CINCINNATI - Procter & Gamble Co. stunned investors, analysts and employees late Thursday with a management shakeup that removed CEO Bob McDonald for the man he replaced in the job four years ago.
A.G. Lafley will serve as president, CEO and chairman of P&G effective immediately, according to a press release. McDonald will leave the company in June after 33 years.
“A.G’s track record and his depth of experience at P&G make him uniquely qualified to lead the company forward at this important time,” said P&G Lead Director Jim McNerney in a statement.
P&G has faced increasing pressure from investors and analysts who complained the company wasn’t growing fast enough, particularly in developed markets like the U.S. and Europe. McDonald has been singled out for criticism by high-profile investors, including Bill Ackman, a hedge fund investor who acquired a 1 percent stake in the company last July.
P&G responded to critics by announcing a $10 billion restructuring program, cutting more than 6,400 non-manufacturing jobs and reinvesting the savings in new product launches. As recently as last week, in a conference call with analysts, Chief Financial Officer Jon Moeller said the strategy was working.
But Bernstein Research analyst Ali Dibadj said the sudden management change is a sign that P&G’s board was as frustrated with McDonald’s leadership as investors.
“This suggests that last quarter's results were the last straw for the Board,” he said. “The company invested a lot but saw topline (revenue) decelerate. Investors had lost confidence in Bob.”
In a memo to P&G employees, McDonald suggested that criticism of his leadership was a factor in his departure.
“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 … When we get to a point where too much attention becomes a distraction, it’s time to change that dynamic,” he wrote, in a letter published by Advertising Age and confirmed as accurate by P&G.
Cincinnati money manager Matt McCormick said the change was surprising but logical.
“I didn’t see this coming, especially with the stock performing as well as it has been recently. But it’s pretty logical from a P&G perspective to go back to someone who is a known entity to all parties involved. It makes a lot of sense,” said McCormick, vice president and portfolio manager at Bahl & Gaynor Inc. “He’s tan, ready and rested.”
In an interview with the Associated Press, Lafley said the board approached him "very recently" after McDonald decided to retire and asked him to reclaim the top spot.
"Frankly, duty called," he said. "I'm back, I'm full on."
His first order of business, he said, will be to stay on the strategic course that the company has been implementing, focusing on core developed markets as well as developing markets, introducing new products and cutting costs.
"I spent nearly 33 years at this company, and the company has got some momentum right now," he said.
In an interview with WCPO Digital in January, Lafley said McDonald was doing a good job as CEO but added the company needed to “renew itself” in beauty care.
“How do you take it to the next level?” he said. “P&G is the second largest beauty care company in the world after L’Oreal. So, the question for P&G is can you become the leader in the beauty care business worldwide?”
Beauty care was P&G’s worst-performing business, when its fiscal third quarter results were announced in April. That makes McCormick think a beauty care overhaul could be Lafley’s first order of business.
“This is an unexpected change, which Procter normally doesn’t do,” he said. “The author has told you what he’s recommending to the board. They don’t let him in without getting his vision of how he expects to renew Procter and Gamble … the playbook is just that. He’s going to find a way to renew Procter & Gamble.”
Shares rose 42 cents to $79.12 in aftermarket trading.