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NIKE, Inc. Annual Shareholder Meeting Transcript September 17, 2020
This transcript is provided by NIKE, Inc. only for reference purposes. Information presented was current only as of the date of the conference call and may have subsequently changed materially. NIKE, Inc. does not update or delete outdated information contained in this transcript and disclaims any obligation to do so.
PRESENTATION
Mark Parker, Executive Chairman, NIKE, Inc.: Good morning, everyone, and welcome to Nike's 2020 Annual Meeting of Shareholders. I'm Mark Parker, Executive Chairman of Nike, and I will chair today's meeting. I now call this meeting to order.
While this is Nike's 40th annual shareholder meeting, it is our first-ever virtual shareholder meeting. We are holding this meeting by webcast due to the public health impact of the COVID-19 pandemic and to support the health and wellbeing of our employees, shareholders, and community.
We also recognize that for our Nike, Inc. family on the west coast of the United States, including our world headquarters in Oregon, many are also facing the impact of wildfires across the region. We are closely monitoring conditions to prioritize the health and safety of our teammates. And the Nike Foundation is donating $1 million to provide relief efforts, focusing both on immediate aid and longer-term support for communities that have been impacted.
Today's virtual meeting format is also unprecedented. Because this will look and feel different than what we've done in the past, I'll first ask our corporate secretary, Ann Miller, to explain the mechanics of today's meeting. I will then introduce certain key participants who are attending this meeting virtually, including our Board of directors.
Once introductions are complete, we will move to the proposals to be voted on. There are five proposals to be voted on at this annual meeting, each of which is described in your proxy statement.
One is the election of directors; two, an advisory vote to approve executive compensation; three, ratification of the appointment of PricewaterhouseCoopers as Nike's independent auditors for the current fiscal year; four, the approval of Nike, Inc.'s stock incentive plan as amended and restated; and five, a shareholder proposal regarding political contributions disclosure.
After voting has ended on these matters, John Donahoe, our President and CEO and a member of our Board of directors, will review our performance during fiscal year 2020. We will then have a Q&A period followed by a preliminary report on the voting results.
Ann, will you review the mechanics for this meeting?
Ann Miller, NIKE, Inc., Corporate Secretary: Thank you, Mark. First, if you have not already voted your shares, or if you previously voted your shares and would like to change your vote, you may do so by clicking on the "Vote Here" button at the bottom right of the webcast screen. Voting will remain open until we conclude our presentation of the five matters to be voted on at this meeting.
Second, in the top right corner of the slide deck on your screen, you will see a small arrow icon. If you click that arrow icon it will expand the slides and improve your viewing experience during the meeting.
Third, during the Q&A period, we will answer as many questions as possible. As noted in your proxy statement, shareholders were permitted to submit questions to management prior to the annual meeting and we have already received a number of questions. You may also submit a question during the meeting by typing your question in the box at the bottom left of the webcast screen. In order to answer as many shareholder questions as possible, if we receive multiple questions on the same or a very similar topic, we will consolidate those questions and answer them together.
Finally, we note that a webcast of this meeting will be available on our website approximately 24 hours after the meeting ends. We therefore ask that you refrain from recording this meeting.
Mark Parker, Executive Chairman, NIKE, Inc.: Thank you, Ann. Before I introduce you to your current Board, let me first say a few words about one of our longest- serving directors.
Last month, we were devastated to lose a beloved member of the Nike family, Coach John Thompson, Jr. After serving for almost 29 years on the Nike, Inc. Board of Directors, Coach retired from the Board at the end of our fiscal year and then served as Director Emeritus until he passed away in August. As many of you know, he was an icon and trailblazer in the world of sport, a hall of fame coach at Georgetown, and the first black head coach to lead a team to an NCAA basketball championship.
At Nike, he coached us just as he coached his athletes. When I think about Coach's leadership in the boardroom, I think about the power of his voice. Rarely the loudest in the room, but one that you always listened for and one that you always took to heart. We will miss him dearly. We offer our condolences to the Thompson family, to Coach's loved ones, and to
The second matter to be voted on is an advisory vote on executive compensation. The Board recommends a vote for approval of the advisory vote on executive compensation.
The third matter to be voted on is shareholder ratification of the appointment of PricewaterhouseCoopers as the company's independent, registered public accounting firm for fiscal 2021. The Board recommends a vote for ratification of the appointment of PricewaterhouseCoopers.
The fourth matter to be voted on is approval of the Nike, Inc. stock incentive plan as amended and restated. The Board recommends a vote for approval of the Nike, Inc. stock incentive plan as amended and restated.
The fifth and final matter to be voted on is a shareholder proposal regarding political contributions disclosure. The Board recommends a vote against this proposal for the reasons set out in our proxy statement.
