Good morning, and welcome to the Nike Incorporated 2020 Annual Meeting of Shareholders. I would now like to introduce NIKE's Executive Chairman, Mark Parker.
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-nineteen pandemic and to support the health and well-being 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 $1,000,000 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, Anne 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 5 proposals to be voted on at this annual meeting, each of which is described in your proxy statement. 1 is the election of directors 2, an advisory vote to approve executive compensation 3, ratification of the appointment of PricewaterhouseCoopers as Nike's independent auditors for the current fiscal year 4, the approval of Nike Inc.
Stock incentive plan as amended and restated and 5, 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 and A period followed by a preliminary report on the voting results. Anne, will you review the mechanics for this meeting?
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 5 matters to be voted on at this meeting. 2nd, 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.
3rd, during the Q and 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.
Thank you, Anne. 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 1st 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 listen 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 all those he inspired.
Nike is a better company because of Coach's leadership, and I know that all of us on the Board will continue to hear his voice. Since last year's annual meeting, we've been proud to welcome Tashunde Dukat, CEO of Chase Consumer Banking at JPMorgan Chase as a member of the Board following her appointment as a Director last November. The Board now consists of the 12 directors you see pictured on your screen. You will hear from John Donahoe and myself during the course of this meeting and each of the other directors is attending today's meeting virtually. Also attending today's virtual meeting is our outside auditor, Kelly Keller from PricewaterhouseCoopers.
PWC has been NIKE's outside independent accounting firm for many years. And finally, Tony Caridio from Broadridge Financial Services has been appointed the Inspector of Elections for this meeting. All right, let's move on to the proposals. I've been advised by the Corporate Secretary that the notices of this meeting were duly and properly given, being mailed in accordance with the bylaws on August 6, 2020, and that a quorum of both Class A and Class B common stock are present today. Since a quorum is present, I declare this annual meeting of the shareholders of NIKE, Inc.
Duly convened. We will dispense with the reading of the minutes of the last annual meeting and proceed to the matters to be voted on. Anne, I'd like to ask you to present the proposals and the Board of Directors' recommendations to the shareholders at this time.
Thank you, Mark. The first matter we will vote on is the election of directors. The Board's nominees for election by the Class A shares are Kathy Benko, Beth Comstock, John Connors, Tim Cook, John Donahoe, Tashunda Duckett, Travis Knight, Mark Parker, John Rogers, Jr. The Board's nominees for election by the Class B shares are Alan Graff, Jr, Peter Henry, Michelle Peluso. The Board recommends a vote for each of these nominees.
Thank you, Anne. In accordance with the company's bylaws and corporate governance guidelines, the Board has reviewed and considered all other nominations received by the company. Therefore, I declare the nominations closed.
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 3rd 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 4th 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 5th 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 and A, we ask you to please keep your remarks related to the proposal and to limit your comments to a period of 3 minutes. We will give you a verbal indication when you have 30 seconds remaining and the operator will close your line if you exceed 3 minutes. Operator, please open the line for Mr.
Herbert at this time.
Mr. Herbert, your line is open.
Thank you and good morning. My name is Bruce Herbert and I stand on behalf of Newgrounds Social Investment in Seattle to move proposal number 5, which asked 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 and 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. Menke's 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 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 Zicline Index. Therefore, please join me in casting your vote for proposal number 5. Thank you.
Thank you, Bruce. We have now covered each of the proposals.
Thank you, Anne. 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.
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 5 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 was a defining year for NIKE. We stayed true to what makes NIKE special, particularly our focus on innovative product, 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-nineteen 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 frontline workers around the globe. And we committed more than $25,000,000 for COVID response in the communities that needed it 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. Across our 3 brands, Nike, Jordan and Converse, and in partnership with Michael Jordan, we have committed $140,000,000 to invest in and support organizations that put social justice, education and addressing racial inequality in America at the center of their work. We're also focused on improving the experience of our black teammates inside of Nike as we deepen our commitment to become a leader as a diverse and inclusive company. Throughout this incredibly dynamic year, we've continued to deliver the results our shareholders expect from NIKE.
We stayed on the offense, always adapting. We navigated fiscal 'twenty thanks to our underlying strengths, our inspirational brand, our commitment to sport innovation, our digital advantage and our amazing team. We leaned on these strengths to keep people connected to sport. We drove inspiration through campaigns, content and experiences that kept people active even while they were confined to their homes. In fact, at the height of the pandemic worldwide, workouts on the Nike Training Club app more than tripled.
And during COVID, we continued to deliver innovative product that allowed athletes all over the world to keep moving. The Pegasus 37 was a hit, particularly with women, as consumers took to running in their neighborhoods. The Air Zoom SuperRep offered an innovative shoe built specifically for high intensity workouts, including those done at home. And new yoga collections, both for men and women, helped fuel increased focus on health and wellness. I'm proud that we kept the lifestyle of sport thriving, even as organized sport was at a halt.
The simple fact is sport has never mattered more than it does today. That unifying power of sport has brought us all together at a time when we needed it most.
Now the
truth is fiscal 'twenty also proved that NIKE's leadership transcends our industry. No one else has the advantages that we do, and no one can benefit more from the structural tailwinds that we're seeing. The shifting consumer behavior towards digital plays to our strengths. The definition of sport is expanding to include all facets of health, wellness and fitness. Consumers want deep and meaningful connections with authentic brands and quality brands that can offer scale will be the brands that win.
These tailwinds combined with NIKE's underlying strengths will bring us even closer to consumers and will extend the gap between us and our competition. It's in times like this when strong companies get stronger. Now our financial performance pre COVID proves this out. Our brand and our business momentum had never been stronger heading into the pandemic, resulting in healthy top line growth, gross margin expansion and operating income growth. And this growth is balanced throughout our 4 geographies with particular strength in Greater China and areas of the business like NIKE Sportswear and the Jordan brand.
