On Monday, September 22 -- just prior to Nike's annual stockholder meeting in Portland, Oregon -- a press conference announced the release of an important new report on Chinese factories producing shoes for Nike and Reebok. Produced by two respected nongovernmental organizations in Hong Kong, this report shows Nike and other major shoe companies to be engaging in systematic and serious violations of the rights of their workers in China.

This year, Nike persuaded the Securities and Exchange Commission to disallow a shareholder resolution submitted by the pension board of the United Methodist Church, arguing that sweatshop issues fall within "normal business decisions" for a company's board of directors. The new Hong Kong-authored report illustrates dramatically just what constitutes business as usual for Nike.

Importance of This Report:

1. This investigation significantly increases our knowledge of labor abuses in factories producing for Nike and Reebok in China.
2. The two organizations which conducted this investigation are prepared to conduct ongoing monitoring of Nike and Reebok factories in China. There now is a credible alternative to the clearly inadequate monitoring currently being done for Nike and Reebok.

Following is a summary of the report. To receive the complete report via email, send a request to Campaign for Labor Rights at clr@igc.apc.org.

GENERAL INFORMATION:
China is now the biggest shoe producing country in the world, producing over one-third of the world's top brand-name sports shoes.

The multinational companies effectively control the conditions in their subcontractors' factories. To stay in business, a subcontractor must accept the timeline set by the multinational and accept the price the multinational is willing to pay per shoe. When the multinationals squeeze the subcontractors, the subcontractors squeeze the workers.

METHODOLOGY OF THE INVESTIGATION:
Researchers from two Hong Kong-based nongovernmental organizations investigated factories of four major shoe subcontractors in China. Two are Taiwanese companies, one is based in Hong Kong and the fourth is South Korean. These factories produce mostly for Nike and Reebok but one also does some production for LA Gear and Adidas. All the factories are located in the Pearl River Delta in southern China.

Most of the workers in the Pearl River Delta are peasants who come from rural areas of other provinces, and 90 percent of them are women 17 to 23 years old.

While these two organizations have monitored conditions in the shoe factories over the past three years, their latest research was conducted in June and July, 1997. For this survey, they conducted detailed interviews with 10 workers in each factory and held discussions with dozens of other workers.

OVERALL FINDINGS:
Investigators found that practices and conditions at all factories in the survey systematically and grossly violated:

• Nike's and Reebok's own codes of conduct
• The Apparel Industry Partnership code of conduct
  (Both Nike and Reebok belong to the AIP)
• Chinese labor law

Compared with the investigators' research on the shoe factories in 1995, conditions today are even worse now.

FREEDOM OF ASSOCIATION
There are no authentic independent non-governmental organizations or trade unions and any attempts at genuine union organizing are harshly repressed. Workers have no established ways to channel their complaints. Workers who engage in wildcat strikes or other demonstrations are likely to be fired. Workers are afraid to lodge complaints, out of fear of dismissal.

HOURS, QUOTAS AND OVERTIME
According to the Chinese labor law, the work day should only be eight hours long, and additional hours of work should be counted as overtime. However, the factories set the "normal" work day as 11-12 hours, and then add 2-5 hours of additional overtime work.

Although Chinese law mandates at least one day of rest per week, workers reported getting off as few as 2 days per month. It is important to take into account that the interviews were conducted in June and early July, which is not peak season. This means that while the work shifts reported here are already grueling, during other months, when there is more work to be done, the workers work even longer hours and are given even fewer days off per month.

Workers who refused to work overtime are docked significant amounts, such as an entire day's pay, and face dismissal after repeated refusals to work overtime.

Many workers are given an unrealistically high daily quota. When, as often happens, the quota cannot be fulfilled in a day's work, the worker must participate in unpaid "prolonged work."

PAY
Most workers are not even given their pay stubs, making it difficult for them to understand what hours they were paid for and at what rate.

At one factory producing for Nike, workers receive $30-$42 per month before overtime although the minimum wage in that region is $42 per month. Overtime rates also are in violation of the law. Minimum overtime pay is $0.36 per hour, but the Nike workers make $0.19-$0.33. After all the deductions are made for company housing, meals and other items, one month's pay -- including overtime -- comes to only $36.14-$72.29.

