NIKE is set to hold its annual meeting today (10 September) and the investor community is very much in consensus that the Q&A section will focus on why the Converse-owner has been shirking responsibility over worker rights in its supply chain.
Nike shareholder Domini Impact Equity Fund, along with five other co-filers and supported by Norway’s wealth fund—Nike’s ninth-largest investor—has proposed a resolution for today’s vote. The proposal urges Nike to consider whether a worker-driven model and binding worker rights agreement would improve its ability to address human rights issues when sourcing from high-risk countries.
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Domini’s director of engagement Mary Beth Gallagher, told Just Style: “Our proposal focuses on worker-driven models and binding worker rights agreements because we know that when workers design a system, has independent monitoring and has accountability, it is then equipped to deliver meaningful outcomes and human rights protections.
“Nike’s existing voluntary approaches failed to protect workers, for example as shown with cases of wage theft in Cambodia and Vietnam. We encourage all investors to vote in favour of this proposal to demonstrate support for evaluation of the benefits of binding protections, with workers at the centre to protect human rights.”
While Nike did not return request for comment when approached by Just Style, its 2024 Notice of Annual General Meeting demonstrates its Board of Directors recommended a vote against the proposal, arguing the company:
- has a fundamental respect for human rights throughout our operations, and expects its suppliers to share in its commitment to respecting the rights of workers and advancing their welfare;
- has established robust controls to identify, assess, and remediate human rights and labor issues throughout its operations and supply chain; and
- the Proposal is unnecessary because the company already shares how it identifies, assesses and manages human rights and labour risks and impacts throughout its supply chain.
“The company has established robust processes and practices to help identify, assess, and remediate human rights and labour issues throughout its operations and supply chain,” the board of directors added.
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By GlobalDataNike further rejected a call for consideration of a supply chain management report which assessed the effectiveness of its existing supply chain management infrastructure in ensuring alignment with Nike’s equity goals and human rights commitments.
Nike recommended its shareholders vote against the proposal, noting its policies and “current disclosure effectively articulate our long-standing commitment to human rights and sustainable sourcing, rendering the proposal unnecessary.”
This is not Nike’s first rodeo
Domini joined an earlier investor call, along with around 60 other shareholders, urging Nike to pay $2.2m in allegedly unpaid wages to more than 4,000 garment workers at two suppliers in Cambodia and Thailand following Covid-19 factory shutdowns, allegations which Nike has denied, according to Reuters.
Investors say they are concerned by Nike’s “total silence” when it comes to supply chain ESG calls.
Worker rights campaign group Clean Clothes Campaign has issued a warning of the long-term effect on Nike’s reputation of its lack of engagement with shareholders over supply chain concerns.
“Ahead of Nike annual meeting, CEO John Donahoe is faced with major investors defying his recommendation to ignore worker rights concerns. Instead, ever more investors are coming out in force to demand that the sportswear giant fixes its failure to accurately monitor human rights violations in its supply chain, ” Clean Clothes Campaign said.
“These investors are joining the chorus of rights organisations, unions, consumers, and students who have urged Nike to end its cruel and unnecessary four-year stand off with thousands of vulnerable unpaid workers. Investors claim that these millions in wages still legally owed to workers in Nike’ supply chain pose a sizable risk.
“The amount owed to workers pales in comparison with the $51.4bn in annual revenue that Nike reported at the end of the last fiscal year. Alongside Proposal 6, that is calling on Nike to respect workers’ rights, are proposals on executive compensation including the approval of CEO John Donahoe’s personal paycheck of millions.”
Clean Clothes Campaign notes voices in support of Nike’s workers include students studying at universities that currently hold licensing agreements.
Is Nike simply trying to keep management on track with targets?
GlobalData analyst Neil Saunders believes Nike may be concerned that if it engages with shareholder demands about addressing ESG problems in its supply chain, it may “open a Pandora’s box of demands and problems”.
“However, ignoring the issue will not make it go away completely; it may even intensify calls for Nike to take action.
“It is possible that Nike is formulating its own response or plans but doesn’t want to be pushed into acting immediately. Ultimately, a lot will come down to whether the resolution is accepted or not.”
He wonders whether Nike is simply prioritising a return to sustainable sales growth.
Earlier it sounded a cautious outlook for FY25, a move which saw shares fall 12%.
Revenues for Nike, Inc. were $51.4bn compared to $51.2bn in the prior year, up 1% on a currency-neutral basis.
Weakness in North America offset currency neutral growth in Greater China and APLA in the Nike brand.
Nike Direct revenues increased 1% on a reported and currency-neutral basis to $21.5bn with growth in Nike-owned stores partially offset by a decline in Nike Brand Digital by 3%.
Wholesale revenues grew 1% reported and 2% in constant currencies.
Converse revenues fell 14% on a reported basis and 15% in constant currencies to $2.1bn.
“The truth is that Nike is in the middle of trying to navigate a slowdown in demand and a lack of focus in the business, they likely don’t want to labour on anything that will increase costs or distract management attention at this time,” Saunders asserts.
“Supply chains are complex and often disintermediated, therefore Nike would prefer to take a hands-off approach rather than being dragged into the intricacies of managing them.”
Balancing consumer demand with investor pleasure
Saunders says much of Nike, and other brands’ problems, is the need to please multiple types of investors.
While many traditional ones are interested in sales and profits and the returns they generate, they don’t necessarily focus on ESG wins, though they will have an expectation the company is compliant with laws and regulation.
“However, there are other investors who have stances on ESG and other issues and make those things a mission. It is not great to be called out on supply chain issues, but ultimately it only really becomes a problem if it starts to impact performance or the share price.”
Though the issue is making headlines globally, Saunders doesn’t expect Nike to fall out of favour with consumers.
“Consumers don’t take a huge amount of notice about investor battles when it comes to their own purchasing decisions. They are more concerned with things like design, innovation and pricing and these are all areas Nike is focusing. However, with wider stakeholders, Nike needs to take back the narrative and be very clear about its own plans for ESG within supply chains.”
