99-10-05, Nike's answer on international letter

To all the signatories of the Clean Clothes Campaign's open letter:

Thank you for your letter. As promised at Nike's Annual General Meeting in Hilversum, Holland, I wanted to personally respond to the open letter you addressed to me. From the content and length of the letter, and from the list of signatories, it is obvious how seriously you regard the issues we are trying to tackle. I also see that we at Nike have a long way to go before we reach a point where you feel confident about our intent, our commitment and our actions when it comes to addressing the issues that face all global manufacturers. It has taken two weeks to respond to your letter because my team and I take these issues very seriously and we have been searching for a way to propose constructive discussions.

I could go into a long list of all of the things we have done over the past 17 months to continuously improve living and working conditions for the 500,000 workers in our subcontracting factories. Instead, our director for labor practices Dusty Kidd will provide an update and address the specifics in the letter attached.

The current state of communications between us - in which your organizations and supporters continue attacking Nike based on an unchanging list of past incidents and Nike offering answers which you clearly find unsatisfactory - is simply not advancing our understanding of global labor practices or the ways in which we are each working to improve them. We are searching for ways to better communicate with a large NGO community of varying interests and perspectives.

Let's start where we have common ground. I think we can all agree that we have a common goal of improving global manufacturing. I think we can also agree that this is really about creating healthy, empowering and rewarding employment for workers who support the global economy in manufacturing jobs around the world.

I know some of you may oppose the very concept of the globalization of the economy. We at Nike are a participant in it and believe that if managed responsibly, globalization can provide opportunities for everyone.

You might agree with us that there are companies that are working hard toward this goal and those that aren't. I believe Nike is one of the companies working toward this goal. However, I won't ask you to believe my words but rather to look at our actions.

I committed us to six new initiatives back in May '98 so you could judge Nike by our actions. These new initiatives included everything from improving the air quality in our factories to raising our age limits of workers. I'm proud of our team for the work we've done over that last 17 months at Nike, and I challenge any company to demonstrate a stronger record of real on-the-ground progress during this same time period.

But this commitment is just a start. We are now an active participant in the Global Alliance for Workers and Communities (www.theglobalalliance.org), strongly support the Fair Labor Association as it begins its work and continue to execute independent monitoring pilot projects with the goal of developing a comprehensive system.

We have spent time engaged in dialogue with workers and NGOs trying to build bridges so we can be more effective in improving the lives and working conditions of Nike contract workers. So, rhetoric, history and emotions aside, we are tackling these issues head on and focussing on the work on the ground.

We know we have a long way to go but we are determined to improve dialogue under appropriate circumstances with the concerned community because it is critical to improving our work. The problem is that the current process, in which we attempt to engage some of you in bilateral conversations, is simply unsustainable - it is episodic, repetitive and does not allow progress or mutual understanding. In fairness to you and to the people in this company that are charged with focussing on continuing to improve our supply chain working conditions, I believe we need a more structured dialogue and a better process for that dialogue.

I ask you to propose a process to us for dialogue in which we ALL have a stake and common goal - improving how we deal with the issues around global manufacturing. We look forward to hearing from you and working with you on how we might accomplish this. I have directed Maria Eitel, our vice president of corporate responsibility, to work with a core team of individuals you designate as representative of your collective interests. We are open to everyone's concerns but it is simply impossible for us to sustain a dialogue with so many interested organizations and individuals. The only precondition we want to put on that dialogue is that it includes workers and owner/manufacturers so those who are most affected have a voice and important role in the process.

It is our commitment, and my commitment as the leader of this company, to ensure we are making progress in this area. I hope - and I ask of you - that from this point on we can establish a process for talking together about this effort and its results.

Sincerely,

Philip H. Knight

October 11, 1999

To all the signatories of the Clean Clothes Campaign's open letter:

Phil Knight asked me to respond on his behalf to the letter posted by Clean Clothes Campaign, Netherlands, and co-signed by other organizations and individuals.

Nike will endeavor to send this response directly to all signatories, but in the event we do not have the contact information, perhaps you will be kind enough to forward this letter, on our behalf, to all.

