$20M Lawsuit Against Nike CEO, Founder and Board Unsealed; New Details Emerge

UPDATE: Nike Responds to New Details Emerging From Lawsuit (Nov. 30; 6 p.m. ET)

In response to FN’s request for comment, a spokesperson for Nike provided the following statement:

“Nike’s Board of Directors strongly dispute the allegations in the complaint, and its members will vigorously defend themselves against these claims.  Nike’s Board acted swiftly, responsibly, and decisively to protect the interests of both Nike employees and shareholders.”

What We Reported Earlier (Nov. 30; 4 p.m. ET)

New details have emerged about the allegations contained in a lawsuit filed in late August against Nike, several of its executives and its board.

The suit, filed on behalf of three Nike shareholders, listed founder Phil Knight, CEO Mark Parker, former brand president Trevor Edwards and the company’s board as defendants. It claimed the group “facilitated, and knowingly ignored [a] hostile work environment that has now harmed, and threatens to further tarnish and impair, the company’s financial position.”

It was the second major legal case to hit the firm since a report in April purported internal behavioral challenges at the athletic behemoth. Details of the Aug. 31 case hadn’t been plentiful, since large sections of the complaint were sealed on Sept. 6, after Nike’s lawyers “successfully argued to have 25 of its 64 pages at least partially redacted,” according to the Portland Business Journal. But a legal challenge by the Journal to unseal portions of the document proved successful this week, making public for the first time certain details of the case.

Among the new information now available is how Nike’s board and management allegedly “dragged [their] feet in addressing the issue of sexual harassment and gender discrimination” at the company. Specifically, the shareholders claim Nike’s board was “regularly apprised of the nature and volume of allegations” that the firm’s employees were submitting to its anonymous whistleblower line, called the AlertLine.

The board was also expressly notified that the number of whistleblower reports sharply declined despite the company’s employee headcount increasing, and despite the trend in the industry steeply increasing,” the suit reads, adding that the decline in reports suggests employees had lost trust in Nike’s HR department.

“The board turned a blind eye to a red flag clearly pointing to significant employee reluctance to report violations of Nike’s Code of Ethics to the Nike HR department,” the suit alleges.

The now-unredacted portions also list specific dates of board meetings during which it said reports on the company’s diversity makeup were revealed — “Edwards himself attended the majority of the board’s meetings during which the board discussed diversity and culture,” the lawsuit states.

“Had the board made any reasonable inquiries — whether with members of the management knowledgeable on the issue of diversity and culture or with the company’s third-party vendor retained to operate Nike’s AlertLine — the board would have discovered a huge gender disparity in the number of female employees within the executive ranks,” the investors noted in the court filing.

In early August, Nike was hit with its first round of litigation resulting from its purported internal behavioral challenges that were first revealed by The New York Times in April. On Aug. 9, two former employees sued Nike alleging it “intentionally and willfully” discriminated against women with regard to pay and promotions, and that its majority-male executives fostered a hostile work environment at its Portland, Ore., headquarters.

The plaintiffs, Kelly Cahill and Sara Johnston, had resigned from their roles in July and November 2017, respectively. Cahill had worked as a communications director at the company for close to four years, while Johnston had been employed as an analyst for around a decade. (The women are seeking class action status for their claim.)

A third case against the Swoosh, came in October from former Nike footwear developer Cecily Schmidt, who filed a complaint with Oregon’s Bureau of Labor and Industries alleging discrimination based on her race and sex, a hostile work environment, retaliation for reporting unlawful conduct and violation of family medical leave laws.

All three cases follow a wave of 11 or so executive departures at the Swoosh this year after the April 2018 exposé detailed alleged systemic and widespread sexual harassment at the firm, which employs around 70,000 staffers. That same month, Nike admitted that it had fallen short in promoting women and people of color, and in July, it announced a plan to raise salaries for 10 percent of its workforce to help correct pay inequity.

Throughout the imbroglio, Nike has maintained that it “opposes discrimination of any type and has a long-standing commitment to diversity and inclusion. We are committed to competitive pay and benefits for our employees. The vast majority of Nike employees live by our values of dignity and respect for others.”

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