Nike Fighting Uphill Battle Over Bad Image

For years, the Nike name conjured up heroic images of Jordan, Agassi and Tiger. The swoosh made many people feel as if they were winners.

That Nike cachet has been clouded by a new image--of Asian workers in hot, noisy factories, stitching together shoes for as little as 80 cents a day.

Suddenly, Nike doesn’t seem so cool anymore. The biggest swoosh now is the sound of falling profits.

“I don’t want to be a billboard for a company that would do these things,” said James Keady, a graduate assistant soccer coach at St. John’s who quit this year rather than wear the swoosh as part of an endorsement deal between Nike and the nation’s largest Catholic university.

Keady is one of the most striking examples of a backlash against Nike, which felt it necessary to confront its image problem this summer by putting a few of the negative letters it has received on the cover of its annual report.

“Your actions so disgust me that I will never buy one of your products again,” read one. “I hope my attitude proves to be universal.”

Nike officials refused repeated requests to discuss the company’s image and labor practices.

Yet the criticism continues as Nike deals with woes such as an Asian financial crisis and a glut of expensive merchandise that have led to slumping sales and record losses.

In many ways, Nike has become a victim of its own success. Many young people wonder what’s left to like about a company that rakes in $9.6 billion a year, grabs nearly half of the U.S. athletic shoe market and puts the swoosh on everything from polo shirts to basketballs.

“All you have to do is walk into the student store and the entire rack of clothing has a swoosh on it,” said Christine Williams, a University of North Carolina junior who led a campus campaign last year opposing Nike labor policy after the school signed a $7.1 million endorsement deal. “It’s gotten really scary to me how much corporate America has gotten into our university.”

The “Just Do It” era has given way to a “Just Cool It” philosophy. Nike is toning down use of the swoosh, removing it from its corporate letterhead and most advertising nowadays, replacing it with an understated, lower case “nike.”

And Nike Chairman Phil Knight, who acknowledged he has been described as “the perfect corporate villain for these times,” took direct aim at the criticism in May with plans for reforms.

Knight promised to raise the minimum age for workers at Nike’s contract plants in Asia to 18, improve factory air quality, allow independent monitoring and provide free education for workers.

But critics said the reforms did nothing to address the main problem--that workers at those plants aren’t paid a living wage.

They say U.S. companies in Asia pay workers in China and Vietnam $1.60 a day and workers in Indonesia less than $1 when these employees say they need $3 a day to maintain an adequate living standard.

Nike officials have said the company pays the minimum wage or the industry standard in whatever country they operate in.

“These factories are sweatshops,” said Medea Benjamin, spokeswoman for the San Francisco-based human rights group Global Exchange. “They’re clean, well-lighted sweatshops, but they’re still sweatshops.”

John Harrington, a California investment manager who oversees a $100 million fund of socially responsible companies, faced Knight at last month’s shareholder’s meeting in Memphis, Tenn., and suggested the company could solve its image problem by doubling the 80 cents-a-day wages of its Indonesia workers.

Harrington said Nike could afford the raise by cutting $20 million out of its $1.13 billion advertising budget, or less than 2 percent.

“I think that the publicity they’d receive from that would be tenfold,” said Harrington, whose proposal was overwhelmingly shot down.

“If they paid living wages, I’d be telling everyone to support them. But I just don’t see it happening.”

In another response to critics, Nike appointed a vice president for corporate responsibility, Maria Eitel, who told shareholders at the annual meeting that the company plans to have an independent monitoring program at its factories by the end of the year.

“We don’t believe that corporate responsibility is a separate function that can be put into a box,” she told shareholders. “It has to be integrated into everything we do at the company. It’s a company of honest, caring people who want to learn from the past, and make the company the best it can be.”

Critics say that no matter how much Nike policy may change, the company still must deal with the rich-man, poor-man image of Knight’s wealth--estimated at $3.5 billion--set against a factory worker’s monthly earnings of $20.

“Last May, I said, ‘Mr. Knight, we want to work with you, we want to have a dialogue,’ and he screamed in front of people, ‘We will never have a dialogue with you!”’ Benjamin said.

However, she is the first to admit that critics have attacked Nike, rather than competitors such as Reebok and Adidas, solely because Nike is the world’s biggest athletic shoe and apparel company.

“We’ve always had the strategy that if you can change Nike, you change the industry,” Benjamin said.

Despite all the criticism, analysts say Nike can change its image and the brand name is more than strong enough to survive the 1,900 layoffs announced this year, when the company earned half as much as it did in 1997.

“I have to believe that Knight and the other people at Nike were in awe of the power of this creature they built,” said Clay Timon, chairman and CEO of Landor Research, a brand-consulting company in San Francisco.

“Whatever the swoosh touched turned to gold. Now the hardships they’re going through are going to make them work for it.”