Your letter was helpful to Nike. In six pages you summarized what seem to be the most important issues you individually and collectively have with Nike with respect to labor practices. If that is not the case, please send along an amendment so we can fully review and respond to all the current issues you wish Nike to address.

We can go back historically as far as you would like, as we know many issues from the past remain important. But the focus of Nike's Labor Practices department necessarily is on the present and the future, as we believe that is the most productive manner in which to deal with these issues.

One exchange of letters cannot effectively deal with ongoing issues and questions. Over the past three years Nike has engaged and exchanged information with a number of organizations, including a number who have signed your letter. We will continue to try to make those conversations more effective, and to be more responsive and informative when issues are raised with respect to specific factory or worker issues

Now to the substance of your letter to Phil:

Your letter begins with a basic point of view that 17 months after his speech at the National Press Club, Phil Knight and Nike have not followed through sufficiently on the pledges he made. It seems only fair to review what he said on May 12, 1998 and what we have done since that date.

That day, Nike raised our minimum age standards to 18 for footwear and 16 for apparel and equipment manufacturing, to put as wide a gap as practical between our global workforce and any possibility of employment of children in that global supply chain. In the intervening 17 months, in the relatively few instances where our oversight has found workers under those age limits, we have required management to remove those workers from the factory, to place them in school, to provide educational stipends, and to continue paying their full basic wage.

We pledged to require and enforce the U.S. Occupational Health and Safety Administration's permissible exposure limits for volatile organic compounds (VOCs) in all of our footwear factories. You note in your letter that Nike's program of replacing VOCs with other forms of solutions using water or detergent make it less likely that workers will suffer health impacts from the process of manufacturing footwear. We agree and believe our program, combined with the testing and remedial work done on other aspects of the factory, such as ventilation, has had a positive impact on worker health and safety. There is more work to do, and we are involving a number of organizations in that process, including individuals and organizations from the NGO community.

We promised that we would begin a systematic program of after-hours worker education opportunities in footwear factories. In the past 17 months, we have seen 22 such programs come on line. Three thousand workers are now receiving free education at factories in four countries. Some have criticized that program as diverting funds that might better be spent on higher wages. Nike believes the money invested in education has an important impact on the workers' future outside the factory and believes these skills will contribute to a better life for them.

We expanded a pilot project to support local communities through micro-enterprise and related developments. That program now reaches families in three countries - Vietnam, Thailand and Indonesia - including the families of some workers, and continues to expand. Some people also criticize this program saying that companies ought not to be in philanthropy, but ought to instead apply those investments to the wage base. The dollars invested in micro-enterprise create livelihoods for whole families, and in many cases we have observed, other jobs as well. We will continue to be active in this work.

Nike committed to opening up our process to include public dialogue on issues of corporate responsibility. Toward that end, in November 1998 we reviewed the results of our indoor air quality testing with our competitors, media and NGOs at an open forum in Bangkok. We are working on second and third forums, which will involve discussions of women and their rights in the workplace. If any of you have interest, please let Nike know and we will ensure you are involved in some manner in that discussion.

Nike also committed to involve NGOs in our independent monitoring process. Our labor practices staff has discussed this with a number of individuals in the NGO community. We have begun working through the process of building trust between Nike and some in the NGO community who have expressed an interest in this work. In the meantime, we are committed to active participation in the Fair Labor Association, which will involve NGO participation and oversight. We are also engaged in discussions with others in the NGO community on enhancing local NGO expertise in areas of monitoring that require considerable training - social auditing, bench auditing and health and safety oversight. We believe all three are important aspects of monitoring activity. We are committed to learning from pilot efforts at monitoring in order to build a comprehensive system.

Additionally, we have begun the process of NGO participation in the assessment of worker attitudes and issues through the Global Alliance for Workers and Communities. The evolving Global Alliance program will begin involving local organizations in Nike's overall approach to factory labor issues management. This approach has two parts: (1) worker-driven assessment of workplace/work-life issues; (2) development of programs to address the issues and needs raised by workers and assessors.

As with other aspects of Nike's overall oversight, the key goal is to enhance the individual's work and life experiences. A critical component of that concept is involving the worker herself, or himself, in the dialogue. Each factory that enters the Global Alliance will establish a project team that includes workers, managers, trade union representatives and service professionals such as clinic and kitchen staff. This project team, working with the local assessor, will determine the schedule and direction of assessment steps, and help keep employees informed as the work progresses.

