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Here's a Raise... And, um, You're Fired!

August 23, 2013

P&G's ex-CEO got a boost in pay before getting canned.

Sometimes good isn't good enough—especially when a key stockholder is miffed. Procter & Gamble Co paid Bob McDonald, its former chairman, president and chief executive who abruptly left last spring, nearly 5% more last year as the company's performance improved.

McDonald was replaced in P&G's top spot on May 23 by his predecessor, A.G. Lafley. While McDonald's departure was termed a retirement, many saw the change as confirmation that his tenure was a disappointment and that the world's largest household products maker needed Lafley to reassure investors and employees. At least that was the opinion of activist fund manager Bill Ackman, who forced the move.

Despite the pressure, McDonald must have been doing something right in the eyes of the board. He earned a $3.3 million bonus in fiscal 2013, up from $2.4 million a year earlier, when P&G started a major restructuring. Lafley earned almost $2 million as he took the helm for the last few weeks of the fiscal year, including salary, bonus and cash instead of stock and option awards, according to the P&G proxy filing.

In the fiscal year that ended in June, largely overseen by McDonald, P&G started to rebound with gains in market share. The company met or exceeded targets that are factored into executives' compensation. Fiscal 2013 core earnings per share rose 5%, exceeding the company's forecast of a decline of 1% to an increase of 4%.

Free cash flow productivity also exceeded its goal, and organic sales rose 3%, the midpoint of P&G's forecast of 2-4%. Organic sales exclude the impact of acquisitions, divestitures and foreign exchange.

In fiscal 2012, P&G issued profit warnings and McDonald admitted the company was too slow to react to thriftier shopping habits, create product hits, and expand in fast-growing international markets.

McDonald's salary was flat at $1.6 million and his longer-term compensation was relatively unchanged. Overall, he took home more than $15.9 million, up from nearly $15.2 million the year before.

From May 23 to June 30, Lafley earned $1.94 million. He took home an additional $94,000 for consulting work during the year before he came back as CEO, bringing his total compensation to nearly $2.04 million, P&G said.

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