Wisconsin Public TV University Place Global Hot Spots  Dennis Dresang, "Sweatshops or Fair Trade?"  December 10, 2010 UP546    cc >> Cynthia Williams: He's the director of the Center on State, Local and Tribal Governance. He's a founding director of the La Follette Institute, which many of you may be familiar with, and he's chaired several major gubernatorial task forces and served on several tribal and local government commissions on human resource management issues, which I think may play into, oops-- what we hear about today. [LAUGHTER] So I also want to mention that he's received distinguished service awards from the Women's Political Caucus and the Wisconsin Equal Rights Council. He's coauthored several books including one on politics and policy in American states and communities, and a number of books that are used in teaching public management. So without further ado, thank you very much. [APPLAUSE] >> Dennis Dresang: Let me turn myself on here. Okay, this is working. Good. How about that? I should also mention that part of my background and the major reason for my being here today is that I served on the athletic board for eight years from 1992 through 2000, and if you sort of think about that time period, we went to the Rose Bowl in 1993, you're welcome. [LAUGHTER] What can I say? And I also served on the committee, we'll talk more about that committee as we get into the discussion. 

It's called the Labor Licensing Policy Committee which advises the chancellor about fair trade and sweatshop kinds of issues. If we think about sweatshops, one of the things that we frequently think of is that these are large factory like, often in a warehouse, low skilled kind of people who are worked very, very hard. And that's partly correct, except that increasingly the issue of being low skilled does not really apply. Lots of times these people are very highly skilled. And this is a worker at a sweatshop in Honduras who has to really master a very complicated machine, and a lot of factories that produce apparel, whether it's university apparel or other apparel, use a variety of machines, sometimes several different vintages to do the same kind of thing. So a worker going from one machine to another really requires a lot of training. And so the training and experience is there. So we should right away get out of our mind the issue of a sweatshop being low skilled people. Not necessarily. What is a sweatshop? Well, generally the definition or the conditions that we think of for a sweatshop have to do with conditions of employment, and by that I mean sometimes the conditions of employment are unsafe, they're dealing with hazardous materials, they're dealing with dangerous machines, accident prone kinds of conditions for working. 

Sometimes we think of conditions of employment as they relate to women's rights. A condition of employment may be that someone provides sexual favors. A condition of employment may be that you may not get pregnant. Once you get pregnant, you're automatically terminated. So that kind of fits in that particular kind of category and umbrella. The issue of course that I think all of us would think of when we think of sweatshops has to do with how much people are paid. And the concept of living wage is used here, not necessarily minimum wage. Even in our country there's a difference between minimum wage and the kind of wage that you need to earn in order to actually live and meet your day-to-day expenses. And, importantly, a part of the sweatshop issue is right of association. Now you may think that this means unions, that's okay. 

Typically it does but not necessarily. And there are factories, there are organizations where workers associate, they have a representative but they are not necessarily in a union situation. They may not have a contract, but they do have representation. There are some important moral dilemmas that raise policy and even philosophical issues when we're dealing with sweatshops. One of those issues is even if we're talking about bad working conditions and a low wage, one might argue that, well, a low wage is better than no wage. Employment is better than abject poverty. And there are, indeed, people who will make an argument, a very passionate argument, that sweatshops are okay. The low wages are okay. That's just part of world competition. That's part of globalization. 

That's part of the dynamics when different companies are trying to get the lowest possible labor costs. And if you're getting the lower labor cost, that means low wages but the low wages, they say, that's better than no wage. Others, obviously, are arguing that when we're thinking about major apparel shops, which is our focus today, Adidas, some people pronounce it Adidas, it's a German company, they pronounce it Adidas so that's what I'll do, or Reebok or a lot of these apparel companies are making are big profit. And so the argument against sweatshops is obviously well, hey, you can share some of those earnings, you can share that profit with the people that you depend on to produce your apparel. For the university, we've got some moral dilemmas as well. And that is we get a lot of revenue when people around the country and around the world buy something and it's got Bucky Badger or University of Wisconsin on it. That logo is worth something. We get royalties and I'll go into the whole process of how that happens. But for us, there is an issue here of revenue, and you can make an argument that, boy, we get a little bit too strident about not dealing with the brands that do rely at least in part on sweatshops and we're kind of cutting off our nose to spite our face. That obviously the other argument is an argument of justice, it's an argument of, well, who do we, as a university, want to be identified with? What kinds of causes, what kinds of concerns do we have as a university community, and how should we act on that? And there are debates, and I respect the debates, that occur on both of these kind of moral dilemmas. 