Nike firmly believes that the process of monitoring, worker-driven assessment and development is the strongest possible platform for understanding and acting upon work/life issues.

Now that we have given you some background information on our efforts to date, Nike would like to address the specific points raised in your letter.

Worker dismissals. First, Nike would like to address your concerns regarding the three workers who are said to have lost their jobs in Vietnam based on participation in television interviews about Nike.

This issue was first brought to Nike's attention in the spring of 1998 via an e-mail from Mr. Tim Connor of Community Aid Abroad. Mr. Connor raised the question as to whether a worker at Samyang shoe factory in Vietnam, Ms. Lap Nguyen, had been treated unfairly, demeaned, demoted and dismissed or forced to resign because of her comments to an American television program about working conditions at the factory.

The source of the allegation, according to Mr. Connor, was Mr. Thuyen Nguyen of Vietnam Labor Watch. Nike's labor practices manager in Vietnam, who like Mr. Thuyen is also Vietnamese-American, investigated. He spoke to Ms. Nguyen, the trade union manager, factory management and workers in the sections where Ms. Nguyen had worked. His conclusion was that there were genuine work performance issues and that the factory's decision not to renew Ms. Nguyen's contract was legitimate. A Vietnamese Court heard Ms. Nguyen's case when she appealed for review. The court, reviewing all the documentation, concluded that the factory had acted properly.

In the fall of 1998, Mr. Connor visited me in Oregon, and asked about that case, and the specifics of the investigation. I declined to speak specifically about the case, or Ms. Nguyen, because we are always reluctant to discuss any individual's work-related issues with any person or organization that does not have standing to represent that worker.

In May 1999, in a conversation with Nike Vice President Maria Eitel, Ms. Medea Benjamin of Global Exchange expressed her concern that Nike was not responding to issues of wrongful dismissals of workers raised by Mr. Nguyen. In addition to Ms. Nguyen, whose circumstances and issues we reviewed with Ms. Benjamin (and through e-mails with Mr. Nguyen), she also raised what Mr. Nguyen said were the wrongful dismissals of two other workers who had spoken to the American television reporters. One was Ms. Khanh Chi, the other only identified as "Ms. Hong."

Nike was first informed of the allegations of wrongful termination with respect to Ms. Chi and Ms. Hong during Ms. Eitel's May 1999 discussion with Ms. Benjamin. Both were said by Mr. Nguyen (through Ms. Benjamin) to have been dismissed in April or May of 1999. Our labor practices manager again investigated, and found that Ms. Chi had, by all accounts, resigned to pursue a job opportunity in Korea. In fact, office staff remember her dropping by to say goodbye on her final day of work. Additionally, Ms. Chi never alerted Nike, the Samyang factory or the Confederation of Labor to any problem she may have had. To this date, the only source of the issue
has been Mr. Nguyen and despite repeated attempts to get more information
from him, he has not responded to me or to anyone else in Nike's Labor
Practices department.

As far as the third person, Ms. Hong, is concerned, the only worker our
investigations have been able to identify with that name resigned from
Samyang on April 30, 1999. We have asked Mr. Nguyen for any information to
the contrary but have so far been unsuccessful in finding any.

Your letter cites the case of Mr. Haryanto, an Indonesian worker and union
organizer who is alleged to have been dismissed for passing out Nike Code
of Conduct cards to workers at P.T. Lintas, an Indonesian shoe factory.
While we will continue to investigate this matter, here are the facts we
have discovered to date. Mr. Haryanto was hired to work at P.T. Lintas in
mid-1996 and, in a factory accident later that year, lost two fingers on
one hand. More than six months later, in March 1997, Nike first became a
customer of P.T. Lintas.

In mid-1998, during a downsizing directly related to a fall in Nike orders,
Mr. Haryanto was let go, along with 400 other workers. He appealed his
termination to the Ministry of Manpower and, though he was awarded a larger
termination package by the Ministry of Manpower and a local court, both the
government agency and the court determined that his dismissal was
appropriate. Subsequently, factory management, in conversations with Mr.
Haryanto and his attorney, offered to reinstate him at either P.T. Lintas
or a sister factory P.T. Astra. We understand that he has refused the
offer of reemployment. Attempts to contact Mr. Haryanto have been
unsuccessful, however, we have pursued this issue with Mr. Haryanto's trade
union and will continue to do so.

