Procter & Gamble 2021 annual meeting is October 12, 9AM Pacific Time. To attend the virtual meeting, you will need to visit www.virtualshareholdermeeting.com/PG2021 and use your 16-digit control number provided in the Notice or proxy card to log into the meeting. Of course, I recommend voting in advance. This proxy should have special significance to participants in The Procter & Gamble Profit Sharing Trust and Employee Stock Ownership Plan, Procter & Gamble Savings Plan, Gillette Company Employee Stock Ownership Plan, Procter & Gamble Commercial Company Employees’ Savings Plan and/or Profit Sharing Retirement Plan of the Procter & Gamble Commercial Company since proposal #4 could increase your voice at the Board level.
As employees can see in the graph above, you could have made three times as much by investing in the S&P. We are confident that with a voice in the Boardroom, Procter & Gamble’s growth can accelerate. To enhance corporate governance and long-term value, see recommendations below. Vote FOR #4 Increase Diversity of Director Nominees: Include Non-Management Employees on Candidate List
The Procter & Gamble Company (ticker PG) provides branded consumer packaged goods to consumers in North and Latin America, Europe, the Asia Pacific, Greater China, India, the Middle East, and Africa. It operates in five segments: Beauty; Grooming; Health Care; Fabric & Home Care; and Baby, Feminine & Family Care. Most shareholders do not vote. Reading through 90+ pages of the proxy probably isn’t worth your time but your vote could be crucial. Below, how I voted and why.
If you have read these posts related to my portfolio and proxy proposals for the last 25 years and trust my judgment, skip 7 minutes of reading. See how I voted my ballot. Voting will take you only a minute or two. Every vote counts.
I voted with the Board’s recommendations 47% of the time. View Proxy Statement via SEC’s EDGAR system (look for DEF 14A).
Read Warnings below. What follows are my recommendations on how to vote the proxy in order to enhance corporate governance and long-term value.
Procter & Gamble 2021: ISS Rating
From the Yahoo Finance profile page: The Procter & Gamble Company’s ISS Governance QualityScore as of September 26, 2021 is 2. The pillar scores are Audit: 6; Board: 2; Shareholder Rights: 7; Compensation: 1.
Procter & Gamble 2021: Board Proposals
1. Directors
Egan-Jones Proxy Services recommends For all. #FlushPGDirectors is the creative hashtag used by a coalition calling on Procter & Gamble shareholders to vote against Angela Braly and James McNerney. These key directors have failed to address ESG human rights and environmental violations in supply chains. However, it was recently announced that Mr. McNerney is not standing for reelection.
Also, see this statement from Friends of the Earth. Additionally, Angela Braly has served on the Board since 2009, so would not be considered independent by many. Since I voted against Executive Compensation, I also voted against all members of the compensation committee: Terry J. Lundgren, Joseph Jimenez, Debra L. Lee, and Christine M. McCarthy. Get rid of the clog; go for a stronger #FlushPGDirectors.
Vote: AGAINST Angela Braly, Joseph Jimenez, Debra L. Lee, Terry J. Lundgren, and Christine M. McCarthy.
2. Ratification of Independent Auditor
Deloitte & Touche LLP has served as the auditor for 131 years. Egan-Jones recommends voting Against auditors that have served for seven years or more. While one can argue it an auditor can really be “captured” by the company in seven years, certainly having the same auditor for 131 years increases that risk.
Vote: AGAINST
3. Advisory Vote on Executive Compensation
Procter & Gamble’s Summary Compensation Table shows the highest paid named executive officer (NEO) was CEO David S. Taylor at $24M. I’m using Yahoo! Finance to determine market cap ($339B) and I define large-cap as $10B, mid-cap as $2-10B, and small-cap as less than $2B. Procter & Gamble is a large-cap company.
