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8/31/2018 4:17 PM 18CV38553 1 2 3 4 IN THE CIRCUIT COURT OF THE STATE OF OREGON 5 FOR THE COUNTY OF MULTNOMAH 6 SHIVA Y. STEIN, ALISON SHERMAN, 7 and LISA UDINE, derivatively on behalf of Case No. NIKE, INC. 8 9 Plaintiffs, COMPLAINT 10 v. (Derivative Action, Breach of Fiduciary Duty, Waste of Corporate 11 PHILIP H. KNIGHT; JOHN G. Assets, Unjust Enrichment) CONNORS; ELIZABETH J. COMSTOCK; 12 TIMOTHY D. COOK; JOHN J. Amount of claim: $10,000,000 13 DONAHOE II, ALAN B. GRAF, JR.; PETER B. HENRY; DR. JOHN C. Filing fee $1,111.00 per ORS 14 LECHLEITER; MARK G. PARKER; 21.160(1)(e) MICHELLE A. PELUSO; JONATHAN A. 15 RODGERS; JOHN R. THOMPSON, JR.; JURY TRIAL DEMANDED TRAVIS A. KNIGHT; and TREVOR A. 16 EDWARDS, Not Subject to Mandatory Arbitration 17 Defendants, 18 -and- 19 NIKE, INC. an Oregon Corporation, 20 21 Nominal Defendant. 22 23 24 25 26 MCGAUGHEY ╫ ERICKSON 65 SW YAMHILL ST., SUITE 200 PORTLAND, OREGON 97204 Page 1 – COMPLAINT TELEPHONE (503) 223-7555 • FAX (503) 525-4833 E-MAIL: [email protected] 1 NATURE OF THE ACTION ......................................................................................................... 4 2 JURISDICTION AND VENUE ..................................................................................................... 7 PARTIES ........................................................................................................................................ 8 3 A. Plaintiffs .................................................................................................................. 8 4 B. Nominal Defendant ................................................................................................. 9 5 C. Individual Defendants ............................................................................................. 9 6 FACTUAL ALLEGATIONS ....................................................................................................... 17 7 A. NIKE’s Ability to Maintain a Positive Brand Image and Reputation is Key 8 to Its Continued Success, Especially in Its Fast Growing Women’s Brand ......... 17 9 B. NIKE’s Pervasive Culture of Sexual Harassment, Gender Discrimination, Gender Bias, and Hostility .................................................................................... 18 10 C. Despite Maintaining a Dedicated HR Department, Clear Cases of Sexual 11 Harassment Occurred with Impunity .................................................................... 22 12 D. NIKE’s HR Department’s Acquiescence to the Sexual Harassment Triggered the Departure of Several Talented Female Employees ........................ 25 13 E. Public Scandal Exposing Widespread Sexual Harassment Triggers a 14 Belated and Limited Wave of Reforms at NIKE .................................................. 26 15 .................................. 31 16 17 ........... 31 18 ................................................. 33 19 20 ................................................... 35 21 DUTIES OF DIRECTOR DEFENDANTS .................................................................................. 38 A. The Fiduciary Duties of the Director Defendants ................................................. 38 22 B. NIKE’s Corporate Governance Principles and Its Code of Business Conduct 23 Impose Additional Responsibilities on Certain Director Defendants ................... 39 24 C. NIKE’s Board Committee Charters Impose Additional Duties on Director Defendants ............................................................................................................ 41 25 1. Additional Fiduciary Duties of the Audit & Finance Committee 26 Members ................................................................................................... 42 2. Additional Fiduciary Duties of the Compensation Committee Members ................................................................................................... 44 MCGAUGHEY ╫ ERICKSON 65 SW YAMHILL ST., SUITE 200 PORTLAND, OREGON 97204 TELEPHONE (503) 223-7555 • FAX (503) 525-4833 Page 2 – COMPLAINT E-MAIL: [email protected] 1 3. Additional Fiduciary Duties of the Corporate Responsibility, Sustainability & Governance Committee Members ................................. 46 2 4. Additional Fiduciary Duties of the Executive Committee Members........ 48 3 DAMAGES TO THE COMPANY ............................................................................................... 48 4 DERIVATIVE ALLEGATIONS.................................................................................................. 49 5 DEMAND FUTILITY ALLEGATIONS ..................................................................................... 50 6 A. Demand on Defendants Thompson, Cook, and Parker is Futile Due to Their Insider Sales ................................................................................................ 