Company Profile: A Glimpse at NIKE

At this age where the importance of fitness is engraved in most of us, physical activities
had been a part of the routine of many. And when its time to get those pair of running
shoes, basketball shoes, tennis shoes or just your daily walking shoes, one brand first
comes to mind to those who seek quality, aesthetics and durability NIKE.

The majority sees Nike as the successful company it is now. The brand is often
associated with prowess, speed, agility and the slogan Just Do It recognizable
worldwide. Though, most are not aware that this multinational company had also gone
through ups and downs to get where they are. In this study, we aim to look deeper at
the soul of Nike its wavy past and progressions that made it a company looked up to
for its success, corporate social responsibility and good governance. We also aim to
analyze their current stance and prospective opportunities for enhancement, particularly
in terms of social responsibility and management.
Our function is to provide knowledge and insights. We are the global repository for the
science of human performance and potential, says Matthew Nurse, the Senior Director
of the Nike Explore Team Sport Research Lab. Innovation has been a fundamental
aspect of Nikes operations to satisfy its ever-growing pool of customers.

Nike, Inc. is an American multinational corporation that is engaged in the design,

development, manufacturing and worldwide marketing and sales of footwear, apparel,
equipment, accessories and services. The company is headquartered near Beaverton,
Oregon, USA in the Portland metropolitan area. It is one of the world's largest suppliers
of athletic shoes and apparel and a major manufacturer of sports equipment. As of the
second quarter of 2015, the revenues for Nike, Inc. increased 4 percent to $7.7 billion
while Net Income increased 20 percent to $785 million. In 2014, the brand alone was
valued at $19 billion, making it the most valuable brand among sports businesses.

The word Nike in ancient Greek religion, was a goddess who personified victory, also
known as the Winged Goddess of Victory. Though, Nike was initially known as Blue
Ribbon Sports (BRS), and was founded by University of Oregon track athlete Phil
Knight and his coach Bill Bowerman in January 1964. The idea was born as a result of a
paper written by Knight during his Stanford MBA program, where he studied the
feasibility of importing athletic shoes from Japan into the US market. Back then, the
industry was dominated by the German competitors Puma and Adidas. [Ferrell, etal,
2010]. The company initially operated as a distributor for Japanese shoe maker
Onitsuka Tiger, gathering customers and making most sale meetings at the back of Phil
Knight's automobile.

In 1964, in its first year in business, Blue Ribbon Sports sold 1,300 pairs of Japanese
running shoes grossing $8,000. By 1965, the fledgling company had acquired a full-time
employee, and sales had reached $20,000. In 1966, BRS opened its first retail store,
located at 3107 Pico Boulevard in Santa Monica, California next to a beauty salon, so
its employees no longer needed to sell inventory from the back of their cars. In 1967,
due to rapidly increasing sales, BRS expanded retail and distribution operations on the
East Coast, in Wellesley, Massachusetts.

By 1971, the relationship between BRS and Onitsuka Tiger

ended. BRS prepared to launch its own line of footwear,
which would bear the Swoosh designed by Carolyn
Davidson. At the time she created the now world famous
logo, Davidson was a student at Portland State University
where one of the co-founders of Nike, Phil Knight, was
teaching as an assistant professor in Accounting. As a trivia,
Carolyn Davidson was only paid $35 for her artwork. The Swoosh was first used by
Nike on June 18, 1971, and was registered with the U.S. Patent and Trademark Office
on January 22, 1974.

In 1976, the company hired John Brown and Partners, based in Seattle, as its first
advertising agency. The following year, the agency created the first "brand ad", called
"There is no finish line", in which no Nike product was shown. The company was
renamed Nike in 1978 and has grown to be the largest worldwide seller of athletic
goods, with approximately 19,000 retail accounts in the United States and about 160
countries around the world. By 1980, Nike had attained a 50% market share in the U.S.
athletic shoe market, and the company went public in December of that year.

Together, Nike and Wieden-Kennedy have created many print and television
advertisements, and Wieden-Kennedy remains Nike's primary ad agency. It was Dan
Wieden, agency co-founder, who coined the now-famous slogan "Just Do It" for a 1988
Nike ad campaign, which was chosen by Advertising Age as one of the top five ad
slogans of the 20th century and enshrined in the Smithsonian Institution. Walt Stack
was featured in Nike's first "Just Do It" advertisement, which debuted on July 1, 1988.
Wieden credits the inspiration for the slogan to "Let's do it", the last words spoken by
Gary Gilmore before he was executed.

Throughout the 1980s, Nike expanded its product line to encompass many sports and
regions throughout the world. In 1990, Nike moved into its eight-building World
Headquarters campus in Beaverton, Oregon. Phil Knight announced in mid-2015 that
he is planning to step down as chairman of Nike in 2016.

Nike markets its products under its own brand, as well as Nike Golf, Nike Pro, Nike+, Air
Jordan, Nike Blazers, Air Force 1, Nike Dunk, Air Max, Foamposite, Nike
Skateboarding, and subsidiaries including Brand Jordan, Hurley International and
Converse. Nike also owned Bauer Hockey which was later renamed Nike Bauer
between 1995 and 2008, and previously owned Cole Haan and Umbro. In addition to
manufacturing sportswear and equipment, the company operates retail stores under the
Niketown name. Nike sponsors many high-profile athletes and sports teams around the
world, with the highly recognized trademarks of "Just Do It" and the Swoosh logo.

Nike sponsors the men's national basketball team of the Philippines, Gilas Pilipinas.
Moreover, among the athletes that Nike had sponsored is the Filipino boxing champion
Manny Pacquiao, whose contract with Nike had recently ended in 2016 due to an issue
on gender belief controversy.
The Nike Research Lab is philosophically and physically at the heart of the NIKE, Inc.,
headquartered in Beaverton, Oregon. It began as a small lab in Exeter, New
Hampshire, USA more than 30 years ago, and has grown into a world-class research
facility harnessing dedicated brainpower and state-of-the-science research equipment
unequalled in the sporting goods industry. Carrying on the traditions of Nikes original
sport researcher Bill Bowerman, the lab continues to deliver proven scientific insights
that help drive performance innovations across the Nike brand. [Nike Inc., 2016]
Today, the laboratory employs more than 40 researchers, many of whom hold
doctorates or masters degrees in a wide range of scientific disciplines including
biomechanics, physiology, biomedical engineering, mechanical engineering, physics,
math, kinesiology and systems science. Combined, the team brings more than 250
years of sport research experience to NIKE, Inc.
The research lab is an integral part of the Nike Explore Team, whose mission is to drive
product innovation for athletes everywhere. The lab fuels product innovation specifically
through knowledge and insight gained from a scientific understanding of athletes and
athletic

performance.

The

research

encompasses

fundamental

questions

to

unlock innovation, and builds on a knowledge base by tapping into insights from the
worlds best athletes. Over the years, researchers have tested countless ideas in pursuit
of aiding performance, reducing injury risk, enhancing perception and feel, and
delivering innovative products to athletes.
As a global hub of sport science knowledge, the sport research lab has established
research partnerships with major universities and institutions throughout Asia, Europe
and North America. These strategic partnerships, along with access to the world's best
talent, tools and athletes, allow the lab to maintain cutting-edge science.

