Investor Pressure on Nike Ahead of Annual Shareholder Meeting

By Helen Reid, Nicholas P. Brown and Simon Jessop
LONDON/NEW YORK (Reuters) – Investor pressure on Nike (NYSE:NKE) is escalating as Tuesday’s annual shareholder meeting approaches. Norway’s sovereign wealth fund is backing a resolution urging the company to improve working conditions in its garment factories.

Sales Decline and Criticism

Nike is facing declining sales and criticism over its supply chain practices. Investment research firm MSCI downgraded Nike’s ESG (environmental, social and governance) rating for 2022 and 2023, categorizing it as a “laggard” regarding supply chain labor standards.

Proposed Resolution

The resolution, supported by investors like Domini Impact Equity Fund, states that current industry practices often “fail to identify and remedy persistent rights abuses such as wage theft, inadequate health and safety, or gender-based violence.”

Last year, Domini and over 60 investors urged Nike to pay $2.2 million in wages to workers in Cambodia and Thailand, who reportedly were not compensated after factory shutdowns due to COVID-19. Nike has denied these allegations.

Engagement and Governance

Nike stated that its corporate governance team has communicated with resolution co-filers. “We value the opportunity to engage and solicit feedback from our shareholders, believing this strengthens our corporate governance practices and disclosures,” the company said.

Calls for Binding Agreements

The resolution encourages Nike to explore binding agreements with workers at factories and suppliers in areas marked by exploitation. This could enhance Nike’s ability to tackle human rights issues in high-risk sourcing countries.

Nike sources from five factories in Pakistan but is not a signatory to the Pakistan Accord, a safety agreement that brands like Adidas and Puma have endorsed.

Investor Concerns

Several investors expressed concern about Nike’s lack of engagement in response to the 2023 letter and meeting requests. Frank Wagemans from Achmea Investment Management noted, “The total silence is what worries me.”

Norway’s fund, Nike’s ninth-largest shareholder, opted to support the resolution against management’s recommendation.

Other Proposals and Recommendations

Nike has urged shareholders to reject another proposal from investor Tulipshare, which seeks to evaluate supply chain management effectiveness. Tulipshare’s proposal gained 11.7% support at last year’s meeting, while Norway’s fund will not back this year’s effort.

Shareholder advisory firms Glass Lewis and ISS have also recommended opposing both resolutions, with Union Investment expressing support for both proposals.

Conclusion

Marie Payne from Cardano emphasized that new regulations, such as the EU’s Corporate Sustainability Due Diligence Directive, heighten the need for companies to improve supply chain practices.

If the proposals receive over 20% of votes, it would highlight these concerns to Nike and signal the materiality of these issues to other shareholders, according to Caroline Boden from Mercy Investments.