Why I'm Not Buying Nike

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This article is part of ourRising Star Portfolio series.

Several weeks ago, I outlined three promising stock ideas for the socially responsible Rising Star portfolio I'm managing for Fool.com. I ended up purchasing shares of one: Darden Restaurants (NYS: DRI) , a bargain-priced stock of a surprisingly socially conscious company.

For a while, though, I was leaning toward purchasing Nike (NYS: NKE) for the portfolio. Nike is making great strides in sustainable manufacturing and phasing out toxin use. However, Nike's recent response to the ongoing Penn State controversy has struck me as not only socially irresponsible, but even socially reprehensible.

Abuse of power
Nike has continued its sponsorship of Penn State's football team even after the mounting allegations of sexual abuse of minors lodged against former assistant football coach Jerry Sandusky. Not only has Nike failed to extricate itself from its relationship with Penn State, Nike has made another mind-boggling blunder.

Although Penn State has fired former head coach Joe Paterno for his failure to blow the whistle to authorities (which of course sounds a lot like he was more interested in protecting Sandusky and his own reputation than protecting children), Nike is retaining the following name for a day care facility: The Joe Paterno Child Development Center.

Granted, Nike is known for standing behind athletes after high-profile, newsworthy personal errors. Tiger Woods is a prime example. Although companies like Procter & Gamble (NYS: PG) , PepsiCo (NYS: PEP) , and Accenture (NYS: ACN) dropped or significantly decreased their exposure to Tiger Woods after his philandering scandal in 2009, Nike stood firmly behind its sponsorship of Woods.

Tiger Woods' behavior was shameful and hurtful to his family, but by comparison, it doesn't hold a candle to the heinous nature of the Penn State scandal. Adults have options; a scorned spouse can leave, file for divorce, or, say, beat the daylights (and headlights) out of a car with a golf club (that last option isn't highly recommended).

However, children are our most vulnerable citizens; they have few options, they rely on adults for guidance, examples, and even survival, and they're still learning about life. When they're victimized, we should all be outraged.

Take a stand; just do it
Perhaps some can defend Nike, and point out that Penn State has been making its own amends, such as firing many of the university officials that contributed to a culture that protected its own at the expense of children's well-being. Penn State also recently announced plans to extract $1.5 million from its athletics program and redirect it to the Pennsylvania Coalition Against Rape and the National Sexual Violence Resource Center.

Still, Nike has copped out in a big way by standing firm (and, I reckon, hoping this will all blow over and leave it untarnished). So have many other companies that have held firm to sponsorship deals with Penn State, such as AT&T (NYS: T) and PepsiCo (which already has a spot in my Rising Star portfolio). (Although about six sponsors reportedly pulled ads from ESPN broadcasts of Penn State games in mid-November, with the exception of Cars.com, it wasn't clear which companies jumped.)

However, I'd argue that Nike's probably the worst offender, because its products directly tie in with athletes and, theoretically, athletic excellence. Our society makes heroes out of athletes, and in some way that relates strongly to Nike's brand, but the situation at Penn State was the ultimate in cowardice, regardless of athletic prowess.

I'm not going to sell PepsiCo, but let's just say that for now I'm terribly disappointed by this incident and the response, and the situation has dented the company's esteem for me. As for Nike, I'm no longer so impressed by its sustainability programs when its Penn State sponsorship and accolades to individuals like Joe Paterno imply that ethics don't matter.  

At some point, it's time to take a stand. And when children have been put at risk and victimized by the adults they should have been able to trust, I'd say it's time. Maybe Nike and PepsiCo are still thinking about it, but I'd like to think Nike and PepsiCo can do far better than this. There shouldn't have been much to think about when it comes to the sexual abuse of children.

Since PepsiCo is on thin ice with regard to my Rising Stars portfolio, you can add the company to My Watchlist to see if any future slip-ups perpetuate their fall from socially responsible grace. You can click here to add them today; the service is free of charge.

At the time this article was published

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