Erik Bodenhofer ’01, general counsel of Reebok International, discusses environmental, social and governance — known as ESG — issues from an in-house perspective. Professor Cale Jaffe ’01 moderated. The event was sponsored by the John W. Glynn Jr. Law & Business Program and the Program in Law, Communities and the Environment (PLACE).
CALE JAFFE: So for folks who don't know, I'm Cale Jaffe. I'm a professor of law here at dear old UVA and also a director of the Environmental Law Clinic, also co-director for this year of PLACE, that's the Program in Law, Communities, and the Environment. This event is being co-sponsored not just by PLACE but also by the law and business-- I'm sorry, the law and business program here at UVA.
We've got Professor Jay Butler who's here, who leads the law and business program. So if you've got questions about law and business, talk to Professor Butler. You got questions about PLACE, you can talk to me. You got questions about all of it, you can talk to our guest, Erik Bodenhofer. I'll introduce Erik before we get going.
So Erik and I were classmates here at dear old UVA. And we got here in the fall of 1998, section J classmates and been good friends ever since. Erik prior to was were a-- you're a Boston native.
ERIK BODENHOFER: Well, I--
CALE JAFFE: You're a Coast Guard kid.
ERIK BODENHOFER: I was a Coast Guard kid. So I'm all over native, but I came down here from Boston.
CALE JAFFE: Right. And speaking of being a Coast Guard kid, I remember one story was that the first fish you caught was, what, a haddock?
ERIK BODENHOFER: Halibut. Yeah.
CALE JAFFE: Halibut.
ERIK BODENHOFER: It weighed more than I did. It ruined me for fishing for the rest of my life.
CALE JAFFE: So Erik comes down here from Boston, Boston College graduate. And then after law school starts out at a litigation boutique back up in Boston, Nutter, McClennen, and Fish, makes his way over to doing transactional work at WilmerHale. I got that the path right and then not too long before that to in-house at Reebok, which for a time was owned by Adidas. Or as I've learned is the German pronunciation Adidas since it's a German company.
Now, Reebok has been sold by Adidas and is now owned by a privately held group, which we can talk more about in a little bit. But I'll just start off by asking Erik, one, just tell us your path from section J friend to general counsel at Reebok International. And also-- so I guess, as David Byrne of the Talking Heads would say, well, how did I get here. So we'll start there.
ERIK BODENHOFER: Fair enough. Well, thank you all for having me. This is-- I'm really happy to be back here. I was talking to Cale's seminar just a little while ago and explaining how I had a plan when I got here, and it did not go-- I did not go to it at all.
I had an idea when I got to the law school. Generally, what I didn't want to do, I didn't want to be a transactional attorney at a major law firm. And three years later, I was a transactional attorney at a major law firm. And it was through-- it was through no conscious choice. It was just a series of small decisions that led me there.
And I think just being open to the possibilities, I've had a really enjoyable career as a result. As Cale mentioned, I started at a regional-- it was the fifth largest firm in Boston when I joined it. It was at a time when the legal market was a real flux. It was the first big tech bubble.
It was the beginning of the salary wars between all the firms. There were a lot of firm mergers and then very quickly, a lot of firm failures. And in my first three years of practice, in a desperate attempt to make sure I hit my hours, I did anything and everything available to me.
And then realizing that that meant that I now had a reputation at my firm as being good at everything and great at nothing, I realized I probably needed to reset. And I left and joined WilmerHale. Shortly after Wilmer Cutler Pickering merged with Hale and Dorr, I joined their venture capital group. So all of my clients were early stage startup companies.
So I got a glimpse at the very beginning of how a corporation might operate. And then after a while realized that firm life just really wasn't for me. I wanted more of a work life balance. I wanted to feel like I was part of a-- really part of something bigger than just reacting to client requests and feeling like I was-- yeah, I'm at a firm, but everybody is an individual contributor there.
I started looking for in-house jobs and had actually given myself a two year window, where I was going to try and build up my areas of practice to be more attractive to an in-house role. And just started looking at the want ads, and it just so happened one of the first ones I looked at was for a role at Reebok, which happened to be 10 minutes from my house.
And the job looked awesome, so I applied for it. And again, my plan went to heck in a way. But it also was great. I ended up in-house at Reebok, where I started off as their general counsel-- in-house general counsel for a sub brand, Rockport, the Brown Shoe Company. And then I did work for Reebok CCM Hockey and for the sports license division, which did all of the league licensing work. So the NFL, the NHL the NBA.
And then I progressed more into general commercial work and marketing and endorsement agreements with the athletes who signed with Reebok. And I was there for 15 years under the ownership of Adidas or Adidas. And then we were sold a year and a half ago to a private company, Authentic Brands Group. And as part of that transition out from Adidas, I was elevated into the general counsel role. So I've been there for just a little over a year at this point.
CALE JAFFE: So I'm just-- if you can tell us a little bit about, one, what does a general counsel do at a retail oriented company like Adidas or rather Reebok? And in particular, what is the general counsel's role when it comes to things like environmental, social, and governance issues?
ERIK BODENHOFER: So the Reebok, the legal department is relatively small given the size of the business. So I touched levels of the business that a general counsel in a bigger department probably wouldn't. When we were under Adidas, the global general counsel really only ever spoke with the CEO, the C-level executives, and the very high level stuff.
