NIKLAB~1.txt a Nike Inc. file; a nikeworkers.com series file; created Friday, June 19, 1998 5:38:15 PM; Modified Saturday, February 14, 1998 2:07:24 PM ; Saved by D. Boje as NIKlaborprac (File Origins).

Over the past year, the working conditions in the factories making NIKE products have been in the news. We think its good that our business is scrutinized , as we can learn to be a better company from those who raise legitimate questions and concerns about any portion of our business. NIKE cares about the issues our consumers are concerned about, and we care about the people who manufacture our products.

For the quarter century that NIKE has been producing performance sports footwear and apparel, we have been a worldwide leader – a leader in innovation and as a global corporate citizen. We have always understood and embraced as a corporate philosophy that with leadership comes responsibility. NIKE has accepted for many years that it is not enough just to produce the best performance athletic products in the world; those products must also be produced in the best working conditions. We won’t stand for anything less. That’s why we have made labor practices a priority.

The following provides an overview of NIKE’s approach to labor practices – both as an individual company and as a leader in our industry

NIKE’S CODE OF CONDUCT AND ENFORCEMENT

As a global company, NIKE manufactures products in over 30 countries in approximately 350 factories – none of which NIKE owns. Through these subcontracted factories, NIKE has helped create jobs for nearly 500,000 people worldwide. The challenges for a global company with a productions system as vast as this should not be underestimated. It is difficult. Nevertheless, NIKE is tackling these challenges as hard as we tackle any part of our business.

To start, in every factory, in every country where NIKE operates, we are guided by business principles which we set forth in our Code of Conduct. This Code binds each of our production subcontractors to a variety of standards to ensure that workers making NIKE products are treated fairly and work in a clean and safe environment.

Specifically, NIKE’s Code of Conduct:

Condemns and prohibits child labor;

Requires that workers be paid a fair wage;

Imposes caps on the days and hours a worker can be required to work;

Prohibits mistreatment or discrimination of workers in any form;

Obligates factories to implement programs that benefit worker’s health and safety; and Recognizes and respects the workers right to freedom of association;

But words on paper are not enough. Just as important as having a Code, NIKE ensures that the provisions of the Code are enforced. NIKE takes a five-pronged approach to the enforcement of its Code of Conduct -- including an elaborate system of both internal monitoring, (NIKE employees), and independent external monitoring,(non-NIKE employees).

First, before NIKE does business with any manufacturing facility, NIKE employees visit and inspect the facility to make an initial determination (based on a set of written criteria) whether the factory can meet the terms of our Code of Conduct. If the factory passes the review, and we decide to do business with the facility, we meet with the factory management, explain our Code, and require them to certify in writing that they will comply with the terms of the Code. Then, every six-months, the subcontract factories are required to demonstrate and re-certify in writing that they understand and are complying with NIKE's Code. Once we agree to do business with a factory, we require that the Codes are posted in numerous locations and several languages so that all factory management and every employee understands what the Code means. In addition, NIKE trains factory owners, managers and supervisors on NIKE’s Code to ensure they understand its meaning. Further, to guarantee that workers understand the NIKE Code, every worker making NIKE products is provided a wallet-size card, with a translated summary of the Code and several health and safety tips.

The second step to ensure our Code is enforced is through direct observation by NIKE staff within the subcontract factories -- in many cases daily. Every factory in the world that manufactures NIKE product has NIKE staff members assigned to it. Currently we have more than 1,000 NIKE employees worldwide to monitor the operations at the subcontractor level. In addition to production issues, these employees are specifically trained and are responsible for Code compliance issues.

On-site visits are combined with NIKE SHAPE reviews on a monthly basis. NIKE’s SHAPE (which stands for safety, health, attitude of management, people investment, and environment) reviews follow a set of criteria which NIKE employees check each month to assess whether a factory meets our Code requirements. If compliance issues are identified, SHAPE provides a mechanism to measure the progress of corrective steps, ensuring that problems are remedied in a timely fashion.

The third step is a system of independent external monitoring. Every NIKE subcontractor knows that the enforcement of the Code will include systematic, unannounced evaluation by independent auditors. Beginning in 1994, we reinforced our internal monitoring program with a new level of independent oversight. Working with the globally recognized independent Certified Public Accounting firms, Price Waterhouse and Ernst & Young, we developed an ongoing system of unannounced, comprehensive monitoring of subcontract factories. The accounting firm’s monitoring covers a range of issues where their expertise is particularly effective: checking pay records and pay stubs against wage standards and overtime compensation requirements; checking documents to assure there are no under-age workers, checking overtime periods to assure none were in violation of local law; surveying health & safety and habitability provisions; as well as a random, confidential and secure interview program to gauge worker attitudes toward the job and the workplace.

