Business

Speculation mounts over P&G leadership

CINCINNATI — While many jittery investors consider Procter & Gamble Co. a safe haven in the economic storm, a big question hanging over the world's largest consumer products maker is how much longer Chief Executive A.G. Lafley will stay at the helm.

Lafley, who was named CEO more than eight years ago as P&G's earnings and stock were sliding, has helped the maker of Tide detergent and Pampers diapers become a steady producer of profits and sales growth by emphasizing innovation and a "consumer is boss" focus.

He has repeatedly insisted he has no plans to step down anytime soon. However, he turns 62 in June, and analysts and investors are speculating about and scrutinizing changes in P&G's upper management over the last two years. "We have to be like Florida's football team," Lafley told analysts at a Dec. 11 meeting in New York. "We just have to be strong and deep."

P&G officials have said the board has a succession plan, but refuse to discuss any names or details. And questions from investors have grown.

Analysts note that finding the right successor to a well-regarded leader can be a difficult process. They doubt that the company's board, which Lafley chairs, would go outside the company for a replacement.

"The CEO of P&G is arguably the most important person in consumer goods manufacturing in the world," said Ali Dibadj, a senior analyst for Sanford C. Bernstein & Co. P&G is a well-known company with widely held stock, and boasts 23 household brands with more than $1 billion each in annual sales, including Tide, Pampers and Gillette shavers.

Lafley has said he's in good health, loves what he's doing and is excited about P&G's prospects for the future. He told the analysts in New York: "The rumors of my passing are greatly exaggerated."

Dibadj, who helped prepare an analysis last year of P&G's managers in response to escalating questions from investors, concluded that indeed, P&G's "bench is deep" with capable potential chiefs.

He expects a long, orderly transition after Lafley does announce his plans.

Speculation about successors usually begins with Robert A. McDonald, the chief operating officer experienced in the emerging markets P&G has targeted for growth, and Susan E. Arnold, president of global business units, with experience in the beauty and personal health care businesses that are also priorities. Both joined the company in 1980, three years after Lafley, and were named to their current posts in a 2007 restructuring.

Matt McCormick, portfolio manager for Cincinnati-based Bahl & Gaynor, which controls more than 7 million P&G shares, expressed confidence about the company's life after Lafley.

"Would we prefer him to stay? Yes," McCormick said. "But we are not as concerned about the next leader because we think the No. 2, No. 3, No. 4 person will follow the same playbook, and will have the same leadership style."

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