According to MyLogIQ, the median CEO compensation at large-cap corporations was $ M 14in 2020. Pay is substantially above that amount. Procter & Gamble’s shares underperformed large-caps substantially over the most recent one and 5-year timeframes. Additionally, Procter & Gamble paid Mr. Taylor’s life insurance policy, financial counseling (including tax preparation), physical examination, use of a Company car, home security, and use of company aircraft, including accompanying family and guests.
The ratio of the annual total compensation of the CEO to the median of the annual total compensation of all employees was 343 to 1.
Egan-Jones Proxy Services found pay aligned with the long-term interest of its shareholders. I do not. Company performance is subpar, yet the CEO is paid handsomely.
All shareholders, especially Procter & Gamble employees invested in various company-sponsored stock ownership plans are suffering. Until their creative wisdom can be heard at the Board level, employees would be better off investing in a large-cap index fund like Engine No 1’s Transform 500 ETF (Ticker: VOTE). As can be seen from the discussion on director compensation, several directors chose not to maximize compensation in restricted stock units, which would have been the optimal choice if they expected shares to outperform the market. Directors are selling more PG stock than buying. Insiders selling. Maybe they see it more as a cash cow than a long-term investment.
Vote: AGAINST Angela Braly, Joseph Jimenez, Debra L. Lee, Terry J. Lundgren, and Christine M. McCarthy.
Procter & Gamble 2021: Shareholder Proposal
4. Increase Diversity of Director Nominees: Include Non-Management Employees on Candidate List
The proposal is from me (James McRitchie) so, of course, I voted in favor. Egan-Jones recommends against. The proposal requests the initial list of candidates from which new director nominees are chosen include (but need not be limited to) current or past PG non-management employees to potentially add an employee perspective on the Board.
Management says Procter & Gamble employees have a “significant influence” on Company practices. They fill out an annual survey and have an opportunity to raise issues at company meetings. Employees should be looking for an ongoing dialogue, not settling for what amounts to a suggestion box.
Brother and sister Jules Feeney and Justine Epstein are calling out P&G, the company their ancestor, James Gamble, started in 1837, for sourcing forests critical in fighting climate change to create its tissue products, CBS News reported. They requested to meet with the CEO, which was not granted. (Procter & Gamble’s descendants call out family’s business for wasteful resources). In their opposition statement, the Board claims “our employees have open access to senior leadership.” If direct descendants of the founder cannot be heard, what chance do non-management employees have of being heard?
Vanguard and BlackRock hold more shares on behalf of their clients but Procter & Gamble employees own more shares than the third-largest institutional investor. How does employee voice compare with that of institutional investors? Do employees have a direct line of communication with the Board for ongoing dialogue?
We offered to withdraw the proposal if the Board agreed to any of a number of options to empower employees and report results to shareholders. Options included appointing a member of the Board to be a liaison with workers, creating a Shadow Board of employees providing input to the Board on strategic issues, as well as other options.
Non-employee directors averaged almost $332,000 in annual compensation. This is for a part-time job that requires attendance at 6 Board meetings plus committee meetings. Interestingly, “Directors were entitled to bring a guest so long as the Director used the Company aircraft to attend the meeting and the guest’s attendance did not result in any incremental aircraft costs.” Also keep in mind that many PG directors also serve on as many as three other boards.
Swimming in Money
People that fly Company aircraft to attend meetings and earn almost one-third of a million dollars for one of what can be several part-time jobs live in a rarefied bubble. Ms. Whitman’s net worth, for example, exceeds $108M. Mr. Lundgren’s net worth was estimated at more than $95M back in 2017. Most of us have seen this kind of wealth, but only in movies. Current or past PG non-management employees would bring a more down-to-earth perspective to the Board.
Envision a typical PG employee or customer. Are they going to be making suggestions to directors with a net worth of $100M? Will those directors even take a call or open an email? Directors who are or have been non-management PG employees are more likely to be open to feedback and ideas from employees and customers than directors who are multimillionaires many times over. Innovation most often comes from good ideas percolating up, not down.
