NIKE'S RESPONSE TO ANDREW YOUNG'S REPORT
ON THE NIKE CODE OF CONDUCT
Our NIKE Code of Conduct sets out a basic goal – for NIKE, and for all of our business partners – always to do what is expected, as well as required, of a leader.
In this spirit, in February, we decided to seek a separate and independent assessment of the extent to which our contractors are complying with that Code. We turned to one person we thought had three attributes that would make that assessment most valuable.
First, a truly independent voice. Second, a person with experience and understanding of the developing world, where most of the world's apparel and footwear products are made. And third, someone who was not party to the issue, who would bring a fresh perspective to bear.
Andrew Young, former United Nations Ambassador, lifelong human-rights advocate, with a wealth of experience in labor and factory issues, was an obvious choice.
Today, after six months of investigation, Ambassador Young delivered his report.
His overall assessment is that we are doing a "good job." But good is not the standard NIKE seeks in anything we do.
We are acting now to improve in every area where he suggests we improve.
His recommendations, and our response, are:
1. Recommendation: "NIKE should continue its efforts to support and implement the provisions of the Apparel Industry Partnership."
Action: NIKE was the first company to join. We will continue to work with our Partnership colleagues from the apparel industry, and related labor, human rights, religious and consumer groups. NIKE is represented on all of its various subcommittees, addressing implementation of the new Code and its monitoring principles. The most-recent meeting was held the very day Ambassador Young presented his report to us.
We will carry this message of industry, labor and rights groups cooperation to all of our business partners and others in the industry. We will urge other apparel and retail companies to sign on. In the past two weeks we have already begun to do this with other athletic, dress and casual footwear companies.
2. Recommendation: "NIKE should take more aggressive steps to explain and enforce the Code of Conduct."
Action: As a result of comments made during Ambassador Young's factory inspection tour in March and April, NIKE reinforced implementation of the Code of Conduct and its monitoring principles by conducting eight weeks of training for NIKE production people and contract factory management in Asia, in 11 countries and 15 cities. We will follow up by:
- Ensuring that contractors provide every employee with renewed Code of Conduct training and a simplified, written form of that Code.
- Redoubling our efforts to ensure that every NIKE contract factory has the Code posted visibly in every major workspace, in the language of both the worker and the manager, when those languages are different.
- Add to our auditing procedures to assure that the Code of Conduct is understood, that training, posting and personal copies of the Code have the desired impact: that workers truly understand their rights, and management its obligations.
3. Recommendation: "NIKE should take proactive steps to promote the development of 'worker representatives' in the factories who can effectively represent the workers' individual and cumulative interests."
Action: NIKE contract-factory-worker representation spans a broad spectrum around the world, from worker-management committees to full trade unions. NIKE will survey existing worker-representation processes and require each of our contract factories to redouble its efforts to assure that workers truly have a voice in workplace issues.
4. Recommendation: "NIKE should insist that the factories which manufacture its products create and enforce a better grievance system that allows a worker to report a complaint without the fear of retribution and abuse."
Action: NIKE will survey existing grievance procedures in our contract factories and with other industries and factory groups. We will require each of our contract factories to adopt and implement one of several model procedures, as appropriate to its size, current representation system, and the effectiveness of that current system.
In addition, NIKE will create several pilot ombudsman projects to determine how well an outside voice can supplement and enhance the grievance procedure.
5. Recommendation: "NIKE should expand its dialogue and relationship with the human-rights community and the labor groups within the countries where they produce goods and with their international counterparts."
Action: NIKE has already begun this process. Starting in major source countries, we are seeking to establish regular sessions with groups that can foster productive dialogue on contract-labor issues. The Apparel Industry Partnership and a quarterly conference call with concerned investor groups are two of several forums in which we will continue to address these issues with affiliated and interested international parties.
6. Recommendation: "NIKE should consider some type of 'external monitoring' on an ongoing basis as a way to demonstrate its commitment to the Code of Conduct and to insure its effective application."
Action: Specifically, Ambassador Young recommends two steps: (a) establish an ombudsman function, and (b) establish a small panel of distinguished international citizens to provide a continuing oversight role similar to that undertaken by the ambassador. We're already doing the first, as noted above. We're working now to appoint an international oversight panel to fulfill the second.
Because NIKE is a leader, we have decided to take further steps beyond Ambassador Young's recommendations, but speaking to issues he raised.
1. NIKE will strengthen the penalty system for contract factories found in violation of the NIKE Code of Conduct. This includes escalating monetary penalties, whose proceeds will fund: (a) remedial action to correct the violation or (b) investment in worker education, recreation or habitability-enhancement programs.
2. We are determined that the 500,000 jobs created by NIKE's contract relationships around the world continue to be the best jobs in the business. If any contractor consistently fails to adhere to our Code of Conduct, we will terminate their relationship with NIKE.
3. With our partner factories, NIKE will establish an ongoing training system for managers and supervisors that includes (a) basic people-management skills; (b) education in local culture for expatriate managers and (c) learning the local language.
4. Ambassador Young has identified the need for a higher level of host-country management in factories owned and operated by foreign investors. NIKE will assess current levels of indigenous management, and establish action plans with each contractor to assure that local management is integrated at the highest levels.
5. NIKE will continue to test pilot projects to measure the effectiveness of independent monitoring by third parties. To date two such projects have been undertaken in two countries. A third is under way.
NIKE will implement each of the actions noted above by Jan. 31, 1998, and then reassess further steps or the enhancement of those already taken.
In addition, NIKE will continue to implement a comprehensive factory inspection program, called SHAPE (Safety, Health, Attitude of Management, People Investment, Environment) in all contract factories worldwide. Our aim is to ensure that every aspect of the factory work experience meets NIKE standards, from fire drills and sanitation to worker training and recreation programs.
Since 1994 NIKE has had independent auditors test factory compliance with our Code of Conduct. We are encouraged that Ambassador Young has found these audits to be "professionally done, (and) rigorous." We will redouble our efforts to assure they are an effective tool. By Aug. 1, 1997, NIKE will have in place a single, unified set of instructions to make sure that every independent audit, anywhere in the world, by any auditor, is done to the same standard.
NIKE management appreciates not only the independence and objectivity that Ambassador Young has brought to these issues, but the many other voices in government, the human rights, labor, religious, consumer and business communities, that have also contributed valuable insight.
Ambassador Young has demonstrated – on his assignment for NIKE, but also over 40 years of public and private service in human-rights arenas – that these issues are always best served by reasoned, honest and respectful discussion. We are committed to that course.