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Over Swooshed: Nike on the Ropes

The giant Oregon-based athletic wear and gear company Nike, one of the big growth, mega-corporations of the '90s many Americans have grown to hate, is encountering some hard times. From global job cuts and plummeting stock, combined with a growing avalanche of negative publicity provoked by the company's policies and practices, the retail empire is facing tough backlash.
 
 
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The giant Oregon-based athletic wear and gear company Nike, one of the big growth, mega-corporations of the '90s many Americans have grown to hate, is encountering some hard times. Soon after the company reported substantial lower earnings and the prospect of large-scale, global job cuts in the last week of February, Nike stock dropped 8 percent. In fact, while once one of the hottest stocks of the '90s, Nike's shares have dropped 43 percent in the last year, despite a booming stock market.Simultaneously -- and maybe even interrelated -- the Nike empire's polices and practices have led to a growing avalanche of negative publicity; perhaps karmic retribution for the company's commercial hegemony and hard ball tactics.The most recent media calamity was during the Winter Olympics, when news about a CBS/Nike contract requiring all CBS personnel to wear swoosh Nike apparel on air -- including news reporters -- lead a chorus of critics to question CBS' integrity and Nike's judgment. At the same time, a well publicized blast by CBS 48 Hours Producer Roberta Baskin asserted that the network had undermined her efforts to follow up her powerful original reporting on horrible working conditions on Nike factories in Vietnam, claiming that CBS had likely knuckled under to Nike because of their huge advertising investment during the winter games.A LONG STRING OF BAD PRESS Long before the Olympics, Nike has had the harsh public light shining on its operations. During 1996 and 1997, especially following Baskin's expose, Nike was the object of intense media scrutiny, in a large part due to these various reports of labor abuse by its subcontractors in Asia. "In Vietnam, 800 laborers walked off the job in protest of what they said were poor working conditions; in Indonesia, thousands of workers ransacked their factory last Spring, claiming that Nike hadn't been paying the $2.50 a day minimum wage," wrote Stephen Glass in The New Republic.During the 1970s, most Nike shoes were manufactured in South Korea and Taiwan. But workers organized and gained wage increases, motivating Nike to move to lower wage markets. Today, Nike shoes are made almost exclusively in China, Indonesia and increasingly Vietnam. These countries have little in the way of protective labor laws, albeit large supplies of cheap labor. In some cases, authoritarian leaders have even outlawed independent labor unions.By 1997, the attention to Nike labor practices provoked a number of demonstrations in various U.S. cities, including a large showing at a multi-floor "Niketown" super store in San Francisco. In response to such erosion of it's public image, Nike hired former UN Ambassador Andrew Young, who had just started a new business Good Works, to help stimulate investment in developing countries.Nike was to be Good Works first client, and Young came through with a positive report after inspecting 15 Nike factories during the spring of 1997. As the New York Times reported: "After completing his two-week tour covering three countries, he informed Nike it was doing a good job in treating its workers, although he allowed it 'should do better.'" But Young was widely criticized by human rights and labor groups for not focusing on wages, for not having his own translators and for doing very superficial inspections -- in some cases for just several hours during his investigation.Several months later, after Nike had taken out full page newspaper ads trumpeting the Young findings, a devastating report about unsafe working conditions at Nike plants was leaked by a disgruntled employee through the advocacy group Transnational Resource and Action Center ( TRAC). The confidential report clearly contradicted Young's findings and undermined Nike's efforts to portray themselves as squeaky clean.Steven Greenhouse of the New York Times explained: "In an inspection report that was prepared in January for the company's internal use only, Ernst & Young wrote that workers at the factory near Ho Chi Minh City were exposed to carcinogens that exceeded local legal standards by 177 times in parts of the plant and that 77 percent of the employees suffered from respiratory problems. The report also said that