<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant |X|
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Useof the Commission Only (as
permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
NIKE, INC.
----------
(Name of Registrant as Specified In Its
Charter)
NIKE, INC.
----------
(Name of Person(s) Filing Proxy Statement, if other than
the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1),
14a-6(i)(2) or Item
22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to
Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-
6(i)(4)
and 0-11.
(1) Title of each class of securities to which
transaction applies:
(2) Aggregate number of securities to which
transaction applies:
(3) Per unit price or other underlying value of
transaction computed
pursuant to Exchange Act Rule 0-11: *
(4) Proposed maximum aggregate value of
transaction:
* Set forth the amount on which the filing fee is
calculated and
state how it was determined.
[ ] Check box if any part of the fee is offset as
provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was
paid previously. Identify the previous filing by
registration statement
number, or the Form or Schedule and the date of its
filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement
No.:
(3) Filing Party:
(4) Date Filed:
- ---------
Notes:
<PAGE>
[NIKE LOGO]
NIKE, Inc.
One Bowerman Drive
Beaverton, Oregon 97005-6453
August 13, 1998
To Our Shareholders:
You are cordially invited to attend the annual meeting of shareholders of
NIKE, Inc. to be held at The Orpheum Theatre, 203 S. Main, Memphis, Tennessee
38103, on Wednesday, September 23, 1998, at 10:00 A.M. Registration will begin
at 9:00 A.M. You must present an admission ticket enclosed in this Proxy
Statement.
This year our annual meeting will be held in Memphis, the location of our
largest distribution center in North America and the home of over 1,500 NIKE
employees. I believe that the annual meeting provides an excellent opportunity
for shareholders to become better acquainted with NIKE and its directors and
officers. I hope that you will be able to attend. Highlights of the meeting will
be available on videotape by calling 1-800-422-NIKE (6453) following the
meeting.
Whether or not you plan to attend, the prompt execution
and return of your proxy card will both assure that your shares are represented
at the meeting and minimize the cost of proxy solicitation.
Sincerely,
/s/ PHILIP H. KNIGHT
Philip H. Knight
Chairman of the Board
and Chief Executive Officer
<PAGE>
NIKE LOGO
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
SEPTEMBER 23, 1998
------------------------
To the Shareholders of NIKE, Inc.
The annual meeting of shareholders of NIKE, Inc., an Oregon corporation,
will be held on Wednesday, September 23, 1998, at 10:00 A.M., Central Daylight
Time, at The Orpheum Theatre, 203 S. Main, Memphis, Tennessee 38103, for the
following purposes:
1. To elect a Board of Directors for the ensuing year.
2. To ratify the appointment of PricewaterhouseCoopers LLP as independent
accountants.
3. To vote upon two shareholder proposals described in this proxy
statement, if the proposals are presented at the meeting.
4. To transact such other business as may properly come before the meeting.
All shareholders are invited to attend the meeting. Shareholders of record
at the close of business on July 24, 1998, the record date fixed by the Board of
Directors, are entitled to notice of and to vote at the meeting. You must
present an admission ticket enclosed in this Proxy Statement.
By Order of the Board of Directors
JOHN E. JAQUA
Secretary
Beaverton, Oregon
August 13, 1998
Whether or not you intend to be present at the meeting, please sign and date the
enclosed proxy and return it in the enclosed envelope.
<PAGE>
PROXY STATEMENT
The enclosed proxy is solicited by the Board of Directors of NIKE, Inc.
("NIKE" or the "Company") for use at the annual meeting of shareholders to be
held on September 23, 1998, and at any adjournment thereof (the "Annual
Meeting"). The Company expects to mail this proxy statement and the enclosed
proxy to shareholders on or about August 13, 1998.
The Company will bear the cost of solicitation of proxies. In addition to
the solicitation of proxies by mail, certain officers and employees of the
Company, without extra compensation, may also solicit proxies personally or by
telephone. The Company has retained The Altman Group, Inc., New York, New York,
to assist in the solicitation of proxies from nominees and brokers at an
estimated fee of $8,000 plus related out-of-pocket expenses. Copies of proxy
solicitation materials will be furnished to fiduciaries, custodians and
brokerage houses for forwarding to the beneficial owners of shares held in their
names.
All valid proxies properly executed and received by the Company prior to
the Annual Meeting will be voted in accordance with the instructions specified
in the proxy. Where no instructions are given, shares will be voted FOR: (1) the
election of each of the named nominees for director, and (2) ratification of the
appointment of PricewaterhouseCoopers LLP as independent accountants; and
AGAINST two shareholder proposals described in this proxy statement. A
shareholder may choose to strike the names of the proxy holders named in the
enclosed proxy and insert other names.
A shareholder giving the enclosed proxy has the power to revoke it at any
time before it is exercised by affirmatively electing to vote in person at the
meeting or by delivering to John F. Coburn III, Assistant General Counsel of
NIKE, either an instrument of revocation or an executed proxy bearing a later
date.
VOTING SECURITIES
Holders of record of NIKE's Class A Common Stock ("Class A Stock") and
holders of record of NIKE's Class B Common Stock ("Class B Stock"), at the close
of business on July 24, 1998, will be entitled to vote at the Annual Meeting. On
that date, 101,392,108 shares of Class A Stock and 185,837,019 shares of Class B
Stock were issued and outstanding. Neither class of Common Stock has cumulative
voting rights.
1
<PAGE>
Each share of Class A Stock and each share of Class B Stock is entitled to
one vote on every matter submitted to the shareholders at the Annual Meeting.
With regard to Proposal 1, the election of directors, the holders of Class A
Stock and the holders of Class B Stock will vote separately. Holders of Class B
Stock are currently entitled to elect 25 percent of the total Board, rounded up
to the next whole number. Holders of Class A Stock are currently entitled to
elect the remaining directors. Under this formula, holders of Class B Stock,
voting separately, will elect four directors, and holders of Class A Stock,
voting separately, will elect nine directors. Holders of Class A Stock and
holders of Class B Stock will vote together as one class on Proposals 2, 3 and
4.
PROPOSAL 1
ELECTION OF DIRECTORS
A Board of 13 directors will be elected at the Annual Meeting. All of the
nominees were elected at the 1997 annual meeting of shareholders. Directors will
hold office until the next annual meeting of shareholders or until their
successors are elected and qualified.
William J. Bowerman, Thomas E. Clarke, Jill K. Conway and Delbert J. Hayes
are nominated by management for election by the holders of Class B Stock. The
other nine nominees are nominated by management for election by the holders of
Class A Stock.
Under Oregon law, if a quorum of each class of shareholders is present at
the Annual Meeting, the nine director nominees who receive the greatest number
of votes cast by holders of Class A Stock and the four director nominees who
receive the greatest number of votes cast by holders of Class B Stock will be
elected directors. Abstentions and broker non-votes will have no effect on the
results of the vote. Unless otherwise instructed, proxy holders will vote the
proxies they receive for the nominees listed below. If any nominee becomes
unable to serve, the holders of the proxies may, in their discretion, vote the
shares for a substitute nominee or nominees designated by the Board of
Directors.
Background information on the nominees as of July 15, 1998, appears below:
NOMINEES FOR ELECTION BY CLASS A SHAREHOLDERS
Ralph D. DeNunzio--Mr. DeNunzio, 66, a director of the Company since 1988,
is President of Harbor Point Associates, Inc., New York, New York, a private
investment
2
<PAGE>
and consulting firm. Mr. DeNunzio was employed by the investment banking firm of
Kidder, Peabody & Co. Incorporated from 1953 to 1987, where he served as
President from 1977 to 1986, as Chief Executive Officer from 1980 to 1987 and as
Chairman of the Board of Directors from 1986 to 1987. Mr. DeNunzio served as
Vice Chairman and Chairman of the Board of Governors of the New York Stock
Exchange from 1969 to 1972 and was President of the Securities Industry
Association in 1981. In 1970, Mr. DeNunzio headed the Securities Industry Task
Force, which led to enactment of the Securities Investor Protection Act of 1970
and establishment of the Securities Investor Protection Corporation. He is also
a director of AMP Incorporated, Federal Express Corporation and Harris
Corporation.
Richard K. Donahue--Mr. Donahue, 71, a director of the Company since 1977,
is Vice Chairman of the Board. He served as President and Chief Operating
Officer of the Company from 1990 until 1994. He has been a partner in the law
firm of Donahue & Donahue, Lowell, Massachusetts, since 1951. From 1961 to 1963,
Mr. Donahue was an assistant to President John F. Kennedy. Mr. Donahue is a
former President of the Massachusetts Bar Association and the New England Bar
Association. He is a member of the John F. Kennedy Library Foundation. He is a
trustee of the Joyce Foundation. Mr. Donahue is also a director of Courier Corp.