Mission and Vision

Mission:
BRING INSPIRATION AND INNOVATION TO EVERY ATHLETE IN THE WORLD.
IF YOU HAVE A BODY, YOU ARE AN ATHLETE.

The mission statement of Nike is focused on the benefits of their customers, a group of primary
stakeholders. From the line Bring Inspiration and Innovation to Every Athlete in the World, they
uphold on a promise of producing quality, inventive, creative products that are aimed to bringing
customer satisfaction.

The legendary University of Oregon track and field coach, and Nike co-founder, Bill Bowerman
said, "If you have a body, you are an athlete." This secondary line encompasses the companys
pursuit to reach a vast target market. It seems to convey that their product line can be suitable
and beneficial to everyone. Implied herein is a marketing strategy; for a wider market brings
forth higher revenues and higher margin for profit.
From Nikes main webpage, they said Our vision is clear: to help NIKE, Inc. and our consumers
thrive in a sustainable economy where people, profit and planet are in balance. To get there,
we're integrating sustainability principles and practices into everything we do: design;
developing sustainable materials; rethinking processes; advocating for change in industry. To
measure our progress, we set ambitious long-term targets and report on our performance.
Nike does not have an official vision statement; but from the companys online marketing
materials, like the previous paragraph, we could deduce that they envision to sustainably remain
as the worlds leading athletic brand, taking into account the interest of their stakeholders,
stockholders and the environment. Corporate Social Responsibility principles are being
engraved in the companys operations, plans and goals.
Following is another excerpt from Nikes main website:
As the world's leading athletic brand, NIKE, Inc. is committed to delivering innovation and
inspiration to every athlete. As we look at the challenges of today and the future, it's clear that
success relies on our ability to transition into the sustainable economy.

We see tremendous opportunity in applying our core strength in innovation to bring about
systemic change in the footwear, apparel and equipment industries; create sustainable products
and business models; and unleash potential through sport. To get after these opportunities,
we've moved beyond corporate responsibility into what we call Sustainable Business and
Innovation.

Financial Times defined business sustainability as managing the triple bottom line - a process
by which companies manage their financial, social and environmental risks, obligations and
opportunities. These three impacts are sometimes referred to as profits, people and planet.
Sustainability, it seems, has become the core principle governing Nike, Inc.

Code of Ethics: Inside the Lines

NIKE, Inc. has a Code of Ethics for all employees called Inside the Lines. It defines the
standards of conduct that all Nike associates are expected to follow. It includes a range
of topics on employee activity, ethical behavior, product safety, legal compliance,
competition and use of resources.

Each year, all Nike employees are required to verify that they have read and
understand Inside the Lines. This ensures compliance to the companys policies and
ethical standards, and its an effective way in governing all associates.

NIKE, Inc. also operates a global toll-free Alert Line for employees to confidentially
report any suspected violations of the law or our code of ethics. Any reported concerns
around accounting, auditing or internal control are communicated to the Board's audit
committee, which determines appropriate action.

Moreover, Nike expects their suppliers to share their standards and operate in a legal
and ethical manner. While Inside the Lines addresses the behavior of NIKE, Inc.
employees, the Code of Conduct also addresses contractors that manufacture Nikebranded products. It directs them to respect the rights of their employees and to provide
them with a safe and healthy work environment.
Inside the Line is preceded by a message from Phil Knight, one of the companys
founders, as follows:

At NIKE, we are on the offense, always. We play hard, we play to win, and we play
by the rules of the game. This Code of Ethics is vitally important. It contains the
rules of the game for NIKE, the rules we live by and what we stand for. Please
read it. And if youve read it before, read it again. Then take some time to think
about what it says and make a commitment to play by it. Defining the NIKE playing

field ensures no matter how dynamic and challenging NIKE may be, our actions
and decisions fit with our shared values.
Inside the Line covers the welfare of all of the companys stakeholders including its
employees, customers, society, environment, suppliers, government and investors.
Nikes Code of Ethics is written in a 32-page handbook with the following summary or
content:

Nike acknowledges the importance of the roles of its employees, as well as the
significance of sharing the same ethical values. As they mentioned in Inside the Lines:
NIKEs good name and reputation result in large part from our collective actions. That
means the work-related activities of every employee must reflect standards of honesty,
loyalty, trustworthiness, fairness, concern for others and accountability. We are
expected to be sensitive to any situations that can adversely impact NIKEs reputation
and are expected to use good judgment and common sense in the way we all conduct
business. This Code of Ethics applies to NIKE and its subsidiaries worldwide.

Following are some of the important excerpts from Inside the Line:

MATTER OF RESPECT
NIKE knows that people perform best in a work environment free from unlawful
harassment and discrimination, and we want to be sure that harassment and
discrimination of all types does not occur at NIKE. To that end, NIKEs policy
prohibits discrimination and harassment, seeks to prevent harassment and
provides employees with an effective complaint process. Employees must take
care to treat others the way they would expect to be treated, as professional
adults, respectful of the diverse workforce NIKE enjoys.

All employees are responsible for creating and maintaining a work environment
free from harassment or other inappropriate behavior.

ENVIRONMENT, SAFETY AND HEALTH

NIKE is committed to providing safe and healthy work environments and to being
an environmentally responsible corporate citizen. The NIKE standard, at a
minimum, is to comply with all environmental, safety and health laws and
regulations. NIKE is committed to minimizing the impact of our business on the
environment with methods that are socially responsible, scientifically based and
economically sound.

AGENTS, CONSULTANTS & PROFESSIONAL SERVICES

Our business partners, such as agents, distributors, consultants, representatives,
attorneys, independent contractors, external temporary workers and suppliers are
expected to observe the same standards of conduct as NIKE employees when
conducting business with or for NIKE. No employee may indirectly, through
agents, do anything the employee is prohibited from doing under NIKE policy.
Business integrity is a key standard for the selection and retention of those who
represent NIKE. Before retaining any significant business partner, we should

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carefully consider their business integrity, and inform them of our ethical
expectations.

SOCIAL RESPONSIBILITY
NIKE is committed to socially responsible sourcing practices. We are driven to do
not only what is required by law, but also what is expected of a leader. We expect
our business partners to do the same. We do this through the NIKE Code of
Conduct, which covers contractors who manufacture NIKE product. This code
calls for our partners management practices to respect the labor and
employment rights of all employees, to minimize the impact on the environment,
provide a safe and healthy work place, and promote the health and wellbeing of
all employees. As a member of the NIKE team, when presented the opportunity,
you have a responsibility to promote compliance with the NIKE Code of Conduct.

PRODUCT SAFETY
It is essential that NIKE provide products to our consumers that are innovative,
inspiring, and safe. This helps fulfill NIKEs responsibilities to the public,
enhances our competitive position in the marketplace, and retains the confidence
of our customers. Products must be designed, produced, and serviced to NIKE
standards and should comply with applicable regulations and contractual
obligations.

