Fiscal 1997 Earnings," July 1, 1997, Beaverton, Ore.
  3. Donald Katz, Just Do It: The Nike Spirit in the Corporate World, New York: Random House, 1994. Katz quotes one Nike representative as saying "We don't pay anybody at the factories and we don't set policy within the factory; it is their business to run."
  4. See Nike's web page www.nikeworkers.com .
  5. The Apparel Industry Partnership was created by the White House in August 1996. In April 1997, the Partnership presented the President with a Code of Conduct and Principles of Monitoring. The Partnership plans to release a second report in November 1 997.
  6. Personal communication with Nike staff in Ho Chi Minh City, Vietnam, October 3rd, 1997.
  7. Interview with Tae Kwang Vina employee, October 7, 1997.
  8. Interviews were conducted with five Tae Kwang Vina employees in October, 1997. These employees ranged from high-level office staff to factory workers.
  9. The Worker Newspaper (Nguoi Lao Dong), in Vietnamese, August 23, 1996. See also Duc Hung and Huong Lam, "Foreign Bosses Blasted: Labour Force Abused as Firms Seek Short Cut to Quick Buck," Vietnam Investment Review, Ha Noi, March 3-9, 1997.
  10. Personal communication with Nike staff in Ho Chi Minh City, Vietnam, October 3rd, 1997.
  11. Interview with Tae Kwang employee, October 11, 1997.
  12. Arthur Reich, "Workplace Inspection & Worker Protection," in J. LaDou (ed.) Occupational Health & Safety, Itasca, Illinois: National Safety Council, Second Edition, 1994, PP: 121-161. Elizabeth Gross and Elise Pechter Morse, "Evaluation," in B.A. Pl og, J. Niland, and P.J. Quinlan (eds.) Fundamentals of Industrial Hygiene, Itasca, Illinois: National Safety Council, Fourth Edition, 1996, PP: 453-483.
  13. Personal communication with Garrett Brown, MPH, Industrial Hygienist, Nov. 2, 1997. Mr. Brown is a compliance inspector for the State of California, and is the National Coordinator of the Maquiladora Health and Safety Support Network.
  14. Personal communication with Lora Jo Foo, October 31, 1997.
  15. See Nike's web page www.nikeworkers.com .
  16. Ibid.
  17. Garrett Brown, "The Slippery Slope of Third-Party Reviews," The Synergist, September 15, 1997.
  18. Articles in Vietnamese and English are available from Vietnam Labor Watch or on their web site at: http://www.saigon.com/~nike
  19. The Asia Monitor Resource Centre and the Hong Kong Christian Industrial Committee, "Working Conditions in Sports Shoe Factories in China Making Shoes for Nike and Reebok," Hong Kong, September 1997.
  20. David Moberg, "Just Doing It: Inside Nike's New-Age Sweatshop," L.A. Weekly, June 20, 1997. Jeff Ballinger, "Just Do It - or Else: Unfair Labor Practices Among Nike Inc.'s Foreign Suppliers," Multinational Monitor, v16, n6, June 1995.
  21. New York Times, "Watching the Sweatshops," Editorial, p. A20, August 20, 1997.

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