Procter & Gamble Co. (PG)’s board, responding to reports that it discussed whether to replace Chief Executive Officer Robert McDonald, said it unanimously supports him and his plan to improve the company’s results.
The board also is monitoring the plan’s effectiveness, the Cincinnati-based company said today in a filing with the U.S. Securities and Exchange Commission.
P&G directors have been dissatisfied with McDonald’s performance and had discussed a possible leadership change, people familiar with the situation have told Bloomberg News. Activist investor Bill Ackman, whose plan to take a stake in P&G was approved by regulators last week, intends to press for management changes and is seeking more investors to join his push, the people said.
McDonald has “about another year’s grace period,” Victoria Collin, an analyst at Atlantic Equities in London who rates P&G neutral, the equivalent of a hold, said today in a telephone interview. “It’s difficult to implement such a change on a company the scale of P&G.”
McDonald, 59, has been CEO for about three years and came under fire from analysts earlier this year when P&G lost market share to competitors. The maker of Tide laundry detergent and Duracell batteries has cut its profit forecast three times this year even as competitors reaffirmed their projections. P&G’s most recent reduction in its outlook came last month, with the company citing currency fluctuations and rising commodity costs.
McDonald in February announced a plan to reduce $10 billion in expenses through 2016 by cutting headcount and streamlining operations. Ali Dibadj, an analyst at Sanford C. Bernstein & Co., has said the planned savings would be closer to $4 billion.
The shares fell 0.8 percent to $64.82 at the close in New York. They have slid 2.8 percent this year.
Ackman, who said his P&G stake is his largest initial investment ever, this year won an effort to remove Canadian Pacific Railway Ltd. (CP) CEO Fred Green and replace him with Hunter Harrison. Ackman also pushed Fortune Brands Inc. to break up, and the company last year split into spirits maker Beam Inc. (BEAM) and a company that sells home products such as faucets and locks.
Ackman’s P&G stake was valued at about $2 billion, a person familiar with the matter has said. Ackman didn’t immediately respond to e-mail and telephone messages seeking comment today.
“There was a sense of urgency around the headquarters in Cincinnati, but clearly that sense of urgency has gone way up with the news” of Ackman’s stake, Jack Russo, an analyst at Edward Jones & Co., said today in a telephone interview. Management is “going to have to respond a little bit more specifically to all this” when it reports earnings next month.
P&G’s other shareholders include Berkshire Hathaway Inc. (BRK/B), led by billionaire Warren Buffett. The firm held a stake of about 73.3 million shares, or 2.7 percent, as of March 31, according to data compiled by Bloomberg. That’s down from 76.8 million at the end of 2011.
McDonald took over P&G’s top job in July 2009 after serving as chief operating officer. A West Point graduate, McDonald rose to lead the company’s Northeast Asia operations in 1999 after stints in the Philippines and Japan. In 2001, he became president of the global fabric and home-care business. Three years later, he was made vice chairman for global operations.
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