Nike Shareholders Reject Proposal to ‘Pause’ Cotton Sourcing in China
Nike Inc. shareholders rejected a proposal to “pause” sourcing of cotton and other raw materials from China until a U.S. government advisory on forced labor in the Uyghur Region is lifted.
The activewear giant opposed the proposal, which was put forward at its annual shareholder meeting on Friday by Domini Impact Equity Fund and Vancity Investment Management Canadian Equity Fund.
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Laura Murphy, professor of human rights and contemporary slavery at Sheffield Hallam University, spoke in favor of the cotton proposal at the virtual meeting.
Murphy described how the Uyghur people, a Muslim ethnic minority group in China, are forced to work, some in camps while the rest are “assigned to jobs in state agencies” and face harsh treatment if they refuse.
It’s estimated that 85 percent of China’s cotton comes from the Uyghur region.
While Murphy applauded Nike for working with its first-tier suppliers to ensure its codes are followed, she said the company needs to go further back into the supply chain, checking that suppliers of yarn, cotton and raw materials are meeting its standards.
In the time allotted, Murphy made both the human case and the business case.
“A vote for this proposal is crucial to ensuring that Uyghur forced labor does not taint Nike product,” she said, pointing to the risks for both Nike and its shareholders.
But a majority of shareholders followed the advice of Nike, which previously advised shareholders to vote against the proposal and noted the company “does not directly source cotton or raw material, and we are committed to responsibly and sustainably sourcing our products.”
In the Q&A portion of the meeting, which was moderated by the company, China did come up again, but for its growth potential, not forced labor or reputational risk.
John Donahoe, president and chief executive officer, said Nike takes a “very long term-view of China,” a market it has spent more than 40 years building equity in.
“We continue to invest in China for China with China-right product that’s relevant and grounded in hyper-local athletic insights,” Donohoe said.
Donahoe also underscored the company’s competitive advantage globally in delivering innovation to the active market and its opportunity to expand in women’s.
Nike marked its 50th anniversary last May with a celebration backed up by a strong run for the company over the pandemic and saw sales increase 5 percent to $46.7 billion last year.
