Nike's CEO Battle
After just 13 months as the CEO of Nike, Bill Perez’s resignation ignited a public clash between the company’s founder Phil Knight and the departing CEO.
On the day that his resignation became public, Bill Perez said in an interview, “The fundamental issue was very basic, Phil didn't retire. When I joined Nike it was with the understanding that Phil was going to retire. I honestly believed he was going to step aside and let me move the ship in the right direction."
After hearing Perez’s interview, Phil Knight responded publicly saying, “While Bill believes that the reasons for his termination were as he described, and it may be in his personal interest to portray it that way, I and the board decided that the company could be better managed with a proven, seasoned industry veteran who has a much greater understanding of our industry and credibility among employees, customers and consumers.”
We are so accustomed to boring corporate public relations statements that such fiery public commentary makes for a real story.
The Phil Knight Company
Phil Knight made headlines on November 18, 2004 when Nike announced he would be stepping down as the CEO of Nike, the company he founded exactly 40 years earlier.
The headlines were especially notable as the company announced they were replacing Knight with Bill Perez, an industry outsider who was the CEO of SC Johnson, the company that makes Windex and Ziploc.
The plan seemed great at the time. Knight could take a back seat after 40 years at the company and only months after his son’s death in a scuba diving accident in El Salvador. And Perez could use his experience leading a large multi-brand enterprise to manage the company’s next wave of growth.
In hindsight, the trouble could have spotted in the very first paragraph of the press release announcing the CEO change:
On November 18, 2004, the Board of Directors of NIKE, Inc. (the "Company") appointed William D. Perez as President and Chief Executive Officer of the Company and as a director of the Company, effective on December 28, 2004. Philip H. Knight, co-founder and current Chairman and Chief Executive Officer of the Company, will continue as Chairman of the Board and remain active in the Company. Mr. Perez will report directly to the Board of Directors.
We should know by now that founders don’t want to give up their companies that easily, especially when they’ve had the job for 40 years and they’re the company’s largest shareholder.
What transpired in Bill Perez’s first year as the CEO of Nike is a case study that has played out thousands of times in boardrooms before.
Perez’s 13 months on the job
According to a Bloomberg article titled Inside The Coup At Nike, Perez spent the first six months on the job traveling and speaking with employees and business partners to learn everything he could about the company.
After those first six months, Perez began to take over the company’s operations and started to make decisions on everything from marketing ideas to cost-cutting initiatives. While this is normal behavior from any CEO, not everyone at Nike was a fan of the outsider coming in an questioning how things worked at their company. There was a growing list of skeptics about Perez’s performance and at the top of the list was Phil Knight.
Bloomberg reports that on January 9th, 2006, less than 60 weeks since the CEO transition, Knight and Perez sat down for their weekly Monday morning meeting. The meeting was business as usual until Knight told Perez that he wasn’t working out and asked Perez to resign.
After several days passed, Perez met with the board of directors to plea his case for staying on longer but was denied.
That Monday, Nike announced that Perez resigned and was replaced by Matt Parker, the longtime Nike executive. And the public blows between Knight and Perez started immediately.
The Battle Arena
Phil Knight did not hold back discussing their relationship in a conference call with investment analysts and reporters on the day of the announcement:
“Basically the distance between the company that Bill managed in the packaged-goods business and Nike ... was too great for him to make that leap.”
Bill Perez responded the same day by giving interviews of his own, saying “Phil didn't back off. He hired me to replace him and he never left. His level of interaction with employees was the same on my last day as the day before I got there.”
Most importantly, the problems between Perez and Nike were summed up well by Perez himself: “I am a data man -- I like to know what the facts are. If you come from the world of packaged goods, where data is always valuable, Nike is very different. Judgment is very important. Feel is very important. You can't replace that with facts. But you can use data to guide you.”
While Perez was dealt an impossible hand, it hopefully makes you feel a bit better knowing he received a $14 million severance package for his troubles.