employees at the site, which is owned and operated by a Korean subcontractor, were forced to work 65 hours a week, far more than Vietnamese law allows, for $10 a week."The inspection report offers an unusually detailed look into condition at one of Nike's plants at a time when the world's largest athletic shoe company is facing criticism from human rights and labor groups that it treat workers poorly even as it lavishes millions of dollars on star athletes to endorse its products."Nike, more than any other corporation (except perhaps Microsoft), represents the "over the top" '90s approach to market dominance and near monopoly through saturation advertising, endorsement contracts and penetration into high school sports. This approach of overwhelming the market -- shared by bookseller Barnes and Noble, by Starbucks, the Gap, McDonald's and a few other huge companies -- has alienated increasing numbers of consumers and retailers alike.If you haven't noticed, and perhaps a cave dweller may not have, the swoosh is everywhere -- bill boards, sportswear, television commercials, on the lapel of famous coaches and on and on. Part of the Nike approach is to literally buy anything that moves in the sports and media world, from uniforms to stars, providing free equipment along the way. Further, Nike has taken its brand into areas where commercially intrusion has never trod. As a result, top tier amateur sports have been transformed into swoosh events, commercial enterprises which know no bounds.Consequently, many in the sportswear business now see the swoosh as double edged sword, with its footwear taking up as much as 60 percent of shelf space. "This is a very unhealthy environment we're dealing with now," said Mark Anderson, sportswear buyer for Chicks Sporting Goods. "Nobody in the history of the business has dealt with a giant like this." The result is unprecedented market dominance and fear on the part of many small businesses.Ed Sherman, a sports columnist for the Chicago Tribune, thinks Nike sales efforts have gone too far. "Sporting events, athletes and coaches have become nothing more than billboards for sponsors bombarding spectators and viewers with one long continuous advertisement. Where does it end? The answer is, it doesn't. The crack in the dike has been blown wide open. It's just a matter of time before the pitcher's mound is engraved with a Budweiser Ad."Still, some may hold out. With Nike negative publicity turning up regularly, the company has become the target of the socially conscious investment movement and recently even poetry got into the mix of bad Nike press. As reported by the Progressive magazine and Stephanie Salter of the San Francisco Examiner, radical poet Martin Espada drafted a biting letter to Nike after he was appalled that an advertising agency offered him $250 to submit a trial poem for a Nike Poetry Slam commercial. Espada would have received $2,500 if the poem was accepted. Espada told Salter: "There are a lot of things I'd do for $250. I'm broke all the time, but there are some lines in your life you cannot cross and still remain human."PHIL KNIGHT AND MICHAEL MOORE'S FILM Apparently, Nike can look forward to more negative attention. In New York City last fall, guerrilla filmmaker Michael Moore previewed his new film, The Big One, at the 1,200-person Media and Democracy Congress. The film features an encounter with Nike billionaire CEO Phil Knight. According to Moore, "Nike obtained a bootleg of the film and Lee Weinstein, director of PR, called me and said he was flying to New York and could we meet. I met him for breakfast and he asked me, 'What would it take to have two scenes removed?' He wanted the scenes where Knight says he doesn't care if 14-year-olds are making his shoes, and the one where he tells me that in five years 'one of those little Indonesians' is going to be my landlord. I told him nothing would ever be removed from the film and, to tweak him, I said I would add a scene at the end of the film -- a scene showing Knight breaking ground for that new shoe factory in Flint. He wrote it all down and said he would get back to me -- and never did."THE BACKLASH EFFECT In terms of the high flying Nike's change of financial fortune, company flacks are blaming changing preferences in the youth market and economic problems in Japan, one of Nike's biggest markets. In the U.S., Nike has almost reached the point of saturation, with 47 percent share in the sneaker market and 61 percent in basketball shoes. But others think something much larger is at play: backlash. Nike's unrelenting hunger to dominate the marketplace has led to overexposure and over intrusion. It's eagerness to find the cheapest wage