Nike Gets Tripped Up While Trying to Change Its Culture

(Bloomberg Businessweek) -- Up until recently, sexual harassment claims at Nike Inc. followed a familiar trajectory in the #MeToo era. Women who worked at the company shared information about the abuse they faced at work. Shortly after, a group of executives left.

Now four former female Nike employees are suing the athletic apparel giant—not for sexual harassment, but for pay discrimination and limited opportunities for women to win promotions. The plaintiffs are seeking damages and an end to Nike’s alleged discriminatory policies. If the lawsuit clears the difficult hurdle of attaining class-action status, a lawyer for the plaintiffs says, she expects at least 500 more women to join.

“Just firing a few people is not going to change something that has been in the making for many years,” says Laura Salerno Owens, the plaintiffs’ attorney. “That’s not how this works.”

High-profile departures by men such as those at the NFL Network and CBS Corp. have been followed by those companies also being sued for sexual harassment. What makes the Nike suit different is that it aims to take down an alleged system of discrimination in which harassment is only one part of a larger problem. It also may mean that the ousting of bad actors may be just the beginning of a company’s legal trouble, rather than the end.

“If there is a culture of harassment within an organization, that probably suggests broader problems around gender equity,” says Emily Martin, vice president for education and workplace justice at the National Women’s Law Center. In the Nike case, those broader problems include accusations of depressed starting salaries and failure to promote women to the highest-paying jobs.

Harassment and pay discrimination often go hand in hand because they’re symptoms of the same disease, women’s rights advocates say. Christina Chen-Oster, who is part of a class-action pay discrimination case against Goldman Sachs Group Inc., for example, said her career went downhill after a sexual assault from a co-worker. And Lilly Ledbetter, who took her pay discrimination case against Goodyear Tire & Rubber Co. to the Supreme Court, this year also acknowledged the sexual harassment she says she experienced while working there. “Often harassment is paired with other sorts of discrimination, since harassment is an expression of devaluing women in the workplace,” Martin says.

Nike has acknowledged problems within its workplace and is making some changes. It recently introduced an anonymous hotline for employees to raise office concerns, is offering companywide unconscious bias training, and is providing additional mandatory training for 10,000 managers. The company also recently hired its first chief diversity and inclusion officer.

The changes aren’t enough, say some former employees, because they do nothing to address a broader environment that demeaned and undervalued women. Kelly Cahill, a former senior producer, says a superior (who’s since been fired) used an anti-gay slur to refer to women on several occasions. Cahill, who now works for Adidas AG, also says she was paid approximately $20,000 less in 2017 than a man on her team who did similar work. Nike says its female employees make 99.9¢ for every $1 paid to men.

To achieve class-action status, plaintiffs have to prove systemic discrimination that goes beyond discrete incidents. That’s a high legal bar. Earlier this year, female engineers at Twitter Inc. were denied group status when a judge ruled that their experiences were the result of actions by individual managers, not companywide policy.

Still, suing as a class for pay discrimination is an easier legal route than for sexual harassment, which often boils down to one employee’s word against another’s. “You won’t have a company policy that says, ‘We harass women,’ ” Martin says. But companies may have pay practices that result in discrimination—and are therefore illegal. The problems at Nike, the lawsuit argues, begin with starting pay, which had been partially based on prior compensation. Nike also ranks its corporate employees and issues bonuses in a way that causes women to receive less compensation, the plaintiffs claim. As of last year, Nike’s senior leadership was 77 percent male, and those making promotion and bonus decisions are also mostly male.

That inhibits women from being fairly considered for promotion, according to the women. Those who are, the women say, are often channeled into positions that the company views as less valuable and therefore less likely to lead to continued career advancement.

In July, Nike revamped its pay structure, raising the salaries of about 7,400 employees, or 10 percent of its global workforce, and tying bonuses primarily to the success of the overall company. It’s also enabling gender-blind résumé reviews. Despite occurring within weeks of the dismissals tied to complaints by female employees, Nike said the changes were aimed at making it more competitive with other apparel companies. In an emailed statement, a spokeswoman for the company said diversity “is critical to driving our business forward.”

The lawsuit also accuses Nike’s human resources department of enabling the hostile workplace. In one instance, plaintiff Sara Johnston told HR that a male co-worker—one she often worked with and who contributed to her performance reviews—had sent her unsolicited naked photos. The HR department said no disciplinary measures were needed and promised to better train supervisors on handling sexual harassment complaints, according to the lawsuit, which says the training never happened.

In a statement, Nike said it “opposes discrimination of any type and has a long-standing commitment to diversity and inclusion” and that a “majority of Nike employees live by our values of dignity and respect for others.”

Many of these pay practices aren’t unique to Nike. Basing salaries on previous compensation, for example, is common. To close the gap between men’s and women’s starting salaries, some states, including Oregon, where Nike is based, have made it illegal. (Nike has said it will stop the practice over the next year.) But most organizations keep a veil of secrecy around salaries, making it difficult for people to know about discrimination.

That changes when a #MeToo moment hits a company, however, experts say. Women start talking to each other—not just about sexual harassment, but all forms of discrimination. And public-relations campaigns or even high-level dismissals may not be enough to extinguish that fire. “Companies should be put on notice,” Martin says. “Addressing harassment is not as simple as ensuring that when the complaint arises, it is addressed.”

To contact the editor responsible for this story: James Ellis at jellis27@bloomberg.net

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