This paper is going to present a discussion on Nike’s main officers, their compensations and some corporate governance issues that the company is facing.
Nike’s Main Officers
The main officers in Nike include Philip Knight, the chairperson of the Board of Directors; Mark Parker, the President, CEO, and a member of the Executive Committee; Donald Blair, the Executive Vice President and also the Chief Financial Officer; Trevor Edwards, President of Nike Inc. Brand; Jeanne Jackson, President, product and Merchandising; Erick Sprunk, the Chief Operating Officer (Nike Inc., 2014).
Brief Description Officers
Knight is Nike’s Chairman of the Board of Directors. He moved the company from just a small partnership, which was set up on a handshake, to the largest apparel, footwear and equipment corporation in the world. He is also the Chair of the company’s Executive Committee.
Parker has been the company’s President and CEO and director beginning from 2006. Mark Parker is also the Executive Committee’s member.
Blair has been the Chief Financial Officer at Nike for over the last ten years. He is also the main architect of Nike’s strategies for the delivery of profitable and sustainable growth. He is in charge of the company’s finances, strategic planning and investor relations functions. Blair has been named among the best Chief Finance officers in the United States (Nike Inc., 2014).
Serving as the Nike Brand President, Edward is in charge of leading all geographic and category business units, the Actions Sports and Jordan Brand, which encompasses Digital Sport, Hurley International LLC and brand management across the globe. He is also in charge of leading the company’s e-commerce and retail operations.
Jackson is the President in charge of Product and Merchandising. He leads the company’s merchandising and product engines. His responsibility is to drive the strategy for the creation of apparel, footwear and equipment for Nike as well as leading product merchandising to the international market.
Sprunk is Nike’s Chief Operating Officer and he leads all sourcing, manufacturing, information technology, as well as procurement for this company. He also oversees the efforts made by the company to drive innovation within its supply chain (Nike Inc., 2014).
Nike Officers’ Compensation Packages
According to OECD, a corporation is required to make disclosures on the way its senior officials are remunerated, the company’s financial performance in the course of a particular period, the board’s structure, the exposure of the company to risk, and any other piece of information that is relevant to the shareholders among other stakeholders (Jesover & Kirkpatrick, 2005). Among these is the issue of how the company’s senior officials are remunerated. Nike Inc. is required by the law to reveal the amount of money paid to officials and the basis of such play in its yearly proxy statements under “Securities and Exchange Commission regulations” (Nike Inc., 2014, p.1).
In disclosing payment made to its executives, this company listed which person it regards to be executive officers and these include the company’s “president and CEO, the Chief Financial Officer, the president Nike Inc. brand, the chief operating officer, and the president of product and merchandising” (Nike Inc., 2014, p.1). In remunerating these executives, the company utilizes several bases, which include the basic salary that is based on the recommendations made by the compensation committee, stock options, performance-based compensation, peer-group-based pay, and restricted stock (Nike Inc., 2014, p. 1). Basic pay is the payment made to the officer regardless of the performance of the company, while “performance-based pay package” is the money paid to the officer for the role he has played in meeting the company’s objectives. For example, in the course of the year ended 2014, this company revealed increased “performance-based” compensation for its President, Nike Inc. brand and “chief operating officer” in $900, 0000 and $750,000 respectively basing on the attainment of their performance targets (Nike Inc., 2014). On the other hand, peer-based compensation is made basing on what the company regards as being it compatriots both outside and inside the industry. Companies that have been used in carrying out assessment of peer-based compensation include Coca Cola, Starbucks Corporation, Gap Inc. and about fifteen other companies (Nike Inc., 2014).
Summary of Executive Compensation Table
Source: Nike Inc., 2014.
The table above presents compensation for fiscal 2014 paid to Chief Executive Officer, Chief Financial Officer and the next three most highly compensated executive officers. Basing on the table above, it can be seen that largest portion of the senior executives compensation package at Nike comes from the Non-Equity Incentive Plan Compensation.
A report was presented in the New York Times indicating that Mark Park, Nike’s president and CEO, was at the forth position in regard to people who are highly compensated in the nation in corporations, having at least five billion in the annual revenue (Sheketoff, 2013). Moreover, the company’s board chairman, Mr. Philip Knight is a billionaire and Fortune made estimates that he is worthy $19, which he made from this company (Willet, 2014).
Governance Issues Nike Faced
Being a huge manufacturing corporation, Nike Inc. at some point, has had to handle various corporate governance controversies and issues. The main issues that the company has dealt with are in relation with child labor and sweatshops, poor working conditions, reputation of the low-labor costs and environmental damage. Indeed, Nike has faced claims that it uses child labor and sweatshops in manufacturing its products, particularly in nations where there is no clear distinction between adult workmanship and child labor. In addition, the company has taken up the practice of contracting several companies within the Asian countries, which are known for having low labor costs. Following these practices, the company has faced accusations of engaging in the violation of labor laws. The accusation that was made recently was that Nike’s contracted firm in Indonesian was actually abusing its employees who were making converse shoes (TheHuffingtonPost.com, Inc., 2011). This company maintains that such allegations are actually a violation of its own “code of labor practice and that it has taken active steps to prevent the events from occurring” (Beder, 2002, p. 1).
