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What is the history of the SWOOSH?

The SWOOSH logo is a graphic design created by Caroline Davidson in 1971. It represents

the wing of the Greek goddess Nike. Caroline Davidson was a student at Portland State

University interested in advertising. She met Phil Knight while he was teaching accounting

classes and she started doing some freelance work for his company. Phil Knight asked

Caroline to design a logo that could be placed on the side of a shoe. She handed him the

SWOOSH, he handed her $35.

In spring of 1972, the first shoe with the NIKE SWOOSH was introduced...the rest is

history.

"How do Nike

subcontractors

promote

economic

development?"

Light manufacturing (starting usually with a flannel short factory and then a T-shirt

factory and finally a jeans factory), leads to moderately technical light manufacturing

(outer wear and performance sportswear, sports shoes), and then to light technical

consumer products manufacturing (radios, calculators, wristwatches), and finally to

technical durables (automobiles, computers). Sometimes these occur in tandem (Korea),

sometimes in sequence (Taiwan), and sometimes the country graduates without the final

stages and heads directly into the post-industrial service economy (Singapore, Hong

Kong).

Nike has been and continues to be a driver of the first two steps. It is doubtful that any

other light manufactured brand is responsible for a comparable record of jobs creation

Nike has built over the past 25 years. At present there are nearly 500,000+ jobs directly

engaged in manufacturing our products; to date, Korea alone has exported well over 500

million pairs of Nike shoes; to date, Nike accounts, after just two years, for 5% of all of

Vietnam's export earnings. These are undisputed facts that demonstrate the economic

good this company creates when it works with partners around Asia and around the

world.

"Don't you just

move your

production

from country

to country,

searching for

the cheapest

labor?"

For years, critics have tried to contend that Nike fled "high-cost, unionized" Korea and

Taiwan for "low-cost, repressive" Vietnam, China and Indonesia. Over those years, Nike

has repeatedly pointed out that we remain in Korea and Taiwan as a buyer, despite higher

wages and labor rights. Nike is in fact the only branded athletic footwear company still

making shoes in Taiwan and South Korea.

In the last three years, we have expanded our footwear sourcing country list to include

three countries: Vietnam, Italy and the Philippines. Two of the three, Italy and the

Philippines, are vibrant democracies. The third, Vietnam, has a recent record of promoting

workers rights through government labor bureaus. Incidentally, Italy has the highest wage

base of any Nike footwear sourcing country, and the Philippines has a minimum wage that

is twice that of Indonesia, and three times that of China and Vietnam.

"Why doesn’t Nike

contribute more to

communities where

they sell their

products?"

Nike is actively involved in communities worldwide, from getting kids to play sports

and supporting mentoring programs to building sport courts in under-served areas

and training volunteer coaches.

In 1994 Nike launched P.L.A.Y. (Participate in the Lives of All Youth) to provide kids

access to inspirational coaches, organized activities and safe places to play.

Nike has made a $5 million commitment to the Boys & Girls Club of America to train

40,000 volunteer coaches, triple girls participation in Club activities and increase

overall youth participation in Boys & Girls Clubs by two million kids.

In the Asia-Pacific region, Nike is beginning a micro-loan program for women workers

in Vietnam to help economic development in areas where factories make Nike products

and to empower Vietnamese women.

Each year, Nike recycles over two million athletic shoes into sport courts such as

basketball, tennis and playground surfaces for under-served neighborhoods. We’ve

built over 50 courts worldwide, 30 in the United States alone.

"Does free

trade

promote

human

rights?"

Absolutely. Taiwan and Korea are prime examples, and Nike has been working in those

countries for more than two decades. Indeed, though some would say the development of

those rights has taken place quite apart from our participation in business, in fact the creation

of jobs and the promotion of a climate where workers are treated with dignity and respect in

the factories cannot help but have a positive impact on values in the community at large.

The classic issue here is the glass half-empty or half-full perspective. Does Nike by its

presence foster higher levels of respect for rights -- at least in the factories? Or does our

presence foster repression in countries where governments do not recognize some of the

rights we in western democracies hold dear? Nike firmly believes -- and the record supports --

the concept that our presence helps.

"Nike makes a lot

of profits. Phil

Knight is a

multi-billionaire.

Nike athletes like

Michael Jordan

and Tiger Woods

earn millions in

endorsement

dollars from Nike.

Nike spends $750

million a year or

more on lavish ads

and promotional

contracts for

coaches and teams.

