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Get Four
|  | JANUARY 24, 2006
By Stanley Holmes Nike's CEO Gets the BootFounder Phil Knight and William Perez haven't been seeing eye-to-eye. Now Perez is gone, replaced by two veteran insidersBug spray and Air Jordans just don't mix. That's the belated conclusion from Nike founder and Chairman Phil Knight. He told Nike CEO William Perez that his transition game wasn't cutting it in the big leagues and replaced him Jan. 23 after only 13 months at the helm of the world's largest sports shoe and fashion company. Perez joined Nike (NKE ) from S.C. Johnson & Son, a household-products company that he had helped to expand into multiple international markets. Knight hoped that Perez could bring some more organizational and managerial discipline to a company that has been expanding rapidly into new global markets as well as acquiring more brands, such as Converse. It seemed like a perfect fit with the more creative, marketing- and design-driven Nike culture (see BW Online, 11/19/04, "Nike: Can Perez Fill Knight's Shoes?"). But Perez, the first outsider to head the sneaker giant, couldn't handle the jump from floor wax to cross-trainers. "Basically, the distance between the company Bill managed in the packaged-goods business and Nike and the kind of new athletic equipment business was too great," Knight told analysts and journalists in a conference call on Jan. 23. "The cultural leap was really too great." TEAM PLAYERS. Calling the decision "painful," Knight said he had been mulling the change after many long walks in recent weeks. The Nike founder said it wasn't one big clash or disagreement with Perez. Rather, it boiled down to "lots of little incidences over a year." Knight named Nike veteran and 50-year-old Co-President Mark Parker as CEO and made Co-President Charlie Denson, 49, president of the Nike brand. Both men have been with the Beaverton (Ore.)-based sneaker juggernaut their entire careers and had been competing with Perez for the top spot little more than a year ago. Parker, an insider who joined Nike in 1979, will succeed Perez on the company's board. Of all of Nike's senior executives, Parker has worked most closely with Knight. And he comes from a design and marketing background, known for his work on the Nike Air franchise and as one of Nike's top shoe designers. Before co-running the Nike brand with Denson, Parker managed the company's sprawling footwear and apparel businesses. STREET SURPRISE. Perez isn't leaving empty-handed. Nike says the newbie's severance would be more than $8 million, including two years' salary at $1.4 million a year and a bonus of at least $1.76 million for 2006. Nike also will buy Perez's house for $3.6 million, which covers remodeling and furnishing costs. Nike's board and Perez mutually agreed to end his relationship, the company says. Perez agrees that things weren't clicking. In a statement, 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." Though the news caught Wall Street off guard, investors took the development in stride. By the end of the trading day, Nike shares fell just 75 cents, or less than 1%, to close at $83.45 on the New York Stock Exchange. Nike has been enjoying strong gains in the U.S. and elsewhere, and posted a 15% jump in the most recent quarter's profits. That's why no one following the company had expected Perez to leave. "The abruptness of this resignation is certainly something of a surprise," says John Shanley of Susquehanna Financial Group. NEVER WALK ALONE? Perez's leadership was clashing with Nike insiders, the company says. Knight said the differences in style and strategy under Perez caused management to operate at "only 80% efficiency." Knight added that while the public may not notice the leadership change, "inside, there will be a significant change. It was very difficult for Bill to get his arms around this place and it showed in a number of places. People respond to Mark Parker and to his sidekick Charlie Denson." Parker says Nike's strategic direction won't change significantly in the near future. Now, investors might be wondering if the 67-year-old Knight is capable of stepping back and letting Nike walk alone. The stock, which started 2005 above $90 now languishes in the low $80s. Yet Parker and Denson deserve a chance to get the company going now that the Perez experiment is ended.  Holmes is a writer for BusinessWeek in the Seattle bureau Edited by Beth Belton Get BusinessWeek directly on your desktop with our RSS feeds.  Add BusinessWeek news to your Web site with our headline feed. Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video. To subscribe online to BusinessWeek magazine, please click here. Learn more, go to the BusinessWeekOnline home page  | | |
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