Phil Knight (search), the former college track star who co-founded the largest athletic shoe and clothing company in the world, is stepping down from daily management of Nike Inc. (NKE) after 36 years of building the corporate name and "swoosh" logo into a global icon. Its stock price fell more than 3 percent Friday.

Knight, 66, became a billionaire and a sports marketing legend after joining forces with his University of Oregon track coach, Bill Bowerman (search), to design shoes popular with the runners who were transforming the athletic equipment industry in the 1970s.

Building on the fitness and distance running craze of the decade, Bowerman molded shoe soles with his wife's waffle iron and Knight hawked the footwear from the trunk of his car to build a company that would challenge early market rival Adidas and eventually overtake it.

On Thursday, in a surprise announcement, Knight said he would resign as president and CEO, in effect giving up the reins of daily management while retaining his chairman's title.

Knight, however, suggested he would still play a major role as "an active chairman," adding in a humorous note that he would work on his status as the "world's No. 1 sports fan."

Effective Dec. 28, Knight will be replaced as Nike president and CEO by William D. Perez (search), who now holds the same titles at S.C. Johnson & Son Inc. (search) , a privately held consumer products company that makes Glade air fresheners and Drano drain cleaner.

Perez has spent his entire 34-year business career with S.C. Johnson, heading its operations in Spain and Latin America before rising to the top management posts in 1996.

Knight, in his resignation announcement, said he felt Perez not only had experience building international brand names, but also "knows how to operate a highly socially responsible global business."

Nike shares dropped $2.69 to $82.31 in on the New York Stock Exchange (search). It recently reached a 52-week high of $87.80.

Knight has been defensive about repeated criticism over conditions at the contract factories in Asia and Latin America where most of Nike's production is based, including withholding major donations to the University of Oregon (search) in 2000 at the height of the labor rights controversy that dogged Nike through the 1990s.

But Knight emerged as one of the leading corporate figures to organize efforts to improve factory conditions when he urged other companies to join the Fair Labor Association (search), a coalition of industry, labor, consumer and human rights groups organized by former President Clinton when he was in office.

Some of Nike's leading critics have said they targeted the company because it was the largest in the industry and got the most media attention, providing the best way to apply pressure for reforms and overall corporate responsibility.

Nike has become the dominant force in the athletic equipment market with $12.3 billion in sales for its 2004 fiscal year.

It has acquired many other companies, including basketball shoe maker Converse, and signed a long list of celebrity athletes to endorse its products, including Michael Jordan and Tiger Woods, which led Nike to create entire new divisions around the basketball and golf stars.

Nike has also built a fortune for Knight, ranked No. 22 among the wealthiest Americans by Forbes magazine in September with an estimated net worth of $7.4 billion.

Knight still owns 72 million — about 28 percent — of the voting shares of Nike Class B stock, worth about $6.12 billion, according to filings with the Securities and Exchange Commission (search).

Analysts say Knight will be a hard act to follow.

"It can be likened to when an Andy Grove steps aside at Intel or Bill Gates hands the reins to Steve Ballmer at Microsoft. It's somewhat the passing of the torch. I think it's a natural transition — though a rather significant one in the history of this company," said Paul Swangard, managing director of the Warsaw Sports Marketing Center at the University of Oregon.

Perez, however, was considered a top choice.

"He's regarded very highly. He's considered to be smart, tough, disciplined and a global player," said Gary Stibel, a former Procter & Gamble Co. executive who now runs the New England Consulting Group in Westport, Conn.