We will now connect with Bruce Herbert, who will present the proposal. Mr. Herbert, out of respect for the other shareholders in attendance and to allow time for the Q&A, we ask you to please keep your remarks related to the proposal and to limit your comments to a period of three minutes. We will give you a verbal indication when you have 30 seconds remaining and the operator will close your line if you exceed three minutes.
Operator, please open the line for Mr. Herbert at this time.
Operator: Mr. Herbert, your line is open.
Bruce Herbert: Thank you, and good morning. My name is Bruce Herbert, and I stand on behalf of New Ground Social Investment in Seattle to move proposal number five, which asks for appropriate disclosure of the company's spending of shareholder dollars for political purposes. Especially today, in 2020, with the state of politics in this country, conspiracy theories, and fake news, the need for transparency and accountability of political spending is paramount.
Now, there are a few companies in the S&P 500 that have no policies whatsoever, but of all America's companies that have even rudimentary policies on political spending, Nike's is frankly the worst we have seen. Its language is so contorted that the company could engage in active, undisclosed, dark money spending in 49 states while only disclosing about one state.
Nike is rank among peers is quite startlingly low. Only some 55 out of 100 on the prestigious CPA Zicklin Index, which is compiled by the Wharton school's Zicklin Center for Business Ethics Research. Northwest peers, Boeing, Microsoft,
Starbucks, Plum Creek, the former Washington Mutual, and Nordstrom each have responded to this very proposal and each now ranks some 30 to 40 points higher than Nike on the CPA Zicklin Index.
Therefore, please join me in casting your vote for proposal number five. Thank you.
Ann Miller, NIKE, Inc., Corporate Secretary: Thank you, Bruce. We have now covered each of the proposals.
Mark Parker, Executive Chairman, NIKE, Inc.: Thank you, Ann. I now declare the polls closed. I will now turn the meeting over to John Donahoe, our President and CEO, to review our fiscal year 2020 performance.
John Donahoe, President & CEO, NIKE, Inc.: Thank you, Mark, and good morning. Nice to be with all of you this morning.
As you know, this is my first shareholder meeting as CEO of Nike. I've had the pleasure of serving on the Board of directors for five years before adding the CEO role earlier this year in January. And I'll tell you, getting to see this company up close, I've learned that Nike is even more impressive than you can imagine. The power of our sport innovation is simply second-to-none. Our brand drives deep and meaningful connections with consumers globally like no one else can, and we have a world-class team that makes it all possible.
This is a defining year for Nike. We stay true to what makes Nike special, particularly our focus on innovative products serving athletes and deepening our relationships with consumers.
But like most companies, our business in the second half of the year was impacted by the COVID-19 pandemic. Our immediate response was to put our teams first. We focused on the health and safety of our teammates, our consumers, and our communities. We swiftly closed our stores as needed while providing pay continuity for employees when the facilities were closed. We rolled out enhanced benefits to support our teammates in these challenging times.
Our teams also delivered personal protective equipment to health systems across the country. We donated footwear, apparel, and equipment to help front-line workers around the globe. And we committed more than $25 million for COVID response in the communities that needed t the most. Simply put, we led with our values. At the same time, our society is reckoning with racial injustice. The Nike brand has a strong and long history of standing against bigotry, hatred, and inequality in all forms. Equality is fundamental to Nike's values. And through our mission and our belief in the power of sport, we are committed to helping create lasting change that addresses systemic racism in our society.
During our last Investor Day, we stated our goal to double the percent of revenue from new innovation platforms. In other words, we would 2X innovation. And in fiscal '20, we more than tripled innovation as a percent of revenue. And we're not slowing down. We will sustain this level of innovation this coming fiscal year and beyond, and in particular, we're looking forward to next summer's Olympics in Tokyo.
We'll continue to bring fresh points of view to our most beloved sportswear: Air Force One, Air Jordan One, and our deep lineup of Air Max. By continuously adding new styles, we expand these popular platforms. And we're also focused on fueling a constant cycle of new scalable distinct platforms.
This year also saw Nike continue its leadership in inclusive design. The launch of the Air Zoom Universe and the first ever Air Jordan One, High FlyEase, both offer easy entry for athletes of all abilities.
The response to our Victory Swim Collection, which included a full-coverage swimsuit among other modest swimwear options, proved to be a game-changing option for female athletes seeking both modesty and movement. And with the Next Percent Marathon shoe, we continue to propel elite athletes to break world records again and again.
This year we also launched our sustainable footwear platform, Space Hippie, to very strong response. The early success we're seeing with Space Hippie offers more proof of the consumer appetite for sustainable product and how our product teams are ready to match that. In fact, you've just seen us launch the Vapor Max 2020, our most sustainable product ever.
