Read the article by Lynn S. Paine: Click here for an in-depth discussion of what other companies can learn from Nike’s experience in setting up a board-level corporate responsibility committee.=”bodybold”> A former president of Smith College, Jill Ker Conway was recruited to Nike’s board by the cofounder and then-CEO, Phil Knight, in 1987. She retired after 25 years of service, including a decade as the chair of the corporate responsibility committee, established at her suggestion in 2001. Five years prior to the committee’s founding, criticism over labor practices at Asian contract factories making Nike products threatened the company’s brand. To get a firsthand look, Conway offered to visit several of the factories in connection with a trip she was planning to her native Australia. That trip sowed the seeds for Nike’s early corporate responsibility initiatives and prepared Conway for an unexpected assignment at the 1996 annual shareholders meeting: When a group of labor activists took to the floor, Knight stepped aside as chair of the meeting and asked Conway to preside. Conway recently spoke with HBS professor and senior associate dean Lynn S. Paine. On the 1996 shareholders meeting Paine: That 1996 meeting sounds pretty dramatic. What went through your mind when Phil Knight said he would ask you to preside if there was any disruption? Conway: You have to remember that I was a vice president at the University of Toronto for many years before I became president at Smith. Both places had very active student radical movements, and I was used to a demonstration a day, if not two or three. So I had a lot of experience with this kind of problem. My worry was that the wonderful Nike team might lose it, especially if Phil was called nasty things. Not in terms of violence, but they might say things that would help create a confrontation. So I thought my role was to keep everybody on the platform quiet and let the labor group, and anybody else who wanted to, ask their questions. I was quite sure that over time the audience members who had come to the meeting to listen to Phil would start shouting them down and telling them to be quiet, and we wouldn’t have to do a thing. It sounds like Nike got another unexpected benefit from the experience you brought to the board. Actually, I have what I think is the highest rank you can have in the Toronto Riot Police. They made me an honorary member because I was involved in so many really nasty situations in the 1970s. What I did at the meeting was totally alien to the way people on the Nike team thought of dealing with problems like that. They are used to running things and wanted me to declare the questions out of order. They didn’t know that there is a standard way of treating student demonstrations. So I had to keep calming everyone down and saying, “Leave it be, because these people came to cause a confrontation. If you don’t give them one, they’ll get tired and go away”—and indeed, that’s what happened. On joining the Nike board Can you give us a sense of what Nike was like when you took your seat on the board, in 1987? Nike was still a start-up company, with less than $1 billion in revenue. Like all start-ups, it was very limited in corporate functions, and things like ads and HR were incidental to growing the business. All but two people on the board were either relatives of Phil’s or people who had helped him sell things out of the back of his father’s car to get the company going. The only non–start-up person was someone named Tom Paine [no relation to the interviewer], who came from NASA. He was an expert in innovation and creative thinking. He managed and designed much of the first Apollo moon shot; he was a real star. When I got there, the organization was growing so rapidly that people could hardly keep up with it. At that time few boards were looking for female members, let alone female members with a background like yours. Were you recruited through a search firm? No. I knew two people on the board, because I served on the board of Arthur D. Little with them. They kept saying to me, “You’ve got to come out to Beaverton and meet this guy Phil Knight; you’ve got to.” And I would say, “Yeah, yeah, yeah.” I didn’t really buy it. But finally they set up a lunch in Boston between Phil and me, and we hit it off. Apart from your positive reaction to Phil Knight, what were some of the factors that led you to accept the invitation to join the board? I joined for basically three reasons. Number one, I’m a jock from way back, and a runner, and I was very involved in athletics at my secondary school. Number two, I’m an ardent feminist, and a lot of my concerns around the time of the invitation related to the research coming out on the impact of early physical activity on women’s health. They have fewer back problems. They are better able to withstand stress. There’s all sorts of evidence. When I was at the University of Toronto, we had a medical doctor as president and we worked on it very actively. So when Phil invited me, I said I would love to do it but I really needed to know that Nike would use its advertising power just as much to stimulate interest in sport for girls. We agreed about that totally. My third interest was in the whole question of what boards and companies take into account in making their strategic decisions. On visiting contract factories in Asia in the late 1990s Let’s return to the 1996 annual shareholders’ meeting. By that time Nike had become a global brand, and you’d made your first visit to some of the contract factories in Asia. What were your impressions? On my first visit, I went to three factories in Indonesia and three in Vietnam and made a side stop at a textile factory in Hong Kong, which was fascinating to me. I’m an historian by training. I had had a major focus on the history of women and had made a pretty extensive study of the process of women’s entry into the paid labor force in the UK and the United States. So I knew quite a lot about factories and the way workers from a rural background responded to them. In an Islamic country like Indonesia, only a woman could go and hang out in the dormitories and the sleeping areas. I spent quite a bit of time with an interpreter talking to the people who were off the shift and getting a notion of what their plans were and what they were doing with their earnings. The dormitories reminded me very much of student dormitories in a women’s college; they were lined with photographs of rock stars and stuffed animals and so on. The space was tiny in relation to Western standards, but the ventilation was pretty good, and I used to eat