The fuel for this success comes where it always does for NIKE, innovation. 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 'twenty, 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 1, Air Jordan 1 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 1 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, the very strong response. The early success we're seeing with Space Hippie offers more proof of the consumer appetite for a sustainable product and how our product teams are ready to match that.
In fact, you've just seen us launch the VaporMax 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 business. Simply put, I'm 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 2020 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.
Thank you, John. We have now reached the Q and 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-nineteen response, our digital transformation and innovation strategy, the CEO transition, supply chain management and social justice issues, just to name a few. As Anne 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. 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. We're already seeing how John is accelerating NIKE's digital transformation. In terms of my own engagement, I remain a very active member of the management team and I lead the Board. I continue to spend more time on key areas of our business in close partnership with John. The transition has really been a win win for NIKE and we're excited to be able to work together.
John, let me pass it over to you for your thoughts.
Well, Mark, I agree. It has been a really incredibly smooth transition. And I just want to personally thank you, Mark. I think shareholders, you should know that Mark and I meet every Friday morning. We spend an hour comparing notes.
I regularly get his advice and counsel and I just want to thank you Mark as your advice counsel and thought partnership been truly invaluable. Mark also continues to meet with our innovation teams, our product teams, which they appreciate he's unmatched in the world and his skills in those areas. And so I'll just say that the support from Mark that I've received and from the Board are deeply appreciated. And I agree with you, Mark, Nike has got a very bright future.
Well, thanks, John. To market? And what's coming down the pipe that you're most excited about? John, why don't you take this one?
Well, Mark, let me just start out what I referred to in my remarks that I have been blown away by NIKE's approach to innovation. It is just deeply ingrained in the culture of NIKE. And it's deeply wired into almost every aspect of how Nike operates from ranging on how we engage with consumers through inspiring storytelling to differentiated consumer experiences and retail concepts. But as it always has been the case at NIKE, innovation ultimately starts with the product and the resources and talent and dedication of our design teams and product development teams and our category teams is just phenomenal. And their ability to fuel innovation in a broad and deep and systematic manner is nothing like I've ever seen before.
It's interesting, even in this dynamic environment, even in the midst of this pandemic, when many companies are pulling back, Nike continues to invest in innovation. And we have not slowed down one bit, and we continue to deliver an unrelenting flow of innovative product that resonate deeply with consumers. I mentioned several of them in my remarks, but it continues to lead the way in sport performance through products like Air Zoom AlphaFly Next Percent, in 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 and deep.
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'll 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.
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-nineteen 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.
All right, Matt, how about I start out and then turn it over to you. Okay. Let me just start off by saying NICE 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 4 or 5 years and drive it hard so we can make that kind of change happen in 2 years or even less. 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 3 or 4 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 'twenty three. And the fact is, we're already delivering on that goal this year, 2 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 brings me to the 2nd 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 2 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 placed 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 want
to comment a little bit on what this means for us financially?
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 connected 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 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.
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.
Sure, Mark. I'll take that one. And thank you so much for the question. And I'm happy to share what I can here. I'd start by reiterating what John just said, which is that our strategy is sound and quite frankly our offense has never been stronger than it is today.
We believe and in fact we know we have an amazing foundation to build from here and we are being very intentional in our plans to shape the marketplace of the future and how we intend to lead it. So here's our commitment. Nike will provide our consumers with the most premium and the most seamless experience of any retailer. And our strategy to meet that commitment is focused on NIKE being more digital, more direct and more differentiated. We will do that through our own channels as well as with select key partners who share that same commitment.
First, we want to ensure our digital channels serve as the most accessible, convenient and engaging platform for consumers. And alongside NIKE's incredible ecosystem of digital commerce, our apps and our platforms, we will further elevate our relationship with our consumers through our physical presence in the marketplace. As I hope you've all seen by now, we've been shaping the marketplace through some of the most innovative retail concepts anywhere in the world. If you consider the pinnacle expression of our brand, that would be our houses of innovation in Shanghai, New York and even our latest store launch in Paris, which we launched just this June. These stores represent the most immersive and most expressive examples of Nike.
Alongside these global beacons, we've launched some incredible digitally enabled neighborhood doors that we call Nike Live. Today, we have Nike Live doors in Los Angeles and Tokyo and you'll see some coming soon to key cities around the world. And then there are stores like our recently opened WOTS community store in Los Angeles and new concepts like Nike Rise, we just opened in Guangzhou and our first Jordan's door in Seoul that are engaging with communities consumers in ways that only Nike can do. At the same time, you see us investing in our own channels. You'll see us continue to shift away from undifferentiated retail.
That means we'll focus on smaller number of key strategic wholesale partners that share our commitment to building the same premium consistent and seamless experience for our consumers. We actually believe this strategy is additive to where we are today and we are incredibly confident that shifts like these will greatly accelerate our opportunities and that this approach will drive further growth for our brand. I hope that answers the question. Thanks, Mark.
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?
Yes. 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. 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, equality is a fundamental value to NIKE and who we are. It's core to our leaders, it's 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.
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 and 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.
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. Anne?
Thanks, Mark. I've received the preliminary tabulation from Broadridge. And based on that tabulation, I'm pleased to report that: 1, the 12 nominees have been duly elected as directors of this company for the ensuing year 2, the advisory vote on the compensation of the named executive officers has been approved 3, Pricewaterhouse Cooper's selection as the independent registered public accounting firm for the current fiscal year has been ratified 4, the NIKE, Inc. Stock incentive plan as amended and restated was approved and 5, the shareholder proposal regarding political contributions disclosure was not approved.
Thank you, Anne. 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.