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April 23, 2003
Is Nike Guaranteed Free Speech? The Supreme Court Will Decide
by William Baue
Advocates of socially responsible investment and corporate social responsibility on both sides of
the Atlantic weigh in on the implications of Nike's Supreme Court case.
SocialFunds.com --
Today, the U.S. Supreme Court is hearing oral arguments in the Nike v. Kasky case. Nike (ticker: NKE)
appealed the California Supreme Court decision in favor of social advocate Marc Kasky, who claimed
that Nike's statements about its sweatshop labor practices were commercial speech and that Nike
broke a state law against false advertising.
 Nike argued that its statements, which were
not made in advertisements but in press releases and letters to editors and college sports
administrators, contributed to the public debate on globalization and should be protected by First
Amendment free speech rights. Nike defined its speech as political, not commercial.
The
decision, which is expected in late June, carries significant implications for socially responsible
investing (SRI) and corporate social responsibility (CSR) globally, as it could affect corporate
disclosure of social and environmental practices and policies.
Earlier this month, Domini Social Investments filed an amicus (or
"friend of the court") brief with the Supreme Court in support of Mr. Kasky.
"The
fundamental premise of our brief is that social and environmental information should be subject to
the same legal requirements as financial information," said Cynthia Williams, an associate law
professor at the University of Illinois College of Law and author of the Domini amicus brief.
She
continued, "Nike or any other company should not be able to 'plead the First' so that the truth of
the facts they assert about their social and environmental records cannot be tested in litigation,
just as they would not be able to plead the First to preclude an examination of their statements of
fact about their financial results of operations or about executive compensation or stock options
or product quality, price, or safety."
"While the government has no role to play in
winnowing false from true political ideas, it has a role to play in ensuring that facts of
commercial significance are accurate," Ms. Williams added.
Domini's brief cites Nike's own
court brief in establishing the commercial nature of all corporate communications.
"[V]irtually everything a company does is ultimately intended to improve its financial
bottom line," Nike's brief states on page 22.
Nike's brief then points out that the company's statements were not addressed to consumers, but
rather were "addressed to the public generally" and sought to "influence lenders, investors, or
lawmakers."
Domini's brief expresses concern that defining Nike's non-advertising
communications as political speech will allow the company to "influence investors" with false and
misleading information about its non-financial operations.
Some European SRI and CSR
advocates view this same issue from the opposite end of the spectrum. In March, SRIMedia.com, a
UK-based media provider on SRI issues, and CoreRatings, a CSR rating agency, filed an amicus
brief in support of Nike. These groups express concern that a Nike defeat will discourage
companies from voluntarily disclosing their social and environmental practices and policies, as
many currently do in CSR reports and conversations with SRI firms. Other European SRI and CSR
experts agree.
"There is no doubt that a finding against Nike at this stage will
represent a major blow against the move towards greater voluntary corporate accountability as
risk-averse companies clamp down on disclosure," said Mallen Baker, development director for
UK-based CSR advocate Business in the Community.
"While I think this is important to
consider, I think it's really a bit of a smokescreen," countered Adam Kanzer, Domini's general
counsel and director of shareholder advocacy.
Domini maintains that corporate CSR and
SRI disclosure will continue even if Nike is defeated because it is in companies' best interest to
do so, and because consumers and other stakeholders demand such information.
"I don't have
a significant fear of a chilling effect," Mr. Kanzer said. "I do think [a Nike defeat] may force
corporations to look a little bit more carefully at the statements they make, which is a good thing
for everyone."
Central to the matter is whether to allow corporations leeway in the
veracity of their public statements, or to allow the public to hold corporations accountable for
disseminating false and misleading statements. Social investors encourage voluntary CSR and SRI
reporting, but many question its usefulness if it allows misleading statements and active deceit.
"There are a number of CSR reports that we've seen that are primarily exercises in public
relations, and not true disclosure documents," Mr. Kanzer said. "If the flow of those reports
stops, I don't think it's going to harm anyone."
©
SRI World Group, Inc. All Rights Reserved.
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