Why doesn't the

worker get a fair

share of that?"

He or she does. Michael Jordan and Tiger Woods are compensated at levels

commensurate with their unique skills, and their unique ability to generate demand for

Nike products. That demand for those products in turn creates jobs in all aspects of

the business. It is a closely linked and unending circle. Product demand created by

good advertising and marketing that links Nike and its products to the consumer

through the performances of Michael and Tiger in turn creates thousands of jobs

which pay people at levels equal to their skills -- from the least skilled worker just

entering the job market in Indonesia or Vietnam, to the skilled longshoreman unloading

those products on the docks at Marseille or Miami, and the part-time college

student/retail clerk selling those products to consumers.

"How can

that be

fair when

the

worker

earns just

a few

dollars a

day

making

shoes that

sell for

$100 or

more?"

The worker's labor is just one of many inputs that impact the cost of a product. Typically labor

is about 15 percent of the factory's price to Nike, and about 4 per cent of the retail price. That is

typical for footwear and apparel. The cost of materials is far greater -- usually in proportion

about four times greater than labor. Between the laborer and the consumer there are a dozen or

more inputs to price: materials, factory overhead, factory depreciation, factory profit (usually

about 5% of the factory price of the product); Nike's shipping and handling costs, insurance,

storage and distribution costs, research and development investment, marketing and sales

costs, administration and taxes.

"How much

do workers

earn in

factories?"

No worker earns less than minimum wage. Period. Most workers earn significantly more. At

Wellco, a footwear factory in southern China, the average income for a direct laborer was

Rmb686 in the month of July. The minimum wage is Rmb350. The average for cash wages

earned by direct labor workers in footwear and apparel contractors in Indonesia, before

overtime, measured by an outside auditor in June and July of 1997, is Rp (rupiahs)225,000.

The minimum wage is Rp172,500. These examples are typical of the worker's take-home

earnings, and they do not include additional salary and benefits such as overtime pay, food,

medical care, some forms of insurance, and in some cases, free or subsidized housing.

"Why does

Nike's Code

only call for

the least

applicable

standard, that

is, minimum

wage?"

Nike's Code sets standards for contractors in 32 countries, each with its own unique blend

of income levels, productivity, investment levels and labor compensation. The only effective

way to delineate global standards in one document such as a Code of Conduct is to set

such standards to the extent possible that are measurable and quantifiable. Minimum wage

is a standard of measurement used by virtually every responsible agency -- government and

private -- in the world. However, Nike's Code also calls for the best practices and continuous

improvement in standards and performance, and that includes compensation.

"Does Nike pay

the full legal

minimum wage in

Indonesia?"

Nike is the only buyer to require full cash minimum wage. Overtime allows additional

earnings, but Nike is one of the few companies to require contractors to cap mandatory

overtime at 60 hours per week. Nike's corporate policy is to keep orders at or below the

level equivalent to 48 hours of work.

Truly independent assessments by outside experts have determined that workers in Nike

factories are saving a significant portion of their earnings, and have more than enough

to accumulate significant disposable income, before any additional overtime is earned.

Independent monitors and sources are verifying these issues on a routine basis for Nike.

These sources include international auditing firms like Price Waterhouse, Ernst &

Young, the Harvard Institute for International Development, the University of

Economics in Ho Chi Minh City, the World Bank and the Amos Tuck School of

Business at Dartmouth University.

"Is the

minimum wage

enough to

provide for a

livelihood?"

The picture of workers who are malnourished because they can’t afford to eat is repeatedly

refuted by unbiased, tangible evidence. On the broadest level, the research firm Jardine

Fleming, a subsidiary of Jardine Matheson, Hong Kong, has developed what it calls its

Nike Index.

In simplest terms, the Nike Index tracks a developing economy's economic development by

Nike's activity in each country. Economic development starts when Nike products are

starting to be manufactured there (Indonesia, 1989; Vietnam, 1996). The economy hits the

second stage -- development at a level where per capita income indicates labor flowing

from basic industries like footwear and textiles to advanced industries like electronics and

cars (Hong Kong, 1985; Korea, 1990); and an economy is fully developed when Nike has

developed that country as a major market (Singapore, 1991; Japan, 1984; Korea, 1994).

On the anecdotal level, Seth Mydans of the New York Times, for example, followed

workers from the factory to the local shopping mall and described the spending portions of

their salaries on the usual things young men and women with jobs buy all over the world:

jewelry, watches, even radios and televisions.

