Nike was begun in 1964 as Blue Ribbon Sports; the name was changed to Nike in 1978. It began as a partnership between an MBA candidate and a former track coach who had manufactured running shoes in his spare time. The company built its reputation on its technological breakthroughs in athletic shoes, and helped to introduce specialized shoes for different sports. Prior to companies such as Nike bringing forth this concept, most athletes used general purpose athletic shoes regardless of the sport in which they were participating, or the strains it put on their feet.
In addition to technology, Nike also brought comfort and fashion to the industry, although Reebok, a competitor, was more closely attuned initially to the effect that stylish shoes could have on fashion-conscious consumers. The company has a high profile in the international market, and ranked number one among American athletic shoe manufacturers in 1990. Annual rates of change for the five years ending 1997 were an impressive 17.5 percent for sales and 13 percent for profits; over the ten-year period ending in 1997, sales increased at an annual rate of 18 percent while earnings increased at 28 percent, a trend which indicates that the company is well managed and able to turn new sales into strong earnings (Chappell, 1998, p. 1669).
The proposed study will research the factors contributing the causes of negative publicity associated with Nike's labor relations and what effect, if any, its labor relations have had on shareholder wealth. There has been a large amount written about the company's labor practices in Asia (where its products, along with most of the products of its competitors, are manufactured); the publicity has even extended to coverage in a popular comic strip (Doonesbury).
The issue is to examine whether Nike's labor practices have impacted shareholder wealth, and what motivated the negative publicity surrounding the company. The company's labor...