CINCINNATI -- Procter & Gamble Co. shareholders asked pointed questions about executive compensation at the company’s annual meeting Tuesday, prompting CEO A.G. Lafley to proclaim he isn’t in it for the money.
“When the board asked me to come back, I did not even ask about compensation. I’m here for duty,” Lafley said. “It’s an honor and privilege.”
Ultimately, shareholders endorsed the company’s pay practices by voting 96 percent in favor of P&G’s compensation plans in the annual “Say on Pay” vote required under a 2010 act of Congress.
P&G awarded a 4.8 percent raise to departing CEO Bob McDonald in the 2013 fiscal year. His $15.9 million in total pay included a $3.3 million bonus.
Lafley earned just over $2 million for his first five weeks on the job. His base salary is 25 percent higher than his predecessor and his pay includes a $200,000 allowance for Cincinnati living expenses, which enables him to maintain permanent residence in Florida.
“We pay for performance,” said Lafley, attending his first annual meeting since returning to the CEO post in May. “We try to pay fairly and that means competitively in the marketplace. Most importantly as a share owner, you ought to know we’re paid for supporting our business strategies.”
Lafley told shareholders those strategies will be focused on four key areas: Value creation for consumers and share owners, productivity and innovation, improved operating discipline and investments in research and development.
He said P&G will make productivity more systemic, as opposed to the recurring waves of restructuring seen in recent years. He said P&G will focus on its largest and most profitable business lines, making sure it has products to sell consumers in all parts of the income spectrum.
While they welcomed Lafley back to his leadership post, some shareholders were not in a mood to give him a free pass on pay.
“I am concerned about executive compensation and salaries,” said shareholder Carl Boeckman of Norwood. “That money belongs to the company and shareholders.”
Columbus shareholder Helga Schwab asked about a $200,000 stipend that was awarded to Lafley to provide local housing while he maintains his permanent residence in Florida.
“Is that the reason we don’t have any goodies out there?” Schwab asked to hearty laughter and applause.
But the most direct questioning came from former P&G employee Jim Baker, who criticized P&G’s board for reducing long-term compensation goals. Said Baker:
“Why are we paying more for achieving less?”
Presiding Director James McNerney, a Boeing Co. CEO and chair of P&G’s compensation and leadership committee, defended the company’s pay practices. He said the pay of its top executives were smaller because P&G failed to meet its growth goals in the last three years. Future growth targets are lower because of the “post financial crisis world” in which all companies now compete, McNerney said.
“They were marginally lower but so were the targets of all of our competitors,” he said. “It is a much slower growth world that this team is confronting. And the compensation committee is convinced that achieving progress against those targets will be at least as difficult as achieving the ones that they missed earlier.”
P&G announced a quarterly dividend of 60.15 cents per share, payable Nov. 15 for shareholders of record on Oct. 18. The company also announced that it is searching for a new home for its annual meeting, which has been held at the Aronoff Center for the Performing Arts for several years.