Douglas G. Houser--Mr. Houser, 63, a director since 1970, is an Assistant
Secretary of the Company and has been a partner in the Portland, Oregon law firm
of Bullivant, Houser, Bailey since 1965. Mr. Houser is a trustee of Willamette
University and a Fellow in the American College of Trial Lawyers, and has served
as a member of the Board of Governors and Treasurer of the Oregon State Bar
Association and as a Director of the Rand Corporation, Institute for Civil
Justice Board of Overseers.
John E. Jaqua--Mr. Jaqua, 77, a director since 1968, is Secretary of NIKE
and has been a principal in the law firm of Jaqua & Wheatley, P.C., Eugene,
Oregon, since 1962. Mr. Jaqua has served as President of the Oregon State Bar
Association and as a State Delegate to the House of Delegates of the American
Bar Association.
Philip H. Knight--Mr. Knight, 60, a director since 1968, is Chief Executive
Officer and Chairman of the Board of Directors of NIKE. Mr. Knight is a
co-founder of the Company and, except for the period from June 1983 through
September 1984, served as its President from 1968 to June 1990. Prior to 1968,
Mr. Knight was a certified public accountant with Price Waterhouse and Coopers &
Lybrand and was an Assistant Professor of Business Administration at Portland
State University.
3
<PAGE>
Kenichi Ohmae--Mr. Ohmae, 55, a director since 1994, was Managing Director
of McKinsey & Company, Inc., an international business consulting firm, with
which he had been employed for over 20 years, until 1994. Mr. Ohmae serves as an
advisor to many large companies in various industries around the world. He is
the author of numerous books on global business strategy, including The
Borderless World, The Mind of The Strategist, Triad Power: The Coming Shape of
Global Competition, and Beyond National Borders: Reflections on Japan and the
World. He is also a Director of Heisei Research Institute in Japan.
Charles W. Robinson--Mr. Robinson, 78, a director since 1978, is Chairman
and President of Robinson & Associates, Inc., Santa Fe, New Mexico, a venture
capital firm. From January 1978 to January 1979, Mr. Robinson was Vice Chairman
of the Board of Blyth, Eastman, Dillon & Co., Inc. and from March 1977 to
December 1977, was Senior Managing Director of Kuhn Loeb & Co., Incorporated.
Mr. Robinson served as Under-secretary of State for Economic Affairs from 1974
to 1976, at which time he was appointed Deputy Secretary of State. From 1964 to
1974, Mr. Robinson was President of Marcona Corporation. Mr. Robinson is also
director of Allen TELECOM, Inc., and a trustee of The Brookings Institution.
A. Michael Spence--Dr. Spence, 54, has been the Philip H. Knight Professor
and Dean of the Graduate School of Business at Stanford University since 1990.
From 1984 to 1990 he was Dean of the Faculty of Arts and Sciences at Harvard
University. He was professor of economics and business administration at Harvard
University from 1977 to 1986. He is the author of three books and numerous
articles on economics and business. Dr. Spence is also a director of Bank of
America NT & SA, Sun Microsystems, Inc., Siebel Systems and General Mills, Inc.
He is a Fellow of the Econometric Society and is Chairman of the National
Research Council Board on Science, Technology and Economic Policy.
John R. Thompson, Jr.--Mr. Thompson, 56, a director since 1991, has been
head coach of the Georgetown University men's basketball team since 1972. Mr.
Thompson also serves as Assistant to the President of Georgetown for Urban
Affairs. Mr. Thompson was head coach of the 1988 United States Olympic
basketball team. He is a past President of the National Association of
Basketball Coaches and presently serves on its Board of Governors.
4
<PAGE>
NOMINEES FOR ELECTION BY CLASS B SHAREHOLDERS
William J. Bowerman--Mr. Bowerman, 87, a director since 1968, has served as
Deputy Chairman of the Board and Senior Vice President of NIKE since 1980. Mr.
Bowerman is a co-founder of the Company and served as Vice President from 1968
to 1980. From 1949 to 1972, Mr. Bowerman was head track coach at the University
of Oregon, and he served as coach of the United States Olympic track team in
1972.
Thomas E. Clarke--Dr. Clarke, 47, a director since 1994, joined the Company
in 1980, and was elected President and Chief Operating Officer in 1994. Dr.
Clarke has held various positions with the Company, primarily in research,
design, development and marketing. He was appointed divisional vice president in
charge of marketing in 1987. He was elected corporate Vice President in 1989 and
appointed General Manager in 1990. Dr. Clarke holds a Doctorate degree in
biomechanics.
Jill K. Conway--Dr. Conway, 63, a director since 1987, is currently a
Visiting Scholar with the Massachusetts Institute of Technology's Program in
Science, Technology and Society. Dr. Conway was President of Smith College,
Northampton, Massachusetts, from 1975 to 1985. She was affiliated with the
University of Toronto from 1964 to 1975, and held the position of Vice
President, Internal Affairs from 1973 to 1975. Her field of academic specialty
is history. Dr. Conway is currently a director of Merrill Lynch & Co., Inc.,
Arthur D. Little, Inc., The Allen Group, Inc., and Colgate-Palmolive Company.
She is currently a trustee of Mount Holyoke College and Lifespan Inc., a Rhode
Island based hospital network.
Delbert J. Hayes--Mr. Hayes, 63, a director since 1975, served as Executive
Vice President of NIKE from 1980 to 1995. Mr. Hayes served as Treasurer and in a
number of other executive positions with the Company from 1975 to 1980. Mr.
Hayes was a partner with Hayes, Nyman & Co., certified public accountants, from
1970 to 1975. Prior to 1970, Mr. Hayes was a certified public accountant with
Price Waterhouse for eight years.
BOARD OF DIRECTORS AND COMMITTEES
The Board currently has an Executive Committee, an Audit Committee, a
Personnel Committee, a Finance Committee, and a Compensation Plan Subcommittee
of the Personnel Committee, and may also appoint other committees from time to
time. There is currently no Nominating Committee. There were five meetings of
the Board of Directors during the last fiscal year. Each director attended at
least 75 percent of the
5
<PAGE>
total number of meetings of the Board of Directors and committees on which he or
she served, except for Dr. Spence who attended 71 percent, Mr. Thompson who
attended 44 percent, and Mr. Bowerman who attended 0 percent.
The Executive Committee of the Board is currently composed of Messrs.
Knight (Chairman) and Clarke. The Executive Committee is authorized to act on
behalf of the Board on all corporate actions for which applicable law does not
require participation by the full Board. In practice, the Executive Committee
acts in place of the full Board only when emergency issues or scheduling make it
difficult or impracticable to assemble the full Board. All actions taken by the
Executive Committee must be reported at the next Board meeting. The Executive
Committee held no formal meetings during the fiscal year ended May 31, 1998, but
took actions from time to time pursuant to written consent resolutions.
The Audit Committee is currently composed of Mr. Hayes (Chairman), Mr.
Houser and Dr. Spence. The Audit Committee reviews and makes recommendations to
the Board regarding services provided by the independent accountants, reviews
with the independent accountants the scope and results of their annual
examination of the Company's consolidated financial statements and any
recommendations they may have, and makes recommendations to the Board with
respect to the engagement or discharge of the independent accountants. The Audit
Committee also reviews the Company's procedures with respect to maintaining
books and records, the adequacy and implementation of internal auditing,
accounting and financial controls, and the Company's policies concerning
financial reporting and business practices. The Audit Committee met twice during
the fiscal year ended May 31, 1998.
The Personnel Committee is currently composed of Mr. DeNunzio (Chairman),
Dr. Conway, Mr. Jaqua, and Mr. Thompson. The Personnel Committee makes
recommendations to the Board regarding officers' compensation, management
incentive compensation arrangements and profit sharing plan contributions. The
Personnel Committee met four times during the fiscal year ended May 31, 1998.
The Finance Committee is currently composed of Messrs. Robinson (Chairman),
DeNunzio, and Hayes. The Finance Committee considers long-term financing options
and needs of the Company, long-range tax and currency issues facing the Company,
and management recommendations concerning major capital expenditures and
material acquisitions or divestments. The Finance Committee met five times
during the fiscal year ended May 31, 1998.
6
<PAGE>
The Compensation Plan Subcommittee of the Personnel Committee is currently
composed of Dr. Conway and Mr. Jaqua. The Subcommittee grants stock options
under the NIKE, Inc. 1990 Stock Incentive Plan, and determines targets and
awards under the NIKE, Inc. Executive Performance Sharing Plan and the NIKE,
Inc. Long-Term Incentive Plan.