EXPORT & IMPORT LAWS

It is NIKEs policy to comply with the export and import control laws and
regulations of all countries in which NIKE does business. Compliance with these
laws and regulations may result in some loss of business opportunities, but
should also ensure that NIKEs imports are not subject to delay or penalties and,
in addition, allow NIKE to take advantage of applicable programs to reduce
duties. Compliance with export control regulations requires that we know the end
use and end-user for all NIKE transactions.

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In addition, NIKEs policy is to comply with U.S. anti-boycott laws. This applies to
NIKE everywhere in the world. U.S. anti-boycott law is intended to prevent NIKE
from taking any action in support of a boycott imposed by one country upon a
country that is friendly to the United States. Requests to support a boycott are
often found in letters of credit, shipping instructions, certificates of origin and
other contract-related documents. Complying with these requests is prohibited by
law. If you become aware of such a request, contact the Legal Department.

PROTECTION OF NIKE INFORMATION , IDEAS, & INTELLECTUAL

PROPERTY
From time to time, NIKE employees may be exposed to confidential information.
Confidential information includes things like strategic plans, sales figures,
financial information, product designs, information regarding negotiations,
agreements or dealings between NIKE and others, human resources information,
software, trade secrets, patents, trademarks, and similar information from
customers or suppliers. Because the nature of NIKEs business is highly
competitive, disclosure of any confidential information could result in severe
damage to NIKE. Disclosing confidential information to any person or
organization, directly or indirectly, without prior written consent from NIKE, is
prohibited, as is using confidential information for commercial or other purposes
not directly related to NIKEs business or operations. Also, employees should not
permit any of NIKEs non-public, proprietary or confidential information to enter
the public domain through electronic transmissions.

ACCURATE RECORDS & REPORTS

Every employee has the responsibility to maintain accurate records and reports,
including financial and accounting records that accurately and completely reflect
all transactions and assets. Employees may not make any false statements,
misleading or artificial entries, or material omissions or misrepresentations in any
of NIKEs financial books, records, or other documents or communications. No
funds or assets may be maintained for illegal or improper purposes. Any report,

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document, or statement submitted to the government or communicated publicly

must be accurate, complete, understandable, and timely. Our goal is to strive for
accuracy, transparency, and fairness in all our records and reports.

SAFEGUARDING ASSETS & RECORDS

Safeguarding NIKE assets and records is the responsibility of all employees and
NIKE representatives. Employees should use and maintain assets with care and
respect, while guarding against waste and abuse. Employees should also
preserve or destroy business records (physical and electronic) in accordance
with NIKEs Record Retention Policy & Schedule.

COMPUTING AND INFORMATION RESOURCES

NIKE considers its computing and information resources to be corporate assets
having strategic value. It is NIKE policy to protect information assets under its
control by implementing security controls to protect the confidentiality, integrity
and availability of information and information systems. NIKE also recognizes the
strategic value of the computing and information assets of others and will
accordingly abide by software licenses for rights to use such assets. NIKE
employees must use NIKE computing and information assets, including the
internet, electronic mail, and other on-line resources, and computer hardware
and software consistent with NIKE business objectives and policy.

PRIVACY
NIKE is committed to handling the personal information of our employees,
consumers and others responsibly and in compliance with applicable privacy
laws around the world. We have implemented a variety of security measures to
maintain the safety of this information. It is the responsibility of every employee to
respect the personally identifiable information we have from our consumers,
fellow employees and other persons. Access and communication of personally
identifiable information should be limited to only that which is necessary to

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conduct NIKE business. Personally identifiable information should not be used for
personal benefit or for non-business use.

FRAUD & THEFT

Theft is straightforward. Its taking what doesnt belong to you without permission.
Fraud can take many forms, but it always involves deceit. When team members
steal or commit fraud, it damages our reputation, our brands, and impacts us all.
Regardless of who benefits, any act that involves theft, fraud, embezzlement or
misappropriation of property, money, or services, including that of NIKE or any of
its employees, suppliers, or customers is strictly prohibited.

CONFLICT OF INTEREST
NIKE recognizes and respects the rights of employees to take part in financial,
business, employment, or other activities outside of their NIKE jobs. However,
these activities must be lawful and free of any potential conflicts with employees
responsibilities at NIKE. Conflicts of interest arise when an employee uses his or
her position at NIKE for personal gain or when the employees personal interests
conflict with NIKE interests. All employees must avoid any actions or
relationships that could conflict with, or appear to conflict with, the interests of
NIKE. For example, having a substantial investment or position in any business
that deals with NIKE, doing NIKE business with close friends or relatives,
supervising family members, relatives, or those with whom you are romantically
involved, using NIKEs name or reputation to gain personal favors, and accepting
or offering payments, gifts or favors from or to companies doing business with
NIKE are situations that could result in an actual or the appearance of a conflict
of interest. As a NIKE team member, through the use of NIKE property,
information, or position you may learn of business opportunities that may be of
benefit to NIKE. You should not take such opportunities to benefit yourself or
others, and you should never compete with NIKE.

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COMPLIANCE WITH LAWS & FAIR DEALING

Employees must comply with all applicable laws, rules, and regulations.
Employees are expected to deal competitively and fairly with others and may not
use deception, misrepresentation, or abuse of confidential information to obtain
unfair advantage over competitors, suppliers, or customers.

ANTITRUST & COMPETITION

It is NIKEs policy to compete fairly and vigorously everywhere we do business.
All NIKE employees must comply with antitrust and competition laws throughout
the world. All product development, manufacturing and sales activities must
conform to the highest ethical standards. Antitrust laws prohibit agreements or
understandings among actual or potential competitors to fix or control prices, fix
bids, allocate territories, or boycott specified suppliers or customers, or limit the
production and sales of products. Under some circumstances, competition laws
prohibit controlling the resale pricing of distributors, dealers, and retailers,
disparaging a competitor, misrepresenting our own products or services,
exploiting a dominant market position, stealing trade secrets or offering or paying
bribes or kickbacks. Failure to comply with antitrust or competition laws could
result in heavy fines for NIKE and/or imprisonment of the employee involved.

POLITICAL ACTIVITY
NIKE will comply with all applicable laws regarding campaign contributions,
lobbying, and ethics standards that apply to dealings with public officials and
government employees. Except as specifically permitted by law and expressly
authorized by company policy, no corporate funds will be used to make
contributions or payments to political candidates or causes. Only designated
NIKE officers and employees are authorized to communicate with elected
officials regarding the public policy issues that affect NIKE.

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CODE OF ETHICS VIOLATIONS

Subject to local law, violation of the NIKE Code of Ethics may lead to corrective
action up to and including termination of employment. Waiver of provisions of the
NIKE Code of Ethics may be made only by the Board of Directors and when
required will be promptly disclosed to shareholders.
The preceding data were derived from Inside the Lines: The Nike Code of Ethics,
retrieved from the company main website.

From the passages, we could deduce that the Nike management is in control of all the
areas, even the slightest details, of their companys operations. Their Code of Ethics is
highly detailed and expounded, and covers the welfare of stockholders and
stakeholders alike.

