Investor pressure on Nike builds over garment workers' rights

Company rated a 'laggard' on supply chain labour standards by investment research firm

Nike is struggling with sliding sales and also faces criticisms over its supply chain. Picture: David Paul Morris/Bloomberg

Investor pressure on Nike is building ahead of Tuesday's annual shareholder meeting, with Norway's sovereign wealth fund pledging to back a resolution demanding the company consider ways it can improve working conditions at garment factories.

Nike is struggling with sliding sales and also faces criticisms over its supply chain. Investment research firm MSCI downgraded its ESG (environmental, social and governance) rating for Nike in 2022 and 2023, and rates it as a "laggard" on supply chain labour standards.

The resolution proposed by a group of investors, including Domini Impact Equity Fund, says current approaches in the industry "often fail to identify and remedy persistent rights abuses such as wage theft, inadequate health and safety or gender-based violence".

Domini was among more than 60 investors last year to sign a joint letter to Nike urging it to pay $2.2m (€1.9m) in wages to workers at suppliers in Cambodia and Thailand who rights groups said were denied severance pay owed to them after factory shutdowns during the pandemic. Reuters could not independently verify the allegations, and Nike has denied them.

In a statement, Nike said its corporate governance team had been in touch with all the co-filers of the resolution.

"We greatly value the opportunity to engage with and solicit feedback from our shareholders, and we believe that maintaining an open dialogue strengthens our approach to corporate governance practices and disclosures," it said.

The resolution reflects a push from some investors for Nike to create binding agreements with workers at factories and suppliers in countries where worker exploitation is a problem.

It asks Nike to consider whether binding agreements with workers would improve its ability to address human rights issues when sourcing from high-risk countries.

Nike sources from five factories in Pakistan, according to its own supply chain disclosures, yet it is not a signatory to the Pakistan Accord, a binding health and safety agreement between workers' unions and brands that peers including Adidas and Puma have signed.

Several investors told Reuters Nike's lack of response to the 2023 letter, and to requests for meetings, were concerning.

"The total silence is the thing that worries me," said Frank Wagemans, senior engagement specialist at Achmea Investment Management in the Netherlands.

Reuters