In the summer of 2021, sportswear giant Nike gave employees at its head office a paid week off, to “rest and recover” from the stresses of the coronavirus pandemic.
That struck quite a contrast with the pandemic experience of the vastly larger number of workers who produce Nike’s products at its subcontractors’ plants in developing nations. Millions of garment workers in Asia saw their livelihoods devastated as global clothing companies cancelled orders in droves — and as we detail below, many say they are still waiting in vain for unpaid wages.
Outsourcing production to a fiercely competitive Asian manufacturing sector, with minimal responsibility to the workers within it, has enabled global brands to supply products at prices that delight their customers — and to splurge billions on share buybacks. But after the trauma endured by garment workers during the pandemic, it’s a good time to consider whether they deserve more support from the likes of Nike. Let us know what you think at email@example.com, or just reply to this email. (Simon Mundy)
Just do it: factory workers in Asia hold Nike to account
Since the pandemic outbreak threw Nike’s business plans into disarray in early 2020, the clothing group has bounced back in fine form. Its share price is well above its pre-pandemic level and it’s booked annual net income of nearly $7bn in each of the past two financial years — by far the most profitable period in its history.
In contrast, many of the workers for Nike’s Asian subcontractors are still reeling from the crisis. They claim they’re still owed wages and severance money that went unpaid as global brands cancelled factory orders en masse.
Now, 20 Asian worker unions and a pair of non-profit groups are trying to hold Nike to account — through an unusual route. They’ve seized upon the guidelines for responsible business conduct laid down by the OECD group of developed economies, which call on companies to carefully monitor for any adverse impacts of their operations and take action where these arise.
The complaint filed this week with the US “point of contact” for the OECD, which sits in the state department, accuses Nike of breaching those guidelines by abruptly cancelling a huge volume of orders in 2020, and failing to assist the workers whose incomes evaporated as a result.
Nike did not respond to a request for comment.
Lalitha Dedduwakumara, head of Sri Lanka’s TGCWU union, told me labour representatives had been shocked to learn about the $18bn share buyback scheme that Nike announced last year on the back of its swelling profits. “Some of that money could have been used to pay workers’ wages during the pandemic,” she said.
The unions — which include bodies from Cambodia, India, Indonesia and Pakistan — have been joined in their complaint by two non-profits: the Asia Floor Wage Alliance and US-based GLJ-ILRF. While the state department doesn’t have the power to compel Nike to act, the complainants hope that a public statement could shame the company into shifting its position.
Late last year, AFWA researchers visited 189 garment factories in six Asian nations. They estimated that workers at the plants were still waiting for $71mn in pay from the peak pandemic period.
This accounts for a small part of the fallout from a brutal period for the industry. Researchers at Penn State University estimated that garment manufacturers lost more than $16bn from order cancellations by US and European clients between April and June 2020.
Anannya Bhattacharjee, AFWA’s international co-ordinator, told me that the groups were targeting Nike because of its size — the company’s market valuation is $185bn — and because it had been especially “unresponsive” to complaints from workers’ representatives. She said this was part of a long-term push to establish that multinational companies hold responsibility for the workers that their business depends on, whether or not they have direct contractual relationships with them.
International clothing companies have developed extensive policies and collaborative initiatives to ensure their suppliers comply with the law — especially since the 2013 Rana Plaza factory collapse, which killed 1,134 workers in Bangladesh.
But researchers at Cornell University warned that garment worker pay actually declined in the years following the disaster, thanks to buyers’ relentless pressure for lower prices. Voluntary measures by companies had created “a flourishing auditing industry” without advancing workers’ rights, they wrote.
The answer, according to the complainants against Nike, is for multinational companies to build a proper relationship with the workers who make their products, rather than merely relying on declarations by factory owners. “The situation of workers has to be something that is part and parcel of these companies’ day-to-day business,” said Sahiba Gill of GLJ-ILRF. (Simon Mundy)
Winning a shareholder resolution isn’t the endgame
It’s hard enough for sustainability focused investors to get resolutions passed at shareholder meetings. But they should beware of celebrating prematurely.
That’s the message from a new study by researchers at the UN Principles for Responsible Investment, which found that companies are in no hurry to take action on this sort of shareholder resolution.
The study looked at 924 shareholder resolutions, focused on environmental, social, and corporate governance issues or shareholder rights, filed last year at companies in the US-focused Russell 3000 index. Only 78 of these won majority support.
The researchers then contacted all the companies hit by those 78 resolutions and the shareholders who proposed them to ask about the implementation of the resolutions.
Of the two-thirds of the companies that responded (nearly all the shareholders did), the results were disheartening. Only half the companies said they had implemented, or would implement, the resolutions. Investors were still more downbeat, saying that only 23 per cent of the resolutions were being implemented.
It’s worth noting that these sorts of resolution are not binding in the US, so companies are legally within their rights to ignore them. But the rate at which they are doing so will be discouraging for those who’d welcomed an increase in the modest rate of support for ESG-focused resolutions — and for those who want to see companies pay more attention to shareholder demands in general.
Emmet McNamee, who co-authored the research, said the findings showed the need for investors to chase companies to take action following shareholder resolutions — and to put pressure on board directors, including through votes against their reappointment where necessary. “Investors have a very long laundry list of things to do, so in some ways it’s a depressing realisation — you can’t just walk on to the next issue; you need to be persistent,” he told me. (Simon Mundy)
The tight US labour market has had a troubling side-effect: a surge in child labour violations. The news comes as at least five US states have attempted to relax child labour laws in the past year.