NIKPRT~1.txt is a Nike Inc. file and part of nikeworkers.com series; created Friday, June 19, 1998 5:38:16 PM; last modified Saturday, February 14, 1998 2:43:10 PM; saved by D. Boje as NIKprTUCKNov397 (file origins).

November 3, 1997

Vada Manager - Senior Manager for Public Relations:

Thank you very much and thanks, everyone, for taking the time to join us today. As many of you who either joined us earlier were aware that we are in receipt today of the final analysis and final report from the Amos Tuck School of Business at Dartmouth College and are assembled here with the both group of students and senior faculty who worked with us in both Indonesia and Vietnam to compile the expenditure study that they conducted both in those two countries.

With us today--just for quick introduction and then I’m going to turn it over to Dusty Kidd for a couple of just very quick opening comments and then we’re going to get to the students’ findings and analyses--but we have with us today Derek Calzini, Jake Odden, Jean Tsai, Shawna Huffman, and Steve Tran, each of which will talk a little bit about their respective experiences in the countries where they conducted the

research and give us a very top-line data. We want to leave plenty of time for questions from each of you as well. I believe that you all did receive on the intermediate advisory or on the preliminary summary spellings of each of the names, but if we need further clarification of that, we can do that as well.

So with no further delay, why don’t I turn it over to Dusty Kidd, who is Director of Labor Practices for NIKE, Inc., to give just a few opening comments about our production processes and some of the initiatives we’ve undertaken. And then we will from there launch into the students and the faculty. I’ve just discovered I failed to acknowledge both Professors Eugene Mihaly and Joseph Massey, who worked with the students on the research. So with no further delay, Dusty Kidd with NIKE.

Dusty Kidd - Director of the NIKE Labor Practices Department:

Good afternoon or good morning, depending on where you are, everybody. Very brief remarks here. First is that this is one of several initiatives that we’ve undertaken this year to further understand and in broader context how the jobs that we create help or do not help people in the workplace. We have ongoing monitoring of our own people on a daily basis; we do training with our contract factory managers on a continuing basis. We also have enlisted people outside of the NIKE and contractor family to help us in some of these areas. One of those is a university in Vietnam that does an ongoing focus group study with various factory workers. And programs like that we think supplement but do not supplant the kind of work we should be doing ourselves, because we are responsible and feel responsible for whatever happens in environments where our products are made.

In the late spring, the Tuck School approached us with the possibility of doing some work of an undefined nature in Indonesia and Vietnam because they were sending teams over there, MBA candidates. And we thought it would be a great idea for them to take a look at wages and spending and see how these patterns evolve and how these jobs relate to local economies and relate to other parts of those economies,

aside from factories. And so we talked to them about the construct and over the summer worked on a basic plan. In August, the teams headed to the two countries, respectively, and about a month and a half afterward came back with a preliminary survey of information. They’ve since developed the final reports which we received this morning in which they gave a briefing to our senior management. And so we thought we’d take this opportunity to have them talk to you. We’ve got seven people here from those teams, including their two professors, and I think you’ll find it interesting. So I’ll turn it over to the team and be happy to answer any questions specific to NIKE later on.

The one final comment I would make is that this is by no means the final answer to all questions about wages in all countries where NIKE does business, nor is it the final answer to questions of wages and need in Vietnam or Indonesia. We think it is, however, a very good first step, and we would invite any organization, either

corporate or otherwise, to continue to process and share the information as broadly as they can, because I think we’re all best served when we’re working with real good information, and we think this is real good information.

Jake Odden - Amos Tuck School of Business at Dartmouth College:

Thank you, Dusty. This is Jake Odden speaking from the Tuck School. And just first by way of background, I think I’d like to just reintroduce ourselves again and explain that the five students here who are involved with this are all second year MBA students at the Amos Tuck School at Dartmouth. There were two of us--Shawna Huffman and Steve Tran--who spent the three weeks in Vietnam; and three of us--Derek Calzini, Jean Tsai, and myself--spent the three weeks in Indonesia. The

survey we conducted was undertaken for a field study in International Business, which is a second-year elective course offered at the Tuck School. And I would like to add that no compensation was received for this, aside from course credit towards our degrees. NIKE’s involvement in our work, in the survey, once we got on the ground in the respective countries, was really mainly to assist us with logistics.

The mandate of our survey was really just to profile the typical expenditure levels for basic spending categories, and this held true in both Indonesia and Vietnam. Based on the data we gathered, I’d like to just provide an overview of the three summary conclusions we arrived at, which were consistent in both Indonesia and Vietnam.

First, for NIKE contract factory workers in both countries, we found that they consistently earn wages at or above government mandated minimum wage levels.

