Two employees quit from Adidas following an ongoing investigation by the German sportswear brand into allegations of corruption in China.

Adidas is currently looking into this issue with the help of external advisers. It has come to light that one employee violated the company's code of conduct during its business with local companies," stated Claudia Lange, head of media relations at the apparel giant, on Wednesday, June 26.

Adidas Ousts 2 Employees Amid Corruption Inquiry

Last week, Adidas announced that it was looking into potential "compliance violations" in China, which is an essential customer base for its sportswear.

This investigation comes after reports from Chinese state media alleged that the company's executives in the country had been involved in embezzlement of millions of euros and accepting significant kickbacks. 

According to a report from Chinese state media outlet Economic View, the two individuals were previously employed in marketing roles at Adidas China.

An unsigned letter from individuals claiming to be employees of Adidas China contained the allegations against Adidas executives. The letter gained significant online attention earlier this month and was covered by state media outlet Jiemian.

According to Jiemian, the letter was initially sent to the company's German headquarters and later circulated on social media.

Last week, Lange informed CNN that Adidas had received an anonymous letter on June 7, which raised concerns about potential compliance violations in China.

An alleged complaint has surfaced, claiming that a senior executive in Greater China, responsible for managing Adidas's marketing budget, has embezzled millions of euros and received kickbacks from external advertising and celebrity agencies.

Adidas Greater China allegedly allocates a massive annual budget of $268 million for various promotional activities, such as marketing, branding, and trade fairs. The senior manager faced allegations of favoritism and mistreatment in the workplace, which included isolating certain employees and pressuring them to resign.

According to the complaint, a subordinate of the manager allegedly received significant amounts of money and physical assets from suppliers, including real estate.

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Adidas' Declining Sales

Adidas holds the position of being the second-largest sportswear retailer globally. The Greater China region, which includes mainland China, Hong Kong, and Taiwan, contributes to 15% of the company's sales.

The ongoing investigations, which Adidas is doing with external counsel, comes as the company attempts to resurrect sales in a market that was once very profitable and rapidly rising until the COVID-19 pandemic and a public reaction over its stance on Xinjiang cotton slowed sales.

In 2021, the German firm was entangled in a nationalist boycott of Western brands that rejected cotton from the western province of Xinjiang, where human rights activists claimed to have discovered proof of forced labor in the supply chain. China has fiercely refuted the allegations., according to FT.

The sportswear company appointed a new leadership team led by Adrian Siu, who was lured back to Adidas from Chinese lingerie business Cosmo Lady in 2022 with the promise of regaining Chinese buyers' "hearts and minds."

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