Charter of the Audit Committee
The purpose of the Audit Committee (the "Committee") of the Board of Directors (the "Board") of NIKE, Inc. (the "Company") is to provide assistance to the Board in fulfilling its legal and fiduciary obligations with respect to matters involving the accounting, auditing, financial reporting, and internal controls of the Company. The Committee's purpose includes assisting the Board's oversight of:
Committee's purpose also includes preparing the report of the Committee that
the Securities and Exchange Commission ("SEC") rules require to be
included in the Company's annual proxy statement.
The Audit Committee shall consist of at least three directors as determined by the Board. The Committee members shall meet the independence, financial literacy, and other requirements of the NYSE and all other applicable rules, regulations, and statutes. At least one of the members must be a financial expert as defined by applicable rules, regulations, and statutes. The chair of the Committee shall be designated by the Board and shall have accounting or related financial management expertise. A member of the Committee may not simultaneously serve on the audit committee of more than three public companies unless such service is approved by the Board upon its determination, based on the recommendation of the Nominating and Corporate Governance Committee, that the simultaneous service would not impair the ability of the member to effectively serve on the Company's Audit Committee. A member of the Committee may not, other than in his or her capacity as a member of the Audit Committee, the Board, or any other Board committee, accept any consulting, advisory, or other compensatory fee from the Company, or be an affiliated person of the Company or a subsidiary thereof. The chair and the members of the Committee shall be appointed by the Board of Directors approximately annually.
The Committee shall meet with such frequency and at such intervals as it determines is necessary to carry out its duties and responsibilities. The Committee may permit attendance at meetings by management and such ex officio members as the Committee may determine appropriate or advisable from time to time. The Committee shall report regularly to the Board on matters within the Committee's responsibilities, and shall maintain minutes of Committee meetings.
Duties and Responsibilities
Committee will have the following duties and responsibilities:
1. The sole authority to retain, with shareholder ratification, and terminate the Company's independent auditor, to approve all audit engagement fees, compensation and terms, and to directly oversee the work of the independent auditor with respect to the annual audit of the Company.
2. To instruct the Company's independent auditor that it is to report directly to the Committee.
3. The sole authority to approve in advance all audit and legally permitted non-audit services to be provided by any independent public accountants; provided, however, that advance approval of non-audit services shall not be required if:
a. the aggregate amount of fees for all such non-audit services provided to the Company constitutes not more than five percent of the total amount of revenues paid by the Company to its auditor during the fiscal year in which the non-audit services are provided;
b. the services were not recognized by the Company at the time of the engagement to be non-audit services; and
c. the services are promptly brought to the attention of the Committee and approved prior to the completion of the audit by the Committee or by one or more members of the Committee who are members of the Board to whom authority to grant such approvals has been delegated by the Committee.
4. The sole authority to delegate to one or more designated members of the Committee who are independent directors of the Board, the authority to grant advance approvals of audit and non-audit services as described in Section 3 above.
5. At least annually, to obtain and review a report by the independent auditor describing: the firm's internal quality control procedures; any material issues raised by the most recent internal quality control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the firm and any steps taken to deal with any such issues; and all relationships between the independent auditor and the Company.
6. At least annually, to evaluate the independent auditor's qualifications, performance, and independence, which evaluation shall include the review and evaluation of the lead partner of the independent auditor and a review of the report referred to in Section 5 above. In making its evaluation, the Committee shall take into account the opinions of management and the Company's internal auditors. The Committee shall further ensure the rotation of the lead audit and review partners every five years, or more frequently as the Committee shall determine in its sole discretion. The Committee shall decide as to whether the Company is obtaining high quality audits and whether rotation of the auditor would be helpful. The Committee shall present its conclusions with respect to the independent auditor to the Board.
7. To discuss the annual audited financial statements and quarterly financial statements with management and the independent auditor, including the Company's disclosures under "Management's Discussion and Analysis of Financial Condition and Results of Operations."