My team is small enough that I sit with the senior leadership team in all their meetings and offer advice, both legal and business, as and when necessary about, of course, all manners of all aspects of what we do as a business.
And then day to day, I'm working specifically with our sourcing team in terms of negotiate the agreements with our vendors who manufacture the product. I interact with our customers. I negotiate-- we just recently signed Justin Fields as an endorsed athlete, I was responsible for that. And then I manage a relatively small team that touches-- I have a patent and trademark attorney who handles all of our intellectual property, another commercial attorney who backstops me, and then a marketing a paralegal who reviews all of our advertising and claims and the like.
But the day to day, it varies from working with the SLT, the senior leadership team, to set broad company policy and then working with the people who actually have to execute that policy on the choices they are making day to day in either supporting that policy or choosing to perhaps deviate from it because of facts and circumstances on that day and then helping advise them both from a what are the legal implications of that, what are the reputational implications, what are the implications upstream even within the organization.
CALE JAFFE: So that-- you mentioned reputational there. And that leads to my next question, which is I was curious for a retail focused brand like-- a consumer focused brand like Reebok, where obviously you want to sell shoes. And you want people to be excited about that brand identity. How much is of ESG policy is-- I'm just curious about the motivations for a company's ESG policy.
So how much of it is, oh, we need to do this for marketing? How much of it is we need to do this to forestall what we fear might be a more aggressive government regulation? So we're going to have an internal climate policy, so to hopefully avoid a top down government mandated climate policy.
So what are the different motivations? And then related to that, does that matter? In other words, do we-- does it matter that a corporation is truly altruistic? Or does that just like-- who cares about that? It's just about finding a way to get a corporation to do the right thing and making it match up with the bottom line.
ERIK BODENHOFER: Yeah. So I think that the motivations vary across all the corporations and then even across the issues within the corporation. So Reebok, I like to think has long time had a reputation as being in the forefront at least within our industry. So footwear and apparel of having a more progressive attitude about things than some of our competitors.
Reebok back in the 1990s was invited to be a leading sponsor of Amnesty International Human Rights Now Concert series. And they made a decision, I think, mostly from a brand reputation, nothing really altruistic. But hey, this is a way to elevate the brand and send a message to consumers to take that role to support the concert.
But as a result of that relationship, the then owner and the founder of the brand just was really moved by what he saw to take a stand for the brand and really put supply chain transparency and standards at the forefront of our brand identity.
So there was a real effort to create workplace standards and hold all the factories to these that you would not-- there could be no unpaid overtime, no child labor, no forced labor. Working conditions had to be safe and clean. We created something called the fair factories clearinghouse, which was a database basically that we shared with our competitors to allow there to be transparency among competitors as to which factories were meeting standards and which weren't.
And that over time-- so I don't think there's anything necessarily altruistic about that it. It was one man, the owner really feeling like this was an important thing to do. Over time, that attitude really permeated how Reebok saw itself as a brand and therefore, how all the employees saw themselves.
It became a very important part of being someone at Reebok, working at Reebok. This was important to us as a brand, and it became important to our employees as people. And so I think in that regard, there was maybe something altruistic about it. It got reinforced by the reputational benefit.
I mean, Reebok really for a while had this great reputation. It was quality product. It was good product, but it was also a company that you could feel good buying from, because you felt like, hey, they're trying to do right. And I think that became this feedback loop, this virtuous circle, where Reebok did this. For whatever reason, it worked. It reinforced itself through reputation. It reinforced itself through the way employees internalized it, and it became a very important part of what we did.
I think the idea of forestalling government regulation, I think, that is a motivation for some corporations sometimes. I'm certain it has been at various times for Adidas. I don't think it's really a calculation at Reebok recently in part, because we aren't big enough.
We aren't a big enough slice of our industry to feel like anything we do is necessarily going to forestall what the government does. It's more important when Nike-- Nike is 10 times the size of Reebok, Adidas is 8 times the size of Reebok. Those are the companies where they might be more interested in forestalling government regulation just because they can.
We might as an industry-- I think there are industry associations where I think there's definitely maybe some push in the hopes that collectively, we can forestall. But when the decisions are made at the individual corporate level, I really think it's the big ones who that's a bigger factor in their decision making.
And then whether or not it matters, I don't know that it does. I think if we get to the right spot in the end, and we move things forward, how we got there, why we got there, a little irrelevant. I might argue that if we're allowing the motivation that gets you there slower to control, then maybe that's not so good, and we should care. But I think it's also the rare corporation that you could ever believe is acting altruistically about anything not because they're evil.
They're human beings. Human beings don't often act altruistically on their own. There's a lot of-- there's feedback. You feel good when you do it. For corporations, there's an element of that as well. And I think-- I was saying to Cale earlier, until you work for one, you have that idea that this corporation is this monolithic actor that just acts as a corporation.
But the reality is that it's people. It's people at every level of it who are acting for all manner of reasons and for all sorts of motivations. And I think, like I said, at Reebok, we've benefited from the fact that there was this internalized idea that Reebok needs to do better. And that's carried through its existence, even with this most recent sale.
