Nike Inc developing an effective public relations strategy

¶ … Nike failed to attain a level of shared ownership regarding Corporate Social Responsibility initiatives and programs with human rights critics and activists by immediately absolving themselves of responsibility for all activities of their suppliers. The stance of Nike not being liable for the actions of suppliers was seen as an evasion of responsibility and only embattled the critics and activists even more.

In the timeframe of this case study Corporate Social Responsibility (CSR) initiatives were in place and already being engrained throughout many of processes of other industries, high tech and retailing being two of note. Nike appeared to be seriously behind on this aspect of their corporate strategy with no apparent level of urgency to close the gap.

After years of prodding and investigations which began to include the members of the U.S. Congress who were driven to action by their constituents, Nike began to define supplier audit procedures and guidelines. It also created a supplier Code of Conduct yet only let one supplier go over violations in the entire span of the program.

The continued audits, Tuck Business School study, and trip sponsored for Dr. Andrew Young all were seen as additional PR damage control when they came back passing or even positive. Nike had lost a significant amount of credibility in their initial approach of managing the crisis and all attempts to close that gap, no matter how apparently sincere and costly, worked.

Nike failed to internalize the values of Corporate Social Responsibility early on and treated the entire problem more as a production-level vs. personal one. The lack of internalization of the core values of treating other human beings well and ensuring fair payment for services had initially been dismissed by the company, and as a result they were seen as exceptionally out of touch. As a result, the activists continued their criticisms and protests, eventually forcing the U.S. government via Congress to consider action.

Two Questions:

1. What could have Nike done differently with regard to defining specific CSR guidelines for their supply chain to avert this to begin with? What other models of CSR programs could they have emulated?

During the time period of the case study, Nike was lagging the progress of other industries with supply chains that were comparable to theirs in terms of Corporate Social Responsibility (CSR) initiatives and governance. Nike needed to be more aware of what was happening in terms of CSR initiatives in supply chains that relied on 3rd world nations and the substantial imbalance of earnings compared to western nations. The lack of awareness of these wide disparities was a result of their senior management being too myopic and focused only on the material-based areas of their supply chain. The human resources function within Nike needed to be more focused on the compliance and governance aspects of their global supply chain, regardless of the companies not being actually owned subsidiaries. Given the market dominance of the brand, with controlling the majority of the U.S. market alone at one point, it would have been feasible from a financial standpoint to seek out fair trade practices. From a branding standpoint this would have been a very significant win and one that would have immediately resonated with the company's customer base. Yet all of these benefits failed to be achieved as the company focused purely on just the financial and material aspects of the supply chain.

Hewlett-Packard's example of managing CSR programs during this timeframe, while not specifically mentioned in the case, is exceptional. The focus on how to create sustainability and green initiatives is also exceptional. Nike, in a completely different industry yet needing to concentrate on the topic of governance, needed to concentrate on how to learn from other corporations with reliance on 3rd world nations' supply chains to see how they could handle a potentially damaging situation. As it turns out, Nike was oblivious to these developments.

2. Should Nike have a Chief Governance Officer as a result of this years-long battle over compliance to social initiatives?

Clearly given the prolonged timeframe of the plans and programs within Nike to address this, the company clearly needs to have a C-level executive that can quickly respond to these issues and create awareness and strategies at the senior management level as well. The need for creating a Chief Governance Officer that reports directly to the CEO is also critical to bring to the attention of the senior staff any potential CSR non-compliance issues or concerns. The Chief Governance Officer would also define and execute all areas of the Corporate Social Responsibility (CSR) framework and be accountable for its results.

What can Nike's Corporate Responsibility team do to improve Nike's image?