53 7 B. Demand on Defendants Connors, Donohoe II, Graf, Jr., and Peluso is 8 Futile for Additional Reasons ............................................................................... 54 9 C. Demand on Defendants Cook, Comstock, Rodgers, and Dr. Lechleiter is Futile for Additional Reasons ........................................................................... 55 10 D. Demand on Defendants Henry, Dr. Lechleiter, Peluso, Rodgers, and 11 Thompson is Futile for Additional Reasons ......................................................... 56 12 E. Demand on Defendants Travis Knight, Parker, and Thompson is Futile for Additional Reasons ......................................................................................... 58 13 F. Demand on Defendants Comstock, Connors, Cook, Donahoe II, Graf, Jr., 14 Henry, Travis Knight, Lechleiter, Parker, Peluso, Rodgers, and Thompson and Nondefendant Benko is Futile for Additional Reasons .................................. 59 15 CAUSES OF ACTION ................................................................................................................. 60 16 COUNT I Derivatively Against Director Defendants for Breach of Fiduciary Duties ................ 60 17 COUNT II Against the Director Defendants for Waste of Corporate Assets ............................... 61 18 COUNT III Against Edwards for Unjust Enrichment .................................................................. 62 PRAYER FOR RELIEF ............................................................................................................... 63 19 JURY DEMAND .......................................................................................................................... 63 20 21 22 23 24 25 26 MCGAUGHEY ╫ ERICKSON 65 SW YAMHILL ST., SUITE 200 PORTLAND, OREGON 97204 TELEPHONE (503) 223-7555 • FAX (503) 525-4833 Page 3 – COMPLAINT E-MAIL: [email protected] 1 Plaintiffs Shiva Y. Stein (“Plaintiff Stein”), Alison Sherman (“Plaintiff Sherman”), and 2 Lisa Udine (“Plaintiff Udine, together with Plaintiff Stein and Plaintiff Sherman, “Plaintiffs”), 3 derivatively on behalf of NIKE, Inc. (“NIKE” or the “Company”), bring the following Shareholder 4 Derivative Complaint (the “Complaint”) pursuant to ORS 60.261 against the Company’s board of 5 directors (the “Board”), and former NIKE Brand President Trevor Edwards (“Edwards”), for 6 breaches of fiduciary duty, corporate waste, as well as for unjust enrichment against Edwards. 7 Except for allegations specifically pertaining to Plaintiffs and Plaintiffs’ own acts, the allegations 8 in the Complaint are based upon information and belief, which include but are not limited to: (i) 9 documents and other information obtained from the Company pursuant to ORS 60.774 (the “Books 10 and Records Production”); (ii) the Company’s public filings with the United States Securities and 11 Exchange Commission (the “SEC”); (iii) the initial complaint filed in the class action lawsuit, 12 titled Cahill et al. v. Nike, Inc., No. 3:18-cv-01477-PK (D. Or.) on August 9, 2018 (the “Wage 13 Class Action”); (iv) media reports; and (v) other public sources. 14 NATURE OF THE ACTION 15 1. 16 This case arises from NIKE’s systematic “boys’ club” culture, which resulted in the 17 bullying, sexual harassment, and gender discrimination of the Company’s female employees. 18 NIKE’s Board and numerous Company officers engaged in, facilitated, and knowingly ignored the 19 hostile work environment that has now harmed, and threatens to further tarnish and impair the 20 Company’s financial position, as well as its reputation and goodwill, which NIKE’s success is 21 built upon. 22 2. 23 NIKE’s troubles first came to light on April 28, 2018, when The New York Times published 24 an explosive article detailing a systematic and widespread culture of sexual harassment, gender 25 discrimination, and bias against women at NIKE that implicated a number of senior executives. 26 The article, based on interviews with over 50 current and former employees, recounted serious Page 4 – COMPLAINT MCGAUGHEY ╫ ERICKSON 65 SW YAMHILL ST., SUITE 200 PORTLAND, OREGON 97204 TELEPHONE (503) 223-7555 • FAX (503) 525-4833 E-MAIL: [email protected] 1 allegations of sexual harassment and gender discrimination by NIKE’s senior management. The 2 New York Times article, however, was just the first leak in the dam. Recent complaints that have 3 surfaced about the Company explain that for years, NIKE has fostered a “boys club” culture where 4 women were excluded from promotions and leadership opportunities. One of the club’s 5 ringleaders was Edwards, a powerful NIKE executive, who was in charge of the NIKE Brand and 6 has been unjustly enriched by tens

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