Nike Inc.Nike Inc.Social ResponsibilitySocial Responsibility

Rich Eggett, Josh Ford, Rich Eggett, Josh Ford, Andy Taylor, Dennis WrightAndy Taylor, Dennis Wright

Nike ExposedNike Exposed 1995: Critics say that Nike is using 1995: Critics say that Nike is using

sweatshops to produce shoessweatshops to produce shoes 1997: Contract with Ernst & Young to 1997: Contract with Ernst & Young to

conduct an independent audit of Laborconduct an independent audit of Labor Findings leaked by disgruntled Nike Findings leaked by disgruntled Nike

EmployeeEmployee 1997: Plant near Ho Chi Minh City, Vietnam 1997: Plant near Ho Chi Minh City, Vietnam

Carcinogens exceeded by 177 times the legal Carcinogens exceeded by 177 times the legal amountamount

Workers are paid $10.00 for 65 hours of workWorkers are paid $10.00 for 65 hours of work 77% have respiratory problems77% have respiratory problems

Nike’s ResponseNike’s Response

Press ReleasePress Release Labor Labor

CommentsComments Fair Labor Fair Labor

AssociationAssociation

Phil Knight’s 1998 Phil Knight’s 1998 PromisesPromises

All Nike shoe factories will meet the U.S. All Nike shoe factories will meet the U.S. Occupational Safety and Health Occupational Safety and Health Administration’s (OSHA) standards in indoor Administration’s (OSHA) standards in indoor air quality.air quality.

The minimum age for Nike factory workers The minimum age for Nike factory workers will be raised to 18 for footwear factories and will be raised to 18 for footwear factories and 16 for apparel factories.16 for apparel factories.

Nike will include non-government Nike will include non-government organizations in its factory monitoring, with organizations in its factory monitoring, with summaries of that monitoring released to the summaries of that monitoring released to the public.public.

Promises continuedPromises continued

Nike will expand its worker education Nike will expand its worker education program, making free high school equivalency program, making free high school equivalency courses available to all workers in Nike courses available to all workers in Nike footwear factories.footwear factories.

Nike will expand its micro-enterprise loan Nike will expand its micro-enterprise loan program to benefit four thousand families in program to benefit four thousand families in Vietnam, Indonesia, Pakistan, and Thailand.Vietnam, Indonesia, Pakistan, and Thailand.

Funding university research and open forums Funding university research and open forums on responsible business practices, including on responsible business practices, including programs at four universities in the 1998–99 programs at four universities in the 1998–99 academic year.academic year.

Fair Labor OrganizationFair Labor Organization

Entity composed of the following:Entity composed of the following: Corporations: Nike, Reebok, Edie Corporations: Nike, Reebok, Edie

Bauer, etc.Bauer, etc. Human Rights OrganizationsHuman Rights Organizations UniversitiesUniversities

Conducts Audits at FactoriesConducts Audits at Factories Each plant every 10 yearsEach plant every 10 years Mediator when needed (Labor dispute)Mediator when needed (Labor dispute)

Nike Response to WageNike Response to Wage

““They pay Michael Jordan $40 million They pay Michael Jordan $40 million to endorse them. Can't they find to endorse them. Can't they find more money to pay the more money to pay the workers?' The short answer is no. workers?' The short answer is no. corporations pay the going rate for corporations pay the going rate for labor wherever they are. And Nike labor wherever they are. And Nike maintains that the rate is good.”maintains that the rate is good.”

TIME Magazine, March 30, 1998TIME Magazine, March 30, 1998

Our Assessment - LaborOur Assessment - Labor

Nike was caught red-handedNike was caught red-handed Is Nike responsible for suppliers?Is Nike responsible for suppliers?

