Appendix 2. Leak of the Ernst & Young report from Nike Headquarters (NYT, 11/8/97).

November 8, 1997

Nike Shoe Plant in Vietnam Is Called Unsafe for Workers


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 Friday 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 slashed 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," 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, six to 177 times the amount allowed by Vietnamese regulations, which itself is about four times as strict as American toluene standards. Extended exposure to the carcinogen 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 Nike 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." 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 why it is hard to impose 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.

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. 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 Friday that as soon as Ernst & Young made its confidential report 10 months ago, the company took numerous steps to improve working conditions.

Nguyen said the number of hours worked a week had been reduced to 45, from 65. He said 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 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 equipment, that pay remained low and that managers still yelled at or otherwise harassed workers.

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 Young, said they were. "We didn't see or read all of the reports they did prior to our going," said Gatlin, who nonetheless defended the job they did. "Nike always said they were asking for the facts," said Gatlin, who was working for Young's consulting firm, Goodworks International.

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. Rourke, for instance, criticized its conclusion that most employees were happy with the wages and working conditions. O'Rourke said the workers whom Ernst & Young interviewed were scared to speak candidly. O'Rourke said his interviews found much discontent.

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.

Other Places of Interest on the Web

  • Nike Workers Web site
  • Communications Works: Just Do It Nike - Pay Fair Wages Web Site
  • Copyright 1997 The New York Times Company

    The Just Don't Do It Campaign at the University of Michigan
    The U. of Michigan's contract with Nike
    Where it all began
    Nike's track record
    Nike drops the ball--the Andrew Young report
    Answers to Frequently Asked Questions
    Organizations, Resources, and References
    Appendix 1. Breakdown of costs for a pair of Nike shoes
    Appendix 2. Leak of the Ernst & Young report from Nike headquarters (NYT 11/8/97)

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