Nike faces EEOC subpoena enforcement in DEI discrimination probe
Federal agency seeks documents dating to 2018 on hiring, promotions, and race-restricted programs
Nike Inc. faces a federal subpoena enforcement action as the Equal Employment Opportunity Commission intensifies its investigation into whether the athletic footwear giant's diversity, equity, and inclusion programs discriminate against white workers.
The EEOC filed a motion in U.S. District Court for the Eastern District of Missouri on February 4, seeking to compel Nike to comply with administrative requests for information related to the investigation. The agency alleges the company has failed to produce documents despite repeated requests.
The investigation, initiated in May 2024 by Republican EEOC Chair Andrea Lucas, examines whether Nike's DEI objectives have led to "a pattern or practice of disparate treatment against white employees, applicants and training program participants" in hiring, promotion, demotion, separation decisions, internship programs, and mentoring and leadership development initiatives.
The subpoena seeks information dating back to 2018, including criteria for layoffs, the tracking and use of worker race and ethnicity data in executive compensation decisions, and details about 16 programs that allegedly offer race-restricted mentoring or development opportunities.
Despite the negative development, Nike shares rose 4.5% to $63.69 in Wednesday trading, adding $4.2 billion to the company's market capitalization. The stock's resilience suggests investors may view the legal challenge as a manageable risk relative to Nike's broader operational challenges, or that the market had already priced in regulatory scrutiny of corporate DEI programs.
The investigation comes as Nike grapples with significant business headwinds. The company reported a 9% decline in fiscal third quarter revenue to $11.3 billion, with footwear revenue dropping 9% and Nike Direct sales falling 12%. The company is implementing a "wholesale reset" strategy to clear excess inventory and reposition its digital channel as a full-price sales platform.
Nike has publicly committed to ambitious diversity goals. The company's "Purpose 2025 Targets" include achieving 50% representation of women in its global corporate workforce and 45% in leadership positions by 2025, while maintaining 100% pay equity annually. In November 2024, Nike appointed Kizmet Mills as its new DEI chief, signaling continued commitment to diversity initiatives even as other corporations retreat from such programs amid legal pressure.
The EEOC action reflects a broader shift in federal enforcement of civil rights laws under Republican leadership, with increasing scrutiny of whether race-conscious hiring and promotion programs violate Title VII of the Civil Rights Act of 1964. Similar investigations are underway at other major corporations as critics argue that some DEI initiatives amount to reverse discrimination.
Analysts remain divided on Nike's prospects despite the regulatory headwinds. The company holds an average "Outperform" rating from analysts, with an average one-year target price of $76.34—representing nearly 20% upside from current levels. However, Zacks maintains a "Sell" rating, citing anticipated near-term revenue and margin pressures.
The outcome of the EEOC investigation could have significant implications for corporate DEI programs nationwide. If the agency finds evidence of systemic discrimination against white workers, it could force Nike to modify or eliminate certain diversity initiatives and potentially result in financial penalties or changes to hiring and promotion practices.
Nike has not yet issued a public statement specifically addressing the subpoena enforcement action. The company has previously stated its commitment to "a respectful and inclusive workplace" following gender discrimination lawsuits, but the current investigation represents a different legal challenge focusing on race-based considerations rather than gender.
Investors will be watching closely for any response from Nike management and for developments in the court case, which could set precedents for how corporations structure and implement diversity programs in an increasingly complex legal landscape.