One of the things that is really just ubiquitous when we're talking about apparel companies and a lot of other goods, again we're really thinking primarily of apparel as well as little trinkets, key chains and stuff like that that you might have a university logo on, ties, are these codes of conduct. There's a concern about sweatshop conditions, and I've just described those, and so codes of conduct are very, very common, and sometimes there are multiple codes of conduct. If someone wants to produce a sweatshirt with the University of Wisconsin logo on it, they have to meet our University of Wisconsin Madison code of conduct. They've got to meet an international code of conduct. They frequently have to meet a code of conduct in the host country wherever the factory is. These are multiple, they typically have the same kinds of features. And what are those features? One very important and obvious one is living wages. That the workers are paid a living wage. Working hours, the whole concept of overtime, 40-hour work week, that's what we're talking about. Allowing the workers to get some sleep and get some rest. 

Child labor, that is not allowed according to any of these codes of conduct. Forced labor, likewise, and we can think of forced labor in a number of different ways. Some of it physically forced, others where you're forcing somebody because of a certain circumstance or because of debt that is owed to the company that's employing you, that kind of thing. Women's rights, particularly we're talking about issues of sexual harassment, requiring sexual favors, women's rights as it applies to pregnancy and childbearing kinds of things. Those are typically in a code of conduct. And then freedom of association. And I should point out, and we'll talk about compliance and oversight issues in more detail, but just a general kind of principle that I'd like you to keep in mind is that oversight is really difficult. It's a very complicated issue, and to some extent the best oversight that we can really have is right there in the factory floor from a representative of the people who is there mindful of what's happening to their coworkers. And so this freedom of association is kind of a process one that really relates to all of the other kinds of issues when we're talking about a code of conduct. It really helps with the whole enforcement mechanism. 

Now, those are some general points, what about the University of Wisconsin and apparel? There are two very separate kinds of issues in terms of how we relate to clothing apparel. One has to do with the athletic department, per se, and the other has to do with consumers, with fans, with people who are wearing clothing on the street or wherever and it has a university logo. First of all, when we're dealing with the athletic department, the issue here for us is in way it's an opportunity that has come with our success. After I won the Rose Bowl in 1993... [LAUGHTER] The university got a lot of attention. The fan base, as you recall from that 1993 Rose Bowl, was incredible. People all over, I mean getting into that stadium was critical for a lot of people. People that didn't make it to Pasadena were all excited, and there was this fantastic demand for University of Wisconsin apparel. People were proud. And whether or not athletics ought to be the end all and be all, that's a separate issue, but the point is that there was really a lot of demand for University of Wisconsin products. 

The University of Wisconsin just catapulted to a high visibility in all sorts of different ways. Nike had really done the pioneering in thinking of the following situation, that is when you've got a university, like we had become after the Rose Bowl in particular, a university like Michigan which has always been very visible, University of Texas, another university with a big fan base, that you can have fantastically successful marketing by these universities, particularly as they are featured a lot on television, if you have that logo on those uniforms. Right? What are wonderful, subtle, but what a wonderful opportunity for marketing. And so Nike started it and then Reebok kind of saw the wisdom and they approached us. And they said, hey, tell you what we'll do, we will supply all of your teams with all of their uniforms and all of their equipment. No cost. We'll do it. That's on our dime. And we'll give you some compensation in addition, some cash. How about it? Well, we're talking about equipment and supplies and uniforms, that runs around $2 million a year for our program. 

That's not chump change. There was the issue of, well, but wait a second, what if you don't make the kind of pads that we need for our hockey team? No problem, we'll let you get them. The only issue that we have is whenever the brand name of the equipment shows, it's either going to be, in this initial case, Reebok or it's nothing. You put tape over it or something like that. We don't want to advertise anything else. Our athletes, believe it or not, particularly on the track team of course but a lot of the other teams as well, they go through four to six pairs of shoes per season. Amazing, isn't it? What if the shoe, because shoes are very important, especially in a lot of sports, what if your shoes don't fit our athletes? Not a problem, just don't have the logo of some other brand showing so that if the TV gets down there it shows somebody else's logo. So they were very accommodating for that. Now, in addition to the budget issue, to be very candid, and I was on the athletic board when we had all these discussions, we had a problem that this really helped us solve, and that is up until this time when we had a universal contract for all of our equipment for the teams, the deal was that if you were a coach of a team we would give you a budget and it would be up to you to figure out who you wanted to provide the shoes, the equipment, the clothing, the uniforms for your team. It was a coach by coach, sport by sport decision. 

And wonderful coaches, wonderful people, for the most part, but what was happening, and it just became a cultural kind of thing where everybody started doing it, was there were all sorts of side deals. All sorts of side deals. You can just imagine the kinds of things. Everything from free trips to exotic places to cash in the pocket. But it was a situation where if you're an employer, and these are major actors in your organization, to have them all being compensated significantly in different ways. We paid them a salary but then they got all these side payments with what we referred to as shoe deals, but they were more than shoes. It was everything. So having these contracts really allowed us to make a more rational compensation system for our coaches. And we got a lot of negative feedback from coaches, not all of them, but some of them were very, very resistant to this particular kind of move. Okay, so we've got the issue of contracts with the university from suppliers. 

