Will P&G CEO McDonald Get Fired?
Courtesy The Procter & Gamble Co.Since consumer products giant Procter & Gamble Co. (NYSE: PG) reported less than stellar results this morning, shares have dropped about 5% and there are new rumblings that CEO Bob McDonald may be looking for…
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Since consumer products giant Procter & Gamble Co. (NYSE: PG) reported less than stellar results this morning, shares have dropped about 5% and there are new rumblings that CEO Bob McDonald may be looking for a new job. Reports that P&Gās board was unhappy with McDonald surfaced last July after the companyās share price had fallen 8%.
The chairman of the companyās compensation committee, James McNerney, CEO of Boeing Co. (NYSE: BA), was reported by Bloomberg to be unhappy with McDonald after P&G was forced to cut its forecast three times in a year. The irony of that is best left to another day.
P&G announced a layoff of 5,700 employees last year, as well as other cost cutting measures totalling some $10 billion by 2016 to help offset rising commodity costs. That has certainly helped the companyās bottom line, but itās nothing more than a near-term fix.
McDonald may also get a shareholder challenge led by activist investor William Ackman of Pershing Square Capital Management. Ackmanās hedge fund owns about 1% of P&Gās stock, and while heās currently busy with Herbalife Ltd. (NYSE: HLF) and J.C. Penney Co. Inc. (NYSE: JCP), if he smells blood in the water here, McDonald could face a tough opponent. Ackman probably thinks he waited too long for results from his hand-picked CEO for Penneyās and is not likely to make that mistake again.
When the notion of replacing McDonald came up last year, many thought that it was premature. After all heād been at the head of P&G for only about three years and those were the toughest years for the U.S. economy since the Great Depression. But as the quarters roll along and P&Gās performance doesnāt improve, McDonaldās tenure in the corner office gets shakier.
Shares of P&G hit a bottom of around $45 in May of 2009 and have since climbed to an all-time high of more than $82. But growth was pretty flat for the two year to January of 2013, when they turned sharply higher as commodity prices fell and the companyās cost reduction program showed some results. Neither force, however, demonstrates much of a strategic vision.
P&Gās shares are down about 4.8% in mid-afternoon trading today, at $78.05 in a 52-week range of $59.07 to $82.54.
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Paul Ausick has been writing for 247Wallst.com for more than a decade. He has written extensively on investing in the energy, defense, and technology sectors. In a previous life, he wrote technical documentation and managed a marketing communications group in Silicon Valley.
He has a bachelor's degree in English from the University of Chicago and now lives in Montana, where he fishes for trout in the summer and stays inside during the winter.