DIRECTOR COMPENSATION AND RETIREMENT PLAN
Messrs. Knight and Clarke do not receive additional compensation for their
services as directors. All other directors are paid a fee of $18,000 per year
plus $2,000 for each Board meeting attended and $1,000 for each committee
meeting attended, except that no fee is paid for attending Compensation Plan
Subcommittee meetings. In addition, directors are reimbursed for travel and
other expenses incurred in attending Board and committee meetings. The Company
also provides its non-employee directors medical insurance and $500,000 of life
insurance coverage.
In 1989 and 1993 the Board of Directors approved resolutions that provide
certain benefits to directors who have served in that capacity for five years or
more. The plan provides that after ten years of service by a non-employee
director, the Company will provide such director for the remainder of his or her
life with $500,000 of life insurance and medical insurance at the levels
provided by the Company to all of its employees at the time such director
retires. The plan also provides that a director who has served for at least five
years will receive an annual retirement benefit for life, commencing on the
later of age 65 or the date the director retires or ceases to be a member of the
Board. New directors elected after the 1993 fiscal year must retire at age 72.
The retirement benefit is equal to a sliding percentage of the director's last
annual Board fee (excluding meeting fees) beginning at 50 percent of the Board
fee for five years of service up to a maximum of 100 percent of the Board fee
for 10 or more years of service.
STOCK HOLDINGS OF CERTAIN OWNERS AND MANAGEMENT
The following table sets forth the number of shares of each class of NIKE
securities beneficially owned, as of July 15, 1998, by (i) each person known to
the Company to be the beneficial owner of more than 5 percent of any class of
the Company's securities, (ii) each of the nominees for director, (iii) each
executive officer listed in the Summary Compensation Table ("Named Officers"),
and (iv) all nominees, Named Officers, and other executive officers as a group.
Because Class A Stock is convertible into Class B Stock on a share-for-share
basis, each beneficial owner of Class A Stock is deemed by
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<PAGE>
the Securities and Exchange Commission to be a beneficial owner of the same
number of shares of Class B Stock. Therefore, in indicating a person's
beneficial ownership of shares of Class B Stock in the table, it has been
assumed that such person has converted into Class B Stock all shares of Class A
Stock of which such person is a beneficial owner. For these reasons the table
contains substantial duplications in the numbers of shares and percentages of
Class A and Class B Stock shown for Messrs. Knight, Bowerman, Hayes and Jaqua
and for all directors and officers as a group.
<TABLE>
<CAPTION>
Shares
Title of Beneficially Percent of
Class Owned(1) Class(7)
--------- ------------ ----------
<S> <C> <C> <C>
William J. Bowerman Class A 116,160 0.1%
Eugene, Oregon Class B 143,916
Thomas E. Clarke(5) Class B 564,082(2)(3) 0.3%
Portland, Oregon
Jill K. Conway Class B 74,000(2)
Boston, Massachusetts
Ralph D. DeNunzio Class B 178,000(2) 0.1%
Riverside, Connecticut
Richard K. Donahue Class B 1,132,907(2) 0.6%
Lowell, Massachusetts
Delbert J. Hayes Class A 770,000 0.8%
Newberg, Oregon Class B 790,445(3) 0.4%
Douglas G. Houser Class B 88,000
Portland, Oregon
John E. Jaqua Class A 605,526 0.6%
Eugene, Oregon Class B 605,526 0.3%
Philip H. Knight(5) Class A 95,653,192(4) 94.3%
Beaverton, Oregon Class B 95,653,192(4) 34.0%
Kenichi Ohmae Class B 48,000(2)
Tokyo, Japan
Charles W. Robinson Class B 460,000 0.2%
Santa Fe, New Mexico
A. Michael Spence Class B 12,000(2)
Palo Alto, CA
John R. Thompson, Jr. Class B 88,000(2)
Washington, D.C
George T. Porter (5) Class B 120(2)(3)
Portland, Oregon
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Shares
Title of Beneficially Percent of
Class Owned(1) Class(7)
--------- ------------ ----------
<S> <C> <C> <C>
Mark G. Parker(5) Class B 297,269(2)(3) 0.2%
Portland, Oregon
David B. Taylor(5) Class B 460,771(2)(3) 0.2%
Beaverton, Oregon
Nissho Iwai American Corporation Preferred(6) 300,000 100.0%
Portland, Oregon
All directors and executive officers Class A 97,144,878 95.8%
as a group (25 persons) Class B 101,208,174(2) 35.3%
</TABLE>
- ------------
(1) A person is considered to beneficially own any shares: (a) over which the
person exercises sole or shared voting or investment power, or (b) of which
the person has the right to acquire beneficial ownership at any time within
60 days (such as through conversion of securities or exercise of stock
options). Unless otherwise indicated, voting and investment power relating
to the above shares is exercised solely by the beneficial owner or shared by
the owner and the owner's spouse or children.
(2) These amounts include the right to acquire, pursuant to the exercise of
stock options, within 60 days after July 15, 1998, the following numbers of
shares: 562,288 shares for Dr. Clarke, 150,000 shares for Mr. DeNunzio,
813,892 shares for Mr. Donahue, 48,000 shares for Mr. Ohmae, 12,000 shares
for Dr. Spence, 84,000 shares for Mr. Thompson, 295,058 shares for Mr.
Parker, 456,164 shares for Mr. Taylor and 2,421,402 shares for the group.
(3) Includes shares held in account under the NIKE, Inc. 401(k) Plan for Dr.
Clarke and Messrs. Hayes, Parker, Porter and Taylor in the amounts of 345,
2,211, 120 and 3,007 shares, respectively.
(4) Includes (a) 3,368,416 shares held by a limited partnership in which a
corporation owned by Mr. Knight's spouse is a co-general partner, (b) 65,224
shares owned by such corporation, (c) 1,000,000 shares held by the Knight
Foundation, a charitable trust in which Mr. Knight and his spouse are
directors, and (d) 950,000 shares held by F.W. Strategic Partners, L.P., a
limited partnership in which Mr. Knight is a limited partner. Mr. Knight has
disclaimed ownership of all such shares.
(5) Executive officer listed in the Summary Compensation Table.
9
<PAGE>
(6) Preferred Stock does not have general voting rights except as provided by
law, and under certain circumstances as provided in the Company's Restated
Articles of Incorporation, as amended.
(7) Omitted if less than 0.1 percent.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company'sdirectors and executive officers, and persons who own more than
10 percent of a registered class of the Company's equity securities, to file
with the Securities and Exchange Commission, the New York Stock Exchange and
the Pacific Stock Exchange initial reports of ownership and reports of changes
in ownership of Common Stock and other equity securities of the Company.
Officers, directors and greater than 10 percent shareholders are required by
the regulations of the Securities and Exchange Commission to furnish the
Company with copies of all Section 16(a) forms they file. To the Company's
knowledge, based solely on review of the copies of such reports furnished to
the Company and written representations that no other reports were required,
during the fiscal year ended May 31, 1998 all Section 16(a) filing requirements
applicable to its officers, directors and greater than 10 percent beneficial
owners were complied with.
10
<PAGE>
EXECUTIVE COMPENSATION
The following table discloses compensation awarded to, earned by, or paid
to the Company's Chief Executive Officer and its next four most highly
compensated executive officers for all services rendered by them in all
capacities to the Company and its subsidiaries during the fiscal year ended May
31, 1998 and the two preceding fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-term
Compensation
Annual Compensation ------------------
------------------------------------------------- Stock All Other
Name and Principal Other Annual Options LTIP Compensation
Position Year Salary($) Bonus($) Compensation($) (#)(1) Payouts ($)(2)
- ---------------------- ---- --------- ------------ --------------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Philip H. Knight...... 1998 1,104,167 0 -- -- 0 574,802(3)
Chief Executive 1997 1,032,500 1,084,125 -- -- -- 696,188
Officer 1996 939,167 915,688 -- -- -- 686,203
Thomas E. Clarke...... 1998 816,667 0 -- 40,000 0 95,209(4)(5)
President and 1997 758,333 739,375 -- 80,000 -- 211,466
Chief Operating 1996 670,833 603,750 -- 140,000 -- 331,304
Officer
Mark G. Parker........ 1998 591,667 0 -- 35,000 0 91,209(4)(5)
Vice President 1997 541,667 487,500 -- 60,000 -- 100,066
Consumer Product 1996 495,833 409,062 -- 120,000 -- 126,316
Marketing
David B. Taylor....... 1998 396,667 0 -- 20,000 0 29,334
Vice President 1997 375,000 309,375 -- 40,000 -- 67,227
1996 347,916 260,937 -- 56,000 -- 64,227
George T. Porter...... 1998 344,775 0 -- 50,000 0 6,200
Vice President 1997 -- -- -- -- -- --
USA Region 1996 -- -- -- -- -- --
</TABLE>
- ------------
(1) These figures have been adjusted to reflect the 2-for-1 stock split that
occurred on October 23, 1996.