As I said, initially this was with Reebok. Reebok is a subsidiary of Adidas. And for the last five years it's been Adidas that's provided and just this past August the contract with Adidas was renewed. So we will be dealing with Adidas for another five years. So through 2016. And, again, they're providing all the equipment and they're providing the athletic department with $1.2 million in cash every year. Now, the other issue is royalty from logo licenses. If you or your neighbor produces a t-shirt and you put a University of Wisconsin logo on that t-shirt, you're violating a law unless you get permission to put that logo on. And you're going to get permission if, number one, you pay the university a royalty, and number two, if we, and it's a specific office within the chancellor's office, regards the logo as appropriate. So it's not obscene, it's tastefully done, etc. 

And the logo that comes in is, in most years it depends a lot on how much visibility there is for the team. This year there's going be a spike because we went to the Rose Bowl again. That generates a lot. If our basketball teams, men and women's, do well, there's probably a spike there, but it's generally $2 million to $3 million, sometimes a little bit more a year. And this is money that goes into our scholarship fund. That's what it's used for. It's not the general budget. It's not for general operations. The issue with the logo licenses is that instead of doing all of the monitoring and the contracting and everything else ourselves, we work with the Collegiate Licensing Company. And we're one of a little over 200 colleges and universities that use the CLC. 

The CLC is also used by the NCAA for the logos each year of the bowl games, the Final Four in men's basketball and women's basketball, the Frozen Four in hockey, etc. All of these are registered with the Collegiate Licensing Company, and they have a code of conduct as well. So part of the license is you have to abide by this code of conduct. It's related to labor practices. This is the royalty that you have to pay for every t-shirt or sweatshirt or whatever it is that you sell. And then the CLC does the monitoring. They will, almost literally, go around and see if there are street vendors by a football game that are selling apparel that have a university logo on it and there isn't, they don't have permission to do that. To give you some senses to how useful it is for the university to work with the CLC, we have, as I've got on the slide here, you see it, over 500 companies that are producing things. Sometimes it's just baseball caps, sometimes it's just one particular item, sometimes, this is a small organization that produced this particular tie. Others produce a wide array of t-shirts and sweatshirts and fleece jackets and all that. 

And they're in 47 different countries and over 3300 factories. So that would be a big thing for us to administer ourselves. This is the logo. So when you buy something that is licensed, you'll see a little tag that has this on it. Some of you are shaking your heads. We've got, at last count that I saw, it was over 375 different logos that we have registered. This is just an example of a handful of them. Interesting little side story here about Bucky Badger. In part to sort of give you a sense as to how important it is to work with these licenses. Bucky is short, as you may know, for Buckingham U Badger, that's the formal full title of our mascot, and Bucky was around almost from the first time that we had football, but in the 1930s and '40s we started getting a little bit more serious about Bucky. 

And in 1940 two things happened. One is we got a badger that was actually trapped in Eau Claire, Wisconsin, and brought the badger to the football games and had the badger on the sidelines. Well, badgers are cantankerous mean, ornery guys. And after it chewed the ankles of a couple of our quarterbacks, we decided that that wasn't a good idea. So Bucky went to the Vilas Zoo and was at the Vilas Zoo until Bucky passed away, that Bucky passed away. The other thing that happened in 1940 is for the first time we had the kind, generally, it was a little bit different, the kind of cartoon like characterization of Bucky that we're all familiar with. And what happened was Brown's Book Store, how many people remember Brown's Book Store? Oh, boy we're all of the same age. [LAUGHTER] Brown's Book Store was the organization that paid for that characterization. It was developed by a company in California, and they started putting it on various kinds of things and selling it and a lot of local merchants started doing it as well. It became very, very popular. 

University of Wisconsin athletic department did not use that characterization until eight years after Brown's first got it. So 1948 it started appearing on football programs and things like that. Well, in 1988 the university thought, gee, you know, it would be a good idea if we licensed this and get some royalty from people who are using Bucky the logo and Bucky the name. Well, Brown's, which by that time had been bought out by University Book Store, sued. They said, that doesn't belong to you. We developed it. We paid for it. We've been using it. It's in the public domain. And the court case agreed with then University Book Store. 

And so Bucky is, since that particular event, Bucky is now licensed by the United States Patent and Trademark Office for the University of Wisconsin Madison but in a kind of unique category where there's also a recognition that there is, especially the characterization that was developed in 1940, is in the public domain. And so you will see that around. There will be Bucky Badger stores. The name will be used. And they are not paying royalty to the university. Just think of how much more royalty we would have if the university had licensed the mascot, the characterization of Bucky a long time ago. And, by the way, as a way of just clarifying things, in 2003 Bucky got the motion W on the shirt instead of just the straight W. And that, in part, was done because the motion W is being used a lot, but for trademark purposes, now it is clear, if you see Bucky with the motion W that is officially licensed, recognized, that's not in the public domain. So it doesn't take much to sort of change some of these logos and get them licensed the way that you want to. It's amazing how many Ws are licensed by us. 

