Corporate Governance of Nike Analysis

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An organization created under the regulations of a state to act as a legal person to carry on business, which can sue or be sued, can issue shares to raise funds with which to start or to increase its capital is a corporation. There are also non-profit corporations organized for religious, educational, charitable or public service purposes.

One of the corporations are the “Nike, Inc” which in other words can be said a company. And what here will be discussed the process how a corporate body that is Nike governs, ethic of it and the corporate responsibility of it upon the business world and balance of interest of the stakeholders such as Government, Employees, Customers, Suppliers, Creditors, Community. Corporate Governance:

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From the report of Cadbury Committee Chaired by Sir Adrian Cadbury 1992 it can be quoted the definition of corporate governance “the system by which companies are directed and controlled”. It means the outline by which the various stakeholders’ interests are balanced, as the International Finance Corporation states, “the relationships among the management, Board of Directors, controlling shareholders, minority shareholders and other stakeholders”.

According to Organisation for Economic Co-operation and Development (OECD) in “Corporate Governance, Value Creation and Growth” this is the infrastructure by which the objectives of the corporation are settled, implies in it the objectives’ meeting assurance and monitoring of it. However Sir Adrian Cadbury had mentioned in his book (3rd edition) Five Golden Rules what can help to define good corporate governance on the basis how it operates and can set out a practical methodology for implementing and monitoring its core goals.

These rules are having a clearly ethical basis to the business, having appropriate goals and the capability to achieve it through suitable stakeholder decision making model, having an effective strategy process which incorporates stakeholder value, creating an organisation suitably structured to effect good corporate governance and lastly having reporting systems structured to provide transparency and accountability. However this skeleton of a corporation has different types of shape depending on which constituent or interested party in the company’s operations has been given the most importance.

Nike: Origin, governing Functions A practical approach to set alight on the corporate governance will be to dissect the functional methods and business curriculums i. e origin, objectives, achievements, responsibilities, of a company like Nike. Nike was born as Blue Ribbon Sports (BRS) in 1964, founded by University of Oregon’s track athlete Philip Knight and his coach Bill Bowerman. At that time it was only a distributor of Japanese shoes. But the purpose of it was making quality American shoes. In 1972 Name changed to NIKE Inc, which was derived from the Greek goddess.

The team also convinced marathon runners at Olympic Trails to wear NIKE shoes and this resulted in strong advertising especially when several runners were some of the top finishers. Popularity continued to grow throughout the 70s by this time NIKE had 50% of the US running shoe market. NIKE goes public1988 with the Famous slogan “Just do it” introduced and company acquired Cole Haan. Throughout its existence, NIKE endorsed and sponsored different athletes like Michael Jordan the famous basketball player or Tiger Woods the young outstanding golf player and so many.

Afterward in 1992, opens its first NIKETOWN store and a few years later, it acquired Canstar Sports, which included hockey equipment maker Bauer. In 1997 the Jordan brand of athletic shoes was launched. 1998 was a hard year for it because of falling sales in Asia and had to cut the cost and employees. From 2000 NIKE started to move little more towards the electronic and technological sector and historical impact on the industry, NIKE released a line of running shoes, introduced a line of athletic electronics, including MP3 players, heart monitors, and two in one, which are always useful to athletes.

However at the present time it is now a mother ocean of Cole Haan, Converse, Hurley, Jordan Brand, Nike Golf, Umbro which puts different products in market mainly Foot wares and sports equipments. It contracted with more than 700 shops in 45 countries all around the world. Although it is an USA based company, its most of the factories are located in Asia, including China, India, Indonesia, Malaysia, Pakistan, Philippines, Taiwan, Thailand and Vietnam. Its mission’s statement is “to bring inspriation and inovation to every athlete in the world”. Ethics and Objectives:

Success in this era, now a days, means maintaining brand value and all that, Nike does not seem to be exceptional. It is reasonable for every company to have some codes or objectives or ethics written down somewhere, but what is important how it is communicating and enforcing throughout the ongoing business and production manner. Here can be quoted Kansas City Journal, by Arthur Chaykin “even Enron… had a perfectly good code of ethics. However, no one was responsible for enforcing it, advocating it or serving as a clearing house for issues arising under it”.