in the cafeterias with the workers on break. On the other hand, the shifts were very long. They ran 12 hours on and 12 hours off. The amount of overtime—which, of course, shoes and clothing being a cyclical business, is governed by seasons—has been a problem in the industry going back to the 18th century in England. I thought there were a number of ways in which the factories could be improved, just through changes in the relationship between workers and management. It was a complex situation, because the factory owners were Taiwanese or Korean, the workers spoke various Indonesian languages, and the supervisors were usually Taiwanese. The opportunity for communication was almost zero, so the supervisors on the lines shouted and yelled—they didn’t know how to speak directly to the workers. The net result was that I spent the period from 1996 to 2001 going on regular visits—moving around the shoe and clothing companies and getting acquainted with the factory owners and so on. How did the workers respond when you, an affluent Westerner, started asking them questions? I was expecting some pretty tough questions in return; those young women were well able to speak for themselves, and they knew I was a director of the company. But they were just so pleased that someone was there, because not many adult women ever appeared in those places. We had a very good relationship, a very warm one. The research project that you helped broker must have been a massive undertaking, and it was one of Nike’s first significant collaborations with an NGO. What was the impetus for it? We decided that with the problem of communication and the difficulty of working through supervision in three different languages, we needed a different take on what the women workers felt. They wouldn’t speak to somebody on the plant premises. So I found something called the International Youth Foundation, which concerned itself with the well-being of young people around the world, and persuaded its president to help us create an NGO that could survey the workers. The idea was to get faculty from universities in various countries, preferably women who spoke all the languages and came from the different cultures, to do the research. We eventually did 67,000 interviews. That’s a lot of interviews—were they face-to-face? Yes. And they were off-site. We made a pact with the women that we would keep their identities completely anonymous so that they would be safe to say what they wanted to say. Our relationship with the International Youth Foundation was very, very helpful, because they were used to doing survey research with young people and sometimes nonliterate people. They did a terrific job. We got a huge body of data as a result. It gave us a lot of insight into how to improve the situation and how to train the supervisors—training the supervisors was one of the big problems. On the rationale for a board-level corporate responsibility committee In 2001 you proposed the creation of a board-level committee as a way to institutionalize Nike’s commitment to corporate responsibility. Why did you think that was important? I had worked on corporate responsibility issues when I was a director of IBM World Trade. They had many problems about introducing their technology into the developing world and making a lot of money out of it but not really responding to the needs of the society. So I had some experience of what those committees could do. I also felt that because people come and go, if you have a legitimate structure for managing these issues, they are much better dealt with—knowledge and understanding accumulate, better records are kept, and so forth. Relatively few U.S. public companies have such a committee, yet all companies have responsibilities they have to meet if they want to succeed. Do you have any thoughts on why such committees are not more common? I’m not sure I have the right answer, but one thing I think about is the definition of a director’s oversight responsibility. What many executives and directors define as their area of responsibility is fairly narrow. The feeling of responsibility to workers has had quite a low valence in the western world for some time. When I think of companies that do have committees, many are global and have had remarkable chairmen who were invested in this issue. I think the combination of the involvement of the number one person in management plus a feeling of responsibility because you’re assuming power over the lives of people in many different kinds of cultures is what makes the difference. Do you think a company’s ownership structure has any bearing on this question? I ask because Nike has a controlling shareholder who was also a founder, and I wonder what effect, if any, that has had on the company’s handling of these issues. I’m absolutely certain it has had an effect. When we set up the Global Alliance to do our survey of workers, I trekked around the world trying to recruit other consumer products companies with the same kinds of supply chains to join us. The only ones that had any interest were those with significant family ownership. I don’t think executives of a typical public corporation have that same feeling of moral responsibility that the principal founder or owner has. On the practicalities of creating a board-level corporate responsibility committee Do you have any suggestions for a director who believes the board needs to be more engaged with corporate responsibility issues but isn’t sure how to make it happen? Well, number one, the person has to be committed to the enterprise totally and not be a complainer. Second, I think they have to have some kind of intellectual framework into which they can fit what they are urging people to do. You can’t just say, “It would be nice if we did things better for low-income countries and poor families.” You have to really have some picture of what might be achieved by undertaking some major changes. And third, you can’t be afraid to be criticized. You need a sense of humor and the ability to get people laughing so that they are relaxed when they’re trying to talk about this subject rather than holding on to the edge of the table and worrying. Are there particular skills or perspectives that should be represented on a corporate responsibility committee? One thing that’s very important is to have members who are deeply interested in innovation. You need people who are imaginative, open to new ideas, and capable of envisioning a different organization of things. Nike had just such a remarkable group in its founding era, from Bill Bowerman [an Olympic track and field coach and Nike’s cofounder] to