HKCIC Research. Your letter cites May 1999 research by the Hong Kong
Christian Industrial Committee and Asia Monitor Resource Center of
allegations of abuse at a factory in Vietnam, the same factory cited by Mr.
Nguyen as the site of worker dismissals. Nike has spoken a number of times
to HKCIC researchers this year, but have to date not heard of any such
research. We would appreciate any information about such allegations.
Your letter also cites what HKCIC's July research suggests are fire safety,
overtime and worker safety issues at the Sewon footwear factory in Qingdao,
China. One of our Asian labor directors, Mr. Todd McKean, would be happy
to accompany HKCIC staffers to that factory and review those issues, at
their convenience, on-site.

Dr. Ha Letter. Nike has repeatedly and publicly regretted that private
comments made by Nike executive Dr. Joseph Ha were misinterpreted as Nike's
corporate attitude towards human rights groups. In discussions with NGOs
associated with the Apparel Industry Partnership who expressed their
concerns over those remarks, Nike agreed to take a number of steps. Nike
wrote a letter to the Vietnamese government ministries concerned
reaffirming our belief that the NGO community offers things of great value
to companies like Nike and to countries such as Vietnam. We gave a copy of
the same letter to the Vietnamese newspaper that had published the text of
Dr. Ha's original letter and asked the paper to print the letter in order
to make our position clear in the same forum. Unfortunately, the paper
declined to do so. In addition, we provided copies of that letter to
international news agencies, and submitted a letter from our European
government affairs director outlining our company's posture on NGOs and
Vietnam to the Financial Times of London, which that paper published on
January 25, 1999. We also sent a delegation of senior Nike executives to
Vietnam to personally brief senior officials there on our position. The
only one of those steps that was not completed was publication of the Nike
letter in the Vietnamese press - they declined to publish it.

Nike has worked - and will continue to work - extensively with national
governments and a wide spectrum of human rights and labor groups to design
programs aimed at improving labor conditions. We continue to urge people
to judge Nike by our actions, not by the private correspondence of one
employee.

Formosa. Your letter alleges that despite our oversight of labor
conditions at the Formosa factory in El Salvador, Nike has not effectively
uncovered abuses which are said to have been brought to light first by the
National Labor Committee and, most recently, by Verite. We have a copy of
the report by Verite, which indicates there are continuing issues to deal
with, with respect to worker/management relations. Nike is working with
the management of that factory to make it a better workplace, using all
sources of information, including that most recent report.

There is work yet to be done but we believe, based on a considerable amount
of oversight not only by Nike but through audits, monitoring and visits
conducted by a half-dozen other buyers, that Formosa is improving not
simply its physical facility, but also its people management. It is
perhaps worthy of note that the same organization which two months ago
publicly charged that we are leaving the factory now signs a letter asking
us to continue making improvements. Nike would like the record corrected
here: Nike has been a customer of Formosa for a number of years, has not
left that factory, and has no intention of doing so. We will continue to
work with its management to make that workplace better, including frequent
on-site visits by our labor practices manager for Latin America, who is a
native Spanish speaker. It is critical we work to improve factories rather
than leave them. Taking our business out of a factory would likely
translate into lost jobs. In many cases, the factory will simply continue
manufacturing products for other companies under the same problem
conditions. Nike believes that working with the factories that are trying
to improve is the best way we can help the workers.

Nikomas. Your letter references a visit to Nikomas, a factory in
Indonesia, by a delegation from the United States. The facts, as we know
them, are as follows:

Representatives of two of the new unions being formed in the wake of
Indonesia's recognition of ILO core conventions contacted the union
representative at Nikomas, and requested a factory visit to discuss labor
issues. When the two delegates appeared at the factory, they were
accompanied by Jeffrey Ballinger of Press for Change, members of United
Students Against Sweatshops and representatives of the Indonesian Sportshoe
Monitoring Network. The factory union representative invited that group
into the union office at Nikomas, and discussed labor issues for about 45
minutes. When Mr. Ballinger asked for a tour, the union representative
contacted the senior factory manager present, who explained to the group
that tours of the factory can be arranged by requesting permission from
Nike.