markets -- often in Asian sweat shops with slave-like conditions -- to maximize growth has led to a resentment against the company. As stock analyst Joise Esquivel from Morgan Stanley Dean Witter notes, "Clearly Asia is a problem, but they have a huge problem in the U.S. as well. Nike's basic fundamental challenge today, we believe, is not their competition. We believe it's Nike itself. The world is overswooshed."As Julie Winokur writes in the book "We the Media," commercial efforts like Nike's are the Western equivalent of the kamseen, the legendary dust storm that sweeps across the Sahara desert with such force that it buries people alive and burrows its grit into seemingly impossible places. Advertising is everywhere and Nike leads the way. Having exhausted traditional venues, advertising has metastasized into what was previously considered sacred places.French Perfume on A SkunkApparently Nike has sensed that they need more help stemming the flood of negative publicity. One step was the hiring of Maria Eitel to be Vice President for Corporate and Social Responsibility, whose duties include shaping up Nike's labor practices. Company President Thomas Clark declared that the hiring of Eitel "signals Nikes commitment from the top to be a leader ... in global citizenship."This new information brought a shriek from populist radio commentator Jim Hightower. "It'll take a tough cookie to bend the Nike Swooshtika toward justice, so let's check her credentials: Ms. Eitel has been a television reporter, a White House spokesperson for the Bush administration, and corporate affairs manager at Microsoft. What? She's a PR flak, a political spinmeister, a corporate con artist. We're to believe that she'll hold Nike's golden feet to the fire?"Hightower continues: "In her Nike debut, Eitel sounds more like a lap dog than a watchdog, declaring that criticism of the company's labor practices have not been justified because this is a 'very complex issue' ... There is nothing complex about the fact that Nike hires teenage girls in Asia to make its pricey shoes, pays them sub-poverty wages and allows them to be abused in the workplace." Hightower adds: "They can put French perfume on a skunk, but it won't hide the stink. "SWOOSH The swoosh -- a simple aerodynamic design, a winged check mark, a boomerang, a whatever -- is clearly the most ubiquitous sports symbol in history. Swoosh recognition is so high the name of the company no longer accompanies the symbol, not even on shoes, or on the company's stationery. David Armstrong of the San Francisco Examiner reports that the swoosh has a 90 percent consumer recognition rating, about the same as the McDonald's arches. Funny thing about that swoosh, though: it was created 30-some years ago by a student named Carolyn Davidson, who the company is not in touch with. She was paid $36.INDIVIDUAL ENDORSEMENTSTiger Woods wears the Nike swoosh on the front of his shirt. And on the back. "It gets worse," complains Gary Peterson of the Contra Costa Times. "Woods now wears the Nike swoosh on the front of his cap. And on the back and on the sides. Ken Griffey wears the Nike swoosh on the back of his batting glove. And because the center field camera doesn't see the back of both hands as he stands at the plate, on the index fingers of his glove."As Chicago Tribune columnist Sherman explains, "The selling out of sports is in full throttle and Nike is the biggest player or offender, depending on your perspective. With almost every big name star in its portfolio, Nike is now buying up college sports. Virtually every big name school has a big money endorsement contract from Nike." As does virtually every big name coach.Into the High Schools Nike has invaded high schools as well. Principal Yvonne H. D. Noble of Crenshaw High School in Los Angeles says that a LA Times reporter asked her about the relationship of Nike to her school. She told him the company gave each member of the boys basketball team a pair of tennis shoes. But the reporter figured there was probably more to the relationship than the 15 pairs of shoes. Turned out he was right."As I investigated, I learned that Nike practically outfitted every member of the boy's team -- several pairs of shoes ... gym bags, hats, warm ups and probably other items. What does Nike get from Crenshaw High School? They get a championship basketball program to advertise for Nike. None of it seems illegal, but is it ethical?"In July of 1997, when I learned quite by accident that Nike had arranged with one of our coaches to use the Crenshaw High gym to film a commercial, I immediately stopped the project," responds Noble. "I was appalled that Nike would totally bypass the administrative