P&G veterans being considered as part of the succession planning
process include Fabrizio Freda, who spent two decades at the company
before becoming CEO of Estee Lauder Cos Inc <EL.N>; and Susan
Arnold, former president of global business units who is now an
operating partner at private equity firm Carlyle Group LP <CG.O>.
Lafley is also closely watching the performance of some of his other
direct reports for their potential to succeed him, the sources said.
These executives include Melanie Healey, group president of North
America; David Taylor, group president of global home care; and
Deborah Henretta, group president of global beauty care; Martin
Riant, the group president of global baby care; and Giovanni
Ciserani, the group president of global fabric care.
P&G declined on Thursday to comment or to make executives available
No formal search process is currently under way, and the sources
said Lafley could stay on for some time to come.
Lafley, 66, was previously P&G's CEO from 2000 to 2009, but came out
of retirement after his successor, Bob McDonald, was abruptly
replaced last year amid pressure from investors who worried about
its growth prospects and lagging share price.
Since taking the helm, Lafley has conducted a "deep dive" to figure
out what needs fixing. He re-organized P&G into four businesses to
boost efficiency. Last year, he said the fiscal 2014 year would be a
transition year, with fiscal 2013 a "stepping stone."
In a telephone interview with Reuters last week, Freda declined to
say whether he had been approached by the P&G board. But he said,
"I'm very happy at Estee Lauder Cos, and that's what I'm doing and
that's what I am focused on and that's what I plan to continue
A representative for Arnold declined to comment.
These new details about P&G's succession planning process suggest
that the company, whose products including Tide detergent, Gillette
razors and Pampers diapers are household names, is leaning toward
choosing one of its own to be the next CEO.
The sources said the appeal of hiring a former or current executive
is that they would not only understand the complexities of a large
multinational company with dozens of products but also understand
Gary Stibel, founder and CEO of New England Consulting Group and a
former P&G executive, said the company is unlikely to select a
candidate with no ties to it.
"It is totally unnecessary, because they have so much internal
talent competing for that job that it will be a challenge to select
one," Stibel said.
P&G has traditionally chosen CEOs and other top executives from
within its management ranks. In 2009, Lafley picked McDonald, who
was the chief operating officer at the time, to take over the
[to top of second column]
McDonald struggled with a pullback in consumer spending in the
aftermath of the financial crisis and the recession. In early 2012,
he unveiled a $10 billion restructuring program, cutting thousands
of jobs and taking other steps to improve operations, launch new
products and expand into fast-growing emerging markets.
Investors wanted faster improvements. Activist investor William
Ackman's Pershing Square Capital Management took a $2 billion stake
in P&G and began pushing for changes, saying shares were
undervalued. (Ackman has since sold at least part of its stake.)
P&G shares underperformed those of rivals between the time McDonald
was appointed in June 2009 and the announcement of his departure.
During that time, P&G rose about 50 percent, while Colgate-Palmolive
Co <CL.N>, for example, was up 74 percent and Standard & Poor's 500
<.SPX> index advanced 75 percent.
"Bob retired, the board called me and I felt like duty called,"
Lafley said in an interview when he returned in May 2013.
Consultants and recruiters said they expect Lafley to remain in the
top seat at P&G for at least another 12 to 18 months.
"It is still early. These changes don't happen overnight. I think
investors have a lot of confidence in him," said Jason Tauber, an
analyst for Neuberger Berman's large cap disciplined growth team.
Neuberger owns about 7 million P&G shares.
But as Lafley and the board consider a potential successor, they
have to contend with investors increasingly eager to see what moves
P&G will make to speed up growth.
Matt McCormick, a portfolio manager at Bahl & Gaynor Investment
Counsel, said shedding some business and making further progress on
cost-cutting would help P&G.
"Procter is doing just fine — but when you look at their other
competitors who have been able to surpass P&G, the reason is they're
more nimble and they're more adroit in adapting to shifts in
consumer patterns," said McCormick.
Bahl & Gaynor owned 4.2 million P&G shares as of September,
according to Thomson Reuters data.
(Editing by Paritosh Bansal and Ken
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