The senior factory manager then spoke to the group and took their questions
for about an hour. During that time, some members of the delegation
specifically asked about the presence of armed security. In a press
release issued not long after, members of the delegation claimed that wage
talks at the factory had broken down, and the military was summoned. This
is not true. First of all, security at this factory is not armed.
Secondly, negotiations over wages had reached the end of the negotiating
period. The factory requested, and received, an extension from the
Indonesian government to continue talks. And the negotiations continue today.

In the meantime, Indonesia's civil order is again threatened. The factory
in question has 23,000 workers and is, in effect, a small city. Since it
opened in 1993, Nikomas has always had security personnel on site to
control access to the factory grounds, to provide security for the
dormitories (where 13,000 men and women have free housing), to provide
security against theft and other crimes, and to protect the factory in case
of civil disturbance, which as you point out is a continuing and serious
threat to all of the people of Indonesia - students, workers and managers
alike.

It is true that in Indonesia, there have been cases in the past of the
military being summoned to factory strikes. And during the last year, on
some occasions military units have been ordered to provide security where
there are large concentrations of people - not only around factories, but
also at office buildings and other such institutions. For example, as
recently as Tuesday last week such forces were deployed in and around the
UN building in downtown Jakarta. Any presence of military units for the
purpose of suppression at any of our contract factories is something we at
Nike abhor. We have specifically instructed factories not to allow
military personnel to be stationed on factory premises.

Jim Keady. You ask about Mr. Jim Keady, a former assistant soccer coach
from St. John's, a school whose athletic teams are supplied by Nike. If
his own statement at a rally in front of the U.S. Department of Labor
headquarters is to be believed, Mr. Keady was not fired. He resigned from
his position because of his conviction that, based on what he had read of
our labor practices, he could not wear our products.

We will not, however, encourage factory management to hire Mr. Keady or any
other signatory to your letter. To do so would make a mockery of the very
concept of the value of a job. Any one person hired to work in a factory
displaces someone else, and our number-one priority in this department is
to ensure the people who need those jobs get them.

Homeworkers Code. Nike will not sign the Australian Homeworkers Code of
Conduct for a very simple reason: we do not allow our contractors in
Australia - or anywhere else - to use homework as a means of production.
Therefore we have seen no value in signing onto a standard for a system we
do not use.

In 1995, Nike made a large mistake when we began to order soccer balls for
the first time from a supplier in Pakistan. When our production sourcing
group discovered that some portion of that work was performed through
contractors in villages and private homes, where children were in some
cases employed, Nike immediately joined our manufacturing partner, SAGA
Sports, in a process of converting all such production to stitching
centers. Homework, though a feature of production systems in many parts of
the world, simply cannot be monitored with confidence. There are too many
points on the ground, too many variables, and too many opportunities for
abuse of age, wage, hours and benefits standards.

Wages. We appreciate your acknowledgement of the steps we have taken on
wages in Indonesia. We continue to review that situation. It may be
helpful to bring more clarity to what we and our suppliers - footwear and
apparel - have done.

The agreed-upon full-cash minimum wage in Indonesia for footwear workers is
Rp271,000/month for a 40-hour work week, plus a minimum of Rp61,000/month
in additional cash benefits, so that even the lowest paid worker takes home
a minimum of Rp332,000/month before overtime. Non-cash benefits such as
housing (where provided), food, transportation, clothing and other benefits
are provided in addition to the cash wage.

Because we have less leverage in apparel factories, and their margins are
generally lower, apparel factories have not been able to make that much of
an adjustment. However, all but one of our apparel suppliers has increased
its minimum wage base, with the lowest in that group providing at least
Rp276,000/month to workers at the lowest skill levels working a regular
40-hour week.

The current government mandated minimum wage in Indonesia is Rp231,000/month.

