100% ANSWERED BY A WRITER- Ethical, Social, and Sustainable Decision-Making – Advertising or Free Speech? The Case of Nike and Human Rights

Brief Integrative Case 1.1
Page 101
Advertising or Free Speech? The Case
of Nike and Human Rights
Nike Inc., the global leader in the production and marketing of sports and athletic
merchandise including shoes, clothing, and equipment, has enjoyed unparalleled
worldwide growth for many years. Consumers around the world recognize Nike’s
brand name and logo. As a supplier to and sponsor of professional sports figures
and organizations, and as a large advertiser to the general public, Nike is widely
known. Nike was a pioneer in offshore manufacturing, establishing companyowned assembly plants and engaging third-party contractors in developing
countries. As an early adopter of this manufacturing model, Nike has faced a
variety of ethical and moral challenges over the last three decades.
In 1996, Life magazine published a landmark article about the labor conditions
of Nike’s overseas subcontractors, entitled “On the Playgrounds of America, Every
Kid’s Goal Is to Score: In Pakistan, Where Children Stitch Soccer Balls for Six
Cents an Hour, Their Goal Is to Survive.” Accompanying the article was a photo of
a 12-year-old Pakistani boy stitching a Nike-embossed soccer ball. The photo
caption noted that the job took a whole day, and the child was paid US$0.60 for his
effort. Up until this time, the general public was neither aware of the wide use of
foreign labor nor familiar with the working arrangements and treatment of laborers
in developing countries. Almost instantly, Nike became a poster child for the
questionable unethical use of offshore workers in poorer regions of the world. This
label continued to plague the corporation as many global human interest and labor
rights organizations have monitored and often condemned Nike for its labor
practices around the world.
In the years following, Nike executives were frequent targets at public events,
especially at universities where students pressed administrators and athletic
directors to ban products that had been made under “sweatshop” conditions.
Indeed, at the University of Oregon, a major gift from Phil Knight, Nike’s CEO,
was held up in part because of student criticism and activism against Nike on
Nike took immediate action to repair its damaged brand. In 2001, the company
established a Corporate Responsibility and Sustainability Committee to ensure that
labor practices were ethical across its supply chain. By 2003, the company
employed 86 compliance officers (up from just three in 1996) to monitor its plant
operations and working conditions and ensure compliance with its published
corporate code of conduct. In 2005, Nike became the first among its peers to
release a complete listing of all of the overseas factories that it contracts for labor.
That same year, Nike released the pay scales of the factory workers and addressed
actions it was taking to further improve conditions. Even so, the stigma of past
practices—whether perceived or real—remained emblazoned on its image and
brand name. Nike found itself constantly defending its activities, striving to shake
this reputation and perception.
In 2002, Marc Kasky sued Nike, alleging that the company knowingly made
false and misleading statements in its denial of direct participation in abusive labor
conditions abroad. Through corporate news releases, full-page ads in major
newspapers, and letters to editors, Nike defended its conduct and sought to show
that allegations of misconduct were unwarranted. The action by the plaintiff, a local
citizen, was predicated on a California state law prohibiting unlawful business
practices. He alleged that Nike’s public statements were motivated by marketing
and public relations and were simply false. According to the allegation, Nike’s
statements misled the public and thus violated the California statute. Nike
countered by claiming its statements fell under and within the protection of the
First Amendment, which protects free speech. The state court concluded that a
firm’s public statements about its operations have the effect of persuading
consumers to buy its products and therefore are, in effect, advertising. Therefore,
the suit could be adjudicated on the basis of whether Nike’s pronouncements were
false and misleading. The court stated that promoting a company’s reputation was
equivalent to sales solicitation, a practice clearly within the purview of state law.
