NIKPEN~1.txt; part of nikeworkers.com Nike Inc. web series; created Friday, June 19, 1998 5:38:15 PM; modified Saturday, February 14, 1998 2:11:26 PM saved by D. Boje as NIKpenaltysys (file origins).

The NIKE Code of Conduct sets the standards our contractors are expected to meet in operating their manufacturing sites. Although violations of the Code can and do occur, the correction and prevention of further violations is usually managed through a partnership process that includes an exchange of information on the violation, agreement on an action plan, and monitoring to assure that action is completed to NIKE's satisfaction. See The Nike Code -- What it is; How it works

What if action plans don't yield results? Sometimes a contractor simply doesn't do the job right, or doesn't truly accept need to make corrections that NIKE feels need to be made to assure a proper workplace. In addition, there are rare instances when a violation is egregious, and correction alone isn't enough to assure that the contractor will right the wrong.

When either situation occurs, NIKE has two further means of protecting the brand. The first and most preferable of these additional steps is to impose a penalty on the contractor. The penalty is in the form of a monetary fine. The second and last step is to sever the business relationship.

How does the penalty system work? When a contractor's actions alone will not lead to permanent correction of the behavior, NIKE's labor practices department will notify the contractor that it is being fined for the violation. The fine is set by NIKE, and NIKE alone.

The contractor must place the funds in escrow, as approved by NIKE, and submit a plan to use these funds to help correct the behavior or violation at issue, if appropriate. If there is not an obvious manner to invest the fine to correct the violation, the funds must be used in a program or investment that directly impacts and improves the worker's lot.

Because the concept of a penalty is to assure correction of behavior, the identity of the contractor and the amount of the fine are treated as confidential information.

What kinds of violations might prompt a fine? Any physical abuse of a worker; use of child labor; harassment or treatment of a worker that violates human dignity; willful violation of the Code; willful or negligent violation of environmental laws.

If a contractor persists in serious violations, at NIKE management’s discretion, additional and larger fines can be imposed. If the sum of all of these actions does not result in correction and remedy of a serious violation, or pattern of violations, NIKE will move to its final step.

NIKE will sever its business relationship if a manufacturer refuses to meet our standards, continues a pattern of violations, or has a single violation so egregious that

a continued relationship could harm the NIKE brand. NIKE's labor practices are designed to assure workers have the best possible work place. Severing ties could cost workers, who are not at fault, their jobs. This is a serious step and is reviewed at the highest levels of NIKE management. NIKE will extend every opportunity for the contractor to correct its practices.

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