Nike is doing all we can to ensure that the 500,000 people around the world
who manufacture our products are paid a fair wage, accompanied by an
appropriate package of benefits. These benefits vary by country but in
many cases factories do provide meals or meal subsidies, housing,
transportation, health care, child care, sick leave and cash bonuses. We
are systematically studying the issue of overall compensation, country by
country, through private research we have commissioned, by studying the
work of others and by cooperating in surveys and other joint projects.

As a member of the White House Apparel Industry Partnership, for example,
Nike will be reviewing a survey by the United States Department of Labor of
wages and need in several countries. We will use this study, along with
the other research and expert opinions we consult, to help us determine the
best way to encourage our factories to compensate manufacturing employees
around the world. Nike remains committed to ensuring that our partners
provide fair compensation that appropriately meets workers' needs.

We will continue to solicit input and work on this complicated issue
through all means at our disposal.

There are a number of other issues your letter touched upon, and I will try
to address those briefly here:

Protecting Women's Rights. Our Code of Conduct - to which we require all
our manufacturing partners to adhere - explicitly states that "there shall
be no discrimination based on race, creed, gender, marital or maternity
status, religious or political beliefs, age or sexual orientation." The
accompanying standards also do not allow pregnancy testing, and require
that women who are pregnant are provided specific additional considerations.

Ensuring the protection of women's rights is a priority for Nike moving
forward. Toward this end, Nike has initiated programs to improve the lives
of the women who work in factories manufacturing Nike products. For
instance, Nike has established factory clinics that provide health care and
counseling on childbearing issues and pre-natal care. In addition, Nike
has instituted specific job limitations for pregnant workers to minimize
the risk to the mother and unborn child. Outside the factory, Nike works
with non-governmental organizations to conduct informal education sessions
on important issues like prevention of sexually transmitted disease and
life skills training on nutrition and personal finance.

Human Rights in China. We believe the best chance we have of impacting
human rights in China is to create safe and steady employment
opportunities, and a climate where business can flourish and people are
more economically secure. The same philosophy applies to Indonesia, where
we are concerned that some organizations have called for a boycott on
Indonesian products - in effect bringing harm to the working people who
make those products. We do not believe it would be constructive to abandon
a manufacturing region like China, leaving thousands of employees without
much-needed jobs. We all recognize that there are restrictions on some
fundamental labor rights in China. Like some of the signatories to the
letter, we also recognize that given that reality, we should work
constructively to try to create parallel processes, so that issues normally
addressed in a more open labor environment can be addressed in China as well.

Disclosure. Nike understands the public's desire to know that the Nike
products they buy are made under safe and fair conditions. One way of
making this known is by disclosing the locations of our factories so that
independent monitors can inspect and evaluate them on a regular basis.
Nike has committed to this in two ways.

First of all, as the Fair Labor Association (FLA) becomes an operating
system, Nike has agreed to allow oversight of our independent monitoring of
factories (which in our current model has global monitoring of every
factory once each year, performed by PriceWaterhouseCoopers) as well as
annual public reporting by the FLA. We will use monitors certified by the
FLA to meet the organization's requirements. It is also our goal to begin
to integrate NGO participants into the monitoring process, as well as to
solicit their input in training our existing monitors. Anyone can apply.

The FLA's goal is to develop and implement unified standards for
independent monitoring and progressive change in manufacturing facilities
around the world. Nike will disclose its factory locations to the FLA for
monitoring purposes and each year the FLA will publish a report detailing
their findings.

Nike is also the only company which has offered to disclose the locations
of all factories where university licensed products are made, provided the
university joins the FLA and requires its other licensees to disclose their
factory locations. We believe this offer is a good first step. The
silence from others in the licensing community is deafening. Students
deserve to feel good about the sweatshirts and T-shirts and uniforms
bearing their university's logo.

Constructive Dialogue. We respect Clean Clothes Campaign's active interest
in the work and lives of the people around the world manufacturing Nike
products, and the interests and hard work of many other people and
organizations focused on the same issue. Our goal is to continuously
improve our work and the conditions in factories, and we look forward to
discussing a process for dialogue that Phil proposed in his own letter to
you.

As you have requested, we will work in good faith to ensure no worker is
exploited and that jobs are good opportunities for workers to build a
better life.

Sincerely,

Dusty Kidd
Labor Practices
Nike Inc.