Keith Richburg of The Washington Post recorded savings rates indicating income levels

sufficient to cover basic essentials and provide an opportunity to set money aside as

savings. The typical young woman in a Nike factory is 19-20 years old, wears neat jeans

and a pressed T-shirt to work, has jewelry and probably shares a television or radio with

her roommates.

"Why don't

Nike

factories

pay a living

wage?"

In most cases workers earn compensation and benefits far in excess of the minimum wage, and

by all responsible measurements of need, earn sufficient income to provide food, shelter,

clothing and a measure of discretionary items as well. Workers also routinely save significant

portions of their income -- as much as 30-40% for those who manage money well.

When critics call for a "living wage," here is how that wage is commonly defined: sufficient

income for one earner to provide for the basic food, clothing and shelter needs of a family of

four, as well as discretionary income and savings sufficient to contribute to the sustainable

development of the local community. In no country in the world does a minimum wage provide

that level of income. The minimum wage in New York City, for example, leaves a worker with

about $8,800 per year -- or below the poverty level for a family of four.

Nike factories pay at least the minimum wage that the governments of the host countries have

set to provide for the needs of their people. Minimum wages are usually set at a level

sufficient to provide at least for the needs of one person who is just entering the work force

and is relatively unskilled. As skills and productivity increase, the worker's ability to earn more

and provide for more needs, or more people's needs, rises as well.

"What is the

labor cost of

Nike shoes?"

The cost of labor for Nike products varies slightly by model, volume and source. As a

general rule, labor represents about 15% of the price Nike pays the factory for the product.

Because Nike’s cost is about 25% of retail cost, labor accounts for about 4% of the retail

cost. The breakdown is roughly as follows:

Consumer pays $90 : Retailer pays $45 to Nike, and then doubles the price for consumers.

Nike pays $22.50 and then doubles the price to retailers for shipping, insurance, duties, R&D,

marketing, sales, administration and profits. The $22.50 price paid the factory includes:

Materials: $14.60, Labor: $3.37, Overhead: $3.41, Factory Profit: $1.12 ------ Total Costs:

$22.50.

"Are

consumers

willing to pay

more if Nike

raises the

wages of its

workers?"

Nike is already absorbing the higher costs associated with labor practice initiatives. We

require the payment of higher wages than the law stipulates in Indonesia, our largest source

for footwear and a significant apparel source; we have shared in the cost of capital

investments for the Pakistani soccer ball stitching centers, the industry’s first; we pay the

costs of independent auditing, also the industry's first.

In Indonesia, specifically, Nike is to date the only buyer requiring its contractors to (a) pay

at least full cash minimum wage, denying them access to exemptions that are allowed by

local law, and (b) to abolish lower "training wages" allowed for new workers.

As Indonesia represents 37% of Nike's footwear production worldwide, and a smaller but

substantial portion of Nike's apparel production, the margin impact has been pronounced.

Nike's after-tax margins of 8.3% are lower by almost a full point than five years ago, and at

least part of that decline is attributable to the cost of leading the industry in labor practices

initiatives. Pakistani hand-stitched soccer balls made in new stitching centers cost Nike 10%

more than a comparable ball made by competitors in the homes and villages of home-work

stitchers. We think that's a financial burden worth bearing.

"Why doesn't

Nike use

independent

monitors?"

We do. Since 1994, Nike has retained the services of independent world-respected

financial auditors like Price Waterhouse and Ernst & Young.

Independent financial auditors are trusted to judge company performance for

shareholders, securities brokers and financial regulators in governments all over the

world. Their most important asset is a reputation for independent and accurate

assessment of corporate performance, which is precisely what Nike demands and receives

in every audit done. The auditing teams are comprised of local, host-country nationals

who speak and live in the culture of the worker.

In addition, Nike contractors have worked on independent monitoring with Thailand

Business Investment in Rural Development (TBIRD); Nike in Vietnam has ongoing

independent monitoring assistance from the University of Economics, Ho Chi Minh City;

and Nike Labor Practices has initiated regular meetings to discuss workplace issues and

share work place information with the Indonesia Sportshoes Monitoring Network.

"Does Nike

use child

labor?"

Nike has zero tolerance for child labor. Nike backs that pledge with enforcement that includes

independent monitoring, the factory presence of Nike employees, and standard identification

procedures to assure all contractors are preventing the hiring of workers below the minimum

age.