Let me tell you, as a way of illustrating some of the issues here, the story about Adidas and the university. Remember now, Adidas is the one that we've got the contract with, university Athletic Department, and you and I can go to a store and get Adidas apparel. So it fits both categories in terms of the relationship to the university, the importance of Adidas to the revenue and the financial well-being of the university. Adidas does have a, it is part of the contract that is has with the athletic department that specifically it has agreed to the university's code of conduct, which has all these things, these features that I mentioned to you before. It has also got its own code of conduct. It has a code of conduct that it has agreed to because of the licensing operation and the like. Well, in 2005 a factory just outside of San Salvador, known as Hermosa, suddenly closed. And it closed primarily because workers were starting to organize a union. Like other factories, the owners of the factory in Hermosa were obliged by an El Salvadoran law to pay for the health insurance of their workers, to pay into a national pension system like our social security system, and they were obliged to pay severance if the factory closed. So they're supposed to pay a severance pay. 

Adidas and others who contracted with this factory, so this factory was not an Adidas factory, it was a factory, however, that did work for Adidas and a number of other apparel companies, not all of these doing collegiate wear. Some of them just doing regular clothes that we wear every day. It turns out that they were paying the money so that it would go into these funds, and those funds were being embezzled by the factory owner. When the workers lost their job, and there were 260 people who lost their job when the factory closed, they found out that the payments for the health insurance were overdue. They had no access to health insurance. That the payments into their pension funds had not been made. And they got no severance pay. Moreover, those 260 workers were blacklisted. And I actually saw the list with the names on. It was circulated to other employers throughout El Salvador essentially saying these are cantankerous union organizers, don't hire them. 

Well, we found out about this and this Labor Licensing Policy Committee that I mentioned earlier that exists on campus did some deliberation. We did a lot of talking with representatives from Adidas. We very seriously pursued the issue. Let's be sure we've got the facts. We felt like we were getting the run around a lot. That didn't leave us with a very good feeling. Adidas kept saying, hold it, you're pursuing us, it's the guy that did the embezzlement who actually had been arrested, he was out on bail, by the El Salvadoran government. He's the person you ought to be going after. He's got the money, why go after us? And, of course, as you can imagine, our position was on the one hand to be somewhat sympathetic but on the other hand to say, well, we're going after you because you're in the room and you've got these contractual obligations and you really shouldn't be having as an excuse kind of shedding this stuff off and shedding off the responsibility, that the code of conduct that you agreed to carries with it a responsibility to be sure that the people that you contract are following the conditions. And you've got the ability to monitor this kind of stuff and you haven't. 

And you're telling us that you're not going to do anything. These are 260 real live people, many of them with families. This is just really not satisfactory. And we very seriously, very seriously, talked to them, and the chancellor did too, about the possibility of terminating the contract with the athletic department, even though that would be the at a cost to us, on the grounds that they didn't uphold their part of the contract because they violated the code of conduct. And that we would revoke their license so that they would not be able to sell any apparel that's got the University of Wisconsin logo on it. 2007, Adidas responded, finally. You can tell how frustrated, I still feel frustrated with how long it took and how long these people had to suffer. But they finally basically said, okay, we will go after the factory guy and the money that he's embezzled. We'll do that. And in the meantime they compensated the 260 workers. 

They trained them, to their credit, they realized as I mentioned at the outset, we're not talking about jobs that don't have any skills, they actually trained them to work on several different kinds of machines, they helped them get jobs, they did away with the blacklist, and it's not that El Salvador is now paradise but at least we felt comfortable enough so that we continued our relationship with them, and, as I mentioned, we actually did just renew the contract that they have with athletic department and that's going to run through 2016. Now, let's talk a little bit more about monitoring these codes of conduct. They really are a challenge. First of all, you really have to have information from the factories. And we're talking about thousands of factories for University of Wisconsin apparel, and we are not the major market, share of the market, but we're important. At over 3700 factories all over the world, man, obviously that really in itself presents a real challenge. And why do you have to focus on the factories? Because it's going to be the factories, that's where the compensation is going to be issued. Perhaps even more importantly that's where the union activity is or is not going to be occurring. That's where sexual harassment is or is not going be occurring. It's going to be at that factory level. 

Financial records. For private companies, as you and I know, their financial records are proprietary. People can't just come in and say I want to look at your books. And when we're talking about these major apparel companies, they have contracts in many different countries all over the place and they also, this relates to the issue of the chain of supply. It is extremely complicated. We could devote another whole hour to the complications of if you just took a shoe and you think about the different parts of the shoe, these shoes are not made in one factory. The different parts are all made in different factories, and then they are assembled in another factory. And then the logo is put on in yet another factory. It's very, very complicated. Different actors, different steps of the process, and all of these companies are, at least in a formal level, not always informally, but at least in a formal level, they are not owned by the brand companies. 