Are we?Are we? Nike has good ideas about what to doNike has good ideas about what to do The scope of what needs to be done to The scope of what needs to be done to

appease activist Americans is too large appease activist Americans is too large for Nikefor Nike

Nike is doing a good job given their Nike is doing a good job given their resourcesresources

Supplier RelationshipsSupplier Relationships

Governed by Nike Code of ConductGoverned by Nike Code of Conduct ““Nike is committed to providing safe Nike is committed to providing safe

and healthy work environments and to and healthy work environments and to being an environmentally responsible being an environmentally responsible corporate citizen. The Nike standard is corporate citizen. The Nike standard is to comply with all environmental, safety to comply with all environmental, safety and health laws and regulations.”and health laws and regulations.”

Supplier Relationships Supplier Relationships cont…cont…

“…“…suppliers are expected to observe suppliers are expected to observe the same standards of conduct as Nike the same standards of conduct as Nike employees when conducting business employees when conducting business with or for Nike.”with or for Nike.”

““Nike is committed to socially Nike is committed to socially responsible sourcing practices. We are responsible sourcing practices. We are driven to do not only what is required driven to do not only what is required by law, but also what is expected of a by law, but also what is expected of a leader. We expect our business partners leader. We expect our business partners to do the same.”to do the same.”

Supplier Relationships Supplier Relationships cont…cont…

““As a member of the Nike team, when As a member of the Nike team, when presented the opportunity, you have a presented the opportunity, you have a responsibility to promote compliance responsibility to promote compliance with the Nike Code of Conduct and to with the Nike Code of Conduct and to report any instances of non-compliance, report any instances of non-compliance, of which you become aware, to the of which you become aware, to the Corporate Responsibility Compliance Corporate Responsibility Compliance Group.” Group.”

Supplier Relationships -- Supplier Relationships -- Assessment Assessment

Nike has demonstrated its Nike has demonstrated its willingness to drop suppliers and/or willingness to drop suppliers and/or work with suppliers to correct any work with suppliers to correct any violations of the Code. violations of the Code.

Nike’s relationships with its Nike’s relationships with its suppliers are in general consistent suppliers are in general consistent with the principles established in the with the principles established in the Code of Conduct. Code of Conduct.

Current Community Current Community ProgramsPrograms

3% of pretax profits invested3% of pretax profits invested Support Employees (Habitat for Humanity)Support Employees (Habitat for Humanity) Support activities for young people to keep Support activities for young people to keep

them movingthem moving Nike makes a profit while kids exerciseNike makes a profit while kids exercise

Support girls and women Support girls and women 5000 micro loans per year in 35000 micro loans per year in 3rdrd world world

countriescountries Support girl’s athletics in Kenyan refugee Support girl’s athletics in Kenyan refugee

campcamp

Our Assessment - Our Assessment - CommunityCommunity

Nike is committed to CSRNike is committed to CSR Nike’s programs for youth are goodNike’s programs for youth are good Nike’s Microloans are goodNike’s Microloans are good

Why women only?Why women only? Nike’s commitment to girl’s Nike’s commitment to girl’s

education is showeducation is show How does supporting refugee camp How does supporting refugee camp

soccer help? (this is a long stretch)soccer help? (this is a long stretch)

Nike Inc.

Revenue Trends

4,761

6,471

9,1879,553

8,777 8,9959,489

9,893

10,697

12,253

1,8962,564

3,684 3,488 3,2833,591 3,704 3,888

4,383

5,252

674 9391348

713 790 964 980 1065 12461550

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

$ M

illi

on

s

Revenue Gross Profit Operating Income

Nike, Inc. Key Measures and Ratiosin millions 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Net Income 399.7 553.2 795.8 399.6 451.4 579.1 589.7 663.3 474 945.6Gross Margin 39.8% 39.6% 40.1% 36.5% 37.4% 39.9% 39.0% 39.3% 41.0% 42.9%Profit Margin 8.4% 8.5% 8.7% 4.2% 5.1% 6.4% 6.2% 6.7% 4.4% 7.7%Earnings Per Share 1.36$ 1.89$ 2.68$ 1.35$ 1.57$ 2.07$ 2.16$ 2.44$ 1.77$ 3.51$ Revenue Growth 35.9% 42.0% 4.0% -8.1% 2.5% 5.5% 4.3% 8.1% 14.5%Free Cash Flow 100.8 113.6 -142.8 11.6 576.9 340 338.9 798.7 731.5 1300.5Return on Assets 12.7% 14.0% 14.8% 7.4% 8.6% 9.9% 10.1% 10.3% 7.1% 12.0%

