Procter & Gamble Co. (PG) Chief Executive Officer Bob McDonald faced criticism from a former manager months before activist investor William A. Ackman took his $1.8 billion stake in the company, the Wall Street Journal reported yesterday, citing an April 12 letter.
The missive, signed by former divisional president Gary Martin and claiming to have the support of other P&G executives, asked the board to split the CEO and chairman roles, the WSJ said. The letter to P&G’s lead independent director, Boeing Co. (BA) CEO Jim McNerney, was dated three months before Ackman took his stake in the world’s biggest consumer-product maker, his largest initial investment ever.
“At no time during our employment can any of us recall such intense and widespread concern about the leadership and strategic direction of the Company as is currently being openly expressed,” the letter states, according to the Journal.
McDonald, who has lowered profit forecasts three times since Jan. 1, faces scrutiny over whether his plan to save $10 billion by 2016 through cutting jobs and marketing will be enough to improve results. Ackman plans to seek other investors to help push for management changes or large asset sales, people familiar with the matter said in July.
’Lack of Innovation’
The letter cited a lack of innovation, subpar financial results and languishing shares as a reason for concern, the WSJ said. The letter prompted the Cincinnati-based maker of Pampers diapers to arrange a meeting between Martin, McDonald and Chief Financial Officer Jon Moeller, which did not result in any specific actions, the Journal reported, citing two people familiar with the meeting whom it did not identify.
The letter was signed only by Martin, who retired in 2001, and also recommends the board hire an outside consultant to conduct a confidential review of senior executives to gather their views on strategy, leadership and morale, the WSJ said.
P&G board members are dissatisfied with McDonald’s performance and are discussing a possible leadership change, people familiar with the situation told Bloomberg in July. P&G met with Ackman, founder of Pershing Square Capital Management LP, last month and McNerney said in a Sept. 27 statement that it supports McDonald and his plan to turn around the company.
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