(2) Includes contributions by the Company to the 401(K) and Profit Sharing Plan
for the fiscal year ended May 31, 1998 in the amount of $9,469 each for Dr.
Clarke and Messrs. Parker and Taylor, $5,469 for Mr. Knight, and $4,000 for
Mr. Porter. The Company also made matching contributions of $1,200 to the
after-tax retirement plan for Messrs. Taylor and Porter. Also includes
contributions by the Company to the Deferred Compensation Plan for Messrs.
Knight, Clarke, Parker, and Taylor of $69,333, $48,944, $33,047, and $18,665
respectively.
(3) The Company paid $500,000 towards a portion of the annual premium for term
life insurance on the life of Mr. Knight pursuant to a "split dollar" plan.
The Company would be reimbursed for its payments from the proceeds of the
life insurance policies in the event Mr. Knight dies.
(4) Includes above-market interest on deferred compensation for Dr. Clarke and
Mr. Parker in the amount of $1,016 and $1,093, respectively, for the 1998
fiscal year.
11
<PAGE>
(5) Pursuant to the terms of certain stock options, in fiscal year 1998 the
Company made a cash payment of $.68 per share to Mr. Parker for the exercise
of 70,000 of Mr. Parker's stock options in fiscal year 1998 ($47,600) and a
cash payment of $1.789 per share to Dr. Clarke for the exercise of 20,000 of
Dr. Clarke's stock options in fiscal year 1998 ($35,780).
OPTION GRANTS IN THE FISCAL YEAR ENDED MAY 31, 1998
<TABLE>
<CAPTION>
Potential Realizable Value
of Assumed Annual Rates
% of Total of Stock Price
Options Appreciation for Option
Options Granted to Exercise or Term(3)
Granted Employees in Base Price Expiration ---------------------------
Name (#)(1) Fiscal year ($/share)(2) Date 5%($) 10%($)
---- -------- ------------ ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Philip H. Knight............ -- -- -- -- -- --
Thomas E. Clarke............ 40,000 2.2% $58.75 7/14/07 $1,478,000 $3,745,200
Mark G. Parker.............. 35,000 1.9% $58.75 7/14/07 $1,293,250 $3,277,050
David B. Taylor............. 20,000 1.1% $58.75 7/14/07 $ 739,000 $1,872,600
George T. Porter............ 50,000 2.7% $54.25 9/22/07 $1,706,000 $4,323,000
</TABLE>
- ------------
(1) All options shown in the table for Messrs. Clarke, Parker and Taylor become
exercisable with respect to 25% of the total number of shares on each of
July 14, 1998, 1999, 2000, and 2001. Mr. Porter's options become exercisable
with respect to 6,250, 6,250, 6,250, and 31,250 on September 22, 1998, 1999,
2000, and 2001, respectively. All options will become fully exercisable
generally upon the approval by the Company's shareholders of a merger, plan
of exchange, sale of substantially all of the Company's assets or plan of
liquidation.
(2) The exercise price is the market price of Class B Stock on the date the
options were granted.
(3) Assumed annual appreciation rates are set by the SEC and are not a forecast
of future appreciation. The actual realized value depends on the market
value of the Class B Stock on the exercise date, and no gain to the
optionees is possible without an increase in the price of the Class B Stock.
All assumed values are before taxes and do not include dividends.
12
<PAGE>
AGGREGATED OPTION EXERCISES IN THE FISCAL YEAR ENDED
MAY 31, 1998 AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised In-the-
Options at Fiscal Year- Money Options at Fiscal
Shares End(#) Year-End($)(1)
Acquired on Value --------------------------- -----------------------------
Name Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ----------- ----------- ------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Philip H. Knight...... -- -- -- -- -- --
Thomas E. Clarke...... 20,000 $1,922,711 463,815 203,473 $15,096,705 $2,789,755
Mark G. Parker........ 70,000 $ 613,825 232,909 148,399 $ 6,486,346 $1,801,294
David B. Taylor....... 20,000 $1,074,812 413,775 91,389 $14,235,591 $1,115,896
George T. Porter...... 0 0 0 50,000 0 0
</TABLE>
- ------------
(1) Based on a fair market value as of May 31, 1998 of $46.00 per share. Values
are stated on a pre-tax basis.
LONG-TERM INCENTIVE PLANS
AWARDS IN FISCAL YEAR ENDED MAY 31, 1998
<TABLE>
<CAPTION>
Performance or Other Period
Until Maturation or
Name Payout(1)(2) Threshold($) Target($) Maximum($)
---- --------------------------- ------------ --------- ----------
<S> <C> <C> <C> <C>
Philip H. Knight.................. Fiscal Year 1998 40,000 400,000 600,000
Thomas E. Clarke.................. Fiscal Year 1998 20,000 200,000 300,000
Mark G. Parker.................... Fiscal Year 1998 20,000 200,000 300,000
David B. Taylor................... Fiscal Year 1998 20,000 200,000 300,000
George T. Porter.................. Fiscal Year 1998 20,000 200,000 300,000
</TABLE>
- ------------
(1) The Compensation Plan Subcommittee established a series of performance
targets based on fiscal 1998 revenues and earnings per share corresponding
to award payouts ranging from 10% to 150% of the target awards. Participants
would have been entitled to a payout at the highest percentage level at
which both performance targets are met, subject to the Committee's
discretion to reduce or eliminate any award based on Company or individual
performance. Under the terms of the awards, on August 15, 1998 the Company
would issue in the name of each participant a number of shares of Class B
Stock with a value equal to the award payout based on the closing price of
the Class B Stock on that date on the New York Stock Exchange. The shares
would be restricted for three years thereafter and subject to forfeiture to
the Company if the participant ceases to be an employee of the Company for
any reason during such three-year period.
(2) Because none of the performance targets were met in fiscal year 1998, there
were no LTIP payouts under the above awards.
Notwithstanding anything to the contrary set forth in
any of the Company'sfilings under the Securities Act of 1933 or the Securities
Exchange Act of 1934, the following Performance Graph and the Report on pages
14-19 shall not beincorporated by reference into any such filings and shall
not otherwise bedeemed filed under such acts.
13
<PAGE>
PERFORMANCE GRAPH
The following graph demonstrates a five-year comparison of cumulative total
returns for NIKE's Class B Stock, the Standard & Poor's 500 Stock Index, and the
Standard & Poor's Shoes and Textiles Indices. The graph assumes an investment of
$100 on May 31, 1993 in each of the Company's Common Stock, and the stocks
comprising the Standard & Poor's 500 Stock Index and the Standard & Poor's Shoes
and Textiles Indices. Each of the indices assumes that all dividends were
reinvested.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN
AMONG NIKE, INC., S&P 500 INDEX,
S&P SHOES INDEX AND S&P TEXTILES INDEX
<TABLE>
<CAPTION>
S&P
S&P
'NIKE, INC.' S&P 500 FOOTWEAR TEXTILES
<S> <C> <C> <C> <C>
1993 100.00 100.00 100.00 100.00
1994 82.70 104.26 85.00 84.04
1995 112.05 125.31 98.67 85.96
1996 287.84 160.94 189.50 108.21
1997 331.75 208.28 223.21 138.86
1998 267.90 272.20 178.40 165.17
</TABLE>
- ------------
The Standard & Poor's Shoes Index consists of NIKE, Reebok International, Brown
Group, Inc. and Stride Rite Corporation. The Standard & Poor's Textiles Index
consists of Liz Claiborne, Inc., Russell Corp., Fruit of the Loom, Springs
Industries, Inc. and VF Corp. The Standard & Poor's Shoe and Textiles Indices
include companies in two major lines of business in which the Company competes.
The indices do not encompass all of the Company's competitors, nor all product
categories and lines of business in which the Company is engaged. Because NIKE
is part of the S&P Shoes Index, the price and returns of NIKE stock affect this
index.
The Stock Performance shown on the Graph above is not necessarily indicative
of future performance. The Company will not make nor endorse any predictions as
to future stock performance.
