Reebok - Managing Human Rights Issues 'Ethically?'

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Case Details:

Case Code : BECG019
Case Length : 13 Pages
Period : 1984 - 2002
Pub. Date : 2002
Teaching Note : Available
Organization : Reebok, China Labor Watch
Industry : Apparel and Footwear
Countries : China, USA

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Reebok's Problems in China

Multinational shoe companies (MNSCs) entered the Peoples' Republic of China (PRC) in the mid-1980s, following the liberalization of the Chinese economy in 1984. Due to large scale unemployment in China, the workers were ready to work for low wages, thus resulting in low wage-related expenditures for MNSCs.

Moreover, labor laws were not strictly implemented by local governments within the PRC, which competed with each other to attract foreign investment, especially in labor-intensive industries such as shoe manufacturing. Like most of its competitors, Reebok entered the Chinese market through the contract manufacturing route, i.e., through sub-contractors. By doing so, the company could absolve itself of responsibilities relating to footwear production, while at the same time take advantage of low production costs to earn higher margins. The company could also bargain with sub-contractors to fix production deadlines and manufacturing price. By the end of 1996, China accounted for nearly 35% of Reebok's worldwide footwear production...

Reebok's Response

In response to the increasing allegations of human rights violations in China, Reebok took few steps to assess and improve the working conditions in its manufacturing facilities.

In May 1999, Reebok, along with Mattel and Levi Strauss (which had large operational interests in China), teamed up with 21 human rights, fair trade and social investment groups to endorse a set of principles (Refer Exhibit V) for corporations doing business in China.

Through these measures, Reebok attempted to address issues such as the use of forced labor, child labor, inadequate wages, long working hours, and physical or other kinds of abuse of employees.

This was one of the first major initiatives taken by leading US business corporations in China to address human rights issues...

Excerpts Contd... >>


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