Secondly, NIKE contract factory workers living on their own can generate discretionary income in excess of basic expenditures such as housing, transportation, and food.

Thirdly and finally, we found that for workers living in extended family households, NIKE contract factory worker wages are typically used to increase or augment total household income to raise overall household living standards.

In addition to these conclusions which we arrived at from the data of our surveys, it was also clear to us that NIKE contract factory jobs are an attractive employment option for entry-level workers. These jobs provide a consistent, recurring stream of income in contrast to common alternatives that exist in these countries such as farming and shopkeeping. In addition, there are significantly more applicants for factory jobs and positions available, which again suggests that these jobs are an attractive employment option.

So I think that that observation, along with our formal conclusions provides us with some of the context of our work, and we’d really like to open it up to questions at this point.

QUESTION AND ANSWER SESSION

Nathaniel Harrison with French Press: Good morning. I was told this morning by a NIKE spokesman that NIKE in fact financed this study. Now I’d like to know if that’s true or not. And if it’s true, do you think it affects the credibility of the study?

Tran: Nathaniel, this is Steve Tran from the Tuck School. I was involved in the Vietnam portion of the survey. NIKE paid basically for flight and for hotel rooms and some miscellaneous expenditures in connection with the actual survey effort. Aside from that, the students here--the five students actually involved in the survey, and likewise the two professors involved in the survey--received no outside compensation. Does that answer your question?

Harrison: Yes. I’m sorry, I didn’t understand. Was the same true in Indonesia?

Tran: Yes, that’s true.

Harrison: So NIKE in both countries simply paid what--flights and hotels? Is that--

Tran: That’s right.

Harrison: Okay. Then who are you? Who is there speaking? I’m sorry, I didn’t catch the name.

Tran: This is Steve Tran.

Harrison: Steve Tran. Okay, fine. Okay, thank you.

Massey: Nathaniel, this is Joe Massey, the professor here at the Tuck School. I should explain that this course--field study in International Business of which the NIKE study was one of eight projects--involves the securing by the Tuck School of corporate sponsors for consulting projects for our entering second year students. We have the companies involved pay a fee that covers all the necessary expenses of the students and faculty involved in the program. It’s a standard fee. The students get no, as they said--the students who do the research, and it’s important to underscore here that this is a students-done research; the faculty did not do the research, they’re not involved as part of the research team. We were just there to guide all the students and to help facilitate their work. This is one of eight such studies that were commissioned by companies involved, basically corporate supporters of this course.

Harrison: And you’re confident that NIKE’s involvement doesn’t call into question the credibility of the study.

Massey: Not at all. First of all, there was no pressure of any sort exerted on us or the students by NIKE to shade or to focus or to bias the results. There is no significant economic incentive here for any of the actors and none whatever for the students.

Mihaly: This is Eugene Mihaly, the other faculty member. Let me add that the methodology was evolved by the students on the ground. The interpreters, to the extent that they used them, they selected. There was every effort made to keep this thing very straight, very objective, and it happened exactly that way.

Harrison: Okay, thank you.

Morgan Holm with Oregon Public Broadcasting: I wondered if you could tell me if you made a distinction in studying the wages of the workers there in Indonesia and Vietnam, between their regular wages and any overtime wages they received. And if you made that distinction, did you also delineate the effect that had on their income spending levels?

Tsai: And for Indonesia, we did make those distinctions. The minimum wage is mandated by the government at 172,500 rupea, and the remaining wages are benefits and overtime, and they result in an average of 237,000 per month.

Odden: That’s in take-home cash pay, if you were to refer to the 237,000.

Tran: I’d like to chime in about the Vietnam portion of the survey. The factory wages that we took into account in calculating discretionary income above and beyond basic expenditure levels is the entry-level factory income, which does not include any overtime whatsoever.

Holm: So were you able to tell--let me focus on Indonesia for just a moment. It sounds like the overtime pay makes a substantial contribution to what the families are able to spend--families of the workers are able to spend. Is that correct?

Calzini: The overtime and bonus--and that includes any kind of attendance bonus or performance bonus--did add to the total take-home pay. Our study focused on consumption and savings levels. We found that on average all of the major consumption categories--housing, food, and transportation--were all met by the base salary. We also found that no worker actually earned only the base salary. That does include overtime, but it also includes portions of the salary that were not overtime such as attendance bonus and performance bonuses. That also excludes what they call a thirteenth month level on bonus which is given annually to all the workers.

Tsai: And Morgan with your question, the minimum wage is not meant to support a family, but these are individual minimum wages.

Holm: Okay, thanks.