CALE JAFFE: So just to pick up on that, and I mentioned this to the clinic, so apologies for clinic students who are hearing this again. But I think it's-- I want to spend a little bit of time on this idea that the people inside the corporations, how that influences corporate culture. So the example that I've used in the clinic is Grassroots' organizers. It's a famous story now, who-- or at least, it's famous to my students-- were working to convince Starkist tuna to adopt dolphin safe policy.
And what the Grassroots' organizers decided to do was first figure out who were the leadership executives at Starkist that might make this decision, then figure out where their children go to school, and then petition those school districts to say, hey, we'd like to just do a presentation on dolphins and marine life and just to educate the kids.
And they didn't even mention tuna. They just were going to talk about how wonderful dolphins were to the kids of these executives in their schools with the idea that ultimately that the executives are really people who don't want to have to tell their kid who says, daddy, are you guys nice to dolphins, wants to say, yes, we are.
And so I'm just curious if you can say a little bit more. That inherent in that strategy is an understanding that corporations are not a monolith, that they are individual people. And so how does that build a corporate culture along the lines of ESG policies one way or the other?
ERIK BODENHOFER: Yeah. And I hesitate to say that this can be-- this could be a strategy everywhere, because there's something organic about it. But fundamentally, my experience with the leadership at Reebok and with the employees at Reebok is that they care about things.
And so decisions get made at every level of the organization every day and to the extent that there's an opportunity for someone to make a choice between if they care about the environment, they care about some particular ESG principle. And they're faced with a choice, one of which is moving that forward and one of which isn't it, and that becomes a factor in the decision.
And over time, all those small decisions get made in favor of the ESG strategy, in favor of the principle that's been adopted. Sometimes I think decisions might get made in opposition to what the corporation might-- there are probably corporations that do not have a strong ESG statement or principle or whatever. But there might be decisions made in various levels of the organization by people who have a decision making opportunity and authority and do so coming at it from their own perspective.
Now, obviously, this all gets colored by the fact that ultimately everyone's there because they're getting paid. This is their job. Fundamentally, they want to keep their job. They want the corporation to do well, because they want to, again, keep their job, maybe get their bonus. So it's not ever done in a vacuum, but I think over time as these statements get made broadly by the corporation and then reinforced by management and then reinforced by middle management, it starts coming-- it gets reinforced from the ground up as well as people starts to really think, OK, this is something that matters to my employer.
I'm going to-- and it matters to me, and so therefore, I want to do what I can to help this. And so it's not just environmental ESG. It's something when you start talking about D&I, the top-down lessons. It only matters in the end when the people at the bottom, the people making those individual hiring choices or whatever, they've internalized it. They care about it, and they start carrying it forward, then that's when you get the real change and the real support.
And I think it's true-- fundamentally, it's true across all of the ESG stuff. Obviously, you you're going to move a lot faster if it's a policy at the top. It's the incremental decisions that get made at the bottom when there's no real support all the way up eventually will peter out. But I think fundamentally, if you look at corporations as the people who are there, and you win the hearts and minds of the people who are there, that's where you make the real progress.
CALE JAFFE: So I want to stay on this topic of the people inside and what their motivations are. And this is outside of Reebok, but it's an Adidas question. So-- and you know Adidas pretty well.
The company got a lot of criticism for how slowly it responded to one offensive or controversial statement after another or action after another from Kanye who was a sponsored athlete. They had the whole Yeezy line. And Adidas was very slow to eventually cut ties.
Do you have any insight on why they might have been slow to respond knowing Adidas or just what their thinking was inside as that controversy was unfolding?
ERIK BODENHOFER: Yeah. Absolutely. So I-- this is one man's perspective on this. So I'm not speaking for Adidas, and I'm not speaking for Reebok in this. But nakedly, a big part of the delay was the fact that the Yeezy line was a huge part of Adidas' business.
And so you could certainly attribute the fact that they were going to lose money. 100%. That was slowing the roll on that. But another factor which I don't think anyone really talked about was that when they cut ties with Kanye and stopped the Yeezy line, they had to lay off more than 3,000 people.
There were actual individual people, there were friends and colleagues of the decision makers who knew. And that was just to begin with. Ultimately, I think they probably lost more than 10,000 positions as a result of the Yeezy line going away. So yeah. Billions of in profit, no doubt that slowed them down.
But there were-- I remember talking to people on that knowing they were going to shut down entire office buildings full of people. So there were-- and these were not-- these were not wealthy executives. These were people who were 9 to 5 making a decent living but not-- these were not people who were going to have a very comfortable landing when they lost their job.
And so there was some real concern that maybe that was a rationalization for some people, but it was definitely a factor in trying to figure out is there a way we can save this not just because of the profit but because of the jobs that were involved.
And certainly, I do not doubt that there were executives who didn't give a damn about the jobs. They were only looking at the bottom line, but there was enough-- there were enough people involved who cared about the people who were going to be impacted, who were trying very desperately to figure out a softer landing for everything.
CALE JAFFE: I have another question about now going back to, let's say, employee-- whether it's fair wages for folks who work in the factories or climate emissions from a factory. You can have a strong-- let's say, Reebok has a strong ESG policy. How do you, especially as a general counsel, how do you supervise that? How do you oversee that if your factories are strewn across-- especially for a global brand, your operations are all over the planet. How do you what your contractors, your suppliers are doing? How do you enforce an ESG policy all the way down the line?
