It seems like they were unable to balance between business objective and labor practices issues because the fact is the more they spend in labor and infrastructure, the less profit they can make. They said that it wasn’t worth investing money into being more humane because at the end it did not resulted in more shoe sales.
Their next effort of creating a Code of Conduct could not satisfy critics with the implementation of human resources management issues because the scope of Nike’s Manufacturing Leadership Standards and practices programs were basically ineffective in persuading the public that they took it seriously in eliminating poor labor conditions in their subcontracted factories. Plus, their approach of having no specific punishment for violating the Code of Conduct generated the impression that the Code had no teeth. Moreover critics stressed that the Code of Conduct didn’t give high impact on the working environment as well.
Nike was apparently unable to understand the main reason behind all the criticism as they actually considered themselves fortunate that their subcontractors would make shoes to their design. It never occurred to them that they should dictate what the factory should look like, how environmental operations or labor practices should be, which really didn't matter to them.
2. What damage, if any, has been done to Nike? Has their image been sullied to a point that future generations might refuse to purchase their goods on an ethical basis?
After Nike ignored all the accussations and insisted that any problems were the responsibility of Nike's subcontractors. This irresponsible and inhuman action definitely shattered Nike’s image. Instead of rushing to reduce or handle the crisis of labor exploitation, they denied the existence of the crisis. As a result, more negative news about their labor practices emerged had given activists and critics a good chance to embarrass Nike even more. Furthermore, a series of anti-Nike protests and campaigns boycotting Nike's products, was organized throughout US and Europe, which somehow affected Nike's customers' purchase decision as Nike underwent decrease in net profit and stock market price. Sales were dropping and Nike was being portrayed in the media as a company who was willing to exploit workers and deprive them of the basic wage needed to sustain themselves in an effort to expand profits. Their image (logo and tagline) had become the symbols of bad labor and ethic practices. Management reputation was tarnished as they failed to live up to the expected standards of an ethical corporate citizen as it said in its advertisement.
In my opinion, shoes and clothing are only the secondary products of the fashion industry, what Nike primarily sells is image. However, now its image is associated with sweatshops in Asia which is more than an embarrassment. If the crisis kept raising up without any appropirate responses from Nike, it would certainly threaten sales as consumers were likely to jump to other more ethical brands instead. As president Bill Clinton said "give American consumers confidence that the clothes they buy are made under decent and human working conditions.” According to a survey, consumers’ purchasing decisions are not affected by their views of Nike’s labor practices. Still, if the issue was not dealt, there was a…