Linda Hamilton with Business Week: I’m wondering if you could say how many workers were interviewed, how they were contacted and interviewed. Was it at the factories? Were there supervisors or was it in their homes? How did you guarantee that the workers were free to speak about the conditions and their wages?

Calzini: I was involved in the Indonesia portion of the study. We went to ten factories and used written questionnaires in the original tongue of the workers there, the Hasa Indonesia. We surveyed approximately 450 minimum wage workers. We asked the factories to provide us with workers that met the following criteria: that they earn minimum wage as a base salary; that they represented functional distribution within the factory where appropriate for minimum wage workers; and they also represented gender distribution for the factory. During the actual surveying, we ourselves conducted the surveys along with a translator. Factory personnel were, to a large extent, not involved. In fact, the factory managers did not see any of the results from the survey, nor did NIKE until we came back from the in-country visits. Any kind of factory managers were not involved at all and were not present during the actual survey.

Hamilton: But they selected them? Are you saying that they provided you with the names of the people who met the criterion?

Calzini: That’s right. It was logistically impossible for us to choose actual workers, simply because these factories employ upwards, in some cases, of 18,000 workers.

Simple logistics kept us from choosing them ourselves. Similarly, when we were in non-NIKE factories, we employed the same method.

Hamilton: And this is both in Indonesia and Vietnam?

Calzini: No, we’re going to let Vietnam speak to their methodology.

Tran: On the Vietnam side, we undertook a slightly different methodology. What we discovered when we came on ground in Vietnam is that the factory workers, in the five Vietnam footwear contract factories affiliated with NIKE, they’d all been surveyed extensively up to this point, both by NIKE and by third parties. So the management of those factories asked us not to disrupt their working more than need be. So given the fact that the mandate for our survey was strictly to understand expenditure levels for the basic spending categories, and secondly, given the fact that these workers all live within the area surrounding the factory, within 5 to 15 kilometers surrounding the factory, we chose to undertake a random sampling of households in the area. In fact, in any given neighborhood we went to, we sampled

every third household. And in some of those households, income earners were factory workers, and in other households we had income earners who were in fact farmers, shopkeepers, or who ran bicycle repair shops. So I think we got a broader sample in terms of the type of income earners, and likewise we got probably a deeper understanding of expenditure profiles, given the fact that we spent about 20 minutes to a half an hour with each particular household.

Tsai: In addition, Linda, I think it’s important to remember that minimum wage workers in established factories are a small percentage of the workers there. So we really needed management’s help in selecting those people. Because once you’ve worked there beyond a year, you no longer qualify as a minimum wage worker and you’ve gained seniority benefits above that.

Odden: On Indonesia again, I would add that the workers’ responses to our surveys actually confirmed that they met the criteria that we asked managers to pursue when selecting workers.

Hamilton: Did anyone ever express, though, reluctance in talking to you or seem uncomfortable in talking to you?

Odden: Not at all. In fact, we found that the general atmosphere, if you will, throughout the conducting of the surveys was fairly pleasant, and the workers seemed to look forward to engaging in exchanges with us.

Tran: On the Vietnam side, Linda, just to backtrack a little bit, I never answered your question about the number--the sample size itself. We interviewed households in the factory areas. The first factory area, we were able to interview 78 households, and within those 78 households there were 149 income earners. In the second factory area, we interviewed 68 households, and within those 68 households there were 151 income earners. And of the grand total of approximately 150 or so households we interviewed combined between both factories, we were only turned away once. So our impression is that they were rather open and delighted to speak with us about their spending habits.

Hamilton: Thank you.

Massey: Dusty Kidd and NIKE for their part and the Tuck School on its part would be happy to make the study available to any and all of you who are interested in seeing it.

Manager: If any of the members of the media are interested in getting a copy of the full study, which I assume everyone is at this point, you can contact my office at (503)671-2875 is my direct line, or you can also dial the main communications office which is (503) 671-3160 and request a copy of the study and we can get that to you as expeditiously as possible.

Calzini: This is Derek Calzini; I was on the Indonesia team. One of our conclusions or observations was that these factory positions at NIKE contract factories were in fairly high demand in both countries. Anecdotally, we visited a factory where we knew that there were 40 or so positions open on that day. We saw upwards of 300 or 400 applicants lined up in an outdoor auditorium applying for those positions. We felt overall upon visiting the factories that these jobs did provide upward mobility for these workers. Most of them were coming from agrarian or informal sector--farming or shopkeeping kinds of jobs, and the NIKE contract factory positions provided them with a steady flow of income; and more often than not, a significantly higher level of income, given that the shopkeeping and farming income levels were not under minimum wage authority by the government.