They're independent and they're doing work for a number of different companies. They're the suppliers and so you're talking about a lot of different kinds of contracts. So it can become extremely complicated. And then, believe it or not, in some of these countries there's corruption. [LAUGHTER] In some of these countries there are sweetheart deals. The guy that I mentioned to you, the factory owner in El Salvador, still not in jail. Still out on bail, that's the technical issue. Charges still pending. Money, who knows where it is. So that complicates things too. 

Another kind of a challenge. Well, it's kind of like with the Collegiate Licensing Company. What we do is we work with independent bodies to do the monitoring. CLC does some but most of their monitoring is done in the United States. Most of their concern is picking up an apparel and looking and seeing if, number one, it's got the logo on, and number two, it's got that little label, the CLC label, that that logo has been registered and there is royalty. That's their focus. Even though they've got the code of conduct that deals with sweatshop kind of issues. There are two major bodies that exist to do the monitoring of the factories and get out there in the field. They typically respond to complaints. That's their major way of operating. 

So somebody makes a complaint and then they go in and investigate. One is the Fair Labor Association, and the other is the Workers Rights Consortium. The Fair Labor Association is a body that was established by apparel companies. The Workers Rights Consortium was established by Students Against Sweatshops in the year 2000. And the Students Against Sweatshops has been a very strong, very articulate, very well organized student group that has really been concerned about sweatshop issues, and its name, of course, reflects that. And the University of Wisconsin Madison, we debated a number of years ago about how to deal with FLA and how to deal with WRC, and we decided that we were going to have our primary relationship with WRC. The FLA was sort of suspect from the outset. When you're the one who might be violating the code of conduct and then you say, well wait a second, I'll hire these people to watch over me, just trust them, it might be okay but right off the bat there's some suspicion. And on the first reports that they came out with looked like more like they were apologies for the companies than anything else. Now you could say that the WRC, it's biased in favor of the workers. 

But when you stop and think about what's the issue about here? What is our concern? The issue is the workers. And I have read, I'm not going to say all of the WRC investigations and reports, but I certainly have read a lot of them and I must say I am very impressed with the professionalism of those reports. And when they do investigations in response to a complaint, I can tell you it is not that they are always going to say, oh, the workers' rights are being violated. There are a number of times when they have come out and their conclusion is the workers misunderstand something, that this is a charge that there doesn't really seem to be any kind of evidence to support the charge and the like. So in any case, we have been working with the WRC in terms of the investigations and the like. Now, what kinds of steps can we take if we get a report, and again we're going to be relying primarily on the reports that are the result WRC investigations. Not entirely but primarily that's our source of information. So WRC says, gee, there's a problem here, what do we do? Well, one thing that we can do, obviously, is terminate the contract. And here again I'm using the term contract to talk about the athletic department relationship. And I should also maybe just mention, so you've got a good perspective on this, that right now there are only 47 universities in the entire country that have a contract like we have with Adidas. 

Most of them are still dealing with a variety of suppliers, dealing with you're providing the uniforms and you're providing the shoes for the track team. And somebody else is providing uniforms and shoes for the basketball team. So it's very diffuse. I don't know one way or the other if they're getting into the same kinds of problems that we did with what we refer to as the shoe contracts. I just don't know. Another option, of course, is just revoke the license so they can't sell anything with our logos on them. And that is another possibility. We have not terminated contracts. We have threatened it. We have threatened revoking a license and we have done so. 

We've revoked the license of New Era Cap. It's a company in Mobile, Alabama, that has been found guilty of actions against people in their factories who try and organize labor unions. And they wouldn't even allow the WRC in to do investigations. And they've been in trouble with the Department of Labor and the like, and we just basically said there are other people that can do baseball caps with university logo on and we terminated the contract. Lands' End, we terminated a contract, we revoked their license. We revoked just recently, almost a year ago, the license of Nike to have university logo on their apparel. And we revoked the license of Russell Athletics which is a subsidiary of Fruit of the Loom. So we have acted in cases. And I've given you brand names that I'm sure you're familiar with. These are not small players. 

The cap producer is probably the smallest of all of them. These are major players and they have been major providers of royalty revenue to our scholarship fund. So it has come at a sacrifice in that sense. Public statements, that's always an issue. And whenever we have terminated a relationship with a company or even threatened, as in the case of Adidas, we have done so publicly. Press releases, the whole bit. And obviously that's not things that the marketing departments of these companies particularly like to see. Another issue is coalition with other universities. There's a frustration, a tension had John Wiley was chancellor and we were dealing with these issues. And the tension was over a basic disagreement. 