ERIK BODENHOFER: Yeah. So there are a number of ways to do it. Under Adidas, we did it with employees. There were roughly 1,000 people supporting the supply chain element of the ESG program. So they would do spot visits to the factories. There were-- we would often have what we call factory liaison officers, so Adidas employees actually on the ground in the factories all the time.
We told our manufacturers they have free rein. You can't keep them out of any part of the factory. You've got to let them go wherever they want to go. So they was just-- they were eyes on the ground. When Reebok first began to really focus on its supply chain integrity, there were not a lot of third parties that you could go to for this.
There wasn't really an industry around it. And so Reebok built its own internal structure initially and then that structure got taken over by Adidas when they bought Reebok. Now that Reebok has been removed from the Adidas family, and we're working for-- we're now owned by a privately held company with not quite the same level of resources-- some cynics might say commitment, but we'll say resources-- we now in contract with third party audit firms.
They're aware of what our standards are. We pay them to make the surprise visits. And so that's the-- and my role is just to make sure that help identify these parties, negotiate the contracts with them, and then just make sure that we're holding them to the deliverables that are in those agreements.
Another way we do it much more informal is that we do send product developers and sourcing team members overseas to our factories on a regular basis not for inspection purposes but for development purposes, so trying to figure out the best way to actually manufacture the shoe. So they're in the factories fairly regularly.
They're very experienced-- well, not all of them, but many of them are very experienced footwear folks, who are able to very quickly spot something that's a little hinky. But yeah. And it runs-- and in our industry, it runs the gamut.
So from Nike and Adidas have amazing internal auditing and monitoring programs. And then as you work your way down the size of the footwear and apparel companies, it becomes much-- they become much more dependent on third party auditors and inspectors.
CALE JAFFE: And yeah. And I think mentioned-- what was it-- 1,000 employees at Adidas or in that neighborhood just working on ESG.
ERIK BODENHOFER: From a supply chain point of view. Yeah. And then they were probably-- there were others focused on different aspects of the ESG program at Adidas. It was--
CALE JAFFE: So obviously, that cost a ton of money. And it's a lot of money whether you're a publicly traded company or a privately held company. Now that we're seeing a rollout of a lot of anti-ESG policies, especially in US politics, states that have adopted laws against ESG policy. I guess, either from a publicly traded company's perspective or privately held company's perspective, how do you navigate that?
You still have your culture, your founder's culture going back to his roots with this Amnesty International event, very progressive roots and very progressive corporate culture. And now, you've got this pushback. How do you navigate that political environment? What's the strategy?
ERIK BODENHOFER: I'm not entirely certain, honestly. And it's interesting. It'll be interesting to see, because the leadership team at Reebok is very committed to this. And I don't think they're going to be easily swayed from the path unless and until there's an actual prohibition on it.
But I do think in an organization where maybe the commitment isn't as long standing or hasn't become as adapted and adopted from top to bottom, it'll be very easy to get pushed off an ESG thing.
It is expensive, and it's an investment in time and resources and money. And it's one of those things, the bottom line-- we have a colleague who often looks at things and says, well, is this going to sell any more shoes. That's the only-- is this worth doing? Are we going to sell more shoes as a result of it?
And oftentimes with an ESG project or policy, it's not clear. It's not clear that it's actually going to help your bottom line. There's some reputational help. There's this anecdotal idea that maybe people are more likely to buy a green product than a not green product. But how big a premium are they willing to pay and all that sort of thing?
So it's easy-- I think it can be easy if it's not firmly established to knock an ESG program off its foundation with blowback or from anti activists who are pushing against it. I think the strategy is really you've got to feel confident that the policy you've adopted is the right policy for your brand.
It might not necessarily be the right policy-- if you were doing it in a vacuum and saying, is this the best way to protect the environment? It may not be, but it's like, OK, what are we able and willing to do from a brand perspective and is that something we believe in.
And if we do then, you've just got to weather the storm to some extent. I look at-- I think Adidas is not going to be easily scared by any of this stuff. You query just how much of the anti-ESG thing can actually-- can you really do.
If you've got free speech as a corporation and campaign finance, why don't you have free speech as a corporation and doing something like this. So I think there'll be some of the more-- I can imagine Patagonia going to the mat to protect its ESG ethos with whatever laws come up. A lot of companies won't. They'll just wait and see what happens but--
CALE JAFFE: Though as you were saying during our class visit earlier, if you're a company that has a significant EU presence and EU has a much more progressive policy, then I'm sorry XYZ state that's adopted this anti-ESG policy, I'm selling 60% of our retail business is not in the United States at all, much less in your state.
ERIK BODENHOFER: Right. No. Absolutely. I mean, I think that's the other thing too is that all the calculus gets different when you start crossing borders. And it's not only what markets you're in but how big is that-- what percentage of your business is in that market? And there are instances where people withdrawn from markets because of the regulation.
If the cost of doing business goes up enough, and it's not a big enough part of what you do, you may back off. But certainly, from a global consumer brand like Reebok and Adidas and all-- you name a footwear company, they rely so heavily on the EU as part of their market that we're getting driven a lot by what the EU does.
CALE JAFFE: So I'm going to ask one more question. I've got a whole binder of questions. I am again like Mitt Romney today. I've got a lot of Mit Romney's binder full of questions questions. But before I get to my next, I'll ask one more. And then I'll see who in the room has questions.