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Corporate Social Responsibility Program

Nike was a subject of heated criticisms in the 1990s because of its Asian labor
practices. The negative publicity from these criticisms was a threat to its market
leadership and they countered this by refining their CSR policy. They established an
executive level multifunctional team with the responsibility to drive compliance with CSR
and environmental standards.

As a result, Nike was able to enhance its production processes to cut waste and reduce
environmental degradation. Their attention was also drawn to the workers and their
responsibility to these workers. They therefore designed a suppliers code of conduct for
all their suppliers in order to ensure adherence to the values they hold including
provision of healthy working environments. Nike has embraced a CSR policy that it
strictly follows and even imposed on their suppliers.
Nikes efforts to reduce waste to conserve the environment enabled them to win the
Gigaton Award which is a reward given to organizations to recognize their efforts in
reducing carbon emission and making a difference in climate change. In a nutshell, Nike
strives to ensure sustainable production that causes least negative impact on the
environment while ensuring the well-being and safety of their employees. Nike also
embraces social responsibility and engages in community giving in order to improve the
welfare of the communities around them. Nike has a global workforce of about 100
employees who are fully dedicated to fueling innovation and transition of company
policies and practices to be in line with their Corporate Social Responsibility goals (CSR
International, 2010).
From Nikes CSR Report they mentioned, Corporate responsibility challenges us to
take a good, hard look at our business model, and understand our impact on the world
around us.

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A. Environmental Conservation
Nike has been on the forefront in innovating products whose production does not
adversely affect the environment. An example of such innovation is the Environmental
Apparel Design Tool which is a software-based tool that enables the organization to
create products while keeping environmental degradation to a minimum (CSR
Newswire, 2010). This tool was used in create the 2010 World Cup Jerseys using
recycled polyester hence using up a significant portion of plastic bottles that would have
ended up as garbage. The used bottles were obtained from Taiwan and Japan.

Nike has made this discovery even more valuable through its decision to outsource it to
other apparel manufacturers hence creating an even greater impact on environmental
conservation. Nike also launched a Zoom MVP Trash Talk in 2009 (CSR Newswire,
2010). This is a hoop shoe made using scrap materials. The shoe packaging is also
fully made from recycled fiber. The upper part is made of leather and synthetic leather
waste. The outsole a type of rubber that reduces toxics, while the laces comprise
recycled polyester. The development of this shoe underscores the commitment of Nike
to environmental conservation. Nike is also known to carry out its business while
endeavoring to minimize the amount of energy used in its factories and in the
contracted factories.

In 2008, Nike developed an energy efficiency program with the goal of reducing the
energy consumption levels (CSR Newswire, 2010). The efficiency program would be
used across its contracted factories to identify ways in which the energy consumption
can be reduced and conservation efforts implemented.

Nike has also been at the forefront in controlling the amount of their worn-out products
that end up as landfill. In 2001, Nike launched a program dubbed collect a shoe in
partnership with various boys clubs across America. The boys would go out in the
neighborhood and collect all worn out Nike shoes and in return, Nike would reward them
by building for them a basketball court. This initiative further underscores Nikes
commitment to sustainable environmental conservation.

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According to the New England-based environmental organization Clean Air-Cool Planet,

Nike ranks among the top three companies, out of 56, in a survey of climate-friendly
companies. Nike has also been praised for its Nike Grind program (which closes the
product lifecycle) by groups like Climate Counts.

One campaign that Nike began for Earth Day 2008 was a commercial that featured
basketball star Steve Nash wearing Nike's Trash Talk Shoe, which had been
constructed in February 2008 from pieces of leather and synthetic leather waste from
factory floors. The Trash Talk Shoe also featured a sole composed of ground-up rubber
from a shoe recycling program. Nike claims this is the first performance basketball shoe
that has been created from manufacturing waste, but it only produced 5,000 pairs for
sale.

Another project Nike has begun is called Nike's Reuse-A-Shoe program. This program,
started in 1993, is Nike's longest-running program that benefits both the environment
and the community by collecting old athletic shoes of any type in order to process and
recycle them. The material that is produced is then used to help create sports surfaces
such as basketball courts, running tracks, and playgrounds. Since the program was
created, more than 1.5 million pairs of used shoes are collected for recycling each year,
in addition to thousands of tons of manufacturing scrap material that are recycled.
B. Workers Welfare Programs
Nike has also been able to demonstrate its concern for the welfare of their workers, both
present and past. A case in point is the recent partnership between Nike and CGT (the
Central General de Trabajadores de Honduras) where they agreed to support the
workers who had been affected by the closure of Hugger and Vision Tex factories which
are contracted by Nike. Nike made a contribution of $ 1.5 million to a workers relief fund
to be administered to the workers [CSR Newswire, 2010].

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In addition, Nike undertook to prioritize hiring these former workers in their other
ventures as well as taking them through vocational training programs. Nike also
undertook to cover their health insurance costs for one year or until they found new
employment opportunities elsewhere. The provision of healthy working environments
coupled with the good treatment accorded the employees has made Nike feature as
among the best companies to work for as exhibited in a survey by Fortune magazine.
Nike moved 31 positions from its 2006 ranking to be at position 69 in 2007. Its culture
and work place facilities were the two most significant factors that lead to its improved
ranking. (Fortune, 2008)
C. Awareness Programs
Nike has also taken the lead in global awareness campaigns in such areas as fighting
cancer. Nike entered into a partnership with LIVESTRONG to promote the distribution of
their products in order to scale up the fight against cancer (CSR Newswire, 2010). Nike
has also created Nike LIVESTRONG collection which consisting various footwear and
apparel where users would be able to show their solidarity with the fight against
cancer.

Moreover, Nike has been participating in awareness programs that are aimed at
highlighting the importance of physical education in schools and other institutions.
Physical inactivity is known to be one of the main factors that lead to obesity, which in
turn poses various health risks to the youth. By participating in these initiatives, Nike
makes its contribution towards creation of an active and healthy society. These
initiatives were also aimed at training the physical education teachers to enable them
offer effective physical education lessons to the students.
D. Empowerment programs
Nike has recently entered into a partnership with Doernbecher hospital with the goal of
empowering their young patients where Nike staff members are paired with the young
patients to train them in design (CSR Newswire, 2010). The resultant collections
generate revenues which are then used to finance the hospital. These funds help treat

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uninsured patients, buy better medical equipment, and support advanced pediatric
research. Young patients involved range between 11 and 14 years old and the program
is estimated to have generated about $ 2 million for the hospital so far.

Through the Nike foundation, Nike has also been instrumental in empowering
adolescent girls in Liberia in collaboration with the World Bank (CSR Newswire, 2010).
The partnership sought to provide training that would equip these girls with the technical
skills necessary for their economic empowerment. The contribution of Nike to the
society in Liberia would be expected to be magnified once the girls become
economically productive and gain the ability to support their families.

The Nike Foundation has also entered into partnership with the Novo foundation in an
effort to boost the economies in the developing world through the empowerment of the
adolescent girls. Nike has already contributed over $ 100 million for this initiative (CSR
Newswire, 2010). This initiative was also aimed at saving girls from vicious poverty
cycles that would see girls forced into early marriages and with no economic means to
support themselves.

