P&G CEO Bob McDonald Steps Down After Pressure From Bill Ackman, Activist Investor
He will be replaced by an old hand: his predecessor, A.G. Lafley (presumably on a temporary basis — Lafley's 65 and has already been CEO once before).
P&G is the world's largest advertiser, with a global media budget of more than $10 billion annually.
The move comes after pressure from activist investor Bill Ackman, according to Forbes:
McDonald was thought to be in jeopardy of losing his job last summer after a string of reductions to profit forecasts frustrated analysts and investors, and Ackman barreled onto the scene, unveiling a $1.8 billion stake in the company.
Ackman had privately urged the company’s board last year to replace McDonald, according to the Wall Street Journal, and at the Ira Sohn investing conference early this month, the hedge fund manager had said that McDonald only had a couple of quarters to show that he could improve performance. Ackman also took pot shots at McDonald for serving on too many corporate boards, which, he claimed to have calculated, ate up 25% of his time.
Ali Dibadj of Sanford C. Bernstein suggested McDonald wasn't cutting it. "How much patience does the board have?" is the quote that will go down in history:
Unilever or Personal Care grew 10%, J&J skin in the U.S. grew 6.3%, [indiscernible] grew 6.5%, Kimberly grew 6%, all organic, all with their profitability, supposedly not through price gaps because it sounds like that's a minor issue. And I'm not sure if you can use geographic mix as an excuse anymore. So I'm just trying to understand how long do you expect investors to wait? How long does your current plan have to work? How much patience does the board have?
McDonald has had difficulty getting the company to fire on all cylinders at once, according to the Wall Street Journal:
Mr. McDonald reacted by refocusing on P&G's core markets and products and cutting costs. The company's shares reacted, rising 26% in the past 12 months. But they tumbled last month after the disappointing earnings report. P&G said its sales rose just 3% after stripping out currency movements and the impact of acquisitions and divestitures, at the low end of the company's forecast.
Most famously, McDonald steered P&G in the direction of "free" social and online media, only to haul it back to old-fashioned paid media when he didn't see the results he liked.
He laid off more than 6,250 marketers in the process.
Here are McDonald and Lafley's letters to their staff, per Ad Age:
Dear P&G Friends,
Today I’m announcing my retirement from Procter & Gamble. This has been a very difficult decision for me, but I’m convinced it is what is in the best interests of theCompany and you.
Replacing me will be my friend and mentor, A.G. Lafley. I’m thankful that A.G. has agreed to come back to P&G and carry on with the work we have collectively done to strengthen the Company, its business and its organization.
During the past year, much attention has been focused on me from several angles, which has been a distraction that is not in our best interests. I’ve always believed that we are a Company -- One Company -- comprised of great individuals. When we get to a point where too much attention becomes a distraction, it’s time to change that dynamic.
Most important, thank you for all you are doing to make P&G the great Company it is and always will be. I am proud of what you have accomplished, and it has been a privilege to be a part of it. During the last four years together, we’ve expanded our business into many new categories and geographies. By the end of this year, developing markets will account for 40% of our sales and 45% of volume. We’ve launched exciting innovations with many more to come. And, we’ve made significant progress on our productivity program. There are many more accomplishments, and I cannot thank you enough for all your hard work and dedication.
I love this Company and all of you. I will celebrate 33 years with P&G on June 4, and I first met A.G. the night before I interviewed. I know you will give A.G. your very best effort. We are on the way up, but there is more to do. We have an opportunity to have an excellent quarter, and there will be many more to come in the future.
My official retirement date is June 30. Please know I am always available to help you in any way I am able.
Best wishes. I have every confidence in you. I am counting on you. Thanks.
Here's Lafley's memo:
Today I am rejoining P&G. I’m looking forward to working with all of you again, to do what we do best and what matters most -- win with consumers.
I want to thank Bob McDonald for his 33 years of service to the Company, and for his leadership. I’ve known Bob his entire career, and he has real passion for doing what is right and for improving the lives of consumers around the world.
I also want to thank P&Gers for the work you’re doing to win with consumers. I want to assure you that we will build on the business momentum behind the current growth strategies:
Strengthening core developed market business.?Maintaining strong developing market momentum.? Building and leveraging a strong innovation pipeline.?Driving cost savings and productivity improvements.
I will be getting up to speed on the business in the next several weeks. In the meantime, here are a few of my core beliefs:
The consumer is boss -- at the heart of everything we do. ?We create and build brands that improve consumers’ lives.?Innovation is our lifeblood.?Every P&Ger is an owner and a leader -- we are one team, with one dream, collaborating internally and competing externally.
I look forward to working with you in the days and weeks ahead.
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