You mentioned about the green premium and this question about how much folks are willing to pay. I'm curious. Do you think it matters? For those of us who are consumers, does voting with our dollars saying, oh, I'm going to-- I'm excited that Reebok cares about Amnesty International or that Reebok has the box program, which is focused on kids health and that matters to me or a company doesn't have it. Does voting with our dollars actually make a difference?
ERIK BODENHOFER: I think it does. I mean, I think going back to what happened at Reebok when we first got involved with the human rights-- the Reebok human rights awards. And the feedback that came from consumers around that helped reinforce it and have the company internalize it.
It helped establish it as a real core principle of how Reebok operated. And so I think that it definitely does help. I don't know-- I can't put a percentage on it. And certainly, the feedback loop is not-- it's a little imperfect. And so it's sometimes hard to know exactly why things are selling.
But I do think voting with your-- well, both. Voting with what your purchase is, and then all these brands are very sensitive to social media. They really do pay attention to that and to the extent that being a bad actor results in a lot of bad social media feedback.
The executives hear that. And similarly, positive stuff, it gets heard. So I do think it's-- I think consumers do have a great deal of influence on how brands behave.
CALE JAFFE: So I'll restate the question. So as Reebok went from public to private, how did that change their your ESG policy or ESG disclosures? Adidas has a ton of resources poured at it, new ownership, who knows? Maybe not so much. So how did your ESG policy change or what were the pressures to change your ESG policies after that sale?
ERIK BODENHOFER: Yeah. It absolutely changed. Certainly, the disclosure aspect of it. Adidas issues an annual report. Reebok doesn't have to now. Adidas was a member of a whole slew of organizations that required reporting, because we moved out. They were not our memberships.
We're now not a member anymore. The other factor here is that the way the business is being done now, it's very divided between markets. There's a standalone Europe, a standalone China. So there's-- we're not as collective an organization as we were before. So 100% big drop off in disclosures and reporting, big drop off in resources behind ESG.
No change as far as I can tell about the commitment of the people in the building towards what we're trying to do. And honestly, some frustration about the fact that we're not with Adidas anymore. Just learning to navigate a new way of doing business where we are privately held, where we're now a member of a group that has multiple brands with very varying reputations in this space.
And so just-- I think it's going to take us several years to find our feet again and know really how Reebok can drive its own messaging and stuff in this new environment. But there's definitely a commitment at Reebok to find a way to do it.
CALE JAFFE: That's a great question. Other folks, I'll go over another one unless there's a hand that jumps up.
ERIK BODENHOFER: Right back there.
CALE JAFFE: Oh, yes. So I'll just restate that. Experience either while in law school or in private practice after law school, they prepared you for the role at general counsel Reebok today.
ERIK BODENHOFER: Yeah. Funnily enough, I think the fact that I didn't have a plan when I got here prepared me really well for being a general counsel. I took whatever course seemed interesting to me while I was here. I wasn't on a path to do anything.
And so I had a varied course path, and then that first job I had where I just did anything and everything, I got very comfortable speaking knowledgeably about things I wasn't very knowledgeable about. Or doing the very desperate research before I had to go into the meeting.
And then so that very broad experience was incredibly helpful. And then the next step when I was representing venture capital companies, we were the only lawyers they dealt with. They didn't have in-house counsel. And for some of them, I developed a real good rapport with the founders or whatnot. And they would just ask questions in general.
And so I got very used to having conversations with business people that weren't necessarily entirely legal. And I think one thing that you all share as law students and you will share as lawyers is you're going to think about things differently than business people do.
You're going to think about things very logically. You're going to be used to trying to anticipate the arguments against or the questions that might come up. And so I think you'll find yourself in sitting in a room with business people, talking about something that there's no legal aspect to it.
There's not some regulation you're worried about, but you're going to synthesize. You're going to be able to synthesize what everybody else is saying around the table and ask the questions that no one else thinks to ask or summarize things in a way no one else in that room can summarize.
And so I think that in a way-- moving in house and being a business attorney, it's not so much the substantive legal training. It's the skill. It's the ability that you probably had when you got here, but it's just getting refined and honed. That I think is the underrated aspect of what a general counsel or in-house counsel of any sort brings to a corporation is this perspective that no one else in the building really has or can articulate.
And so I think if you think want to go in-house, honestly, then try everything. Seriously, the broader are, it's a terrible path if you want to make partner somewhere. Find an expertise and then you'll make partner. But if you think want to go in-house, it's great to be a generalist.
Really, it has made my career in-house so much more interesting than it would have been had I gone to a bigger legal department where I was the leasing attorney, because I was a real estate attorney. And now, I'm just going to do all your leases. And yeah. OK. And I apologize. If that's the kind of thing you want to do, the more power to you.
I would have poked my eyes out by now. So I just think to the extent that you think want to be in-house, being a generalist is a great way to do it. And I also say-- my other bit of unsolicited advice-- do not go in-house directly out of law school. That's just a bad idea. You should go to a firm and let them train you and get those skills and then go in-house.
And it's a much better path. I do know some people went in-house straight out of school. And I just think they're lesser lawyers as a result of it. Nice people but lesser lawyers.
