Nike Founder, CEO and Board Facing $20M Lawsuit Over ‘Hostile Work’ Culture

The fallout stemming from reports of Nike Inc.’s alleged “boys club” culture continues.

The athletic behemoth’s board of directors, co-founder Phil Knight, CEO Mark Parker and former brand president Trevor Edwards are all named as defendants in the second lawsuit to hit the company since a report in April revealed its purported internal behavioral challenges.

The claim, filed last week by three Nike shareholders, alleges Knight, Parker, Edwards and the company’s board “facilitated, and knowingly ignored the hostile work environment that has now harmed, and threatens to further tarnish and impair, the company’s financial position.”

More specifically, the suit — which seeks at least $10 million in damages from the company’s directors and (at least) another $10 million from Edwards — states Nike officers “failed to investigate allegations of sexual harassment and discrimination; act to prevent members of management from harassing and discriminating against female employees [and] failed to implement adequate internal control and reporting programs to prevent the creation and maintenance of this hostile work environment.”

The new case stems from an April 2018 exposé by The New York Times detailing a culture of alleged systemic and widespread sexual harassment at the firm. That report further suggested that a recent string of executive departures at the company were prompted by an anonymous internal survey conducted by a group of female employees that claimed sexual harassment, demeaning comments, unfair treatment and other misconduct, which they delivered to CEO Mark Parker.

In total, at least 11 executives departed the Swoosh over the course of a few months. In April, Nike admitted that it had fallen short in promoting women and people of color, and in July, it said that it would raise salaries for 10 percent of its workforce to help correct pay inequity.

Still, last month, the brand was hit with its first round of litigation resulting from the scandal: 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.)

Departures of female employees — such as Cahill and Johnston — are among the motivating factors for the most recent suit against Nike’s leadership.

In their Aug. 31 filing, investors Shiva Stein, Alison Sherman and Lisa Udine allege that Nike’s HR department’s “acquiescence to the sexual harassment [of female employees] triggered the departure of several talented female employees,” leading to a disparity in female high-level leadership at the firm. (Stein, Sherman and Udine’s suit references a stat released by Nike in April stating its global workforce is evenly split among men and women but that just 29 percent of its VPs are women.)

While some industry insiders have praised Nike’s “swift” response to its internal behavioral issues — citing the abrupt executive exits and the company’s announcements of sweeping pay raises and other internal changes — the latest suit accuses the firm of producing a “belated and limited set of reforms.” It also alleges that the brand “unjustly enriched” Edwards — who resigned in March — “by tens of millions of dollars” instead of firing him for his alleged actions.

In an email exchange with FN today, a spokesperson for Nike denied the latest claims.

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

Also in an email exchange with FN today, Gustavo Bruckner, an attorney with Pomerantz LLP who is representing investors in the suit, doubled down on the claims against Nike.

“Integrity matters, and it starts at the top,” Bruckner said. “We seem to live in a time where bad behavior is not only tolerated but is rewarded. Stockholders will stand in the front lines policing corporate wrongdoing, but they cannot do it alone. We still don’t know the full extent of damage to the company from the suppression and exodus of top female talent, nor to the Nike brand.”

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