Growth of Nike Inc. vs. S&P 500

1

10

100

198

7

198

8

198

9

199

0

199

1

199

2

199

3

199

4

199

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7

199

8

199

9

200

0

200

1

200

2

200

3

200

4

Value of $1 (S&P 500) Value of $1 (Nike)

Nike Inc.

Historical Stock Price

0

10

20

30

40

50

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

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Mil

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Volume Closing Price

ConsumersConsumers

Though market Though market share declined in share declined in 2000, Nike has re-2000, Nike has re-bounding nicely, bounding nicely, regaining 42% regaining 42% market share in market share in 20042004

US Market Share: Sporting FootwearUS Market Share: Sporting Footwear

Manufacturer  Manufacturer       20002000 19991999

1.  Nike1.  Nike 39.20%39.20% 48.90%48.90%

2.  Adidas2.  Adidas 15.10%15.10% 16.90%16.90%

3.  Reebok3.  Reebok 10.90%10.90% 10.90%10.90%

4.  New Balance     4.  New Balance      9.40%9.40% 3.70%3.70%

5.  K-Swiss5.  K-Swiss 3.60%3.60% 3.10%3.10%

6.  Timberland6.  Timberland 2.90%2.90% 2.10%2.10%

7.  Asics7.  Asics 2.10%2.10% 1.50%1.50%

8.  Saucony8.  Saucony 1.40%1.40% 1.40%1.40%

9.  Skechers9.  Skechers 1.40%1.40%   0.9%0.9%

10.  And 110.  And 1 1.20%1.20% 0.90%0.90%

- Adapted from WSJ Oct 2000- Adapted from WSJ Oct 2000

Nike: Mission StatementNike: Mission Statement

““To bring inspiration and innovation To bring inspiration and innovation to every athlete in the world.”to every athlete in the world.”

If you have a body, then you are an If you have a body, then you are an athleteathlete

Mission statement, Bill BowermanMission statement, Bill Bowerman

Growing Market ShareGrowing Market Share

Keys to Nike Success: Innovation and Keys to Nike Success: Innovation and product differentiation.product differentiation. Nike made a conscious decision to not only Nike made a conscious decision to not only

make the shoe, but also all items required to make the shoe, but also all items required to play.play.

The Ball, (Nike One Black Golf Ball)The Ball, (Nike One Black Golf Ball) The Stick, Clubs and Bats The Stick, Clubs and Bats Gloves, baseball, golf, hockeyGloves, baseball, golf, hockey Bags and Water BottleBags and Water Bottle Hats, Helmets, FaceguardsHats, Helmets, Faceguards Wristwatches and mile-counters, and heart monitorsWristwatches and mile-counters, and heart monitors Shirts, Shorts, Socks, and JacketsShirts, Shorts, Socks, and Jackets

Environment: Eco-Environment: Eco-FriendlyFriendly

Nike aimsNike aims Reduce emissions from Reduce emissions from

manufacturing (GHG)manufacturing (GHG) Reduce emissions as Reduce emissions as

part of product part of product distribution and distribution and deliverydelivery

Displace materials with Displace materials with organic cotton in Nike organic cotton in Nike shoes and apparelshoes and apparel

Independent Audit of Independent Audit of Business PracticesBusiness Practices

Partnering GroupPartnering Group World Wildlife World Wildlife

Federation (WWF)Federation (WWF) Business for Social Business for Social

Responsibility (BSR), Responsibility (BSR), with 12 additional with 12 additional companiescompanies

Organic Trade Organic Trade Association (OTA) Association (OTA) and Sustainable and Sustainable Cotton Project (SCP)Cotton Project (SCP)

Fair Labor Fair Labor Association (FLA)Association (FLA)