It is also likely that PG employees are more likely to share values with typical customers than are current directors. For example, PG placed last with regard to sustainability on paper products like toilet paper. (P&G Stuck in the Past in a Shifting Tissue Marketplace) Those swimming in money are less likely to suffer from climate change than the rest of us. They can always move to higher ground, build fireproof mansions, or retreat to New Zealand.
Procter & Gamble 2021 CorpGov Recommendations
Proxy Insight reported no votes when I last checked.
In looking up a few funds in our Shareowner Action Handbook, I see Calvert voted For all items, including #4. Pensions & Investment Research Consultants Ltd (PIRC), Europe’s largest independent corporate governance and shareholder advisory consultancy, advises: Against Braly for her role in failing to address sustainability issues; Against Taylor as combined CEO/Chair and for failing to address human rights proposal; Against Woertz for lack of independence after 9 years of service; Against Auditor as not independent after 131 years without rotation; Against Compensation for failure to balance performance and reward; For #4 “It is considered that the appointment of representatives of (non-management) employees to the board has the potential to create a positive influence in areas of decision making normally reserved for the Board and senior management. The election of employee-representative director(s) is common practice in a number of major economies, and is considered to be an effective way of ensuring that employee views and concerns are considered properly at board level.”
- Directors: AGAINST Angela Braly, Joseph Jimenez, Debra L. Lee, Terry J. Lundgren, and Christine M. McCarthy.
- Auditor: AGAINST
- Compensation: AGAINST
- Increase Diversity of Director Nominees: Include Non-Management Employees on Candidate List
Procter & Gamble 2021 Issues for Future Proposals
Looking at insightia for anti-shareholder provisions:
- No requirement to separate CEO and Chair
Procter & Gamble 2022: Mark Your Calendar
We anticipate that the 2022 annual meeting of shareholders will be held on Tuesday, October 11, 2022. Pursuant to regulations issued by the SEC, to be considered for inclusion in the Company’s proxy statement for presentation at that meeting, all shareholder proposals must be received by the Company on or before the close of business on April 29, 2022.
Procter & Gamble 2021: Related Posts
Warnings
Be sure to vote for each item on the proxy. Any items left blank get automatically voted in favor of management’s recommendations. (See Broken Windows & Proxy Vote Rigging – Both Invite More Serious Crime). I generally vote against pay packages where NEOs were paid above median in the previous year but make exceptions if warranted. According to Bebchuk, Lucian A. and Grinstein, Yaniv (The Growth of Executive Pay), aggregate compensation by public companies to NEOs increased from 5 percent of earnings in 1993-1995 to about 10 percent in 2001-2003.
Few firms admit to having average executives. They generally set compensation at above average for their “peer group.” Peer groups are often chosen by aspiration. The “Lake Woebegone effect” may be nice in fictional towns, “where all the children are above average.” However, corporations live in the real world. All CEOs are above average. Ignoring that fact partly explains why their collective pay spiraling out of control. We need to slow the pace of money going to the 1% or our economy will fail to serve the majority. The rationale for peer group benchmarking is a mythological market for CEOs. For more on the subject, see CEO Pay Machine Destroying America.
At the beginning of the meeting I typed in the following question: Re Prop #4 How long will P&G allow after the last proposal is given for shareholders to consider the presentation and vote?
P&G stated there were no questions on proposal #4 and immediately closed the polls. There was NO time for anyone to vote base on the proponent’s statement. While I realize very few people vote at the meeting, the SEC imposes severe penalties if a proponent fails to present. Not only is the proposal thrown out, but the proponent is prohibited from filing at the company for the next two years.
I find it troublesome that many companies, like P&G, make a mockery of the process by not allowing any time to vote after a proposal is introduced at the meeting. What is the point of the presentation if it cannot be weighed and considered by those in attendance?
The preliminary vote announced was 7%. Was Procter & Gamble afraid to allow those in attendance to change their vote? Probably not. My assumption is that they have no respect for the process and view the AGM as a legally required event that they want to get over as quickly a possible.