Many of us on the committee that was advising Chancellor Wiley took the position that Adidas, and I told you that story with some others, they were doing something that was naughty and they should be punished. John Wiley did not act as forcefully as we had wanted to on the grounds that he didn't want to just do something for PR purposes or just to make a statement or just because it was right. He wanted to do something if it was going to have an effect. And the University of Wisconsin, with all due respect, we're in the top 10 of the universities that sell apparel with our logos on, but we aren't the major market. You've got to go to Michigan, Notre Dame, University of Texas, they are in the top three almost all the time. And so he basically said, look, we go to Nike or something like that and we basically say you're naughty, we're going to revoke your license, they're going to yawn because we're just not that big a deal. They're not going to change their practices just for us. So what he proposed doing was establishing, instead, a network among university administrators on this issue. And he took the lead in doing it. And in retrospect I've got to say that while we were frustrated and frustrated with the time that this took because he had to make personal contact and he had to persuade presidents and chancellors of other universities to be sensitive of the issue and work with us on this issue, it took time. 

And it meant that we didn't act as forcefully as some of us wanted to. Turns out he was right, that it's important to have a bigger share of the market, it's important to do this coalition building with other universities. And let me just tell you quickly about the Nike situation. In 2009 there were two factories in Honduras that closed their doors and shut out workers. Total workers was a little over 1500, and it was because they were organizing a union. Turns out that somewhat like that situation in El Salvador, the factory owners, eight months before they closed the factory, were not paying money into the health program. They didn't pay any pension. They were taking all sorts of money and resources from the factory. So this was planned, it wasn't just a situation even though it seemed like it was done very suddenly, there was some planning that went to it. WRC had a report and indeed confirmed all of this. 

Confronted Nike. Nike initially lied. There's no other way of calling it. They said we don't have any collegiate apparel. We might have some other stuff but no collegiate apparel is produced by these factories. In a way that was kind of dumb because that's an easy thing to check up on. And WRC and FLA, too, checked up on it and sure enough there was university apparel with logos was being produced at these two factories. Chancellor Biddy Martin last December, December 2009, said to Nike, look, you've got to take care of this situation, and if we don't have a satisfactory response in four months, we're probably going to revoke your license. And Nike responded by saying, well, you know, here we go again. These are not our factories. 

We just contract with them. We didn't do it, somebody else did it. We'll talk to them. And Chancellor Martin said that's not a very satisfactory response. We'd like a response more along the lines that Adidas had, at a minimum, when we brought up a similar situation to them. Nike did not do anything, and true to her word, she said, okay, that's it. Four months were up and we terminated our contract, revoked the license that Nike had. As of today, Nike still doesn't have a license to use our logo. She then used some of these networks that were being built by Chancellor Wiley and immediately we got universities all over the country. The most forceful responses came from the University of Washington, from the University of Oregon, and from Cornell University. 

Georgetown has always been right up at the forefront. Unfortunately, Michigan is not even on their radar screen. Students agitate on their campus all the time, and they basically say we don't want to get involved in this. Penn State has had the same kind of reaction. Notre Dame has had the same reaction. So it would have been nice to get some, Texas, it would have been nice to get some of the big players on board, but at least we got some of the medium size players on board. And indeed, last July Nike said okay, we give. And they wrote a check for two million dollars and made whole the workers that were hurt by that plant closing because of the union activity. All is not well, most of them are still unemployed, but what are you going to do? Another kind of response, a more positive kind of response, is to say, hey, if there's a fair trade, which means it's not a sweatshop kind of operation, let's put our orders with them, let's do business with them, let's give them some positive reinforcement, let's reward them for doing that. And we have to some extent and we have some local vendors. 

Fair Indigo, you may be familiar with that store. It's got some university apparel out at Fair Indigo. They only deal with fair trade apparel. University Book Store has prominent sections that deal with fair trade, and you don't have to pay extra to have a fair trade, it's not like going to the grocery store. You can get a sweatshirt at University Book Store that's produced by a non-sweatshop type, you can also get one that's produced by a sweatshop apparel. But there is that that's going on. At this point we can't really have a contract for our teams because there is no fair trade operation that's big enough to do it. And indeed if somebody from University Book Store were here, is anybody from the university book store here? No? What they would I'm sure tell you, and I believe them when they say this, they would have more apparel, they would even phase out the sweatshop kind of stuff if they could get fleece jackets and sweatshirts and t-shirts and shorts. But it's just not being produced at this point. Maybe that would happen. 

