P&G’s Lafley gets boost in bonus

Dayton Business Journal - by Lisa Biank Fasig DBJ Contributor

Procter & Gamble Co.
awarded its CEO, A.G. Lafley, a 12 percent increase in bonus in the
fiscal year, contributing to a total pay package of almost $23.5
million in a period when Procter’s profit rose 17 percent and its stock
price, almost 10 percent.

Lafley, 61, collected $1.7 million in salary and a $4 million in
bonus, reflecting a $500,000 bonus raise, though his salary was flat
compared with the previous three years. In addition, Lafley was awarded
a combined $640,000 for a variety of expenses and perks from
contributions to his retirement fund, to home security, to use of the
corporate jet. Lafley is required by P&G to use the company jet
even for personal travel, though he has to pay taxes on the value of
those flights.

But most of Lafley’s pay - 72 percent - came in the form of stock
awards, and 89 percent is termed “at risk,” meaning it is
performance-based. The CEO was granted $16 million in options, plus
slightly more than $1.1 million under a three-year performance program,
half of which was paid in stock and the other half in cash, according
to a proxy filed with the Securities and Exchange Commission.

It should be noted that Lafley’s $1.1 million payout in that
three-year program, called the Business Growth Program incentive,
dropped sharply from the previous year, when he collected $5.2 million.
That is not a reflection of performance, said David Loucks, said vice
president of global compensation and benefits at P&G (NYSE: PG).

“In year three we square up for the whole thing,” Loucks said. “They had already received much of it.”

In other words, the total incentive pool was weighted. Lafley took
expedited payments in the first two years of the three-year program (in
fiscal 2006, he collected $5.9 million). This being the third year, he
collected the balance and then some, having performed beyond target. In
total, his three-year-payout ($12.2 million) equaled 120 percent of the
target amount.

P&G’s compensation committee will approve the next three-year bonus program in September, Loucks said.

In determining Lafley’s pay, the compensation committee considered
Procter’s performance, as well as the personal performance and
individual leadership of Lafley. It also measured his compensation
against that of a 25-member peer group, with a median revenue of $61
billion, which includes Wal-Mart (NYSE: WMT), General Electric (NYSE: GE) and Boeing
(NYSE: BA). In the proxy, the compensation committee stated that Lafley
“continues to perform effectively and to deliver consistent results.”

Since Lafley assumed the role of CEO in 2000, P&G’s sales rose
to $83.5 billion from $39 billion, while earnings per share rose 13
percent per year. For its fiscal year ended June 30, Procter posted net
income of $12.1 billion, or $3.86 per share, compared with $10.3
billion, or $3.22 per share, in fiscal 2007.

Shares in Cincinnati-based P&G closed at $71.01 Thursday, up 95 cents.

The annual meeting is scheduled for Oct. 14 at the Aronoff Center
for the Arts downtown. Two shareholder proposals are up for vote at the
meeting. The first, filed by shareholder activist Evelyn Davis of
Washington, D.C., who owns 800 shares, is seeking that Procter rotate
the venue of its annual meeting among “Cincinnati, New York, Chicago,
L.A., Dallas, Miami and other major cities where there is a large
concentration of holders.”

A second proposal, by Peter Flaherty of the National Legal and Policy Center
in Falls Church, Va., who owns 60 shares, asks the board to adopt a
policy that would annually give shareholders an advisory vote on
P&G’s compensation analysis report in the proxy statement.

“Current rules governing senior executive compensation do not give
shareholders enough influence over pay practices,” his proposal states,
though it also emphasizes the vote would be purely advisory.

P&G’s board is advising against both proposals.