The sports apparel giant's focus on keeping factory costs low affects working conditions.

    Nike contract factories will abuse workers, critics say, as long as the company forces the plants to make shoes and apparel for ever-lower prices.

    "As long as they continue to pay sweatshop prices," says Scott Nova, executive director of the Worker Rights Consortium, a labor-rights monitoring organization in Washington, D.C., "they're going to continue to get sweatshop conditions."

    Not true, say managers of the Beaverton-area shoe giant. Nike can't change industry conditions, they say, without help from other companies, governments and workers' rights groups.

    The controversy sounds like a debate from the 1990s, when student groups and others regularly lambasted Nike. Critics now say Nike's manufacturing structure is exploitative, while company officials defend the free-market approach. They say their operations have helped propel nations to prosperity.

    "The real way to address this is for the brands to collaborate and agree on a core set of standards," says Erin Dobson, Nike's director of corporate-responsibility communications. "Our monitors aren't going to catch everything."

    Nike staff members swung into action recently after an Australian television station exposed squalid living conditions, garnisheed wages and withheld passports of foreign workers at a Malaysian factory. Nike is arranging approved housing, refunds and trips home for workers at the Hytex Group T-shirt plant outside Kuala Lumpur.

    An Australian activist organization, the Committee to Protect Vietnamese Workers, claims credit for helping reporter Mike Duffy uncover the story, which has Nike inspecting all 37 of its Malaysian contract factories. Trung Doan, the committee's general secretary, says his organization had learned of similar abuses by interviewing more than 100 Vietnamese people working in Malaysian industries ranging from electronics to timber.

    "Nike is neither alone nor the worst in Malaysia or Vietnam," Doan says. "There are others and worse, employers who break the law, break their own ethics codes, or in any case treat workers very badly. We plan to name and shame some more."

    Contradictory Goals

    Nova, of the Worker Rights organization, says Nike can't hide behind its independent contract factories because the company picks plants on the basis of price.

    "Factory owners are being asked to do two mutually contradictory things: improve standards and cut prices," Nova said. "The factories do everything they possibly can to hold down labor costs, and they hope nobody catches them" for violating labor standards.

    Nike and other companies repeatedly jump from factory to factory, Nova says, instead of sticking with plants, paying them slightly more to meet standards and rewarding them when they do. Nike's supply chain of about 700 plants in 52 countries is far too big to monitor, he says.

    Nike's Dobson says that in fact the company has begun to consolidate production, especially following the recent abolition of global textile quotas that set amounts firms could order from various countries.

    "You have an ability to identify factory groups and build longer-term partnerships," she says.

    Dobson says usually Nike can only prompt changes in plants where its goods make up the majority of production. She defends the effectiveness of Nike's Code of Conduct, a set of standards for workers established in 1992, and the quality of the company's monitoring system.

    Independent Monitors

    But Leslie Kretzu, cofounder and director of Educating for Justice, a New Jersey-based social-change organization, says there's no evidence to show that the Code of Conduct has diminished human-rights abuses. She says Nike should allow independent researchers into its factories.

    "If they wanted to find out about these problems, they could invite people like myself, or students from United Students Against Sweatshops or people from academia," Kretzu says.

    Dobson says Nike has invited in experts from the International Labor Organization, a United Nations agency, and the Fair Labor Association, a monitoring group. But Jeffrey Ballinger, a longtime anti-Nike activist, says Nike and other companies co-opted some monitoring organizations who agreed to partner with them.

    "Monitoring was a huge dodge from the beginning," Ballinger says. "If they put four factories in competition for 100,000 Air-whatever shoes, they can't go back and say, 'Give the workers Saturdays off,' because the contractor needs to make money."

    When the debate over working conditions made news in the 1990s, consumers started to avoid Nike products. This time, they remain largely on the sidelines. Critics such as Ballinger, who is in Vienna writing a book on Southeast Asian labor practices, say company managers distracted journalists and shoppers through a "masterful" public-relations job.

    "There'll be business-school case studies written about how they extricated themselves from this problem," he says. "But it didn't help the workers."