In the wake of the Paradise Papers revelations about tax avoidance, the AFL-CIO and Domini Impact Investments LLC, a provider of socially responsible mutual funds, is asking Nike Inc. (NKE - Get Report) to adopt formal tax practice principles.

Beyond Nike, companies like Uber, Facebook Inc. (FB - Get Report) and Apple Inc. (AAPL - Get Report) have been accused of tax-dodging, but "we didn't fully understand how it was done until now," said Clark Gascoigne, deputy director of the Financial Accountability and Corporate Transparency (FACT) Coalition, on a Wednesday, Nov. 15, call with reporters.

The International Consortium of Investigative Journalists and 95 media partners examined 13.4 million files from offshore tax service providers leaked to German newspaper Süddeutsche Zeitung. ICIJ found that from 2006 to 2009, Nike increased its after-tax profits 55% to $1.88 billion, thanks in part to a drop in its effective tax rate from 34.9% to 24.8%. That number fell even further to 13.2% last year.

Nike transferred ownership of the rights outside the United States for its Swoosh trademark and other intellectual property to a Bermudan subsidiary, Nike International Ltd., thanks to an agreement with Dutch tax authorities. When that agreement expired in 2014, the Swoosh and other trademarks went from the Bermuda subsidiary to Dutch subsidiary Nike Innovate CV, a corporate structure under Dutch law, which "can be entirely stateless, and as a result taxless," wrote ICIJ's Simon Bowers.

The AFL-CIO co-filed alongside the Domini Impact Equity Fund, a domestic large-cap equity fund. The two groups want Nike to follow other companies and "adopt and publish a set of principles to guide its tax practices," Domini managing director of corporate engagement Adam Kanzer said on the call. Their proposal suggests Nike consider the impact of tax strategies on the local economies in which they do business; pay tax in the jurisdiction where they're creating value; assess the "reputational consequences" and opinions of shareholders, customers and employees from its tax practices; and annually review tax policies and their alignment with Nike's stated values.

"Right now the media is telling Nike's tax story," Kanzer said. "This would allow Nike to tell its own story, and, as investors, we'd like to see them do that."

Heather Slavkin Corzo, director of the AFL-CIO Office of Investment, said it is considering similar proposals at Facebook, Alphabet Inc. (GOOGL - Get Report) and Allergan plc (AGN - Get Report) . It  also considered Apple, but the filing deadline has passed.

Domini owns about 375 shares of Nike, worth about $21,000, while union pension assets in AFL-CIO funds own nearly 500,000 Nike shares, worth about $28 million. Domini's goal is to make companies "more public and more proactive with discussing their tax practices," Kanzer said. "These investors are really in the dark."

He emphasized the complexity of multinational tax accounting. Although it sometimes sounds as though "every single company is engaging in these horrendous practices," many companies are operating in good faith. Still, he added, "I think there's plenty out there...diving through every loophole they can find."

And Nike's response to a past labor scandal engendered confidence.

"When Nike was first hit with sweatshop allegations in the 1990s, they responded, we think, very positively to that, and they became a leader. They adopted really strong policies," Kanzer noted. "We subject all our investments to social and environmental standards, and we're long-term investors for Nike. We're not suggesting Nike is an evil company...but we are concerned Nike is undermining their commitments."

While both Kanzer and Corzo acknowledged that investors may be reluctant to encourage companies to adopt proposals that may lower corporate profits through higher tax rates, they argued that tax transparency is conducive to long-term financial success.

"It's important for us to understand how businesses are making money," Corzo said. When businesses focus money on tax avoidance, that's "money that should be used to develop products and services that people want to buy," and tax avoidance practices are "not a long-term way to grow the business and they're not a way to make sure that the American economy is successful going into the future."

"I do recognize that a lot of investors will look at it as a proposal to ask Nike to pay more money, and that's on us to get the message out that it's understood properly as a governance and risk management proposal," Kanzer added. "As investors, we don't like surprises."

The Paradise Paper leaks follow similar revelations revealed by the ICIJ investigations in the Luxembourg Leaks of 2014 and the Panama Papers last year. With each successive leak, there's "some surprise about some big company in our portfolio," he said. "Investors should be concerned about that. There's potential undisclosed liability."

With the adoption of transparency practices, investors and corporations can start to reverse the "global race to the bottom for offshore tax avoidance," Gascoigne said.

Nike, which did not respond to requests for comment, will hold its investor day next fall. Share are up 10.7% this year, trailing the S&P's 15.2% rise during the same period.

Apple, Facebook, Google and Allergan are holdings in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells AAPL, FB, GOOGL and AGN? Learn more now.

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