Nike also involved themselves in the promotion of innovation in schools especially in

public schools. This is as evidenced through the creation in 2007 of a Nike School
Innovation Fund. It was created to help schools provide quality education to students
hence making them grow into responsible and productive members of the society.

E. Community Development through Sport

Nike has in many occasions created opportunities for development of sport in various
communities. A case example is Nikes launch of the N7 collection which was
commenced in a bid to promote sport development in the Native American
communities. Parts of the profits from the sale of the kits are channeled to a fund (N7
fund) which supports youth sports in these communities.

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Nike has also been establishing growth opportunities for women and youth as
evidenced by their introduction of a community store in New Orleans where they
established an annual grant program (Nike Inc, 2009). This program aims at supporting
community based programs that engage developing sport opportunities for women and
the youth. The development of these initiatives has the twin effect of sharpening the
athletes skills and diverting the vibrant youth into constructive sporting activities.

Nike has also, through Jordan Brand, been involved in motivating teachers in public
schools to offer more dedicated education to the economically disadvantaged students
who are the main population in those schools. The award recognizes teachers that offer
dedication and show absolute commitment to their students education. This initiative
should be hailed as the sincere commitment of teachers is crucial in ensuring students
are well equipped to be of greater service to the society as a whole.

Nike also funded various nonprofit organizations within different American communities
to a tune of $ 100,000 in 2005 to enable them promote youth activity in a bid to improve
their physical health (CSR Newswire, 2010).
F. Community Support
Through its partnership with the United Nations High Commission for Refugees
(UNHCR), Nike participated in a campaign that was created to raise awareness and
resources for Refugees. These resources were used to provide education and sports
opportunities for the refugees. Sports are hailed as an effective way of alleviating the
trauma and stress that many refugees face after losing their homes. They are also
crucial in developing life skills and leadership skills for young refugees. By participating
in this program, Nike demonstrated their concern for the general welfare of the society.

Initiatives such as donation of funds to facilitate training of child athletes have also seen
Nikes CSR taken a step higher. In 2007, Nike donated $ 175,000 to create a special
Olympic games that would offer youth with intellectual disabilities knowhow of certain
sports and enable them exposure to an Olympic experience (Nike Inc, 2009). This event

22

was a one-day clinic and entailed skills development and sports competitions. It also
entailed various activities for the families of youth with disabilities.

Nike has also been at the forefront in establishing a physical education program for
preschool children with an initiative called Head start. This program was aimed at
encouraging children to embrace physical activities at an early age and has been hailed
as one of Americas most successful educational program for early childhood. This
came one year after Nike had launched an after school sports program where children
going to schools could engage in various sporting activities after classes. These
activities would be conducted at various recreational facilities and boys and girls clubs.
The importance of physical exercise in a persons general health cannot be
overemphasized and it is for the good of society that Nike has been able to articulate its
position and exerted itself in the promotion of these ideals.

Nike has also been a good donor in a bid to alleviate human suffering especially due to
the occurrence of various natural calamities. In 2004, Nike donated $ 1 million to be
channeled to South East Asia and Eastern Africa through various nonprofit
organizations already present in those areas (CSR Newswire, 2010). These donations
were aimed at alleviating suffering suffered through earthquakes and tsunamis in the
respective regions.

23

Good Governance Program

Nike was founded on a handshake between a young athlete and his coach. Implicit in
that act was the determination that they would build the business based on trust,
teamwork, honesty and mutual respect.

As they have grown from a two-man partnership to a global business, their task has
been to maintain this same ethic across all aspects of their operations. They have put in
place corporate governance policies and practices to help them achieve this. In
recent years, they have extended these to include corporate responsibility issues as a
central part of their governance system.

Nike has unified or integrated Governance with Management since the current Chief
Executive Officer (CEO), Mr. Mark Parker, is also a member of the Board of Directors
since 2006. This is advantageous in terms of efficiency and dynamic leadership. The
CEO, as the manager of the corporation, has a superior knowledge of the operations of
the business. When that role is unified with his role as Chairman of the Board, one
person occupying both of these roles may better be able to lead the corporation and to
identify any problems that may arise. This can provide superior knowledge to the board
and increase the information available to it.

This unified leadership structure creates efficiency by allowing the unified executive to
operate in both capacities at once. The other board members can have confidence that
the CEO is fully aware of the corporations strengths and weaknesses, along with what
issues need to be addressed moving forward.

BOARD OF DIRECTORS
Nikes board of directors is responsible for corporate governance in compliance with the
U.S. Sarbanes-Oxley Act and other laws, and the interests of their shareholders. The
board is currently composed of 10 members, eight of whom are independent non-

24

executive directors as defined under the listing standards of the New York Stock
Exchange. Six board committees share responsibility for overseeing specific policies
and procedures, including audit, compensation, corporate responsibility, executive,
finance and nominating and corporate governance.
The Nominating and Corporate Governance Committee of NIKE, Inc. (the Committee)
considers and evaluates candidates for appointment or election to the Board of
Directors. In evaluating potential candidates for suitability, the Committee considers
many factors to identify individuals with the requisite intelligence, education, experience,
and character to make significant contributions to the Board of Directors.

The Board, which is elected by shareholders, is the ultimate decision-making body of

Nike, except with respect to those matters reserved to the shareholders. The Board
represents the owners interest in the operation of the business, including optimizing
long-term financial returns. It elects the corporate officers comprising the senior
management team, who are responsible for the conduct of the Companys business.
The Board acts as an advisor to and oversees the senior management team, and
ultimately monitors its performance. The Board has the responsibility to ensure that in
good times, as well as difficult times, management is capably executing its duties.

The Board is also responsible for reviewing and establishing procedures designed to
ensure that the Companys management and employees operate in a legal and ethically
responsible manner. [Nike Inc., 2016]

ROLE OF DIRECTORS
Normally it is managements duty to formalize, propose and implement strategic
choices, and the Boards role to approve strategic direction and evaluate strategic
results. To accomplish this, the Board engages in a regular dialogue with the
Companys Chief Executive Officer (CEO) and other members of the senior
management team. The Board regularly reviews with the senior management team the
Companys long-term strategic business plans and other significant issues affecting the

25

business of the Company. Directors are expected to spend the time and effort
necessary to properly discharge their responsibilities. [Nike Inc., 2016]

CORPORATE RESPONSIBILITY (CR) MANAGEMENT AT THE BOARD LEVEL

One of the six committees on Nikes board of directions is the corporate responsibility
committee. The CR committee was established in 2001 to review significant policies
and activities and make recommendations to the board of directors regarding labor and
environmental practices, community affairs, charitable and foundation activities,
diversity and equal opportunity, and environmental and sustainability initiatives.
Nikes executive team attends the committee meetings. The committee meets at least
five times annually and reviews strategies and plans for issues including:
Communications and global issues management
Corporate Responsibility (CR) investments
Establishment of a CR Business Leadership Team
CR reporting and metrics
CR strategic plan
Diversity
Environment, safety and health
Evolution of our compliance programs
Factory exit response plan
MIT research collaboration
Nike Foundation
Stakeholder Forum
Subsidiaries
Value channel