More recently, this company has taken a beating for the accusations it had with some two popular but controversial athletes; Lance Armstrong and Tiger Woods. Nike’s association with these athletes contributed towards ruining of the company’s reputation and the company even went to an extent of losing financially. Nike uses a higher amount of money on promoting its product’s reputation as compared with most other corporations across the world. Such celebrities as Michael Jordan, Carl Lewis, Tiger Woods, John McEnroe, and Andre Aggasi are paid a large amount of money for the association they have with Nike’s products. For instance, the company paid $28 million to Tiger woods and $45 million to Michael Jordan, in 1998 (Beder, 2002).
It would not be a long time before the manufacturing ways employed by Nike were discovered. One of the initial accusations happened way back in 1996 when Nike’s engagement in child labor abroad in Third World nations was criticized in an article published by Life Magazine. Among the well-known kinds of demonstrations is the “Nike International Mobilization Day”, where protesters across the globe, take a role improving the working conditions for the Nike factory employees. At company’s stores, especially those in New York City and San Francisco, protestors were seen standing outside and handing leaflets to the customers giving description of the factories’ conditions where the manufacturing of Nike’s products is carried out. Various accusations and protests linked to these across the world compelled Nike to take action.
Nike started monitoring the working conditions within the factories, which produce the company’s products. This code is referred to as SHAPE, “Safety, Health, Attitude, People, and Environment” (Beder, 2002, p.1). The company spend approximately $10 million annually to adhere to the code, abiding by the fire safety regulations, air quality, overtime limits, and minimum wage. In the course of time, this company introduced a particular program to substitute its “petroleum-based solvents” with water-based solvents that were less dangerous. One year later, the company pointed out that it had replaced less dangerous chemicals, “in its production, installed local exhausts ventilation systems, and trained key personnel on occupational health and safety issues” (Beder, 2002, p.1). Nike has engaged in regulating a large number of its standards and goes on posting its standards, audit data and commitments as being part of its CSR reports.
The company went on defending its levels of wages with rhetoric and commissioned studies. The company’s CEO presented claims that the working conditions in factories in Asia had witnessed drastic improvements beginning from the time the company had started business. However, by 1998, the damage done on the reputation of Nike was starting to be felt in account books. The share prices were going down and sales were growing weak. Phil Knight accepted that, “Nike product has become synonymous with slave wages, forced overtime and arbitrary abuse” (Cushman, 1998). To deal with this, the company poured its marketing capability into its corporation status and looked for ways to portray themselves as a caring business organization, which concerned with the employees’ working conditions in the company’s contractors’ factories. Nike took a step to hire a former Microsoft executive to serve as the vice president for CSR and ensured expansion of its corporate responsibility department to seventy people (Beder, 2002).
In responding to the continuing criticism, Nike engaged in formulating a “code of Conduct” for the contractors it had. The code, whose initial formulation was carried out in 1992, and amendments carried out on it in 1997 as well as 1998, is intended to be applicable in all factories manufacturing Nike products. It encompasses recommendations for the minimum wages, maximum compulsory working hours, a prohibition on forced labor and the minimum environmental and safety standards (Beder, 2002).
Moreover, in relation to environmental damage, the first measure was to bring to an end the utilization of a poisonous adhesive referred to as toluene. This chemical has been found to be harmful to workers who are not guarded properly from it and the fumes emitted by it. Researchers at Nike substituted toluene with a water-based adhesive that does not have side effects. Knight gave assurance to the public that the company could go on with researching and by the time the year 1998 could come to an end, all the company’s factories would have met the “United States occupational Safety and Health Administration (OSHA) standards in indoor air quality” (Wisley & Lichtig, n.d. p. 1). To ensure this is assured, Nike pointed out that it will carry out indoor air tests of all the footwear factories as well as follow-up tests where need be. Such tests would lead to presentation of a final report created by an independent NGO. Each individual factory would be given 3 months beginning from the day the day of making the final report to take corrective measures to ensure levels of air quality are brought to those required by the OSHA (Wisley & Lichtig, n.d).
Moreover, Knight made an announcement that they would expand education programs within factories for all employees in the company’s footwear factories. Employees would be offered free classes in the course of non-working hours. It was projected that by 2002, the company would ordering only form the footwear factories, which offered some kind of after-hours lessons to the qualified workers (Wisley & Lichtig, n.d). Finally, Knight added that the company would also increase its support for “Micro Enterprise Loan program” to about 1000 families each in Thailand, Indonesia, Vietnam and Pakistan. This program offers loans to the women who want to start small businesses. The goal Knight had was to offer capital for over 5000 business by the middle of 1999. The focus of the program is that, women who are unemployed can engage in running small business, which can promote the economic welfare of their families and contribute to the overall development of their community (Wisley & Lichtig, n.d).
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