CALE JAFFE: Yeah. Right here. I'll ask that again. Sorry. So following up on, I guess, any lessons learned from watching Adidas suffer through or flounder through the whole Yeezy disaster, and what are those lessons learned as you move towards signing another athlete star with Justin Fields?
ERIK BODENHOFER: Yeah. So I don't know that there are actually lessons learned from the Kanye thing, because everyone already knew. The Kanye agreement had all the provisions it needed to terminate the deal. The issue there was that Adidas just became way too dependent on one person. Not just from a income standpoint, but there was a whole division of individuals who were employed to support the Yeezy brand.
And because that brand was so tied to one individual, it was all on him. So in some respects, I guess the lesson would be don't put all your eggs in a crazy person's basket. But it's also hard. That wasn't what Adidas set out to do.
Adidas signed Kanye, because he was influential and whatnot. And they thought, great, we'll sell some more shoes. But it took off. It was amazing. And for a while, it was fantastic. And so they were blinded by their own success and put more and more behind this.
And maybe the lesson learned was the first time he went a little nutso, they should have just stopped. But he came back to reality, and they doubled down. Because the sales were good. But with what we've done for a while or tried to do-- and this is a tough balance, because with an athlete like Justin Fields, you can do the diligence and see what's his character, who are the people around him, just what-- and you feel a little more confident about it.
Because his image is relatively wholesome, and that's important to him. When you do something with a rapper, who's got an edgy public persona to begin with, how do you protect against that persona that you're consciously choosing to associate your brand with to come back and bite you but make that the rappers fault?
I remember we were years ago doing a deal with Conor McGregor. So always a controversial figure, and we knew that. We knew that, but we pushed really hard to put language in his contract that was going to allow us to get out if he acted up.
I remember having a conversation with his agent saying, you're signing him, because he acts up. He's important to you, because he acts up. You want him to be who he is, because that's why he has this influence. And so we had to make a choice like, all right. That's fair. They don't want to have Connor have to behave differently just because he's now a Reebok athlete.
And so we had to-- so there was some absurdly specific language in this agreement about certain things that if he did, we got to get out. But it was embarrassingly specific. So anyway, so I think brands have always known. It's just that this-- Adidas has really got too in with him. And that's-- just the cautionary tale is be careful how reliant you become on one individual.
CALE JAFFE: I'm going to ask one follow up on that, which is-- and to bring this discussion of endorsed celebrities back to the ESG world. So you have been involved I know in deals involving Shaquille O'Neal and Allen Iverson. And do you have any stories you can share or insights from working with Shaq or Allen Iverson or others about how they have influenced your ESG policies?
In other words, that they say, my brand is whatever it is, cares about environmental issues, social issues, fair trade issues. And so therefore, before I sign this endorsement deal, I want to make sure that Reebok meets my standard.
ERIK BODENHOFER: No. Definitely, there's a growing sense among the athletes that this thing is important to them as well. And it's this-- it reflects itself more often in the athletes will ask that in addition to paying them something that Reebok make a donation to a cause near and dear to their heart.
It doesn't tend to be as overarching as an ESG policy overall, and they're not necessarily focused on a broader sense of this. Although, they are more often now. Traditionally, the agreement's always included reputational outs for us.
So if the athlete engaged in some activity that brought us into disrepute, we could get out. We're starting to get a lot more pushback or athletes wanting some mutual assurances that if-- and I think it is leaning a little more towards the ESG stuff, because that's the more reputational place where we can get in trouble.
And so I think there is-- you're starting to see more of that. And maybe in some ways, it's like trying to sway a consumer at the cash register to pick your shoe over somebody else's because you have this good reputation. It's the same thing getting in front of an athlete.
They want to associate themselves with brands with good reputations as a general rule. And so in order to be competitive in the market for someone like Justin Fields, you need a brand that he actually wants to associate himself with. So there is definitely some pressure there.
I don't know if it's as explicit as your question maybe was looking for, but it's definitely-- it's another factor that-- and it actually-- it's interesting. The supply chain stuff that Reebok was really pioneering, it's come full circle now. Anytime we partner with another IP holder, be it someone like Universal Studios or Warner Brothers or the leagues when we were doing NFL and NBA, they all now have requirements that we are only going to associate ourselves with outfitters with manufacturers of product who have manufacturing standards that protect the workers in the factories.
And so it's-- and so that-- I think in many ways, I mean, there are obviously exceptions to these supply chain-- the supply chain quality stuff. But it became, again, the virtuous circle. The consumers cared about it. We as the middleman cared about it. The people licensing us, their IP cared about it. And it became something that we just had to do to do business.
CALE JAFFE: Yeah. That's great. Yeah. Jay. So that's a great question. So I'll try to reiterate Professor Butler's question just for the recording. But the gist of it is it's one thing to make a voluntary commitment along the line of ESG issues. Another thing to have a mandatory commitment, which seems to be harder to secure.
So ultimately then, what is-- if you've made a commitment, whether we want to call it voluntary or binding, what is the enforcement mechanism for, let's say, factory workers in Bangladesh if they feel like, hey, this is actually not a fair trade factory? What is the enforcement mechanism? Is that a fair restatement?
ERIK BODENHOFER: Yeah. From our perspective in some ways, the enforcement mechanism which is not great for the factory workers is that we remove-- we stop using that factory. So it doesn't really help the workers all that much, because now, there's no one using the factory.