In Pakistan, Nike has one contractor for soccer balls, Saga Sports. To date, Nike and Saga

have collaborated in the construction of five world-class stitching centers, small factories in

the villages surrounding Sialkot, Pakistan, where working conditions and workers' ages can

be monitored. More centers -- Pakistan's first -- are on the way.

In addition, Nike through a Soccer Industry Council of America (SICA) initiative, has pledged

only to use soccer ball manufacturers whose work is monitored by organizations such as

UNICEF and Save the Children.

"What is your

involvement in

President

Clinton’s 'no

sweat'

initiative?"

When President Clinton asked apparel companies, labor unions and human rights groups

to work together on eliminating sweatshops, Nike was the first company to step forward.

Our presence encouraged the participation of Liz Claiborne, Warnaco, L.L. Bean and

Patagonia, among others. Reebok finally joined three months later.

Nike's Code of Conduct was used as a working document as we discussed Codes and labor

standards. Nike has been and continues to be a catalyst for the group's ongoing efforts to

define monitoring, and to define how we should work to inform consumers about these

efforts. This is a good process, not without some pain, and we are committed to continue to

push ahead. Indeed, in meetings with unions and human rights groups in Europe during

September, 1997, Nike was active in urging the many different code of conduct discussions

into a common forum with businesses. We will continue to work on these issues.

As the discussion continues, we do not resist talking on any issue, be it monitoring by

independent bodies (Nike was the first company to do so), real wage discussions (like, do

you know what your factories are paying?) and anything else on the table.

"Why did Nike hire

Andrew Young?"

Nike sought an independent, respected and unbiased assessment of how well its Code

of Conduct was being implemented around the world. He did precisely that.

"Why didn't

he address

wages?"

He did. In his report, Ambassador Young clearly indicated that on the basis of his research,

Nike contract employees appeared to be earning enough to buy discretionary items and to

save, as well as to provide for basic needs. He also said the criticism of companies like Nike

that create jobs in the developing world is misplaced. "The basic human right," he said, "is to

have a job." Nike has created nearly 500,000 jobs around the world through contract

manufacturing.

"Why did he

not look

deeper into

the question

of a living

wage?"

Ambassador Young was asked to evaluate Nike's Code. It states that contractors must pay at

least the minimum wage, or the prevailing industry wage, whichever is higher. That standard

was developed in consultation with human rights and labor rights groups, as well as unions

and religious rights groups, who participate with Nike on the White House Apparel Industry

Partnership. Ambassador Young confirmed that contractors are meeting this standard.

"Ambassador

Young visited

factories for, at

most, 3 to 4

hours, and in

only three

countries for

less than two

weeks. How can

he claim to

really know

what is

happening?"

The factories he visited in total represented one-quarter of the contract workforce

employed by Nike contractors worldwide. That is at least a representative sample. His

factory time was intended to provide him with an overview of work conditions, which can

be pretty easily ascertained in that amount of time. He deepened his perspective through

many hours of conversations with workers, critics, academics, government officials and

others -- both inside the factory and without. All of these conversations, plus observation

of a broad sampling of factories, provided him with an excellent platform from which to

draw basic conclusions about work practices and Nike.

"Nike

provided

interpreters

for

Ambassador

Young, and

gave him

guided tours

of factories

selected in

advance and

prepared by

Nike. Doesn't

this make it

impossible for

him to render

a balanced

judgment?"

The aim was to get good information in whatever manner would work. Ambassador Young

selected the countries to visit, and once arrived, selected factories as well. He was shown

old and new, footwear and apparel, foreign-owned and operated, and locally owned and

operated factories. He also visited a factory run by the government. The choice was his

alone. For at least some of the time that he visited, he talked to workers without factory or

Nike production management present. He also spoke with union leaders, factory clinic staff,

non-governmental organizations, critics and government officials. Although in many cases

a Nike labor practices manager acted as interpreter, he asked for their assistance because

they know the complications of such work issues as identifying processes and machinery;

explaining the sometimes confusing rules for overtime and holidays; and because those

managers have a bi-lingual/bi-cultural background that is essential to understanding the

nuances of a worker's response. The Nike labor practices manager who in some cases

interpreted for Ambassador Young in Vietnam, for example, is a former Vietnamese refugee

who holds a PhD from M.I.T., has worked in factories, has worked with non-governmental

organizations, and talks to workers day in and day out.

