Decision time in Procter & Gamble boardroom brawl

Gillette has lost market share to upstart digital companies such as Dollar Shave Club, which was acquired last year by Unilever. (Reuters)
Updated 08 October 2017
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Decision time in Procter & Gamble boardroom brawl

NEW YORK: A costly months-long battle over the direction of one of America’s biggest companies culminates on Tuesday with a shareholder vote at Procter & Gamble headquarters in Cincinnati.
The fight pits the maker of Gillette razors and Olay soap against activist investor Nelson Peltz, 75, a billionaire hedge fund chief who has pitched himself as the outsider needed to reignite P&G, the largest company by market capitalization ever to face a proxy battle.
The grizzled veteran of high-profile boardroom brawls accuses the company of operating with excessive cost, being weak on innovation and missing the boat on key shifts in consumer behavior.
Peltz, whose firm Trian Partners holds 1.5 percent of P&G shares, attributes declining market share in key businesses to P&G’s “slow moving and insular culture.”
His campaign has been fortified by support from respected proxy advisory services, including Glass Lewis, which said a new voice might help reinvigorate a giant that appears to suffer from a “degree of complacency.”
P&G counters that Peltz’s campaign is based on an outdated perspective on the company and ignores key hires of outsiders as well as progress since its decision in 2014 to divest dozens of underperforming products in order to target giant brands that resonate best with consumers.
Company executives also say Peltz’s campaign seems to be motivated mostly by short-term gain to the potential detriment of long-term performance.
“We strongly recommend you give us the opportunity to finish this transformation,” chief executive David Taylor said on an October 3 investor conference call.
Whoever wins, the battle has been costly. P&G has estimated that it will spend $35 million to try to keep Peltz off the board, while Trian has said it expects to spend $25 million, according to securities filings.
P&G has reported revenue declines for the last three years, pointing to the drag from the strong dollar that has caused it to underperform against European rivals Unilever and L’Oreal in some key benchmarks.
But macro conditions are improving for P&G due to the declining dollar, said Taylor, who joined P&G in 1980, assumed the top spot in November 2015, replacing A.G. Lafley, who was brought back to the company out of retirement in 2013 to take over from Bob McDonald, another long-time P&G executive whose selection in 2009 board members now concede was a mistake.
Among his charges, Peltz has hit P&G for misreading US shaving, where P&G stalwart Gillette has lost market share to upstart digital companies such as Dollar Shave Club, which was acquired last year by Unilever.
The company pushed back on Peltz’s attacks on big brands, saying that the best-known names dominate smaller format markets in urban areas, a key growth venue.
Better-known names are also more likely to appear on the first page of major e-commerce sites, Taylor said.
Taylor rejected the depiction of P&G as weak on innovation, saying launches of major new incontinence and detergent performed better in consumer surveys as sub-brands under “Always” and “Downy,” rather than as new product launches.
Taylor said he respected Peltz, but that much of the activist’s thinking appeared to be framed by his experience with companies like PepsiCo. and Heinz.
“What he most of the time talked about are food examples, which are very different from the business we are in,” Taylor said. “I think he’s projecting food onto our business.”


US says conserving oil is no longer an economic imperative

Updated 19 August 2018
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US says conserving oil is no longer an economic imperative

  • Fears of oil scarcity no longer driver of US energy policy
  • Surging shale production brings energy abundance

WASHINGTON: Conserving oil is no longer an economic imperative for the US, the Trump administration declares in a major new policy statement that threatens to undermine decades of government campaigns for gas-thrifty cars and other conservation programs.
The position was outlined in a memo released last month in support of the administration’s proposal to relax fuel mileage standards. The government released the memo online this month without fanfare.
Growth of natural gas and other alternatives to petroleum has reduced the need for imported oil, which “in turn affects the need of the nation to conserve energy,” the Energy Department said. It also cites the now decade-old fracking revolution that has unlocked US shale oil reserves, giving “the United States more flexibility than in the past to use our oil resources with less concern.”
With the memo, the administration is formally challenging old justifications for conservation — even congressionally prescribed ones, as with the mileage standards. The memo made no mention of climate change. Transportation is the single largest source of climate-changing emissions.
President Donald Trump has questioned the existence of climate change, embraced the notion of “energy dominance” as a national goal, and called for easing what he calls burdensome regulation of oil, gas and coal, including repealing the Obama Clean Power Plan.
Despite the increased oil supplies, the administration continues to believe in the need to “use energy wisely,” the Energy Department said, without elaboration. Department spokesmen did not respond Friday to questions about that statement.
Reaction was quick.
“It’s like saying, ‘I’m a big old fat guy, and food prices have dropped — it’s time to start eating again,’” said Tom Kloza, longtime oil analyst with the Maryland-based Oil Price Information Service.
“If you look at it from the other end, if you do believe that fossil fuels do some sort of damage to the atmosphere ... you come up with a different viewpoint,” Kloza said. “There’s a downside to living large.”
Climate change is a “clear and present and increasing danger,” said Sean Donahue, a lawyer for the Environmental Defense Fund.
In a big way, the Energy Department statement just acknowledges the world’s vastly changed reality when it comes to oil.
Just 10 years ago, in summer 2008, oil prices were peaking at $147 a barrel and pummeling the global economy. OPEC was enjoying a massive transfer of wealth, from countries dependent on imported oil. Prices now are about $65.
Today, the US is vying with Russia for the title of top world oil producer. US oil production hit an all-time high this summer, aided by the technological leaps of horizontal drilling and hydraulic fracturing.
How much the US economy is hooked up to the gas pump, and vice versa, plays into any number of policy considerations, not just economic or environmental ones, but military and geopolitical ones, said John Graham, a former official in the George W. Bush administration, now dean of the School of Public and Environmental Affairs at Indiana University.
“Our ability to play that role as a leader in the world is stronger when we are the strongest producer of oil and gas,” Graham said. “But there are still reasons to want to reduce the amount we consume.”
Current administration proposals include one that would freeze mileage standards for cars and light trucks after 2020, instead of continuing to make them tougher.
The proposal eventually would increase US oil consumption by 500,000 barrels a day, the administration says. While Trump officials say the freeze would improve highway safety, documents released this month showed senior Environmental Protection Agency staffers calculate the administration’s move would actually increase highway deaths.
“American businesses, consumers and our environment are all the losers under his plan,” said Sen. Tom Carper, a Delaware Democrat. “The only clear winner is the oil industry. It’s not hard to see whose side President Trump is on.”
Administration support has been tepid to null on some other long-running government programs for alternatives to gas-powered cars.
Bill Wehrum, assistant administration of the EPA’s Office of Air and Radiation, spoke dismissively of electric cars — a young industry supported financially by the federal government and many states — this month in a call with reporters announcing the mileage freeze proposal.
“People just don’t want to buy them,” the EPA official said.
Oil and gas interests are campaigning for changes in government conservation efforts on mileage standards, biofuels and electric cars.
In June, for instance, the American Petroleum Institute and other industries wrote eight governors, promoting the dominance of the internal-combustion engine and questioning their states’ incentives to consumers for electric cars.
Surging US and gas production has brought on “energy security and abundance,” Frank Macchiarola, a group director of the American Petroleum Institute trade association, told reporters this week, in a telephone call dedicated to urging scrapping or overhauling of one US program for biofuels.
Fears of oil scarcity used to be a driver of US energy policy, Macchiarola said.
Thanks partly to increased production, “that pillar has really been rendered essentially moot,” he said.