14
<PAGE>
REPORT OF THE PERSONNEL COMMITTEE OF THE BOARD OF
DIRECTORS ON EXECUTIVE COMPENSATION
The Personnel Committee of the Board of Directors (the "Committee"),
subject to the approval of the Board of Directors, determines the compensation
of the Company's five most highly compensated executive officers, including the
Chief Executive Officer, and oversees the administration of executive
compensation programs, except that stock option grants, and targets and awards
under the Executive Performance Sharing Plan and the Executive Long-Term
Incentive Plan, are made by the Compensation Plan Subcommittee, which is
composed of outside directors.
Executive Compensation Policies and Programs. The Company's executive
compensation programs are designed to attract and retain highly qualified
executives and to motivate them to maximize shareholder returns by achieving
both short- and long-term strategic Company goals. The programs link each
executive's compensation directly to individual and Company performance. A
significant portion of each executive's total compensation is variable and
dependent upon the attainment of strategic and financial goals, individual
performance objectives, and the appreciation in value of the Common Stock.
There are three basic components to the Company's "pay for performance"
system: base pay; annual incentive bonus; and long-term, equity-based incentive
compensation. Each component is addressed in the context of individual and
Company performance, competitive conditions and equity among employees. In
determining competitive compensation levels, the Company analyzes information
from several independent surveys which include information regarding the general
industry as well as other consumer product companies. Since the Company's market
for executive talent extends beyond the sports industry, the survey data
includes global name-brand consumer product companies with sales in excess of $2
billion. A comparison of the Company's financial performance with that of the
companies and indices shown in the Performance Graph is only one of many factors
considered by the Committee to determine executive compensation.
Base Pay. Base pay is designed to be competitive, although conservative
(generally in the second quartile) as compared to salary levels for equivalent
executive positions at other global consumer product companies. The executive's
actual salary within this competitive framework will vary based on
responsibilities, experience, leadership, potential future contribution, and
demonstrated individual performance (measured against strategic management
objectives such as maintaining customer satisfaction,
15
<PAGE>
developing innovative products, strengthening market share and profitability,
and expanding the markets for the Company's products). The types and relative
importance of specific financial and other business objectives vary among the
Company's executives depending on their positions and the particular operations
or functions for which they are responsible. The Company's philosophy and
practice is to place a relatively greater emphasis on the incentive components
of compensation.
Annual Incentive Bonus. Each executive is eligible to receive an annual
cash bonus under the Executive Performance Sharing Plan. The "target" level for
that bonus, like the base salary level, is set with reference to Company-wide
bonus programs, as well as competitive conditions. These target levels are
intended to motivate the Company's executives by providing substantial bonus
payments for the achievement of financial goals within the Company's business
plan. An executive receives a percentage of his or her target bonus depending on
the extent to which the Company achieves financial performance goals set by the
Committee and the Board, as measured by the Company's net income before taxes.
Bonuses may exceed the target if the Company's performance exceeds the goal.
Long-Term, Equity-Based Incentive Compensation. The long-term equity-based
compensation program is tied directly to shareholder return. Under the current
program, long-term incentive compensation consists of stock options, 25% of
which vest in each of the four years after grant, and awards of restricted stock
under the Long-Term Incentive Plan ("LTIP").
Stock options are awarded with an exercise price equal to the fair market
value of the Class B Common Stock on the date of grant. Accordingly, the
executive is rewarded only if the market price of the Common Stock appreciates.
Since options vest over time, the Company periodically grants new options to
provide continuing incentives for future performance. The size of previous
grants and the number of options held are considered by the Compensation Plan
Subcommittee, but are not entirely determinative of future grants. Like base
pay, the grant is set with regard to competitive considerations, and each
executive's actual grant is based upon individual performance measured against
the criteria described in the preceding paragraphs and the executive's potential
for future contributions.
Under the LTIP, the Compensation Plan Subcommittee has established a series
of performance targets corresponding to awards of restricted stock ranging from
10% to 150% of the target awards. The performance targets are currently based on
revenues and earnings per share. The Company expects that future awards under
the LTIP will be for
16
<PAGE>
performance periods of up to three years, in order to provide an incentive to
achieve the Company's longer-term performance goals. If performance targets are
achieved, the shares of stock issued to executives remain restricted for an
additional three years, meaning that the shares are subject to forfeiture if the
executive's employment terminates within that period.
Stock options and awards of restricted stock under the LTIP are designed to
align the interests of the Company's executives with those of shareholders by
encouraging executives to enhance the value of the Company and, hence, the price
of the Common Stock and the shareholders' return. In addition, through deferred
vesting, this component of the compensation system is designed to create an
incentive for the individual executive to remain with the Company.
Other Plans. The Company maintains combined profit sharing and 401(k)
retirement plans, and a Supplemental Executive Savings Plan. Under the profit
sharing retirement plan, the Company annually contributes to a trust on behalf
of employees, including executive officers, an amount that has historically
approximated 1.7% of the Company's earnings. That percentage is determined by
the Board of Directors, and in the past five fiscal years has represented a
yearly contribution of between 5.07% to 6.94% of each employee's earnings. This
retirement plan serves to retain employees and executives, since profit sharing
funds do not fully vest until after five years of employment with the Company.
The Company maintains combined profit sharing and 401(k) retirement plans,
and a Deferred Compensation Plan. Under the profit sharing retirement plan, the
Company annual contributes to a trust on behalf of employees, including
executive officers, an amount that has historically approximated 1.7% of the
Company's pre-tax income. For fiscal 1998, under the terms of the profit sharing
plan, each employee, including each executive officer, received a contribution
to his or her plan account of 3.42% of the employee's total salary and bonus up
to $160,000, and an additional 0% of the employee's total salary and bonus in
excess of approximately $65,400 and below $160,000. Under the terms of the
Deferred Compensation Plan, employees, including executive officers, whose total
salary and bonus exceeds $160,000 receive a supplemental profit sharing
contribution into a nonqualified deferred compensation account in an amount
equal to the additional contribution they would have received under the profit
sharing plan if not for the $160,000 cap on salary and bonus considered for
purposes of that plan as required under IRS regulations. Accordingly, those
employees each received supplemental contributions equal to 3.42% of their
salary and bonus in excess of
17
<PAGE>
$160,000. These profit sharing plans serve to retain employees and executives,
since funds do not fully vest until after five years of employment with the
Company.
Under the 401(k) retirement plan, the Company contributes up to 2.5% of
each employee's earnings as a matching contribution for pre-tax amounts deferred
into the plan, and up to 0.75% for after-tax amounts deferred into the plan.
This matching contribution is invested entirely in NIKE Class B Common Stock,
which strengthens the linkage between employee and shareholder interests.
Annual Reviews. Each year, the Committee reviews the executive compensation
policies with respect to the linkage between executive compensation and the
creation of shareholder value, as well as the competitiveness of the programs.
The Committee determines what changes, if any, are appropriate in the
compensation programs for the following year. In conducting the annual review,
the Committee considers information provided by Human Resources staff and uses
surveys and reports prepared by independent compensation consultants.
Each year, the Committee, with the President and Human Resources staff,
reviews the individual performance of each of the other five most highly
compensated executive officers, including the Chief Executive Officer, and the
President's recommendations with respect to the appropriate compensation levels
and awards. The Compensation Plan Subcommittee sets performance and bonus
targets, and certifies awards, under the Executive Performance Sharing Plan and
the LTIP and makes stock option grants. The Committee makes recommendations to
the Board of Directors for final approval of all other compensation matters. The
Committee also reviews with the President and the Human Resources staff the
financial and other strategic objectives, such as those identified above, for
each of the named executive officers for the following year.
For fiscal year 1998, the Company did not meet the targeted financial
performance objectives set for named executive officers under the Executive
Performance Sharing Plan. This resulted from weakness in demand for sports and
fitness products in the Asia Pacific and U.S. regions, reducing total revenues
and earnings. However, the Company's competitive position in the industry
remained strong. Because the Company did not meet financial targets, the named
executive officers received no bonuses under the Executive Performance Sharing
Plan and no payouts under the LTIP.
Chief Executive Officer. In reviewing Mr. Knight's performance, the
Committee focused primarily on the Company's performance in fiscal year 1998,
which resulted
18
<PAGE>
lower earnings compared to the previous fiscal year's record performance. The
Committee noted continued progress toward the achievement of various strategic
objectives such as infrastructure expansion and development of international
markets. The Committee also considered the other factors and considerations
described above. Consistent with the plans, Mr. Knight received no bonus under
the Executive Performance Sharing Plan and no award under the LTIP. The
Committee did not increase Mr. Knight's base salary for the 1999 fiscal year.
Mr. Knight's position as a founder of and a substantial shareholder in the
Company provides an effective long-term performance incentive tied directly to
shareholder return. Accordingly, he received no stock option awards.
