Procter & Gamble board’s oversight questioned as boss departs
Procter & Gamble’s 12-member board includes six chief executives
The sudden exit of Procter & Gamble’s Bob McDonald as chief executive and the return of former chief executive AG Lafley in his place has raised questions about the vigilance of one of America’s highest-profile corporate boards.
On paper at least, P&G, the maker of a myriad of household products such as Crest toothpaste and Tide detergent, has one of the strongest boards in the world with chief executives from six other companies among its 12 members, including three from companies in the Dow Jones industrial average. The chief executives include Boeing’s James McNerney, Hewlett-Packard’s Meg Whitman, American Express chief executive Kenneth Chenault, and Macy’s chief executive Terry Lundgren.
P&G in its annual proxy statement to shareholders last year described the board as “highly qualified and each director brings a diversity of skills and experiences.” It said all of the directors - who also include Archer Daniels Midland chief executive Patricia Woertz, Frontier Communications chief executive Maggie Wilderotter and former Mexico President Ernesto Zedillo - qualify as possessing “extraordinary leadership qualities and are able to identify and develop leadership qualities in others.”
But some investors and corporate governance experts say that having so many powerful directors could also be a weakness because serving chief executives are under a lot of pressure in their own jobs and therefore cannot commit much time to being a director of another company.
They also suggest that major P&G investors, such as Warren Buffett’s Berkshire Hathaway (which had a P&G stake of about 2 per cent at the end of March), and activist hedge fund investor Bill Ackman’s Pershing Square Capital Management (with around 1 per cent), would also have more at stake than the chief executives, who only have modest P&G shareholdings.
While boards in corporate America are often dominated by current and retired executives, many also have investors represented - Coca-Cola, for example, has Buffett’s son Howard Buffett on its board (Berkshire has a 9 per cent stake).