In addition to the accounting firm audits, we have strengthened our oversight with additional independent monitoring programs. In the Los Angeles area, for instance,

NIKE produces some apparel, NIKE has contracted with an outside inspector (Cal Safety) to perform site visits and evaluations of factories. In Pakistan, in addition to industry wide monitoring, NIKE uses an independent monitor (the Pakistani affiliate of

Grant Thorton) to review soccer ball manufacturing facilities. NIKE has also begun pilot-projects with NGOs in Thailand and Vietnam.

In Vietnam, a NGO has performed factory visits and evaluations with specific emphasis on workplace health and safety issues. We have also contracted with the University of Economics in Ho Chi Minh City to engage in an ongoing focus group with Vietnamese workers to monitor working conditions in factories making NIKE products. We also work with CARE International to gather comparative wage information for a broad number of occupations from bus drivers to doctors and state-owned factory workers in the areas surrounding NIKE contract factories.

In Thailand, the Thailand Business Investment in Rural Development (TBIRD) interviews workers in footwear factories about their jobs and the nature of their experiences at work and shares the results of these interviews with factory management, who use the information to make adjustments to the workplace.

Fourth, to coordinate all the different enforcement procedures, NIKE created a Labor Practices Division in 1996, focused solely on enforcement of the NIKE Code of Conduct. This division includes regional labor practices managers and labor inspectors located in key countries or regions where NIKE does business. Among other things, the Labor Practices Division trains NIKE personnel, factory management and factory employees on NIKE’s Code, collects information provided by the NIKE personnel who visit the factories daily, regularly meets with factory managers and employees on a secure and confidential basis, conducts its own factory inspections and schedules independent external monitoring. NIKE believes it is important to coordinate our enforcement procedures so when Code compliance enforcement issues develop, the Labor Practices Division can respond quickly to address and remedy the problem.

To carry out these tasks, the department has people on the ground in key source countries, and people with a global scope to develop the standards and the tools. On the ground, Labor Practices has a director for Asia-Pacific, the most important sourcing region, and labor practices managers in four key source countries: Vietnam, Indonesia, China and the Philippines. Each of those managers has at least one inspector, who moves from factory to factory, inspecting, recording and communicating the labor practice goals. The Asia team was selected to bring many talents to bear -- expertise in culture, training, production, NGOs and development, medicine, poverty and language. Similar teams are planned for the Americas and Europe.

To provide the standards and tools, the department has a global director, who is responsible for overall compliance issues, setting corporate and departmental labor policy, and outreach to NGOs and other interested organizations. The director is the primary link between the department and outside consultants (in fields as diverse as industrial hygiene, cultural and management training, and auditing); to senior management; and to the five NIKE departments that have an interest in contract factory issues: production, NEAT, communications, public affairs and governmental affairs. The department also has a training manager, whose job is to train NIKE and contract managers in the labor practices issues.

Finally, while less tangible but no less important, is the fact that over the past 20 years we have established long-term relationships with select subcontractors, and we believe that our sense of corporate responsibility has influenced our subcontract partners.

While it is always better to work with factories to resolve code of conduct compliance issues, NIKE is willing to stop doing business with factories that don’t take our Code of Conduct seriously. If, after given adequate opportunity to remedy problems, NIKE is prepared to stop doing business with factories who persistently fail to abide by NIKE’s Code. Recently, NIKE severed its relationship with several

Indonesian-based contractors to maintain compliance with its Code of Conduct requirements for wage levels and working conditions.

Overall, NIKE believes it has a Code of Conduct which instills our corporate philosophy with the people making NIKE product – be that the factory owner/manager or the worker. We also believe that we have a monitoring system that works. That doesn’t mean that problems won’t come up from time to time.

Remember these are factories we are dealing with – many in the developing world with several cultures involved. Our goal is to prevent problems from arising in the first place by ensuring our Code is understood through a variety of educational and training procedures. But we have strengthened this effort with a monitoring system that identifies problems if they occur and provides remedies in a timely basis.

NIKE’S INDUSTRY -WIDE INITIATIVES

In addition to the actions NIKE is taking itself to address working conditions in factories making NIKE products, we are actively engaged in several global initiatives to get the footwear, apparel and sports equipment industry to address working conditions as an industry. One such initiative affects the soccer ball industry in Pakistan.