There have been moments in my career-- I know when Adidas had a factory in Malaysia, where they'd actually pulled out months before. And the factory ended up going bankrupt, and the workers were unpaid. And they were petitioning-- I think it was Malaysia or Indonesia. One of the two, they were petitioning the government for redress.
And then the government was looking to the brands that had been in that factory to fund basically unemployment and back wages for the factory workers. And it was a very complicated-- from Adidas perspective, there was some resentment to the fact that we hadn't been the only one in the factory.
We'd been out. We'd pulled out like six months earlier. It was a not insignificant amount of money. There was some real resistance to paying. There was pointing fingers between the other brands. What then ended up happening is-- and the activism part of it, at the time, both UCLA and the University of Wisconsin were Adidas universities. Their teams wore Adidas uniforms.
The students at those factories started protesting and demanding that the university move away from Adidas as sponsor because of what was happening in this factory. And that-- and I think there were some other Nike universities. And ultimately, that's what got the brands at the table together. And they figured out a way to fund-- accepted responsibility for this without allowing themselves to be responsible.
They disclaimed any liability and yet said, here's what we'll do. And they made everyone whole. It's a very difficult-- it's a very complicated interaction when you're talking about factories in countries that don't necessarily have the best court systems, or the governments themselves are a little suspect in terms of their integrity.
You have a lot of NGOs who monitor this. And ultimately, I think the remedy becomes the reputational harm to the brands if they don't step up and make it right. That's, I think, how the system currently works and that's how it worked in that instance.
But I don't have a good solution. It's hard for Reebok to financially take responsibility for every aspect of these operations. Part of the reason why we have third party factories is because we can't really afford to have our own factories. Because we don't produce enough to hold a whole-- take a whole factory's production quantity.
So we get third party factories, but there is a recognition-- there's a real feeling that we have an obligation there, which is why we do these workplace standards, why we inspect, and why we will only do business with a factory that meets our standards. But yeah. The remedy unfortunately doesn't necessarily help the workers in the end.
CALE JAFFE: Did you have a follow up or-- I have a follow up on it to start with. Yeah.
AUDIENCE: [INAUDIBLE] insurance if something goes wrong. So in terms of the financial obligations, usually, the insurance is [INAUDIBLE].
ERIK BODENHOFER: Well, insuring for something like a factory's bankruptcy isn't an easy policy to get. I mean, it can be very expensive to insure something like that. I mean, honestly, I don't that we've ever really sat down and thought it through. But yeah. I guess we could, but I think that's just an additional cost then.
And it doesn't happen all that often. I mean, at least from our perspective in our supply chain, it isn't something that we've regularly dealt with. And quite honestly, when we-- I mean, I suppose the one thing is when we pull out because the working conditions aren't good, I don't how we insure against someone not having good working conditions.
Certainly, maybe the absolute failure and failure to pay. But if we're leaving because they're not paying overtime or they don't have enough fire exits or they don't have enough fire extinguishers, I don't know what the remedy can really be there from us to them other than to say, we won't do business with you.
And then I don't what our insurance could cover in terms of adding another door and a fire extinguisher. So you're absolutely right that, I think, for the financial failure of a factory, because we pull out, we probably could insure for that. But the bigger issue that what we're trying to do is improve the working standards.
And I think the only way we can really do that-- the only remedy we really have available is, well, I mean, we have the carrot and the stick. The carrot is will do business with you. We'll put more-- if you're a good factory, we'll do more business with you. If you're a bad factory, we won't do business with you.
CALE JAFFE: Yeah. So it's not-- so hopefully, what happens is the threat of you all withdrawing from the factory leads the ownership, the third party owner to actually implement the change that they'd been resisting.
ERIK BODENHOFER: Exactly.
CALE JAFFE: That would be the--
ERIK BODENHOFER: Yeah. And I think-- and Reebok, we don't have as much influence as we used to. We are a much smaller brand. But thankfully, Nike and Adidas, which are massive and have-- they take up the production capacity of factory complexes, they have similar standards. And so it's-- and factories get reputations.
There are desirable factories. There are factories that we as brands are desperately trying to get into. We're trying to convince them to add production lines, because we know that-- we are certain that they will meet all of our standards. And we will get quality products, and that's really-- and we're willing to pay a little bit more to have a factory like that, not always but sometimes.
CALE JAFFE: Well, I want to ask another question and then we'll go-- I'm going to jump in on this point. We've got about seven minutes to go for folks who are looking about their next class to get to. And we had a speaker a couple of years ago, Avi Garbow, who was an environmental attorney in-house at Patagonia.
And before going to Patagonia, he had been at EPA doing climate work. And he said he felt more fulfilled at Patagonia in part, because they could sustain progress, that with government, it was two steps forward. But then the next administration might roll back whatever they had just done. So it felt they were just-- it was harder to sustain forward progress.
Do you think that sense is unique to a company like Patagonia that has this mission that very much overlies with an ESG policy? Or is that, at large, true that you can sustain progress in the private environmental government space in a way that you can't in traditional public governance?