Nevertheless it is a fact, at least whenever training is not directly increases profit, the facilities are merely just a “nice-to-have” rather than necessity. For the remedy example of Oracle Learning Management is a highly suitable solution to this problem. Barrier to the objective: One of the important points in the notion of Corporate Governance is the Separation of Ownership and Control mechanism, this concept is fundamental to any definition of corporate governance and also known as the agency issue or Theory.

This separation creates the need for systems of independent monitoring and control as this freedom enjoyed by the wings of the corporations may sometimes increase the risk in business. Nike’s most of the factories are in Vietnam, Indonesia and China are totally owned and operated by Asian companies while NIKE is neither the legal owner nor even holds a direct control over the administration of these factories but these factories are dependent on Nike because of the huge influence of contract between them. It seems to be a great challenge for NIKE that they oppressed by the situation to rely on absentee owners.

Achievements and Success: However according to the survey of GoodWork in those factories NIKE’s goods were hygienic, ordered, satisfactorily ventilated and well lit. According to their report factories are very keen about the quality control. The Clean Air-Cool Planet, an pressure group has ranked Nike at the top three companies for their climate-friendly attitude on the basis of their survey. Reuse-A-Shoe program is also well known, longest-running program of Nike since 1993 works for the environment and the society by collecting old athletic items to process and recycle them.

Here can be mentioned in accordance with their mission statement Nike pays sponsors many sports by giving their products and promote and advertise their technology and design. A Romanian tennis player Ilie Nastase was Nike’s first sponsored professional athlete. It also sponsors various athletic programs at Penn State and it will be useful to demonstrate its strong values towards sports from example that the decision of not to diminish the relation instead of the Penn State sex abuse scandal. Few front spots of the governing system: Turn the clock back 10 years Nike was in the news.

It was found by a journalist three under-age workers were working in an Asian factory of Nike. However that time the Nike advocated about the strong corporate responsibility and enlightened that it was a mistake. And now it employs around 80 people all over the world within the supply chain. But yet there is no recognised scale to measure performance, and no standards for reporting on conditions in contract factories as well. To resolve these problems it has made own standards, programmes and activities to discover, tackle and and ensure the accountability of the issues in contract with the factories.

If a consumer would have ever emphasized how company like Nike makes it functions even if there is any breach of local law by the factories it will be absolutely not healthy for the growth of itself. For a healthy Corporate Governance, there should be proper and sound response of executive compensation, shareholder protection and should have respect to the international law as well as to the local law and government rules. However few examples had made some clear spot on the face of Nike’s corporate governance. At the time of 90s in Cambodia-Pakistan factories child labour was a sensitive issue.

From a BBC documentary (2001) it was shown in a Cambodian factory six girls used to work seven days a week and 16 hours per day. It seems in most of the Factories workers get rights such as housing facilities and minimum leisure in a very congestive manner. For the need of good governance I think the Code of Conduct of NIKE should be based on the relationship between NIKE, the plant ownership and management and the workers as in 2011 Nike itself stated “two-thirds of its factories producing Converse products still do not meet the company’s standards for worker treatment”.

Recommendations and conclusions: However recommendations can be made on the basis of the entire discussion It should continue its noble mission by supporting athletes and should take more forceful ladder to clarify the Code of Conduct of it. As the most important stakeholder is the consumer at side by side employee, bank and government all are very important so they need to work more specifically on the development of the outside factories’ regulations and management and should try to increase the living standard of their workers.

NIKE should expand its dialogue and relationship with the human rights community and the labor groups within the countries where they produce goods and with their international counterparts. In addition its external monitoring should be more effective thus it is important that NIKE’s professional audits ensure it.


1. Frederikslust R. (2008) ed 1st , Corporate Governance and Corporate Finance An European Perspective, London: Rautledge 2. Everatt D. , Slaughter k. 1999) ed 1st , Nike Inc: developing an effective public relations strategy, Canada: Richard Ivey School of Business, The University of Western Ontario 3. Avery C. (1999) Business and Human Rights in a Time of Change, www. business-humanrights. org :Business and human Resource Center 4. Than, Ker ( 2010). “Why the Deaf Have Enhanced Vision”. National Geographic Society. Retrieved 23 July 2011. 5. Kendall (2009-2012) Definition of Corporate Governance, www. applied-corporate-governance. com : Applied Corporate Governance

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