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Arizona governor to withdraw Nike financial incentives after shoe company pulls 'Betsy Ross' American flag sneakers

Key Points
  • Arizona Gov. Doug Ducey said Tuesday in a tweet that he will order the state's commerce authority to withdraw all financial incentive dollars for Nike to locate in the state.
  • On Monday night, Nike said it would pull sneakers featuring an early American flag designed by Betsy Ross in celebration of the July Fourth holiday.
  • The decision followed a complaint from former NFL football player Colin Kaepernick, who pointed to the flag's use during a period of slavery, The Wall Street Journal reported Monday. There also have been reports of the flag's use by extremist groups, according to the paper.
  • "It is a shameful retreat for the company. American businesses should be proud of our country's history, not abandoning it," Ducey wrote on Twitter.
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Nike pulls 'Betsy Ross flag' sneakers after Colin Kaepernick steps in

Arizona Gov. Doug Ducey said Tuesday in a tweet that he will order the state's commerce authority to withdraw all financial incentive dollars for Nike to locate in the state after the shoe company said it's dropping its Betsy Ross American flag sneakers.

Nike has been planning to build a manufacturing plant on metro Phoenix's west side, which is expected to bring 500 jobs to the area, The Arizona Republic reported Monday. The commerce authority had promised roughly $1 million in incentives, the paper wrote. In addition, The Goodyear City Council on Monday had agreed to waive up to nearly $1 million in review and permit fees and reimburse up to $1 million for the jobs it will create, the paper reported. The Goodyear City Council is not under the discretion of Gov. Ducey. 

On Monday night, Nike said it was pulling the sneakers, which featured an early American flag designed by Betsy Ross in celebration of the July Fourth holiday. The decision followed a complaint from former NFL football player Colin Kaepernick, who pointed to the flag's use during a period of slavery, The Wall Street Journal reported Monday. There also have been reports of the flag's use by extremist groups, according to the paper.

"It is a shameful retreat for the company. American businesses should be proud of our country's history, not abandoning it," Ducey wrote on Twitter.

"Nike has made its decision, and now we're making ours. I've ordered the Arizona Commerce Authority to withdraw all financial incentive dollars under their discretion that the State was providing for the company to locate here."

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Arizona governor to withdraw Nike plant incentives after 'Betsy Ross' sneaker controversy

Ducey, a Republican who was formerly CEO of Cold Stone Creamery, has been Arizona's governor since 2015.

In his role, he oversees the Arizona Commerce Authority, an organization founded in 2010 to bring and maintain corporate operations in the state. The agency has come under fire from some politicians for its inability to measure its success.

"I was never a fan … and that was one of my problems to begin with: How are we going to quantify whether this agency is successful?" said Senate President Andy Biggs, (R-Gilbert) in 2015, according to the Arizona Republic. As governor, Ducey has scaled back its funds, the paper reported.

Later Tuesday, Sen. Martin Trevor Heinrich (D-NM) tweeted, "We will gladly take a new Nike manufacturing plant in New Mexico!"

Kaepernick has been a polarizing figure in sports after he decided not to stand for the national anthem during a 2016 NFL preseason football game, in a protest against racial injustice. His actions have been widely defended as an exercise of his freedom of speech.

Kaepernick has not played in the league since that 2016 season after the San Francisco 49ers failed to re-sign the former quarterback. He then filed collusion grievances against the league, which have since been settled.

Last year, Nike featured Kaepernick as part of the 30th anniversary of its iconic "Just Do It" campaign.

In a statement provided to CNBC, Nike said the company "...made the decision to halt distribution" of the shoes "... based on concerns that it could unintentionally offend and detract from the nation's patriotic holiday."

It added, "...We already employ 35,000 people in the U.S. and remain committed to creating jobs in the U.S., including a significant investment in an additional manufacturing center which will create 500 new jobs."

Nike shares closed down less than 1% in trading Tuesday afternoon, having risen about 8% over the past 12 months.

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