Nike Can Step Back on My Watch List

This article is part of our Real-Money Stock Picks series.

Nike's (NYSE: NKE  ) swooshed straight into the spotlight this week, after dropping Lance Armstrong on the heels of a doping controversy. The Armstrong news isn't why Nike's landed back on the watch list for the socially responsible real-money portfolio I manage for Fool.com, but it reminded me of why the company got booted from consideration to begin with.

Last December, I shoved Nike out of the running, despite its impressive goals and efforts to make its business more sustainable. I was disgusted that Nike didn't take a hard-line stance on the sex abuse scandal at Pennsylvania State University. Not only did Nike stand by its Penn State partnership, but the company wouldn't even budge on its child care center named after Joe Paterno, the coach who didn't intervene while defensive coordinator Jerry Sandusky abused multiple young victims(Sandusky was recently sentenced to 30 to 60 years in prison.)

Granted, companies like Nike, that rely on sports stars to help boost their brands, can't have an easy time, especially when these celebrities show their less heroic sides. Nike has stood by controversial sports figures like Tiger Woods, although it did cut off Michael Vick after the horrific dog-fighting incident(It has since hooked back up with Vick after he served his prison time.)

Clearly, Lance Armstrong had to go. Hey, "cheaters never win," or so they say, but sometimes in our society, we have found that's not always the case, or at least that the comeuppance doesn't come swiftly enough. Nike's statement also said that Armstrong "misled" the company for a decade.

While cheating is extremely poor sportsmanship, not to mention morally wrong, on the spectrum of moral failings, child abuse is a truly heinous crime. As I researched the Armstrong case, thinking it was a crying shame that Nike never took a stand on the Penn State issue, I discovered that, actually, it finally had.

Last summer, Nike relented, and removed Joe Paterno's name from the child care center. It took about seven months since I penned my article, but at least it finally acknowledged the seriousness of that situation and did something about it. Not that Nike set a striking example; State Farm also pulled its sponsorship after the NCAA sanctioned Penn State last summer. Sherwin-Williams (NYSE: SHW  ) , and Cars.com had pulled their sponsorships from the very beginning of the scandal, earning them major points in my book.

Nike is by no means the only company that's hooked itself up with sports figures only to be burned by bad, even really, really bad, behavior. Kellogg (NYSE: K  ) had to drop Michael Phelps after his marijuana controversy. (On the other hand, Visa (NYSE: V  ) was one of Phelps' corporate partners that thought his public apology and admission of "bad judgment" was enough to keep him on.) Years ago, Hertz (NYSE: HTZ  ) extricated itself from its agreement with O.J. Simpson, due to allegations that he had committed murder.

The fact that Nike's drawing some moral lines with its athlete partners allows it back on my watch list. Honestly, though, I hope that, going forward, the sports gear giant will be a harsher critic, and exert more pressure on athletes to be models of heroism, not individuals who are somehow "above it all," and excused for immoral or unethical conduct. Nike can do a lot of good by putting its swoosh-clad foot down harder and more often.

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Alyce Lomax has no positions in the stocks mentioned above. The Motley Fool owns shares of Hertz Global Holdings and Nike. Motley Fool newsletter services recommend Nike, Sherwin-Williams, and Visa. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.The Motley Fool has a disclosure policy.


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  • Report this Comment On October 22, 2012, at 12:44 AM, countryhicks wrote:

    Should the author not be recommending stocks based on their financial performance potential versus social responsibility? Of course they had to drop them due to US customer but global customer might care less. The bigger question is how much do these acts affect earnings?

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