Maybe it's in the future. And the other kind of response that we have pursued and is a possible one is the designated suppliers program which is a program that the Workers Rights Consortium got going, and it has, again it's sort of a positive sort of thing. What they'll do is identify people who are in this particular program meet the standards. There are 48 colleges and universities that are, we're one of them, that are doing this, and what we're basically doing is pushing the suppliers of our products, products with our labels on, to work with people that are producing apparel at least give them a three year period, 25%, 50% and then eventually 75%, so we're not even saying 100%, is from sources that are paying living wages. Importantly that they are paying the factories enough so that they can afford to pay living wages. That's the way around of trying to get into somebody's financial records, right? Is that you basically saying, okay, one thing you can tell us is how much you're paying under that contract, and if that's not enough to pay a living wage, that's not good enough. Something's got to give here. They do recognize the right so associate, again, not necessarily unions but most of the times it will be. That the factories don't just do a little bit of this designated supplier stuff, but at least 50% of the work that they do is with participants in the program and that they allow inspections, inspections from WRC as well as FLA or really anybody that wants to get involved. Let me just end on a note before entertaining questions, comments, and wise cracks from you, with recognition of who the leaders are, who the actors are in this whole issue, particularly as we deal with the University of Wisconsin and sweatshop and apparel kinds of issues. 

The chancellor is the one with all the authority. Chancellor says yes or no on these things. It's not something that goes to a larger body. It is the chancellor. So the chancellor is really critical. We have had two chancellors now, John Wiley and Biddy Martin, who have been very strong, very firm, very passionate on the issue, and they have been helped enormously by someone who is usually behind the scenes and usually these people don't get recognition and that's Dawn Crim. I don't know how many of you know Dawn but she's a very special person, and she's very, very committed to the issues that we've been talking about this afternoon and have provided them with a lot of advice. She herself has gone down to a number of these factories and done inspections and talked with workers who have been laid off and the whole bit. The Labor Licensing Policy Committee I mentioned. It's a committee that involves not just faculty, which most of our committees are that way, but staff, both classified and unclassified staff, and importantly students. 

And I can't tell you how much credit, assuming that you want to say that this is something we should provide credit to, how much credit should go to the students on our campus. It's one of these what if situations. What if the students hadn't been real active? What if they hadn't been passionate? What if they hadn't been articulate? What if they hadn't done their homework? Would our chancellor, would our faculty, would our community be attentive to the issue and acted on the issue? My guess is actually that we really need to give credit to the students for raising the visibility and doing the homework, and some of these students, individually as well as collectively, but I think of some of the individuals as absolutely incredible, very special people. Command a heck of a lot of respect for the work that they do. Athletic department is a prime mover. Chancellor could overrule but that's the prime mover, of course, on the contract issue not the apparel. And then, of course, retailers and us, consumers. So it's helpful to have a couple retail agencies here in town that are on board on the issue. I grew up in Kimberly, Wisconsin. Those of you familiar with Wisconsin know that's a very kind of a small factory town, very Catholic, so I feel very comfortable with guilt feelings. 

[LAUGHTER] So join me in guilt as we kind of look around at the stuff that we've got that has not been produced by fair trade. Questions? Comments? Yes. >> I'm going to kind of put you on the spot here. >> Oh, no. >> Based on your research and your knowledge being on the committee, what brand should we buy and what brand should we not buy? >> Okay. For sure it's easier to answer the latter. At least for the moment, Nike has done something that's been, they've gotten a lot of praise for back tracking and doing what they did in July, and they may very well get re-licensed by the university. They were not good actors and they generally have not been very good actors. So they're on probation as far as I'm concerned, but certainly Russell Athletics, Lands' End, this New Era Cap, the ones that we revoked the licenses of. That was done with good reason. 

We're not talking about emotional knee-jerk reactions here. They had chances. They're always given a chance to remedy the situation. They did not. Russell Athletics said they would, and then they lied through their teeth, and my mom always told me that when somebody lies on top of it, that's even worse. So those are ones I would put on, they're certainly on my bad list. Which ones do we purchase? The frustration, even as we buy apparel for our every day living, quite apart from university apparel, the frustration is that there really are so few companies that are fair trade, that are not sweatshop, and they don't produce the full array. So it's sort of like, well, you want a fleece, I've got a nice Badger red fleece with Bucky right there and I like wearing it when it's cold out. Well, that's produced by a brand where at least some of their stuff is sweatshop. And, Chancellor Wiley was keen on, in a way it was kind of a cheap shot, but he would say, look, we can't have our teams go out there on the field naked. 

[LAUGHTER] But you see the point. The point is, at this point in time we do have to make some compromises while pushing. And so I would, if I were buying apparel, the first thing I would do for Badger apparel, I'd go to University Book Store or I'd go to Fair Indigo, see what they've got and see if they can meet my needs, and if not, I would reluctantly then get something else. Yes? >> How is a fair wage calculated? Or a living wage? >> Living wage? Good question. The calculations, and this is done by the WRC, they get the information to do it, is really very similar to the way we do it in the United States. That some people refer to it as a shopping basket kind of approach, and in the shopping basket you do put food but you also put in not luxurious housing, but what would you need to get a decent apartment or a decent house of some sort? What are energy costs like? It does not include having a car or that kind of transportation. A little bit for bus transportation. So it's really based on the local conditions, and it's what at a minimum do you need? And it's going to change a bit. Usually what they do is they do it for a family of four. Now that could be if somebody is single and they don't have dependents, obviously, from a need standpoint but most employers don't consider need on an individual basis when they're making compensation. 