PAKISTAN SOCCER BALL INDUSTRY

The use of child labor in Pakistan's soccer ball industry has been a long-standing problem. Although NIKE began sourcing soccer balls from Pakistan just two years ago, we quickly recognized the inherent problem with their soccer ball industry; soccer ball panels are sent out to local villages for stitching -- where it is extremely difficult to monitor who actually ends up stitching the balls.

Well before the Soccer Industry Council of America and the global soccer industry developed an industry wide approach (discussed below)

NIKE and SAGA Sports (our Pakistani manufacturer) determined that the best way to control the stitching process is to eliminate stitching outsourcing and instead do all stitching in centers where it is easier to monitor the ages of the stitchers.

By September 1997 SAGA Sports opened and began operations in five such centers. Additional stitching centers will be completed by December 1998, raising the total to 15 centers. SAGA Sports will have created a controlled, monitored and child labor-free work environment for 7,500 people who, just two years ago, were stitching soccer balls in small village huts and homes.

SAGA is the first Pakistani manufacturer to eliminate the use of the outsourced stitching system and hire employees directly to ensure they meet the minimum age requirements. The stitchers receive the same benefits as SAGA factory workers, including free medical care for workers and their immediate family; group life and disability insurance; free meals; free transportation to and from work; a fair-price shop to sell staples at below market cost; on-site child care facilities and retirement benefits. SAGA is also building schools in the surrounding area and will pay tuition for all stitcher's children. SAGA donates books, supplies and necessities to existing schools in each village where it builds a stitching center.

In addition, this year NIKE was instrumental in leading the U.S. soccer ball industry in addressing the problem of child labor in the stitching of soccer balls in Pakistan.

Working with the Soccer Industry Council of America (SICA), The World

Federation of Sporting Goods Industries, and a coalition of leading Pakistani soccer ball manufacturers, NIKE and other major brands developed a two-prong program designed to eliminate child labor from the soccer ball industry and place Pakistani children into schools. This program, based on SAGA’s stitching centers, is being coordinated under the International Labor Organization's International Program on the Elimination of Child Labor (IPEC) and Save the Children, an international human rights organization. NIKE has pledged to use only Pakistani-manufacturers who actively participate in the program and agree to monitoring provided under the agreement.

PRESIDENT CLINTON’S APPAREL INDUSTRY PARTNERSHIP

In August of 1996, President Clinton invited NIKE and several other key U.S. companies to work with human rights, labor, religious and consumer groups to devise ways to inform consumers that the products they purchase were made under good working conditions.

In April 1997, the Apparel Industry Partnership (AIP) completed the first part of its work by completing a model workplace Code of Conduct based on International

Labor Organization (ILO) standards. The Code is a broad set of principles that participating companies agree to abide by and enforce amongst their contracting factories. The standards include prohibitions against child, forced and bonded labor, caps on weekly and hourly work, provisions for freedom of association, fair wages and collective bargaining, and a variety of other standards. In spring of 1998, NIKE changed its Code of Conduct to incorporate the standards developed in the AIP.

All participating industry members likewise agree to incorporate both internal (company specific) as well as external (independent organization) monitoring systems to ensure compliance with the Code. The agreement provides specific principles to guide the monitoring mechanisms. NIKE has begun to incorporate many of the principles in our internal and external monitoring practices.

In the second phase of its work, the AIP is continuing to work toward the development of an Association which will facilitate the operation of the Code and monitoring principles. The issues Partnership members have been discussing include developing criteria for companies to join the AIP, developing standards and procedures for the qualification of external monitors and identifying ways to inform consumers about the AIP. It is expected the AIP will finish its work in early 1998.

NIKE is prepared to work on similar initiatives and has recently been discussing how to contribute to a similar process in Europe with several European human rights organizations, labor unions and government officials.

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NIKE LABOR PRACTICES:

What it is; How it works

"At every step of the product process, from initial concept until it is used on the athletic field or court,

NIKE can and should be the leader."

That simple statement defines the NIKE's Labor Practices Department mission: to assure best practices in every factory where NIKE products are made, regardless of who owns the factory, who operates the factory, or the scale and duration of our presence there.

The labor practices department, like many of NIKE's initiatives in this field, is a first. On October 1, 1996, when it was inaugurated, no other company in the United States had a group of people dedicated full-time to assuring contractor compliance with its Code of Conduct in manufacturing sites around the world.