Section 162(m) of the Internal Revenue Code. In 1995 shareholders adopted
the Executive Performance Sharing Plan, and in 1997 shareholders approved the
stock option plan and the LTIP. The plans are each designed to satisfy the
performance-based exception to the Section 162(m) limitation on deductibility
with respect to incentive compensation for named executive officers.
Members of the Personnel Committee:
Ralph D. DeNunzio, Chairman
Jill K. Conway*
John E. Jaqua*
John R. Thompson, Jr.
- ------------
* Also members of the Compensation Plan Subcommittee.
PERSONNEL COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Personnel Committee of the Board of Directors during the
fiscal year ended May 31, 1998, are listed above. The Committee is composed
solely of non-employee directors. Mr. Jaqua serves as Secretary of the Company,
but is not an employee. During the fiscal year, the Company paid Harbor Point
Associates, Inc., of which director Ralph D. DeNunzio is President, $100,000 for
financial consulting services, and paid Robanna, Inc., which is owned by
director John R. Thompson, Jr., $407,986 for services rendered pursuant to an
endorsement contract. The Company expects to pay Mr. DeNunzio or his firm, and
Mr. Thompson or his firm for additional consulting work that may be performed by
them for the Company during fiscal 1999.
19
<PAGE>
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND
CHANGE-IN-CONTROL ARRANGEMENTS
An agreement between the Company and President and Chief Operating Officer,
Dr. Thomas E. Clarke contains a covenant not to compete that extends for one
year following the termination of his employment with the Company. The agreement
provides that if he voluntarily resigns, the Company will make monthly payments
to him during the one-year noncompetition period in an amount equal to one-half
of his last monthly salary. The agreement provides further that if his
employment is terminated by the Company, the Company will make monthly payments
to him during the one-year noncompetition period in an amount equal to his last
monthly salary. The Company may unilaterally waive the covenant not to compete.
If the covenant is waived, the Company will not be required to make the payments
described above for the months as to which the waiver applies.
The Company has a similar agreement with Vice President Mark G. Parker that
extends from one year following the termination of Mr. Parker's employment with
the Company. The agreement provides that if Mr. Parker voluntarily resigns, the
Company will make monthly payments to him during the one-year noncompetition
period in an amount equal to the greater of (i) $20,833 or (ii)
one-twenty-fourth of the total salary and bonuses received by Mr. Parker during
the 12-month period immediately preceding his resignation. The agreement
provides further that if Mr. Parker's employment is terminated by the Company,
the Company will make monthly payments to him during the one-year noncompetition
period in an amount equal to the greater of $41,667 or (ii) one-twelfth of the
total salary and bonuses received by Mr. Parker during the 12-month period
immediately preceding his termination. If Mr. Parker is terminated without
cause, the parties may mutually agree to waive the covenant not to compete, and
if Mr. Parker is terminated for cause, the Company may unilaterally waive the
covenant. If the covenant is waived, the Company will not be required to make
the payments described above for the months as to which the waiver applies.
CERTAIN TRANSACTIONS AND BUSINESS RELATIONSHIPS
During the fiscal year ended May 31, 1998, the Company paid the law firm of
Bullivant, Houser, Bailey, of which director Douglas G. Houser is a partner,
approximately $13,503 for services rendered. During the same period, the Company
paid Harbor Point Associates, Inc., of which director Ralph D. DeNunzio is
President, $100,000 for financial consulting services, paid Robanna, Inc., which
is owned by
20
<PAGE>
director John R. Thompson, Jr., $407,986 for services rendered pursuant to an
endorsement contract, and paid Mr. Hayes $23,833 for consulting services. The
Company expects to pay Mr. Houser, or his law firm, Mr. DeNunzio, or his firm,
Mr. Thompson, or his firm, and Mr. Hayes for additional legal and consulting
services that may be performed by them for the Company during fiscal year 1999.
Mr. Knight makes his airplane available for business use by the Company for
no charge. NIKE operates and maintains the aircraft. During fiscal 1998, Mr.
Knight reimbursed the Company $78,278 for NIKE's operating costs related to his
personal use of this aircraft.
INDEBTEDNESS OF MANAGEMENT
In 1994 the Company loaned $500,000 at 5.65% per annum to President Thomas
E. Clarke for the purchase of a second home. The loan is secured by the second
home, and must be repaid within 180 days following termination of employment. As
an inducement to remain employed by the Company, the Company has agreed to
forgive $100,000 of the loan commencing January 1, 2000 and on each of the four
anniversary dates thereafter, provided that Dr. Clarke remains employed by the
Company.
PROPOSAL 2
RATIFICATION OF INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company, upon recommendation of its Audit
Committee, has appointed PricewaterhouseCoopers LLP as independent accountants
to examine the Company's consolidated financial statements for the fiscal year
May 31, 1999 and to render other professional services as required.
The appointment of PricewaterhouseCoopers is being submitted to
shareholders for ratification.
Price Waterhouse has served as independent accountants to the Company since
1971. Representatives of PricewaterhouseCoopers will be present at the Annual
Meeting and are expected to be available to respond to questions.
21
<PAGE>
PROPOSAL 3
SHAREHOLDER PROPOSAL
The Amalgamated Bank of New York LongView Collective Investment Fund, of
11-15 Union Square, New York, New York 10003, a holder of 74,000 shares of Class
B Common Stock, submitted the following resolution for the
reasons stated:
RESOLVED that the shareholders urge the Board of Directors to adopt a
policy that no Board members shall serve on the Personnel Committee or its
Compensation Plan Subcommittee unless he or she is an independent director. For
these purposes, the board is requested to define an "independent director" as
one who:
- has not been employed by Nike or an affiliate in an executive capacity;
- has not been a member of a corporation or firm that is one of Nike's paid
advisers or consultants;
- has not been employed by a significant customer of or supplier to Nike;
- has not had personal services contracts with Nike or one of its
affiliates;
- has not been employed by a foundation or university that receives
significant grants or endowments from Nike;
- is not a relative of an executive of Nike or one of its affiliates:
- has not been part of an interlocking directorate in which the CEO or
other executive officer of Nike serves on the board of another
corporation that employs that director; and
- does not have any personal, financial and/or professional relationships
with the CEO or other executive officer that would interfere with the
exercise of independent judgment by such director.
Supporting Statement
This proposal proposes for the Board's Personnel Committee and its
Compensation Plan Subcommittee a standard of independence that will permit
objective decision making on compensation issues. Although Nike requires that
directors meet a minimal standard of independence to serve on the Personnel
Committee, we do not view that standard as sufficient to ensure that a director
is free of relationships that could diminish his or her independent judgment.
22
<PAGE>
Currently, there are two directors on the Personnel Committee who would not
meet the standard of independence set forth above:
- John Thompson, head basketball coach of Georgetown University, has
substantial financial ties to Nike. Mr. Thompson has an endorsement
contract with Nike that has provided $2.3 million in fees since 1991. In
1997, a company owned by Mr. Thompson received over $350,000 in
endorsement fees from Nike.
- Ralph DeNunzio is president of Harbor Point Associates, a firm that has
received nearly $1 million in consulting fees from Nike since 1991. Last
year, Harbor Point received a $100,000 contract from Nike.
In our view, these relationships with Messrs. Thompson and DeNunzio present
at least the appearance of a conflict of interest, and shareholders would be
best served if Committee members were truly independent.
We regard director independence as especially important in light of the
large compensation packages awarded to Nike executives, as well as the fact that
Nike's recent stock price reflects a 30% drop in value from its 52-week high.
We urge you to vote FOR this resolution.
MANAGEMENT'S RESPONSE:
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE AGAINST PROPOSAL 3.
The Board of Directors believes that the proposal is unnecessary for all
practical purposes. While the Personnel Committee determines base salaries for
the named executive officers, all major incentive plans in which executive
officers participate are administered by an independent subcommittee of the
Personnel Committee, known as the Compensation Plan Subcommittee. The Personnel
Committee does not administer these plans.
The Subcommittee is composed of directors who already meet the standard of
independence advocated by the proponent. NIKE's 1990 Stock Incentive Plan (stock
option plan), the Performance Sharing Plan (performance bonus plan) and the
Long-Term Incentive Plan are all governed by the Subcommittee. The Subcommittee
is made up of the same independent directors now as when two of the plans were
approved by shareholders by overwhelming majorities. Messrs. Thompson and
DeNunzio, who are of particular concern to the proponents, have never served on
the Subcommittee, and will not while they are performing substantial consulting
services for NIKE.
