This Harassment Scandal Will Haunt Nike Inc Stock for Awhile

Dumping toxic executives is a good start, but it's only the first step in protecting Nike stock

Nike stock - This Harassment Scandal Will Haunt Nike Inc Stock for Awhile

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Nike Inc (NYSE:NKE) CEO Mark Parker probably hasn’t slept very well for the past couple of months. It’s not a problem with Nike stock, to be clear. Indeed, Nike managed to reach a record high just a few days ago, and continues to test its ceiling.

No, Parker has an even bigger problem. It is a problem the extent of which he likely didn’t realize he was facing until it came to a head in April, as an internal investigation regarding workplace harassment was winding down. Between mid-March and mid-April, nine Nike executives were effectively forced out due to inappropriate behavior.

A heartfelt apology from Parker to employees made on May 3 superficially seemed to be the end to the ugly matter. And in some regards, it was.

In light of the sheer number of employee “exits” over the course of the past few weeks though, it’s clear that Nike may have far more to repair than the damage done by a couple of proverbial bad apples. Nine are now gone, but who did they hire (and groom) that’s still around? And, what sort of workplace tone has been set that won’t be so easily reset?

Consumers Remember

There was a time not that long ago when gaffes were forgiven and forgotten, provided problems were solved appropriately.

Case in point: BP plc (ADR) (NYSE:BP) was put in the public’s crosshairs back in 2010 for its part of the Deepwater Horizon oil spill in the Gulf of Mexico, but a reasonably sincere effort to do what it could do to fix it allowed the company, and consumers, to move on. Many people struggle today to even name the company implicated in the environmental disaster.

Much has changed since then with how consumers see the world though. They remember things. They also remember things with (for better or worse) more passion. And they’re angry.

It’s seemingly too simple to chalk it up to the advent of the internet, and the mobile internet in particular, but that is the crux of why consumers can remain enraged indefinitely.

One simple tweet, one short Facebook post or one short video posted on Snapchat can serve as a rallying cry, rekindling rage for things that happened years ago… things that would have otherwise been left in the past.

Though it remains to be seen just how damaging it was or will be to Nike stock, consumers will almost certainly struggle to forget that Nike was the epicenter of questionable employee behavior at a time when consumers were (understandably) sensitive to questionable behavior.

It’s not just consumers’ memories that have improved though. The workplace mindset has also changed in a less-than-healthy way.

Corporate Culture Affects the Nike Stock Price

There was a time not all that long ago when employees mentally and physically clocked out and 5:00 p.m. Not anymore though. The rise of the mobile internet has also meant employees are effectively “on call” 24/7.

That’s a two-way street, however. While work-life has crossed the personal-life boundary, the personal-life boundary has also seeped into the workplace. With the lines blurred between personal and professional lives, it’s not surprising to see inappropriate remarks and decisions materialize in an increasingly-casual workplace. It’s still wrong. It’s just not surprising.

It’s also contagious, in a manner of speaking.

One only has to look at General Electric Company (NYSE:GE) to realize how the wrong mindset can spread like a virus. The once-great company has since imploded, as now-former CEO Jeff Immelt is said to have fostered a “success theater,” embellishing what was going right and ignoring what may be going poorly.

It’s a habit current CEO John Flannery is trying to break, but it hasn’t been easy.

Nike’s Mark Parker may find himself in a similar situation overseeing an environment that included a “look the other way” attitude. Though he’s arguably cleaned out the nine ring-leaders who were laying the groundwork for a poisoned corporate culture, that’s the easy part.

The hard part comes now, replacing the existing corporate culture. Making it even more challenging is the fact that it’s intangible.

Bottom Line for Nike Stock

It’s not a reason not to buy Nike stock, to be clear. Despite an environment that lacked candor, Nike has been and continues to be the leading company within the athletic apparel market.

Nevertheless, disruption of any kind is still disruption, and the company’s just gone through a rather serious shakeup.

Consumers are also just now starting to see how ugly things had become within the company. Though they may not have cared a few years ago, activism is a new norm now; consumers express their opinions with dollars.

Just ask Target Corporation (NYSE:TGT), which has struggled with the fallout from a decision to open all of its bathrooms and fitting rooms to persons of any gender.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter, at @jbrumley.

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