The Labor Practices Department has two roles. 1. To establish, and continually refine, standards by which we judge the performance of our contractors. 2. To provide the tools for NIKE employees worldwide to assure contractors meet those standards.

To carry out these tasks, the department has people on the ground in key source countries, and people with a global scope to develop the standards and the tools. On

the ground, Labor Practices has a director for Asia-Pacific, the most important sourcing region, and labor practices managers in four key source countries: Vietnam, Indonesia, China and the Philippines. Each of those managers has at least one inspector, who moves from factory to factory, inspecting, recording and communicating the labor practice goals. The Asia team was selected to bring many talents to bear -- expertise in culture, training, production, NGOs and development, medicine, poverty and language. Similar teams are planned for the Americas and Europe.

To provide the standards and tools, the department has a global director, who is responsible for overall compliance issues, setting corporate and departmental labor policy, and outreach to NGOs and other interested organizations. The director is the primary link between the department and outside consultants (in fields as diverse as industrial hygiene, cultural and management training, and auditing); to

senior management; and to the five NIKE departments that have an interest in contract factory issues: production, NEAT, communications, public affairs and governmental affairs. The department also has a training manager, whose job is to train NIKE and contract managers in the labor practices issues.

The success of NIKE's contractor labor practices hinges on the extent to which production people understand and embrace NIKE's responsibilities for workplace issues, and the extent to which contract managers carry out these responsibilities. The two key concepts that drive the process, as expressed in the Code of Conduct, are: best practices, and continuous improvement. And one key point of view has to be uppermost: view every step, every investment, and every program, through the eyes of the worker. What does this do for her, and for him?

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SO YOU THINK YOU KNOW NIKE?

I bet you didn’t know that:

NIKE creates jobs, spurs economic development worldwide.

NIKE has created nearly 500,000 jobs worldwide.

The first NIKE shoe was made in Japan 25 years ago and today that country is our second largest consumer market.

"...plants making clothes and shoes for foreign markets are an essential first step toward modern prosperity in developing countries." New York Times, 6/22/97

When NIKE enters a country to manufacture products, wages increase and poverty decreases.

"The overwhelming mainstream view among economists is that the growth of this kind of employment is tremendous good news for the world’s poor," Paul Krugman, Professor of Economics, Massachusetts Institute of Technology.

NIKE is leading the sporting goods industry in improving factory working conditions.

NIKE created the sporting good industry’s first Code of Conduct in 1992 to ensure that workers manufacturing NIKE products know and can exercise their rights.

NIKE has almost 1000 employees in factories every day monitoring working conditions and making changes when needed.

"NIKE is doing a good job... But NIKE can and should do better." - Former United Nations Ambassador Andrew Young, a man with four decades of human rights experience, after visiting NIKE factories in China, Indonesia and Vietnam.

NIKE was the first company to have its Code of Conduct monitored by an independent third party, the international accounting firm Ernst & Young.

When factories can’t live up to our Code of Conduct, as in the case with four Indonesian subcontractors, NIKE terminates their contract.

NIKE is a founding member of President Clinton’s Apparel Industry

Partnership, a group composed of trade unions, religious and human rights groups, and industry participants, who have agreed to voluntary standards and objectives for international labor practices.

Providing the wages, dignity and respect workers deserve.

People who work in NIKE subcontracted factories never earn less than the minimum wage -- and frequently earn more.

NIKE has always stood for gender and racial equality in sports and does not tolerate discrimination of any kind in sports or the workplace.

NIKE factory contract workers sometimes earn more than state salaried doctors and engineers in their respective countries.

Most NIKE subcontracted factories provide their workers benefits such as free or subsidized housing and food, medical care, and child care.

In some locations, the medical staff who care for NIKE employees provide health care to all people who live in the area.

Contributing to the world’s communities.

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.

NIKE knows that what is good for the environment is good for business.

NIKE’s Environmental Action Team (N.E.A.T.) takes a holistic approach to ensure that every step of a NIKE product’s lifecycle is examined and continually improved to become more environmentally friendly.

NIKE was the first company in our industry to use water based solvents in production, reducing volatile solvent use by 200,000 gallons monthly.

So, now you know a little more about NIKE.

Hey, we’re not perfect. Like every determined athlete, we occasionally stumble. But we’re getting stronger as the race progresses.

When NIKE leads, others follow. We’re the leader -- always have been, always will be.

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