Tom Paine—the wonderful person from NASA I mentioned earlier. Of course, you also have to have some core values. I’m a committed feminist, and I was bound to do the best I could to see that this major economic transformation didn’t leave young women stranded just the way they’d always been. What are some of the factors that make for an effective corporate responsibility committee? It’s very important to work with the finance committee and the financial analysts, because there’s always a lot of loose talk about how much this or that is going to cost or whether it’s going to have any yield. Another thing that is always persuasive and gets people nodding in agreement is the committee’s sense that a lot of really bad mistakes are being avoided and a lot of fruitful opportunities are being created. It’s also important to put people at ease when talking about difficult subjects. Sometimes you need to talk to people one-on-one and just take the time to find out what’s on their mind or why they’re troubled. When we were beginning, I went around and asked everybody what they thought this committee should do. We talked about the business model and what new ways of evolving it might come out of such a committee, and so on. On the corporate responsibility agenda Looking back over your decade as chair of the corporate responsibility committee, are there any issues that stand out as particularly challenging for the group? There are probably three. The first would definitely be the way we tried to understand the problems of overtime. We had increased wages, but we could not get away from overtime. We had beaten up on the factories about that, but not very much happened. Suddenly the penny dropped for us and we said, “Let’s review the front end of the supply chain.” We learned that that was where many of the problems were created. It’s still not possible to avoid periods of very high overtime if there’s a sudden surge in demand or at the beginning of a season. But we tried very hard to eliminate the late orders, sudden changes in materials, and so on that were creating a lot of the problems. The second area was the environment. Environmental questions came up in all sorts of ways, because, of course, Nike’s original business model was built on low-cost labor, low-cost materials, and relatively inexpensive transportation. The minute you have a surge in oil prices or something similar, it’s a sign that you have to think hard about the sustainability of the model and the future. The third has to do with the whole question of how we grow as a company. Nike now has a very substantial portfolio. But building that portfolio raised a lot of corporate responsibility issues. All the problems that Nike had dealt with early on—they had to be processed all over again. But at this stage in the company’s life, we know how to deal with them. What do you see as key issues that Nike and the committee will face in the next five to 10 years? One is the source of energy, which looks great at the moment but may change quite dramatically and is bound up with major environmental issues. The problem of water shortage is with us already, and the committee is working very hard on that right now. A big drop in the value of the dollar could mean the whole supply chain might need to be revamped. Any change like that could quickly get people thinking even more about the business model and how to do things differently—which, of course, they are already doing to some extent. And I imagine there will be questions—I can’t predict when—about the issue of the Arab world and athletics and the kind of organization that would flourish in a modernizing Arab world. Looking more broadly at corporate America and companies around the globe, what do you see as the most important issue of corporate responsibility in the years ahead? I’d have to say it’s the environment and our source of energy—oil and its potential to destroy the environment. It’s not just potential; we know it happens every day. You’ve been deeply involved with college students throughout your career. Their concerns are often a bellwether. Do you have a sense of what corporate responsibility issues today’s students are concerned about? The college population I know consists of people who go to the Ivy League or the top-tier women’s colleges or some of the major universities. They are all terrified by their level of debt. I think that’s an issue that will be fought out politically over the next decades. The problem of reducing the cost of education for students at all economic levels is very important. If you have mortgaged your soul to get an Ivy League degree, and then you don’t get a job and can’t pay the interest on your debt, you’re in a very difficult situation. That is happening today much more than I realized until recently. It could become a flashpoint for anger directed at business. But I don’t see an alienated population radically disapproving of American society. And getting back to environmental and energy issues, I think a younger generation may be willing to trade in the big cars; it’s an occasion of pride now to get one of those little bugs and drive it around. On learning in the boardroom We’ve covered a lot in this conversation, but we haven’t talked about boardroom culture. Does that affect the corporate responsibility discussion? One of the things I’ve been struck by is all my colleagues on the Nike board, whatever their political orientation, saying, “I have learned more on this board than from anything else I’ve done.” I believe nobody thinks about board structures as a place where you really gain new knowledge and new insight, but I think my colleagues would all say that. Where does that sense of learning come from? It’s how the board is run. You know, the board has dinner together every board meeting. And some unfortunate person is picked on by Phil to start the discussion of some important long-range subject. These are long discussion dinners, where people talk about what the original goal was for the company, how it has grown, what we are doing that’s true to that dream, and so on. In the board meeting, nobody is afraid of asking a question or looking silly—it’s very open. Phil usually sits in the middle of the boardroom and is very quiet and just lets people start talking. The freedom with which people are encouraged to talk about things that they may not feel they know all that much about leads to a different kind of discourse. It sends people home saying, “That was really interesting at the board session. I’ve got to go look that up.” It sounds like a really fun board. It is. It is. People just love it.
