Nike’s CEO sees pay package shrink 16 per cent in most recent fiscal year

PORTLAND, Ore. – Nike Inc.’s CEO Mark Parker saw his compensation fall 16 per cent to about $11 million during fiscal 2011 largely due to a drop in his pay based on the company’s performance, which has hurt during the economic downturn.

Parker has helped lead the world’s largest athletic shoe and clothing company through some of its most profitable years. But the Beaverton, Ore., company didn’t grant any of its executives long-term incentive pay in the 2011 fiscal year because of the company’s performance during the three years prior, which was dampened by a combination of the economic downturn and costs from its acquisition of soccer goods maker Umbro PLC.

Nike weathered the tough economic times better than others. Its revenue slowed during the downturn but it remained profitable as consumers continued to flock to its popular brand worldwide. The company reported a 23 per cent increase in its most recent fiscal year net income to $2.13 billion, or $4.39 per share. But the cumulative three-year growth results fell short of the company’s goals.

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The move to not grant executive long-term incentive pay was one of the biggest reasons behind the decline in Parker’s pay from the $13.1 million he received in the 2010 fiscal year. Parker’s salary rose by 4 per cent to about $1.5 million. The value of his stock awards held steady at $3.5 million, while the value of his options fell 17 per cent to $2.9 million. His incentive compensation, which was absent the long-term incentive he typically receives, was down 38 per cent to $2.7 million.

Parker’s other compensation, which includes perks such as contributions to retirement funds, rose 79 per cent to $343,395.

The Associated Press formula calculates an executive’s total compensation during the last fiscal year by adding salary, bonuses, perks, above-market interest the company pays on deferred compensation and the estimated value of stock and stock options awarded during the year. The AP formula does not count changes in the present value of pension benefits. That makes the AP total slightly different in most cases from the total reported by companies to the Securities and Exchange Commission.

The value that a company assigned to an executive’s stock and option awards for 2010 was the present value of what the company expected the awards to be worth to the executive over time. Companies use one of several formulas to calculate that value. However, the number is just an estimate, and what an executive ultimately receives will depend on the performance of the company’s stock in the years after the awards are granted. Most stock compensation programs require an executive to wait a specified amount of time to receive shares or exercise options.