What are you searching for?

Sign in
Company News

P&G Chief Faces Criticism from Former Employee

"The Letter" makes headlines in The Wall Street Journal.

Author Image

By: TOM BRANNA

Editor

It’s one thing to have a hedge fund manager calling for your scalp…it’s another when former employees feel the urge to vent about your performance. But that’s the case for P&G CEO Bob McDonald as he heads into the company’s fiscal Q1 announcement this week, according to The Wall Street Journal.


Everyone knows about activist-hedge fund manager Bill Ackman, who amassed a $1.8 billion stake in the company this summer and pressed the board to consider a change at the top. Yet months before Mr. Ackman got involved, the CEO faced critics inside P&G’s own walls, according to The Journal.



On April 12, a former executive sent a 13-page letter to P&G’s lead independent director, Boeing Co. CEO Jim McNerney, that detailed a number of concerns about Mr. McDonald’s leadership and called on the board to split the CEO and chairman responsibilities.

The previously unreported letter was signed by Gary Martin, a former president of family care at P&G, and claimed to have the support of many current and former executives.

“None of us has taken any pleasure in pointing out issues with our company where, for the most part, we have spent our entire careers,” according to the letter, which was reviewed by The Wall Street Journal. “Critiquing this great company, that we have loved and that has engendered in each of us great pride, has been a serious matter.”


P&G said its board and executives are confident in the company’s turnaround plan. The company didn’t make Mr. McDonald available for comment.
It wasn’t clear how many executives backed the letter, which was signed only by Mr. Martin, who retired in 2001 after 33 years at P&G. Several current and former executives reached by The Journal, however, said they were aware of the letter and continue to agree with some or all of the criticisms it raised—a lack of innovative products, disappointing financial results and poor stock-price growth at the time.

P&G’s shares have risen nearly 8% to almost their highest point in a year following the company’s fiscal fourth-quarter earnings report in August, when the company reported better than expected profits and said it would buy back more stock in the current fiscal year. Fourth-quarter sales fell 1% to $20.2 billion, and the company lost market share in two-thirds of the product-market categories it tracks.


The maker of Tide detergent, Gillette razors and Pampers diapers took the letter seriously enough to arrange a meeting for Mr. Martin with Mr. McDonald and Chief Financial Officer Jon Moeller, but no action was taken, two people familiar with the meeting said.


Martin’s letter reflects the frustration of many former executives who rely heavily on holdings of P&G stock for their retirement. He began sounding out fellow retired P&G executives in February and March about making some of their frustrations about the company’s share price and performance known to the board, former executives said.


“When most of us retired we had an expectation that the stock would perform, over the long term, in line with the way it had performed while we were employed, say 30 years,” the letter states.


In addition to asking the board to split the chairman and CEO roles, the letter recommends the board hire an outside consultant to conduct a confidential review of senior executives to gather their views on strategy, leadership and morale.


P&G rejected a request in the letter that shareholders be allowed to vote on splitting the chairman and CEO roles. Shareholders also appear to be backing Mr. McDonald. At the company’s annual meeting Oct. 9, Mr. McDonald was re-elected to the board with 94% of the vote. He received the highest number of votes against of any board member, however.

Keep Up With Our Content. Subscribe To Happi Newsletters

Topics