Monday, December 2, 2019

Nike and Winning at All Costs

Win

In running circles, Nike has been in the news quite a lot this year.

In May, Nike was criticized for its maternity policy (of lack thereof) for sponsored runners (SeeNike Told Me to Dream Big, Until I Wanted a Baby”).

In September, Nike’s running coach, Alberto Salazar, was suspended for 4 years for facilitating doping. (SeeNike’s Elite Running Group Folded After Suspension of Coach Alberto Salazar”)

In October, Nike's sponsored runner, Eliud Kipchoge, ran the first sub-2 hour marathon, wearing the much-hyped Nike Vaporfly shoes. (SeeEliud Kipchoge runs first ever sub-two hour marathon in INEOS 1:59 challenge”) (See also, “Achieving the Seemingly Impossible: A Tribute to Eliud Kipchoge” by our own Colleen Baker)

In November, former Nike-sponsored runner Mary Cain’s allegations of verbal abuse and weight shaming went viral. (See “I Was the Fastest Girl in America, Until I Joined Nike: Mary Cain’s male coaches were convinced she had to get “thinner, and thinner, and thinner.” Then her body started breaking down.”) (See also, “Mary Cain Speaks Out Against Nike and Coach Alberto Salazar Over Emotional, Physical Abuse”)

I think Robert Johnson of Let’s Run gets it right - Don’t Believe The Spin, Nike’s Treatment Of Mary Cain Is Very Much In Line With Its #1 Core Value: Win At All Costs. And, at least based on what I see among my serious running friends, the negative press is not hurting Nike’s sales. The Nike Vaporfly shoes are the best running shoes on the market, and the negative press appears to be rationalized or ignored by consumers. Even the author of the Mary Cain story for Sports Illustrated (which was extremely critical of Nike) donned a Nike kit and the Nike Vaporflies in his recent marathon.

So here is the perennial business law question: is Nike's "ruthless winning" strategy proper, or even required? As we all know, the business judgment rule allows Nike’s board of directors a great deal of flexibility in their decision-making. But the pull of the shareholder maximization norm---and the fact that shareholders hold many more accountability tools than other stakeholders---makes the results above pretty unsurprising.

Former Chief Justice of the Delaware Supreme Court has posted a paper with some ideas for encouraging more prosocial behavior by U.S. corporations, but there are no easy solutions and still much academic work to be done in this area.

https://lawprofessors.typepad.com/business_law/2019/12/nike-and-winning-at-all-costs.html

Business Associations, Corporate Governance, CSR, Haskell Murray | Permalink

Comments

I have a great deal of sympathy for a high school or college athlete who, having perhaps no alternative, has to endure an abusive coach. I have difficulty finding any sympathy to express for a professional athlete who signs on with Nike or one of its competitors, accepts training benefits and/or endorsement money, and then whines about the training being too tough or the regimen dictated by the funding source too demanding, as in the notion of "thinner, thinner, thinner". Surely the training facility has a lighted sign over the doorway marked "EXIT". What about a bit of self-policing on the part of the athlete? Should a Board of Directors really have to get involved with the training aspects of a hugely financially successful corporation that is providing a splendid return to shareholders? (Of course, if Draconian training methods are so notorious as to impair that return, that becomes an issue for the Board.)

Posted by: Craig Sparks | Dec 3, 2019 9:11:51 AM

Thanks for the comment, Craig. In response to---why didn’t Mary Cain just leave?--- people often ask similar questions about battered spouses, but hopefully we know that sort of question ignores the psychology of the cycle of abuse. Also, Mary was a teenager when she signed with Nike. On the board issue, I am not sure how much the directors knew about Alberto Salazar’s tactics prior to the viral stories, but the tone that the board set certainly facilitated or even encouraged him. If you are asking if I would like for financially successful corporations to sacrifice some returns to shareholders in order to treat their employees humanely, the answer is yes.

Posted by: Haskell Murray | Dec 3, 2019 10:12:49 AM

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