Mihaly: Let me throw in a bit of context. In the Vietnam case, the World Bank had done a national survey a few years ago, and the work that we did--the students did, rather--is very consistent, though I think a little more precise than that bank work.

And in Indonesia as well, this wasn’t a totally green field. There’s a general thread of consistency running through all of this. Again in the Indonesia case, I think there’s more elaboration.

Tran: To chime in about Vietnam once again, I think there’s a couple of very important points I want to bring up. Firstly, it’s important to note that I think the real value of our survey is better understanding--if I may use the word, the true expenditure levels out there, that the workers actually need to spend on a recurrent basis. There’s been a lot of press out there with numbers floating around that we just weren’t able to substantiate. We’ve seen a number, for example, along the lines of $2.10 per day for food expenditures in Vietnam. That may be true in urban areas, but we quite frankly didn’t find that in the two village areas that we interviewed. They’re more along the lines of approximately $.40 to $.50 per day for food expenditures.

Most of these workers really don’t eat out that much. They buy bulk and they buy forthe families rice, vegetables, meat, and their daily dietary habits are rather consistent:

they eat at home. So I think once again the real value in our survey is better understanding the true expenditure habits. And secondly, the important point to note is that even though these factories are just about 40 to 50 kilometers outside of Ho Chi Minh city, they’re very distinct micro-economics. Their living standards, their lifestyles are drastically different from urban lifestyles within the cities, partially due to the fact that the road infrastructure in Vietnam is actually quite bad, so there’s not that much efficient mobility between the different provinces. So even though these particular factories are officially within the Ho Chi Minh city province, they’re in fact very different economies in and of themselves.

Tsai: To re-address the overtime question, on average overtime makes up 20% to 25% of total salary. But we were fairly fortunate because when we went over to do the study, there really was very little overtime and the factories were letting people out because of orders that are down for now--they’re letting them out early. And 91% of those that we surveyed felt that they could support themselves on minimum wages that right now is fairly exclusive of overtime.

Calzini: When Jean said that workers were let out early, it’s important to note that--this is Indonesia--that the minimum wage of 172,500 rupea per month, that is a monthly minimum wage. So if workers are let out early, their income is not lessened by that. Even if they work only 35 hours per week, they’ll still get the full monthly minimum wage.

Odden: This is Jake Odden on Indonesia as well. Again, just to be explicit about the 172,500 base minimum wage, on average allows people to meet their expenditure needs for transportation, food, and housing. And in addition to that, we found that above and beyond that over 82% of the workers surveyed can either save or contribute a portion of their income to home.

Peter Minsky with KXL Portland: I would like to ask those participating if they sense that with the completion of this study that the dispute over whether NIKE pays its employees in the contract factories fairly can be put to rest.

Calzini: I was on the Indonesia part of the study. I don’t think that there could be conclusive proof of anything simply by one study. We did do an extensive survey of the expenditure levels, and I think this gives good evidence that workers are able to cover their basic spending needs and save, in some cases, a substantial portion of their income. As far as laying it to rest, I think that there will be continued criticism, simply because this is just one study. And we encourage any other groups to look further into the income levels and the spending habits of workers in these countries.

Tran: To address that question on the Vietnam side, there’s two ways to look at that particular question. I think the key word that’s been tossed around is whether or not NIKE pays a living wage. For an individual factory worker who lives alone or lives in dormitories--and that in Vietnam is not a very large percentage; in one particular factory area, I would estimate approximately 10% to 15% of the workers actually live on their own--we came away with a very, very strong impression that NIKE definitively does pay a living wage there. They’re able to have discretionary income above and beyond basic expenditure levels of approximately 30% to 40% of their total take-home pay. The other side of the issue is that a lot of people who work in these factories actually live in households with their extended families. Now what we found out is that most of these families, with the mother and father working in farming or shopkeeping, typically have their older children, ages 18 to 24, work in factories to substantially augment total household income. There is no doubt in our mind that these families are actually able to live better, given the fact that their older children are

actually able to work in these factories.

Minsky: Thank you.

Vada Manager - Senior Manager for Public Relations:

If there are no additional questions, we’ll be happy to conclude the phone call at this particular time. We thank you all for making the time for the phone call. Let me

reiterate that the telephone number for receiving a full copy of the study is (503) 671-2875 or (503) 671-3160, and we can make arrangements to have that transmitted to you. We’ll also probably make arrangements a transcript of this call to be made available as well for not only those that need it for print purposes but for those who were not able to join us today, and also just for the general record.

Thank you all very much, and we will talk to you the next time we have issues to talk about in the public domain.

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