The majority of justices summarized their decision by declaring, “because
messages in question were directed by a commercial speaker to a commercial
audience, and because they made representations of fact about the speaker’s own
business operations for the purpose of promoting sales of its products, we conclude
that these messages are commercial speech for purposes of applying state laws
barring false and misleading commercial messages” (Kasky v. Nike Inc., 2002). The
conclusion reached by the court was that statements by a business enterprise to
promote its reputation must, like advertising, be factual representations and that
companies have a clear duty to speak truthfully about such issues.2
In January 2003, the U.S. Supreme Court agreed to hear Nike’s appeal of the
decision in Kasky v. Nike Inc. from the California Supreme Court. In Page 102
particular, the U.S. Supreme Court agreed to rule on whether Nike’s
previous statements about the working conditions at its subcontracted, overseas
plants were in fact “commercial speech” and, separately, whether a private
individual (such as Kasky) has the right to sue on those grounds. Numerous amici
briefs were filed on both sides. Supporters of Kasky included California, as well as
17 other states; Ralph Nader’s Public Citizen Organization; California’s AFL/CIO;
and California’s attorney general. Nike’s friends of the court included the American
Civil Liberties Union, the Business Roundtable, the U.S. Chamber of Commerce,
other MNCs including Exxon/Mobil and Microsoft, and the Bush administration
(particularly on the grounds that it does not support private individuals acting as
public censors).3
Despite the novelty of this First Amendment debate and the potentially widereaching effects for big business (particularly MNCs), the U.S. Supreme Court
dismissed the case (6 to 3) in June 2003 as “improvidently granted” due to
procedural issues surrounding the case. In their dissenting opinion, Justices Stephen
G. Breyer and Sandra Day O’Connor suggested that Nike would likely win the
appeal at the U.S. Supreme Court level. In both the concurring and dissenting
opinions, Nike’s statements were described as a mix of “commercial” and
“noncommercial” speech.4 This suggested to Nike, as well as other MNCs, that if
the Court were to have ruled on the substantive issue, Nike would have prevailed.
Although this case has set no nationwide precedent for corporate advertising
about business practices or corporate social responsibility (CSR) in general, given
the sensitivity of the issue, Nike has allowed its actions to speak louder than words
in the years since. As part of its international CSR profile, Nike has assisted relief
efforts (donating to tsunami relief in 2004 and Haiti earthquake relief in 2010) and
advocated fair wages and employment practices in its outsourced operations. Nike
claims that it has not abandoned production in certain countries in favor of lowerwage labor in others and that its factory wages abroad are actually in accordance
with local regulations, once one accounts for purchasing power and cost-of-living
differences.5 The Nike Global Community Impact Fund (formally called the Nike
Foundation), a nonprofit organization supported by Nike, is also an active supporter
of the Millennium Development Goals, particularly those directed at improving the
lives of adolescent girls in developing countries (specifically Bangladesh, Brazil,
China, Ethiopia, and Zambia) through better health, education, and economic
opportunities. The Nike Global Community Impact Fund partners with more than
five dozen international partners to distribute donated products and funding to a
variety of causes across the globe.6 Environmental impact is also a key component
of Nike’s CSR profile. The company has focused on preserving water in the areas
where its products are manufactured, incorporating new technology that minimizes
the amount of water needed for dyeing processes. In 2018, Nike achieved 75
percent recycled material in its products, and 96 percent of its waste from the
manufacturing process was either recycled or converted into energy. In 2019,
Nike’s North American energy supply was 100 percent renewable; by 2025, the
company plans to power 100 percent of its worldwide facilities with renewable
energy sources.7
As part of its domestic CSR profile, Nike is primarily concerned with keeping
youth active, presumably for health, safety, educational, and psychological/esteem
reasons. Nike has worked with Head Start and Special Olympics Oregon, as well as
created its own community program, NikeGO, to advocate physical activity among
youth. Partnering with then First Lady Michelle Obama, Nike worked to implement
the “Let’s Move” campaign into schools across the U.S. In conjunction with the
U.S. Olympic Committee, Nike also sponsors Project Play, which aims to reshape
the direction of youth sports by encouraging children to stay involved and feel
included. In advance of the 2020 Olympics, Nike also launched a free online
training program for volunteer youth coaches. Furthermore, Nike is committed to
domestic efforts such as hurricane relief and bettering education, the latter through
grants made by the Nike School Innovation Fund in support of the Primary Years
Literacy Initiative.
