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Nike report bites the dust despite Kasky settlement

October 2003

Nike has abandoned publication of its corporate responsibility report, despite reaching an out-of-court settlement to bring the long-running Kasky v Nike legal case to an end.

The US-based footwear and clothing company had suspended publication while the lawsuit – which involved a company’s right to make public statements on its social responsibility performance – came to a head this summer.

But even though the lawsuit is now settled, Nike says it remains at risk of similar actions because the Californian state law under which the case was originally brought is still in force.

As a result, Nike has decided not to publish its existing corporate responsibility report, which covers the fiscal year 2002, or its 2003 report – and will ‘continue to limit its participation in public events and media engagement in California’.

The settlement, announced last month, means the truth or falsity of Nike’s statements has not been tested in court. Under the deal, Nike will put an extra $1.5million (£900,000) into its existing workplace standards programme, which includes monitoring of suppliers. The money will go to the US-based Fair Labor Association to help Nike with ‘worker development programmes’ for its suppliers.

A joint announcement from the two parties said: ‘Investments designed to strengthen workplace monitoring and factory worker programmes are more desirable than prolonged litigation.’

Patrick Coughlin, attorney for Kasky, said: ‘Mr Kasky is satisfied that this settlement reflects Nike’s commitment to positive change where factory workers are concerned.’

Speaking through Reclaim Democracy, a US non-governmental organization that backed his case, Kasky added that his ‘trusted sources’ believed ‘working conditions have been changed significantly’ for the better since he filed the lawsuit five years ago. Reclaim Democracy described the settlement amount as ‘surprisingly low’.

Jim Carter, Nike’s general counsel, said that although an ‘amicable settlement’ had been reached, the company and ‘many other corporations’ in the US ‘remain concerned’ about the impact of the California law on transparency and ‘specifically on companies who wish to report publicly on their progress in the area of corporate responsibility’. However, other commentators argue Nike has over-reacted to the situation.

The law in California says statements from companies defending their social and environmental record can be regarded as having been made ‘for the purpose of promoting sales of its products’, and are therefore subject to state laws on advertising that bar ‘false and misleading commercial messages’.

Environmental campaigner Marc Kasky took Nike to court in 1998, claiming its statements on labour standards were false and therefore infringed the law. Arguments over the case reached the US Supreme Court this summer. But the Supreme Court decided it would not rule on the case until it had been heard in California.




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