COMMITTEE MATTERS
The Company has six standing committees: Audit, Compensation, Nominating and
Corporate Governance, Finance, Corporate Responsibility, and Executive. The purpose

26

and responsibilities of each committee are described in charters adopted by the Board.
The Audit, Compensation, and Nominating and Corporate Governance Committees are
composed entirely of independent directors. The CEO chairs the Executive Committee.
The Board may, from time to time, form a new committee or disband a current
committee depending on the circumstances. In addition, the Board may form ad hoc
committees from time to time, and determine the composition of the committees. [Nike
Inc., 2016]

MANAGEMENT REVIEW AND SUCCESSION

The Compensation Committee is responsible for overseeing the performance evaluation
of the CEO. The Compensation Committee considers (1) achievement against
approved financial performance measures and targets (such as revenue, net income,
and earnings per share), and (2) other factors such as leadership, achievement of
strategic goals, market position, and brand strength, which are signals of Company
success. The Compensation Committee endeavors to reflect the CEOs performance in
the CEOs compensation. [Nike Inc., 2016]

SUCCESSION PLANNING
The Board plans for succession of the Chairman, the CEO and certain other senior
management positions in order to assure the orderly functioning and transition of the
management of the Company, in the event of emergency or retirement of senior
management. As part of this process, the Chairs of the Nominating and Corporate
Governance Committee and the Compensation Committee, in consultation with the
Chairman and CEO, assess management needs and abilities in the event a transition
becomes necessary. [Nike Inc., 2016]

27

Problems Encountered in CSR and Good Governance

As the popularity of the Nike product grew, so did its product demands and the need to
produce more apparel to meet the demands of customers. In contrast to its meteoric
rise in the 1980s after going public, the late 1990s began a period composed of
combating allegations about labor and human right violations in Third World Countries
in which manufacturing had been subcontracted. Nikes response to these issues had
been considered by critics to be more of a damage control stunt than a sincere attempt
at labor reform. [Ferrell, 2010]
A. CRITICISMS OF NIKES MANUFACTURING PRACTICES
In order to remain competitive and keep manufacturing costs low, Nike moved the
athletic footwear production to areas of the world with low labor cost. Assembly of
shoes, apparels, equipment and electronics was shifted from the United States to
Japan, then to Korea and Taiwan in 1960s. By 1980s, it also started in Southern China.
By that time, Taiwan and Korea supplied 45% of the worlds footwear exports and the
trend has continued for production to continually shift to lower-cost Asian Nations. In the
Philippines, Nike has two factories one in Malabon and another in Bulacan. [Nike, Inc.
2015]

Sweatshops
Nike has been criticized for contracting with factories (known as Nike sweatshops) in
countries such as China, Vietnam, Indonesia and Mexico. A total of 669 independent
contract factories, most of which are in poor Asian nations, manufacture the majority of
Nikes products. The working conditions for the workers in these factories have been a
source of heated debate. Because the Asian factories have further subcontracted out
the work, it has become increasingly difficult for Nike to keep track and regulate the
working conditions and wages in these factories. [Ferrell, 2010]

Vietnam Labor Watch, an activist group, has documented that factories contracted by
Nike have violated minimum wage and overtime laws in Vietnam as late as 1996,

28

although Nike claims that this practice has been stopped. The company has been
subject to much critical coverage of the often poor working conditions and exploitation of
cheap overseas labor employed in the free trade zones where their goods are typically
manufactured. Sources for this criticism include Naomi Klein's book No Logo and
Michael Moore documentaries. [Stodder, 2007]

Campaigns have been taken up by many colleges and universities, especially antiglobalisation groups, as well as several anti-sweatshop groups such as the United
Students Against Sweatshops.

As of July 2011, Nike stated that two-thirds of its factories producing Converse products
still do not meet the company's standards for worker treatment. A July 2011 Associated
Press article stated that employees at the company's plants in Indonesia reported
constant abuse from supervisors.

Child Labor Allegations

During the 1990s, Nike faced criticism for the use of child labor in Cambodia and
Pakistan in factories it contracted to manufacture soccer balls. Although Nike took
action to curb or at least reduce the practice, they continue to contract their production
to companies that operate in areas where inadequate regulation and monitoring make it
hard to ensure that child labor is not being used.

In 1996, Life magazine published an expose article complete with photos of Pakistani
children stitching soccer balls for Nike, Adidas and other companies. The images of
these children, working in factories instead of being in school, had a devastating effect
impact on Nikes sales and corporate reputation. Customers who had previously held
the Nike brand in high regard began to develop a lower opinion of the company. [Ferrell,
2010]

29

In 2001, a BBC documentary uncovered occurrences of child labor and poor working
conditions in a Cambodian factory used by Nike. The documentary focused on six girls,
who all worked seven days a week, often 16 hours a day.

Extremely Low Wages

In April 2014, one of the biggest strikes in mainland China took place at the Yue Yuen
Industrial Holdings Dongguan shoe factory, producing amongst others for Nike. Yue
Yuen did underpay an employee by 250 yuan (40.82 US Dollars) per month. The
average salary at Yue Yuen is 3000 yuan per month. The factory employs 70,000
people. This practice was in place for nearly 20 years.

Hazardous Health and Safety Conditions

Nike also experienced problems with factory conditions in Vietnam. This was especially
serious since the discovery came as a result of a report commissioned by Nike as part
of an Audit by Ernst and Young. The private report was leaked to the press, resulting in
the New York Times running it as a front-page article. The audit reported unacceptable
levels of exposure to chemicals in the factory and documented cases of resulting
employee health problems, as well as other infringements of the established code of
conduct. [Ferrell, 2010]

Hannah Jones, Nike Inc.'s head of sustainable business, had been lecturing colleagues
for years about the dangers of manufacturing in Bangladesh. The country featured
some of the cheapest factories in the world, she argued, but the athletic-gear maker
could ill afford another public pasting over its labor practices. Her counterparts in the
production division, charged with squeezing costs, countered that they should all visit
the place together and then decide. So one day last year, five of them slogged up a dirty
staircase to the top floors of an eight-story building here that housed one of Nike's
suppliers, Lyric Industries. Rolls of fabric were strewn across the production floor and
some windows were bolted shut, Ms. Jones recalls, clear-cut hazards in the event of a
fire. The building was filled with other businesses, and there was no telling how safe

30

those were. After spending the morning speaking with Lyric managers, workers and
people in the neighborhood, they flew home and decided to cut ties with the company.

Moreover, a project through the University of North Carolina at Chapel Hill found
workers were exposed to toxic isocyanates and other chemicals in footwear factories in
Thailand. In addition to inhalation, dermal exposure was the biggest problem found.
This could result in allergic reactions including asthmatic reactions.

