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Nike, Inc. – Sexual Misconduct Risk management – (2018)

Nike, Inc. – Sexual Misconduct Risk management – (2018)

Outcome: Withdrawn following a commitment from the company to evaluate our request and meet quarterly to discuss the results.

RESOLVED: Shareholders request the Board Compensation Committee prepare a report assessing the feasibility of integrating improvement of culture or diversity metrics into the performance measures of senior executives under the Company’s compensation incentive plans.

Nike has come under heavy public scrutiny for allowing a workplace with gender imbalance and pay disparity at its highest ranks. After internal complaints about inappropriate workplace behavior surfaced in March 2018, two veteran executives abruptly left the company. This moment of intense scrutiny is an opportunity for Nike to demonstrate leadership and to address the issue comprehensively.

There is a compelling business case for stopping and preventing harassment. Sexual misconduct can have a dramatic financial impact on investors. Wynn Resorts lost close to $3 billion in market capitalization just days after its CEO was accused of sexual misconduct. In terms of direct costs, in 2015 the EEOC alone recovered $164.5 million for workers alleging harassment. Misconduct not only incurs a cost on those who suffer the harassment, it may also reduce productivity, increase recruitment and retention costs and cause reputational damage.

According to the Wall Street Journal, at Nike, “leadership turnover in the last year has left fewer women in its executive ranks. The highest-ranking female executives are the company’s general counsel and head of human resources, the latter of whom was promoted last July.” The EEOC identifies workplaces with significant power disparities and workplaces that lacked diversity among the top risk factors for harassment. Studies have found that male dominated workplaces have been found to “tolerate, sanction, or even expect sexualized treatment of workers, which can lead to a culture of complicity.”

Nike can take proactive measures to significantly improve risk oversight and signal to investors – and employees – that the Board and management are committed to ensuring a safe workplace. ISS Analytics has published several indicators of effective sexual misconduct risk management:

Board committee oversight of sexual misconduct risk (including anti-harassment and discrimination policies and procedures)
A regular review of policies and procedures to confirm that effective grievance mechanisms are in place.
Proactively performing regular corporate culture health checks. Employees should be aware of policies and procedures, and feel safe reporting incidents without fear of retaliation.
Board expertise in workplace and employee issues. Inclusion and safety are integral parts of HR professionals’ roles and the Board would benefit from this type of background.
Material penalties for perpetrators and abettors. Imposing real penalties for abusive behavior sends a clear message of non-tolerance.
Executive compensation structures – at a minimum – contain incentives for creating a safe and equitable workplace. Promoting a diverse and equitable workplace culture helps to create an environment where employees feel safe and where an abusive culture is less likely to take hold.

We believe the report should include a description of resources devoted to harassment prevention including efforts to implement new approaches to training across all workforce groups and workplaces. It should also include the company’s strategy to create a gender balanced workforce.

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