Bob McDonald has stepped down as chairman-CEO of Procter & Gamble Co. to be replaced by his predecessor, A.G. Lafley. Mr. McDonald, in less than four years on the job, saw the company lose ground to key rivals and weather heavy investor criticism.
Despite investor pressure, the timing of the move, which is effective June 30, came as a surprise. Mr. McDonald and Chief Financial Officer Jon Moeller had been pointing to momentum behind the company's nearly year-old turnaround plan, most recently at a Goldman Sachs investor conference last week. While down from recent highs, the company's stock was still up 26% on the year, just behind the S&P 500.
Mr. McDonald, 59, was scheduled to speak at a P&G alumni reunion in Geneva, Switzerland, on Saturday. In an odd parallel, Mr. Lafley made an appearance at a P&G alumni reunion days after he took charge of the company for the first time, in 2000.
"Unless and until the board decides otherwise, A.G. will be the CEO with all the authority and responsibility that goes with the position," P&G spokeswoman Jennifer Chelune said, noting that it's not an interim assignment.
Mr. Lafley, 65, was most recently a partner with the private-equity firm Clayton Dubilier & Rice. His return signals what many company watchers had suspected -- that P&G had yet to groom or identify a clear successor to Mr. McDonald.
"Bob chose to retire," Ms. Chelune said. "This was his decision. ... The board is confident A.G. is the right leader to build on P&G's momentum and to continue to improve our results."
She declined to make Mr. McDonald available for comment, and Mr. McDonald didn't immediately respond to an email request for comment.
In a statement, Jim McNerney, lead director of P&G and chairman-CEO of Boeing Co., said: "We thank Bob for his service and note the Company's improving business performance. Under his leadership, the Company expanded its business in developing markets, built a strong innovation pipeline, and has made substantial progress implementing a $10 billion cost savings and productivity program."
P&G confirmed its fiscal year and fourth quarter guidance in the statement announcing the leadership change.
Mr. Lafley, who picked Mr. McDonald to succeed him and moved him ahead of several rivals in P&G's hierarchy during his prior 10 years in the CEO post, said in the statement: "I wish Bob well, and thank him for his service to P&G. I am confident that we will deliver strong innovation, productivity and growth to win with consumers, customers and shareholders."
Here is Mr. McDonald's memo to P&G employees:
Dear P&G Friends,
Today I'm announcing my retirement from Procter & Gamble. This has been a very difficult decision for me, but I'm convinced it is what is in the best interests of the Company and you.
Replacing me will be my friend and mentor, A.G. Lafley. I'm thankful that A.G. has agreed to come back to P&G and carry on with the work we have collectively done to strengthen the Company, its business and its organization.
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. I've always believed that we are a Company -- One Company -- comprised of great individuals. When we get to a point where too much attention becomes a distraction, it's time to change that dynamic.
Most important, thank you for all you are doing to make P&G the great Company it is and always will be. I am proud of what you have accomplished, and it has been a privilege to be a part of it. During the last four years together, we've expanded our business into many new categories and geographies. By the end of this year, developing markets will account for 40% of our sales and 45% of volume. We've launched exciting innovations with many more to come. And, we've made significant progress on our productivity program. There are many more accomplishments, and I cannot thank you enough for all your hard work and dedication.
I love this Company and all of you. I will celebrate 33 years with P&G on June 4, and I first met A.G. the night before I interviewed. I know you will give A.G. your very best effort. We are on the way up, but there is more to do. We have an opportunity to have an excellent quarter, and there will be many more to come in the future.
My official retirement date is June 30. Please know I am always available to help you in any way I am able.
Best wishes. I have every confidence in you. I am counting on you. Thanks.
Here is Mr. Lafley's memo to P&G employees:
Today I am rejoining P&G. I'm looking forward to working with all of you again, to do what we do best and what matters most -- win with consumers.
I want to thank Bob McDonald for his 33 years of service to the Company, and for his leadership. I've known Bob his entire career, and he has real passion for doing what is right and for improving the lives of consumers around the world.
I also want to thank P&Gers for the work you're doing to win with consumers. I want to assure you that we will build on the business momentum behind the current growth strategies:
Strengthening core developed market business.
Maintaining strong developing market momentum.
Building and leveraging a strong innovation pipeline.
Driving cost savings and productivity improvements.
I will be getting up to speed on the business in the next several weeks. In the meantime, here are a few of my core beliefs:
The consumer is boss -- at the heart of everything we do.
We create and build brands that improve consumers' lives.
Innovation is our lifeblood.
Every P&Ger is an owner and a leader -- we are one team, with one dream, collaborating internally and competing externally.
I look forward to working with you in the days and weeks ahead.