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<PAGE>
Furthermore, the Board believes the proponent's concern over potential
conflicts of interest with respect to incentive plans is already more than
adequately addressed by federal law. The current policy of complying with IRS
and SEC rules is more than sufficient to assure the directors serving on the
Compensation Plan Subcommittee are independent.
As stated in the Report of the Personnel Committee contained in this proxy
statement, it is NIKE's policy to comply with Section 162(m) of the Internal
Revenue Code of 1986, as amended. Section 162(m) requires that directors
administering performance-based compensation plans must qualify as "outside
directors." A director may not be an employee or former employee still receiving
compensation, and may not be an executive officer or former executive officer. A
director also may not receive either direct or indirect remuneration from NIKE
in any capacity other than as a director. All directors serving on the
Subcommittee qualify as "outside directors" under Section 162(m).
It is also NIKE's long-standing policy to administer stock-based plans in
accordance with the requirements of Rule 16b-3 adopted by the Securities and
Exchange Commission (the "SEC"). This rule requires the committee administering
such plans to consist of "non employee directors." In order to qualify as a non
employee director, a director may not be employed by the Company, may not
receive compensation of $60,000 or more from NIKE in any capacity other than as
a director, and may not possess an interest in any other transaction involving
NIKE which is required to be disclosed in this proxy statement as a related
party transaction. All directors serving on the Subcommittee qualify as "non
employee directors" under SEC Rule 16b-3.
NIKE's Compensation Plan Subcommittee meets all legal requirements for
independence. The proponent simply prefers an additional standard. The Board
believes that the standards established by IRS and the SEC are more than
sufficient to assure that the Subcommittee is composed of directors who are
independent and free from relationships which could diminish the exercise of
independent judgment.
Finally, with respect to the broader Personnel Committee, its independence
has been carefully reviewed by the Board of Directors. The Board believes that
the proponent's proposed definition of an "independent director" would
unnecessarily impair the ability of the Company to secure prominent, successful,
and capable individuals to
24
<PAGE>
serve as members of the Committee.(1) The Board believes that excluding such
valuable contributors would do nothing to enhance the wisdom or independence of
the Personnel Committee.
ACCORDINGLY, THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE
AGAINST PROPOSAL 3.
Holders of Class A Stock and Class B Stock will vote together as a single
class on Proposal 3. If holders of a majority of the shares of Common Stock vote
on the proposal, Proposal 3 will be adopted if a majority of the votes cast are
cast for the proposal. Abstentions are considered votes cast and have the same
effect as "no" votes in determining whether the proposal is adopted. Broker
non-votes are not counted as voted on the proposal and therefore have no effect
on the results of the vote.
PROPOSAL 4
SHAREHOLDER PROPOSAL
Ms. Jeanne Henry, 3290 S.E. Harrison Street, Portland Oregon 97214, a
holder of 45 shares of Class B Common Stock, submitted the following resolution
for the reasons stated:
Review of Executive Compensation
WHEREAS: We believe that financial, social, and environmental criteria
should be taken into account in setting compensation packages for corporate
officers. Public scrutiny on compensation is reaching a new intensity, with
serious concerns being expressed about the widening chasm between salaries of
top corporate officers and their employees. Concerns include:
- Increases in CEO compensation continue to dwarf the compensation
increases enjoyed by employees. Among 365 U.S. companies, the average CEO
salaries
- ---------------
(1) For example, Mr. DeNunzio's consulting fees resulted from the fact that NIKE
utilized his business expertise in analyzing many major transactions outside
his normal director's duties, and the Company believes that he should be
compensated (above the $18,000 retainer paid to all directors) for his
services. If the Company utilized the resources of an investment banking
firm for this analysis, the fees would have been substantially greater.
Similarly, NIKE has utilized Mr. Thompson's consulting services as a coach
of the Georgetown University basketball program for the same reasons that
Mr. Thompson was invited to join the Board: his exceptional experience in
the field of sports and his understanding of labor issues. In any event,
neither of these individuals administer any of NIKE's performance-based
bonus or stock plans.
25
<PAGE>
and bonuses increased 39% in 1997. With stock options and other forms of
compensation, the increase rose to 54%. Profits rose only one-fifth that
rate at 11%, and U.S. Factory employee's pay rose only 3%, lagging behind a
3.3% rise in inflation (Business Week, April 21, 1997).
- In 1996, U.S. CEOs earned on average 209 times the average U.S. factory
worker's pay, a dramatic rise from the 42 times reported in 1980.
- The discrepancy between wages is even greater between U.S. executives and
Asian factory workers. In 1997, Nike's CEO earned 5,273 times the annual
pay of an Indonesian shoe factory worker.
- Nike's code of conduct requires that workers in its subcontracted
factories earn at least minimum wage, but minimum wage overseas is often
calculated below subsistence levels. In Indonesia, while minimum wage was
calculated at 90% of subsistence for one person, the wage is often
crucial to the subsistence of an entire family.
- The Asian economic crisis has dramatically reduced the purchasing power
of many of the workers who make Nike products. The monthly minimum wage
in Indonesia is now a mere $34.50. Inflation is likely to reach 50% in
1998, further reducing workers' purchasing power.
- Nike's first quarter 1998 profits dropped 69%, sales dropped 17%,
thousands have been laid off, and stocks have been dropping. Meanwhile,
Nike's CEO compensation has increased.
THEREFORE BE IT RESOLVED that Nike institute an Executive Compensation
Review and prepare a report to shareholders by Fall 1999 that includes ways to
link executive compensation more closely to financial performance and to a
reasonable ratio between executives and the lowest wages for factory workers in
the U.S. and overseas. In addition, the report should include a review of the
possibility of a cap on executive compensation.
SUPPORTING STATEMENT: As we are increasingly operating as a global company,
it is necessary that we seriously address the issues that arise in using global
labor markets. We are concerned with the rising wage-gap between corporate
executives and factory workers both in the U.S. and abroad. Furthermore, in a
time of decreasing
26
<PAGE>
stock values, we believe that it would be advantageous for Nike to more closely
link executive compensation to financial performance.
We urge shareholders to endorse such an initiative by voting for this
resolution.
MANAGEMENT'S RESPONSE:
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE AGAINST PROPOSAL 4.
The Board shares the proponent's concern about fair wages for employees of
footwear contractors. The problems with a minimum wage are not isolated to
developing countries. For example, few people would contend that the minimum
wage in the United States is enough to support a family of four. Yet millions in
the U.S. receive the minimum wage for lower skilled and entry-level jobs.
In fact, studies from institutions such as C.A.R.E., the World Bank (in
cooperation with the Vietnam Ministry of Planning and Industry), and the
Dartmouth College School of Business continue to confirm that NIKE contract
factory workers are compensated in the top 25% of all income earners in Vietnam
and Indonesia. Moreover, wages rise with industrialization. As shown by NIKE's
production experience in the former developing countries of Japan, Korea, and
Taiwan, rapid improvements in infrastructure, living standards, worker skill and
education resulting from industrialization invariably cause market wages to
rise. And NIKE's footwear contractors keep pace.
Additionally, NIKE's many initiatives over the past several years
demonstrate that NIKE seeks constant improvement in labor practices. The Company
has a strict program of requiring overseas footwear contractors to pay the
market wage, which can never be less than the minimum wage. NIKE has an
aggressive independent monitoring program to help assure compliance. But NIKE
realizes that unique situations sometimes require special action. For example,
in response to the declining purchasing value of Indonesian currency, and the
impact it was having on workers, NIKE required its factory partners to
immediately increase wages 15%. In all instances, NIKE seeks to have the best
labor practices in the industry.
Regarding executive pay, the Board of Directors believes that the Company
already has in place an effective system that ties executive compensation
closely to NIKE's financial performance. Over the past 3 years, shareholders
have adopted and NIKE has
27
<PAGE>
implemented risk-based compensation plans that are overwhelmingly weighted
toward paying for performance.(1)
The Board firmly believes that the pay-for-performance policy, explained in
more detail in the Report of the Personnel Committee on page 15 and as
demonstrated by wage studies reviewed by the Company, results in total
compensation paid to executives which is reasonable and competitive with other
consumer product companies that vie for executive talent.
The proponent implies that disappointing financial performance has resulted
in an increase in pay for NIKE executives. Nothing could be further from the
truth. The base salary of CEO Philip Knight was increased a modest 6.2% in June
1997 as a result of record-breaking performance of the Company in fiscal year
1997. But, consistent with pay-for-performance, he received no salary increase
this year.
In fact, because the Company's financial performance did not meet the high
goals set for fiscal year 1998, none of the executive officers received any
performance bonus, any Long-Term incentive payment, or a raise in salary.