Despite the creation of the Code of Conduct, the development and execution of the MESH (Manufacturing -- Environment -- Safety -- Health) Program in addition to the development of the Manufacturing Leadership Standards the harsh criticism continues in the context of this case study. This is a result of Nike initially dismissing the claims of any ethical or moral imperatives being compromised. What Nike needs to do is admit that it was ethically and morally wrong to allow these abuses to continue on, even though these manufacturers, key partners in their supply chain, are not owned and operated by them. The Code of Conduct did little to embed the ethical and moral values that many critics contended were essential for Nike to overcome these serious allegations of workers abuse (Lim, Phillips, 144). For Nike's Corporate Responsibility team then the issue is one of winning back the trust they have lost not only with their critics but also with the buying public as well. As public sentiment swayed more to the worker's rights than the distancing of Nike from the suppliers, Nike's Corporate Responsibility teams realized that paying the role of a corporate citizen not responsible for their supply chains was only going to make matters worse over time (DeTienne, Lewis, 359). Instead of incrementally creating programs that sought to bridge the gap in both critics and the publics' trust that Nike was indeed concerned about unethical and immoral practices in their supply chain, Nike should have immediately moved to ban any supplier caught in a violation. Nike however took years to get to this point, further fueling the need for even more expensive audits and independent monitoring and inviting more investigations over time. The invitation to Andrew Young appears patronizing and seems like yet another stop-gap measure. In the end the Corporate Responsibility team fails to get on top of this crisis through actions that support their contention they are justified by taking an arms-length approach to solving it.

Why have Nike's attempts to date to address its critics been unsuccessful?

Nike creates a governance framework and adequately defines it yet does not bring it to fruition through continued execution (Nadvi, 324, 325). This governance framework is also devoid of any accountability to Nike itself, as it continues to push the responsibility of compliance down on suppliers. The company still has not shown that they are capable of taking ownership of the program at the senior management level. Third, the company's initial reaction was one of saying their suppliers, not themselves, needed to be reprimanded. It is important to keep in mind that during this same time period Hewlett-Packard had defined a Code of Conduct and rigorously enforced it for human rights, green or sustainability compliance and support for their Planet Partners Program which by 2007 had recycled nearly 30 million cartridges (Chaudhri, 2006). Critics of Nike are seeing the depth of commitment that HP and others have to Corporate Social Responsibility (CSR) initiatives, and judging the company harshly as a result. HP has gone as so far at this point to define metrics of performance for evaluating the depth and extent of their performance to CSR initiatives as well, and publishing them in sustainability and CSR reports anyone can download from their website in Adobe Acrobat format. Nike is absolving themselves of any responsibility for their supply chain in an era where companies of their comparable size are embracing costly yet strategically important initiatives to ensure a very high level of compliance to sustainability and CSR initiatives. By not taking action comparable to other companies in this time period the company is inviting criticism and further auditing efforts (DeTienne, Lewis, 359).

What damage, if any, has been done to Nike? Has Nike reacted appropriately? Has it overreacted? Underrreacted?

Nike has isolated itself from a specific segment of customers who are concerned about workers' rights globally and those that see manufacturers having ethical and moral responsibilities for their supply chains. The fact that Nike continued to keep this crisis at arms-length then created governance and compliance frameworks to organize their response did little. What was needed was more of an internalizing of the ethical and moral values to ensure this would be attacked with the same urgency as an issue impacting their profits (Lim, Phillips, 151, 152). Instead, it was treated as an issue that could be resolved through systematic rather than complete immersion in. Nike consistently underreacted to these concerns and as a result created an even larger public relations challenge for themselves by not internalizing it equivalent to a threat to profitability. As with any crisis that gets ignored, the critics only get louder the more they perceive their voices not being heard. For Nike, this continued on for years until they began to aggressively attack the problem as if it were one impacting profits, including the development of auditing and independent monitoring programs, and an open-door policy to Congressional critics who had the power to initial investigations and define if any U.S. laws were being broken or not.

Many of Nike's competitors subcontract production to Asian factories similar to those used by Nike. What was Nike singled out by human rights and labor activists?