8. Review NIKE's Annual Report filed with the SEC on Form 10-K, and recommend to the Board that the audited financial statements be included in the Form 10-K.
9. Review with the independent auditor and management NIKE's quarterly financial statements prior to filing and discuss with the independent auditor any items required to be communicated by the independent auditor with respect to interim financial statements in accordance with SAS 61 and 71.
10. To discuss with the Chief Executive Officer and the Chief Financial Officer the individual certifications required to be filed with the Company's periodic reports to the SEC.
11. To discuss earnings press releases, as well as financial information and earnings guidance provided to analysts and rating agencies.
12. To engage and compensate independent counsel and other advisors, as the Committee determines necessary to carry out its duties.
13. To discuss policies with respect to risk assessment and risk management and to discuss the Company's major financial risk exposures and the steps management has taken to monitor and control such exposures.
14. To meet separately, at least quarterly, with management, with internal auditors, and with the independent auditor.
15. To review with the independent auditor any audit problems or difficulties and management's response, including, but not limited to, any restriction on the scope of the independent auditor's activities or on access to requested information, any significant disagreements with management, any accounting adjustments that were noted or proposed by the auditor but were passed as immaterial or otherwise, any communications between the audit team and audit firm's national office respecting auditing or accounting issues presented by the engagement, and any "management" or "internal control" letter issued, or proposed to be issued, by the independent auditor to the Company. The review shall also include discussion of the responsibilities, budget and staffing of the Company's internal audit function.
16. To resolve disagreements between management and the independent auditor regarding financial reporting.
17. Obtain from the Company's independent auditor any information required to be provided pursuant to Section 10A of the Securities Exchange Act of 1934 (the "'34 Act").
18. To review and approve, if appropriate, the internal audit charter and any changes thereto.
19. To ensure the independence of the chief internal auditor and to concur in the selection, retention, and dismissal of the chief internal auditor.
20. To review the effectiveness of the Company's accounting and internal control structure and procedures through inquiry and discussions with the Company's independent auditor, internal auditors, and management of the Company, and approve the internal control structure and procedures and any amendments thereto.
21. To establish procedures for (i) the receipt, retention, treatment, processing and resolution of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters, and (ii) the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters.
22. To set hiring policies for employees or former employees of the independent auditor all in accordance with applicable legal requirements.
23. Meet periodically with the general counsel or other legal counsel to review legal and regulatory matters, including any matters that may have a material effect on the financial statements of the Company.
24. Meet periodically with the Company's internal Clearance Director, who will (i) review and approve in advance all trades of NIKE common stock owned by the Company's directors and officers who are subject to Section 16 of the '34 Act, (ii) be a member of, and be provided with all information furnished to, the Disclosure Committee, (iii) meet at least annually with the Company's directors and officers to inform them of the stock trading policies and procedures applicable to them, and (iv) provide periodic reports to the Committee regarding the performance of his or her duties and any issues or problems encountered.
25. Receive reports from the Company's internal Disclosure Committee, which is responsible for quarterly review of material issues regarding accounting, financial reporting, public disclosure, internal control, and fraud issues in respect of the financial statements of the Company.
26. To report regularly to the Board any material issues that arise with respect to the quality or integrity of the Company's financial statements, the Company's compliance with legal or regulatory requirements, the performance and independence of the Company's independent auditor, or the performance of the internal audit function.
27. Direct preparation of and approve the Audit Committee Report for inclusion in the annual Proxy Statement that summarizes the Committee's activities in compliance with Item 7 of Schedule 14A under the Securities Exchange Act of 1934.
28. Direct preparation and execution of the NYSE's annual written affirmation of director independence and qualifications to serve on the Committee as required by the NYSE Listed Company Manual.
29. Annually evaluate the performance of the Committee and report the results of the Committee performance evaluation to the Board.
30. Review and assess annually the adequacy of the Committee's charter.
31. Perform such additional activities and consider such other matters within the scope of its responsibilities as the Committee or the Board deems necessary or appropriate.