5.24.2007 - 09:00am ET

(CSRwire) BEAVERTON, OR - May 24, 2007 - NIKE, Inc. (NYSE:NKE) announced today that the company is resuming Nike brand soccer ball production in Pakistan with a vendor committed to setting new standards for workers' rights in the industry. Nike's agreement with its new contract factory, Silver Star Group, requires all workers to be registered as full-time employees who are paid hourly wages and are eligible for social benefits. The agreement prohibits the use of part-time workers paid piece wage rates per ball produced without access to health care and other social benefits, a standard industry practice.

The agreement also requires that workers have full rights to freedom of association and collective bargaining, as mandated by International Labour Organization (ILO) conventions. The contract factory also must comply with Nike’s labor compliance standards and with all requirements of the 1997 Atlanta Agreement and any identified successor agreements that establish labor and compliance standards in Pakistan’s soccer ball industry.

"Our decision to resume soccer ball production in Pakistan is the result of extensive work with stakeholders, based on a collective desire to help move the industry in a more competitive direction that strongly supports workers' rights," said Mark Parker, Nike, Inc.'s President and CEO. "Silver Star has committed itself to realizing this vision. We hope this is the beginning of broader, positive systemic change for workers, and that the example Silver Star sets will help Pakistan’s soccer ball industry create a new model of responsible, globally competitive manufacturing."

Nike expects to place its first order with Silver Star this summer, with production to begin in the fall. Initial and ongoing production with Silver Star will be contingent upon the factory's ability to comply with Nike's product and compliance standards and follow-through on its commitments to support workers' rights.

The decision to work with Silver Star comes about six months after Nike announced in November 2006 that it would cease placing orders with its primary hand-stitched soccer ball contract manufacturer. That decision was due to the factory’s inaction on correcting significant labor compliance violations and a fundamental breach of trust with factory management. Among the violations was widespread, unauthorized outsourcing of Nike production inside homes in the surrounding area. Although home-based production is common in the Sialkot-based soccer ball industry, Nike has a long-standing policy against such practices because of the potential for using under-age workers and the inability to verify safe working conditions in home-based settings.

Following its decision, Nike engaged with a diverse group of governmental, non-governmental and industry stakeholders to secure support for affected workers and to jointly explore fresh approaches to soccer ball manufacturing that could lead to improved working conditions and greater protection of workers' rights. The company is working with the ILO, the World Federation of the Sporting Goods Industry, and other stakeholders, including Pakistan government officials.

As part of that process, in February Nike requested proposals from 20 vendors for manufacturing hand-stitched soccer balls in Pakistan. The company received 13 proposals from Sialkot-based manufacturers and narrowed the list to four finalists. Those finalists were reviewed in-depth by Nike and by third-party organizations in Pakistan. Silver Star Group was selected as Nike's new contract manufacturer through that process and the successful completion of Nike’s standard evaluation procedures for new vendors.

Nike's request for proposal outlined nine workplace conditions that must be met, including hourly wages for workers, full benefits and rights to freedom of association. All production must occur within Nike-approved facilities, and technology must be installed to electronically track all Nike production and inventory.

More broadly, Nike's request for proposal also outlined the company's five key objectives for soliciting a new manufacturer in Pakistan: to remain in Pakistan despite the company’s cessation of orders from its prior contract manufacturer; to build a better manufacturing process which empowers workers, supports the community and enhances the local manufacturing process; to bring systemic change for workers in the soccer ball industry; to see a transformed business model develop for soccer ball manufacturing that accesses Nike's global supply chain and enhances the company's brand offering; and to further stimulate a broader and deeper stakeholder dialogue about supply chain models.

Nike will continue to participate in industry forums and other discussions to help transform local soccer manufacturing models in Pakistan and help create sustainable development.

NIKE, Inc. based near Beaverton, Oregon, is the world's leading designer, marketer and distributor of authentic athletic footwear, apparel, equipment and accessories for a wide variety of sports and fitness activities. Wholly owned Nike subsidiaries include Converse Inc., which designs, markets and distributes athletic footwear, apparel and accessories; NIKE Bauer Hockey Inc., a leading designer and distributor of hockey equipment; Cole Haan, a leading designer and marketer of luxury shoes, handbags, accessories and coats; Hurley International LLC, which designs, markets and distributes action sports and youth lifestyle footwear, apparel and accessories and Exeter Brands Group LLC, which designs and markets athletic footwear and apparel for the value retail channel.

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