ILLEGAL "DEPOSITS"
Many factories require an illegal "deposit" equal to one month's wages or withhold the first month's pay. Frequently, workers are not given their "deposit" upon leaving the job.

ILLEGAL FINES
The factory of one Reebok contractor is run like a prison labor camp . The workers must do mandatory calisthenics before work. A worker might have to pay as much as 18 days worth of wages for missing morning calisthenics or talking to a coworker. Substantial fines for minor "offenses" are common in both the Nike and Reebok factories.

HEALTH AND SAFETY
Investigators heard of instances where workers lost their fingers in the machines, fainted due to heat and fumes and one worker had died from inhaling poisonous chemicals. Several of the workers complained of dizziness, skin irritations, headaches and dyspnea and said that their co-workers also have these problems. Dust levels are so high as to constitute a serious health hazard.

ILLEGAL DISMISSALS
Workers often are fired for being "too old" (more than 25). Even though Chinese law stipulates the right to a maternity leave, workers who become pregnant are fired.

CHILD LABOR
One Nike contractor hires females as young as 13 years old.

AWARENESS OF RIGHTS
Almost all of the workers who were interviewed had no knowledge of the Nike or Reebok codes of conduct. The workers who thought they knew about the codes were often confusing them with the international quality control standards which products must meet in order to be exported. It is clear that the companies are not making their codes available, as they claim they are.

MONITORING
As the evidence in this report all too clearly proves, Nike's and Reebok's monitoring systems are a failure. Truly independent external monitoring is needed if the companies are to correct the systematic pattern of serious labor rights abuses in their Chinese shoe operations.

CRITICISMS OF THE ANDREW YOUNG/GOODWORKS REPORT
Andrew Young took only 12 days to visit three countries and spent only 3-4 hours at each factory. Discussions with workers were conducted on the factory premises and translated by Nike interpreters. Workers naturally assume that a well-dressed foreign visitor who is introduced by management in the confines of the factory is connected to the company. In these circumstances, most workers would fear punishment if they shared their true feelings. Moreover, management informs workers beforehand when visitors are coming and asks them to behave well and clean up the work place.

Young and GoodWorks apparently were unaware of the subcontracting system used by producers in China. Many big factories subcontract part of their business to small partners on a regular or irregular basis, often to small township and village enterprises (TVEs). Conditions in TVEs are notoriously worse than in other factories.

In China, many facilities have the factory on the ground floor, the warehouse on the second floor and the workers' dormitories on the third floor. These "three-in-one buildings" are illegal because they have proven to be dangerous fire hazards. Many workers have died in their dormitories when fires break out below them. Despite the ban, such factories are still found among small TVEs as well as in big joint ventures and foreign enterprises. Three years ago, a major supplier of Nike and Reebok was found to have its dormitory inside or on the roof of the factory building. GoodWorks failed to investigate whether Nike shoes were still being made in such dangerous facilities.

GoodWorks was silent about the use of hazardous chemicals, a common problem in factories in China. Protective equipment is substandard at best. The footwear industry is a prime user of dangerous chemicals. Glue is indispensable in the production of footwear products, and many glues present serious health risks to workers. Benzene, a glue component banned in the United States, is widely used in China. The factories also use large quantities of thinners which can cause cancer.

GoodWorks not only refused to address the living wage issue, they failed to examine whether laws regarding minimum wage and overtime pay were being respected, as stipulated in Nike's code of conduct. Thus, they overlooked very serious violations.

GoodWorks also did not address the issue of workers being fined for things like arriving late or talking to coworkers during work time, fines that often amount to a substantial portion of their salary. Though China's labor law clearly states that fines cannot be deducted from salaries, it is a well instituted practice in nearly every factory in the Pearl River Delta, including the Nike and Reebok factories.

The GoodWorks report did not address the issue of forced overtime, nor the fact that overtime and the number of days worked exceed limits established by Chinese labor law.

In general, the GoodWorks report is misleading and does not present a clear picture of the conditions in the factories. The Hong Kong nongovernmental organizations vigorously disagree with the GoodWorks conclusion that there is "no widespread or systemic abuse or mistreatment of workers." Nike subcontractors consistently violate numerous regulations in China's Labour Law and Nike's Code, which constitutes a systemic abuse of workers.

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