Experts say new Procter & Gamble (PG) boss will stabilize, strategize and search for his successor

A.G. Lafley called caretaker CEO

CINCINNATI - Analysts and corporate governance experts like the choice of A.G. Lafley to replace CEO Bob McDonald, but they don't think he'll be in the job a long time.

"Typically you don't hire somebody who's 65 to be your CEO for 20 years," said Jill Fisch, professor at the University of Pennsylvania Law School. "You have to assume this is not going to be some long-term assignment. But if you've got people you're hoping to bring into this role, you can see how bringing somebody with long-term experience would be helpful in that transition."

Corporate governance expert Charles Elson agreed that Lafley is a "caretaker" CEO, brought in by P&G's board to engender confidence while it evaluates the company's next steps.

"I don't think anything radical happens under the caretaker," said Elson, director of The Weinberg Center for Corporate Governance at the University of Delaware. "This is a 'hold it together until we figure out what to do' next move."

P&G surprised everyone late Thursday by announcing the retirement of McDonald and the immediate appointment of Lafley as president, chairman and CEO. P&G shares rose nearly 4 percent on the news, trading at $81.80 Friday afternoon.

Some have criticized P&G's lack of internal candidates to replace McDonald, but Elson praised the board's approach.

"These things are highly situational. There's no playbook," he said. "Perhaps the person they were thinking of wasn't ready."

Morningstar analyst Erin Lash is among those who have questioned P&G's bench strength in the past. She thinks Lafley could be in the job for less than a year and that P&G's board might be ready to break with P&G tradition and explore outside CEO candidates.

"If there was an internal candidate, they would have appointed that candidate right away rather than having Lafley step in," she said. "I think it's definitely possible that there could be an external candidate."

Bernstein Research analyst Ali Dibadj predicts Lafley will spend up to three years at P&G, enough time to settle things down, realign spending and groom a successor. "The board and CEO should have done that (before now)," Dibadj said. "A lot of people left who could have been that person."

Dibadj thinks an internal candidate is most likely to succeed Lafley. He named several potential successors including Chief Financial Officer Jon Moeller and Global Group Presidents Deborah Henretta (beauty care), Martin Riant (baby care) and Steven Bishop (feminine care).

Dibadj does not expect major strategy shifts from P&G but he does think Lafley will look for ways to weed out products that lack growth potential, starting with products in P&G's beauty care division. For example, he P&G's Olay brand has "too many SKUs," which is retail jargon for a single inventory item.

"From a business perspective it's got to be beauty," said Dibadj. "What precipitated all of this is that they're spending a lot of money and getting no results."

In a research note, Lash offered this advice for its new - and former - CEO Lafley:

"We still regard P&G as a wide-moat giant that enjoys the benefits of scale and unprecedented brand reach, but we believe a healthy dose of reinvestment (both in research and development, and marketing) will be needed for the business to truly turn the corner."

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