staff in seeking to use district facilities for a profit-making enterprise."I am embarrassed to admit the depth of my na•vetŽ. But I must let those who influence my students, including Nike, know that ethical values count in the Crenshaw community. What I was is a relationship in which not only Nike but my student athletes prosper. The exploitation of student athletes at Crenshaw High School must stop. For me to remain silent on this issue is to collude with those who do not have my students' best interest at heart."The schools and pro teams will argue that they need the revenue from advertising deals to cover budgets, make up deficits. But the trend grows as more gets spent and more is needed. "Every time a swoosh is placed on a coaching giant, a football field gets named for a steak house, every time an ad is placed on the field of play, the event becomes less special. It loses some of its character and integrity." says Sherman.SPORTSWEAR BUSINESS CONCERNED Sporting Goods Business reports that while the Nike brand has long been the bane of other footwear manufacturers -- Nike has swept into categories from basketball to even indoor volleyball -- a feeling of entrapment has emerged among retailers who feel they have less control over what they stock, but are too dependent on swoosh revenue to do much about it. Many retailers fear the obvious --that if or when Nike makes a slip or falls out of faith with the consumer, the results will be disastrous. That moment may be on the horizon.In stories reminiscent of other industries where independent stores are getting the squeeze, -- like book sellers, coffee cafes, clothing outlets -- smaller companies appear to have a more difficult time getting the service they need to compete with the Foot Lockers and other chains who give Nike big business.NOT SOCIALLY RESPONSIBLENike also has been in the cross-hairs of the socially responsible investment world, a still modest but growing group of stock holders who want companies they invest in and exercise a social conscience. Mutual fund assets linked to social issues have grown to $96 billion, according to the Washington-based Social Investment Forum, a huge increase from the $12 billion just two years ago.And many are "exercising" their social conscience. As reported in the Sacramento Bee, for example, Laurel Kuzins does not wear Nike Shoes. They don't measure up, she says, because the company relies on cheap overseas labor to make them. Laurie is 8-years-old.Laurie's parents, Matt and Nanci, have long held beliefs about human rights and the environment and feel strongly that "Where we put our money should reflect our view of how we'd like the world to be."ARE PEOPLE PICKING ON NIKE? Americans are generally fair. They don't want a person (or a company for that matter) singled out when others are to blame as well. Many people asked the obvious questions: Aren't all shoe companies the same? Aren't workers being paid the minimum wage at Nike factories and aren't they happy to have the jobs?Let's take a look. Like their dominance in the advertising world, Nike gets a lot a of attention because they are the biggest shoe company in the world, spending more than $600 million on marketing that "empowers women and inner city youth to buy their expensive shoes."These shoes are made by Vietnamese workers, who are paid $1.60 daily wages, while according to Global Exchange, the cost of a single meal in Ho Chi Minh City is 60 to 90 cents. The Indonesian government admits that their minimum wage is only 90 percent of subsistence. As for what Nike can afford, advocates come up with the following statistic: Just 2 percent of Nike's $630 million operating budget could raise the salary of all 25,000 Vietnamese workers from a meager $1.60 per day to $3.00, a livable wage. After all, the critics say, Reebok factories pay $65 per month and Coca-Cola and Goodyear recognize that minimum wage is not enough, while Nike pays $45 monthly -- a poverty wage. Furthermore, New Balance makes most of their sneakers in the U.S., paying more than 30 times what Nike pays and they still make a profit.LOOK FOR NIKE PROTEST IN YOUR COMMUNITYA final word will no doubt go to Michael Moore. He finished his Nike story: "Nike apparently has, behind the scenes, threatened to cancel a cross-promotion they had planned to do on an upcoming film called 'The Mighty.' But the Miramax brothers (distributors of Moore's film "The Big One") are not the type to be intimidated. Miramax is gearing much of their publicity of the film around Nike. We will also do 30 benefit screenings around the country and a number of them will be to help the anti-Nike efforts. That should keep the heat on the Nike publicists."