Despite Nike’s impressive CSR profile, if the California State Supreme Court
decision is sustained and sets a global precedent, Nike’s promotion or
“advertisement” of its global CSR initiatives could still be subjected to legal
challenge. This could create a minefield for multinational firms. It would
effectively elevate statements on human rights treatment by companies to the level
of corporate marketing and advertising. Under these conditions, it might be difficult
for MNCs to defend themselves against allegations of human rights abuses. In fact,
action such as the issuance and dissemination of a written company code of
conduct could fall into the category of advertising declarations. Although Kasky v.
Nike was never fully resolved in court, the issues that it raised remain to be
addressed by global companies.
Despite the publicity of the case, at both the state and Supreme Court levels,
and the lingering criticism about its labor practices overseas, Nike has thrived over
the last decade. With strong and growing sales and profits globally, Nike was
ranked as the most valuable apparel brand by Brand Finance in 2019. It is
estimated that the Nike brand is now worth US$32 billion—far ahead of rival
Adidas (US$17 billion).8 The company has expanded its operations into different
types of clothing and sports equipment and has continued to choose successful
athletes to advertise its gear. Nike has shown no signs of slowing down, suggesting
that its name and logo have substantially recovered in the global market.
Questions for Review
What ethical issues faced by MNCs in their treatment of foreign workers
could bring allegations of misconduct in their operations?
Page 103
Would the use of third-party independent contractors insulate MNCs
from being attacked? Would that practice offer MNCs a good defensive
shield against charges of abuse of “their employees”?
Do you think that statements by companies that describe good social and
moral conduct in the treatment of their workers are part of the image
those companies create and therefore are part of their advertising
message? Do consumers judge companies and base their buying decision
on their perceptions of corporate behavior and values? Is the historic
“made in” question (e.g., “Made in the USA”) now being replaced by a
“made by” inquiry (e.g., “Made by Company X” or “Made for Company
X by Company Y”)?
Given the principles noted in the case, how can companies comment on
their positive actions to promote human rights so that consumers will
think well of them? Would you propose that a company (a) do nothing,
(b) construct a corporate code of ethics, or (c) align itself with some of
the universal covenants or compacts prepared by international agencies?
What does Nike’s continued financial success, in spite of the lawsuit,
suggest about consumers’ reactions to negative publicity? Have American
media and NGOs exaggerated the impact of a firm’s labor practices and
corporate social responsibility on its sales? How should managers of an
MNC respond to such negative publicity?
This case was prepared by Lawrence Beer, W. P. Carey School of Business, Arizona State University
as the basis for class discussion. It is not intended to illustrate either effective or ineffective
managerial capability or administrative responsibility.
Ericka Cruz Guevarra, “Oregon Student Organizers Protest Nike over
Sweatshops,” The Columbian, July 31, 2017,
Marc Kasky v. Nike Inc., No. 994446, 02 C.D.O.S. 3790 (Cal., San
Francisco Superior Ct. 2002).
Linda Greenhouse, “Free Speech for Companies on Justices’ Agenda,” New
York Times, April 20, 2003, A17.
Linda Greenhouse, “Nike Free Speech Case Is Unexpectedly Returned to
California,” New York Times, June 27, 2003, A16.
“Nike and Child Labour—How It Went from Laggard to Leader,” Mallen
Baker, http://www.mallenbaker.net/csr/CSRfiles/nike.html.
“What We Do,” Nike Global Community Impact Fund, 2019,
“Protecting the Environment,” Nike, 2019,
“Apparel 50: 2019,” Brand Finance, February 2019,
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Brief Integrative Case 1.2

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