Moreover, stock options awarded to executives in 1996 and 1997 currently have
little or no value due to the depressed price of the stock. The Board believes
that executive pay could not be more clearly tied to Company performance.
The Board of Directors believes that the proponent's last suggestion to
determine executive pay with an unspecified, arbitrary "cap" or "ratio" would be
counterproductive to achieving the goals of shareholders. Any method not based
on the job market, competitors, individual performance, or NIKE's performance
would impair NIKE's ability to attract and retain qualified leaders who are
essential to the Company's success. More important, limitations on risks and
rewards would not provide incentives for executives to increase shareholder
return.
ACCORDINGLY, THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE
AGAINST PROPOSAL 4.
- ---------------
(1) The Executive Performance Sharing Plan (adopted in 1995), the Stock
Incentive Plan (adopted 1997), and the Long-Term Incentive Plan (adopted
1997), all provide incentives such that if performance targets are not met,
or the price of the Company's stock does not rise, executives receive no
compensation. For example, under the Executive Performance Sharing Plan,
between 33% and 55% of executives' total cash compensation can be paid only
if the Company achieves performance targets.
28
<PAGE>
Holders of Class A Stock and Class B Stock will vote together as a single
class on Proposal 4. If holders of a majority of the shares of Common Stock vote
on the proposal, Proposal 4 will be adopted if a majority of the votes cast are
cast for the proposal. Abstentions are considered votes cast and have the same
effect as "no" votes in determining whether the proposal is adopted. Broker
non-votes are not counted as voted on the proposal and therefore have no effect
on the results of the vote.
SHAREHOLDER PROPOSALS
A proposal by a shareholder for inclusion in the Company's proxy statement
and form of proxy for the 1999 annual meeting of shareholders must be received
by NIKE at One Bowerman Drive, Beaverton, Oregon 97005-6453, Attention: John F.
Coburn III, Assistant General Counsel of NIKE, on or before April 15, 1999 in
order to be eligible for inclusion. A proposal by a shareholder submitted
outside the processes of Rule 14a-8 of the Securities Exchange Act of 1934 must
be received by NIKE at the above address on or before June 29, 1998, or it will
be considered untimely.
OTHER MATTERS
As of the time this proxy statement was printed, management was unaware of
any proposals to be presented for consideration at the Annual Meeting other than
those set forth herein, but if other matters do properly come before the Annual
Meeting, the persons named in the proxy will vote the shares represented by such
proxy according to their best judgment. The Company's bylaws prescribe that a
shareholder may bring matters before an annual meeting only if such shareholder
has given the Company advance written notice of such matters. For purposes of
the 1999 Annual Meeting, such notice must be received 60 days before the meeting
by John F. Coburn III, Assistant General Counsel of NIKE, at One Bowerman Drive,
Beaverton, Oregon 97005-6453.
A COPY OF NIKE'S 1998 ANNUAL REPORT ON FORM 10-K WILL BE AVAILABLE TO
SHAREHOLDERS WITHOUT CHARGE UPON REQUEST TO: INVESTOR RELATIONS, NIKE, INC., ONE
BOWERMAN DRIVE, BEAVERTON, OREGON 97005-6453.
For the Board of Directors
JOHN E. JAQUA
Secretary
29
<PAGE>
ANNUAL
MEETING
AND
PROXY STATEMENT
------------------------
SEPTEMBER 23, 1998
MEMPHIS, TENNESSEE
------------------------
LOGO
(LOGO)
This proxy statement is printed on recycled paper
P
NIKE, INC.
R
CLASS A COMMON STOCK PROXY
O
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
X FOR THE 1998 MEETING OF SHAREHOLDERS--SEPTEMBER 23, 1998
Y
The undersigned hereby appoints Philip H. Knight, Thomas E. Clarke and Douglas
G. Houser, and each of them, proxies with full power of substitution, to vote,
as designated below, on behalf of the undersigned all shares of Class A Common
Stock which the undersigned may be entitled to vote at the Annual Meeting of
Shareholders of NIKE, Inc. on September 23, 1998, and any adjournments thereof,
with all powers that the undersigned would possess if personally present. A
majority of the proxies or substitutes present at the meeting may exercise all
powers granted hereby.
Election of Directors, Nominees: (change of address/comments)
Ralph D. DeNunzio; Richard K. Donahue;
Douglas G. Houser; John E. Jaqua; ----------------------------
Philip H. Knight; Kenichi Ohmae; ----------------------------
Charles W. Robinson; Michael Spence; ----------------------------
John R. Thompson, Jr. ----------------------------
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE
BOXES, SEE REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH SEE
TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. REVERSE
THE PROXIES CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS SIDE
CARD.
- -------------------------------------------------------------------------------
Please mark your
X votes as in this 9317
example. ----
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED, BUT IF NO
SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE
NOMINEES FOR DIRECTOR, FOR PROPOSAL 2, AND AGAINST PROPOSALS 3 & 4.
THE PROXIES MAY VOTE IN THEIR DISCRETION AS TO OTHER MATTERS WHICH MAY COME
BEFORE THE MEETING.
- -------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE THE BOARD OF DIRECTORS
FOR PROPOSAL 2. RECOMMENDS A VOTE AGAINST
PROPOSALS 3 & 4.
- ------------------------------------------------------------------------------
1. Election of Directors FOR WITHHELD
(see reverse) [_] [_]
For, except vote withheld from
the following nominee(s):
- ------------------------------
FOR AGAINST ABSTAIN
2. Proposal to ratify the
appointment of Price
Waterhouse as independent
accountants. [_] [_] [_]
3. Shareholder proposal regarding
independence standard. [_] [_] [_]
4. Shareholder proposal regarding
executive compensation. [_] [_] [_]
Mark here for address change
and note on reverse side. [_]
SIGNATURE(S) _______________________DATE ______________________________________
(Please date and sign above exactly as your name or names appear hereon. Joint
owners should each sign personally. Corporate proxies should be signed in full
corporate name by an authorized officer and attested. Persons signing in a
fiduciary capacity should indicate their full titles in such capacity.)
- --------------------------------------------------------------------------------
P
NIKE, INC.
R
CLASS B COMMON STOCK PROXY
O
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
X FOR THE 1998 MEETING OF SHAREHOLDERS--SEPTEMBER 23, 1998
Y
The undersigned hereby appoints Philip H. Knight, Thomas E. Clarke and Douglas
G. Houser, and each of them, proxies with full power of substitution, to vote,
as designated below, on behalf of the undersigned all shares of Class A Common
Stock which the undersigned may be entitled to vote at the Annual Meeting of
Shareholders of NIKE, Inc. on September 23, 1998, and any adjournments thereof,
with all powers that the undersigned would possess if personally present. A
majority of the proxies or substitutes present at the meeting may exercise all
powers granted hereby.
Election of Directors, Nominees: (change of address/comments)
William J. Bowerman; Thomas E. Clarke;
Jill K. Conway; and Delbert J. Hayes ----------------------------
----------------------------
----------------------------
----------------------------
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE
BOXES, SEE REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH SEE
TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. REVERSE
THE PROXIES CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS SIDE
CARD.
- --------------------------------------------------------------------------------
Please mark your
X votes as in this 9316
example. ----
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED, BUT IF NO
SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE
NOMINEES FOR DIRECTOR, FOR PROPOSAL 2, AND AGAINST PROPOSALS 3 & 4.
THE PROXIES MAY VOTE IN THEIR DISCRETION AS TO OTHER MATTERS WHICH MAY COME
BEFORE THE MEETING.
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE THE BOARD OF DIRECTORS
FOR PROPOSAL 2. RECOMMENDS A VOTE AGAINST
PROPOSALS 3 & 4.
- --------------------------------------------------------------------------------
1. Election of Directors FOR WITHHELD
(see reverse) [_] [_]
For, except vote withheld from
the following nominee(s):
- ------------------------------
FOR AGAINST ABSTAIN
2. Proposal to ratify the
appointment of Price
Waterhouse as independent
accountants. [_] [_] [_]
3. Shareholder proposal regarding
independence standard. [_] [_] [_]
4. Shareholder proposal regarding
executive compensation. [_] [_] [_]
Mark here for address change
and note on reverse side. [_]
SIGNATURE(S) _______________________DATE ______________________________________
(Please date and sign above exactly as your name or names appear hereon. Joint
owners should each sign personally. Corporate proxies should be signed in full
corporate name by an authorized officer and attested. Persons signing in a
fiduciary capacity should indicate their full titles in such capacity.)
- --------------------------------------------------------------------------------
