As Nike prepares to publish its 2024 proxy statement ahead of the Paris Olympics on Thursday, a group of 70 investors with a collective $4 trillion in assets under management wants the sportswear Goliath to pay Southeast Asian supply-chain workers the millions of dollars in back wages they’ve been owed since 2020.
They’ve also filed a shareholders’ request—to be voted upon at this fall’s annual general meeting—asking that Nike publish a report evaluating how supporting worker-driven social responsibility principles and implementing binding agreements like the International Accord for Health and Safety in the Textile and Garment Industry would affect the way it identifies and remediates human rights issues in high-risk sourcing destinations.
It’s nothing that investors haven’t asked before. Last fall, ABN AMRO Bank, the Netherlands’ third largest bank, and CCLA Investment Management, Britain’s largest manager of charitable assets, led a dozen Nike stakeholders in voicing their “growing concerns” over “non-payment issues” at Violet Apparel in Cambodia and Hong Seng Knitting in Thailand. Domini Impact Investments, a women-led investments advisor, filed proposals in the past urging Nike to suspend manufacturing in China until the U.S. government lifts or rescinds its advisory about the heightened risks for businesses with supply chain and investment links to Xinjiang. And Tulipshare, a London-based “activist investment” platform has asked the Swoosh to supply the metrics it uses to track and measure performance on forced labor and wage theft risks.
The stakeholders’ request, which follows recent demands by U.S. labor campaigners and garment-sector unions that the “Just Do It” firm meet workers’ demands for fairer pay, dovetails with investors’ desire to obtain justice for Violet Apparel and Hong Seng Knitting’s workers, said Mary Beth Gallagher, Domini’s director of engagement.
“Our proposal focuses on worker-driven models because we know that when a system is designed by workers and has binding commitments to ensure protections, it is then equipped to deliver meaningful outcomes and human rights protections,” Gallagher said. “We believe this best practice is the next step for Nike’s human rights program, and urge them to evaluate the benefits now.”
Nearly 4,000 workers have been seeking remedy for the past four years, a re-release of ABN AMRO Bank and CCLA Investment Management’s Sept. 7 letter to Nike CEO John Donahoe, now with five times the number of original signatories, explained this week.
An investigation by the Worker Rights Consortium (WRC), a Washington, D.C.-based labor organization, found that Violet Apparel failed to pay 1,280 workers $1.4 million in legally owed severance after a pandemic-induced slump in orders drove it to shut its doors in June 2000. A similar probe revealed that Hong Seng Knitting owed some 3,300 workers more than $800,000 in legally owed partial wages when lockdown measures forced it to suspend production between May and October 2000.
“As investors, we are raising this issue with you in line with the expectations for investors provided by the United Nations Guiding Principles for Business and Human Rights and the OECD Guidelines for Multinational Enterprises because we understand that remedy has not yet been adequately provided,” wrote Kees Gootjes, business and human rights advisor at ABN AMRO Bank and Martin Buttle, Better Work lead at CCLA Investment Management, on behalf of the other investors.
Whether Nike is responsible for what happened is a matter of dispute. While the Air Jordan maker did not respond to a request for comment, it has claimed to have stopped sourcing products from Violet Apparel in 2006, though the WRC offered evidence suggesting otherwise. Nike also said that an independent third-party investigation and legal review found that all workers at Hong Seng Knitting were compensated per local law and Nike’s code of conduct and that “there is no evidence that workers are owed back pay or compensation.” This, too, has been cast into doubt by the WRC and others.
“Unlike most other brands in the apparel industry that ensure workers are paid what they are owed, like PVH and Victoria’s Secret, Nike is now an outlier in the industry in what appears to be a throwback to their past as the worst performer on rights for their supply chain workers,” said Thulsi Narayanasamy, director of international advocacy at the WRC. “With unprecedented spending at the Paris Olympics on an image of support for women of color, workers themselves are continuing to call on the Nike board of directors to take action.”
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 of support” for former Violet Apparel workers. A petition organized by Ekō, formerly known as SumofUs, to push Nike to compensate the Cambodian and Thai workers has amassed nearly 126,000 signatures.
Lisa Hayles, director of international shareholder advocacy at Trillium Asset Management, which engages in socially responsible investing, said that Nike’s business model, which relies on the ability to outsource to predominantly Asian factories, assumes that the legal and regulatory conditions, alongside its codes of conduct and social auditing practices, will protect workers’ rights. And yet allegations of labor violations keep “popping up” with little to no response, she said.
“There appears to be a pattern of ignoring investor concerns on the issue of substantial and well-documented labor violations,” Hayles said of Trillium and Domini’s repeated requests to meet with Nike that went unanswered.
Questions are also mounting over the effectiveness of Nike’s voluntary approach, said ??Buttle, who co-authored the investors’ letter. He said that although Nike has a long track record of working to protect the lowest rung of its supply chain since the 1990s, increasing legislation requiring mandatory human rights due diligence and reporting has shifted expectations.
“As investors in Nike, we are concerned that the company’s existing practices are no longer adequate to play a full role in identifying and tackling human rights abuses in its supply chains,” he said. “That is why we are coming together with other concerned investors to engage Nike and try to drive progress on these vital issues.”