They pay you for the job that you're doing. >> Who makes the calculations? >> The Workers Rights Consortium. So they do it, and as I said, they actually go to the place and get this information about what a living wage is like. Yes? >> Why are they so insistent on living wages for the other countries when they don't pay them here? >> Well, if here means Madison, Madison's got an ordinance requiring employers to pay living wage not minimum wage. And it's controversial because people say if I've got a store or company I want to locate I'll just go on the opposite side of the street so I'm not in Madison. But your question is good and I want to treat it seriously and I think the answer is that we probably ought to be thinking about living wage rather than minimum, the way we do now. The minimum is somewhat arbitrary. It's not really based upon a calculation. It's done on a national basis. >> And you can't live on it. 

>> You can't live on it, particularly in some communities. Even in the United States, we're big enough and diverse enough so that a living wage is going to be a different dollar figure depending on where you're living, right? So it's complicated. The minimum wage that we've got in our country right now is simple in a sense. It's like poverty rate, if you're familiar with that. Every January the federal government comes out with what the poverty rate is. They do a poverty rate for a family of four. And then when we talk about eligibility for welfare programs or food stamps and stuff like that, like in Wisconsin, as well as most other places, what we do is we say, well, you are eligible for this particular benefit if your income is at 185% of the poverty rate. Well, we do that because we realize that the poverty is really too low. That's poverty, yeah, but that's below living. So, crazy, isn't it? >> So who computes the living wage in this country or is it just not computed? >> In this country it's usually locality by locality. 

We don't have a national living wage. >> Who's doing it? >> Who's doing it? I don't know. Probably, I would think that most people would rely on the wisdom of professors. [LAUGHTER] I don't know. [LAUGHTER] That's wishful thinking, I guess. Yes? >> Any foreign countries where the factories are, I suppose it would vary from country to country too whether the employees would get, say, unemployment compensation if they lose their job if there is such a thing and things like that? >> It does vary from country to country, you're absolutely right. And what exists instead of unemployment compensation, what exists in most of the contracts are this concept of severance pay. And it's got behind it philosophically the same idea as unemployment compensation which is to provide people with some funds as they transit from this job to that job and assuming that there's going to be some down time there for a while. And the severance pay is meant to do that. And that's what's often been embezzled in the cases that I mentioned to you, or just not paid at all. 

So the concept of unemployment compensation, it exists more in Europe but we're talking about factories that are not in Europe. Some are in the United States but most of these factories are in Central America Thailand, Asia, increasingly in China, Indonesia, Philippines. >> I think we can take one more question, and then we can talk informally after that. >> Sure, sure. >> Given the transient nature of the student body, how is the WRC staffed? >> Good question. The WRC is actually staffed with professionals so that the student, what we do as a university is we pay a fee to the WRC as our part in having them do investigations and monitoring for us. And that's true of, let's see there's 86 universities that rely on the WRC. So that's one way that they get their money. Students, again, sweatshops provide money as well. Even though the students are transient, they still, they raise money. 

They'll have fundraisers that they do and part of the funds that they raise go to the WRC. But we're talking about a professional staff, a lot of them with legal training, but some economists, sociologists, it's a pretty multi-disciplinary. They have to speak different languages. >> How much does the university make on an annual basis? >> From the royalties? >> Yeah. >> From the royalties, given some fluctuation year to year, my guess is that with this year, Rose Bowl and all that sort of stuff and the fact that Bo Ryan's team is going to the Final Four... [LAUGHTER] And the women's hockey team is going to get a national championship again, anyhow, my guess is, I would guess that this year is probably going to be about $3.5 million in royalties. We do know about, and that's, like I said, we're in the top 10, typically. There's the big three and then there's a number of us that come in right below that. The athletic department as I mentioned, that's a contract. That's for five years. 

They're getting a little over a million dollars in cash each year, and they're getting clothing and equipment that would be valued at around $2 million each year. [INAUDIBLE] >> That's in addition, right. Yep. And our teams are treated well in that regard. You wear out a pair of shoes, you're going to get a new pair of shoes. Most of our teams, if you watch them, their uniform changes every other year. So we're big time. We should be. >> What percentage of the royalties go to non-athlete students? >> The royalties go all entirely to non-athlete students. >> Really? >> Yeah, entirely. 

There's not a penny that goes to the, and in part that's because of the NCAA. NCAA allows us to give scholarships to athletes. Their rules are somewhat complicated because there are some sports where you give a full scholarship or you give nothing. Other sports where you can give partial scholarships up to a certain amount, blah, blah, blah. But whatever, that's all got to be done through the athletic department through an athletic scholarship. You may not use your general scholarship fund to pay a dime of expense to an athlete. That would be a violation of NCAA rules and Big Ten. Okay? All right. Thank you. [APPLAUSE]