Nike CEO resigns over differences with Knight


Published: Tuesday, January 24, 2006 at 6:01 a.m.
Last Modified: Monday, January 23, 2006 at 11:18 p.m.
BEAVERTON, Ore. - Nike Inc. Chairman Phil Knight said Monday he has replaced CEO William D. Perez after only a year on the job because the former S.C. Johnson & Son Inc. leader could not make the transition from the household products industry to head the world's largest athletic-shoe company.
"Basically the distance between the company that Bill managed in the packaged goods business and Nike and the kind of new athletic equipment business was too great for him to make that leap," Knight said during a conference call with industry analysts.
The Nike founder called his decision "painful" and came down to "lots of little incidences over a year."
Knight named longtime co-president Mark Parker as CEO to replace Perez, whose resignation was accepted last Friday by the Nike board of directors.
Perez was the first outsider ever hired to lead Nike after Knight decided late in 2004 to hand over the day-to-day management responsibilities he had held as chairman, CEO and president.
Nike will pay Perez at least $4.5 million in salary and bonus, and buy his Portland house and reimburse him for remodeling expenses, totaling about $3.6 million, the company said in a filing with the Securities and Exchange Commission.
Knight said he felt the Beaverton-based company was "operating at 80 percent efficiency" under Perez.
"Personally, I think the failure to really kind of get his arms around this company and this industry led to confusion on behalf of the management team," Knight said. "And I didn't see that getting any better."
He noted that Nike still has been generating record sales and earnings, but "I thought we can and will be so much better under Mark Parker's leadership."
In a statement released Monday, Perez said he and Knight "weren't entirely aligned on some aspects of how to best lead the company's long-term growth. It became obvious to me that the long-term interests of the company would be best served by my resignation."
Last month, when Nike announced its second quarter earnings, Perez joked that his "rookie status" was about to end with completion of his first year on a job whose mission as CEO was "to make sure this company has the right strategies in place to sustain long term growth and to ultimately double the size and value of our business."
But Knight said Monday that he and Perez eventually could not agree on that strategy.
"It was too much a difference in industries, too much a difference in companies, too much a difference in brands and too much a difference in culture," Knight said.
John Horan, publisher of the Sporting Goods Intelligence, said Knight originally chose Perez because of his experience marketing multiple brands of products.
"It's a very, very unique culture," Horan said of Nike and the athletic shoe industry, which was built around performance products that appealed to runners and other athletes before it began expanding to a broader consumer base.
Now Nike owns other brands, such as Converse and the Cole Haan fashion shoes and accessories line, and it is moving into more diverse markets.
"The whole reason for bringing Perez in was because he had a real multibrand background," Horan said.
Parker said during the analyst conference call that he plans no changes in strategy for Nike.
"I really think we're confident that our Nike Inc. growth strategy is the right one," Parker said.
Parker, 50, joined Nike in 1979 and is considered the visionary behind the Nike Air franchise and many other innovations, Nike said, and one of the key executives leading the company's long-term strategic planning
Charlie Denson, who had been co-president of the Nike brand, will remain as president.
Knight, 67, who founded Nike in 1968 along with Bill Bowerman, stepped down as CEO in December 2004 - at age 66 - but remained chairman. At the time, Knight suggested he would still play a major role as "an active chairman."
Analyst John Shanley of Susquehanna Financial Group said Perez was a rare outsider in the Nike house and had a different idea about how to move shoes. Rather than relying on Nike's high-profile advertising campaigns, Perez worked the phones and met with retailers, Shanley said.
Knight "has always felt that retailers get in his way," Shanley said. "Perez took a very opposite way in reaching out. ... That sounds a little bizarre, but some of the retailers that had been in Nike's top 10 accounts had not spoken with a Nike CEO."
Shanley said, though, that it was too early to say whether Perez's attempts to change the marketing culture were part of the reason for his departure.
Shares of Nike fell $1.03, or 1.2 percent, to $83.17 in afternoon trading on the New York Stock Exchange. The stock has traded in a 52-week range of $75.10 to $91.54.

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