Apparently even the Swoosh feels a sense of moral obligation. On May 31, Nike (NKE – 53.42) announced a corporate responsibility program designed to overcome its image as a $15 billion corporate empire focused more on its bottom line than its employees, the community, and the world around it. The Beaverton, Oregon athletic apparel maker intends to implement several initiatives by 2011, including reducing environmental waste, improving work conditions for its employees, and contributing $315 million to community-based youth sports programs.
Of course, the most publicized sin committed by Nike comes from the miniscule wages paid to its employees. For example, an average sweatshop worker in Vietnam makes $47 per month, which barely covers 1/3 of the price tag for a pair of Air Force Ones. I remember my junior year in college when students camped out for a couple weeks at the President's office to protest the lack of a living wage for University employees and I can tell you firsthand that large institutions catch some serious flak when the public perceives that lower-end employees don't get a fair shake.
So what does all this mean for Nike? Right now, not much. Activists will appreciate the fact that Nike has listened and at least addressed its issues. But for a company with net earnings of $350.8 million last quarter, the continuing hit to its corporate image from undercompensated sweatshop labor won't pose enough of an immediate threat to make Nike do an immediate 180. However, with inexpensive upstarts like the $14.98 Starbury 1 threatening to open urban youths' eyes to the high price they pay for their Nikes, the Swoosh should understand that it needs to protect its brand name now more than ever. Solving the sweatshop problem would go a long way toward repairing the chinks in the armor that could widen over time. So while issuing a promise through a press release sounds nice, Nike needs to follow its own advice and "Just Do It."
Disclosure: I do own a mutual fund that may contain one or more of the stocks mentioned in this post. However, any interest that I may own is subject to the discretion of my mutual fund manager.