Justin Gatlin Sponsorship

In March 2015, Nike drew criticism after announcing a new sponsorship deal with
American sprinter Justin Gatlin who had served two bans for doping. Nike had
previously dropped Gatlin after his second failed drug test and resulting long term ban.
Critics said that Nike was sending out a bad message by endorsing an athlete who has
never been repentant for his actions and still causes widespread discontent within the
sport. English sprinter Marlon Devonish described the deal as "a kick in the teeth to the
99% of guys who are clean".
Nike 6.0
As part of the 6.0 campaign, Nike introduced a new line of T-shirts that include phrases
such as "Dope", "Get High" and "Ride Pipe" sports lingo that is also a double entendre
for drug use.

Boston Mayor Thomas Menino expressed his objection to the shirts after seeing them in
a window display at the city's Niketown and asked the store to remove the display.
"What we don't need is a major corporation like Nike, which tries to appeal to the
younger generation, out there giving credence to the drug issue," Menino told The
Boston Herald. A company official stated the shirts were meant to pay homage to
extreme sports, and that Nike does not condone the illegal use of drugs. Nike was
forced to replace the shirt line.

31

Environmental Problems
Because of the nature of the textile industry, Nike faces numerous challenges and
potential critical problems. Due to the processes involved in making the materials, the
textile industry negatively impacts the environment wherever manufacturing is located.
Problems generated by the textile industry in general, and Nike specifically, are
increased water deficits, climate change, pollution of land, air and waterways, and large
fossil fuel and raw material consumption. In addition to these environmental hazards,
todays electronic textile plants expend significant amounts of energy.

These issues were aggravated by Western Cultures that have a consumption-based

mentality that clothing is disposable and that one must buy each new seasons musthave items. [Ferrell, 2010]

32

B. ACTIONS TAKEN TO ADDRESS CSR AND GOVERNANCE PROBLEMS

In response to the criticisms of the 1990s, Nike took rapid measures not only to redeem
its reputation, but also to rectify problematic policies and lack of international oversight
of its operations. In 1998, Nike revenues and stock prices decreased by approximately
50%, leading to the laying off of 1,600 employees. Therein, Nike prioritized to make
certain that its factories were not taking advantage of their workers. They also ensured
that workers have a safe work environment and competitive wage.

Action 1:

Public Relation Campaigns

Nikes first reaction to all of the bad press was to do damage control. Nike launched a
large public relations campaign encouraging retailers and university partners to combat
the damaging allegations. In an effort to directly address the concerns of student
activists, Nike even visited several college campuses and opened discussions with
students and university administration about its manufacturing policies. Nike also invited
teams of Dartmouth graduate students to tour the Indonesian and Vietnamese factories
for three weeks at Nikes expense.
Action 2:

Reassessing Policies

Being the subject of such exposes caused Nike to re-examine its practices in subcontractor labor. While it had broken no laws, Nike understood that they may have
been perceived as acting unethically.

The company took a number of steps to

resolves these issues, including requiring all workers be at least 18 years of age, and
that exposure to hazardous materials be within the OSHA limits in place for workers in
the United States.
Action 3:

Code of Conduct: Inside the Lines

To more effective address the issues, Nike implemented a Code of Conduct for all its
employees and suppliers. Initially drafted in 1991, Nikes Code of Conduct was its first
step toward improving the working conditions in its factories. It has been the foundation
of Nikes Corporate Ethics. Inside the Lines was founded on a belief that Nike is
comprised of many different kinds of people, and in order to reach the desired level of

33

employer responsibility, it was necessary to respect individual diversity and become

more dedicated to offering equal opportunities for every individual. Aside from
addressing the employees welfare, Nike shared its goals with its business partners and
contractors and required them to embrace the same commitment to best practices and
continuous improvement in four key areas: management practices, environmental
responsibility, safety in the workplace and promoting the overall wellbeing of all
employees. Contractors are required to recognize the dignity of each employee, and the
right to a workplace free of harassment, abuse, or corporal punishment. Decisions on
hiring, salary, benefits, advancement, termination and retirement must be based solely
on the employees ability to do the job, free from discrimination based on race, creed,
gender, marital status, religious or political beliefs, age or sexual orientation. [Ferrell,
2010]

Nike also worked with Global Alliance to help review its factories. In August 1996, Nike
Corporation joined the Apparel Industry Partnership, a coalition of companies and
human rights groups, to draft an industry-wide code of conduct.
Action 4:

Audit Tools

In 1998, Nike developed three main auditing tools to help provide increasing
transparency and insight into the manner in which Nike contract factories are evaluated
for compliance with company standards. Management Audit Verification (MAV)
combines audit and verification into one tool. It helps to identify issues related to work
hours, wages and benefits, freedom of association and grievance systems, as well as to
follow-up on these issues and to create an action plan to correct them according to local
law and Nikes Code Leadership Standards. The Environment, Safety and Health (ESH)
Audit is an in-depth audit tool used by Nike compliance teams to determine compliance
with Nikes Code Leadership Standards. [Ferrell, 2010]

In addition to its own audit tools, external organizations such as NGOs frequently audit
Nike. Recently, Nike also employed a Safety, Health, Attitude of Management, People
and Environment (SHAPE) tool used quarterly by contract factories to determine their

34

compliance with Nikes standards. This tool involves inspections that help to improve
work conditions, for example, by reducing workers exposure to toxic solvents and
glues.

Action 5:

Factory Transparency

In 2000, the company disclosed the names and locations of factories that produced its
sneakers, apparel and other products. This move was a first in the industry and
appealed to many critics. This represented a genuine effort to invite critics to review its
factories.

By disclosing its supply chain, Nike believes it can be more successful at monitoring
and making changes once issues have been uncovered not only in its own factories but
on an industry-wide basis. Nike hoped that by disclosing its own supply chain, it can
encourage other companies to do the same.

Transparency also work as a motivator for contract factories to ensure compliance to

standards. Nike also implemented the Balanced Scorecard for its suppliers. Rather than
simply assessing financial factors, the Balanced Scorecard also measures labor, health
and environment standards. The system gave Nike a reliable method for rewarding
high-performance, compliant factories. [Ferrell, 2010]
Action 6:

Corporate Responsibility Board

In 2001,Nike developed a Corporate Responsibility (CR) Board to review policies and

activities and to make recommendations to the board of directors regarding labor and
environmental practices, community affairs, charitable and foundation activities,
diversity and equal opportunity, and environmental and sustainability initiatives.
Nikes Vice President of Corporate Responsibility reports directly to the CEO who is a
member of the board of director. Nearly 120 employees work on CR issues as their
primary function or have CR work as a significant portion of their workload. The board

35

played a significant role in disseminating information on the workers rights and taking
corrective actions when concerns and issues arise.

Action 7:

Corporate Philanthropy

Among Nikes newest endeavors is to increase its Social Responsibility by building a

social network where innovations are shared, new funds are mobilized and human and
social capital is exchanged in support of a global movement based on the power of
sport to unleash human potential. Nike encourages the use of Sports as a means of
empowering individuals and building skills such as leadership, conflict resolution, equity
and trauma relief. Nike partners with various groups that work with low-income youth,
minorities and young women who live in conflict situations across the world.