In short, our strategy is working. We continue to deliver innovative product that resonates and fuel a digital transformation to better serve consumers.
And as we look to the opportunity before us, it is clear that now is the time to accelerate. And so in June, we announced the next phase of our strategy, the consumer direct acceleration, which is all about investing in and aligning against our biggest future growth opportunities. The CDA offers a systematic approach that allows us to drive even greater focus, resources, and action, against these biggest opportunities. We know that consumers are embracing digital more than ever. In fact, we now expect digital, both owned and partnered, to be over 50% of our business in the foreseeable future. And as part of CDA, we will accelerate our investments in digitally enabled stores and in our technology platform to create one integrated technology strategy across the business.
Simply put, I am excited when I see the future of Nike. We are transforming Nike and the marketplace around us, and the result will be greater speed and responsiveness for consumers as well as generating more profitability and growth for our business.
And so today, our opportunity is vast. As the global leader in sport, we will continue to bring the world together. And we will continue to extend our competitive advantage in sport innovation. I'm truly excited by the results our team delivered in fiscal year '20 and I'm even more excited by what we will accomplish next.
So, thank you. And now, Mark, I'll turn it back over to you.
Mark Parker, Executive Chairman, NIKE, Inc.: Thank you, John. We have now reached the Q&A portion of the meeting, and many questions were submitted in advance of the meeting. And we have also monitored any questions submitted during the meeting. Several key themes have emerged with shareholders expressing interest in hearing more about our ongoing COVID-19 response, our digital transformation and innovation strategy, the CEO transition, supply chain management and social justice issues, just to name a few.
As Ann previously noted, we have consolidated similar questions based on these key themes, so that we will have time to address as many topics as possible. Joining me to answer these questions are John Donahoe as well as Matt Friend, our Chief Financial Officer, and Heidi O'Neill, President, Consumer and Marketplace.
I will read the questions and then ask this team to answer them.
QUESTION AND ANSWER SECTION
Mark Parker, Executive Chairman, NIKE, Inc.: So, let's begin with the first question which is about the CEO transition. How is the CEO transition going, and how has Mark continued to stay engaged in the business?
Well, I guess I'll start this answer and then kick it over to John for some input.
As I said when John became CEO, he is the right leader. He's a proven CEO and he's no stranger to Nike. I am deeply confident in John's leadership and I really think he has hit the ground running in an incredibly dynamic environment. John's expertise in global strategy, in leadership, in consumer and digital technology, is helping us navigate this current climate, and Nike's brand and business are in very strong places.
And John's strategic approach means that we remain hyper-focused on long-term growth, and we're already seeing how John is accelerating Nike's digital transformation.
defining new looks like the Jordan Delta and Converse CX collections, and through more accessible innovation like Nike FlyEase and the new, launched this morning, Nike M maternity collection. We're very excited about that.
And so, as we look forward, the innovation pipeline is strong, indeed. It's stacked. And it's really incredible to see how far out our teams continue to look to make sure that innovation pace does not slow down one bit. I tell you, Mark, very, very few companies in the world that I've seen have anywhere close to the capability and resources and scale that Nike does to be able to deliver the consistent cadence of innovation. And so, innovation always has been and always will be our biggest differentiator, and we've got a long runway to growth, and we continue to invest even during these challenging times.
Mark Parker, Executive Chairman, NIKE, Inc.: Thanks, John. I have to add that I continue to be incredibly excited about what's in the innovation pipeline, myself. And the team is doing a fantastic job.
The third question we have relates to navigating COVID-19 and the digital transformation. Nike seems to be increasingly shifting focus to digital. Can you speak to how your business priorities have changed due to the pandemic and what the future looks like for Nike? John and Matt Friend, let's have you tackle this one together.
John Donahoe, President & CEO, NIKE, Inc.: All right, Matt. How about I start out and then turn it over to you.
Matt Friend, Chief Financial Officer, NIKE, Inc.: Okay
John Donahoe, President & CEO, NIKE, Inc.: Let me just start off by saying Nike's strategy is working. The consumer-direct offense coming into this pandemic was working. The results prove that out and there's no doubt that's the case. But what's been interesting during the pandemic, in many ways you could say it stress-tested the strategy and reaffirmed how correct the direction is. And now, to be honest, we see an opportunity to take what we probably would have already done in the next four or five years and drive it hard so we can make that kind of change happen in two years or even less.
You know, simply put, the consumer behavior is shifting fundamentally during this pandemic and we don't think it's going to flip back. And so, we're doubling down and accelerating in three or four areas. And let me just briefly touch on each.