ERIK BODENHOFER: I think it's true in general, but I think it probably-- I don't want to say it only matters, but it's more important to some a brand like Patagonia. Because that's who they are. So I think we want to do better. But it's not what we're trying necessarily-- what I'm saying, our goal isn't to improve the environment. Our goal is to make quality products in a way that is decent to the environment.
But I do think it's true. I think that unless and until the government tells us we can't be doing something, we can keep doing it. So certainly, us choosing to focus on using less water in the dying process, that's progress we will make and we will maintain. Because we will start-- that's how we will make our apparel from here on out.
Now, I suppose it's conceivable we could find that it's way too expensive, and we're losing market share. And we need to start going back to a cheaper dye process. But fundamentally, I think it is easier to maintain to not take the two steps back in the private sector.
CALE JAFFE: OK. So that's a good question. Does a push to bring manufacturing back to the United States, is that part of an ESG policy or something that you've seen either at Reebok or elsewhere?
ERIK BODENHOFER: It is not really part of the policy. It's been explored at times entirely from-- well, so Adidas was trying to figure out a way to do-- they had something called speed factories. And it was automated. They were basically 3D printing footwear, and they thought that they could bring that to the United States mostly just for the idea that you would cut down on shipping costs and the restrictions around that.
Honestly, it's not something that Reebok has as part of its policy. There's really only one footwear company that even makes it in any way part of who they are. New Balance has some US based manufacturing, and it plays up in their brand identity. There's certainly no resistance to it. But as a general rule, I think everyone just sort of accepts that footwear and apparel manufacturing can't be done in the United States in a cost effective way without making everything so much more expensive for consumers in the end.
CALE JAFFE: We've got about time for maybe two more questions from the group. Yeah.
AUDIENCE: It sounds like a lot of these issues have inherently large risks. Is that something that keeps y you up night as [INAUDIBLE]? And if not, then [INAUDIBLE]?
CALE JAFFE: So great question. So risks, I guess, it's market share risks and everything from who might be. Yeah. Do the risks that we've discussed in the ESG space keep you up at night? And if not, what are the things that keeps the general counsel at Reebok up at night?
ERIK BODENHOFER: So the ESG stuff in general doesn't keep me up at night, because I feel like we've got a handle on it. And we're trying very hard to get there, and the things that go wrong in our ESG space aren't necessarily certainly someone like Kanye. But that's a different animal.
What I do sometimes worry about, we've gotten back into making children's product. And children's product is very heavily regulated in a lot of the same spaces that ESG is concerned about. So chemicals in the manufacturing, chemicals on the product. That's gotten me that that's kept me awake a few times lately. Because I just worry that we're not-- we're still in a transitional phase.
And I don't feel like our processes are up. So that one has occasionally had me wake up in the middle of night remembering I should talk to somebody about something. I joke about this. I mean, we make we make shoes. No one's going to die.
So I don't tend to wake up in the middle of the night with sweaty palms and stuff. But there are the occasional moments where we've got a litigation going on, and I'll suddenly realize something or just that sometimes there are executives who get a little carried away with themselves. And you've-- but as a general rule, for me, just the roles, it's time consuming.
And I have to think about it a lot, but thankfully, it doesn't keep me up too late at night. But I've only been in it a year, so maybe check back in a year. And I'll tell you if I've discovered the thing that I didn't even I was supposed to be worried about.
CALE JAFFE: Anyone want the last question? All right. I'm going to take the last-- oh, wait. Yes. Go for it. No, you got it.
AUDIENCE: I was just going to ask, how much of your role is forward fire proofing versus trying to solve problems in the moment? I guess you could say, how much of your job's fire fighting versus fire proofing?
CALE JAFFE: Oh, that's a great question. So how much of it is looking forward, fire proofing for future problems versus firefighting dealing with the crisis at the moment?
ERIK BODENHOFER: I think it probably varies week to week. Generally, I think it's probably a 50/50 split. I mean, I try to be strategic, I try to be tactical, and I try to be responsive. And so you-- and maybe in the here and now, because we're moving off of Adidas, which is a German company, very process driven, lots of policies, lots of people spending a whole lot of time fireproofing.
So it was getting done for us as a general rule. And so there was-- I spent a lot more time either putting out fires or helping people at my business understand what the heck it was Adidas wanted us to do. Now, we're setting up a whole lot of things. So by the very nature, it's a lot more forward looking, because I'm trying to get us not back to where we were with Adidas. That was a little too much but to somewhere where we have the infrastructure that's going to allow us to just operate.
And then I'm spending a lot more time on privacy law lately, because the states have gotten much more active in that. So trying to anticipate where we're going to get there. Yeah. So it really-- it does vary. And then trying to insinuate myself in some of the more long term business thinking in the hopes that I can steer them away from making choices early on that are going to cause us problems later down the road.
Again, in part, because they don't think about things the way we were all being trained and I was trained to think about things. So it's definitely in that regard.
CALE JAFFE: Great. Well, I have about 26 more numbered questions, but we have no more time.
ERIK BODENHOFER: But actually, before we go, I apologize. I realize that in the course of my talking, I said crazy and nutso. And that was not right. So I apologize. That was-- I shouldn't have used those terms. So I just want to say that I was trying to be funny, and I shouldn't have used those terms. So I apologize for having done so.
CALE JAFFE: Well, I put you on the spot, so-- well, please join me in thanking Erik for turning to the law school and sharing his insights.