Nike awarded $315 million in grants, product donations and other support through 2011
to give underprivileged youth greater access to sport programs. Nike contributed an
additional $100 million annually in cash and products to non-profit partners around the
world. While contributing to the global community. Nike also strives to invest in its own
local

communities.

36

Annual Report
The success of Nike Inc. can be further attributed to it progressive profitability. The
following data covers some Financial Highlights of Nike Inc. from the last five years
retrieved from Marketwatch, a financial information catalogue of The Wall Street.
BALANCE SHEET

37

38

CASH FLOW STATEMENT

39

40

INCOME STATEMENT

41

42

As previously mentioned, in 2011 alone, Nike awarded $315 million in grants, product
donations and other support for the underprivileged youth. Nike also contributes an
additional $100 million annually in cash and products to non-profit partners. The $415
million contribution is for philanthropic activities alone, accounting for 0.02% of the
$20.89 Billion revenue in 2011. It is 19.48% of the $2.13 Billion Net Income garnered on
that year.

The said figures does not account for the expenses Nike had attributed for their
Corporate Responsibility Board, Research, Audit and other CSR expenses. Herein, we
can infer that the company is taking drastic measures in enhancing and promoting
Corporate Social Responsibility and Good Governance.

43

The following summary on Nikes financial performance, expressed in charts, more

prominently shows the companys progression over the last five years in terms of
profitability.

Since we have also inferred from the preceding discussions that Nike had allotted a
valuable sum for its CSR endeavors, it is presumed that Nikes efforts to improve their
Corporate Social Responsibility and Good Governance programs had also brought a
remarkable positive impact to the companys finances for the benefit of their investors or
shareholders.

44

Evaluation
We believe that the various challenges faced by Nike concerning social responsibility
had valuably contributed to the success of the company and led them to become an
industry leader, not just in terms of profitability but also in areas of corporate social
responsibility and good governance.

Putting ourselves in the perspective of the Nike team, managing hundreds of factories in
different countries is quite difficult, considering that different regulations and customs
are followed in each nation. The fact that subcontractors were even hired by their
contractors made governance even more difficult. Despite these challenges, Nike has
developed an efficient governance and CSR platform and emerged victorious.

Problems are always a part of running a business, and how a company deals with
challenges determines it track. It was evident that Nike gradually but strategically
imposed effective solutions to overcome the massive criticisms.

From the CSR and Governance programs of Nike, including their detailed Code of
Ethics, Corporate Responsibility Board, Audit tools, CR programs, and Philantrophic
activities, it is apparent that the company endeavors to take care of stockholders and
stakeholders alike. The actions they took to enhance the welfare of their employees,
suppliers, customers, investors and society are highly commendable.

The company has strived to satisfy not only what is required by law, but also the
expectations of what is necessary as a leader. Nike officials said they were moving
away from using Corporate Responsibility as a crisis management tool and instead,
they used it as an opportunity for innovation and growth.

With a continued focus on Corporate Responsibility, Nike built and improved its
relationships with consumers, achieved a high-quality supply chain and were able to
create top-quality innovative products. Although their evolution was a rocky one filled

45

with lessons learned along the way, the benefits are seen for their employees all around
the world and for the company itself.

While Nike has come a long way since the 1990s, its Ethics and Compliance system still
has rooms for improvement. For example, Nike employs only one compliance staff
member for every ten factories. Nike tries to perform two inspections per year per
factory, but in reality, it inspects only about 25 percent of factories per year. Nike also
contracts third parties to inspect roughly 5 percent of its factories per year. [Ferrell,
2010] Herein, they may employ more associates as part of their Audit team to ensure
that inspection standards are met. Otherwise, they may also improve on their inspection
procedures such that it will be more efficient. In an article, Nike itself admitted that they
can still improve on the area of corporate responsibility, including continuously
improving its monitoring systems.

As Corporate Social Responsibility and Good Governance should be a sustainable

process, Nike must continue to develop its CSR strategies and increase enforcement of
its policies in its factories to ensure its market share dominance in the footwear industry.

Due to its genuine efforts, Nike is rewarded for its advancements and contributions to all
its stakeholders and the society in general. With Nike, customers are buying into an
ideal, not just the product.

46

Summary and Conclusion

Despite the challenges that Nike faced throughout the decades, the company has come
far. Nikes Corporate Social Responsibility (CSR) practices have remarkably evolved
since 1991.
At first, Nikes approach to CSR could be characterized as insufficient and generally
lacking in terms of regulation and implementation throughout its global supply chain.
Manufacturers in foreign locations were simply trying to comply with the minimal
contract requirements, while at times overlooking fair labor practices in order to perform
as low-cost suppliers. The environmental impacts of their manufacturing practices were
also subjected to criticisms. They, however, took corrective measures to bring their
practices into compliance with ethical values and societys expectations.
As we have previously mentioned, Nikes initial response to criticisms was reputation
management rather than wide-scale changes in practices. Though, as more and more
issues surfaced, it was apparent that Nike has increased its efforts to be more ethical in
its manufacturing practices and has become an industry leader in many areas.
Ferrel and Thorne in their book Social Responsibility and Business described that
Corporate Responsibility can evolve through five stages:
1. Defensive, when the companys mentality is to prove Its not our fault.
2. Compliance, when the mindset is Well do only what we have to do.
3. Managerial, when the company starts taking marginal steps and their rational is
Its for the business.
4. Strategic, when they take into consideration that CSR gives us a competitive
edge.
5. Civil, when their objective progress to We need to make sure everybody does it,
and they become an epitome and leader.

47

Taking into consideration all that Nike faced and all the actions they took, our group
believes that Nike has evolved from the defensive stage, through the compliance stage,
to the managerial stage. Later on, they also fully grew into the fourth and fifth CSR
stages.

It is apparent that Nike has endeavored to remain true to its CSR obligations and CSR
policy. Nike has in overall maintained its working environment to high standards to the
extent that it would be listed being among the companies employees would prefer to
work for. They have also made immense contributions to various community initiatives
and have creatively innovated ways of fostering community development through
sports. Another key achievement of Nike is the success with which they have reinvented
their products to suit the societal expectations in regard to minimization of
environmental hazards.
As a result of its positive changes, Nike appeared in Business Ethics magazines 100
Best Corporate Citizens list for 2005-2007. The said magazine mentioned that Nikes
commitment to community and environment garnered them the award. Nike was ranked
number one in the magazines environmental category due to its efforts to eliminate
waste and toxic substances from production processes. Nike was also listed among
Fortune magazines 100 Best Companies to Work for list in 2006 and 2008. Fortunes
2009 list of The Worlds Most Admired Companies ranked Nike as the number one
most admired Apparel Company, and ranked it 23 rd among the companies from all
industries. Nike was also listed number 26 in CRO (Corporate Responsibility Officer)
Magazines best corporate citizens in 2009. Herein, their efforts were clearly rewarded
my numerous rewards.

With its emphasis on Corporate Responsibility as an innovative tool, we believe that

Nikes CSR initiatives had made them an industry leader. Their commendable
Corporate Social Responsibility efforts and Good Governance had been a competitive
edge.

48

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49