Nike shareholders shot down on Tuesday a proposal that would have required the sportswear juggernaut to publish a report evaluating the impact that worker-led interventions and legally binding agreements would have on its ability to flag and remediate human rights issues when sourcing products from high-risk countries.
The petition, which garnered the support of Norway’s wealth fund last week, was submitted by Domini Impact Investments, a women-led investments advisor that is one of 70 investors that have been urging Nike to pay thousands of its Southeast Asian supply-chain workers the millions of dollars in back wages and benefits they’ve been fighting to claim since 2020.
Domini said that the audit-reliant approach to due diligence that Nike favors often fails to identify and remedy “persistent” rights abuses such as wage theft, gender-based violence and deficiencies in health and safety, particularly in geographies where national regulation and enforcement of labor and whistleblower laws fall short. Any lapses, it said, could expose the Air Jordan maker to “increased risks of operational disruptions, legal liability and reputational harm.”
The proposal used as an example the $2.2 million that campaigners say 4,000 workers from Violet Apparel in Cambodia and Hong Seng Knitting in Thailand are still owed, in the former because a pandemic-induced reduction in orders drove the factory to close up shop, and in the latter because management allegedly failed to provide employees with the partial compensation they were supposed to receive during the Covid-19 lockdown. This happened “in spite of its existing programs,” the shareholders’ request said of Nike.
Worker-driven social responsibility programs and legally enforceable pacts such as the Dindigul Agreement, the Lesotho Agreement and the International Accord on Health and Safety in the Textile and Garment Industry are increasingly being positioned as an alternative to the decades of voluntary, top-down corporate initiatives that many in the ethical labor space say haven’t worked to improve conditions, at least to the same transformative degree. Among brands such as H&M Group, Tommy Hilfiger and Calvin Klein parent PVH Corp. and Zara owner Inditex, Nike has been an outlier in supporting such efforts despite its progressive image.
“Many of Nike’s peers have taken steps to improve conditions for workers and remediate rights violations by employing WSR approaches or binding agreements,” the proposal said. “In contrast, Nike has not demonstrated the same level of due diligence in countries where binding agreements and WSR approaches to remedy are available and have proven to be essential in protecting vulnerable workers.”
In an opposition statement published in its annual general meeting notice, Nike recommended that shareholders vote against the proposal, calling it unnecessary.
“The company has established robust processes and practices to help identify, assess, and remediate human rights and labor issues throughout its operations and supply chain,” it said. “The company expects each of its suppliers to share in its commitment to respecting the rights of workers and advancing their welfare, with particular care for people with unique vulnerabilities such as women, migrants and temporary workers. To that end, the company requires each of its suppliers to comply with the minimum standards set forth in the company’s supplier code of conduct and code leadership standards when producing company products.”
The Adidas rival said that it regularly monitors its supply chain for compliance with these standards, which include “strict” requirements regarding forced and child labor, excessive overtime, compensation and freedom of association.
But Mary Beth Gallagher, Domini’s director of engagement, said she was disappointed in the results—and the fact that Nike didn’t address worker rights concerns or the merits of the proposal in its remarks or during the Q&A session.
“We filed this proposal because we recognize the impact and effectiveness of worker-driven social responsibility models and binding agreements to deliver meaningful outcomes for workers’ protections, from gender-based violence and harassment to building and fire safety and wages,” she said. “This proposal presented an opportunity to educate Nike and its shareholders about the WSR model, and will likely prompt more investor scrutiny, regardless of the final vote.”
Domini also wants to see the Just Do It firm sign the International Accord’s Pakistan program. (It no longer produces in Bangladesh, according to a public supplier list.) If Nike continues to avoid doing so, it should explain to its shareholders why it continues to favor voluntary models that “fail to deliver concrete outcomes for workers,” Gallagher said.
Resolutions need to receive 50 percent of the vote before they pass, but even then they’re not legally binding. Still, a company might be pressured to take action if a petition is backed by a majority of shareholders.
“Though we did not receive a majority vote, which is relatively rare for shareholder proposals, we are still pleased we were able to raise awareness of the issue of worker-driven social responsibility principles with investors,” said Lisa Hayles, director of international shareholder advocacy at Trillium Asset Management, which co-filed the bid. “We believe both investor expectations and increasing regulatory oversight will demand that Nike and other brand focus on the outcomes for workers of any initiatives they adopt, voluntary or not.”
Christie Miedema, campaign and outreach coordinator at the Clean Clothes Campaign, the garment industry’s largest consortium of trade unions and labor rights organizations, wonders how long Nike can ignore the increasing calls to pay the Southeast Asian workers. Last July, nearly 60 labor rights organizations, including the Asia Floor Wage Alliance, the Clean Clothes Campaign and Human Rights Watch, published a joint statement asking Nike to put the matter to rest. A petition organized by Ekō seeking the same has hit 140,000 signatures.
While Nike has previously said that it had stopped sourcing from Violet Apparel in 2006 and that it found no evidence that Hong Seng Knitting workers are owed back pay, organizations such as the Worker Rights Consortium have disputed this.
“Independent investigations and workers’ own proof and testimony have again and again that these workers have been wronged and Nike carries responsibility,” Miedema said. “Yet Nike continues to deny wrongdoing or even involvement, with as the only industry-led initiatives and Nike’s own paid consultants that back up its side of the story with bogus investigations that disregard the voices of workers.”