First, digital. As you know, a few years ago Nike estimated and set a goal that our digital business would be 30% of our business by fiscal '23. And the fact is, we're already delivering on that goal this year, two years ahead of time. And now
we think digital will be over half our business in the foreseeable future.
So, we're taking an end-to-end approach across our entire value chain to ensure that we digitally enable it so we can provide consistent premium seamless experiences for our consumers. Which leads me to the second area of acceleration, which is driving the marketplace of the future, where we're going to be working with a small number of key strategic partners who are equally committed to providing the consistent, premium seamless experience that consumers demand and expect.
And then, last but not least, as you know, we embraced a new consumer construct that just simplifies things. And so we're aligning our organization and resources against Men's, Women's, and Kids', which will help us better capitalize on consumer trends and to take advantage of what we see as two enormous growth opportunities in Women's and Apparel, as well as the broader health and wellness opportunity. And we see great opportunity to accelerate Jordan, which I think is another huge growth opportunity for us both in footwear and apparel.
So, we sort of feel like this window of opportunity that's open, has played to our advantage, and we're going to embrace it aggressively and transform Nike even faster. And that, frankly, is what strong companies do during periods of turbulence.
So Matt, why don't you -- you want to comment a little bit on what this means for us financially?
Matt Friend, Chief Financial Officer, NIKE, Inc.: Sure, John. In an environment where many companies are focused on survival, Nike's financial strength, scale and adaptability allow us to make appropriate near-term decisions while also investing to fuel long-term growth and create even greater competitive advantage in times of dislocation like this.
As we've said before, a more digitally-collected Nike is a more valuable Nike. The consumer adoption of Digital across all aspects of life provides an opportunity to create deeper, more direct consumer relationships at scale, and we know heightened engagement ultimately translates into higher consumer lifetime value.
Digital is not just strategically accretive. It is also financially accretive for Nike. And as I said during our Q4 earnings call a few months ago, digital is operating-margin accretive and we see opportunity for further value creation as we look ahead.
Mark Parker, Executive Chairman, NIKE, Inc.: Okay, great. The next question is about marketplace shifts. How will Nike prevent losing market share as you shift away from mass merchant retailers? Heidi, let's hear from you on this one.
Thanks, Heidi. The last question we have time for is about social justice. Is it appropriate for public companies to be so vocal about social change and risk alienating consumers? John, why don't you take this one.
John Donahoe, President & CEO, NIKE, Inc.: Yeah, thanks, Mark. And actually, thank you for those of you that asked this question, because I think it's an incredibly important one at this point in time.
You know, my perspective is that every company has to know what its values are and what it stands for. And Nike has a long history of standing against bigotry, hatred, and inequality in all forms. And so, while there are many challenges out in the world today, the quality is a fundamental value to Nike and who we are.
It's core to our leaders, its core to our teammates, our elite athletes, our consumers, and our communities. Quite simply, Nike has a responsibility to lead when it comes to equality. And systemic racism and the events that have unfolded across America serve as an urgent reminder of the continued change that's needed in our society. Simply put, we know Black lives matter.
You know, for the last 40 years, our brand has celebrated incredible Black athletes and inspired millions of people all over the world by amplifying their excellence. Michael Jordan, Tiger Woods, Serena Williams, LeBron James, Colin Kaepernick, Simone Biles, and many, many other incredible Black athletes. We have all been inspired and honored by our connection to each one of them and to many other elite Black athletes who have helped build our brand. And Nike stands in support of all athletes across the sports community in their response to the senseless shootings.
Simply put, we must act to help create lasting change that addresses the systemic racism in our society and Nike will never stop striving to role model how a diverse company must act.
Mark Parker, Executive Chairman, NIKE, Inc.: Thank you, John, and Matt and Heidi, and thank you everyone for your thoughtful questions. At this time, I'd like to hear the voting results. Ann?
Ann Miller, NIKE, Inc., Corporate Secretary: Thanks, Mark. I've received the preliminary tabulation from Broadridge, and based on that tabulation I am pleased to report that: one, the 12 nominees have been duly elected as directors of this company for the ensuing year; two, the advisory vote on the compensation of the named executive officers has been approved; three, PricewaterhouseCoopers' selection as the independent registered public accounting firm for the current fiscal year has been ratified; four, the Nike, Inc. stock incentive plan as amended and restated was approved; and five, the shareholder proposal regarding political contributions disclosure was not approved.
Mark Parker, Executive Chairman, NIKE, Inc.: Thank you, Ann.
Since there are no other matters to discuss, I will adjourn the meeting with best wishes to everyone to stay safe and healthy. And as we create and define our future, we'll close with one more look at Nike's belief in the continual pursuit of progress.