"Ambassador

Young did not

talk to all the

people he

claims to have

engaged on this

issue. Doesn't

that call into

question the

whole report?"

What matters is that his research effectively identified ways Nike can improve its

performance. His recommendations have been cited as helpful by outside and interested

parties such as Bob Dunn, president of Business for Social Responsibility, and Kevin

Sweeney, communications director for Nike competitor Patagonia. It is true that one of the

40 people publicly identified as having been consulted by the Young report was in fact

not contacted. That was an unfortunate but not critical error. He also talked to many

people not listed in the appendix. The bottom line: look at the recommendations. Was this

a step forward? Nike thinks it is.

"How credible

is a report from

a paid

consultant?"

Nike, like other companies, unions, governments and universities, uses paid consultants

for a variety of purposes. They are all expected to provide value for money. Ambassador

Young himself has said "I didn't do this for the money," and indeed, characterized his

income from the project as "about equal to what I would make for one speech." Critics are

not reluctant to ask for remuneration as well. One consulting proposal from a critical

non-governmental organization group in Indonesia offered to undertake independent

monitoring of Nike factories. The suggested price was $750,000 per year. The largest line

item in that proposed budget was $152,000 for a resident, expatriate director. Nike declined.

"What is Nike

doing with the

report?"

Nike has pledged to carry out all of the Ambassador's recommendations, and to go

beyond. We have already produced and distributed Code of Conduct cards for every

worker, in the language of their choice. Nike will periodically update interested parties on

its progress.

"Critics

charge that an

attack on Nike

- the industry

leader - will

affect change

through out

your industry.

Has this

occured?"

Critics push the concept that attacking Nike, the leader, will force others to follow. Not true.

In 1992, Nike's Code of Conduct was written. To date, only Reebok has followed in

footwear. Adidas, the world’s second largest sports company, has not even written a Code.

Neither have Fila, Mizuno or Asics, never mind posted those Codes in native languages in

all factories, and inspected monthly to assure compliance.

In 1996, Nike was the first company to join the White House Partnership to eliminate

sweatshops. Reebok joined after deliberations had been underway for three months. Only

seven companies have agreed to abide by the Code of Conduct that body produced. No

other companies have agreed to join, despite repeated pleas from Nike, Claiborne and other

members. Followers don’t lead, they follow.

"How does Nike

compare to other

shoe brands?"

Nike is leading the change in the industry in all aspects of labor practices, from

wallet-size Code of Conduct cards in native languages to help instruct workers in their

rights, to health and safety inspections on a monthly basis.

"Where do you

get your

information?"

Anyone who chooses to have an opinion on Nike and labor practices needs to think

about how information is gathered, and how it is used in context. For the value of wages

in Vietnam, for example, consult the World Bank study on living conditions. It is the best

source on Vietnam and income and spending, and our critics ignore it. Why? Because it

illustrates clearly that the wages currently paid in factories are appropriate to the level of

the job, and provide a good income for an unskilled and entry-level worker.

If Nike were to rely on methodology used by our critics -- most recently, Global Exchange

and its release of a report on factories in China -- we would be rightly crucified by the

public for shoddy research and an inappropriate sampling technique. Setting up a card

table outside a factory gate, asking leading questions, and then issuing a "report" on

Nike factories -- without any conversation with Nike or its factory management, never

mind requesting a factory visit -- is not research. It is campaigning under the guise of

research. The China report is the best example extant of how not to do independent

monitoring, and a perfect illustration of why Nike chooses a responsible third party (in

China, that party is Price Waterhouse) to look at factories in depth and with some

precision.

"Who is

conducting this

campaign?"

There are two answers that need attention.

One, this is indeed a campaign - it is an organized, well-funded and coordinated attack on

one company, Nike, not because our practices are bad, but because we make a visible

target.

Secondly, although there are many organizations listed as part of the "working group" on

Nike, several are at best tangent to the campaign. United Methodists General Board of

Pensions is working with Nike, not against us. Vidette Bullock Mixon, general counsel, at

the annual shareholders meeting publicly commended Nike for the steps we are taking. The

groups allied with her organization that agreed to support that position include Informed

Investors, Progressive Asset Management, and the Interfaith Center on Corporate

Responsibility. Amnesty International is not part of the campaign, and in fact in recent

weeks has asked Nike to assist in a campaign to get more companies to adopt a Code of

Conduct such as we have had in force for five years.